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Hello and welcome to the X Financial first quarter 2026 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Victoria Yu. Please go ahead.

Thank you, operator. Hello, everyone, and thank you for joining today's call. Our financial results for the first quarter ending March 31st, 2026 were released earlier today and are available on the company's investor relations website at ir.xiaoyinggroup.com. On the call today from X Financial are Mr. Kent Li, President, Mr. Frank Fuya Zheng, Chief Financial Officer, and Mr. Noah Kauffman, Chief Financial Strategy Officer. Mr. Li will begin with an overview of our business performance and the key operational developments. Mr. Kauffman will then discuss the regulatory environment and the first quarter financial performance, followed by Mr. Zheng, who will review the financial results, capital position, and outlook. After the prepared remarks, Mr. Li, Mr. Zheng, and Mr. Kauffman will be available to answer your questions during the Q&A session.

I remind you that This call may contain forward-looking statements and that the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on the management's current expectations and involve known or unknown risks, uncertainties, and other factors. These factors are difficult to predict, and many are beyond the company's control, which may cause actual results, performance, or achievements to differ materially from those described in these statements. Further information on these and other risks can be found in our SEC filings. The company undertakes no obligation to update any forward-looking statements as a result of new information, future events, or otherwise, except as required by law. It is now my pleasure to introduce Mr. Kent Li.

Thank you, Victoria, and hello, everyone. In the first quarter of 2026, we continued to operate with a high degree of discipline as the operating environment remained challenging. Carrying forward the more conservative posture we adopted in the second half of 2025, we further reduced the pace of activity in Q1, keeping our business closely aligned with evolving supervisory expectations while maintaining an unwavering focus on credit quality and risk management. During the quarter, we facilitated and originated RMB 14.63 billion in loans, a decline of 58.4% year-over-year and 35.8% sequentially from the fourth quarter. This pullback was deliberate as we continue to place greater priority on portfolio integrity and long-term balance sheet stability over near-term origination volume. Operationally, we made further progress on a number of key initiatives during the quarter.

We continued shifting our origination mix toward internally operated channels to deepen borrower relationships and reduce reliance on higher-cost third-party traffic. Underwriting criteria were further tightened, compliance infrastructure was strengthened, and we continued rolling out process automation across servicing and collections, all with the goal of improving operational efficiency while keeping our cost base. From a volume standpoint, borrower activity continued to contract in the first quarter. We served approximately 956,520 active borrowers, down 60.6% year-over-year and 43.5% from the prior quarter. We facilitated approximately 1.25 million loans during the period, with an average loan size of RMB 11,741 per transaction. Outstanding loan balance at quarter end stood at RMB 35.3 billion, a decline of 39.6% from the same period of 2025. Credit quality. Credit conditions remained under pressure in the first quarter, consistent with the broader stress we and others across the industry have been observing.

As of March 31st, our 31 to 60-day delinquency rate was 2.61%, compared with 2.9% at end of Q4 2025 and 1.25% as of the same period of 2025. Our 91 to 180-day delinquency rate increased to 9.95%, compared with 6.31% at end of Q4 2025 and 2.73% as of the same period of 2025. The data reflects a borrower base under continuous financial strain, consistent with what we are seeing across the broader consumer credit industry. We have addressed this by further narrowing our approval criteria, deploying more resources into collections, and pulling back on our origination in segments where repayment risk has risen most sharply.

Higher credit costs weighed on quarter's financial results. We accepted that trade-off knowingly. Protecting the integrity of the portfolio matters more to us than defending short-term earnings. Looking ahead, our focus is on keeping credit quality stable, managing liquidity carefully, and running the business with the same level of discipline we have maintained throughout this period. With that, I'll turn the call over to Noah, who will cover the key financial results for the first quarter, as well as the regulatory environment.

Great. Thank you, Kent. Hello, everyone. It's great to speak with you again. Kent walked through the operational and credit developments. I'll take you through the financial results for the quarter and then provide an update on the regulatory landscape. In the first quarter of 2026, total net revenue was RMB 1.18 billion , or $170.5 million, representing a 39.3% decline year-over-year and a 19.9% decline sequentially from Q4 2025. Total operating costs and expenses came in at 1.04 billion RMB or $150.1 million, down 28.5% sequentially and 24.1% year-over-year. The year-over-year cost reduction was driven by the sharp pullback in borrower acquisition and marketing spend, which fell from 709 million RMB in Q1 2025 to 219.8 million RMB this quarter.

