LX

Good day and thank you for standing by. Welcome to Lexin first quarter 2026 earnings conference call. At this time, all participants are in listen only mode. After the speakers presentation, there will be question and answer session. Please be advised that today's conference is being recorded. I'd like to hand the conference over to your first speaker today, Will Tan, IR Director of the company. Please go ahead.

Thank you operator. Hello everyone, welcome to our first quarter 2026 earnings conference call. Our results were released earlier today and concurrently available on our IR website. Today, you will hear from our Chairman and CEO, Mr. Jay Wenjie Xiao, who will provide an update on our overall performance and strategies of our business. Our CRO, Mr. Arvin Qiao, will then provide more details on our risk management initiatives and updates. Lastly, our CFO, Mr. James Zheng, will discuss our financial performance. Before we continue, I would like to refer you to our safe harbor statement in our earnings press release, which also applies to this call, as we will be making forward-looking statements. Last, please note that all figures are presented in renminbi terms, and all comparisons are made on a quarter-over-quarter basis unless otherwise stated. Please kindly note Jay and Arvin will give their whole remarks in Chinese first, then the English version will be provided by AI-based voices. With that, I'm now pleased to turn over the call to Mr. Jay Wenjie Xiao, Chairman and CEO of Lexin. Please.

好的，大家好，很高兴和各位分享我们2026年第一季度的业绩。第一季度，面对宏观环境及行业挑战，公司布局多年的独特的多元生态业务展现出了较强的经营韧性。季度内，分期零售、线下普惠及To B数字科技业务等交易量占比接近50%，生态业务增速高于线上助贷业务，成为公司新的增长曲线。新旧业务动能转换初步完成，多元发展的长期主义初见成效，公司正朝着稳健可持续的健康方向发展。季度内，公司交易额578.98亿元，环比增长了15.9%，同比增长12.2%，营收33.09亿元。活跃用户516.7万，环比增长14.1%，同比增长8.6%。新增活跃用户数144.4万，环比增长63%，同比增长101.6%。净利润2.01亿元。多项风险指标保持稳定并持续改善。 接下来我向大家介绍重点工作的进展。 第一，多元生态业务占比近50%，成为新的增长引擎。第一季度，虽有春节假期的影响，公司分期零售、线下普惠、To B数字科技等业务依然稳定增长，交易量大幅提升，为公司业绩带来新的动能。高效对接流量平台与金融机构，打开To B增长的新空间。一季度，公司布局多年的To B数字科技业务开始快速增长。我们的Yunxi Technology PRO解决方案，通过技术能力与运营经验的结合，在互联网流量平台与各类金融机构之间搭建了高效协同的桥梁，让合作平台流量实现精准高效的分发，助力合作机构获得最稳健盈利的资产，充分实现了三方的共赢。分期零售完善供应链，全面渗透至刚需消费场景。分期零售业务深耕分期消费场景，完善供应链体系，丰富吃、穿、用、行、游、购、娱、宠等多品类商品供给。季度内，平台发挥头部品牌的合作优势，新增引入知名头部品牌近150个，并推出品牌特卖频道，签约20多个国内外时尚运动品牌。频道上线以来，参与特卖品牌总销量环比提升43%，充分满足了用户品质消费需求。针对民生刚需、节庆送礼等场景，在元旦、年货节、春节等消费节点，平台推出多场大促活动，持续带动消费增长。在3C数码领域持续不断贴息免息优惠，有效促进了用户活跃度的提升。季度内，平台优质用户交易订单环比增长37.5%。普惠业务扩大县域布局，在下沉市场挖掘新的增量。公司线下普惠业务一直聚焦本地化经营，面向农林牧渔等特色产业。公司推出独特的针对行业客群的风险模型与审批策略，助力县域小微个体工商户资金需求与地方金融机构精准匹配，推动普惠金融活水持续流向县域，助力县域经济的发展。季度内，海外业务也取得了稳定的发展，规模、盈利与资产质量继续保持稳步的增长。 第二，调优风险策略，优化产品矩阵，资产质量有所改善。一季度，我们持续调优风险策略，深度迭代的算法和模型大幅提升渠道对接及目标用户筛选效率，新推出真人报告、解毒智能以及交互式真伪功能，让用户识别更加准确，有效支持了优质客户的个性化定价定额。公司开放所有产品自随借随还、先息后本的灵活化功能，聚焦白领、小微客群，打造差异化授信与触达策略。通过场景化经营，向优质客群倾斜定价与额度资源，持续促进优质客群活跃，季度内公司资产质量延续稳定恢复的态势。新增资产和全量资产风险同步改善。全量资产逾期率环比四季度下降7%左右，30天逾期率保持逐月回升。新客质量有所改善，优质客群放款规模显著增多。预估一季度新增放款FPD30下降约6%。一季度公司不断加大消保和客户体验改善方面的资源投入。我们强化前台服务消保团队与各业务条线之间的协调联动，使信息传递更为顺畅，问题响应更加及时，整体处理闭环机制更加高效。在服务体验方面，通过智能化路由分配与排队策略，并引入高峰期预警机制，用户服务效率得到明显提升，核心用户服务指标进一步改善。在用户关怀层面，我们通过更加完善的模型，强化用户的针对不同群体实施更有针对性的服务关怀举措，整体提升了用户的体验与满意度。在打击金融黑灰产方面，公司积极响应有关部门部署，发挥在人工智能大数据领域的技术优势，完善风险识别、案件侦破等全链条防御与治理体系，有效地维护了消费者的合法权益。 展望未来，公司将在多元布局已取得阶段性成果、业务呈现良好增长态势的基础上，继续发力分期零售、线下普惠、To B数字科技等业务，在多元稳健发展的道路上继续前进。我们相信独特的优势将会持续增强公司的竞争优势，充分应对未来的不确定性，为股东创造长期可持续的回报。接下来我把发言时间交给阿伟，谢谢。

Hi everyone, thanks for joining us today for our first quarter 2026 earnings call. In the first quarter, against the backdrop of macroeconomic and industry challenges, our unique and diversified business ecosystem, which we have been building for many years, demonstrated strong operational resilience. During the quarter, the loan volume of our installment e-commerce, offline inclusive finance and Fintech Empowerment businesses accounted for nearly 50% of the total. Ecosystem businesses grew faster than the online loan facilitation business, becoming the company's new growth drivers. This indicates the transition from old to new growth drivers, the initial success of our long term oriented strategy of diversified development, and the company's steady progress toward healthy and sustainable development. During the quarter, the company achieved a loan volume of RMB 57.9 billion, representing a quarter-over-quarter increase of 15.9% and a year-over-year increase of 12.2%. Revenue reached RMB 3.3 billion.

Number of active users stood at 5.17 million, a quarter-over-quarter rise of 14.1% and 8.6% year-over-year. Number of new active users was 1.44 million, up 63.3% quarter-over-quarter and 101.6% year-over-year. Net profit reached RMB 201 million. Besides, a number of key risk indicators continued to show improvement, maintaining a stable trend. Next, I will walk you through the key initiatives we have undertaken since the first quarter. First, our diversified ecosystem businesses accounted for nearly 50% of our total loan volume, becoming the new growth drivers. In the first quarter, despite the seasonal impact of Chinese Spring Festival holiday, our installment e-commerce, offline inclusive finance and Fintech empowerment businesses continued to grow steadily, with loan volume increasing significantly, adding new growth momentum to the company's overall performance.

We have unlocked a new growth space for our B2B business by efficiently connecting with internet traffic platforms and financial institutions. In the first quarter, our Fintech empowerment business, which we have been building for many years, began to grow rapidly. Our Yunxi Technology PRO solution builds a bridge of resource collaboration between Lexin, internet traffic platforms and various financial institutions by incorporating our technological capabilities and operational experience. It enables our partner platforms to distribute traffic precisely and efficiently, empowers financial institution partners to obtain assets with stable profitability, and thereby benefits for all three parties. Our installment e-commerce refined its supply chain and fully penetrated essential consumption scenarios. Installment e-commerce business continued to deepen its presence in different consumption scenarios, refine the supply chain system, and enrich product offerings across categories such as food, apparel, transportation, travel, shopping, entertainment, and pets.

During the quarter, leveraging our advantage in partnerships with industry leaders, we added nearly 150 well-known brands and launched an outlet channel for select merchants, signing more than 20 domestic and international fashion and sports brands. Since its launch, total transaction volume of participating brands increased by 43% quarter-over-quarter, fully meeting users' demand for quality consumption. Targeting essential daily needs and festive gifting scenarios and several major promotional campaigns during key consumption periods such as New Year's Day, Chinese Spring Festival Gift Fair and the Lunar New Year holiday, consistently driving consumption growth. In the 3C digital product segment, ongoing interest-free and discount offers effectively boosted user activity. During the quarter, the number of orders from high-quality users on our platform increased by 35.7%. Inclusive finance business expanded its county-level presence, unlocking new growth in lower-tier markets. Our offline inclusive finance business has always focused on localized operations.

For specialized industries such as agriculture, forestry, animal husbandry and fishery, we have launched unique risk models and credit approval strategies tailored to industry-specific customer segments. This helps match the funding needs of county-level small and micro businesses and individual merchants with local financial institutions, ensuring that inclusive financing resources continue to flow into county economies and support their development. During the quarter, our overseas business developed steadily with continued stable growth in loan volume, profitability and assets. Second, we refined our risk strategies and optimized our product matrix, leading to improvements in asset quality. In the first quarter, we continued to adjust and optimize our risk strategies. Our deeply iterated algorithms and models significantly improved the efficiency of channel connection and target user screening.

We newly launched a credit report interpretation AI agent and an interactive credit enhancement function, making user identification more accurate and effectively supporting personalized pricing and credit line allocation for high-quality users. We have made flexible repayment features such as on-demand borrowing and bullet repayment available across all products. Focusing on white-collar workers and small and micro business owners, we developed differentiated credit granting and outreach strategies. Through scenario-based operations, we allocated pricing and credit line resources preferentially to high-quality customers, consistently boosting their activity levels. During the quarter, our asset quality continued its steady recovery, with risk indicators improving for both existing and new assets. For total assets, day one delinquency ratio decreased by about 7% quarter-over-quarter. 30-day collection rate improved month-over-month. New customer quality also improved. Loan volume to high quality segments rose notably.

FPD30 of new loans initiated in the first quarter is expected to decrease by about 6%. In the first quarter, we continued to increase resource investment in consumer protection and customer experience improvement. We strengthened the coordination between our frontline service and consumer protection teams and various business lines, enabling smoother information flow, more timely issue response and a more efficient closed loop resolution mechanism. In terms of service experience, by optimizing intelligent routing and queuing strategies and introducing peak time early warning mechanisms, we significantly improved service efficiency with key customer metrics showing further improvement. On the customer care front, we enhanced our user behavior analysis through more sophisticated models and refined customer tiering, implementing more targeted care measures for different segments, which improved overall user experience and satisfaction.

In combating illegal financial activities and fraudulent syndicates, we actively responded to relevant regulatory deployments, leveraging our technological advantages in AI and big data to strengthen the end-to-end defense and governance system, including risk identification and case detection, thereby safeguarding consumers' legitimate rights and interests. Looking ahead, building upon the initial success of our diversified ecosystem strategy and the solid growth momentum of our businesses, we will continue to drive our installment e-commerce, offline inclusive finance and fintech empowerment businesses steadily advancing along the path of diversified and resilient development. We believe that our unique ecosystem advantages will continue to strengthen the company's operational resilience, enabling us to navigate future uncertainties and create long-term sustainable returns for our shareholders. Next, I'll hand over the floor to our CRO, Arvin. Thanks.

