LexinFintech Holdings Ltd.

Good day and thank you for standing by. Welcome to the Lexin fourth quarter 2025 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation there will be a question and answer session. To ask a question during the session you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. to withdraw your question, please press star one and one again. Please be advised, today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Will Tan. Please go ahead.

Thank you, operator. Hello, everyone. Welcome to our fourth quarter 2025 earnings conference call. Our results were released earlier today and are currently available on our IR website. You will hear from our chairman and CEO, Mr. J. Wenjie Xiao, who will provide an update on our overall performance and strategies of our business. Our CIO, Mr. Arvin Zhang Wenqiao, will then provide more details on our risk management initiatives and updates. Lastly, our CFO, Mr. James Deng, will discuss our financial performance. Before we continue, I would like to refer you to our safe harbor statement in our earnings press release. which also applies to this call, as we will be making forward-looking statements. Last, please note that all figures are presented in R&B terms, and all comparisons are made on quarter-over-quarter basis, unless otherwise stated. Please kindly note Jay and Arvind will give their whole remarks in Chinese first, then the English version will be delivered by Jay's and Arvind's AI-based voices. With that, I'm now pleased to turn over the call to Mr. Jay Wenjie Xiao. Chairman and CEO of Lexin, please.

Hello, everyone. I am very happy to share with you the performance of our company in 2025. In the fourth quarter, we adjusted the business structure under the new rules and completed a large-scale project. In the fourth quarter, we adjusted the business structure under the new rules and completed a large-scale project. In the fourth quarter, we adjusted the business structure under the new rules and completed a large-scale project. In the fourth quarter, we adjusted the business structure under the new rules and completed a large-scale project. In the fourth quarter, the company achieved a transaction amount of 500 billion yuan, revenue of 3 billion yuan, and the number of active users was 453 million, and the number of new active users was 88.4 million. In the whole year of 2025, the company's transaction amount reached 2,053 billion yuan, and the new profit was 17 billion yuan, which increased by 52.4%. Next, I would like to introduce some of the key work progress since the fourth quarter. to meet the requirements of the new rules and meet the requirements of the new rules. In the fourth quarter, as the new rules of the industry officially come to an end, on the basis of the business adjustment and system deployment that the company has completed in the early stages, we insist on using the users as the center, continuing to optimize product governance and personalize service experience. We strictly implement the business in the framework of the new rules. At the same time as effectively improving the company's sustainable management and resistance to risk, Through personal credit, branch sales, general finance, etc. multi-faceted business Accurate, efficient, connect financial services and market needs Help actual economic development, promote consumption, health growth Second, comprehensively strengthen risk management, industry business stable development Since the fourth quarter, the risk of the industry has been rising In the quarter, the company optimized the risk strategy, monitoring the quality of new assets Strengthen the recognition and acquisition of high-quality customers By using more real-time data to increase the simplicity and accuracy of risk recognition, the new asset risk indicators will be significantly improved. In terms of storage assets, we focus on the precision operation of high-quality assets. By optimizing the price-to-performance ratio and building a decentralized pricing system, improving product competitiveness and customer experience, and ensuring that the storage asset risk continues to stabilize, the company has stabilized the overall risk range in the quarter, and the asset quality has remained stable. The overall risk indicator is improving rapidly. Since January to February this year, many risk indicators have shown good trends. The dew rate has dropped more than 10% compared to the high point in October. Third, unique ecological businesses are strengthening their advantages in the period of industry change. In the fourth quarter, separate sales businesses are narrowing down the living and consumption scene, continuing to improve the supply chain, enriching the supply of food, clothing, and other products. In the Double 11 and Double 12 e-commerce big events, We continue to strengthen marketing and operation, and by avoiding discounts and other measures, we have steadily improved the activity and transaction performance of users, and we have consolidated the advantage of diversification of retail sales. In the quarter, we continue to strengthen the construction and investment of customer capacity, and we have increased the number of new and new customers in the quarter. At the same time, we focus on improving the business of old customers by diversifying the pricing and price strategy, and we are continuously increasing the activity of users. In the quarter, general meeting, digital, and overseas business have all achieved steady growth, further highlighting the company's business model. Fourth, in-depth use of AI technology to improve user service experience. In the fourth quarter, the company continues to upgrade its large-model application technology. Customer service intelligence is successfully applied to core scenarios such as receivables, transactions, and refunds. Reply accuracy is more than 90%, and the average response time is within three seconds. In this scenario, only 3.4% of the power is transferred. This greatly improves the service efficiency and experience. In the future, we will continue to promote the 10-stage landing application of no-person service at night to achieve a 24-hour non-stop service. In the future, we will further apply large model landing in the core part of the wind control, such as the rule system. Large model auxiliary system gradually replace the traditional rule system. Accuracy is increased to 89%. In the wind control strategy part, large model support strategy, deep modeling customer data, deep modeling customer data, implementation of differential strategy, automatic deepening and full process assessment, decision accuracy and response efficiency continue to improve. User operation part, to match the needs of the user in the self-converting, accurately identify the needs of the user, guide user self-management, reduce the cost of artificial service, and improve the user experience. The company has always insisted on the service concept of the user as the center, The consumer's right to protection is the core competitive advantage. In the fourth quarter, the standardization and optimization of the service process and the ability of self-discipline, the overall service efficiency and response speed have been improved. We will further deepen the precision operation of user group services by continuing to optimize the user-based service platform functions to improve user satisfaction. In the fourth quarter, the policy level will introduce a series of consumer-based development of the existing economy, and develop a multi-net direction for the industry. We have always relied on the policy requirements of the country to fully play our own advantage, to increase the investment in small and medium-sized product services in the consumer scene, and to provide more comprehensive full-service and timely assistance for the development of small and medium-sized products with rich products through low-input and low-input methods. We believe that in 2026, the market will have more opportunities. The company will seize the opportunity to stick to the bottom line and stick to the user as the center. deep-rooted multi-faceted ecological business, continue to improve the company's operability and the ability to match the cycle. In 2026, we will also increase the investment in small and medium-sized enterprises and high-quality consumer groups, continue to increase the proportion of high-quality customers, build better customer groups, and establish a more stable business base with better source of profit, and encourage high-quality growth, and create long-term and sustainable returns for shareholders.

