LexinFintech Holdings Ltd.

Good day and thank you for standing by. Welcome to Listing First Quarter 2026 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. please be advised that today's conference is being recorded. And I'd like to hand the conference over to your first speaker today, Will Tan, IR Director of the company. Please go ahead.

Thank you, operator. Hello, everyone. Welcome to our first quarter 2026 earnings conference call. Our results were released earlier today and concurrently available on our IR website. Today, you will hear from our chairman and CEO, Mr. J. Wenjie Xiao, who will provide an update on our overall performance and the strategies of our business. Our CIO, Mr. Arvin Tsang Wenqiao, will then provide more details on our risk management initiatives and updates. Lastly, our CFO, Mr. James Zeng, 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 present in Renminbi terms, and all comparisons are made on a quarter-over-quarter basis, unless otherwise stated. Please kindly note Jay and Alvin will give their whole remarks in Chinese first, then the English version will be 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, sir. Hello, everyone. I am very pleased to share with you the performance of our first quarter of 2026. In the first quarter, in the face of the macroeconomic environment and industry challenges, the company has set up a long-standing, unique, and diverse ecological business, which has shown a stronger business mentality. In the quarter, in-season sales, offline fairs, and 2B digital technology business and other trading products are close to 50% of the ecological business. The number of real estate is higher than the online real estate business, which has become the company's new growth curve. New and old business can be converted to initial completion. The long-term effect of multilateral development is that the company is heading for stable and sustainable health development. In the quarter, the company's trading volume is 578.98 billion yuan, which is 15.9% higher than the growth. increase growth by 12.2%, revenue 33.09 billion, active users 516.7 million, return growth by 14.1%, increase growth by 8.6%, new active users 144.4 million, return growth by 63%, increase growth by 101.6%, net profit 2.01 billion, multiple risk indicators maintain stability and continue to improve. Next, I would like to introduce you to the progress of our work. First, the multi-faceted ecological business accounted for nearly 50% and became a new growth engine. Although the first quarter has the impact of the Spring Festival holiday, the company's split sales, offline meeting, 2B digital technology, and other business still grow steadily, and the volume of transactions is greatly increased, bringing new momentum to the company's performance. High efficiency connects the traffic platform and financial institutions to open a new space for 2B growth. In the first quarter, the company's 2B digital technology business, which has been in place for many years, began to grow rapidly. Our Yunxi Technology PRO solution is combined with technical ability and operating experience to create a bridge between the Internet traffic platform and various financial institutions, allowing the cooperation platform traffic to achieve accurate and efficient distribution. The most stable and profitable assets of the cooperating institutions are fully realized by the three sides. Separate sales and perfect supply chain fully penetrates into the demand and consumption scenarios. Separate sales and business deep-rooted supply and consumption scenarios, perfect supply chain system, rich, eat, wear, use, go, buy, fish, and so on. The cooperation advantage of the leading brand in the market, and added nearly 150 well-known head brands, and launched a brand special sales channel with more than 20 domestic and foreign fashion and sports brands. Since the channel was launched, the total sales of special sales brands has increased by 43%, which has fully met the needs of users for quality consumption. For scenes such as nameshifting, festive gifts, and other consumer events such as New Year's Day, New Year's Eve, and Spring Festival, the platform has launched many large-scale activities that continue to drive consumer growth. In the 3C digital field, continuous and non-exhaustive discounts effectively promote the improvement of user activity, and the sales of high-quality users in the platform and trading orders have increased by 37.5% in the quarter. Supply and exchange business to expand the current layout, and to dig up new values in the lower market. The company's offline supply and exchange business has always focused on localization management. In the face of special industries such as nomads and carp, the company has launched a unique risk model for industry customers. and a mysterious strategy to assist the local financial institutions to accurately match the financial needs of individual business owners and local financial institutions to promote universal financial vitality and continue to flow to the local area to assist the development of the local economy. In the quarter, overseas business has also achieved stable development. The scale, profit and asset quality continue to maintain steady growth. The second is to optimize the risk strategy and optimize product evidence. The asset quality has improved. In the first quarter, we continue to optimize the risk strategy Deeply integrated algorithms and models greatly improve channel connectivity and target user selection efficiency. Newly launched true-to-heart report, interpretation of the intelligence system, and interactive true-to-heart function. Make user identification more accurate. Effectively supports personalized pricing and pricing of high-quality customers. The company opens up all products from the beginning to the end, flexible functions. Focusing on white-collar, micro-customer groups to create differentiated, lean, and complex strategies. Through long-term management, we can clean up the price and support the positive customer group. We continue to promote the active positive customer group. The company's asset quality in the quarter continues to stabilize and recover. Added assets and total assets have the same risk of improvement. Total asset loss rate decreased by about 7% in the fourth quarter. The 30-day loss rate remained high. The new customer quality has improved significantly. There has been a significant increase in the number of customers who have applied. We estimate that the number of new customers will drop by about 6% in the first quarter. In the first quarter, the company continues to expand its resources for the improvement of sales and customer experience. We will strengthen the coordination and coordination between the front desk service sales team and all business