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Good day, and welcome to the Yiren Digital fourth quarter and full year 2025 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, please 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 Miss Keyao He, Director of Investor Relations of Yiren Digital. Please go ahead, ma'am.

Thank you, operator. Good morning and good evening, everyone. Today's call features a presentation by our Founder, Chairman, and CEO, Mr. Ning Tang, and our CFO, Mr. William Hui. There will be a question and answer session after the prepared remarks. Before beginning, we'd like to remind you that discussions during this call contain forward-looking statements made under the Safe Harbor provision of the U.S. Private Securities Litigation Reform Act of 1995. Such statements are subject to risks, uncertainties, and factors that can cause actual results to differ materially from those contained in any such statements. Further information regarding such risks, uncertainties or factors is included in our filings with the U.S. Securities and Exchange Commission. We do not undertake any obligation to update any forward-looking statements as required under relevant law.

During the call, we will be referring to certain non-GAAP financial measures and supplemental measures to review and assess our operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with the U.S. GAAP. For information about those non-GAAP financial measures and the reconciliations to GAAP measures, please refer to our earnings press release. As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on our IR website. I will now pass it on to our CEO, Mr. Tang, for opening remarks.

Thank you, Keyao. Good day, everyone, and thank you all for joining us. In 2025, we celebrated 10-year anniversary of our listing on the New York Stock Exchange. Together, we've reached many milestones. We made a breakthrough in our AI innovation, where we completed regulatory filing of our own large language model, Zhiyu. In the second half of the year, we released our first multi-agent platform, Magic Cube. With support of these AI tools, we incubated our internet insurance business, which has achieved strong growth quarter after quarter in 2025. 2025 was also a year that demanded the best of us, and our team delivered. Heightened credit regulations and industry-wide deterioration in credit quality created significant pressure across our business. Yet we navigated these headwinds with discipline and operational resilience. Equally important, we enter 2026 with growing confidence.

Our next generation fintech platform is gaining meaningful traction and validating the strategic investments we've made. I'm deeply grateful to our entire team for their dedication and resolve through one of the most challenging periods in our recent history. The rapid advancement of AI is fundamentally reshaping the industries we operate in, and we believe we are uniquely positioned to lead that transformation. Our years of deep vertical expertise in credit facilitation and insurance brokerage, combined with the AI infrastructure and agent technologies we've purposefully built, give us a differentiated foundation to reimagine our business ecosystem, accelerating growth and unlocking new avenues of innovation. Amid these challenges, we made meaningful progress on the two strategic priorities that will define Yiren Digital's next chapter. The continued scaling of internet insurance distribution as our second core growth engine, and the accelerating integration of AI capabilities across our business operations.

Both are delivering results and both give us confidence in the trajectory ahead. For years, we have applied our proprietary AI capabilities to continuously analyze our platform data, systematically searching for where our next growth opportunity lies. That process of discipline discovery led us to a clear and compelling insight. Our users demonstrated strong validated demand for online insurance products, demand that was underserved and ripe for a technology-driven solution. In the third quarter of 2025, gross written premiums generated through our internet insurance distribution business surged by 206% quarter-over-quarter. This strong momentum continued in the fourth quarter with another 95% quarter-over-quarter growth, and the revenue contribution to the segment had reached 22% in the fourth quarter.

2025 was also a landmark year in the comprehensive build-out of our AI infrastructure, where we closed the gaps and reached significant milestones. Following the regulatory filing of Zhiyu, our proprietary large language model in April, we launched the Magic Cube in October, our internally developed agent integration platform, purpose-built for enterprise scale AI deployment. Magic Cube is the connective infrastructure that enables large scale coordinated deployment of multi agents across every critical function of our credit lending business, from sales and risk management to capital planning, compliance and customer service. With Magic Cube in place, we have laid the foundation to automate processes with AI-driven agents throughout our operations. A transformation that we believe will fundamentally redefine how Yiren Digital operates and competes in the marketplace. The depth of our AI integration is best reflected in its financial impact.

In 2025, AI-driven optimizations generated cost savings exceeding RMB 80 million, driven by the deployment of AIGC for marketing and AI-assisted outbound customer service. Capabilities that have structurally reduced our dependence on both external vendors and internal headcount and better cost and capital efficiency. The operational impact of our AI deployment is best illustrated through concrete examples. Response times for our real-time AIGC powered customer service script generation were cut by more than half from 1.2 seconds to under 0.6 seconds, delivering measurably smoother customer interactions at scale. In a particularly compelling demonstration of our internal AI capabilities, our R&D team rebuilt our IVR system entirely in-house, decreasing our dependence on an external vendor and reducing the cost per call by 84% from RMB 0.95 to RMB 0.15.

