Ladies and gentlemen, good day, and welcome to Yuanbao Inc.'s Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Stella Liu, Investor Relations and Strategy Associate Director. Please go ahead.

Thank you, operator. Please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions and other factors. Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and discussion. A general discussion of the risk factors that could affect Yuanbao's business and financial results is included in certain filings of the company with the Securities and Exchange Commission. The company does not undertake any obligation to update this forward-looking information, except as required by law. During today's call, management will also discuss certain non-GAAP financial measures. For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the earnings release issued earlier today. Joining us today on the call from Yuanbao's senior management are Mr. Rui Fang, our Chairman and Chief Executive Officer; and Mr. Huirui Wan, our Chief Financial Officer. Mr. Fang will deliver his remarks in Chinese, followed by an English translation. All figures will be in RMB unless otherwise noted. We will conclude the call with a Q&A session. As a reminder, this conference is being recorded. In addition, a webcast replay of this conference call will be available on Yuanbao's Investor Relations website. I will now turn the call over to our Chairman and CEO, Mr. Fang. Please go ahead, sir.

[Interpreted] Hello, everyone. Thank you for joining us today for our fourth quarter and full year 2025 earnings conference call. We concluded the year with strong performance in the fourth quarter of 2025, laying a solid foundation for sustained growth going forward. Our total revenues for the quarter reached RMB 1.18 billion, reflecting a year-over-year increase of 32.2%. Net income was RMB 337.4 million, up 15.4% year-over-year with a net margin of 28.7%. With this performance, we achieved profitability for 14 consecutive quarters. For the full year, total revenues reached RMB 4.37 billion, representing a year-over-year increase of 33.1%. Net income was RMB 1.31 billion, up 51% year-over-year, with net margin improving by 3.5 percentage points to 29.9%. This strong growth further validates the sustainability of our business model and underscores the success of our scaled operations and disciplined management. As of the end of 2025, we held RMB 4.04 billion in cash reserves, providing a solid financial foundation to support continued investments in model and big data capabilities as well as for the continuous expansion of our business. From an operational perspective, we also made significant progress. In the fourth quarter, the number of new policies increased by 34.5% year-over-year to approximately 7.9 million. For the full year, new policies reached approximately 30.7 million, representing a year-over-year increase of 36.7%. This growth was supported by the continued strengthening of our AI capabilities. As of the end of the year, our AI team accounted for over 10% of our total workforce. Our model network included more than 4,900 models capable of analyzing over 5,700 labels. Through continuous model iteration and the ongoing accumulation of business data, we are able to understand and serve a vast user base with greater efficiency and precision, supporting an industry-leading intelligent service ecosystem. The commercial…

Thank you, Mr. Fang, and thank you, everyone, for joining today's earnings conference call. I will now provide an overview of our 2025 fourth quarter and full year financial results. Building on the past few quarters momentum, we delivered a strong financial performance in the fourth quarter, bolstered by an expanding user base, deeper AI integration across our operations and continued improvements in operational efficiency. We strengthened both our top and bottom lines during the quarter and further improved our cash generation capacity. Our total fourth quarter revenues reached RMB 1.18 billion, representing a robust 32.2% year-over-year increase. This growth was primarily driven by significant increases in both our insurance distribution and system services businesses. Breaking down the revenue mix, revenues from insurance distribution services reached $401.1 million, a 35.1% year-over-year increase. This growth was primarily fueled by a higher number of policies purchased on our platform, underpinned by more precise consumer targeting and enhanced marketing capability. Revenues from system services totaled 774.1 million, up 31.1% year-over-year. This growth was driven by ongoing improvements to our AI integrated full consumer service cycle engine, which further enhanced our marketing solutions and precise analytics services for insurance carriers. In addition, the increase reflected an expanded provision of system services to both existing and newly acquired insurance carrier partners. Turning to our expenses. Total operating cost and expenses increased by 30.2% year-over-year to RMB 780.4 million. Operations and support expenses decreased by 13.7% year-over-year to RMB 36.7 million, mainly due to our improved operating efficiency and effective cost control measures. Selling and marketing expenses rose by 47.7% year-over-year to RMB 552.3 million as we continue to invest in our marketing capabilities to attract new consumers and retain existing ones. General and administrative expenses decreased by 22.5% year-over-year to RMB 79.6 million, primarily due…

[Operator Instructions] We will now take our first question from the line of Amy Chen from Citi.

This is Amy Chen from Citi. Congrats to the management on a robust set of full year results. My question is, firstly, on the top line and bottom line growth guidance for the year of 2026. And we also noted that your selling and marketing efficiency actually improved quite a lot in the year of 2025, and we're wondering about the sustainability of such improvement going on into 2026 and onwards?

[Interpreted] We didn't give specific earnings guidance on 2026, but we expect to maintain our revenue and net profit growth momentum in 2026. Despite intensified industry competition, we have sustained both revenue growth and margins past 14 quarters, demonstrating ongoing improvements to our tech-driven operational efficiency. This has created a self-reinforcing flywheel effect while scale expansion and cost optimization fuel each other, moving us beyond reliance on market tailwinds.

We will now take our next question from the line of Yue Xu from China Securities.

So regarding the dividend plans, do we have a specific plan or time line for dividends in the coming year?

[Interpreted] We continue to evaluate the best strategies to maximize shareholder returns through various operational initiatives and capital markets opportunities, including potential dividend policies. Shareholder returns form a core pillar of our long-term strategy, and we are steadily advancing this process to support long-term sustainable development. And we didn't give a specific time line on the dividend payout plan.

We will now take our next question from Thomas Wang of Goldman Sachs.

My question is really on 2023 outlook on sales and also on marketing cost?