谢谢建。下面我将汇报一下今年一季度风险管理方面的工作情况。2026年一季度，随着新规落地，对行业风险影响逐步降低。一季度行业整体风险开始平稳回落，我们也保持了从去年11月起风险稳步下降趋势。从具体风险表现来看，一季度环比25年四季度全量资产入催率下降了7%左右，30天出催率也保持了逐月回升。预估一季度新增放款FPD30下降约6%左右，整体风险表现持续改善。下面介绍一下我们一季度采取的具体风险措施。 第一，我们季度继续加大模型在风险管理场景中的应用，持续提升风险管理的效率和效果。在负向处置方面，利用大模型能力，优化升级了负向处置机器人和风险自动巡检机器人。有效地提升了风险识别能力和风险客户处置效率，使得一季度风险继续保持下降趋势。同时，通过大模型进行实时交互提额，做大优质份额，促进新增放款，风险持续改善。通过大模型实现线上提额实时交互，高效获取客户的额度和增信材料，这不仅大幅提升了风险识别的准确性与效率，更能基于对客户风险的全面洞察和对客户需求的全面了解，为客户提供满足其个性化需求的信贷offer。 第二，消费信贷业务通过优质客群专项经营，促进优质规模稳步增长。重点针对优质白领和小微客群，通过专项识别模型、差异化提额降价策略和管护服务，大幅提升优质专项人群的可经营人数以及动资率，促进优质规模显著增长。一季度相比四季度，白领客群规模上涨了56%，优质小微客户规模上涨了30%。优质人群专项经营方案初见成效，二季度将持续优化优质人群专项经营能力，经营服务促进优质资产规模增长。 第三，普惠金融业务。我们持续深耕广阔县域，全面落地本地化经营策略。针对县域客户的特点，开发县域小微风控模型，优化准入、授信、定价等风控策略，适配线下批零、农资、养殖等类别小微客户的风险特点和信贷需求。同时通过线上线下，小微客群风险管理和贷后回收。截止目前，覆盖近百个县域，累计服务400万家小微个体，风险表现稳定，业务规模持续提升。 另外，我们在一季度还加大了对黑灰产的识别和打击，构建事前预警、事中拦截、事后打击生态协同全面陆防空体系，打击代理诉讼等黑灰产行为，向公安机关移送有效黑灰产线索，并协助成功打击山东某黑灰产团伙，抓获犯罪嫌疑人40余名。 展望2026年二季度，我们将继续加强资产结构优化以及放款的风险管控，同时更好满足优质客户需求，提升用户体验，促进优质资产规模增长，保障风险平稳可控，逐步将风险水平控制到风险偏好以内。下面有请CFO James介绍公司一季度的财务表现情况。

Thanks, Jay. Next, I will provide a review of our key initiatives and achievement in risk management for the first quarter of this year. In the first quarter of 2026, as the impact of the new regulations on industry risk gradually subsided, industry-wide risk began to decline. We also maintained the steady risk reduction trend we have seen since last year. Regarding specific risk performance compared to the fourth quarter of 2025, day one delinquency ratio of total assets decreased by approximately 7%. The 30-day collection rate continued to recover month-over-month, and we estimate that FPD30 for new loans initiated in the first quarter to decline by about 6%. Overall, risk performance continued to improve. Now let me walk you through the specific risk initiatives implemented during the quarter.

First, we continue to scale up the application of large models in risk management scenarios during the first quarter, consistently improving the efficiency and effectiveness of risk management. On the high-risk asset management side, we leverage large model capabilities to optimize and upgrade our high-risk asset management robot and automated risk inspection robot, effectively enhancing our risk identification capabilities and the efficiency of high-risk customer management. This helped sustain the downward trend in risk during the quarter. At the same time, we used large models to enable real-time interactive credit line increases, growing the prime asset base and driving continued improvement in new loan risk. Through large models, we achieved real-time online interaction for credit line increases, efficiently capturing customers' credit needs and credit enhancement documentation.

This not only significantly improved the accuracy and efficiency of risk identification, but also enabled us, based on a comprehensive understanding of customer risk profiles and needs, to offer customers personalized credit offers that meet their specific requirements. Second, in our consumer credit business, we promoted steady growth in prime asset volume through dedicated prime customer segment management, focusing on prime white-collar customers and small and microbusiness owners. We leverage dedicated risk identification models, differentiated credit line increase, and pricing reduction strategies and account management services to substantially increase both the addressable customer base and drawdown rate of prime target segments, driving significant growth in volume. Compared with the fourth quarter of 2025, loan volume from prime white-collar customers increased by 56%, and volume from prime small and microbusiness customers increased by 30% in the first quarter, demonstrating the early success of our prime segment management approach.

In the second quarter, we will continue to refine our prime segment management capabilities to further drive prime asset growth. Third, regarding our inclusive finance business, we continue to deeply cultivate broad county-level markets and fully implemented a localized operation strategy. Tailored to the characteristics of county-level customers, we developed a county-level business risk model and optimized risk strategies with optimized customer onboarding, credit granting, and pricing to match the risk profile and credit needs of small and micro customers in offline wholesale and retail, agricultural supplies, and farming segment. At the same time, we strengthened risk management and post-loan collection for small and micro customers through online and offline coordination. To date, we have covered nearly 100 counties, served over 4 million small and micro merchants and individual operators, maintained stable risk performance, and continue to grow loan volume.

Additionally, in the first quarter, we strengthened our identification and focus on illegal and fraudulent activities. We built an end-to-end prevention and control system encompassing early warning, in-process interception, post-event enforcement, and ecosystem coordination to combat illicit activities such as agent-assisted complaints. We provided actionable leads to public security authorities, assisted in the successful crackdown of a fraudulent syndicate in Shandong Province, and facilitated the arrest of over 40 suspects. Looking ahead to the second quarter of 2026, we will continue to optimize our asset mix and strengthen risk management over new loans. At the same time, we will better serve prime customers and enhance their experience, driving further growth in high-quality assets while keeping risk stable and controllable. Our goal is to gradually bring risk levels back within our target risk appetite.

Next, I will hand over to our CFO, James, to provide a review of the company's financial performance for the first quarter.

Thanks, Arvin. I will now provide a detailed overview of our first quarter financial results. Please note that all figures are presented in renminbi terms, and all comparisons are made on a quarter-over-quarter basis unless otherwise stated. During the first quarter, the industry continued to navigate a period of adjustment. Against this complex backdrop, our diversified business ecosystem demonstrated continued operational resilience. Driven by the structural optimization of our business portfolio, we successfully grew our total loan volume. While our online consumer finance business faced pressure due to the macro uncertainties, our ecosystem segments, particularly the fintech empowerment service, achieved solid growth. Consequently, total revenue for the first quarter was RMB 3.3 billion, representing an 8.7% sequential increase, with net income remaining relatively stable at RMB 201 million. Let's take a review of our first quarter financial results.

First, net revenue of the credit business, which is derived by adding up credit facilitation service income and tech empowerment service income, net of credit costs, including provisions and fair value changes, and the funding cost was CNY 1.5 billion, representing a 7.2% or CNY 98 million increase quarter-over-quarter. The overall growth was largely driven by CNY 382 million rise in tech empowerment service income. This was underpinned by revenue growth from lower provision top-ups for our capitalized portfolio, amongst improving asset quality. Since our capitalized income is recorded net of credit costs, the material sequential decline in provisions directly boosted this revenue line. Credit facilitation service income, our capital-heavy business, declined by about 10%, or CNY 253 million. This reflects the ongoing volume and pricing headwinds in our online consumer finance business, partially offsetting the increase in our tech empowerment service income.

Second, net income of the installment e-commerce business, defined by installment e-commerce revenue, net of cost of inventory sold, increased by CNY 41 million to CNY 208 million. The total net revenue summing the credit and installment e-commerce business added up to CNY 1.7 billion, a 9.1%, or CNY 138 million increase quarter-over-quarter. On the expense side, operating expenses, including sales and marketing, research and development, general administrative expenses, and processing the servicing cost increased by 13.8%, or CNY 169 million to CNY 1.4 billion. Tax and others decreased by 20.9%, or CNY 18 million to CNY 68 million. Consequently, total expenses added up to CNY 1.5 billion, an increase of CNY 151 million. By deducting the total expenses of CNY 1.5 billion from the total net revenue of CNY 1.7 billion, we arrive at a net income of CNY 201 million, a decrease of 5.9% or CNY 30 million quarter-over-quarter.

While there are industry macro headwinds, our diversified ecosystem has successfully sustained our financial performance. Now let me walk you through three key business highlights behind these results. First, the resilience of our diversified business ecosystem. Amid continued industry consolidation in the first quarter of 2026, we proactively optimized our business mix to strengthen risk management and compliance. Anchored by our diversified ecosystem, we continue to demonstrate strong operational resilience. Consequently, non-online consumer finance GMV, which encompasses offline inclusive finance, fintech empowerment services, and our e-commerce businesses, grew to nearly 50% of our total GMV, up 42% sequentially, effectively offsetting the contraction in our online consumer finance business. This shift was largely fueled by our fintech empowerment or ShuKe model, where we partnered with leading internet platforms and banks on risk assessment and assumed the corresponding credit risk.

With loan volume surging to around CNY 31 billion, this model's financial contribution is not yet fully reflected due to its lower pricing and advertise the revenue recognition. However, the build-up of the ShuKe model creates a robust revenue pipeline, and it will improve our long-term asset quality and ensure steady profitability across market cycles. The installment e-commerce business maintained its positive momentum, supported by stable transaction volumes and improving gross margins, which I will elaborate later. At the same time, our offline inclusive finance and overseas business advanced steadily, serving as additional stabilizers and diversifiers for our broader business portfolio. Second, the steady development of our installment e-commerce business. Our installment e-commerce business continue to be deeply integrated into our ecosystem, providing seamless and convenient consumption scenarios and acting as a unique competitive advantage. Given the current macroeconomic environment, this segment continued to prioritize asset quality over rapid expansion.

While demand remained strong in the first quarter of 2026, we deliberately moderated the growth to contain credit risk within our risk appetite. As a result, installment e-commerce GMV remained steady at CNY 2.2 billion. Gross profit from the e-commerce business reached CNY 208 million, representing a 24% increase, with gross margin expanded by 169 basis points sequentially to 9.4%. This solid performance was largely driven by the continued refinement of our e-commerce operations. Ultimately, the steady development of this segment not only generates reliable gross profit, but also allows us to capture and serve the diverse consumption needs of our users, further diversifying our revenue streams and reinforcing our operational resilience. Third, proven provision coverage. In the first quarter, our total credit cost, which encompasses three provision line items and the fair value changes of financial guarantee derivatives in our income statement, stood at CNY 1.3 billion, up 0.8% sequentially.

This increase was primarily volume driven, aligning with the growth in our new loan origination. As Arvin Qiao noted, our risk indicators are stabilizing, with risks for both existing and new loans trending downwards from January through March. The supplementary provisions required for our existing portfolio were lower than in Q4. To highlight our provision strength, let's look at a gross provisions matrix. By stripping out the net non-impact of the fair value changes, gross provision offers a true picture of the capital we have reserved against our loan portfolio. Specifically, our gross provision ratio for new capital-heavy loans stood at about 7.2%, comfortably exceeding our historical peak vintage charge-off rates. Coverage ratio was 258% in the first quarter. To summarize, our diversified ecosystem has proven its value as a structural stabilizer.