conditions, so that the information is transmitted smoothly and the response to the problem is more immediate. The overall handling of the closed ring mechanism is more efficient. In terms of service experience, through the automation of route allocation and queue strategy, and the introduction of high-end warning mechanisms, the efficiency of user service has been significantly improved. The core user service indicators have been further improved. In terms of user care, we use a more perfect model to strengthen the user's interest in various groups, and implement more targeted service care. Overall, it has improved the user's experience and satisfaction, and it has also hit the black and gray. The company is actively responding to related department deployments in terms of financial KV production, playing a technical advantage in the field of artificial intelligence and big data, and perfecting the whole chain of defense and governance systems that break down cases at risk time to effectively maintain the legal rights of consumers. Looking forward to the future, the company will continue to work hard on the basis of good growth attitude in the multilayered layout to achieve stage results and continue to sell and distribute digital technology. Hi, everyone. Thanks for joining us today for our first quarter 2026 earnings call.

In the first quarter, against the backdrop of macroeconomic and industry challenges, our unique and diversified business ecosystem, which we have been building for many years, demonstrated strong operational resilience. During the quarter, the loan volume of our installment e-commerce, offline inclusive finance, and fintech empowerment businesses accounted for nearly 50% of the total. Ecosystem businesses grew faster than the online loan facilitation business. becoming the company's new growth drivers. This indicates the transition from old to new growth drivers, the initial success of our long-term oriented strategy of diversified development and the company's steady progress toward healthy and sustainable development. During the quarter, the company achieved a loan volume of RMB 57.9 billion, representing a quarter-over-quarter increase of 15.9%, and a year-over-year increase of 12.2%. Revenue reached RMB 3.3 billion. Number of active users stood at 5.17 million, a quarter-over-quarter rise of 14.1%, and 8.6% year-over-year. Number of new active users was 1.44 million, up 63.3%, quarter-over, and 101.6% year-over-year. Net profit reached RMB 201 million. Besides, a number of key risk indicators continue to show improvement, maintaining a stable trend. Next, I will walk you through the key initiatives we have undertaken since the first quarter. First, our diversified ecosystem businesses accounted for nearly 50% of our total loan volume, becoming the new growth drivers. In the first quarter, despite the seasonal impact of Chinese Spring Festival holiday, our installment e-commerce, offline inclusive finance, and fintech empowerment businesses continue to grow steadily, with loan volume increasing significantly due to growth momentum to the company's overall performance. We have unlocked a new growth space for our B2B business by efficiently connecting with internet traffic platforms and financial institutions. In the first quarter, our FinTech empowerment business, which we have been building for many years, began to grow rapidly. Our Yunxi Technology Pro solution builds a bridge of resource collaboration between Luxian, internet traffic platforms, and various financial institutions by incorporating our technological capabilities and operational experience. It enables our partner platforms to distribute traffic precisely and efficiently, empowers financial institution partners to obtain assets with stable profitability, and thereby benefits for all three parties. Our installment e-commerce refined its supply chain and fully penetrated essential consumption scenarios. Installment e-commerce business continued to deepen its presence in different consumption scenarios, refine the supply chain system, and enrich product offerings across categories such as food, apparel, transportation, travel, shopping, entertainment, and pets. During the quarter, leveraging our advantage in partnerships with industry leaders, we added nearly 150 well-known brands and launched an outlet channel for select merchants, signing more than 20 domestic and international fashion and sports brands. Since its launch, total transaction volume of participating brands increased by 43% quarter over quarter, fully meeting users' demand for quality consumption, targeting essential daily needs and festive gifting scenarios, and several major promotional campaigns during key consumption periods, such as New Year's Day, Chinese Spring Festival gift fair, and the Lunar New Year holiday, consistently driving consumption growth. In the 3C digital product segment, ongoing interest free and discount offers effectively boosted user activity. During the quarter, the number of orders from high quality users on our platform increased by 35.7%. Inclusive finance business expanded its county level presence, unlocking new growth in lower tier markets. Our offline inclusive finance business has always focused on localized operations. for specialized industries such as agriculture, forestry, animal husbandry, and fishery. We have launched unique risk models and credit approval strategies tailored to industry specific customer segments. This helps match the funding needs of county level small and micro businesses and individual merchants with local financial institutions, ensuring that inclusive financing resources continue to flow into county economies and supports their development. During the quarter, our overseas business developed steadily with continued stable growth in loan volume, profitability, and asset. Second, we refined our risk strategies and optimized our product matrix, leading to improvements in asset quality. In the first quarter, we continued to adjust and optimize our risk strategies. Our deeply iterated algorithms and models significantly improved the efficiency of channel connection and target user screening. We newly launched a credit report interpretation AI agent and an interactive credit enhancement function, making user identification more accurate and effectively supporting personalized pricing and credit line allocation for high-quality users. We have made flexible repayment features such as on-demand borrowing and repaying and bullet repayment available across all products. Focusing on white collar workers and small and micro business owners, we developed differentiated credit granting and outreach strategies. Through scenario-based operations, we allocated pricing and credit line resources preferentially to high-quality customers, consistently boosting their activity levels. During the quarter, our asset quality continued its steady recovery, with risk indicators improving for both existing and new assets. For total assets, day one delinquency ratio decreased by about 7% quarter over quarter. 