Good day, and welcome to the Yiren Digital Fourth Quarter and Fiscal Year 2024 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference call over to Ms. Keyao He. The floor is yours, ma'am.

Thank you, operator. Good morning and good evening, everyone. Today's call features the presentation by the Founder, Chairman, and CEO of Credit Ease; our CEO, Mr. Ning Tang; and our CFO, Mr. Yuning Feng. There will be a Q&A 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. Federal Security Litigation Reform Act of 1995. Such statements are subject to risk, 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 filing 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 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 those non-GAAP 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 closed out the year on a strong note, delivering another solid quarter of results that were in line with our previous guidance. The year 2024 marked a significant milestone for us, driven by four key achievements. Firstly, we reshaped and upgraded customer segments for our Financial Services business, significantly improving asset quality and paving the way for long-term, sustainable development. Secondly, we made meaningful progress in the development and application of AI, by integrating our proprietary AI system throughout our operations, including customer acquisition, customer service, and asset management; we are seeing significant improvements in operational efficiency and user experience. Thirdly, our International Business steadily made progress throughout the year, meeting our phased objectives and achieving profitability. While expanding our operations in the Philippines, we are also working to replicate this success in more countries and regions moving forward. Lastly, our Insurance Brokerage business is actively adopting a digitization and internally-driven model, while the traditional model continues to be a major revenue contributor for this segment. Social media has emerged as an increasingly vital channel for client acquisition. To capitalize on this trend, we have established a dedicated team focusing on social media to drive conversion rates and further expand our digital footprint. Together, these achievements are laying a solid foundation for our next phase of higher quality growth, one that will continue to create value for our stakeholders in the years ahead. Now, I will go into details of our operational highlights for the quarter. Our Financial Services business continued to grow during the fourth quarter of 2024, with total loan volumes reaching RMB15.4 billion, a 32% year-over-year increase. The number of borrowers remained stable quarter-over-quarter at RMB1.6 million and grew 14% from the same period last year. For the full year 2024, total loan volumes reached RMB53.6 billion, representing an impressive 49% increase from the previous year, surpassing our internal target. At the same time, our Yixianghual ending platform maintained strong popularity, with 4.5 million monthly active users in the fourth quarter, a 27% year-over-year increase. As I mentioned earlier, we are seeing clear improvements in asset quality. For the full year 2024, the average first payment default rate for 30 days rate dropped by 13 basis points compared to 2023, reflecting stronger anti-fraud measures. As of December 31, 2024, delinquency rates for 1 to 30 days and 61 to 90 days buckets decreased by 20 basis points and 10 basis points respectively, from the previous quarter. Moreover, M1 recovery rates in the fourth quarter further rose by 23 basis points to reach a record high. The upgrade in our customer base has clearly established a strong foundation for our long-term growth. On the funding side, we made substantial progress in expanding our funding partnerships by adding 22 new funding partners in 2024. Our funding costs in the fourth quarter saw another 23 basis points decline sequentially, translating into a total decline of 210 basis points compared to the same period in 2023. Moving on to our international business, we have upgraded our customer mix and shifted towards higher quality borrowers with a better credit performance in the Philippines. This led to a noticeable improvement in profitability, which has already turned positive and reached the high single digits. Currently, monthly loan volumes are in the RMB30 million to RMB40 million range, with total loan volume in 2025 expected to double compared to 2024. We are also exploring opportunities to replicate this successful model in other countries and regions and look forward to updating you on our progress in the near future. On our AI strategy, we have constantly prioritized the development and application of AI as a key element of our overall strategic approach. In 2024, research and development expenses totaled RMB412 million, a year-over-year increase of 177%, of which approximately RMB0.2 billion was allocated specifically to AI development. We have continuously built and refined our AI models for collections, customer service, quality assurance, and overseas identity verification, among other uses. These models have been widely applied across various areas of our operations, resulting in significant cost savings and improvements in efficiency. For our domestic business operations, as of the end of the fourth quarter, 81% of day one overdue cases were handled by AI robots, reducing labor costs by RMB1.9 million during the quarter alone, and approximately RMB9 million for the year. Our AI-powered intelligence funding routing system significantly enhanced funding allocation efficiency by optimizing fund distribution based on the borrower's credit performance, funding partner's risk preference, and funding cost. This resulted in cost savings of RMB44 million for the year. We recently integrated DeepSeek, which is expected to further enhance our deep thinking and customer analysis capabilities, providing further support to our customer service strategy. For overseas operations in the Philippines, our AI-powered ID verification model achieved an accuracy rate of over 96% during the quarter. We also applied our AI systems to loan collections, which improved the customer experience and reduced customer complaints by 47% in the fourth quarter. Moving on to our Insurance Brokerage business, 2024 was a challenging year for the entire industry due to regulatory changes and lower interest rates under the impact of the unified commissions and fees in reporting and underwriting policy. Total premiums in 2024 were over RMB4.4 billion, down 10% year-over-year. Specifically, Life Insurance products saw strong renewal rates of 96% in the fourth quarter, much higher than the industry average, reflecting higher client recognition of our services. Moreover, as I mentioned earlier, we have been proactively expanding our business online with the support of AI-driven customer service and AI-generated content. As of the end of 2024, we have successfully onboarded over 10,000 users who are now engaged with us and in the conversion pipeline, making a strong start. Meanwhile, additional efforts to create synergies between our lending platform and the insurance services are beginning to pay off. By offering customized insurance products to our borrowers, growth momentum remains strong, with December premiums from this channel increasing more than eight times compared to September 2024. For our Property Insurance, total premiums reached over RMB2.0 billion in the full year 2024, driven by our strategy of strong channel partnerships and tailored solutions. Currently, we have over 120 institutional partners, including more than 40 in the property insurance sector, and we offer more than 1,100 property insurance products. Moving forward, we will maintain this strategy and explore collaborative opportunities in additional technological and emerging fields, including AI, advanced modeling, and the low-altitude economy sector. Just some recent exciting news to share: our insurance brokerage operation, Hexiang Insurance Brokers, has successfully crafted an insurance solution for two Robinson R44 helicopters operated by Xinjiang Tianyin General Aviation Company Limited. We look forward to sharing more good news in the quarters to come. Last but not least, we are pleased to announce a cash dividend for the second half of 2024 of US$0.22 per ADS. This dividend is expected to be paid on or around May 15, 2025, to holders of the company's ordinary shares and ADS as of the close of business on April 30, 2025, Hong Kong time and New York time, respectively. In conclusion, AI development and exploration, high-quality growth, and global expansion will be the key themes of our business journey in 2025. We will continue to embrace the changes shaping our current era, consistently exploring and refining our strategies to deliver sustainable long-term returns for both our company and our shareholders. Now, I'll pass it to Yuning, who will go through our financial performance.