The solid progress in our fintech empowerment and e-commerce segments effectively offset the near-term pressure of consumer finance business, building a sustainable revenue pipeline for future quarters. Coupled with our conservative provisioning strategy, we have established a resilient foundation to navigate current and potential market uncertainties, ensuring steady operations across all cycles. Now let's move on to our operating expense line items. On the cost and expense side, total operating expenses increased by 14%, or CNY 169 million to CNY 1.4 billion, mainly due to the increase of sales marketing expenses of CNY 124 million, primarily reflecting our investment in ecosystem user engagement alongside the upgrading of our service infrastructure to further improve consumer protection and overall user experience. For balance sheet items as of March 31st, our cash position, which includes cash equivalents and restricted cash, was approximately CNY 3.3 billion.

Shareholder equity remained solid at about. We expect the gradual recovery trend we saw in the first quarter to carry into the second quarter, modest in pace but trending in the right direction. That said, as the lingering impact of macroeconomic uncertainties have not yet fully dissipated, we will strictly maintain our prudent operational approach. As such, we expect the total loan originations for the second quarter to remain relatively stable. That's all I will prepare remarks for today. Operator, we are now ready to take questions.

Thank you. To ask a question now, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. A moment for our first question. We will now take our first question from the line of Alex Ye from UBS. Please ask your question. Alex, your line is open.

My first question is regarding the recent rollout of various new regulations. What's the company's outlook on this front, and what are the variety of measures that you are taking to adapt to those changes? Second question is regarding to asset quality. Could you provide some update on the latest asset quality trend for your loan portfolio? How should we think about the risk outlook for the coming quarters? Thank you.

[Non-English content]

This is the translation for Jay's remarks. Overall, the industry is evolving more mature and organized, with a greater focus on compliance and user experience. For us, that's both a challenge and an opportunity. With the macro economy still heating up and some competitors pulling back and even exiting the market space and opportunities remain. This gives us more room to grow in healthy and high quality ways. In this environment, we will continue to deepen our customer-centric approach to serve different customer segments. More specifically, we will keep improving customer experience, grow our high quality assets, further optimizing our asset mix and strengthen the overall risk resilience. At the same time, we will steadily promote the healthy development of our diversified ecosystem businesses. We are also accelerating our efforts to explore new customer segments, new products, and new business models.

For example, going deeper into serving small and micro-businesses owners, and improving services for our prime customers. On consumer rights protection, we will put more focus on compliance process, covering the whole process from product design, disclosure, to post-loan services. Over the long run, we will stick to compliant operation and leverage our diverse business ecosystem to further enhance our operational resilience. We believe this strategic positioning will help us navigate external changes and achieve stable operations and long-term sustainable growth.

Okay.

Overall, in the first quarter of 2026, the quality of both our new loans and existing loans maintained an improving trend. Regarding the specific metrics, compared to Q4 of 2025, day one delinquency ratio of total assets decreased about 7% in Q1. 30-day collections. FPD30 for new loans originated in Q1 is expected to decline around 6%. You can see the overall risk performance continued to improve. Looking ahead to the second quarter of 2026, we will continue to optimize our asset mix and strengthen risk management over new loans by enhancing risk identification, risk disposal, and maintaining the quality of new loans. This will help us to further reinforce the current downward trend that we have already seen in the risk metrics.

Our overall goal is to our risk strategy in the second quarter, which will set us up for a recovery and high-quality growth for the rest of the year.

Thank you. We will now take our next question from the line of Judy Zhang from Citi. Please ask your question, Judy. Your line is open.

Thank you for letting me ask questions. This is Judy Zhang from Citi. In light of the changing regulatory environment, what's your outlook for the company's full-year financial performance? Thank you.

Okay, I will take the question. As a summary, if we look ahead to 2026, there are still a lot of uncertainty in the macro environment. We'll continue to take a prudent approach and keep strengthening our operational resilience. I really, at this time, can't really provide specific numbers. Maybe I can quickly walk you through a few key metrics and its trend. Maybe first on the loan volume side, the online consumer finance business may remain under pressure. Thanks to the solid growth of our ecosystem business, like our Fintech empowerment and installment e-commerce platform, we would expect the total loan volume to stay relatively stable quarter-over-quarter. Second, on the revenue side, because the Fintech empowerment business recognize the revenue more gradually due to the accounting policy, so it will fully offset the near-term revenue impact from the contractions of the online consumer finance business.

In the longer run, having a larger contribution from these businesses will give us more stable revenue base. Our asset quality continued to improve, resulting in lower provision top-ups on the existing capitalized business, which led to the increase in our tech empowerment service revenue. I would expect this trend to contribute positively to our revenue in the near term. Third, on the credit cost side, they should come down as risk continues to decline, assuming no major macro or regulatory changes. With that said, we'll remain prudent with our provisions. Fourth, on the expense side, due to the expansion of our ecosystem business, our continued investment in customer experience, OpEx increased slightly on a sequential basis in Q1. Going forward, we'll keep driving operational efficiency, reduce cost where we can, and aim to steadily optimize our expense ratio. Put all these together as a summary.

Overall, for 2026, we'll continue to focus on making steady progress while navigating the uncertainties. We'll keep building a strong foundation for the long-term, high-quality business.

Thank you. We will now take our next question from the line of Zihan Wang from Goldman Sachs. Please ask your question. Zihan, your line is open.

Thank you for taking the question. This is Zihan Wang from Goldman Sachs. Could you please elaborate on the corporate plan to enhance shareholder return? Thank you.

[Non-English content]

We have always put an emphasis on shareholder return. The company plans to cancel 20 million ADS, which represents about 12% of our total outstanding shares. Given the ongoing macro uncertainties, we have temporarily suspended new share repurchases for now. We always try to balance shareholder return with capital efficiency. Going forward, we will stay flexible. When market conditions are right, we will restart the program and make sure our buyback moments have the best possible impact on shareholder value. After we complete this repurchase program, we will actively consider launching a new one based on how our business. Our goal is to steadily improve long-term returns for our shareholders. Through consistent and practical steps and initiatives, we want our shareholders to share in the value we create.

We have now reached the end of the question and answer session. I'd now like to turn the conference back to Will for closing comments.

Thank you. This conference is now concluded. Thank you for joining us today. If you have any more questions, please do not hesitate to contact us. Thanks again.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your line.

Good day and thank you for standing by. Welcome to the LexinFintech fourth quarter 2025 earnings conference call. At this time all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Will Tan. Please go ahead.

Thank you, operator. Hi everyone, welcome to our fourth quarter 2025 earnings conference call. Our results were released earlier today and are currently available on our IR website. Today, you will hear from our Chairman and CEO, Mr. Jay Wenjie Xiao, who will provide an update on our overall performance and strategies of our business. Our COO, Mr. Arvin Zhanwen Qiao, will then provide more details on our risk management initiatives and updates.

Lastly, our CFO, Mr. James Xigui Zheng will discuss our financial performance. Before we continue, I would like to refer you to our safe harbor statement in our earnings press release, which also applies to this call. As we will be making forward-looking statements. Last, please note that all figures are presented in RMB terms, and all comparisons are made on quarter-over-quarter basis unless otherwise stated. Please kindly note Jay Wenjie Xiao and Arvin Zhanwen Qiao will give their whole remarks in Chinese first. Then the English version will be delivered by Jay Wenjie Xiao's and Arvin Zhanwen Qiao's AI-based voices. With that, I'm now pleased to turn over the call to Mr. Jay Wenjie Xiao, Chairman and CEO of LexinFintech. Please.

大家好，很高兴和各位分享我们2025年第四季的业绩。四季度，我们在新规框架下调整业务结构，完成了大规模向风险的过渡，季度内公司独特的生态业务布局在行业调整期展现出差异化的优势，活跃用户明显回升。在长期主义的驱动下，公司多业务协同的发展韧性持续显现，抵御周期波动的能力进一步增强。四季度公司实现交易额500亿元，营收30亿元，活跃用户数453万，新增活跃用户数88.4万。2025年全年公司交易额实现2,053亿元，净利润17亿元，同比增加52.4%。接下来我跟大家介绍一下四季度以来重点的一些工作进展。 第一，积极响应新规要求，以高标准严要求合规经营。四季度伴随行业新规正式落地，公司在前期已经完成的业务调整与系统部署基础上，坚持以用户为中心，持续优化产品矩阵与个性化服务体验。我们严格在合规框架内稳健开展业务，在有效提升公司可持续经营与抗风险能力的同时，通过个人信贷、分期零售、普惠金融等多元业务，精准高效链接金融服务与市场需求，助力实体经济发展，促进消费健康增长。 第二，全面强化风险管控，各行业务稳健发展。四季度以来，行业风险呈上行态势。季度内公司优化风险策略，严控新增资产质量，加强优质客户识别。通过更多的实时数据维度，提升风险识别的前瞻性与精准度，实现新增资产风险指标逐月改善。在存量资产端，我们聚焦优质资产的精细化运营，通过优化授信额度与构建差异化定价体系，提升产品竞争性与客户体验，保障存量资产风险持续稳定。季度内，公司稳住了整体风险大盘，资产质量保持稳定，总体风险指标正在逐月改善。今年一到二月以来，多个风险指标呈现向好趋势，陆催率相比十月高点下降超过10%。 第三，独特的生态业务在行业变革期优势增强。四季度分期零售业务紧扣生活消费场景，持续完善供应链，丰富吃穿用等商品供给。在双十一、双十二电商大促活动中，持续加强营销和运营，通过免息优惠等措施带来用户活跃度和交易表现稳步提升，巩固了分期零售的差异化优势。季度内，我们持续加强获客能力的建设和投入，有效带动季度内新增授信用户数增长。同时，我们聚焦优质老客经营，通过差异化的定价、金额策略，推动用户活跃度正在持续上升。季度内，普惠、数科、海外业务都实现稳健的增长，进一步彰显出公司的经营韧性。 第四，深度运用AI技术，提升用户服务体验。四季度，公司继续深耕大模型应用技术，客户服务智能体成功应用于授信、交易和还款等核心场景，回复信息准确率均在90%以上，平均响应时间在三秒以内，其中授信场景转人工率仅3.4%，大幅提升了服务效率和体验。未来将持续推进夜间无人服务时段落地应用，实现7×24小时的不间断服务。季度内，我们进一步将大模型落地应用在风控的核心环节，如合规字典、大模型辅助系统逐步替代传统的规则四字点，准确率提升至89%。在风控策略环节，大模型辅助策略生成智能体，深度建模客户数据，实现差异化策略的自动生成与全流程评估，决策准确性与响应效率持续提升。用户运营环节，集合智能体在智能对话中精准识别用户需求，引导用户自助操作，降低人工服务成本的同时，提升用户的办理体验。公司始终坚持以用户为中心的服务理念，将消费者权益保护视为核心竞争优势。四季度内持续推进服务流程的标准化与智能调度能力优化，整体服务效率与响应速度都有所改善。我们进一步深化用户分群服务的精细化运营，通过持续优化用户自助服务平台功能，提升用户满意度。 季度内政策层面相继出台一系列鼓励消费、发展县域经济的举措，为行业发展锚定了方向。我们始终紧紧围绕国家的政策要求，充分发挥自身优势，加大在消费场景、小微产品服务的投入力度，通过免息、低息等补贴手段，以丰富的产品供给，更完善的全服务，切实助力了消费提振，为小微的发展注入金融活水。 展望2026年，我们相信市场会有更多的机会，公司将抓住机遇，坚守合规底线，坚持以用户为中心，深耕多元生态业务，持续提升公司经营韧性及对冲周期的能力。2026年，我们还将加大在小微企业和优质消费人群方面的投入，不断提升优质客户占比，构建客群结构更优、盈利来源更稳的业务基础，助力高质量增长，为股东创造长期可持续的回报。 Hi everyone, thanks for joining us today for our fourth quarter 2025 earnings call. In the fourth quarter, we optimized our business operations within the new regulatory framework, successfully achieving our objectives of stabilizing scale and mitigating risk. During this period of industry adjustment, our unique business ecosystem demonstrated its differentiated advantages, leading to a significant rebound in active users. Guided by our long term oriented philosophy, we are seeing the resilience of our multi business synergy become increasingly evident, further strengthening our ability to navigate business cycles. In the fourth quarter, our loan volume reached RMB 50 billion and revenue reached RMB 3 billion. Number of active users stood at 4.53 million, with 884 thousand new active users. For the full year of 2025, total loan volume was RMB 205.3 billion , net profit was RMB 1.7 billion, representing a year-over-year increase of 52.4%.

