Operator:

Good day, and welcome to the Yiren Digital Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ms. Keyao He, Director of Investor Relations of Yiren Digital. Please go ahead, ma'am. Keyao He: 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 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 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. Ning Tang: 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 have 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, Magicube. With support of these AI tools, we incubated our Internet insurance business, which has achieved strong growth quarter -- 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 2 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 disciplined 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 Magicube in October, our internally developed agent integration platform purpose-built for enterprise scale AI deployment. Magicube 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 Magicube 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 [indiscernible] 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 2 proprietary AI agents, YiQ agent and ZhuQue 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 solutions 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 have served exceeded RMB 14.3 million, representing a 16% increase from approximately RMB 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 more refined customer segmentation, we prioritized 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 fourth 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 guaranteed service revenue as a result of changing credit requirements by our partners. Encouragingly, our lending -- our leading risk indicators are beginning to turn. Our first payment default rate FPD30 for loan delinquency over 30 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 continued improvement in both industry conditions and our own asset quality metrics, giving us well-funded confidence in our ability to deliver disciplined and stable operations in 2026. On the institutional funding side, we secured wide list 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 financial discipline by our partners as well as less competition in the market and 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 Indonesian markets while maintaining prudent financial discipline and a clear focus on profitability. We look forward to showing 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. As 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 towards 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 will now pass it over to William, who will provide more details on the financials for this quarter and the full year. Ka Hui: 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 automation 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 solutions 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 with 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. Having said that, 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 1 or 2 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 year 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 comparing to the full year of 2024. This growth was driven by strong performance in the first 3 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 to 60 days and 61 to 90 days delinquency rates reached 3% and 2.8%, respectively, in the fourth quarter, while the 1 to 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 risk 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 to 30 days FPD rate 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, and the full year gross premium was down by 17% year-over-year. The decrease was due to premium from the traditional channel which decreased by RMB 290 million. That decrease was partially offset by RMB 50 million increase from the insurance -- 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 year 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 an 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 cost 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 R&D 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 the increased AI automation as over 81% of our first payment delinquent 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 guaranteed 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 model, while the corresponding revenue is amortized over the loan period. The increasing proportion of the risk-taking model loan volume has -- 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 we taking model loan volume growth because standby guarantee liability is recorded on the balance sheet at loan inception. This liability will be amortized to become guaranteed service revenue over the guaranteed 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 RMB 14.5 million. To match the revenue and contingent liability accrual 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. So 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 sheet remains 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 continued 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. So that's the end of our presentation. Operator, back to you. Operator: [Operator Instructions] And our first question will come from [ Connie Gu ] with [indiscernible]. Unknown Analyst: And my question is about AI. You mentioned that internal AI transformation has brought significant cost savings to the company in 2025. So looking to the longer term, do you expect further cost savings or a broader potential for AI application scenarios? And when we compare in-house developed AI agents to the third-party ones, what are the specific advantages? And how do you view the security of the popular AI tools lately like open? Ning Tang: Thank you for your question regarding AI. And actually, let me, explain more, talk more about our AI strategy. And I think it's extremely important because we are, as I reported earlier on, redefining the company. Yes, previously, it's a fintech company utilizing technology to do better finance credit work to begin with. Then we included insurance. But in the future, it's going to be an 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 of years. So basically, it's going to be a different value proposition evolving from our past. Let me explain more. Yes. So when we first started to utilize AI. It was more like a tool for cost savings to do our existing processes better, cheaper. Yes, AI as a tool. That's like in like 2023, 2024, but from last year and even more so this year, you just mentioned the [ OpenClaw ], AI is now a colleague is now a person, yes, a worker. So that means we are going to do businesses differently. We're going to reengineer our business processes for credit and insurance existing businesses. And at the same time, because our technologies, our AI capabilities have been well tested, proven in this 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. So this is the strategy. This is the development process, yes. So going forward, we're going to do AI more and more for our credit, for our insurance businesses. But at the same time, we'll look for more subsectors in financial services and new verticals beyond financial services to leverage our AI capabilities, proven capabilities, yes. So 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. They will do -- we will do like credit, we'll do insurance. These are great applications for AI. But at the same time, we're going to do more. Yes, there are better also subsectors for AI applications, agents and growth for us going forward. So this is the strategy we have in mind, and we are executing. Thank you. Ka Hui: Yes. Just to add to Ning's comment with the numbers, in 2025, we already achieved a cost saving of RMB 80 million, and that is on top -- and those are the direct -- just the direct costs, and that's on top of other indirect cost savings such as the avoidance of fraud losses, which was approximately RMB 180 million last year and also other costs like the staff training and office space and all that. So I think just to add on to Ning's comments, we are transforming the company from just being using the AI to save cost to using the AI to generate revenue. So the -- 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 new business opportunities. Operator: The next question will come from [ Wang Yang ] with [indiscernible] Securities. Unknown Analyst: [Interpreted] 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 the industry risk environment to evolve over the course of the year? Ka Hui: Okay. Thank you. Thank you for your questions. Based on our credit performance metrics, our risk level peak 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 development. Our January FPD30 and DPD30 metrics, which track 30 days delinquency rate have dropped by 38% to the level seen in May 2025 when this cycle began. When the new regulation took effect in October, our cost of capital -- sorry, 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. So indicating after the new regulation, the competition is -- has been eased, and we view this as a positive signal. And our balance sheet remains solid, providing the financial strength to manage potential risk as these improvements continue to flow through the business. But overall, we remain confident in the long-term fundamentals of our business. We think the new business will make the industry healthier. Thank you. Operator: The next question will come from [ Yulong Yu ]. Unknown Analyst: [Interpreted] I have 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? Ning Tang: Okay. Let me take the first crack and yes, William can add to it. The insurance -- internet insurance business market potential is very big. Yes. And 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, yes, 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, yes. So the online part will be bigger and bigger contribution to our insurance business, top line, bottom line. And 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 live streaming, like WeChat, Douyin kind of applications. We'll do that more and more. So the offline part will be also more and more effective. And as you have seen, the online part, the purely online part is showing great potential, super fast growth. And that's also very promising. So going forward, the insurance brokerage business will have this, yes, high growing like online part and also a more efficient like offline part kind of being offline, online combined model. Yes. So this is the vision we have for our insurance business. And William, do you have anything to add? And by the way, I'd like to add something why like our online Internet insurance business is growing, yes, 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. So it's a much faster acceleration process. And 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. But to begin with, the technology platform capabilities have been built. So it's a much faster, much accelerated process. Thank you. Operator: And that will conclude our question-and-answer session. If you have any further questions, please connect to the IR team of the Yiren Digital or Piacente Financial Communications. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.