Thank you, Ning. Hello, everyone. On this call, I will be focused on our key financial highlights. Please refer to our earnings release and IR data for further details, both available on our website. First of all, we are pleased to report a solid year of strong financial performance, with 2024 full-year revenues showing 90% annual growth, meeting our current full-year guidance. In particular, total revenue for the fourth quarter of 2024 sustained this growth momentum with a 14% year-over-year increase. In the financial services segment, total loan facilitation continued at a strong momentum, reaching RMB15.4 billion in the fourth quarter, up 32% year-over-year. Loan volumes facilitating the full year of 2024 reached RMB53.6 billion, jumping by 49% compared to 2023. This growth was primarily driven by robust demand for our small revolving loan product, coupled with a steady increase in demand from repeat higher-quality borrowers. The platform's ability to track and retain these high-quality borrowers has significantly contributed to the overall increase in loan volume. Consequently, revenue from this segment in the fourth quarter grew 34% year-over-year to RMB1,048 million, that's RMB1.048 billion. And the revenue for the whole year grew by 38% annually to RMB3.5 billion. In the insurance sector, our growth-reaching premium totaled RMB1.1 billion in the fourth quarter of 2024, marking a 9% year-over-year decline. The year-over-year decline was primarily driven by a significant drop in life insurance sales, resulting from ongoing industry-wide impacts of regulatory changes and the adjustment to our product offering. In the fourth quarter, revenue from our insurance segment increased by 8% year-over-year to RMB106 million. This increase was due to a higher than expected renewal rate. For the year of 2024, revenue from the insurance segment reached RMB408 million, down 58% year-over-year, and we expect a double-digit recovery in 2025. In the consumption and lifestyle segment, as we strategically scale back product offering during this quarter, the total revenue dropped 25% year-over-year to RMB298 million. Revenue of this segment for the year was more than RMB1.9 billion, up 36% year-on-year. Currently, we are conducting a strategic review of this segment to better understand its potential and identify the best ways to serve our customers. Based on our findings, we will adjust our approach to ensure we effectively meet their needs. On the expense side, sales and marketing spend in the fourth quarter increased 45% year-over-year to RMB298 million. This yearly growth was primarily driven by the rapid growth of our financial services division and the improved marketing strategy aimed at attracting new and high-value customers. Research and development expenses increased 246% year-over-year to RMB165 million. This is fueled by ongoing investment in AI enhancement, the development of advanced technology, and the strategic hiring of specialized AI talent. The costs associated with origination, servicing, and other operating costs was RMB197 million in the quarter, up 7% year-on-year due to the expansion of our financial services business. General and administrative expenses for the quarter decreased by 16% year-over-year to RMB42 million. This decline reflects our AI-driven efficiency improvements, resulting in labor cost savings. The allowance for contract assets and receivables for the quarter was RMB203 million, up 103% year-over-year, primarily driven by the increase in allowance for accounts receivable and financing receivables, reflecting our prudent response to market conditions. The allowance for contingent liability this quarter increased to RMB251 million, from a reversal of RMB1.5 million in the same period of 2023. This reflects the sustained growth in loan volume facilitated under our risk-taking model, which requires substantial up-front provisions according to current accounting standards. However, the associated guaranteed revenue will be recognized periodically in the profit and loss statement as guaranteed service fees over time, introducing a time difference in revenue recognition. In the fourth quarter, revenue from guaranteed service gains reached RMB207 million, compared to RMB9 million in the same period last year, reflecting the growth in our loan volume facilitated under the risk-taking model. Now on the bottom line, net income for this quarter was RMB331 million, a decrease of 42% year-over-year. The profit margin for the fourth quarter was 23%, maintaining a healthy stable level compared to 24% in the previous quarter. Total net income for the year of 2024 was RMB1,582 million, down 24% compared to the previous year. The decline in net income can be attributed to three key factors. First, there was a reduction in overall profitability within the insurance business. Second, marketing and administrative expenses increased as we continued to invest in attracting new high-quality borrowers for our financial services segment and enhancing our in-house AI capabilities. Thirdly, substantial provisioning was allocated due to the growth in loan volumes under the risk-taking models. Regarding our cash flow, following a one-time strategic outflow last quarter, our net cash flow from operations normalized at RMB373 million this quarter, compared to RMB417 million in the same period last year. On our balance sheet, our cash and cash equivalents remained strong at RMB3.8 billion, underscoring our financial flexibility and positioning us to capitalize on strategic opportunities. Regarding shareholder returns, we are pleased to announce that the company is about to distribute cash dividends for the second half of 2024, amounting to US$0.222 per ADS, with approximately a 20% payout ratio, up from 14% for the first half of 2024. The dividend is expected to be paid out on about May 15, 2025, with the record date as of the close of business on April 13, 2025, based on Hong Kong time and New York time. Moreover, as of December 31, 2024, we have repurchased 5.2 million ADRs from the market, totaling approximately US$17.9 million under the 2022 share purchase program. Lastly, based on our assessment of current business and marketing conditions, we expect our revenue for the full year of 2025 to stand between RMB5.5 billion to RMB6.5 billion, with a healthy net profit margin. This represents our current preliminary assessment, which may be subject to changes and uncertainties. I will conclude our remarks.