Hi, everyone. Thanks for joining us today for our fourth quarter 2025 earnings call. In the fourth quarter, we optimized our business operations within the new regulatory framework, successfully achieving our objectives of stabilizing scale and mitigating risk. During this period of industry adjustment, our unique business ecosystem demonstrated its differentiated advantages, leading to a significant rebound in active users. Guided by our long-term oriented philosophy, we are seeing the resilience of our multi-business synergy become increasingly evident, further strengthening our ability to navigate business cycles. In the fourth quarter, our loan volume reached 50 billion RMB and revenue reached 3 billion RMB. Number of active users stood at 4.53 million, with 884,000 new active users. For the full year of 2025, total loan volume was 205.3 billion RMB. Net profit was 1.7 billion RMB, representing a year-over-year increase of 52.4%. Next, I will walk you through the key initiatives we have undertaken since the fourth quarter. First, we proactively aligned our operations with the new regulatory requirements, adhering to a high standard of compliance. Following the official implementation of the new regulations in Q4 and building on the earlier completion of business adjustments and system deployment, we remained focused on our customer-centric strategy to further optimize our product matrix and personalized service experience. By operating prudently within the regulatory framework, we have not only enhanced our long-term sustainability and risk resilience, but also effectively connected financial services with market demand. Through our diversified business lines, including online consumer finance, installment e-commerce, and offline inclusive finance, we continue to support the real economy and foster healthy growth in consumer spending. Second, we have comprehensively strengthened our risk management to ensure steady business development. Since the fourth quarter, the industry has faced an upward trend in credit risk. In response, we optimized our risk strategies and maintained stringent standards for new loan quality. By incorporating more real-time data dimensions, we have enhanced the proactiveness and precision of our risk identification, leading to a month-over-month improvement in risk indicators for new loans. Regarding our existing portfolio, we focused on refined operations for high-quality assets. By optimizing credit line allocations and implementing a differentiated pricing framework, we enhanced both product competitiveness and the customer experience, ensuring the continued stability of our existing assets. Overall, we successfully stabilized our risk profile during the quarter, with asset quality remaining steady and key risk indicators improving monthly. Since the beginning of 2026, several key risk indicators have shown a positive trajectory in January and February. Specifically, day one delinquency ratio of our total assets decreased by over 10% from its peak in October last year. Third, our unique business ecosystem has demonstrated greater strengths during this period of industry transition. Our installment e-commerce business remained deeply integrated with daily consumption scenarios. In the fourth quarter, we continued to optimize our supply chain, expanding our offerings across essential categories such as food, apparel, and household goods. During major e-commerce events like Double 11 and Double 12, we ramped up our marketing efforts. Through initiatives such as interest-free promotions, we drove steady growth in both user engagement and transaction volume, further reinforcing our differentiated advantages in installment e-commerce. During the quarter, we continued to invest in our customer acquisition capabilities, which effectively fueled growth in new users with credit line. At the same time, we focused on deepening engagement with high-quality existing customers, utilizing differentiated pricing and credit line strategies to drive a sustained rise in user activity. Furthermore, our offline inclusive finance, tech empowerment, and overseas businesses all achieved steady growth, further underscoring the overall resilience of our diversified ecosystem. Fourth, we deeply integrated AI technology to elevate the user service experience. During the fourth quarter, we continued to advance our applications of large models, our customer service AI agents are now successfully deployed in core scenarios, including credit approvals, transactions, and repayments. These agents maintain a response accuracy of over 90%, with an average response time of under three seconds. Notably, in the credit approval stage, the human intervention rate was only 3.4%, significantly boosting both efficiency and user satisfaction. Looking ahead, we will expand these automated services to nighttime hours to achieve seamless 24-7 coverage. During the quarter, we further implemented large models in key risk management processes. For example, in compliance quality assurance, our AI-assisted system is gradually replacing traditional rule-based monitoring, raising our QA accuracy to 89%. In risk strategy, our strategy generation AI agents perform deep modeling of customer data to automate the creation and full process evaluation of differentiated risk strategies, consistently improving decision-making precision and response efficiency. In user operations, our credit line adjustment AI agents accurately identify user needs during their dialogues with customers and provide self-service guidance. This not only reduces manual service costs, but also enhances the user experience. The company has always adhered to a user-centric service philosophy, positioning consumer rights protection as a core competitive advantage. In the fourth quarter, we continued to standardize our service processes and optimize intelligent routing, leading to a measurable improvement in overall efficiency and response times. We also refined our tiered customer service model, enhancing our self-service platform to drive higher user satisfaction. During the quarter, a series of macro policies supporting consumption and the county-level economy were rolled out, anchoring the direction for industry development. We have always closely aligned with national policy requirements, fully leveraged our own advantages, and increased investment in consumption scenarios and products tailored for micro and small business owners. Through measures such as interest-free and low interest promotions, complemented by an enriched product supply and comprehensive services, we are delivering tangible support for the consumption rebound and injecting financial vitality into the growth of micro and small businesses. As we enter 2026, we are optimistic about the market's development potential. We are well positioned to seize growth opportunities while upholding a high standard of compliance and a customer-centric philosophy. By deepening our diversified business ecosystem, we will continue to strengthen our operational resilience and our ability to navigate market cycles. Next, I'll hand over the floor to our CRO, Arvind. Thanks.