30-day collection rate improved month over month. New customer quality also improved. Loan volume to high-quality segments rose notably. FPD30 of new loans initiated in the first quarter is expected to decrease by about 6%. In the first quarter, we continue to increase resource investment in consumer protection and customer experience improvement. We strengthen the coordination between our frontline service and consumer protection teams and various business lines, enabling smoother information flow, more timely issue response, and a more efficient closed-loop resolution mechanism. In terms of service experience, by optimizing intelligent routing and queuing strategies and introducing peak-time early warning mechanisms, we significantly improved service efficiency, with key customer metrics showing further improvement. On the customer care front, we enhanced our user behavior analysis through more sophisticated models and refined customer tiering, implementing more targeted care measures for different segments, which improved overall user experience and satisfaction. In combating illegal financial activities and fraudulent syndicates, we actively responded to relevant regulatory deployments, leveraging our technological advantages in AI and big data to strengthen the end-to-end defense and governance system, including risk identification and case detection, thereby safeguarding consumers' legitimate rights and interests. Looking ahead, building upon the initial success of our diversified system strategy and the solid growth momentum of our businesses, we will continue to drive our installment e-commerce, offline inclusive finance, and FinTech empowerment businesses steadily advancing along the path of diversified and resilient development. We believe that our unique ecosystem advantages will continue to strengthen the company's operational resilience, enabling us to navigate future uncertainties and create long-term sustainable returns for our shareholders. Next, I'll hand over the floor to our CRO, Arvind. Thanks.

Thank you. Next, I will report on the work situation of the risk management of the first quarter of this year. In the first quarter of 2026, with the fall of the rule of law, the impact of industry risk gradually decreased. The overall risk of the first quarter of the industry began to fall back steadily. We also maintained the trend of steady decline of risk from November of this year. From the specific risk performance, the first quarter is compared to the fourth quarter of 2025. The full-fledged asset inflow rate has dropped by about 107. The 30-day inflow rate has also maintained a good recovery. FPD30 is estimated to drop about 160% in the first quarter. The overall risk performance continues to improve. Next, I will introduce the specific risk measures we have adopted in the first quarter. First, we continue to increase the application of large models in risk management scenarios, and continue to improve the efficiency and effectiveness of risk management. In terms of image storage, large model capabilities have improved image storage robots. and the risk automation robot effectively increased the risk identification ability and the risk customer utilization efficiency, allowing the risk to continue to fall in the first quarter. At the same time, by using the large model to carry out real-time delivery, increase the quality division and promote new methods, the risk continues to improve. By using the large model to achieve real-time delivery on the line, it is effective in obtaining the customer's This not only greatly increases the accuracy and efficiency of risk identification, but also allows us to fully understand the risks of customers and their needs, and provide customers with a personalized offer that satisfies their needs. Second, consumer innovation business through high-quality customer groups, specialized management, promote high-quality scale, stable growth, focus on high-quality white-collar and micro-customer groups, through specialized identification model, diversify the price-reduction strategy and management service, greatly improve the number of specialized people and the rate of movement. Promote the growth of the quality scale. Compared to the first quarter, the customer base in the fourth quarter has increased by 56%. The quality of the small and medium-sized customers has increased by 30%. The quality of the people's professional management project has been built into effect. The second quarter will continue to optimize the quality of the people's professional management ability. The financial department promotes the growth of the quality asset scale. Third, in the general financial industry, we continue to enhance the wide-ranging pre-landed localization of the pre-landed localization of the pre-landed localization of the pre-landed localization of the pre-landed localization of the pre-landed localization of the pre-landed localization of the pre-landed localization of the pre-landed localization of the pre-landed localization of the pre-landed localization of the pre-landed localization of the pre-landed localization of the pre-landed localization of the pre-landed localization of the pre-landed localization of the pre-landed localization of the pre-landed localization of the pre-landed localization of the pre-landed localization of the pre-landed localization of the pre-landed localization of the pre-landed localization of the pre-landed localization of the pre-landed localization of the pre-landed localization of . . . . . The risk performance is stable, and the scale of business continues to improve. In addition, in the first quarter, we have increased the recognition and strike against black coal production, and built a pre-prevention, pre-intervention, post-prevention, and post-prevention ecosystem, a comprehensive prevention and control system, and a strike on the black coal production behavior. We have sent effective black coal production signals to the public security agencies, and have successfully assisted in the strike on Shandong, black coal production fire, and caught more than 40 criminal suspects. Looking forward to the second quarter of 2026, we will continue to strengthen asset structure optimization and risk management at the same time. At the same time, it is better to meet the needs of high-quality customers, improve user experience, promote high-quality asset size growth, and ensure that the risk is stable and controllable. Next, I will provide a review of our key initiatives and achievements in risk management for the first quarter of this year.