Next, I will walk you through the key initiatives we have undertaken since the fourth quarter. First, we proactively aligned our operations with the new regulatory requirements, adhering to a high standard of compliance. Following the official implementation of the new regulations in Q4 and building on the earlier completion of business adjustments and system deployment, we remained focused on our customer-centric strategy to further optimize our product matrix and personalized service experience. By operating prudently within the regulatory framework, we have not only enhanced our long-term sustainability and risk resilience, but also effectively connected financial services with market demand. Through our diversified business lines, including online consumer finance, installment e-commerce, and offline inclusive finance, we continue to support the real economy and foster healthy growth in consumer spending.

Second, we have comprehensively strengthened our risk management to ensure steady business development. Since the fourth quarter, the industry has faced an upward trend in credit risk. In response, we optimized our risk strategies and maintained stringent standards for new loan quality. By incorporating more real time data dimensions, we have enhanced the proactiveness and precision of our risk identification, leading to a month-over-month improvement in risk indicators for new loans. Regarding our existing portfolio, we focused on refined operations for high quality assets. By optimizing credit line allocations and implementing a differentiated pricing framework, we enhanced both product competitiveness and the customer experience, ensuring the continued stability of our existing assets. Overall, we successfully stabilized our risk profile during the quarter, with asset quality remaining steady and key risk indicators improving monthly.

Since the beginning of 2026, several key risk indicators have shown a positive trajectory in January and February. Specifically, day one delinquency ratio of our total assets decreased by over 10% from its peak in October last year. Third, our unique business ecosystem has demonstrated greater strengths during this period of industry transition. Our installment e-commerce business remained deeply integrated with daily consumption scenarios. In the fourth quarter, we continued to optimize our supply chain, expanding our offerings across essential categories such as food, apparel and household goods. During major e-commerce events like Double 11 and Double 12, we ramped up our marketing efforts. Through initiatives such as interest free promotions, we drove steady growth in both user engagement and transaction volume, further reinforcing our differentiated advantages in installment e-commerce.

During the quarter, we continued to invest in our customer acquisition capabilities, which effectively fueled growth in new users with credit line. At the same time, we focused on deepening engagement with high quality existing customers, utilizing differentiated pricing and credit line strategies to drive a sustained rise in user activity. Furthermore, our offline inclusive finance, tech empowerment, and overseas businesses all achieved steady growth, further underscoring the overall resilience of our diversified ecosystem. Fourth, we deeply integrated AI technology to elevate the user service experience. During the fourth quarter, we continued to advance our applications of large models. Our customer service AI agents are now successfully deployed in core scenarios including credit approvals, transactions and repayments. These agents maintain a response accuracy of over 90%, with an average response time of under 3 seconds.

Notably, in the credit approval stage, the human intervention rate was only 3.4%, significantly boosting both efficiency and user satisfaction. Looking ahead, we will expand these automated services to nighttime hours to achieve seamless 24/7 coverage. During the quarter, we further implemented large models in key risk management processes. For example, in compliance quality assurance, our AI-assisted system is gradually replacing traditional rule-based monitoring, raising our QA accuracy to 89%. In risk strategy, our strategy generation AI agents perform deep modeling of customer data to automate the creation and full process evaluation of differentiated risk strategies, consistently improving decision-making precision and response efficiency. In user operations, our credit line adjustment AI agents accurately identify user needs during their dialogues with customers and provide self-service guidance. This not only reduces manual service costs but also enhances the user experience.

The company has always adhered to a user-centric service philosophy, positioning consumer rights protection as a core competitive advantage. In the fourth quarter, we continued to standardize our service processes and optimize intelligent routing, leading to a measurable improvement in overall efficiency and response times. We also refined our tiered customer service model, enhancing our self-service platform to drive higher user satisfaction. During the quarter, a series of macro policies supporting consumption and the county-level economy were rolled out, anchoring the direction for industry development. We have always closely aligned with national policy requirements, fully leveraged our own advantages and increased investment in consumption scenarios and products tailored for micro and small business owners.

Through measures such as interest-free and low interest promotions, complemented by an enriched product supply and comprehensive services, we are delivering tangible support for the consumption rebound and injecting financial vitality into the growth of micro and small businesses. As we enter 2026, we are optimistic about the market's development potential. We are well positioned to seize growth opportunities while upholding a high standard of compliance and a customer-centric philosophy. By deepening our diversified business ecosystem, we will continue to strengthen our operational resilience and our ability to navigate market cycles. Next, I'll hand over the floor to our CRO, Arvin. Thanks.

谢谢建建。下面我将汇报一下四季度风险管理方面的工作情况和进展。2025年四季度，助贷新规正式落地实施，流动性收紧对行业规模和风险持续造成比较大的影响和冲击。针对行业风险周期，四季度我们持续加强风险管控，提升优质资产占比，优化资产结构，保障风险可控。具体风险表现来看，环比三季度全量资产入催率上升了约百七左右，全量资产90+不良率上升了百三左右。但季度内分月来看，在十月风险达到高点后，十一月、十二月连续两个月小幅下降，风险开始企稳回落，呈下降趋势。十二月入催率较十月下降百八左右。2026年上半年，我们仍将继续加强管控，保持风险下降趋势，逐步控制到风险偏好内。下面我向大家介绍一下我们在四季度采取的重点风险管理措施。 第一，在四季度继续加强高风险客户的识别和管控。在模型方面加快风险模型迭代，通过模型自动化更新，按周将最新发生的坏样本数据纳入模型训练，从而能够更快地学习因当前市场环境变化而引发的逾期客户的特征。策略方面，引入更丰富的实时多头信息、逾期信息、负债信息、收入信息和工作稳定性信息，对短期内高频借贷、高共债、收入负债高的客户实施更加严格的交易拦截与授信敞口控制。另一方面，加强全量资产入催管理，重点提升高入催人群的识别，优化还款提醒频率，加强贷后能力和链路升级。 第二，在四季度继续完善优质资产的经营能力，提升优质资产占比，优化资产结构。从数据模型层面持续优化优质客户识别能力，对优质客群开发专项额度、价格、还款方式策略，全面提升offer竞争力。另外，深化优质客群的一对一专享服务，通过管户服务、交付式补件、大额专项人审等，根据客户的需求提供个性化定制化的re-offer，提升客户的满意度和留存率。 第三，在电商方面，四季度加大了对客户的消费支持力度，通过专项策略支持电商Double 11和Double 12大促活动。在活动期间，我们针对三C数码等大额优质消费进行了专项零额支持。此外，针对头部优质客户，我们通过十二期、二十四期免息分期活动，促进优质规模增长。 展望2026年一季度，我们将继续加强存量在贷以及新增放款的风险管控，同时加大高风险客群的处置力度，保持风险持续下降趋势。下面有请CFO介绍公司四季度的财务表现情况。 Thanks, Jay. Next, I will provide a review of our key initiatives and achievements in risk management for the fourth quarter. The fourth quarter of 2025 marked the full implementation of the new loan facilitation regulations. The resulting liquidity tightening across the sector created significant headwinds for both industry scale and risk performance. In response to the cyclical volatility, we maintained a disciplined approach to risk management throughout the quarter, increasing our mix of prime assets and optimizing our portfolio structure to ensure overall stability. Specifically, in the fourth quarter, day 1 delinquency ratio of total assets increased by 7% and 90 days plus delinquency ratio edged up by 3% quarter-over-quarter. On a month-over-month basis, our risk indicators saw a marginal decline in November and December after peaking in October, signaling that asset risk performance has begun to stabilize.

In December, Day one delinquency ratio declined by 8% compared to October. We will sustain our rigorous risk controls through the first half of 2026 to reinforce this downward trajectory and gradually bring our asset risks back within our target risk appetite. Next, I would like to walk you through the key risk management initiatives we have implemented during the fourth quarter. First, we continue to intensify the identification and management of high-risk customers. From a modeling perspective, we accelerated the iteration of our risk models by implementing automated weekly updates. By incorporating the most recent default samples into our training sets every week, we were able to more rapidly capture and learn the shifting characteristics of delinquent borrowers in the current market environment.

On the strategy front, we integrated a broader range of real-time data dimensions, including cross-platform borrowing, delinquency history, leverage ratios, personal income, and employment stability. This allowed us to apply more stringent transaction interception and credit exposure controls to customers exhibiting frequent borrowing, excessive cross-platform debt, or high debt to income ratios. Furthermore, we reinforced our Day one delinquency management across the entire portfolio. We placed a particular emphasis on improving the identification of high-risk cohorts at the earliest stage of delinquency while optimizing the frequency of repayment reminders and strengthening our auto deduction efficiency and payment clearing infrastructure. Second, we continued to refine our operational capabilities for high-quality assets, consistently increasing the mix of prime assets and optimizing our portfolio structure. At the data and modeling level, we continuously optimized our prime customer identification capabilities.

We developed dedicated strategies, including credit line allocation, pricing and repayment, tailored to prime segments, comprehensively enhancing our offering competitiveness. In addition, we deepened our one-on-one exclusive services for prime customers through account management services via instant messaging, interactive supplementary document submission, and dedicated manual reviews for large ticket loans. We provided customized re-offer based on customer needs, thereby boosting customer satisfaction and retention. Third, regarding our installment e-commerce business, we significantly intensified consumer support during the fourth quarter through initiatives tailored for the Double 11 and Double 12 shopping festivals. During these events, we provided dedicated temporary credit lines to support large ticket purchases, particularly in the 3C and consumer electronics categories. Additionally, for our top-tier prime customers, we launched 12- and 24-month interest-free installment campaigns to further accelerate high-quality volume growth.

Looking ahead to the first quarter of 2026, we will continue to strengthen risk controls over existing and new loans while intensifying our efforts in managing and phasing out high-risk segments to ensure a sustained downward trend in risk levels. Next, I will hand over to our CFO, James, to provide a review of the company's financial performance for the fourth quarter.

Hi, everyone. Thanks, Arvin. I will now provide a detailed overview of our fourth quarter financial results. Please note that all figures are presented in Renminbi terms and all comparisons are made on a quarter-over-quarter basis unless otherwise stated. The fourth quarter marked a pivotal transition for the industry as the new regulatory framework officially came into force. We have strictly followed these regulatory requirements, ensuring that the comprehensive interest rate for all new loans is capped at or below 24%. Following the implementation of these new regulations, we observed elevated volatility in industry-wide credit risk. This complex market environment created challenges for our performance. In the fourth quarter, our net income reported RMB 214 million.

