LexinFintech (LX) Q4 2022 Earnings Call Transcript

LexinFintech (LX -0.59%)
Q4 2022 Earnings Call
Mar 13, 2023, 9:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day and thank you for standing by. Welcome to LexinFintech fourth quarter and full year 2022 earnings conference call. [Operator instructions] After the speakers' presentation, there will be a question-and-answer session. [Operator instructions] Please be advised that today's conference is being recorded.

I would now like to turn the conference over to your first speaker today, Ms. Jamie Wang, IR manager. Thank you. Please go ahead.

Jamie Wang -- Investor Relations Manager

Thank you, Desmond. Hello, everyone. Welcome to Lexin's fourth quarter and full year 2022 earnings conference call. With us on the line today are our CEO, Jay Xiao; president, Jared Wu; and CFO, James Zheng.

Before we get started, I'd like to remind you that the call and presentation contain business outlook and forward-looking statements, which are based on assumptions as of today. The actual results may differ materially, and we undertake no obligation to update any forward-looking statements. Jay will first provide an update on our overall performance. James will cover the financial results in more detail.

And lastly, Jared will then discuss risk management. I'll now turn the call over to our CEO, Jay. His remarks will be in English and -- sorry, his remarks will be in Chinese, and the English translation will follow. Jay.

Jay Xiao -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Jamie Wang -- Investor Relations Manager

Good morning and good evening, everyone. It's my pleasure to speak with you again. In the fourth quarter of 2022, the COVID situation in China underwent a major turning point, bringing considerable pressure to the Chinese economy. But despite the such pressure, we were able to achieve satisfactory results by rigorously adhering to a strategy of prioritizing risk management, making data-driven decisions, and continuously focusing on improving and refining our operations.

Our loan originations for the past quarter reached 56.1 billion, representing an increase of 29% year over year, with total outstanding loan balance reaching 99.6 billion as of December 31, 2022, representing an increase of 16% year over year. Total revenue reached 3.1 billion, representing an increase of 38.7% year over year, with net income reaching 301 million, representing an increase of 17.9% year over year. Our asset quality continued to steadily improve. In addition, funding costs decreased to 6.8% from 7% in the third quarter.

Our net profit margin increased substantially from 4.8% in the first quarter of 2022 to 9.9% this past quarter. From our fourth quarter numbers, we can see that Lexin has clearly produced three consecutive quarters of steadily improving profitability, realizing a V-shaped recovery.

Jay Xiao -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Jamie Wang -- Investor Relations Manager

To be more specific, there were three main highlights for the past quarter. First, the continued improvement in asset quality. Second, the ability of our installment e-commerce platform service business to deliver growth against a weak backdrop and breakthroughs in our tech-empowerment service sector, which achieved its first quarterly profit. And third, notable results in reducing operating costs and in increasing efficiency.

Jay Xiao -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Jamie Wang -- Investor Relations Manager

On asset quality, although we were affected by the COVID outbreaks, Lexin was able to continue our stable and upward trajectory in asset quality, which was accomplished through our focus on continuous improvements to our risk management capabilities and our progress in refining our operations. And this can be seen from our existing and our new customers.

Jay Xiao -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Jamie Wang -- Investor Relations Manager

For existing customers, we took the following two steps. First, we improved our ability to identify prime customers from our data. And through deeper data mining of the information available with Lexin's ecosystem, we refined our ability to identify different customer segments. In particular, we continued to data mine and obtain valuable information from the PBOC's credit data.

This allowed us to more deeply and comprehensively to improve our customer risk assessment-related profiles in multiple dimensions, including customer risk profile, income level information, asset information, and existing customer liabilities. In the application of our models, we were able to finalize the joint modeling of over 10 data loops, building an accurate ROI evaluation framework in the progress. Improvements in our ability to identify prime customers allowed us to dedicate greater resources toward serving this customer segment while also expediting the reduction of high-risk segments.

Jay Xiao -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Jamie Wang -- Investor Relations Manager

Second, we applied our change on [Inaudible] policy, which refines our operating strategy by improving our ability to identify different customer groups and segments via more accurate segmentation capabilities, enabling us to dig deeper to meet and satisfy the needs of different customer cohorts and improve our customer satisfaction rates and customer retention.