Thank you. Next, I will report on the work and progress of the four-level risk management. The four-level risk management has been officially implemented. Flexibility tightens the scale of the industry and the risk continues to cause a relatively large impact and impact. For the industry risk cycle, we continue to strengthen risk management in the fourth quarter. Increase the quality of asset ratio, optimize asset structure, and ensure risk control. In terms of specific risk performance, compared to the third quarter, the total asset loss rate rose by about 170, the total asset loss rate of 90 plus bad rate rose by about 130, But within the quarter, in October, the risk reached a high point. In November and December, the risk began to rise and fall after two consecutive months of a small drop. In December, the rate of entry fell to about 180 in October. In the first half of 2026, we will continue to strengthen control and maintain the trend of risk reduction, gradually controlling the risk bias. Next, I would like to introduce to you the key risk management measures we adopted in the fourth quarter. First, increase the recognition and control of high-risk customers in the fourth quarter. In terms of models, speed up risk model delivery. Automatically update the model, enter the latest bad sample data into the model training in secret, so as to be able to learn faster the characteristics of expected customers caused by the current market environment change. In terms of strategy, we will introduce more real-time multi-heading information, period information, debt information, income information, and work stability information. We will implement a stricter transaction barrier for customers with high debt, high public debt, and high income debt within a short period of time and control them in the long term. On the other hand, we will strengthen the management of full-time assets and focus on increasing the recognition of high-income people. optimize repayment reminder frequency, strengthen loan ability and chain upgrade. Second, in the fourth quarter, continue to improve the management ability of high-quality assets, improve the ratio of high-quality assets, optimize the asset structure, store data model level, continue to optimize the recognition ability of high-quality customers, develop the price and repayment method strategy for high-quality customers, and comprehensively improve offer competitiveness. In addition, the one-to-one special service of deepening the quality of the customer group through the management service, the delivery service, and the large-scale special person review, etc. According to the customer's needs, we provide a personalized, customized re-offer to improve the satisfaction and storage rate of the customer. Third, in the field of e-commerce, the customer's consumption support has increased by four quarters. Through special strategies, Support for e-commerce double 11 and double 12 large-scale activities during the activities we have made a special amount of support for 3C digital and other large-scale high-quality consumption In addition, for the first high-quality customers, we have promoted the growth of high-quality scale through 12-24-7-7-7-7-7 activities. In the first quarter, we will continue to strengthen the risk management of the stock market and the increase in the risk of new loans, and at the same time increase the management of high-risk customers to maintain the risk and continue to decrease the trend. Next, please CFO introduce the financial performance of the company in the fourth quarter.