Meanwhile, our AI-powered intelligent routing 2.0 system brought a step change in productivity to our fund management team, replacing legacy Excel-based workflows with an intelligent natural language interface driven by our two proprietary AI agents, EQ Agent and DuJie Bot, fundamentally modernizing how our team operates day-to-day. These technological advancements are not just improving how we operate. They are redefining who we are. Our AI-enabled capabilities across intelligent marketing, smart capital management, and advanced risk control have strengthened our ability to deliver technology solutions to the broader credit industry. Revenue from technology-driven services, including networking, marketing, and technical support, has grown significantly year-over-year, validating the commercial potential of our AI capabilities beyond our core business. We are now accelerating this growth to transform the company from a fintech platform into an AI-native company for multiple industries.

Finally, I'd like to review the performance of our credit solution business against the market backdrop in 2025. In the fourth quarter, we facilitated RMB 12.0 billion in loan originations, moderated by 22% year-over-year, and 40% quarter-over-quarter. The moderation reflected our financial discipline when credit environment was difficult. We focused on higher quality credit during the quarter, which led to reduction in loan facilitation activities. For the full year, however, total loan facilitation reached RMB 67.8 billion, up by 26% from RMB 53.6 billion in 2024. As of December 31, 2025, the cumulative number of borrowers we had served exceeded 14.3 million. Representing a 16% increase from approximately 12.4 million at the end of 2024.

During 2025, we strengthened our customer analytics and operational management with a particular focus on maximizing the lifetime value of high-quality repeat borrowers. At the same time, we maintained a prudent approach toward new customer acquisition. Through enhanced data analytics and the more refined customer segmentation, we prioritize the management and engagement of high-quality existing borrowers. As a result, our repeat borrowing volume remained high at 77% in the fourth quarter of 2025, compared to 65% in the same period of 2024. Meanwhile, the average loan ticket size on our lending platform increased from RMB 8,000 in the first quarter to RMB 11,500 in the fourth quarter of 2025. These operational strategies allowed us to effectively control customer acquisition costs while retaining higher quality borrowers with deeper credit insights and stronger brand trust.

The quality from the legacy assets came under pressure in the fourth quarter, with the delinquency rate reaching a cyclical high in October. Our 1- to 30-day delinquency rate for fourth quarter reached 3.4%. The 31- to 60-day rate was 3.0%, and the 61- to 90-day rate stood at 2.8%. These levels are in line with industry trends and the macroeconomic environment. During 2025, assets under the risk-taking model nearly doubled, which contributed to an increase in our guarantee service revenue as the result of changing credit requirements by our partners. Encouragingly, our leading risk indicators are beginning to turn. Our first payment default rate, FPD 30 for loan delinquency over thirty days, has been on a declining trend since October 2025. Recently approaching the levels observed in the first half year of 2025.

We believe these are early but meaningful signals that the credit cycle is gradually turning, and we expect a broader easing of the credit environment to support continual improvement in both industry conditions and our own asset quality metrics, giving us well-founded confidence in our ability to deliver discipline and stable operations in 2026. On the institutional funding side, we secured whitelist status with 29 institutional funding partners as of the end of 2025, and this number continues to grow in the new year, reflecting recognition of our risk management capability and the financial discipline by our partners, as well as less competition in the market under the new regulatory framework. As the industry digests the impact of the new regulations and the market consolidates, we are confident that leading highly compliant players like us will benefit.

In overseas markets, we expect to gradually expand our operations in the existing Philippines and the Indonesian markets while maintaining prudent financial discipline and a clear focus on profitability. We look forward to showing you more results in the coming quarters. As mentioned earlier, our traditional insurance brokerage business, which is predominantly anchored in a traditional sales network, has found new direction of growth. Amid the regulatory headwind on commission rate and the macroeconomic challenges in the fourth quarter, gross written premiums of our insurance brokerage business reached RMB 860.1 million, down 22% year-over-year, while full-year premiums reached RMB 3.7 billion, a 17% decline from 2024.

However, the composition of the revenue and the premium has changed significantly as contribution from internet insurance business increased rapidly in the past few quarters, largely filling up the gap from the traditional line. Our internet insurance business has delivered a meaningful expansion in both customer base and policy volumes, reinforcing our conviction that internet insurance represents a sustainable and scalable second growth engine for Yiren Digital. For the insurance brokerage business as a whole, at the end of 2025, we had served over 2 million insurance clients, up 33% from 1.53 million at the end of 2024.