Jay Xiao -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Jamie Wang -- Investor Relations Manager

In the fourth quarter, loan contributions from our prime customers increased by 60% year over year, while loan contributions from our high-risk customers decreased by 13%. So, prime customers as a percentage of loan increased from 72% in the fourth quarter of 2021 to 82% in the fourth quarter of 2022.

Jay Xiao -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Jamie Wang -- Investor Relations Manager

For our new customers, we continued to expand our data set and the use of our models. We have built a complete end-to-end RTA processing model, which has significantly improved our post-customer acquisition conversion rate by over 50%. We have improved the efficiency and accuracy of our customer identification capabilities by 20% through pre-lending and in-lending channel model iterations. We have also constructed a new operational matrix to continuously increase and improve the retention rate and the activity rate for both new and existing customers.

Jay Xiao -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Jamie Wang -- Investor Relations Manager

In the fourth quarter, the percentage of new prime customers with approved credit lines increased by 18.2%, with average ticket sizes for new customers increasing by 16.7 quarter over quarter. Online advertising costs to convert credit lines into active borrowers from the time of granting of the credit line to the time of the use of credit decreased by 25.9% over -- quarter over quarter for prime customers.

Jay Xiao -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Jamie Wang -- Investor Relations Manager

The second highlight was the ability of our installment e-commerce platform service business to deliver growth against a weak backdrop and outbreaks in our tech-empowerment service sector, which achieved its first quarterly profit. Our installment e-commerce platform service business, under a weak backdrop of poor overall consumption throughout the year last year, was able to achieve 1.4 billion in GMV for the fourth quarter, an increase of 40.2% year over year. Younger, more fashion-focused, non-electronic devices consumption scenarios such as cosmetics, apparel, and footwear favored by younger demographics became our main driver, demonstrating notable increases in growth and further enhancing our competitive advantages in consumption scenarios and consumer demographics in the process. For the year 2022, our e-commerce platform, Fenqile, total number of merchants grew by 103% year over year, with average ticket prices increasing by 39% year over year.

Jay Xiao -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Jamie Wang -- Investor Relations Manager

So, in addition, our tech-empowerment service business designed for small- and medium-sized banks had also made significant progress. Our service enables the digital transformation of our financial institutional partners by providing five core services, product development, customer acquisition channel for building, joint risk management, customer life-cycle management, and intelligent customer services, enabling our partners to achieve breakthroughs in their businesses. Our partners have been steadily growth wherever the corporation has come online, and all new launches in the fourth quarter have progressed to scale, enabling our tech-empowerment service business to achieve profitability for the quarter.

Jay Xiao -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Jamie Wang -- Investor Relations Manager

These two businesses are both critical components of our ecosystem, forming a mutually reinforcing cycle and linking with our main credit facilitation business. Each business has also achieved its own respective breakthroughs in the fourth quarter and can be expected to become Lexin's new growth driver in the future. Lexin's ecosystem, which is integrated with different businesses in various consumption scenarios, as well as technological capabilities, will, in time, become our core competitive advantage, differentiating ourselves from our competition and establishing our sustainable long-term core competitive advantages.

Jay Xiao -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Jamie Wang -- Investor Relations Manager

The third highlight is related to the notable results in reducing operating costs and in increasing efficiency. Operational expenses for the fourth quarter were RMB 660 million, down 2.1% sequentially. In particular, G&A expenses decreased by 7% quarter over quarter to about RMB 97 million. Total expenses as a percentage of the outstanding loan balance have continued to [Audio gap] second quarter of 2022.

In addition, in the fourth quarter, we restructured some functions and downsized the headcount to further stimulate the overall vitality of the company and to improve organizational efficiency.

Jay Xiao -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Jamie Wang -- Investor Relations Manager

Behind the aforementioned operational achievement is the continued enhancement of our data and technological capabilities. R&D expenses for the fourth quarter was approximately RMB 136 million, which represents a leading position in the industry. Lexin's unique smart business engine has integrated digital and intelligent capabilities into every key aspect of our daily operation and enterprise. Specifically, in terms of system capabilities, we further applied the indicator variation and intelligent attribution system to the core notes of our transaction and risk management systems.