Thanks, Jay. Next, I will provide a review of our key initiatives and achievements in risk management for the fourth quarter. The fourth quarter of 2025 marked the full implementation of the new loan facilitation regulations. The resulting liquidity tightening across the sector created significant headwinds for both industry scale and risk performance. In response to the cyclical volatility, we maintained a disciplined approach to risk management throughout the quarter, increasing our mix of prime assets and optimizing our portfolio structure to ensure overall stability. Specifically, in the fourth quarter, day one, delinquency ratio of total assets increased by 7% and 90 days plus delinquency ratio edged up by 3% quarter over quarter. On a month-over-month basis, our risk indicators saw a marginal decline in November and December after peaking in October, signaling that asset risk performance has begun to stabilize. In December, day one delinquency ratio declined by 8% compared to October. We will sustain our rigorous risk controls through the first half of 2026 to reinforce this downward trajectory and gradually bring our asset risks back within our target risk appetite. Next, I would like to walk you through the key risk management initiatives we have implemented during the fourth quarter. First, we continue to intensify the identification and management of high-risk customers. From a modeling perspective, we accelerated the iteration of our risk models by implementing automated weekly updates. By incorporating the most recent default samples into our training sets every week, we were able to more rapidly capture and learn the shifting characteristics of delinquent borrowers in the current market environment. On the strategy front, we integrated a broader range of real-time data dimensions, including cross-platform borrowing, delinquency history, leverage ratios, personal income, and employment stability. This allowed us to apply more stringent transaction interception and credit exposure controls to customers exhibiting frequent borrowing, excessive cross-platform debt, or high debt-to-income ratios. Furthermore, we reinforced our day-one delinquency management across the entire portfolio. We placed a particular emphasis on improving the identification of high-risk cohorts at the earliest stage of delinquency, while optimizing the frequency of repayment reminders and strengthening our auto-deduction efficiency and payment clearing infrastructure. Second, we continued to refine our operational capabilities for high-quality assets, consistently increasing the mix of prime assets and optimizing our portfolio structure. At the data and modeling level, we continuously optimized our prime customer identification capabilities. We developed dedicated strategies, including credit line allocation, pricing and repayment, tailored to prime segments, comprehensively enhancing our offer competitiveness. In addition, we deepened our one-on-one exclusive services for prime customers. Through account management services via instant messaging, interactive supplementary document submission, and dedicated manual reviews for large ticket loans, we provided customized re-offer based on customer needs, thereby boosting customer satisfaction and retention. Third, regarding our installment e-commerce business, we significantly intensified consumer support during the fourth quarter through initiatives tailored for the Double 11 and Double 12 shopping festivals. During these events, we provided dedicated temporary credit lines to support large-ticket purchases, particularly in the 3C and consumer electronics categories. Additionally, for our top-tier prime customers, we launched 12- and 24-month interest-free installment campaigns to further accelerate high-quality volume growth. Looking ahead to the first quarter of 2026, we will continue to strengthen risk controls over existing and new loans while intensifying our efforts in managing and phasing out high-risk segments to ensure a sustained downward trend in risk levels. Next, I will hand over to our CFO, James, to provide a review of the company's financial performance for the fourth quarter.

Hi, everyone.