New policies issued reached 2.3 million, a 25% increase from 1.8 million in 2024. Internet insurance continues to contribute more to our total brokerage revenue in 2026 and serves as a low-cost customer acquisition channel for the entire platform. We are confident that our insurance business will successfully turn to both growth and profitability. To summarize, 2025 was a year that demanded resilience and revealed opportunity. We navigated one of the most challenging credit environments in recent history while simultaneously advancing our transformation into a next generation FinTech driven by AI. The explosive global growth of AI is reshaping customer, consumer credit, insurance, and industries far beyond, and we intend to be at the forefront of that transformation, not merely a participant in it.

We are actively building toward that future, incubating AI native business models, developing technology driven revenue streams from our credit solutions, and reshaping our insurance brokerage business by fully integrating our online and offline capabilities as the cornerstone of long-term growth. Encouragingly, leading indicators increasingly signal that the worst of the credit stress cycle is behind us, and our core lending business is embracing recovery with renewed momentum. As we enter 2026, we are optimistic about the recovery of our core business. We are confident in our strategy and commitment from the team that delivered through one of the most demanding years. Our AI foundation has been laid, and we continue building it. With that, I'll now pass it over to William, who will provide more details on the financials for this quarter and the full year.

Thank you, Ning. Hello, everyone. I will be walking you through our financial performance for the fourth quarter and full year 2025. Please refer to our earnings release and IR deck for further details, both available on our website. This quarter reflects continued progress across several of our key strategic priorities. First, our investment in AI are beginning to translate into tangible outcomes. We achieved direct net cost savings of approximately RMB 80 million, driven by improvements in areas such as high sales conversion, customer service automations, and risk management efficiency. This figure excludes other business benefits from AI, such as avoidance of fraud losses, savings from staff training, and other indirect cost savings because of AI. In addition, our proprietary AI technology is beginning to generate revenue in new business within the credit solutions and internet insurance segment. Second, our internet insurance business continues to gain momentum.

During the quarter, we recorded gross written premiums of RMB 50 million, representing 95% quarter-over-quarter growth. The annualized premium reached RMB 267 million in the fourth quarter, representing 36% growth quarter-over-quarter, up from a negligible amount in the fourth quarter of 2024. The revenue accounted for 22% of the revenue from our entire insurance segment in the fourth quarter of 2025. We expect this revenue contribution to continue to grow and take a bigger revenue share in 2026. For the credit solution business, 2025 was a unique year. We began with a very good growth momentum, seeing a 43% growth in loan facilitation volume in the first half of 2025. However, we subsequently faced a downward trend in the credit cycle alongside regulatory changes.

In the second half of 2025, we shift our strategic priority to credit quality over loan growth, resulting in a 22% year-over-year contraction in our loan volume. That being said, we are seeing early signs of turnaround in our credit cycle. Key credit metrics have improved. The 30 days first payment delinquency, or FPD rate, peaked in October 2025 and began to stabilize and trend down in November 2025. Figures for December 2025 and January 2026 have improved more than expected. The delinquency rate in February was 38% below the peak, which is already back to the May 2025 level when credit quality began to deteriorate.

However, as a reminder, there is typically a lag of one or two quarters before these improvements are fully reflected in our financial results. Overall, we remain focused on maintaining strong balance sheet with cash positions of RMB 3.3 billion, while continuing to invest in AI capabilities and high growth opportunities. We believe this balanced approach positions us well for sustainable long-term growth. Turning to the key financial figures for the fourth quarter and full years of 2025. Total revenue for the full year 2025 was RMB 5.72 billion, representing 1.5% decrease from 2024. The decrease was a result of prioritizing credit quality over loan growth in the second half of the year as we tightened our credit policy in response to a challenging credit environment.

Full year loan facilitation volume was RMB 67.8 billion, representing 26% growth compared to the full year of 2024. This growth was driven by strong performance in the first three quarters, partially offset by a contraction in loan volume during the fourth quarter of 2025. Our guarantee services also saw significant growth, with revenue reaching RMB 612 million in the fourth quarter of 2025, up nearly 196% year-over-year. As we shift more loan origination to a risk-taking model during the year. Regarding credit quality, our 31-60 days and 61-90 days delinquency rates reached 3% and 2.8% respectively in the fourth quarter. While the 1-30 days delinquency rate reached 3.4% in the fourth quarter of 2025.

This reflects the higher risk environment and in response, we have tightened our credit policies. Our upgraded AI-driven risk management system is enabling us to more frequently and effectively assess and mitigate risks across our portfolio. Looking at the same metrics on a monthly basis, the delinquency rate peaked in October and gradually decreased in December 2025. For instance, the 1-30 days FPD rates decreased by 38% from October 2025 to January 2026. For the customer acquisitions, our AI models have enhanced our ability to understand customer behavior and execute more effective precision marketing strategies to drive higher sales conversion. As a result, customer acquisition cost as a percentage of total loan facilitation volume declined by 80 basis points to a record low in the fourth quarter compared to the same period in 2024.