Total provisions were RMB 282.9 million or $41 million, down substantially from RMB 669.3 million in Q4 2025, which was a meaningful sequential improvement but still well above the RMB 135.5 million we recorded in the same period last year, continuing to weigh on profitability relative to prior year levels. On the discretionary spending side, we maintained tight control. Borrower acquisition and marketing expense was RMB 219.8 million or $31.9 million in the first quarter, significantly below the RMB 709 million we spent in Q1 2025 as we continue to prioritize capital efficiency over volume growth. Income from operations recovered to RMB 140.7 million or $20.4 million, a 75.4% decrease year-over-year, but a meaningful rebound from the depressed Q4 2025 level. Operating margin improved to 12%, up from 1.4% in Q4 2025, that is still well below the 29.6% recorded in the prior year period.

Income before income taxes was RMB 136.8 million or $19.8 million as the sequential improvement in operating results was partially offset by investment related items below the operating line. Net income was RMB 37.9 million or $5.5 million in the first quarter, compared with RMB 57.2 million in Q4 2025 and 458.1 million RMB in Q1 2025. Net profit margin was 3.2%, compared with 3.9% in the prior quarter and 23.6% a year ago. Return on equity was 1.9% for the quarter, reflecting the substantial reduced earnings base. On the regulatory environment, the regulatory environment governing internet-based lending in the People's Republic of China continued to evolve during the first quarter of 2026, with authorities further strengthening oversight across the consumer credit business chain. The company continues to monitor these developments closely. However, management has limited visibility into the ultimate scope and direction of implementation.

If current and emerging regulatory requirements are implemented as currently understood, the company's operating results may be materially and adversely affected, and historical levels of profitability should not be assumed to be indicative of future performance. The first quarter results reflect a business in transition, revenue and profitability well below prior year levels as we work through a period of elevated credit costs and reduced origination activity, but with early signs of sequential stabilization and operating performance. We are managing carefully through this environment. With that, I'll hand things over to Frank to take you through the detailed financial results per ADS metrics, non-GAAP adjustments, and the balance sheet.

Thank you, Noah, and hello, everyone. I will walk through the key financial highlights for the first quarter, then cover the balance sheet, capital returns, and our outlook. Please note that all numbers stated in RMB and rounded up. Full details are available in the 6-K file with SEC. Financial results. The total net revenue for the first quarter was approximately RMB 1.2 billion, down around 39% from the same period of last year, and about 20% from the prior quarter. The decline was driven primarily by the significant reduction in loan origination activity we have been deliberately pursuing and was partially offset by growth in guarantee income and financing income. Operating income was RMB 141 million, with an operating margin of 12%, well below the 29.6% we recorded a year ago, with a meaningful recovery from the 1.4% we reported in the fourth quarter of 2025.

The improvement sequentially reflects the benefit of the low origination-related provisions as our credit tightening measures took hold. Net income for the quarter was RMB 38 million, compared with RMB 458 million in the same period of last year. The sharp year-over-year decline reflects substantially higher credit provisions and the substantially low revenue base. Non-GAAP adjusted net income was RMB 81 million. On a per ADS basis, basic earnings were RMB 0.96, $0.14, compared with RMB 10.92 a year ago, and the non-GAAP adjusted basic earnings per ADS were RMB 2.8 or $0.30. Revenue mix. Across our business lines, the pattern was consistent with the overall volume pullback. Facilitation fees fell sharply as origination volume dropped. Post-origination fee declined more modestly, in line with the smaller outstanding portfolio. On the positive side, guarantee income more than tripled year-over-year, reflecting continued recognition of revenue from our existing guarantee loan portfolio.

Finance income was broadly stable. For the full breakdown by line item, please refer to the 6-K. Balance sheet and liquidity. Our balance sheet remained well-capitalized at the end of the quarter. Total assets were approximately RMB 13.6 billion, and the shareholders' equity was approximately RMB 7.8 billion, giving us an equity to assets ratio of around 57%. We remained a solid liquidity position, and with total cash, including the restricted cash, of approximately RMB 2.4 billion, and the balance sheet's in good shape to navigate the current environment. Capital return to the shareholders. We continue our share repurchase program during the quarter. From January 1st through May 15th, 2026, we repurchased approximately 1.8 million ADS for a total of approximately $8.2 million. We have approximately $39.8 million remaining under the existing program, which will run through November 30, 2026.