Thanks, Arvind. I will now provide a detailed overview of our fourth quarter financial results. Please note that all figures are presented in remaining terms and all comparisons are made on a quarter-over-quarter basis unless otherwise stated. The fourth quarter marked a pivotal transition for the industry as a new regulatory framework officially came into force. We have strictly followed these regulatory requirements, ensuring that the comprehensive interest rate for all new loans is capped at or below 24%. Following the implementation of these new regulations, we observed elevated volatility in industry-wide credit risk. This complex market environment created challenges for our performance. In the fourth quarter, our net income recorded $214 million. This sequential decrease was primarily driven by the fighting adjustment to strictly comply with the 24% cap, coupled with the contraction in loan volume resulting from our prudent strategy to proactively manage risk exposure. Furthermore, heightened market volatility led to increased credit costs and more conservative provisioning. Lastly, operating expense did not decline proportionately with the revenue due to the fixed cost and expense recognition seasonality. Now let's take a holistic review of our fourth quarter financial results. First, net revenue of the credit business, which is derived by adding up credit facilitation service income and the tax empowerment service income, net of credit costs, including provisions and the fair value changes and the funding cost, was $1.4 billion. representing a $586 million decrease quarter over quarter. The overall decline was primarily driven by a $132 million drop in credit facilitation service income stemming from contracting a low volume in our online consumer finance business that decreased overall pricing. During the fourth quarter, weighted average APR of new loans originated was 21.7 percent, a 140 basis points decline quarter over quarter. This was compounded by approximately 185 million increase in credit costs, reflecting elevated risk volatility and our prudent provision. Additionally, our tech empowerment service income decreased by $286 million, mainly due to the wind-down of the ICP business, although this was partially offset by revenue growth in our value-added services. Second, net revenue of the e-commerce business, defined by e-commerce revenue net of cost of inventory sold, increased by $56 million to $167 million. So the total net revenue, summing the credit and the e-commerce business, added up to $1.5 billion, a 26% or $530 million decrease quarter over quarter. On the expense side, operating expenses, including the sales and marketing, research and development, general and administrative expenses, processing and servicing costs, decreased by 11%. or $147 million to $1.2 billion. As I mentioned earlier, because this 11% reduction in operating expenses was outpaced by the 26% decline in net revenue, the difference weighed on our net profit for the quarter. Tax and others decreased by $76 million to $86 million. total expenses added up to $1.3 billion, a decrease of $223 million. By deducting total expenses of $1.3 billion from the total revenue of $1.5 billion, we arrived at a net income of $214 million, a decrease of $307 million quarter over quarter. Although the complex environment posed challenges to our performance, we demonstrated our operational resilience. Next, I will elaborate on three key business highlights that underscore our strength during this transitional period. The resilience of our business ecosystem, our prudent provision coverage, and the further reductions in funding costs. The resilience of our business ecosystem. Amid the cycle of adjustment, While our online consumer finance business was significantly impacted, other business lines actually provide critical stability, specifically regarding our e-commerce business. Although the GNV declined slightly as a result of our prudent operational strategy, gross profit continued to achieve steady growth, recording $167 million during the fourth quarter. Notably, the e-commerce gross margin calculated as the growth profit divided by GMV, reached 7.8%, representing a quote-over-quote increase of 295 business points. In parallel, our tech empowerment business continued to expand, acting as a vital counterbalance to the volume decline in the online consumer finance business. Under this model, we worked together with the internet super platforms like ByteDance, and the banking partners, we assist our banking partners with customer risk assessment while assuming the corresponding credit risk. Given the better quality of this consumer base, these loans carry lower pricing. It is worth highlighting that since this model recognized revenue over the loan tenor rather than upfront, and it carries lower take rate consistent with its lower risk nature, It creates a temporary time lag between the revenue recognition and the loan volume. However, this mix shift is accretive to our long-term asset quality and steady financial performance. Furthermore, our offline inclusive finance business progressed steadily, maintaining stable risk performance and acting as a stabilizer for our overall portfolio. Resilience of our business ecosystem demonstrates that we have built a comprehensive product matrix that serves a broader spectrum of the market. Our business lines now cover a wide range of interest tiers, from competitive rates for client users to standard rates for the mass market. This allows us to effectively match users with the right products, maximizing our reach and retention. amidst the evolving regulatory environment. Second, prudent provision coverage. In the fourth quarter, impacted by heightened volatility in industry risk, our total credit costs, including the three provision line items and the fair value changes of financial guarantee derivatives in the income statement, rose by $185 million to $1.3 billion. While we observed early signs of improvement in December following our credit tightening measures, overall risk indicators remain at elevated level, and we expect that the industry will need time to fully digest the risks. Consequently, we adopted a more prudent approach to provisioning for new loans facilitated during this period. To better illustrate our provisioning strength, I encourage you to focus on the gross provision which excludes the impact of the net accounting policies in the item changing fair value of financial guarantee derivatives and loan values in the income statement. Specifically, the gross provision ratio of new loans calculated as the gross provisions divided by the capital heavy new loan volume increased by 27 basis points from the third quarter Please note that for an apple-to-apple comparison, this volume metric excludes loans from tech empowerment services. This level stands well above our historical peak vintage charge-off rate of around 6.1%. We view this elevated provision ratio not just as a reflection of the current volatility but also as a buffer to future-proof our performance against potential macro uncertainties. Third, the optimization of funding costs. With the implementation of the new policy, institutional funding that was previously allocated to segments priced above 24% was released in the fourth quarter, resulting in ample funding supply. Consequently, our funding costs declined substantially from 4.4% in third quarter to 3.8%. Looking ahead to 2026, as the industry landscape shifts to a new normal stage and the new regulatory framework, we anticipate a structural flight to quality. Funding will increasingly congregate towards platforms that are fully compliant and possess strong risk management capabilities. Currently, we have successfully secured our place on the white list of our key funding partners, laying a solid foundation for our steady development in the future. To summarize, the above three highlights mainly impacted the net revenue side of the income statement. On the cost and expense side, total operating expenses reduced by 11%, or $147 million to $1.2 billion. mainly due to the decrease of sales and marketing expenses reflecting our disciplined approach to user acquisitions during this industry transition. However, our total operating expense reduction was slower than the decline in the net revenue. This was primarily due to fixed costs and seasonal impacts. For balance sheet items, as of December 31st, our cash position, which includes cash, cash equivalents, and restricted cash, was approximately 4.0 billion. Shareholders' equity remained solid at about 12 billion. To conclude, I'd like to reaffirm our commitment to enhancing shareholder value. As of March 2026, we have repurchased 39 million worth of ADS alongside the CEO's personal purchase of over 10 million US dollars worth of ADS. On the dividend front, Our board of directors has approved a dividend of 0.188 US dollars per ADS, bringing our total dividend for 2025 to 0.2382 US dollars per ADS. This represents a more than 100% increase compared to 0.182 US dollars in 2024. On the foundations of our current shareholder return policy, we continue to evaluate opportunities and explore different ways to ensure we deliver optimal value to our shareholders. Looking ahead, while our asset quality continues to show positive momentum, we maintain a prudent approach given the ongoing macroeconomic uncertainties. We expect the total loan origination to remain relatively stable in the first quarter of 2026. That's all our prepared remarks for today. Operator, we're now ready to take questions.

Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. And to withdraw your question, please press star 1 and 1 again. As a reminder, please do translate your questions into English. And please remember to mute yourself after asking your question. Thank you. We will now take our first question. Please stand by. First question is from Alex Yee from UBS. Please go ahead.

Hello, Ms. Guan. Thank you for giving me the opportunity to ask this question. The first question is, under the new building environment, what are the main considerations for the future development strategies? I have two questions. The first one is given the new regulatory environment. The second question is, could management share with us some of the key operating performance outlook for this year? Thank you.

Okay, let me answer these two questions. The first question is, we feel that as we live in the complete land of Xinggui, The industry has entered a new stage of high-quality nuclear nuclear regulations. The resources of the industry will also focus on the entire nuclear platform. Under such an environment, we will insist on fully operating with the users as the center to maintain the integrity of the entire business. We have a diverse ecological business. It provides us with the ability to serve more users. It can also help us meet a group of different risks. As a result, it can be more stable in the market. Specifically, we are still actively responding to the direction of supervision. We have always adhered to high standards and regular operations. Based on the existing supervision requirements, the company is taking the initiative to lower the comprehensive loan interest rate. According to our four systems, after the new average loan interest rate drops to 21.7%, we will also further reduce it in 2026. In addition, we will continue to deepen the market. Accurate service to small and medium-sized consumer groups, and rely on their own separate retail platform, rich in the supply of long-term products, in-depth digging of users, and some consumer potential under a diverse consumption scenario such as food and travel. At the same time, we will also expand our overseas business with the output of technology, and the company's income structure will become more diversified. In addition, under the new supervision framework, we will continue to implement long-term business theory, So this is the translation for Jay's answer.