This sequential decrease was primarily driven by the pricing adjustment to strictly comply with the 24% cap, coupled with a contraction in loan volume resulting from our prudent strategy to proactively manage risk exposure. Furthermore, heightened market volatility led to increased credit costs and more conservative provisioning. Lastly, operating expense did not decline proportionately with the revenue due to the fixed cost and expense recognition seasonality. Now let's take a holistic review of our fourth quarter financial results. First, net revenue of the credit business, which is derived by adding up credit facilitation service income and tech-empowerment service income, net of credit costs, including provisions and fair value changes, and the funding cost was RMB 1.4 billion, representing a RMB 586 million decrease quarter-over-quarter.

The overall decline was primarily driven by a RMB 132 million drop in credit facilitation service income, stemming from contracting the loan volume in our online consumer finance business and a decreased overall pricing. During the fourth quarter, weighted average APR of new loans originated was 21.7%, a 140 basis points decline quarter-over-quarter. This was compounded by approximately RMB 185 million increase in credit cost, reflecting elevated risk volatility and our prudent provisioning. Additionally, our tech-empowerment service income decreased by RMB 286 million, mainly due to the wind down of the ICP business, although this was partially offset by revenue growth in our value-added services. Second, net revenue of the e-commerce business, defined by e-commerce revenue, net of cost of inventory sold, increased by RMB 56 million to RMB 167 million.

The total net revenue summing the credit and the e-commerce business added up to RMB 1.5 billion, a 26% or RMB 530 million decrease quarter-over-quarter. On the expense side, operating expenses, including the sales and marketing, research and development, general and administrative expenses, processing and servicing cost, decreased by 11% or RMB 147 million to RMB 1.2 billion. As I mentioned earlier, because this 11% reduction in operating expenses was outpaced by the 26% decline in net revenue, the difference weighed on our net profit for the quarter. Tax and others decreased by RMB 76 million to RMB 86 million. Consequently, total expenses added up to RMB 1.3 billion, a decrease of RMB 223 million.

By deducting total expenses of RMB 1.3 billion from the total revenue of RMB 1.5 billion, we arrive at a net income of RMB 214 million, a decrease of RMB 307 million quarter-over-quarter. Although the complex environment posed challenges to our performance, we demonstrated our operational resilience. Next, I will elaborate on three key business highlights that underscore our strength during this transitional period. The resilience of our business ecosystem, our prudent provision coverage, and further reductions in funding costs. The resilience of our business ecosystem. Amidst the cycle of adjustment, while our online consumer finance business was significantly impacted, other business lines actually provide critical stability, specifically regarding our e-commerce business. Although the GMV declined slightly as a result of our prudent operational strategy, gross profit continued to achieve steady growth, recording RMB 167 million during the fourth quarter.

Notably, the e-commerce gross margin, calculated as the gross profit divided by GMV, reached 7.8%, representing a quarter-over-quarter increase of 295 basis points. In parallel, our Tech empowerment business continued to expand, acting as a vital counterbalance to the volume decline in the online consumer finance business. Under this model, where we work together with the internet super platforms like ByteDance and the banking partners, we assist our banking partners with customer risk assessment while assuming the corresponding credit risk. Given the better quality of this consumer base, these loans carry lower pricing. It is worth highlighting that since this model recognizes revenue over the loan tenor rather than upfront, and it carries lower take rate consistent with its lower risk nature, it creates a temporary time lag between the revenue recognition and the loan volume.

However, this mix shift is accretive to our long-term asset quality and steady financial performance. Furthermore, our offline inclusive finance business progressed steadily, maintaining stable risk performance and acting as a stabilizer for our overall portfolio. Resilience of our business ecosystem demonstrates that we have built a comprehensive product matrix that serves a broader spectrum of the market. Our business lines now cover a wide range of interest tiers, from competitive rates for prime users to standard rates for the mass market. This allows us to effectively match users with the right products, maximizing our reach and retention amidst the evolving regulatory environment. Second, prudent provision coverage.

In the fourth quarter, impacted by heightened volatility in industry risk, our total credit cost, including the three provision line items and the fair value changes of financial guarantee derivatives in the income statement, rose by RMB 185 million to RMB 1.3 billion. While we observed early signs of improvement in December following our credit tightening measures, overall risk indicators remain at elevated level, and we expect that the industry will need time to fully digest the risks. Consequently, we adopted more prudent approach to provisioning for new loans facilitated during this period. To better illustrate our provisioning strength, I'd encourage you to focus on the gross provision, which excludes the impact of the net accounting policies in the item changing fair value of financial guarantee derivatives and loan values in the income statement.

Specifically, the gross provision ratio of new loans calculated as the gross provisions divided by the capital-heavy new loan volume increased by 27 basis points from the third quarter to 7.24%. Please note that for an apple-to-apple comparison, this volume metric excludes loans from tech-empowerment services. This level stands well above our historical peak vintage charge-off rate of around 6.1%. We view this elevated provision ratio not just as a reflection of the current volatility, but also as a buffer to future-proof our performance against potential macro uncertainties. Third, the optimization of funding costs. With the implementation of the new policy, institutional funding that was previously allocated to segments priced above 24% was released in the fourth quarter, resulting in ample funding supply.

Consequently, our funding cost declined substantially from 4.4% in third quarter to 3.8%. Looking ahead to 2026, as the industry landscape shifts to a new normal stage and a new regulatory framework, we anticipate a structural flight to quality. Funding will increasingly congregate towards platforms that are fully compliant and possess strong risk management capabilities. Currently, we have successfully secured our place on the whitelist of our key funding partners, laying a solid foundation for our steady development in the future. To summarize, the above three highlights mainly impacted the net revenue side of the income statement. On the cost and expense side, total operating expenses reduced by 11% or RMB 147 million to RMB 1.2 billion, mainly due to the decrease of sales marketing expenses, reflecting our disciplined approach to user acquisitions during this industry transition.

However, our total operating expense reduction was slower than the decline in the net revenue. This was primarily due to fixed costs and the seasonal impacts. For balance sheet items, as of December 31st, our cash position, which includes cash equivalents, and restricted cash, was approximately RMB 4.0 billion. Shareholders' equity remained solid at about RMB 12 billion. To conclude, I'd like to reaffirm our commitment to enhancing shareholder value. As of March 2026, we have repurchased $39 million worth of ADSs alongside the CEO's personal purchase of over $10 million worth of ADSs. On the dividend front, our board of directors has approved a dividend of $0.188 per ADS, bringing our total dividend for 2025 to $0.2382 per ADS.

This represents a more than 100% increase compared to $0.182 in 2024. On the foundations of our current shareholder return policy, we're continuing to evaluate opportunities and explore different ways to ensure we deliver optimal value to our shareholders. Looking ahead, while our asset quality continues to show positive momentum, we maintain a prudent approach given the ongoing macroeconomic uncertainties. We expect the total loan origination to remain relatively stable in the first quarter of 2026. That's all our prepared remarks for today. Operator, we're now ready to take questions.

Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced, and to withdraw your question, please press star one and one again. As a reminder, please do translate your questions into English, and please remember to mute yourself after asking your question. Thank you. We will now take our first question. Please stand by. First question is from Alex Ye from UBS. Please go ahead.

Good evening.

变化，有哪些主要的考量。然后，第二个问题想请管理层给我们展望一下，2026年公司的一些主要核心指标的一些经营表现。 I have two questions. The first one is, given the new regulatory environment, so how LexinFintech's development strategy are going to change going forward? And then the second question is, could management share with us some of the key operating performance of outlook for this year. Thank you.

好的，这两个问题我来回答一下。第一个问题呢，就是我们觉得说随着助贷新规的全面落地，行业已经进入到一个高质量严合规的整个的一个新的阶段，行业的资源也会进一步向整个的合规的平台集中。在这样的一个环境下面呢，我们将会坚持以用户为中心的全域经营来保持业务的整个的一个韧性。我们有多元的生态业务，它赋予了我们能够服务更多用户的整个的一个能力，也能够帮助我们承接不同风险的一个客群，从而在波动的市场中可以更加稳健地发展。具体而言，我们还是积极响应监管的导向，始终坚持高标准合规的经营。在现有的几个监管的要求的基础上，公司正在主动地下调综合贷款利率。继我们四季度新增平均借款利率下降到21.7%以后，我们在2026年也会进一步压降。此外，我们也会持续深耕普惠的这个市场，精准服务小微的消费群体，并依托自己的整个的一个分期零售的平台，丰富场景商品的供给，深度挖掘用户在衣食住行等刚需多元的消费场景下的一些消费潜力。与此同时，我们也会随着科技的输出与海外业务的稳步扩张，公司的收入结构将会变得更加多元化，从而在新的监管框架下持续夯实长期的经营韧性。公司始终还是坚持以用户为中心的这样的一个理念，我们将消费者权益保护视为提升公司经营韧性的主要的一部分内容。未来我们也会继续通过流程的整个标准化来智能调度与精细化的一个运营，不断提升对客户的服务体验，加强消费者的一个保护。

This is the translation for Jay's answer. With the full implementation of the new regulation, the industry has entered a new phase centering on quality and compliance. Industry resources will increasingly concentrate on platforms that demonstrate both quality and compliance. Under such new regulatory environment, the key to LexinFintech's business resilience lies in our user-centric approach and our ability to serve customers across different segments. Our unique business ecosystem enable us to engage and serve users with varying risk profiles and achieve stable growth amid market fluctuations. Specifically, we actively respond to regulatory guidance by adhering to a high standard of compliance. Building on the current regulatory requirements. We further lower the overall loan rates. In the fourth quarter, the average loan rate on our new loans was 21.7%, which will be further lowered in 2026.

Furthermore, we remain deeply committed to the offline inclusive finance market and serve the micro and small business owner segment. Leveraging our installment e-commerce platform, we enrich the supply of products on our platform across diverse and essential life service categories to tap into the consumption potential of our users. Meanwhile, with the steady expansion of our tech-empowerment and overseas business, the revenue structure is becoming more diversified, strengthening our long-term operational resilience under the new regulatory framework. Last but not least, we adhere to a user-centric service philosophy, viewing consumer protection as a key part of enhancing our operational resilience. Moving forward, we will continue to improve efficiency and experience of our customer service through process standardization, intelligent task routing and refined operation, further strengthening consumer rights protection.

第二个问题就是公司2026年的整个的一些经营的情况。展望2026年，在风险逐渐趋稳的这个前提下，我们将会采取积极的一个获客策略，我们会提升客户的体验和产品竞争力，聚焦优质的客群，推动业务稳步回归常态化的增长轨道。具体到核心的几个经营指标，产品及客群方面，我们还是会聚焦优质客群，持续通过优化授信额度，构建差异化的定价体系来提升用户的整个的一个体验，夯实以用户为中心的全域经营的能力，积极拓展优势的客群。在资产质量方面，由于我们可以获得更多的优质客群来改善资产结构，目前我们已经观察到资产的质量已经企稳，即看到有不少的边际改善。如没有新的一些宏观的冲击，预计行业将会逐步消化现有风险，整体的风险指标也会稳步回落到我们风险天花区间，从而积极为获客及业务的复苏奠定一个比较好的基础。 在放款规模方面，我们会继续加强获客能力的建设和投入，所以我们今年的整个的规模将会在目前企稳的基础上，逐步恢复至一个常态化的整个的增长区间吧。

Regarding the second question about the outlook of our business operation in the year of 2026. With risk level stabilizing, we will adopt a more proactive user acquisition strategy. By enhancing the customer experience and product competitiveness, we will focus on high-quality segments to bring our business back onto a path of steady, normalized growth. More specifically on our key operational initiative. In terms of products and customer segments, we will focus on the refined management of high-quality assets. By optimizing credit allocation and building a differentiated pricing system, we aim to strengthen both product competitiveness and customer experience. This will reinforce our user-centric operational capabilities to serve different segments of customers and enable us to expand and better serve prime segments.