This reflects our ongoing commitment to returning value to the shareholders while maintaining balance sheet strength. Business outlook. Our near-term outlook remains cautious. The regulatory environment continues to evolve quickly, and we have limited visibility into the full scope and timing of the implementations. We expect these dynamics to continue to influence our industry pricing, funding conditions, and origination activity for the foreseeable future. For the second quarter of 2026, we expect total loan origination to be in the range of RMB 11.5 billion-RMB 12.5 billion. Consistent with our continued focus on quality over the volume. We remain focused on capital preservation, disciplined origination, and cost control. We will keep investors updated as the regulatory picture becomes clear. That concludes our prepared remarks. We will now take questions. Operator, please go ahead.

We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily. At this time, we will pause momentarily to assemble our roster. Once again to ask a question press star one to join the question queue. We are showing no questions at this time. I would like to turn the conference back over to Victoria Yu for any closing remarks.

Okay. Thank you everyone for joining us today. If you have additional questions, please reach out to our investor relations team directly. We appreciate your interest and look forward to speaking with you again. Thank you. Operator, back to you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Hello, and welcome to the X Financial fourth quarter 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity for questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Victoria Yu. Please go ahead.

Thank you, operator. Hello, everyone, and thank you for joining today's call. Our financial results for the fourth quarter and the fiscal year ended December 31, 2025 were released earlier today and are available on the company's investor relations website at ir.xiaoyinggroup.com. On the call today from X Financial are Mr. Kan Li, President, Mr. Frank Fuya Zheng, Chief Financial Officer, and Mr. Noah Kauffman, Chief Financial Strategy Officer. Mr. Lee will begin with an overview of our business performance and key operational developments. Mr. Kauffman will then discuss the regulatory environment and fourth quarter financial performance, followed by Mr. Zheng, who will review the full financial results, capital position and outlook. After the prepared remarks, Mr. Lee, Mr. Zheng, and Mr. Kauffman will be available to answer your questions during the Q&A session.

I remind you that this call may contain forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and involve known or unknown risks, uncertainties, and other factors. These factors are difficult to predict and many are beyond the company's control, which may cause actual results, performance, or achievements to differ materially from those described in these statements. Further information on these and other risks can be found in our SEC filings. The company undertakes no obligation to update any forward-looking statements as a result of new information, future events, or otherwise, except as required by law. It is now my pleasure to introduce Mr. Kan Li.

Thank you, Victoria, and hello, everyone. In the fourth quarter of 2025, we continued to operate with heightened discipline as the external environment became more demanding. Following a strong first half, we deliberately moderated activity in Q4 to remain aligned with evolving supervisory expectations and to prioritize credit quality and prudent risk management. During the quarter, we facilitated and originated RMB 22.77 billion in loans, representing a 29.5% decline year-over-year and a 32.3% decline sequentially from the previous quarter. This moderation was intentional, reflecting our focus on protecting portfolio health and maintaining long-term stability rather than pursuing near-term volume expansion.

For the full year 2025, we facilitated and originated RMB 130.6 billion in loans, up 24.5% from RMB 104.9 billion in 2024. This full year performance reflects the scale we achieved earlier in the year and our ability to operate with discipline as market and regulatory conditions evolved. During the quarter, we focused on strengthening the stability of our core operations through disciplined channel management, tighter risk controls, and continued efficiency improvements. We increased the proportion of activity on internal operated platforms to enhance customer stability and reduce dependence on higher cost external traffic sources. We also further tightened underwriting standards to strengthen the compliance processes, optimize operational workflows, and expanded automation across services and collection functions to improve efficiency without increasing headcount.

From an operational standpoint, borrower activity moderated meaningfully in the fourth quarter. We served approximately 1.69 million active borrowers, down 20.2% from a year ago and down 30.7% sequentially. We facilitated approximately 2.47 million loans in the quarter, with an average loan amount per transaction of RMB 9,226. We ended the quarter with RMB 50.5 billion in outstanding loan balance, down 3.6% from the same period of 2024. Credit quality. We did observe continued credit pressure during the quarter, consistent with broader market trends and a more cautious industry-wide risk posture.