With the full implementation of the new regulation, the industry has entered a new phase centering on quality and compliance. Industry resources will increasingly concentrate on platforms that demonstrate both quality and compliance. Under such new regulatory environment, the key to Lushin's business resilience lies in our user-centered approach and our ability to serve customers across different segments. Our unique business ecosystem enables us to engage and serve users with varying risk profiles and achieve stable growth amid market fluctuations. Specifically, we actively respond to regulatory guidance by adhering to a high standard of compliance. Building on the current regulatory requirements, we further lower the overall loan rate. In the fourth quarter, the average loan rate on our new loans was 21.7%, which will be further lowered in 2026. Furthermore, we remain deeply committed to the offline inclusive finance market and serve the micro and small business owner segment. Leveraging our installment e-commerce platform, we enrich the supply of products on our platform across diverse and essential life service categories to tap into the consumption potential of our users. Meanwhile, with the steady expansion of our technology solution empowerment and overseas business, the revenue structure is becoming more diversified, strengthening our long-term operational resilience under the new regulatory framework. Last but not least, we adhere to a user-centric service philosophy viewing consumer protection as a key part of enhancing our operational resilience. Moving forward, we will continue to improve efficiency and experience of our customer service through process standardization, intelligent task routing, and refined operation, further strengthening consumer rights protection.

第二个问题就是公司2026年的整个的一些经营的情况。 展望2026年吧。 Under the premise of gradually stabilizing the risk, we will take an active back-up strategy. We will enhance the customer experience and product competitiveness, focus on high-quality customers, and promote business stability, return, and normalization. In terms of core business indicators, products, and customers, we will still focus on high-quality customers. We will continue to build a customized pricing system by optimizing the price. to enhance the user's overall experience. At the same time, the user has the ability to be the center of power management and actively promote the advantageous customer base. In terms of asset quality, because we can get more advantageous customers to improve the asset structure, we have observed that the quality of assets has been stable and seen a lot of edge improvements. If there are any new red lines, it is expected that the industry will gradually digest the existing risks. The overall risk index will also steadily fall into the risk-saving zone, and thus actively establish a better foundation for the recovery of customers and business. In terms of the return to scale, we will continue to strengthen the construction and investment of customer capacity, so our entire scale this year will gradually recover to a standardized growth zone based on the current stability.

Regarding the second question about the outlook of our business operation in the year of 2026, with risk level stabilizing, we will adopt a more proactive user acquisition strategy. By enhancing the customer experience and product competitiveness, we will focus on high quality segments to bring our business back onto a path of steady, normalized growth. More specifically on our key operational initiatives, In terms of products and customer segments, we will focus on the refined management of high-quality assets. By optimizing credit line location and building a differentiated pricing system, we aim to strengthen both product competitiveness and customer experience. This will reinforce our user-centric operational capabilities to serve different segments of customers and enable us to expand and better serve prime segments. In terms of asset quality, We will improve our customer mix and enhance asset quality by ramping up on acquisition of more high-quality customers. By far, we have already observed early signs of risk stabilization and improvement in asset quality. Barring any new macroeconomic shocks, we expect the industry to gradually digest the existing risks, bringing overall risk metrics back within our risk appetite. This will lay a solid foundation for proactive customer acquisition and business recovery. And in terms of loan origination, we'll continue to invest in and strengthen our customer acquisition capabilities. Driven by our improved product competitiveness and proactive customer acquisition strategy, we expect our loan volume to gradually return to a normalized growth range following a period of bottoming out and stabilization.

Thank you.

We will now take the next question. Next question is from Judy Zhang from Citi. Please go ahead.

Thank you for the opportunity to ask a question. I have two questions. The first question is about risk. Let me translate the two questions. The first question is regarding the risk outlook. Can management share with us the company's latest risk performance and the future outlook? And the second question is, what is the outlook for the company's full-year financial performance for this year? Thank you.

Okay, I will answer the risk question. This is the first quarter of the fourth quarter of the new rule. For the entire industry, the impact and impact in terms of risk and scale is still relatively large. It is also a critical period for us to deal with the entire risk wave. At present, the industry's The overall risk has begun to show a steady decline, but the overall risk will fall back to a relatively low level in the first half of 2025. It may take some time to clear up. For the entire industry risk cycle, we will continue to strengthen the control of the entire risk in the fourth quarter. At the same time, we can optimize and improve the ratio of high-quality assets to optimize our entire asset structure, and to ensure that the overall risk of our overall risk is within a controllable range. In terms of specific risk performance, although there is a certain rise in overall risk compared to the third quarter of the fourth quarter, but after the risk reached a high point in October, from November to the present, In the past few months, our risk has shown a downward trend. If we look at the future, we feel that the whole risk can still maintain a downward trend. Although the current risk has improved, it is still at a high position. This is the translation for Alvin's answer.