[Interpreted] We expect consumer demand to remain healthy as we continue to innovate and elevate insurance products, significantly enhancing user value and experience. This should help improve user retention and support stronger industry fundamentals. Looking ahead up to 2026, as we balance growth and profitability, we aim to maintain sales and marketing expenses as a percentage of revenue broadly stable with only a modest potential risk increase.

We will now take our next question from Xintao Chen of CICC.

So my question is in the fourth and full year 2025 growth, what's the contribution breakdown between new users and existing users? What's the company's current customer policy renewal rate? How do you plan to improve customer retention in the future?

[Interpreted] We did not provide a detailed breakdown of user compensation in our quarterly report. However, given our continued significant investment in customer acquisition and the fact that inclusive health insurance remains an emerging and policy-supported growth market, the majority of our current users are still new users. Year-to-date, our customer renewal rates have not changed significantly compared with the prior fiscal year. Our retention strategy focused on three key areas: First, product innovation. We continue to drive product innovation to improve payout ratios and user value perception, ultimately helping consumers better recognize the value of commercial insurance. Second, user education. Through content-driven marketing, we aim to shift the consumer mindset from viewing insurance as just a cost to recognizing it as the essential protection as short-term insurance products, resemble instant consumption purchases, they align perfectly with social media and public traffic platforms, which gives us a natural edge in conversion efficiency. Third, industry trends. Looking at the long-term trend, as product value improves, claim ratios will naturally trend upward. While this might lead to some commission pressure, it will be offset by higher retention rates. As a result, we expect user lifetime value to remain stable or potentially rise meaningfully.

We will now take our next question from [indiscernible] of CITIC Securities.

[Interpreted] My question is the two sessions highlighted the importance of speeding up the development of commercial health insurance and implementing a long-term care insurance system. So from a policy perspective, what drivers can we expect in the future?

[Interpreted] This policy serves as a direct and significant catalog for us as Mr. Fang also mentioned it earlier. First, the report highlights key initiatives such as launching the Commercial Insurance Innovative Drug Catalog, accelerating the development of commercial health insurance and encouraging the development of an inclusive insurance system. These priorities reaffirm the role of commercial insurance as a core component of China's diversified medical payment system and emphasize the importance of inclusive development. At the end of last year, following the release of the inaugural National Commercial Insurance Innovative Drug Catalog, we partnered with insurers to rapidly expand the drug coverage of our Super Medical Insurance, Million-RMB Medical Insurance product series, responding to public demand for access to advanced treatments and high-quality medical medications under the new policy cycle. The policy also encourages the development of an inclusive insurance system and highlights support for vulnerable groups such as individuals with disabilities or cognitive impairment. We consistently innovate to meet the protection needs of different populations, developing dedicated products for specific user segments such as women, new urban residents and individuals with pre-existing conditions. These efforts allowed us to expand coverage and reach more users who were previously underserved. This policy direction serve as strong catalyst for expanding the reach of commercial insurance through online channels, while continued product innovations enhance the value delivered to customers. Our AI capabilities allow us to translate complex and evolving policy shifts into the precise insurance finance its customer commercial logic. We are well positioned to convert this policy tailwinds into tangible long-term business growth.

We will now take our next question from [ Ying Ying Shu ] from [indiscernible] Securities.

Could you assess the current development of AI agents and their impact on the company's business model? Do you foresee any potential threat to the company's competitive moat?

[Interpreted] AI agents are definitely a promising direction, but the key question lies in the specific usage scenarios. Most insurance sales today happen in instant consumption context, moments when users are engaged with leisure content. In contrast, our knowledge or Q&A platforms where AI agents typically operate, users are in an active problem-solving mindset rather than a consumption mindset and differs from content platforms where information is pushed to consumers. The core question is whether the content platforms where users currently spend a significant amount of their daily time will disappear. We're involved into places where users spend time interacting with intelligent agents. We see a clear distinction between search-driven environments such as SEO or GEO where consumers are actively looking for answers and discovery-based environments where consumers' engagement tends to be more passive.

We will now take our next question from [indiscernible] from Shenwan Hongyuan Securities.

This is [indiscernible] from Shenwan Hongyuan Securities. Congratulations on the results of fiscal year 2025. I have one question for the management team. How do you perceive the impact of the ongoing wave of AI application iterations on the company's business?

[Interpreted] Broadly speaking, AI in insurance is rapidly moving from the exploration phase to large-scale implementation in terms of large language models with different types of institutions focusing on different areas. Yuanbao's core competitive edge in AI has been anchored by three key areas from day 1. First is our deep vertical expertise. We have built a comprehensive insurance knowledge system and structured product capabilities, which enable our AI to better understand both insurance products and user needs. Second is our data capabilities. We leverage massive amounts of business data and continuously iterate and optimize our user understanding and recommendation, and service engines. Third is our agentic capabilities. We are actively deploying an agentic approach to embed both discriminative AI and generative AI across the entire life cycle from sales consulting to customer service. This includes applications such as intelligent insurance planning and AI-powered supportive tools for our customer service teams. Looking ahead, we believe insurance AI will evolve from tool-based applications into a full cycle intelligent service ecosystem, taking on roles like AI insurance advisers and long-term customer risk management assistance. Yuanbao's strategic direction is to build an AI-driven insurance service platform, positioning AI as the primary gateway connecting users with insurance products.

And that concludes the question-and-answer session. I'd like to turn the conference back to the management for any additional or closing comments.

Thank you once again for joining us today. If you have any further questions, please feel free to contact us directly or Piacente Financial Communications. Our contact information for IR in both China and the U.S. can be found in today's press release. Have a great day.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines. [Portions of this transcript that are marked [interpreted] were spoken by an interpreter present on the live call.]