We built a unified event management platform, covering all internal and external events related to products and technology, greatly improving our data efficiency and accuracy. In terms of model applications, we continued to improve our life-cycle model and have developed and iterated more than 30 targeted marketing model, among which our model matrix of customer intent and customer reaction is able to cover scales of 10 million users per month and has achieved meaningful results. For specific customer groups, after using our models, order rates have increased by 30%, with ARPU and profits increasing by over 50%.

Jay Xiao -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Jamie Wang -- Investor Relations Manager

Finally, I would like to update you on Lexin's corporate social responsibility initiatives. In the first half of 2022, we launched a specific program called [Inaudible] to help relieve small and micro enterprise with their cash liquidity problems. In the fourth quarter, we continued to provide assistance, enabling the total amount of small- and microloans to reach 5 billion for the quarter. In February of this year, a follow-up program called [Inaudible] was launched, which aims to promote a recovery in consumption through our nine initiatives and three directives, promoting individual consumption, facilitating merchant growth, and enabling the recovery of small- and micro-sized businesses.

In addition, to better protect customers, we are currently instituting a 24/7 customer protection hotline, which will also further enhance our customer satisfaction rates.

Jay Xiao -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Jamie Wang -- Investor Relations Manager

Turning forward, we see an accelerated pace of recovery for domestic consumption and an improved macroeconomic environment, so we remain cautiously optimistic about the prospects for business growth this year. In 2023, we will make sustainable profitability, which is Lexin's main objective. Four concrete steps which will take toward this goal are first is to continue to strengthen our risk management systems and build our core capabilities, further improving our asset quality in the process. Second is to focus on refining our customer operations by improving our ability to identify and manage our prime customers from our existing ones, adjusting policies for our new customers based on the economic conditions, capturing the opportunities presented by the consumption recovery through investing in customer acquisition at the opportune times, continuing to both improve our customer quality and quantity and improving asset quality in the process.

Third is to strengthen Lexin's unique business ecosystem, including online consumer finance, offline Puhui team, installment e-commerce platform service, tech-empowerment service, and more, allowing our multiple and diverse businesses to become mutually supportive and mutually reinforcing, generating a virtuous cycle. Fourth is to continue to reduce costs and improve efficiency, increasing our ability to generate sustainable profits in the process.

Jay Xiao -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Jamie Wang -- Investor Relations Manager

In the first quarter of 2023, our total loan balance exceeded RMB 100 billion, marking another milestone in the company's growth and development. With the exception of the beginning of the first quarter, which was negatively impacted by the tail end of the COVID outbreak, all risk management-related metrics have started to recover since February, and we expect both our loan originations and profitability for the first quarter of 2023 to improve from levels achieved in the fourth quarter of 2022. In addition, we expect to continue double-digit growth in both our loan originations and net profit for the year 2023. 

Jay Xiao -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Jamie Wang -- Investor Relations Manager

Let me now hand over the call to our CFO for the financial update. Thank you.

James Zheng -- Chief Financial Officer

OK. I will now provide more details on our financial results. Please note that all numbers are in RMB terms unless otherwise stated. In the fourth quarter, we continued our third consecutive quarter of recovery, both in our overall business and in our financial numbers.

This was in spite of the impact of COVID and weaker economic conditions. Our continued recovery was the result of the management's continuous efforts in overhauling our risk management, focusing on better-quality user segments, upgrading our technology and operational capabilities, as well as our new cost restructuring initiatives. First, please let me explain at a high level what happened in the quarter as compared with the same quarter of 2021. Total loan originations for the quarter reached 56.1 million, an increase of 29% year over year in spite of the COVID outbreak and beating the high end of our guidance.

Revenue grew by 38.7% year over year to reach 3.1 billion for the quarter, which was mainly driven by the GMV growth. The weighted average APR stood at approximately 24% for the fourth quarter, close to 2 percentage points lower than a year ago. Loans with APR under 24% now make up more than 83% of all loans. Partially offsetting the negative impact from the lower APRs on our loans was a decrease in our cost of funding, from 7.7% a year ago to 6.8% in the fourth quarter.

Loan tenors increased to 13.9 months, versus 10.3 months a year ago. Importantly, we have been relentless in our focus on overhauling our risk management. This includes a focus on better credit user segments and rebuilding the team, the systems, and the infrastructure. Jared will elaborate more on this shortly.