In terms of asset quality, we will improve our customer mix and enhance asset quality by ramping up on acquisition of more high quality customers. So far, we have already observed early signs of risk stabilization and improvement in asset quality. Barring any new macroeconomic shocks, we expect the industry to gradually digest the existing risk, bringing overall risk matrix back within our risk appetite. This will lay a solid foundation for proactive customer acquisition and business recovery. In terms of loan origination, we will continue to invest in and strengthen our customer acquisition capabilities. Driven by our improved product competitiveness and proactive customer acquisition strategy, we expect our loan volume to gradually return to a normalized growth range following a period of bottoming out and stabilization.

Thank you. We will now take the next question. Next question is from Judy Zhang from Citi. Please go ahead.

谢谢给我提问的机会，我这边有两个问题，第一个问题是关于风险这边，可否请管理层跟我们分享一下公司最新的这个风险表现以及未来的一个展望。第二个问题呢，就想问一下，刚才分享一些这个经营指标，那可否展望一下2026年全年的一个财务表现。那let me translate the two questions. The first question is regarding on the risk outlook. Can management share with us the company's latest risk performance and the future outlook? The second question is, what is the outlook for the company's full year financial performance for this year? Thank you.

好的，风险这个问题由我来回答一下。四季度是助贷新规落地的首个季度，对整个行业来说，在风险和规模方面的影响和冲击都还是比较大的，也是我们应对整个风险波动的一个关键时期。目前来看，行业整体风险已经开始呈现一个高位企稳下降的迹象，但整体风险要回落到二五年上半年相对比较低的水平，可能还需要一定的时间出清。针对整个行业风险周期，我们从四季度起，继续在加强整个风险的管控，同时优化和提升优质资产的占比，优化我们整个资产结构，从分子分母两个方面来保证我们整体的风险的上升幅度和冲击是处在一个可控的范围之内。落到具体的风险表现上来说，虽然四季度相比于三季度，我们整体的风险有一定的上扬，但是在十月份风险达到高点以后，从十一月份起，截止到目前，已经连续多个月我们的风险呈现一个小幅下降的趋势。展望未来，我们觉得整个风险仍将能够保持一个下降的趋势。当前虽然风险有所改善，但是仍然处于一个高位，需要时间进一步下降，逐步管控到我们整个风险偏好之内。展望二六年，我们继续加强整个资产的风险管控，加大高风险客户的处置力度，力争保持风险持续下降到我们的风险偏好之内。

This is the translation for Arvin's answer. The fourth quarter was the first quarter after the implementation of the new regulation and was a critical period for the entire industry to digest the impact of the new regulation. While the industry-wide risk has begun to show signs of stabilizing, it will take some time for this risk to be fully clear and return to the levels before the first half of 2025. In response to this round of risk cycle, we continue to strengthen our risk management in Q4 by increasing the proportion of high-quality assets and optimizing our asset structure, ensuring risks remain under control.

Regarding the specific performance, although the overall risk indicator in Q4 was higher than that in Q3, on a month-over-month basis, starting from the month of November, we have started to see risk trend down for multiple months consecutively, signaling a downward trend, and we expect this downward trend to continue. Despite this improvement, it's important to note that risk levels remain elevated in the fourth quarter. Looking ahead to the first quarter of 2026, we will continue to strengthen risk control over loans while intensifying our efforts in managing and phasing out high-risk segments to ensure a sustained downward trend in risk levels and gradually bringing the loan risk back within our target risk appetite in the second half of 2026.

Okay, I will take on the second question regarding the financial guidance. The fourth quarter of 2025 was indeed one of the most challenging periods, absorbing the concentrated impact of several factors. This include revenue compression from pricing adjustments and the deliberate scale down of loan volume in our consumer finance business, a shift in the pace of revenue recognition driven by changes in our business mix due to the tech empowerment business volume growth, short-term uptick in our credit risk, and the seasonal impact on our operational expenses. For the first quarter of this year, as I stated earlier, we expect the loan volume origination of our originations to be at a similar level as our fourth quarter.

Given the ongoing macroeconomic uncertainties and the lower visibility, we are not providing a full-year financial guidance for 2026 at this point. However, I would like to share a few variables that may impact our financial performance. Looking ahead, our full-year financial performance will be primarily influenced by the following dynamics. On the revenue side, number one, volume. While our overall loan volume will remain stable or even grow a little bit, the short-term revenue contribution from tech-empowerment business, Shuke Ye, will be relatively modest. This is due to its lower credit cost, lower pricing profile, and a relatively slower revenue recognition accounting schedule. Second is the pricing. The proactive downward adjustment to our overall pricing will also continue to weigh on our top line. On the cost and expense side, number one, funding cost.

In the near term, frequent regulatory window guidance directed at funding partners has led to a somewhat tightened funding supply in the first quarter. Moving forward, our funding cost will be influenced by a combination of the broader regulatory environment, the quality of our customer cohorts, and the overall funding liquidity. Second, the credit cost. As risk progressively stabilize and we pivot towards a higher quality customer cohorts, we anticipate a gradual optimization of our credit cost while maintaining an ample provision. Third point is the operating expenses. We'll persistently drive cost reduction and efficiency initiatives to optimize our operational leverage and steadily lower our operating expenses. In summary, in view of the macro uncertainties, we will maintain prudent in our overall business strategy in the executing.

At the same time, optimize the profit and the shareholder value and strive to build a long-term healthy and a sustainable business.

Thank you. We will now take our next question. Please stand by. Next question is from Zhuhan Wang from Goldman Sachs. Please go ahead.

[Foreign language] I'll quick translate that question. What's the company's future plan for enhancing shareholder returns in terms of both share buyback and cash dividend? Thank you.

[Foreign language]

First, starting from the second half of 2025, our dividend payout ratio was raised to 30% of our semi-annual net profit. This actually puts us at the forefront of the industry. On top of cash dividends, as of today, we have repurchased $39 million worth of ADS, completing 80% of our current repurchase program. I have also fully executed my personal $10 million share repurchase plan. This action reflects the management's firm confidence in the company's outlook and its long-term intrinsic value. Following this earnings release, we will continue to execute the remaining portion of our share repurchase program, delivering our commitment to enhance shareholder returns.

Looking ahead, we will closely monitor market dynamics and, based on our actual operational needs, actively explore diverse initiatives, including further repurchases to create sustainable value for our shareholders.

Thank you. I will now hand the conference back to Will Tan for closing comments.

Thank you. This conference is now concluded. Thank you for joining us on today's call. If you have any more questions, please do not hesitate to contact us. Thanks again.

Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect.

Good day, and thank you for standing by. Welcome to the Lexin Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised, today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Will Tan. Please go ahead.

Thank you, operator. Hello, everyone. Welcome to our third quarter 2025 earnings conference call. Our results were released earlier today and are currently available on our IR website. Today, you will hear from our Chairman and CEO, Mr. Jay Wenjie Xiao, who will provide an update on our overall performance and strategies of our business. Our CRO, Mr. Arvin Zhanwen Qiao, will then provide more details on our risk management initiatives and updates. Lastly, our CFO, Mr. James Zheng, will discuss our financial performance. Before we continue, I would like to refer you to our safe harbor statement in our earnings press release, which also applies today's call as we will be making forward-looking statements. Last, please note that all figures are presented in renminbi terms, and all comparisons are made on a quarter-over-quarter basis, unless otherwise stated. Please kindly note, Jay and Arvin will give their whole remarks in Chinese first, then the English version will be delivered by Jay's and Arvin's AI-based voices. With that, I'm now pleased to turn over the call to Mr. Jay Wenjie Xiao, Chairman and CEO of Lexin. Please.

[Interpreted] Hi, everyone. Thanks for joining us today for our third quarter 2025 earnings call. In the third quarter, we efficiently completed our business adjustments to comply with the new regulation. The smooth transition was mainly attributed to the company's strong risk management capabilities that we've been enhancing over recent years and the resilience of our business ecosystem. This demonstrates our long-term oriented development philosophy and our strong resilience in navigating business cycles, effectively mitigating the impact of industry fluctuations on the company. Against the backdrop of industry fluctuations, we delivered solid performance in the third quarter. Loan volume reached RMB 50.89 billion, revenue reached RMB 3.42 billion. Net profit was RMB 521 million, up 2% quarter-over-quarter and 68% year-over-year. Net profit take rate stood at 2.01%, increasing by 9 basis points quarter-over-quarter and 92 basis points year-over-year. We believe that the implementation of the new regulations will further raise industry entry barriers and drive the industry toward a healthier and more orderly development. Our unique advantages in business ecosystem synergy and customer-centric operation system will position us more favorably in the future. We are confident that our long-term investment in the fundamental capabilities and the ecosystem businesses will gradually turn into our distinctive and powerful advantages. We have always placed great emphasis on shareholder returns. As we announced previously, the dividend payout ratio was increased from 25% to 30% of the net profit starting from the second half of this year. In addition to the cash dividend, the company's share repurchase plan and my personal share purchase plan are progressing well with each initiative, now more than halfway completed. Next, I will walk you through the key initiatives we have made in the third quarter. First, we strengthened user categorization and risk identification and took early actions to address the industry risks. In light of the industry risk trends in the third quarter, we enhanced user categorization and risk identification and took proactive measures to manage risk, effectively balancing business volume and asset risk. During the quarter, leveraging our historical cycle models, we systematically phased out users highly sensitive to cyclical impacts and exhibiting instability and adjusted our risk management strategy accordingly. We further refined our customer segmentation and implemented tailored pricing strategies accordingly. As a result, new assets in the third quarter maintained a balanced risk return profile. Second, we enhanced user experience by adopting a customer-centric approach. In the third quarter, we upgraded our products and management capabilities, and the development of our customer care system has yielded positive results. This allowed us to fulfill the financial and service needs of different customer segments. During the quarter, we collaborated with financial institutions to optimize funding supply and expanded the coverage of flexible repayment solutions, such as flexible borrowing and repayment and bullet loans. In addition, we provided customized reoffer to improve customer satisfaction and loyalty, effectively enhancing user retention. As a result, the proportion and contribution of high-quality customer continued to grow. Third, we accelerated our AI technology deployment leveraged integrated AI agents to drive digital transformation. In the third quarter, we further advanced our AI initiatives. Our self-developed large model, Lexin GPT, has incorporated multidimensional data providing AI agents with stronger decision-making capabilities under different scenarios. This has improved the accuracy of user request identification by over 20% and significantly enhanced request solution efficiency. During the quarter, AI agent has been applied in multiple areas such as risk management, credit granting and repayment, and we'll continue to expand to other areas. [indiscernible] to the industrial integrated AI agent has facilitated data connectivity and task coordination in different scenarios, thereby creating stronger business synergies. We have laid a solid foundation for AI-driven digital transformation, providing robust technological support for improving efficiency, revenue growth and user experience optimization. In the third quarter, different business units within our ecosystem work together to create synergies and collectively reinforce the resilience of our ecosystem. Online consumer finance business targets at high-quality customers and focused on optimizing service experience, significantly enhancing user engagement and retention. Installment e-commerce business targets at young customers in key consumption scenarios. We continue to refine the supply chain system of our e-commerce platform, GMV, for essential daily consumer goods, grew 58.5% quarter-over-quarter and 133.8% year-over-year during the recent Singles' Day Shopping Festival. The total GMV of e-commerce platform increased by 38% year-over-year, with transaction volume for essential daily consumer goods surging by 237% year-over-year. Offline inclusive finance focuses on small and micro business owners in lower-tier markets. The asset quality of inclusive finance business remained stable in the quarter, validating the value of the lower-tier markets. We will continue to increase investments in off-line markets and further improve its operations. Both tech empowerment business and overseas business achieved steady growth in volume during the quarter. The company has always adhered to a user-centric service philosophy, positioning consumer rights protection as a core competitive advantage. In the third quarter, we comprehensively strengthened our consumer rights protection system across multiple dimensions, including policies, products and services. In terms of policies, we integrated consumer rights protection into our sustainable development strategy, implementing measures across all business processes through various mechanisms. In terms of products and services, we actively responded to user needs by leveraging technological means, such as online customer service center and AI-empowered customer support to improve service efficiency and quality. We also proactively gathered user feedback for data analytics aiming to enhance user satisfaction at the sorts. In response to frequent violations of consumer rights by illegal activities, we actively followed regulatory requirements and collaborated with the industry to combat such activities, which has achieved positive results. With the new regulations taking effect in the fourth quarter, the industry is now on a healthier and more sustainable path. Having completed our business adjustments, we are well positioned to capture opportunities arising from the industry adjustments by increasing investments in ecosystem businesses and drive steady growth. Looking ahead, we are confident in achieving stable performance growth. Next, I'll hand over the floor to our CRO, Arvin. Thanks.