In the insurance brokerage segment, our gross written premium decreased by 22% year-over-year to RMB 860 million in the fourth quarter of 2025. The full year gross premium was down by 17% year-over-year. The decrease was due to a premium from the traditional channel, which decreased by RMB 290 million. That decrease was partially offset by RMB 50 million increase from the internet insurance. For the fourth quarter of 2025, revenue from the overall insurance brokerage segment was RMB 84 million compared to RMB 106 million in the same period of 2024. The internet insurance revenue contributions accounts for 22% of the total segment revenue in the fourth quarter and 14% for the full years of 2025.

It has become a significant part of the business. The integration of our online and offline channel, combined with our AI-driven sales and servicing capabilities, enhance the overall customer experience while supporting more competitive customer acquisition cost structure for our traditional business. This integrated approach also creates opportunities for increased synergies across channels. We also recorded technology-driven marketing service revenue in the fourth quarter. As we are transforming our organization into AI solution platform company, we look forward to presenting you more details in the coming quarters as these services scale. On the expense side, sales and marketing expenses in the fourth quarter of 2025 decreased by 31% year-over-year to RMB 206 million.

This is attributable to lower origination volume, lower acquisition costs for new customer driven by AI, and an increase in our repeat borrower ratio to 76% through the year. The overall customer acquisition cost as a percentage of loan volume decreased by 80 basis points in the fourth quarter of 2025 compared to the same period of 2024. It was a record low, reflecting less competition in the market as some players exited the market following the new regulation, and also our AI marketing strategy, which was driving a better customer acquisition efficiency. Research and development expenses decreased by 26% year-over-year to RMB 121 million in the fourth quarter of 2025. This was due to a high base effect from the expense of our credit analysis system development project in the second half of 2024.

The full year expenses were RMB 407 million, representing 1.3% decrease from 2024. With the innovative AI tools, we are building more for less. We will continue to invest in talent and AI infrastructure to enhance the overall productivity of the R&D team. Origination, servicing, and other operating costs increased by 27% year-over-year to RMB 251 million in the fourth quarter of 2025. This was driven by increased commission rates for asset recovery services to boost collection incentive during a challenging credit environment. Full year origination and servicing costs decreased by 11% to RMB 786 million, driven by decrease in insurance brokerage business costs, along with an increased AI automation as over 81% of our first payment default cases are being handled by our AI agents.

General and administrative expenses for the quarter increased by 4.8% year-over-year to RMB 44 million. We have imposed tighter cost control to lower the expenses further. The allowance for contract assets and receivable for the fourth quarter decreased by 46% year-over-year to RMB 296 million, driven by higher receivables from guarantee services and financing services amid industry level higher risk profile of assets. Provisions for contingent liability this quarter increased by 343% year-over-year to RMB 1.1 billion, reflecting the growth in loan origination volume under the risk-taking model, which grew by 48% year-over-year. Under the current accounting standard, we are required to recognize provisions for contingent liability immediately upon loan origination under the risk-taking models, while the corresponding revenue is amortized over the loan period.

The increasing proportion of the risk-taking model loan volume has had, will continue to have an accounting impact on our earnings in the coming quarters. As previously noted, accounting standards give rise to a timing mismatch that results in a near-term earning pressure when risk-taking model loan volume grows because standby guarantee liability is recorded on the balance sheet at loan inception. This liability will be amortized to become guarantee service revenue over the guarantee period in the future, where the provisions for the associated guarantee related contingent liability and standby guarantee liabilities are recognized upfront in accordance with GAAP, resulting in timing mismatch for revenue and cost. This timing mismatch is expected to normalize when the loan balance under the risk-taking model stabilize, when the amortized revenues from the legacy assets balance out the provisions from new loans.

For the fourth quarter of 2025, GAAP net loss amounts to RMB 882 million, largely due to higher accounting provisions driven from the guarantee business as mentioned. The moderation in performance of the traditional insurance business and RMB 109 million fair value loss on the crypto assets. For the full year of 2025, the GAAP net income was 144.5 million RMB. To match the revenue and contingent liability accrue after adjusting for revenue from the stand-ready guarantee liabilities, our non-GAAP net income for the full year 2025 was about RMB 834 million.

Regarding our cash flow, we recorded a net cash outflow from our operation of RMB 198 million in the fourth quarter of 2025, but our balance sheets remain strong with cash and cash equivalents of RMB 3.3 billion as of December 31, 2025. Looking ahead to 2026, our non-lending business will continue to drive our revenue growth while our credit performance continue to improve on a sequential basis. As this is a conservative forecast, as our delinquency figures are improving more than expected, we may revise our forecast during the year. Overall, we are optimistic about the business as the core business has shown signs of recovery. Our internet business has become a significant growth contributor, and our AI platform engine is starting to deliver results. That's the end of our presentation.