As of December 31, our 31 to 60 day delinquency rate increased to 2.9% compared with 1.85% at the end of Q3, and 1.17% a year ago. Our 91 to 180 day delinquency rate increased to 6.31% compared with 3.52% at the end of Q3, and 2.48% a year ago. These movements reflect rising repayment stress among certain segments, as well as a more conservative approach to risk. In response, we tightened underwriting criteria, enhanced the collection strategies, and adjusted capital deployment to preserve balance sheet resilience. As credit costs increased, we chose to prioritize stability and risk management, which affected short-term earnings but strengthens the foundation of the business. We believe this more cautious stance is appropriate given current conditions.

Our near-term priorities remain clear, safeguard portfolio quality, preserve liquidity, and maintain discipline in operations. With that, I'll now turn the call to Noah Kauffman, who will walk through fourth quarter financial performance and profitability trends, along with a brief regulatory update.

Thank you, Kan. Hello, everyone. It's great to speak with you again. Kan covered the operational and credit picture for the quarter, so I'll focus on the financial performance and our profitability profile in Q4. On the regulatory environment, the regulatory environment governing Internet-based lending in China continued to evolve meaningfully during 2025, with authorities increasingly refining and strengthening oversight across the entire consumer credit chain. The most significant development was Notice Nine, issued by the National Financial Regulatory Administration on April 1, 2025, which requires commercial banks to strictly control total borrowing costs. While Notice Nine does not explicitly stipulate a hard cap, in practice, a 24% per annum ceiling on total borrowing costs for a single loan is generally being implemented and enforced across the industry. Importantly, 24% may not represent the outer boundary of that pricing pressure.

Regulatory authorities have continued to tighten borrowing cost caps applicable to microcredit and consumer finance companies, and those entities may face de facto requirements set below that level. The pace and manner of implementation across different institution types and jurisdictions remain highly uncertain, and we currently have no reliable basis on which to predict the ultimate scope or trajectory of these limitations. If current and emerging requirements are implemented as we currently understand them, our operating results will be adversely and materially affected relative to prior years. The magnitude of that impact is subject to significant uncertainty, and investors should not assume our historical profitability levels are indicative of future performance, including the possibility of operating losses in future periods. Notice Nine also requires commercial bank head offices to implement whitelist management systems for loan facilitation platform operators, prohibiting cooperation with institutions not on those lists.

This has introduced additional uncertainty around our funding relationships, and implementation practices vary across banking groups and their subsidiaries. Future regulatory guidance could alter how those determinations are made in ways that affect our authorized funding relationships. This is just one example of the broader unpredictability we are navigating. Separately, payment institution rating measures issued by the People's Bank of China in December 2025 extend regulatory oversight further across the lending chain, adding to compliance burdens and operational costs for industry participants. We are closely monitoring all of these developments as they continue to evolve in 2026. At this stage, management has limited visibility into the ultimate scope, pace and direction of implementation, and the potential impact on our business, financial condition and results of operations cannot be determined with any degree of certainty. On fourth quarter financial performance.

In the fourth quarter of 2025, total net revenue was RMB 1.47 billion, or $209.9 million, representing a 14.1% decrease year-over-year and 25.1% decrease sequentially from Q3. Total operating costs and expenses were RMB 1.45 billion or $207 million, down 9.5% sequentially, but up 22.3% year-over-year. The year-over-year increase was driven primarily by materially higher credit related provisions, while operating expenses also reflected our continued efforts to align spending with a more measured pace of activity. Credit related provisions were the primary factor weighing on the fourth quarter results.

Total provisions were RMB 669.3 million, or $95.7 million, reflecting higher expected credit losses and a more conservative provisioning across in response to elevated risk indicators during the period. We also continued to take a disciplined approach to discretionary spending. For example, borrower acquisition and marketing expense was RMB 212.2 million, or $30.3 million in Q4, reflecting a substantial reduction compared with both the prior quarter and the same period last year as we prioritized efficiency and risk discipline.

As a result, income from operations was RMB 20.2 million or $2.9 million, a 96.2% decrease year-over-year and a 94.4% decrease sequentially. Operating margin decreased to 1.4% compared with 18.5% in Q3 and 30.7% in the same period last year. Below operating income, the quarter remained profitable, but at a level that underscores the degree of near-term credit pressure. Income before income taxes was RMB 31.2 million, or $4.5 million, reflecting the cumulative effect of lower revenue and elevated provisioning.

