Good day, and welcome to the First Quarter 2025 Year-end Digital Conference Call. [Operator Instructions] 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 the presentation by the Founder, Chairman and CEO of Credit, our CEO; Mr. Mei Zhao; and our CFO, Mr. Yuning Feng. Our incoming CFO, Mr. William Hui will join us for the Q&A session after the prepared remarks. Before beginning, we will 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 future 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 laws. 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 reconciliations to GAAP measures, please refer to our earnings press release. I will now pass it to Ning for opening remarks.

Thank you all for joining our earnings conference call today. We are pleased to report another solid and healthy quarter, reflecting the strength of our technology transformation strategy, which focuses on sustainable growth, operational efficiency, technology innovation and international expansion. Our core business benefits from domestic economic stimulus policies that boost consumption and expand credit access, creating sector-wide opportunities. Through our strategic focus on attracting and serving high-quality borrowers, combined with ongoing integration of advanced technology across our platform, we are well positioned to capitalize on these favorable conditions and confident in maintaining our growth momentum through 2025. Before discussing our operations in detail, I would like to share our interpretation of the new rules on loan facilitation business issued by China's National Financial Regulatory Administration in early April this year. Under the new rules, commercial banks are required to adopt a formal white list mechanism for fintech partnerships and comply with standardized financing cost structures under the new regulatory framework, we anticipate accelerated consolidation in China's online lending industry due to stricter compliance requirements. While smaller platforms may face pressure in maintaining partnerships with funding sources, major platforms like ours are gaining dominance through compliance advantages and technological strength. Looking ahead, risk management capabilities, regulatory compliance and differentiated product pricing capabilities will become critical competitive differentiators, and those are precisely the areas where we are strategically building our operational edge. Now let me go through our business highlights for this quarter. First, on our financial services business, in the first quarter of 2025, loan volume facilitated reached RMB 15.2 billion, representing a slight decline of less than 1% quarter-over-quarter, but a strong 28% increase year-over-year, demonstrating resilience amid seasonal headwinds. We project double-digit growth in loan volume for the second quarter this year, attributable to 3 key growth drivers.…

Thank you, Ms. Tang, and thank you for all your kind wishes. So hello, everyone. On this call, I will be focused on our key financial highlights. Please refer to our earnings release and IR deck for further details, both available on our website. Firstly, we are pleased to report a steady growth in the first quarter of 2025. Our total revenue increased 13% year-over-year to RMB 1.6 billion. In the Financial Services segment, total loan facilitation reached RMB 15.2 billion in the first quarter, up 28% year-over-year. The growth was primarily driven by robust demand for our small revolving loan products, coupled with a steady increase in demand from repeat higher-quality borrowers. The platform's ability to attract, retain and nurture high-quality borrowers has been a key driver of the sustained growth in loan volume. As a result, revenue from this segment surged by 59% year-over-year to RMB 1.2 billion in the first quarter, further highlighting the platform's success in meeting growing customer demand. In the first quarter, the revenue from guarantee service reached RMB 318 million compared to RMB 17 million in the same period last year, reflecting the growing loan volume facilitated under the risk-taking model. As loan balance under risk-taking model continue to grow, we expect higher revenue contribution from the guarantee services. In the insurance sector, our gross written premium totaled RMB 802 million in the first quarter of 2025, making a 12% year-over- year decline. The decline was mainly driven by industry-wide new sales contraction amid regulatory changes. Consequently, revenue from our insurance segment declined 43% year-over-year to RMB 71 million. In the Consumption and Lifestyle segment, as we strategically scaled back product offering since the second half in 2024, the total revenue dropped 40% year-over-year to RMB 308 million. Following our strategic review, just…

We're now ready for Q&A.

[Operator Instructions] Our first question comes from Chris Wu from Luke Capital.

Perhaps my question is what kind of impact or changes do you expect from the new loan facilitation rules?

Okay. Thank you for the question. The recent loan facilitation regulation in China, we believe, is a significant step towards formalizing and stabilizing the industry within the country's financial framework. So these rules promote greater transparency and regulatory clarity, which align with the government's support goals of supporting financially robust lenders and fostering healthy industry growth. So for Yiren Digital, benefited from -- it is beneficial for a big platform like us as the industry will see -- we likely to see an acceleration in industry consolidation. So as we are already on the white list of our funding partners. So we believe this is good news for us.

I hope that answers your question, Chris. Do you have any other questions?

Yes. Can you provide some details on the international expansion?

Tang, will you answer this question?

And then previously reported international business is very strategic for us and will, yes, grow into a significant part of our revenue and value in the future, I hope, yes, not too far away. And we are making very solid progress in the Philippines, as I earlier reported, yes, and the second quarter will likely see also double-digit growth. And also, we are already profitable there. And so AI is playing a very key role in the Philippines, and I expect also in other markets, international markets. And yes, we are working closely with our partner in Indonesia for the launch, yes, sooner rather than later, I hope, yes, in the beginning of the second half of the year, and because our partner has very rich resources in Indonesia, and we contribute our great technology capability and also fintech experience in Mainland China and also in Philippines. So there is strong synergy between the partners. And I very much hope that, yes, our results in Indonesia will also be very positive. William, you have more color to add?