Operator, it's back to you.

Thank you. We 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 speaker phone, 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. Our first question will come from Connie Gu with Piacente. Please go ahead.

Thank you, management, for taking my question. My question is about AI. You mentioned that internal AI transformation has brought significant cost savings to the company in 2025. Looking to the longer term, do you expect further cost savings or a broader potential for AI application scenarios? When we compare in-house developed AI agents to the third-party ones, what are the specific advantages? How do you view the security of the popular AI tools lately, like OpenAI? Thank you very much.

Thank you for your question regarding AI. Actually, let me yeah explain more. Yeah, talk more about our AI strategy. I think it's extremely important because we are, as I reported early on, redefining the company. Previously, it's a fintech company utilizing technology to do better finance, credit work to begin with. Then we included insurance. In the future, it's going to be a AI agent, AI native company, not only for credit and insurance subsectors, but also for more financial services subsectors and a few select industries in the coming couple years. Basically, it's going to be a different value proposition evolving from our past. Let me explain more.

When we first started to utilize AI, it was more like a tool for cost saving to do our existing processes better, cheaper. Yeah, AI as a tool. That's like in, like, 2023, 2024. From last year, and even more so this year, you just mentioned the OpenAI, AI is now a colleague. It's now a person. Yeah, a worker. That means we are going to do businesses differently. We're going to re-engineer our business processes for credit and insurance, existing businesses. At the same time, because our technologies, our AI capabilities have been well-tested, proven in these heavily regulated, demanding, super tight security standard industries, sectors. Our AI capabilities, our agents can be utilized for other financial services needs, subsectors, and going beyond financial services subsectors to more industries. This is the strategy. This is the development process.

Yeah. Going forward, we're going to do AI

More and more for our credit, for our insurance businesses. At the same time, we'll look for more subsectors in financial services and new verticals beyond the financial services to leverage our AI capabilities. Proven capabilities. Yeah. This is the strategy we have, and my vision is after 1 year, 2 years, 3 years, Yiren Digital will be a different company. It's not totally away from our traditional businesses. We will do like a credit, we'll do insurance. These are great, yeah, applications for AI, but at the same time we're going to do more. Yeah, there are better also subsectors for AI applications, agents and growth, yeah, for us going forward. This is the strategy we have in mind and we are executing. Thank you.

Yeah. Just to add to Ning's comment with the numbers. Well, in 2025, we already achieved a cost saving of RMB 80 million, and that is on top, and those are just the direct costs. That's on top of other indirect cost savings, such as the avoidance of fraud losses, which was approximately RMB 180 million last year. Also other costs like the staff trainings and office space and all that. I think just to add on to Ning's comments. We are transforming the company from just using the AI to save costs to using the AI to generate revenue.

What AI will help us is, it will reduce our time to market with the technologies and also the analytics that will help us to identify a new business opportunities. Thanks.

The next question will come from Huang Yong with Zheshang Securities. Please go ahead.

Since the new loan facilitation regulation issued in October 2025, the industry has generally experienced a significant impact. Has the company seen any improvement in this effect so far? How do you expect industry risk environment to evolve over the course of the year?

Okay. Thank you. Thank you for your questions. Based on our credit performance metrics, our risk level peaked in the last October and now showing signs of recovery. The new industry regulation had a short term impact on us, our funding partners and our peers. We believe the industry has already adapted to this short term impact, position itself for better long term developments. Our January FPD 30 and DPD 30 metrics, which track 30 days delinquency rates, have dropped by 38% to the level seen in May 2025 when this cycle began. Since the new regulation took effect in October, our cost of capital has decreased by 93 basis points.

Meanwhile, our customer acquisition cost as a percentage of loan volume continued to drop by another 0.8% to a record low now. Indicating after the new regulation, the competition has been eased and we view this as a positive signal. Our balance sheets remain solid, providing a financial strength to manage potential risk as these improvements continue to flow through the business. Overall, we remain confident in the long term fundamentals of our business. We think the new business will make the industry healthier. Thank you.

Thank you for this question. Yeah.

The next question will come from Yulong Lu. Please go ahead.

Uh, 另外的话呢，就是相比于传统的这个保险分销业务的话呢，我们的竞争的优势主要体现在哪里？谢谢。

好，谢谢您的提问。Hello, management team. I've noticed that the company's internet insurance distribution business has demonstrated strong breakout growth. Could you elaborate on the development targets and strategic priorities for this segment in the new year? Additionally, compared with traditional insurance distribution models, where do you see our key competitive advantages are?