The fourth quarter was the first quarter after the implementation of the new regulation and was a critical period for the entire industry to digest the impact of the new regulation. While industry-wide risk has begun to show signs of stabilizing, it will take some time for this risk to be fully clear and return to the level before the first half of 2025. In response to this route of recycle, we continue to strengthen our risk management in Q4 by increasing the proportion of high-quality assets and optimizing our asset structure, ensuring risk remain under control. Regarding the specific performance, although the overall risk indicator in Q4 was higher than that in Q3, on a month-over-month basis, Starting from the month of November, we have started to see risk trends out for multiple months consecutively, signaling a downward trend, and we expect this downward trend to continue. Despite this improvement, it's important to know that risk levels remain elevated in the fourth quarter. Looking ahead to the first quarter of 2026, we will continue to strengthen risk control over loans, while intensifying our efforts in managing and facing up high-risk segments to ensure a sustained double trend in risk levels and gradually bringing the long race back within our target risk appetite in the second half of 2026.

Okay, I will take on the second question regarding the financial guidance. The fourth quarter of 2025 was indeed one of the most challenging periods absorbing the concentrated impact of several factors. This includes revenue compression from pricing adjustments and a deliberate scale-down of loan volume in our consumer finance business, a shift in the pace of revenue recognition, return by changes in our business mix due to the tech empowerment business volume growth, short-term uptick in our credit risk, and a seasonal impact on our operational expenses. For the first quarter of this year, as I stated earlier, we expect the loan volume of originations to be at a similar level as our fourth quarter. Given the ongoing macroeconomic uncertainties and the lower visibility, we are not providing a full-year financial guidance for 2026 at this point. However, I would like to share a few variables that may impact our financial performance. Looking ahead, our full-year financial performance will be primarily influenced by the following dynamics. On the revenue side, number one, volume. While our overall loan volume will remain stable or even grow a little bit, the short-term revenue contribution from a tech empowerment business will be relatively modest. This is due to its lower credit costs, lower pricing profile, and a relatively slower revenue recognition accounting schedule. Second is pricing. The proactive downward adjustment to our overall pricing will also continue to weigh on our top line. On the cost and expense side, number one, funding cost. In the near term, Frequent regulatory window guidance directed at funding partners has led to a somewhat tightened funding supply in the first quarter. Moving forward, our funding costs will be influenced by a combination of the broader regulatory environment, the quality of our customer cohorts, and the overall funding liquidity. Second, the credit cost. As risk progressively stabilized and we pivot towards higher quality customer cohorts, we anticipate a gradual optimization of our credit cost while maintaining an ample provision. Third point is the operating expenses. We'll persistently drive cost reduction and efficiency initiatives to optimize our operational leverage and steadily lower our operating expenses. So in summary, In view of the macro uncertainties, we will maintain prudence in our overall business strategy in the execution. At the same time, optimize the profit and the shareholder value and strive to build a long-term, healthy, and sustainable business.

Thank you. We will now take our next question. Please stand by. Next question is from Claire Ouyang from Goldman Sachs. Please go ahead.

I'll quickly translate my question. What's the company's future plan for enhancing shareholder returns in terms of both share buyback and cash dividends? Thank you.

Let me answer this question. Starting from the second half of 2025, our share price has increased to 30% of the net profit. This is at a leading level in the industry. In addition to the current share price, the company has already bought back 39 million dollars of stock until today, and completed 80% of the return plan. My own 10 million dollars of stock, the real plan, has been fully executed. These actions reflect the firm confidence of management to the company's prospects and long-term internal value. After the launch of this year's performance, we will continue to implement the remaining repurchase plans and gradually enhance the commitment of shareholder feedback. Looking forward to the future, we will closely monitor the market dynamics and combine the development situation of the company's management to actively explore multi-specialization actions, including repurchase, to create sustainable value feedback for shareholders.

So first, starting from the second half of 2025, our dividend payout ratio was raised to 30% of our semi-annual net profit. This actually puts us at the forefront of the industry. On top of cash dividends, as of today, we have repurchased US$39 million worth of ADS, completing 80% of our current repurchase program. I have also fully executed my personal 10 million US dollar share repurchase plan. This action reflects the management's firm confidence in the company's outlook and its long-term intrinsic value. Following this earnings release, we will continue to execute the remaining portion of our share repurchase program, delivering our commitment to enhance shareholder returns. Looking ahead, we will closely monitor market dynamics and, based on our actual operational needs, actively explore diverse initiatives, including further repurchases, to create sustainable value for our shareholders.

Thank you. I will now hand the conference back to Will Tan for closing comments.

Thank you. This conference is now concluded. Thank you for joining us today's call. If you have any more questions, please do not hesitate to contact us. Thanks again.

Thank you. This concludes today's conference call. Thank you for participating and you may now disconnect.