Net income was RMB 57.2 million, or $8.2 million in Q4, compared with RMB 421.2 million in Q3 and RMB 385.6 million in Q4 of last year. Net profit margin was 3.9% compared with 21.5% in the prior quarter and 22.6% a year earlier. Return on Equity decreased to 2.9%, reflecting substantially lower net income during the quarter. Taken together, Q4 reflects a materially different earnings profile compared with earlier periods, driven primarily by higher credit costs and a more measured level of activity. We are managing through this phase with a conservative financial posture and maintaining flexibilities as conditions evolve. With that, I'll now hand the call over to Frank to discuss the full year financial results per ADS metrics, non-GAAP profitability, and our balance sheet and liquidity position.

Thank you, Noah, and hello, everyone. I will walk through our full year financial results and then discuss our balance sheet, liquidity and outlook. Full year financial highlights. For the full year 2025, total net revenue was RMB 7.64 billion or $1.09 billion, representing a 30.1% increase from RMB 5.87 billion in 2024. Income from operations was RMB 1.63 billion or $233.1 million compared with RMB 1.87 billion in 2024. Our full year operating margin was 21.3% compared with 31.9% in the prior year, reflecting a higher credit-related provisions and a more cautious operational posture in the second half.

Net income for the full year was RMB 1.46 billion or $209.4 million, compared with RMB 1.54 billion in 2024. Full year GAAP net profit margin was 19.2% compared with 26.2% in 2024. On a non-GAAP basis, adjusted net income was RMB 1.56 billion or $223 million for the fiscal year 2025, compared with RMB 1.54 billion in 2024. Per ADS and the non-GAAP metrics.

On a per ADS basis for the full year, net income per ADS was RMB 36 or $5.15 and RMB 35.22 or $5.04 on a basic and diluted basis, respectively, compared with RMB 31.98 basic and RMB 31.50 diluted in 2024. For additional Q2 context, non-GAAP adjusted net income in the first quarter was RMB 31.3 million and $8.8 million. Non-GAAP adjusted earnings per ADS was RMB 1.56 or $0.22 on both a basic and diluted basis. Balance sheet and liquidity. Our balance sheet remains solid as of December 31, 2025. Total assets were RMB 14.667 billion or $2.1 billion. Total liability was RMB 6.83 billion or $976.5 million. Total shareholder equities was RMB 7.84 billion or $1.12 billion.

the end of the year with the RMB 987.6 billion or $141.2 billion in cash and cash equivalents, and RMB 115 billion and $133.9 billion in restricted cash, and total cash, including restricted cash of approximately RMB 2.13 billion or $305.1 billion. Capital return to shareholders. As of March 15, 2026, under the company's $100 million share repurchase program, the company had repurchased an aggregate of approximately 3.79 million ADS, including approximately 3.37 million ADS and 2.53 million Class A ordinary shares for a total consideration of approximately $53.85 million.

The company now has approximately $46.15 million remaining under the share repurchase program, which is effective through November 30, 2026. This program underscores the company's confidence in its long-term growth outlook and its commitment to enhancing shareholder value. The repurchases under the program remain subject to market conditions and other factors and may be modified or suspended at management's discretion. Business outlook. Given evolving regulatory developments and the limited visibility into how regional policy measures will be implemented across different jurisdictions, our near-term outlook remains cautious. The full impact of these changes on funding availability, pricing dynamics, and the overall industry activity is still uncertain and may take time to become clear. We are prioritizing asset quality, disciplined risk management, cost control, and the preservation of liquidity and operational flexibility.

As the regulatory expectations continue to develop, we are adapting our operation approach to maintain compliance while safeguarding the long-term stability of the business. While we believe our platform is well-positioned to navigate a more stringent environment, additional policy adjustments or implementation actions could further affect industry economics and the growth prospects. We will continue to monitor developments closely and will update our outlook as greater clarity emerges. This concludes our prepared remarks, and we will now open the call for questions. Operator, please go ahead.

We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. This concludes our question-and-answer session. I would like to turn the conference back over to Victoria Yu for any closing remarks.

Thank you, everyone, for joining us today. If you have additional questions, please reach out to our investor relations team directly. We appreciate your interest and look forward to speaking with you again soon. Operator, back to you.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.