Okay. Let me take a first crack and yeah, William can yeah add to it.

The internet insurance business market potential is very big. You may well remember that our credit facilitation business actually was quite offline several years ago, and then we successfully moved it to online to digitally transform the business. That was absolutely necessary, the right thing to do, bring us growth opportunities, and the same is happening for our insurance brokerage business. But not exactly the same. Let me explain. Well, more and more businesses are moving online. The online part will be bigger and bigger contribution to our insurance business, top line, bottom line. The same is happening as the credit business going from offline to online. The difference is we will still have offline part, but that offline part is also going to be more and more kind of like the so-called offline and online, meaning our offline colleagues will do more and more online activities like you know, live streaming, like you know, WeChat, Douyin kind of applications.

We'll do that more and more. The offline part will be also more and more effective. As you have seen, the online part, the purely online part, is showing great potential, super faster growth, and that's also very promising. Going forward, the insurance brokerage business will have this, high growing like online part and also a more efficient like, offline part, kind of being offline, online combined model. This is the vision we have for our insurance business. William Hui, you have anything to add? By the way, I'd like to add something. Why, like, our online, internet insurance business, is growing so fast, much faster than our credit business transforming from offline to online, because pretty much all the tools have been built for the credit business.

The analytics, the AI agents capabilities, so on, have been built. It's a much faster acceleration process. The same logic goes for what I just mentioned, us moving to other like verticals, other industries, the same kind of AI infrastructure, the agent capabilities have been built. Of course, we need to add new kind of like vertical domain expertise. That's also essential. To begin with, the technology platform capabilities have been built. It's a much faster, much accelerated process. Thank you.

That will conclude our question and answer session. If you have any further questions, please connect to the IR team of Yiren Digital or Piacente Financial Communications. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the Yiren Digital Ltd. Third Quarter 2025 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Keyao He. Please go ahead.

Thank you, Operator. Good morning and good evening, everyone. Today's call features a presentation by our Founder, Chairman, and CEO of Yiren Digital Ltd., Mr. Ning Tang, and our CFO, Mr. Ka Chun Hui. There will be a Q&A session after the prepared remarks. Before beginning, we would like to remind you that discussions during this call contain forward-looking statements made under the Safe Harbor provision of the U.S. Private Securities Litigation Reform Act of 1995. Such statements involve risks, uncertainties, and factors that can cause actual results to differ materially from those contained in any such statements. Further information regarding such risks, uncertainties, or factors is included in our filings with the U.S. Securities and Exchange Commission. We do not undertake any obligation to update any forward-looking statements as required under the relevant law. During the call, we will be referring to certain non-GAAP financial measures and supplemental measures to review and assess our operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For information about these non-GAAP financial measures and reconciliation to GAAP measures, please refer to our earnings press release. I will now pass it to Ning Tang for opening remarks. Thank you all for joining us today.