The improved results from our efforts can be partially seen in our 90-day-plus delinquency rate, which was at 2.53% in the fourth quarter, as compared to 2.66% in the third quarter. The 30-day-plus delinquency rate was at 4.62%, basically remaining stable as compared to third quarter in spite of the rapidly deteriorating COVID situation in December. At the same time, we have launched a new initiative to restructure our cost by benchmarking against the industry. We have seen some early improvements to operating expenses.

Specifically, processing and servicing cost, sales and marketing, research and development, and the G&A expense combined as a percentage of average loan balance are at about 1.2%, as compared to 1.3% in the third quarter. G&A expense as a percentage of average loan balance stood at 0.1%, versus 0.12% in Q3. Of course, we realize this is only a very small start, but we will be sure to fully explore all the opportunities to improve our operational efficiency in the future. As a result of the aforementioned, we are able to report net income of 301 million, an increase of 18% year over year.

This is not an easy achievement in light of the severe impact of the COVID outbreak and the weak macroeconomic conditions. Apart from the above year-over-year analysis, I would also like to elaborate a little bit more on the progress achieved through some quarterly comparisons. Total GMV was 56.1 billion, almost flat from Q3, as we have generally taken a more prudent approach toward scale in terms of the uncertainty around COVID for all of 2022. However, total Q4 revenue grew 13.4% quarter over quarter due to an improved take rate of 2.59%, versus 2.55% in Q3.

The up [Audio gap] take rate is a result of an overall improvement in asset quality and lower funding cost, which has continued to improve since the beginning of the year. Operating expenses declined by 2.1% quarter over quarter as a result of our cost restructuring initiatives. And this, in turn, led to a sequential growth in net income of 9.3%. In summary, we have made great progress during the fourth quarter of the past year from both a year-over-year and a quarter-over-quarter perspective.

If you take a look at the full year 2022 numbers, total GMV was 204.6 billion, a decrease of only 4.3% year over year, with the total loan balance reaching 99.6 billion, an increase of 15.9% year over year. Total revenue was 9.9 billion, a decline of 13.3% year over year. Obviously, like most other companies, we have been negatively impacted by the weak macroenvironment. However, since hitting the lowest point in earnings in the first quarter of 2022, we have since seen a continuous recovery in profitability, and the fourth quarter represents the third consecutive quarter of this recovery.

This demonstrates the resilience and the sustainability of our business. We fully realize that, in our turnaround, we still have a long way to go, but the fourth quarter of 2022 should mark the end of three years of macro-related uncertainty, with the ending sounding on a bit of a positive note. Next, let's take a detailed look at the financials. As mentioned, our total operating revenue for the fourth quarter was 3.1 billion, representing an increase of 13.4% quarter over quarter and 38.7% year over year.

Revenue from credit facilitation service was approximately 2.0 billion, representing a 17.9% increase quarter over quarter and an over 71.4% increase year over year. Revenue from tech-empowerment service was 413 million, representing a 17.4% decrease quarter over quarter and 34.6% year over year, which was mainly due to the COVID impact, where both the volume and the rev share percentage were lowered. Revenue from installment e-commerce platform service was 674 million, representing an increase of 28.4% from the last quarter and an increase of 59.3% year over year, which can be attributed to a strong Singles' Day shopping festival. Moving on to the expense side of this quarter.

Sales and marketing expense decreased by 0.4% quarter over quarter, which was mainly due to our scaled-down approach to new user acquisition in a time of macro uncertainty. Recently, however, we have noticed an improvement in user credit quality, as well as improved economic activity. We will continue to closely monitor this and other macro indicators, and we'll be sure to seize on the right opportunities to invest in new user acquisition when conditions are favorable. Research and development expenses decreased by 3.5% quarter over quarter and decreased 17.1% year over year to 136 million.

General and administrative expenses decreased by 7% quarter over quarter and then 17.9% year over year to 97 million. While our top-line revenue continued a promising upward trajectory this year, G&A expenses remained very stable and decreased on a quarter-over-quarter basis for three consecutive quarters, demonstrating the continuous improvements to our operating efficiency, which we expect to continue in the future. Net profit was approximately 301 million in the fourth quarter, a 9.3% increase quarter over quarter and a 17.9% year over year, in line with our expectation. Next, some updates on our share repurchase program and our convertible notes.