Thank you. And operator, we’ll now open for Q&A.

The first question will come from Haonan Zhang of Erdos Investments. Please go ahead.

Hi, it's Haonan from Erdos Capital. Thanks for taking my question. I have two questions here. Firstly, as the Chinese government now relaxed regulations, what change will the company make, especially when your competitors may act more positively? Thank you. It's the first question.

So the question is about, as the macro environment becomes more favorable, what is our action plan? Okay. So yes, indeed, the macro environment is getting better, and we will continue to drive up, repeat the borrowing rate. Now, it's below 70%. We want it to be 70% this year. We are close, yes. So we will try and get there. That will make our risk side stable and improve. At the same time, we will do better customer acquisitions, smarter customer acquisition. So we work with platforms like Douyin to do real-time advertising. We pick up the prospects to target, utilizing our AI-driven analytics model. This will make us more proactive in the customer acquisition process. Also, we'll explore more acquisition channels, like non-financial, life-related platforms for more loan volume. As our customer mix gets upgraded, we will increase the average ticket size, currently around 7K to 8K. It will further go up, likely, this year. We will keep the risk side stable. We'll do that by taking a variety of measures. Yes, thank you.

Okay. Thank you for answering the question. The second question is, can you share some long-term goals for the overseas business? Like, what scale will the business achieve, and how much will you invest in the overseas business? Do you think that overseas business could be bigger than the domestic business one day? Yes, thank you.

Yes, one day, yes. The international market is very vast. It is potentially as large as the domestic market. Therefore, it is quite possible that one day the international business could be maybe half of our total business, but we are still in the early stages right now. We will try to make the international business a meaningful revenue contributor in the next couple of years, over a three-year timeframe. We can utilize AI effectively in those markets and have achieved good momentum in the Philippines, where we can replicate our success. Our research indicates progress beyond Southeast Asia into America, Central America, and the Middle East. Thus, we are optimistic about our global growth; this is certainly our strategic objective. Our competitive advantages in domestic China can be applied as we expand into other markets.

Thank you. Thank you.

Well, the conference call has now concluded. If you have any further questions, you may contact Yiren's IR department for any follow-ups. Thank you for attending today's presentation. At this time, you may disconnect. Thank you, and have a great day!