Yes. Well, I'll just add some financial context into it. So in Q1, our international transaction volume has reached RMB 1.24 [ billion ]. That's up 75% quarter-over-quarter with the loan facilitation for new borrower growing by 108%. So we expect a continued double- digit growth in loan volume in the second quarter. So in Indonesia, as Ning just mentioned, we are preparing for the launch, and we expect it will launch in the second half of this year. And meanwhile, besides the Philippines and Indonesia, we will continue to explore the possibilities of the other markets, such as the Middle East or even Europe.

Thank you. And I hope that answers your question, Chris.

Our next question comes from the line of [ Dale Tiongson ], a shareholder.

I just wanted to ask about the crypto asset that appeared on the balance sheet this quarter and then also the fair value adjustment. So any context there would be great.

[indiscernible], this is about what asset.

Crypto asset and then also I think there was a fair value adjustment that took place in the quarter and in the cash flow statement, it looked like it might have been related to the crypto asset?

Yes. This is part of our -- yes, effort to, yes, invest our cash. And yes, so crypto is becoming more mainstream and part of the financial system. So it's a minority piece of our investment efforts. And in the first quarter, it experienced some value drop. But as we see, its value has gone up? Yes. So we expect some fluctuation, yes, in this emerging asset class. But yes, we are hopeful that we are making through the investment and things will work out. William, you have more color to add?

Yes, this is William. So yes, in the first quarter, we have allocated a small amount of our cash into crypto assets as we explore new ways to manage our, especially overseas cash and cash equivalents in our balance sheet. As Mr. Tang mentioned, yes, in the first quarter, there are some market valuation, and we have managed our positioning during the fourth quarter and second quarter. And we are happy to see that actually, the [indiscernible], we see has been already -- the asset value has been growing back in the second quarter. And -- but in the fourth quarter, the fair value changes on this investment item has been approximately USD 70 million. I hope that answers question.

Yes, that answer it.

[indiscernible] adjustment for fair value, we can see that the adjusted EBITDA in the first quarter was RMB 325 million, which is quite stable compared to the last quarter. So we expect the fair value adjustment will be lifted in the second quarter this year.

Okay. And then on the guarantee business?

Just to the fair value changes in this asset class was RMB 70 million.

Great. And then when do you expect the guarantee business to sort of stabilize? Just in terms of -- it looks like you're still ramping it just when do you expect it to stabilize and potentially show profitability?

Yes. Currently, the guarantee business is at around 40% level, and we believe the -- less than 50% is our optimal target. So we expect it will continue to grow slightly in the next couple of quarters. And after that, it will start to come down as our non-guarantee business start to outgrow the sub-guarantee business.

Our next question comes from the line of Bruce [ Oren ] from Black Lab.

First, I'd like to say I'm delighted that Yiren Digital expects to benefit from consolidation in the new regulatory environment. I have 2 questions. First, concerning the sixfold increased provision for contingent liabilities, which has now grown to the largest operating cost and expense. Why would a higher volume of loans decrease profitability, especially since delinquency rates have remained stable? And my second question is, can you offer any insight into Yiren's dividend commitment for later this year?

Okay. To answer your first question about the 6x the provision, it's because of we are taking a bigger position in the self-guarantee business. With that according to the accounting standards, we need to make the relevant provisions immediately, even though the revenue will come on a month-by-month basis. So with that, we -- that's why we see a hit on our margins in the -- as we -- as the loan volume growth in the self-guarantee assets. So I think that answered the kind of discrepancy between why the delinquency is low and the provision is high because it's more like an accounting treatment for us. So for your second question about the dividend, I think it's -- we are committed to our semiannual dividend policies to ensuring the consistent value is returned to our investors. So according to our semiannual dividend policies, our current dividend payout ratio stands at around 10% based on the earnings of that of the prior 6 months period. So while our payout ratio reached around 20% when we last pay out our dividend in May. So moving forward, we are carefully assessing the balance between increasing shareholder return and reinvesting in the high potential opportunities and innovation to drive a more sustainable long-term growth. So this strategic evaluation will guide us our decision to maximize the value for all stakeholders.

Yes. And we will do cash dividends next quarter. We will make the announcement next quarter because it is semi-annual.

But at the same time, we are also noticing and comparing the dividend policies of our peers and then we will make a decision that will maximize the value for our shareholders.

I hope that answers your question.

Yes. I have a small follow-up. I failed to completely understand with the higher provision for contingent liabilities, is that a one-off for this quarter? Or can we expect levels of that level for continuing quarters?

I mean every time when we increase the loan balance in this self-guarantee loans, then we need to increase our provision proportionately. So I think as we -- as that the loan volume in that category continue to rise as we expect it will peak at around Q3, then after Q3, we will see that the provision will start to [ take ] off. But at the same time, the loan that we made earlier in Q1, we will start getting more interest revenue from it. So that will more or less offset the impact on the contingency liability. The way it works is when that loan balance reached a steady state, the provision will -- the change in provision will start.

Yes. I hope that answers your question. And back to you, Operator.

This concludes our question-and-answer session for today. If you have any further questions, you can please connect the IR team of Yiren Digital. The conference has now concluded.

Thank you.

Thank you. For attending today's presentation. You may now disconnect.