First, on our share repurchase program, in March 22, 2022, the company's board authorized a $50 million U.S. dollars share/ADS repurchase program. And in addition, in November 2022, the company's board authorized a second share repurchase program, under which the company could purchase up to an aggregate of $20 million U.S. dollars of its shares/ADS over the next 12 months.

As of December 31, 2022, the company had repurchased a total of approximately 22 million ADS for about $48 million U.S. dollars. Lexin's management remains open to making further repurchases in the future. Separately, on our convertible notes, we have entered into an amendment agreement with PAG regarding our existing convertible notes in the amount of $300 million U.S.

dollars. According to the original payment schedule, the company was potentially expected to pay the principal plus interest in one lump sum in September 2023. With the amendment, we're able to begin the repayment ahead of the original schedule and complete the installment payment plan over a 14-month period ending in April 2024. The notes remain convertible into fully paid Class A ordinary shares of the company or ADS at the original conversion price of $14 U.S.

dollars per ADS at the holder's option. At the end of 2022, the company had a cash position of 4.1 billion on hand and a net equity position of 8.6 billion. Although Lexin has a strong balance sheet and sufficient cash reserves to meet the original terms of the convertible notes agreement, we see the new arrangement as more beneficial for the company as it will allow us to smooth out the cash flow impact from the repayment as opposed to a single lump sum payment. This will give us more time and flexibility to efficiently plan and utilize capital in pursuing business growth opportunities.

Finally, I would like to discuss our outlook for the first quarter of 2023. Based on the company's preliminary assessment of the current market conditions, total loan originations for the first quarter of 2023 are expected to be around 60 billion RMB, representing an increase of 39% on a year-over-year basis. These estimates reflect the company's current expectation, which is subject to change. For 2023, as Jay mentioned earlier, we remain cautiously optimistic about China's macroeconomic recovery, consumption outlook, and stabilize the regulatory environment.

Currently, we can see that our turnaround is well underway. As we continuously improve and revamp ourselves to be able to better meet the new challenges and address new opportunities ahead, we are looking forward to establishing a more solid and sustainable foundation for our future growth and profitability. With that, I would like to turn the call over to our president, Jared Wu, who will discuss our risk management. Jared, please go ahead.

Jared Wu -- President

[Foreign language]

Jamie Wang -- Investor Relations Manager

Thank you, James. Good morning and good evening, everyone. It's my great pleasure to speak with all of you again. So, I'll elaborate more on our risk management measures and related progress.

The impact of the COVID outbreak in December brought some pressure on our risk management, which, in turn, led to some short-term deterioration in our early risk metrics. But thanks to our continued focus on stable risk policies and prudent customer acquisition, as well as the use of our previously built COVID risk monitoring system and refined management mechanisms, we were able to mitigate the short-term impact. At the end of the fourth quarter, we were able to hold our 30-plus-day delinquency rate flat, compared to the third quarter at 4.62%, with our 90-plus-day delinquency rate continuing a steady decrease to 2.53%, down 13 basis points quarter over quarter. As a result of the trend that we're observing right now, with a recovery in China's social and economic activities after the Chinese New Year, we are seeing all our credit metrics recovering to normal levels and continue on a positive trajectory. 

Jared Wu -- President

[Foreign language]

Jamie Wang -- Investor Relations Manager

In the fourth quarter, increasing the overall percentage of our prime customers was our top priority. With our focus on this goal throughout the past year, we have worked on continuously improving our overall risk management in the following areas. First, we focused on our prime customers by restructuring our user-tiering system. This new system enables us to target the prime customer group in a more focused manner.

Second, to further improve our core risk management capabilities, we invested heavily in the acquisition and utilization of compliant external data sources and have substantially improved our ability to data mine such data to further segment users with different risk profiles. In particular, we put heavy emphasis on the credit data from PBOC, with our mining and usage of this data increasing dramatically. Third, due to the improvement on our capacity to handle data, we are able to more quickly perform higher iterations of our user identification models to target different customer segments, and we have made significant strides in user risk recognition. As a result of the above improvements, we are seeing notable increases in the rate of improvement in our asset quality, which is being demonstrated in our fourth quarter and in our first quarter risk performance metrics of 2023.