This past quarter presented a more challenging operating environment than we have seen in recent periods, driven primarily by heightened regulatory uncertainty and a more cautious credit backdrop. While these factors weighed on parts of our business, we moved quickly to adjust our risk posture and protect asset quality. I am pleased to share that these actions have been effective. At the same time, our Internet insurance segment continued to deliver solid growth, reinforcing the resilience and diversification of our platform. As we look ahead, we remain focused on disciplined execution and positioning the company for the next generation of fintech with AI and blockchain. As part of our ongoing transformation, we continue to advance our agentic AI capabilities to enhance process efficiency and strengthen unit economics. These innovations are helping us offset the margin pressure associated with rising credit risk. Our agentic platform, MagicQ, is already demonstrating meaningful impact, improving sales conversion, elevating risk controls, and driving greater overall productivity. With that, let me walk you through the key business highlights for the quarter. First, turning to our financial services segment. We facilitated RMB 20.2 billion in loan origination during this quarter, up 51% year over year. Our repeat borrowing rate remained at a record high of 77%, in line with last quarter and 16 percentage points higher than a year ago. While the number of our total borrowers decreased by 11% to 1.3 million compared to the same period last year due to the tightening of credit policies, our total cumulative borrower base increased by 21% year on year to 14 million. We also continued to see healthy structural improvements across our borrower base. The average size for new loans from our lending platform rose from RMB 7,000 to RMB 10,100, driven by our ongoing shift towards higher credit quality customer segments and better credit predictability from repeat borrowers. We expect this favorable mix trend to continue as we continue to trade up for better quality borrowers. Our agentic AI has delivered a remarkable boost in our operations. For marketing, our AI-driven marketing agent continues to deliver strong results. It enhanced customer profiling accuracy and expanded the pool of identified high-intent users by 38% quarter over quarter. In addition, our proprietary AI agent now generates tailored responses across a wide range of customer inquiries, effectively reactivating dormant users and driving a 15% increase in their ATP engagement. For customer service, our LLM-powered service robot continues to strengthen its performance, with response accuracy rising from roughly 80% to over 92%. Meanwhile, the rate of inquiries requiring escalation to human agents declined by nearly 15% quarter over quarter. For quality control and risk management, we continue to optimize our multi-model models. Fraud detection coverage increased from a weekly manual sampling of 450 cases to 5,800 by agentic AI, while accuracy improved to 91%. Now let's turn to capital allocation. As of September 30, 2025, our total outstanding loan balance is RMB 34.2 billion, representing 10% quarter-to-quarter growth. Our funding cost rose by 55 basis points during the quarter, in line with the sector trend. We are now included in the YBASE of nearly 30 compliant funding partners under the new regulatory framework, positioning us as one of the leading players in the market. Asset quality and credit risk, we continue to see industry-wide pressure this quarter. Although we proactively tightened our credit policies, our risk indicators edged up in Q3. As of September 30, our one to thirty-day delinquency rate stood at 2.7%, while the thirty-one to sixty-day and the sixty-one to ninety-day delinquency rates were 1.7% and 1.4%, respectively. The good news is that we see that risk indicators for the loan portfolio from new borrowers begin to trend down in November, which is proof of the effectiveness of our upgraded credit strategy. However, from a conservative point of view, we expect the industry-wide impact on the overall asset quality to continue in the fourth quarter and that the recovery is likely to begin early next year as the market stabilizes. Our AI-driven collection capabilities play an important role in mitigating early-stage synthesis. This automation drove productivity growth, reducing labor costs by an average of RMB 5 million per month, up from RMB 2.7 million in the second quarter, while improving service quality. Turning to our overseas business, our Indonesian operations launched on schedule in September 2025, and we expect this segment to contribute significant growth in 2026. Now turning to our insurance brokerage business. After navigating significant regulatory headwinds and commission pressure in 2024, we entered 2025 with a transformed operating model. Our insurance business has shifted from a high-touch, high-cost brokerage approach to a digital, low customer acquisition cost, high-margin model by tapping into new insurance demand within our existing customer acquisition channels on the platform. This has allowed us to focus on a healthier, more profitable customer base that is contributing meaningfully to segment margins. In 2025, gross written premium reached RMB 1.15 billion, an increase of 35% quarter over quarter. Revenue from the segment was RMB 84.2 million, up 45% from the prior quarter. Our Internet insurance business continued its rapid expansion, delivering RMB 196 million in annualized premium, representing 204% quarter over quarter growth. Total customer numbers rose 93% quarter over quarter to 229,353, driven by more precise marketing and still low penetration within the target segment. We expect the Internet insurance business to sustain strong momentum over the coming quarters. Finally, while we continue to strengthen and scale our core business, we are also investing strategically into the future. Building on our technology capabilities and our position within the broader fintech ecosystem, we are exploring new ways to better serve customers and manage assets through AI and blockchain-enabled solutions. We see AI and blockchain as core strategic pillars for the future of our business, especially as we expand our footprint globally. We are investing in the systems and capabilities needed to build our next-generation fintech infrastructure while deepening partnerships with key industry players. In October, we signed an MOU with TrainUp, a leading crypto solutions provider in Singapore, and we also announced our plan to launch an Ethereum staking service, which is currently undergoing testing. This initiative marks an important milestone in our journey toward delivering seamless 24/7 global financial services. Over the next few quarters, we look forward to introducing additional products designed to enhance financing efficiency and asset monetization for our customers. To conclude on the quarter, while the third quarter brought its share of challenges, the progress we have made demonstrates that our diversification and forward-looking strategy are working. We have built a stronger, more resilient foundation that positions us well for sustainable growth and value creation in the quarters ahead. I am confident that by staying disciplined and continuing to execute on our priorities, we will emerge even stronger. With that, I will now pass it over to Ka Chun Hui, who will provide more details on the financials for the quarter.