[Interpreted] Thanks, Jay. Next, I will provide a review of our key initiatives and achievements in risk management for the third quarter. In the third quarter, industry uncertainty remained elevated. With the new regulations officially took effect in October, industry-wide liquidity tightened further on a month-over-month basis in the fourth quarter. Impacted by the broader industry trends, our day 1 delinquency ratio and the collection rate of loan balance saw a minor increase. Thanks to the proactive measures we've taken to enhance risk control and mitigate risk starting from the second quarter. The overall risk volatility remains manageable. In response to the complex industry environment, we have further tightened risk controls over high-risk customers by phasing out risky accounts and reducing credit lines. These measures have helped keep new loan risks manageable and ensure full compliance with regulatory requirements.Meanwhile, we doubled down on serving prime customers to promote the growth of high-quality assets. Let me introduce the key initiatives we've taken in the third quarter. First, during the third quarter, we further enhanced risk control measures for high-risk customers. From a credit model perspective, we enhanced data mining on key variables, such as multiple borrowing, pricing preference and income verification to enhance identification of customers sensitive to industry fluctuations. In the meantime, by integrating the latest risk trends and optimizing our customer credit behavior time series model, we were able to identify anomalous signals accurately and swiftly, further enhancing the identification of high-risk customers. From risk strategies perspective, we continue to intensify management of high-risk assets. We systematically phase out customers with excessive share debt exposure, multiple borrowings and high-risk profiles, and reduced credit line of borrowers with weak repayment capacity or those vulnerable to liquidity tightening. Second, in the third quarter, we continued to enhance our operational capabilities tailored to prime customers. In terms of model and enhancement, we operated multidimensional models, including demand, response and churn models and made targeted investments in our outreach approach, credit line granting and pricing alignment to ensure service quality. Also, we have reinforced our customer-centric approach to enhance the customer experience for prime customers. In terms of credit line, we continue to maintain our offer competitiveness. In terms of pricing, we implemented product-based pricing to reactivate dormant and churned customers. In terms of repayment methods, we introduced tailored solutions like flexible borrowing and repayment and bullet loans for prime customers. Furthermore, we enhanced one-on-one services for prime customers by providing customized re-offers, further boosting customer satisfaction and loyalty. Thanks to these initiatives, loan volumes from prime customer segments achieved month-on-month growth in the third quarter. Third, in the installment e-commerce business, our risk management system has been gradually refined with further strengthened risk identification capabilities. In the third quarter, in light of external uncertainties, we proactively adjusted the growth pace of our installment e-commerce business to strike a balance between scale and risk and to achieve sustainable business development. We've strengthened the risk criteria of our installment e-commerce business, proactively scaling back exposure to high-risk and sensitive customers. At the same time, we selectively provided support for categories such as high-quality consumer electronics by allocating dedicated credit lines, which help drive e-commerce GMV growth. Looking ahead to the fourth quarter, we will dynamically adjust our strategies based on the industry risk trends to ensure steady, healthy and sustainable business growth. Last but not the least, in the development of intelligent risk control tools, we've achieved remarkable progress in building the next-generation smart risk control system. The risk control intelligent agent for credit decision-making empowered by larger scale models has been launched. It enables full process automation and intelligence from customer targeting, segmentation and strategy formulation to results evaluation, marking a paradigm shift from quantitative driven to AI-driven risk management. This has significantly enhanced the efficiency and effectiveness of credit decision-making. In the fourth quarter, the impact of the new regulation is expected to persist, characterized by industry-wide liquidity tightening and risk fluctuations. As such, business volume and risk performance are expected to remain under pressure in the first half of the fourth quarter and may gradually stabilize and improve in the second half. In response, we will continue to strengthen risk identification and enhanced management of high-risk assets in order to ensure risk fluctuations under control, laying a solid foundation for steady and sustainable business operations.

Thanks, Arvin. I will now provide a detailed overview of our third quarter financial results. Please note that all figures are presented in renminbi terms, and all comparisons are made on the quarter-over-quarter basis, unless otherwise stated. As Jay mentioned earlier, to proactively adapt to the evolving regulatory environment, we initiated a business adjustment in the third quarter. While this adaptation temporarily led to declines in loan volumes and overall pricing, we leveraged our business ecosystem to effectively mitigate these impacts. Despite ongoing business adjustments and industry credit risk volatility related to the new policy, we delivered steady net profit growth in the third quarter. Our net income grew by 2% quarter-over-quarter and 68% year-over-year to reach RMB 521 million, a record high in the last 15 quarters. Our net income margin increased to 15% from 14% last quarter. Our net income take rate increased 9 basis points to reach 2.01%. We have realized the net income take rate goal of achieving over 2% by year-end ahead of the original schedule as we communicated earlier this year. This underscores the company's results and improved ability to execute on our business objectives. Now let's take a holistic review of our third quarter financial results. First, net revenue of the credit business, which is derived by adding up credit facilitation service income and tech empowerment service income, net of credit cost, including provisions and fair value changes and the funding cost reached RMB 1.9 billion, a 3% or RMB 59 million decrease quarter-over-quarter. The decrease was primarily attributable to an increase in credit costs of approximately RMB 40 million, reflecting continuously strengthened provisioning. Second, net revenue of the e-commerce business, defined by e-commerce revenue. Net of cost of inventory sold increased by 14% or RMB 14 million to RMB 111 million. So the total net revenue summing the credit and e-commerce business added up to RMB 2.1 billion, a 2% or RMB 46 million decrease quarter-over-quarter. Operating expenses, including sales and marketing, R&D, G&A, processing and serving costs decreased by 4% or RMB 57 million to RMB 1.4 billion. Tax and others increased by 1% or RMB 1.8 million to RMB 162 million. The total expenses added up to RMB 1.5 billion, decreased by 3% or RMB 56 million. By deducting total expenses of RMB 1.5 billion from the total net revenue of RMB 2.1 billion, we get net income of RMB 521 million, an increase of 2% or RMB 10 million quarter-over-quarter. Given the backdrop of the pending regulation and the associated industry credit risk volatility, it was not an easy task to achieve this record high profit in the third quarter. During the net profit growth, driving this is the resilience of our business model and the 3 key factors: one, our operational agility demonstrated by smooth transitioning between the capital light and capital heavy models; two, our installment e-commerce steady growth and the profit contribution; three, our solid financial position underpinned by the adequate and prudent provisioning. Next, I'm going to elaborate a little bit more on these 3 highlights. First, our operational agility demonstrated by smooth transitions between the capital-light and the capital-heavy model. In the third quarter, in order to meet the new regulatory requirements, we started to transition our business by gradually reducing capital light business volume. By October 1, we have completely stopped facilitating loans with APRs above 24% and were fully compliant with the new rules. As a result, in Q3, the mix of capital light loan volume further reduced from 20% to 13%, while the ICP business only accounted for 8.5% of the new loans. As the new regulatory framework, we continue to serve a select group of long-tail clients using the capital-heavy model. As such, the mix of capital-heavy loan volume increased from 80% to 87% of the total new loan volume, largely offsetting the decline of ICP volume. Thanks to the smooth transitions between the 2 models, total loan volume only saw a modest decrease of 3.7% compared to the second quarter. As ICP business primarily serves long-tail customers, it naturally bears higher pricing, therefore, the wind-down of ICP business had a negative impact on our overall pricing, which was partially offset by the lower funding costs associated with the capital-heavy model. Driven by the above factors, our tech empowerment service income, which represents income from capital-light model and value-added services, decreased by 45% or RMB 374 million. While our credit facilitation service income, which mainly consists of income from capital-heavy model, increased by 15.3% or RMB 347 million. As a result, revenue from credit business only decreased by 1% or RMB 27 million despite a loan volume decrease of 3.7% in the third quarter, demonstrating our operational agility to navigate regulatory changes. Second, steady growth of e-commerce business and its growing contribution in the third quarter. Despite strong demand driven by limited credit availability for long-tail customer segments since the second quarter, we observed an industry-wide risk volatility in the third and fourth quarter. In response, we prudently slowed down the growth of e-commerce loan volume as we prioritize quality rather than volume of the assets. As a result, our e-commerce loan volume grew by 50% sequentially to RMB 2.3 billion. For the upcoming fourth quarter, we'll continue to keep a close eye on the asset risk performance and strike a balance between the volume growth and asset quality. As a reminder, if you look at the e-commerce revenue in our P&L, it recorded a decline of 29% to RMB 345 million despite the e-commerce GMV growth of 15%. This is caused by the accounting treatment difference due to the continued volume shift to third-party sellers from company direct sourcing model. For third-party sellers, only platform service fee is recognized as revenue, rather than the entire transaction amount and the direct sourcing model. In the third quarter, third-party seller model accounted for 85% of e-commerce GMV compared to 75% from last quarter. As mentioned earlier, our e-commerce business generates 2 profit streams, mainly the gross profit from selling merchandise and interest income from loan installment services. In the third quarter, gross profit reached RMB 111 million, representing an increase of 14%. The growth in our e-commerce business gross profit has not only enhanced our overall profitability, but also expanded our targeted long-tail user segments, thereby further mitigating the impact of our business model transition. Going forward, we will continue to grow our e-commerce operations prudently and fully leverage its unique advantages and the new regulatory environment. Third, we continue to maintain a robust financial position, characterized by adequate and prudent provisioning. Our total provisions saw an increase, while the overall asset quality remained healthy, evidenced by a 15-basis-point improvement of 90-day delinquency ratio to 3.0%. However, as the industry transitions towards the new regulatory framework, we observed an increased volatility in early risk indicators starting from September. While we consider the fluctuations to be temporary, the whole industry may need some time to fully absorb the impact, and we expect the industry-wide risk volatility to continue into the fourth quarter. In response, we have sustained our strategy of setting aside ample provisions to ensure a strong buffer during the transition period. In the third quarter, our credit cost, including 3 provision line items and fair value changes on financial guarantee derivatives, rose 4% or RMB 40 million to RMB 1.1 billion. Due to the net accounting policy we've adopted for the item change in fair value of financial guarantee derivatives and loans and fair value, the actual full provision we set was partially offset by the guaranteed income and recorded as a net amount in our P&L. As such, the reported item only represents part of the actual full provision. If excluding the impact of the net accounting policy and the recovering the growth provision, the full provision ratio of new assets calculated by dividing gross provision by capital-heavy loan volume, increased 6 basis points from the second quarter to 6.97%, well above the historical highs of vintage charge-offs. As Arvin mentioned, we continue to closely monitor asset performance and utilize various post-lending management tools to strengthen collections, while maintaining ample financial buffer to navigate through the credit cycle. As a summary, the above 3 highlights impacted net revenue side of the income statement. In short, total revenue reached RMB 3.4 billion, representing a decrease of 5% quarter-over-quarter. This was mainly due to a 29% decrease in e-commerce platform service income, which was caused by ongoing shift in the e-commerce business model and the corresponding net versus growth adjustment in the accounting treatment. On the cost and expenses side, total operating expenses, which include processing and servicing costs, sales and marketing expenses, R&D and G&A expenses, reduced by 4% to RMB 1.4 billion, reflecting reprioritization of user acquisition costs during the uncertain times of business transition. For balance sheet items, as of September 30, our cash position, which includes cash, cash equivalents and restricted cash, was approximately RMB 4.3 billion. Shareholders' equity remained solid at about RMB 11.8 billion. Looking ahead, as Q4 marks the first quarter after the new regulation framework came into force, we expect industry-wide risk fluctuations to remain for some time before the industry enters into a new normal stage. In light of this, we'll continue to adopt a prudent operational approach, prioritizing regulatory compliance and asset quality over business expansion. For the fourth quarter, we expect to see moderate quarter-over-quarter decline in loan volume. Impacted by the ongoing credit risk volatility, net income and net income take rate will see a sequential decrease. We expect to see more clarity and certainty of credit risks and the profit outlook may be at the close of the fourth quarter. To conclude, I'd like to reaffirm our commitment to enhancing shareholder value. In addition to our semi-annual dividend, we'll continue to execute our share buyback program. As of October, we have repurchased $25 million worth of ADS, alongside the CEO's personal purchase of over USD 5 million worth of shares. On the foundation of current shareholders' return policy, we will continue to evaluate opportunities and explore different ways to ensure we deliver optimal value to our shareholders. That's all our prepared remarks for today. Operator, we are now ready to take questions.