Since the beginning of the year, we have noticed that our day-one delinquency rate has followed a downward trend. On the basis of our continuous investment and current trend, we are confident that, in 2023, our risk management capabilities will make additional improvements and breakthroughs.

Jared Wu -- President

[Foreign language]

Jamie Wang -- Investor Relations Manager

2022 was a challenging year but was also a year where we actively raised our risk management capability to another level and rapidly implemented a more refined risk management system. Going forward, as mentioned both by Jay and James, while we are encouraged by the improving macroeconomic conditions and trends, we will remain cautiously optimistic, adhering to a policy of putting risk management first and focusing on laying a solid ground for the healthy, sustainable, long-term, and balanced growth of the company. Thank you. This concludes our prepared remarks.

Operator, we are now ready to take questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] First question comes from Yada Li from CICC. Please go ahead.

Yada Li -- CICC -- Analyst

[Foreign language] Then I'll do the translation. Hello, management. This is Yada from CICC and thanks for taking my question. My question is from the user demand side, after the COVID, currently, are we experiencing a notable recovery? And I was wondering what's the guidance on loan growth in the coming quarters and the full year 2023 and 2024? That's all.

Thank you.

Jay Xiao -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Jamie Wang -- Investor Relations Manager

OK, we're actually feel -- we can feel for ourselves the fast recovery of the consumption of the entire nation actually, especially on individual consumption, say, for example, offline restaurants, touring spots. You can see people lining up for restaurant, waiting. And me, myself, for the past three years during the COVID, you know, time while I myself was driving, there never was much of the traffic, even in Shenzhen. But right now, we're seeing traffic jams literally everywhere.

As for our company, Lexin, itself, for the ticket side of our scale, we were not terribly affected by the overall consumption scenario. Our risk alone was actually better, alongside with the recovery of the consumption. Especially after Chinese New Year, we are seeing better risk indicators with the macroeconomic revival and recovery of the entire nation.

Jay Xiao -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Jamie Wang -- Investor Relations Manager

So, as for e-commerce platform, as we mentioned earlier, it actually saw a growth a little bit against the overall e-commerce trend as our nation's economy not being a little bit hit by the overall COVID restrictions and all the policies, all that for the past several years, especially past year. The credit needs actually grew. And for us, we are a little bit different from other e-commerce platforms. We are still mostly mainly credit-driven.

So, when the -- in a way, when the macro economy is not as good as before, our credit need was actually -- it actually went higher.

Jay Xiao -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Jamie Wang -- Investor Relations Manager

So, for the full year guidance for 2023, well, overall, our -- we are confident on the recovery of the overall consumption of the country. But we -- like we said before, we are continuously to remain prudently optimistic. We still put sustainable development, especially on the profitability, first. And we are -- we will take actions when the time is right to invest in S&M.

And we actually do believe it will be a good year for Lexin to develop, especially after the last year, which was 2022, we had a turnaround. We had a strategic adjustment of the company. In terms of the full year loan guidance, we expected, as of right now, under current situation, on our speculation, it should be around 245 billion to the top line of 255 billion.

Jay Xiao -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Jamie Wang -- Investor Relations Manager

And also, this year, our installment e-commerce platform services, as well as tech-empowerment service business, will be both of our -- are the two growth drivers as well.

Jay Xiao -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Jamie Wang -- Investor Relations Manager

Thank you.

Operator

For the questions -- one moment for the next question. Next question is from Alex Ye of UBS. Please go ahead.

Alex Ye -- UBS -- Analyst

[Foreign language] So, I have two questions. First one is on asset quality. Management has mentioned that various indicators have shown notable improvement beginning of the year. I'm wondering if you can share any color on what's the expectation in 2023 in terms of the magnitude of improvement versus last year, for example, in terms of the vintage change of rate and the annualized credit cost perspective? Second question is on the loan pricing and funding cost.

I'm wondering what -- to what extent do we expect them to decline in this year and their implication for our take rate outlook? Thank you.