Thank you, Ning. Hello, everyone. I will now walk you through our financial performance for the third quarter this year. Please refer to our earnings release and IR deck for further details, both available on our website. For the third quarter, total revenue grew by 5.1% year over year to RMB 1.55 billion, mainly attributable to 70% growth from the Financial Services segment. It was partially offset by the decline in revenue from the consumers and lifestyle segment, as we announced the mid-decommission of the business in 2024. In the Financial Services segment, total loan facilitation volume increased by 51% year over year. The increase was driven by growth in average loan ticket size, the growth of repeated borrowers, and an increase in loan referral revenue. The loans from repeat borrowers account for 77% of the total loan volume facilitated in the third quarter this year, up 16 percentage points compared to the same period last year. As the credit from repeated borrowers is more predictable, it allows us to extend the credit without substantially affecting our portfolio risk. The average size for new loans from our lending platform increased by 44% to RMB 10,100. Overall, the revenue from this segment increased by 70% year over year to RMB 1.4 billion in the third quarter. The revenue growth is driven by our loan guarantee services revenue, which reached RMB 1.4 billion in the third quarter, up nearly 2.4 times year over year, driven by higher loan facilitation under the risk-taking model. As our service revenue and loan facilitation from the risk-taking model increases, our provisions for contingency liability also increased by 68.8% year over year to RMB 460 million. But as the economic benefits of the guarantee services are recognized over the next few quarters, the total of guarantee liabilities of RMB 930 million will be recognized as revenue over the next few quarters. The contribution margin for the entire Financial Services segment improved from 5.2% in 2024 to 23% in the third quarter, driven by a 27.1% decrease in the origination expense while the revenue grew by 70%. In the insurance segment, our gross written premium in the third quarter was RMB 1.15 billion, up 35% from the second quarter this year. It is showing a sign of recovery for this business. Compared to the third quarter of 2024, the premium is still down by 15%. The total premium is slightly down by 1.5% year on year. We have successfully turned around the business. The main growth contributor is the Internet insurance line that we launched in the first quarter. In the third quarter, the gross premium from the Internet insurance line was RMB 196 million, representing 204% growth quarter over quarter. We expect this growth momentum will continue in the next few quarters and have significant revenue contribution to the overall insurance line. One thing to highlight is that the margin and the take rate for the Internet insurance business is much higher than the traditional brokerage line because the clients for this segment come from our customer traffic from insurance and other business segments. These customer segments are of better risk quality than traditional insurance carriers are not able to reach. As such, the Internet insurance business has lower customer acquisition costs, better revenue sharing with the carriers, and no commission cost. The margin is expected to increase as the premium scales, which will benefit the bottom line. On the expense side, sales and marketing expenses in the third quarter decreased by 1.2% year over year to RMB 332 million. The marketing expenses decreased while our total loan facilitation increased by 51%. This is the result of better AI-assisted precision marketing that drives a higher sales conversion, effectively lowering the borrower acquisition cost. Research and development expenses decreased by 39% year over year to RMB 92 million. This is because, during the same period last year, there was a one-off large system development project. The origination, servicing, and other operating costs decreased by 27% year over year to RMB 150 million because of the 27.1% decrease in the origination expense from the financial services business due to the improved collection efficiency driven by AI and lower commission costs from the traditional insurance brokerage line. General and administrative expenses for the quarter increased by 30% year over year to RMB 104 million, primarily due to increased personnel-related costs to strengthen our risk management and to fund the plan for new business initiatives such as the development of the next-generation fintech that we mentioned in the announcement in October. The allowance for contract assets and receivables and others for the quarter increased by 142% year over year to RMB 229 million. This is driven by higher receivables from loan facilitation services and guarantee services as the loan volume has grown with particular strength from the risk-taking model that generates higher service revenues. Along with the increase in the self-funded loan balance in 2025, provisions for contingent liability this year increased by 69% year over year to RMB 460 million because of the increase in loan volume facilitated under the risk-taking model. Net income for the third quarter was RMB 318 million, translating to RMB 3.65 per ADR share or USD 0.51 per ADR share. This represents a 12% decline from the second quarter of this year. The pressure on profitability is attributed to multiple reasons, including the substantial upfront provisions under our risk-taking loan facilitation model, industry-wide volatility in asset quality, a declining fee rate for the loan facilitation business following the new regulation, as well as the decreasing commission rate in our traditional insurance brokerage line. Our net margin declined slightly from 22% in the prior quarter this year to 20%. However, we maintain a very good cash position. The net cash outflow from operations in the third quarter was RMB 1 million, and our balance sheet remained robust with a total cash equivalent and restricted cash of RMB 4 billion. This will position us well to address any future challenges and to capture new opportunities. Looking ahead, we remain cautiously optimistic about our business. While we anticipate volatility in the credit and regulatory risk environment, our disciplined credit policy, enhanced risk management capability, and effective risk revenue model will position us well in this market environment. Our international business and Internet insurance segments are expected to drive higher revenue growth and margin growth in the next few quarters. For 2025, we are projecting revenue to be in the range of RMB 1.4 billion to RMB 1.6 billion, reflecting our disciplined approach to growth and risk management. That's the end of my part of the presentation. Thank you very much.

Thank you. And operator, we are open for Q&A. We will now begin the question and answer session. The conference has now concluded. If you have any questions, you are welcome to contact the company's IR team. Thank you for attending today's presentation. You may now disconnect.

Thank you.