[Operator Instructions] First question today is from Alex Ye from UBS.

[Interpreted] First one is regarding the new regulation on the loan facilitation industry, which has come into effect in October 1. Could you share us more color on what impact does it have on the business operations? Second question is on maybe you can share more color on the development strategy and outlook of the e-commerce business?

[Interpreted] This is a translation for Jay's remarks. In the third quarter, we proactively made business adjustments to comply with the new regulation. On October 1, we have stopped underwriting loans with APR above 24% and ensure the business compliance. All new loans issued by the company carry an APR at or below 24%. After shifting to business with pricing below 24%, we gave up higher risk customers, which have some impact on both business volume and average loan pricing. Following the implementation of the new regulation, industry-wide risks have increased due to tighter funding. Starting in September and October, most platforms stopped offering products with APR above 24%, leading to significant short-term volatilities in risk. Although the overall impact remain manageable, the industry [ needs ] some time to fully digest the associated credit risk. For Lexin, as we have taken effective measures, our risk performance for new loans or existing loan portfolio have shown signs of stabilization and improvement now, validating the effectiveness of our risk management system. In the long run, the new regulation will pave the way for a more compliant, healthy and sustainable stage of high-quality development in industry. When the regulatory framework becomes clearer, market resources will be increasingly concentrated towards leading compliance platform with strong risk control capabilities and stable operations. Lexin has always adhered to a customer-centric business philosophy, prioritizing compliance operations, asset quality and prudent development. Furthermore, it's worth noting that Lexin's diversified business ecosystem has demonstrated strong resilience in adapting to the new regulation. More specifically, our online consumer finance business is progressing steadily and has been included in the wide list of all major financial partners, paving the way for future development. Our offline inclusive finance business focuses on small and micro business owners in lower-tier markets. This asset quality remained stable in the quarter, validating the value of the lower-tier markets. Installment e-commerce business targets at young segments in key consumption scenarios for building the consumption and financing demand of long-tail customer segments through innovative model. Both tech empowerment and overseas businesses achieved stable volume growth in the quarter. Under the new regulatory environment, Lexin will gradually unlock the unique competitive advantages of its business ecosystem. As a crucial component of Lexin's ecosystem, our installment e-commerce business will continue to play a key role in consumer -- in customer acquisition, engagement and expanding our operational values. In terms of business development strategy, over the past year, we have comprehensively upgraded the e-commerce platform supply chain, introduced branded merchants from various industries and expanded lifestyle product categories to meet users' essential daily consumption. In the third quarter, the transaction volume of essential lifestyle product categories increased by 58.5% quarter-over-quarter and 133.8% year-over-year. During the recent Double 11 Shopping Festival, the e-commerce GMV also experienced significant growth. Meanwhile, leveraging the e-commerce platform's independent risk management system, we are able to balance business quality with scale. Looking ahead, we will continue to optimize and expand our product categories on our platform to meet users' consumption and financial needs while effectively managing risk, further expanding our operational model. In terms of development pace, we have consistently adhered to the principle of prudent operation and prioritized asset quality. The third and fourth quarters, as we observed increased industry-wide rate fluctuation, we proactively moderated the growth pace of our installment e-commerce business. In the near term, given the industry rate do require time to stabilize, we will continue to exercise caution in growing our installment e-commerce business. When industry-wide credit rate show size of stabilization, we will gradually resume the growth pace in order to capture the next phase of rapid expansion opportunities.

We will now take the next question. And this is from Judy Zhang from Citi.

[Interpreted] So during the transitional period before and after the implementation of the new regulation, the industry credit risk has already fluctuated significantly. And the company upgraded the risk control system, how are we managing this round of risk cycle? And what improvements have been made in the risk the management system?

[Interpreted] After the rollout of the new regulation, we anticipated that it will affect the industry's liquidity supply. This is based on the experience that we accumulated across multiple cycles. This would, in turn, weigh on the industry's credit rate. Therefore, starting from the second quarter, we made an adjustment in our risk management re-identification strategy and also made business adjustments. We proactively identified customers who were vulnerable to tighten industry liquidity based on factors such as high multi-borrowing, high debt exposure, loan income, unstable employment and high exposure to high pricing credit. Based on this re-identification, we utilized automated rescanning robot, clearance robots and credit line robots to improve efficiency and effectiveness of account clearing and credit line reduction. This allowed us to respond early in the risk cycle and control the risk fluctuations to both new loans and existing loan portfolio. At the same time, by enhancing pricing competitiveness, optimizing loan tenor and repayment experiences, we've strengthened engagement with prime customers, promoted the growth of quality assets, adjusted asset structure and improved resilience against recycles. So in summary, we not only controlled the formation of delinquent assets, but also tried to increase the volume and mix of high-quality assets. Thanks to the proactive measures that we have taken, the overall risk fluctuation for both new and existing loans remain under control in the third quarter. For the overall loan book, day 1 delinquency ratio increased by around 5 basis points compared to the second quarter. For new loans, the magnitude of FPD30 -- 30 interest is expected to be 5%. Q4 is the first full quarter after the implementation of the new regulation. So it's expected to be more challenging, not only in risk performance, but also in loan volume and also profit. For the existing loan portfolio based on the latest performance, day 1 delinquency ratio peaked in October due to the combined impact of the new regulation implementation and the long National Day holiday and then exhibited month-on-month improvement in November, showing signs of stabilization. For new loans, as we further tightened credit criteria in October, we expect FPD30 of loans in October to improve compared to the peak in September. So overall, moving into the month of October, the risk performance of existing loans and new loans, both show signs of stabilization.

We will now take the next question. This is from [ Dong Peng Chu ] from CICC.

[Interpreted] And let me translate my questions, and I have 2 questions. First, what is the outlook and guidance for the fourth quarter and full year 2026 performance? And second question is, as the company has utilized over half of share repurchase quarter, what are the plans for future shareholders' return?

Okay. I guess I will take the first question and ask Jay to take the second. The first one, the fourth quarter is really the first full quarter following the implementation of the new regulation, and our results will be negatively impacted to the similar extent as other leading players in the industry. On the one hand, we ceased facilitated loans with APR above 24% starting October 1. On the other hand, in response to the rising industry-wide risk volatility, we have been proactively controlling the pace of low volume growth. As a result, we expect moderate loan volume decline in the fourth quarter. At the same time, we expect industry-wide risk fluctuation to gradually stabilize towards the end of the quarter. Therefore, along with the industry, our risk indicators will also fluctuate in the fourth quarter, which will push up the credit cost. Affected by these factors, the Q4 net profit will see a sequential decline. To put things in perspective, it is worth mentioning that in the first 9 months of this year, we have achieved a net profit of RMB 1.5 billion, representing a year-over-year growth of 98%, in line with our previous guidance. Although the fourth quarter net profit will see some decline related to the regulation, the company's full year 2025 net profit is still expected to achieve significant year-over-year growth. Looking ahead to 2026. Due to the industry and regulatory uncertainties, it is really hard to pin down a clear guidance at this stage. We are under the same pressure as other leading players. For the same reason, the performance in Q4 cannot be simply taken as a base for predicting 2026 profitability. However, I'd like to discuss several key factors that may impact the net profit of 2026, for your reference. One, the overall pricing impact. After the implementation of the new regulations, the interest rate on new loans are all below 24%. As this portion of the new loans accumulate over time, the average pricing on the outstanding loan book will gradually drop below 24%. So the decline in pricing will put some pressure on the net profit. Two, risk stabilization. When the credit risk in this cycle bottoms out -- when this bottoms out, we're really determining when the volume growth and the profitability pick up. So customers with interest rate within 24% exhibit more stable credit risk profile. Therefore, their credit costs will be lower, which will help offset the declines in pricing to some extent. Three, funding costs trending down. The temporary tightness in the funding supply in Q3, Q4 were gradually eased as the regulations settle in. Therefore, funding costs are expected to follow a downward trend. And at the same time, with a better quality customers who carry lower risks, funding costs will also be lower. Four, the synergies from ecosystem business, i.e., e-commerce. During this period, our e-commerce business has achieved steady growth, enhancing the company's profitability. Our off-line inclusive finance and the tech empowerment businesses have maintained stable risk performance despite challenging market conditions, enhancing the company's operational resilience. So the continued growth of the company's ecosystem business will further strengthen our operational resilience and boost the overall profitability. So in conclusion, Q4 will be a temporary dip in our business and financial numbers due to the regulation. When the recovery will resume depends on the industry risk stabilization and further regulatory certainty. However, given the unique ecosystem business and the past 3 years turnaround effort, we are confident that we are better positioned than many other players. And we will be the first ones to recover when things are more settled, maybe in the early part of next year or so. That's first question. Jay?

[Interpreted] We have been actively executing repurchase program in [indiscernible]. Both the company's share repurchase program and our personal share repurchase plan have been more than halfway, which is well ahead of the original 1-year schedule. This fully demonstrates the management's strong confidence in the company's outlook, and reaffirms our commitment and capability to enhance shareholders [indiscernible]. Company's repurchase program is fully executed, alongside a dividend payout ratio of 30%. Our total shareholder returns rise above the industry average. The company has always attached high importance on shareholder return. Once the current share repurchase program is fully executed, we will explore more initiatives to further enhance value for shareholders.

[indiscernible] back to management for closing comments.

Thank you. This conference is now concluded. Thank you for joining today's call. If you have any more questions, please do not hesitate to contact us. Thanks again.

This concludes today's conference call. Thank you for participating, and you may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]