Jay Xiao -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Jamie Wang -- Investor Relations Manager

OK. In terms of the asset quality, for the year 2023, as I mentioned earlier, we are still confident in the macroenvironment. We are still confident in putting our risk management as one of our priority and also the optimization of the -- our customer segmentation, as well as the mixing of the matrix and modeling. We expect to continue our risk indicators to continue to decrease in risk level, especially with our new -- the percentage of our RR1 to 3 prime customers in our new loan continue to increase, and we target to expedite to shrink down the size of the RR6 to 8, which are less higher risk customers on the new loan.

As the new loan structure gets better, the overall structure gets utilized and optimized, the overall structure of the outstanding loan gets better, our risk management can show a very prominent sign of decrease. In terms of APR, for this quarter, we already have over 80% mix within 24. And for this quarter, our pricing is actually indefinitely close to 24%. And in the near future, we expect to see the pricing level to be around this range.

In terms of take rates, as our risk level gets better, like I mentioned earlier, the funding cost continues to decrease. As you might have heard earlier in my script, we mentioned that this quarter -- for the quarter -- for the fourth quarter of 2022, our funding costs actually lowered comparatively, sequentially even quarter over quarter. And we are, for this quarter, first quarter of 2023, seeing also lowered funding costs. These two factors together, we actually expect our take rate to continue to increase, and we are seeing, for the past couple of months, take rates were over 3%.

Thank you. Hope that answers your question, Alex.

Operator

Thank you for the questions. One moment for the next questions. Next, we have Zoe Zhou from CLSA. Please ask your question.

Unknown speaker -- CLSA -- Analyst

[Foreign language] And I will do the translation. Thank you for taking my question. This is Zoe from CLSA. So, the first question regarding the coupling of the link, and we are wondering when we can target them to achieve their full compliance in terms of all the existing loan priced below 24%.

And second, what's our business strategy between capital-light and capital-heavy model going forward? Thank you.

Jay Xiao -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Jamie Wang -- Investor Relations Manager

So, as of right now, we have not yet received further clear instructions. It's worth mentioning that we are not one of the 14 platforms, and the ratification of [Technical difficulty] are more [Technical difficulty] for the 14 platforms are more on the decoupling, disconnecting from the banks. And also, it's worth noting that we are both simultaneously in discussion with Baihan, as well as Pudao. Especially with Pudao, we are expect, as of right now, based on the progress, to have the trial run by or before June 30th.

But right now, as far as we know, with all the adjustment, as well as all the changes with the regulators, the ratification and the actual deadline is possible to be delayed. And also, with the new structure -- the regulatory structure being adjusted, the date -- there is a possibility of a postpone of a date, and the regulator's foundations might need time to cohort itself, put themselves together in a more formal and regulated way to actually proceed.

James Zheng -- Chief Financial Officer

OK. Regarding your second question, I will take a shot at it. Basically, you're asking about the capital-light model. Right now, the revenue share model with the financial partners, basically, it comes about -- in terms of revenue, account roughly about 20% to 30%.

I think this will continue to be our target for the remaining of the year. Obviously, this is a balance between the profitability -- the risk we are taking versus the profitability, right? So, if we increase the risk-taking on the business side, obviously, this will increase the profitability. But if we want to be kind of more capital-light, obviously, you are taking less risks, then this is the balance we have to take. So, I think directionally, from the company perspective, we do want to gradually increase the capital-light model.

And what will help us in this regard is that we have the tech-empowerment business that we have with the medium- to smaller-sized banks. And with increase of that business, obviously, we will increase the rev share with the financial partners. Eventually, this will lead to a gradual increase of the capital-light model. Hope this answers your question.

Operator

Thank you very much. With that, I'd like to hand the call back to the management for closing remarks. Thank you.

Jamie Wang -- Investor Relations Manager

Thank you again, everyone, for joining us today. If you have further questions, please contact us via our contact information available on our IR website. Thank you.

James Zheng -- Chief Financial Officer

Thanks. Bye bye.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Jamie Wang -- Investor Relations Manager

Jay Xiao -- Founder, Chairman, and Chief Executive Officer

James Zheng -- Chief Financial Officer

Jared Wu -- President

Yada Li -- CICC -- Analyst

Alex Ye -- UBS -- Analyst

Unknown speaker -- CLSA -- Analyst

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