the first quarter of 2026 as the impact of the new regulations on industry risk gradually subsided industry-wide risk began to decline we also maintain that the steady risk reduction trend we have seen since Last year, regarding specific risk performance compared to the fourth quarter of 2025, day one delinquency ratio of total assets decreased by approximately 7%. The 30-day collection rate continued to recover month over month, and we estimate that FTD 30 for new loans initiated in the first quarter to decline by about 6%. Overall risk performance continued to improve. Now, let me walk you through the specific risk initiatives implemented during the quarter. First, we continue to scale up the application of large models in risk management scenarios during the first quarter, consistently improving the efficiency and effectiveness of risk management. On the high-risk asset management side, we leverage large model capabilities to optimize and upgrade our high-risk asset management robots and automated risk inspection robots. effectively enhancing our risk identification capabilities and the efficiency of high-risk customer management. This helps sustain the downward trend in risk during the quarter. At the same time, we used large models to enable real-time interactive credit line increases, growing the prime asset base and driving continued improvement in new loan risk. Through large models, we achieved real-time online interaction for credit line increases. efficiently capturing customers' credit needs and credit enhancement documentation. This not only significantly improved the accuracy and efficiency of risk identity, but also enabled us, based on a comprehensive understanding of customer risk profiles and needs, to offer customers personalized credit offers that meet their specific requirements. Second, In our consumer credit business, we promoted steady growth in prime asset volume through dedicated prime customer segment management, focusing on prime white-collar customers and small and micro-business owners. We leveraged dedicated risk identification models differentiated credit line increase and pricing reduction strategies and account management services to substantially increase both the addressable customer base and drawdown rate of prime target segments, driving significant growth in volume. Compared with the fourth quarter of 2025, loan volume from prime white-collar customers increased by 56% and volume from prime small and micro-business customers increased by 30% in the first quarter, demonstrating the early success of our prime segment management approach. In the second quarter, we will continue to refine our prime segment management capabilities to further drive prime asset growth. Third, regarding our inclusive finance business, we continue to deeply cultivate broad county-level markets and fully implemented localized operation strategies. Tailored to the characteristics of county-level customers, we developed a county-level business risk model and optimized risk strategies with optimized customer onboarding. credit granting, and pricing to match the risk profile and credit needs of small and micro customers in offline wholesale and retail, agricultural supplies, and farming segments. At the same time, we strengthened risk management and post-loan collection for small and micro customers through online and offline coordination. To date, we have covered nearly 100 counties, served over 4 million small and micro merchants and individual operators, maintained stable risk performance, and continued to grow loan volume. Additionally, in the first quarter, we strengthened our identification on illegal and fraudulent activities, We built an end-to-end prevention and control system encompassing early warning, in-process interception, post-event enforcement, and ecosystem coordination to combat illicit activities such as agent-assisted complaints. We provided actionable leads to public security authorities, assisted in the successful crackdown of a fraudulent syndicate in Shandong Province, and facilitated the arrest of over 40 suspects. Looking ahead to the second quarter of 2026, we will continue to optimize our asset mix and strengthen risk management over new loans. At the same time, we will better serve prime customers and enhance their experience, driving further growth in high-quality assets while keeping risk stable and controllable. Our goal is to gradually bring risk levels back within our target risk appetite. Next, I will hand over to our CFO, James, to provide a review of the company's financial performance for the first quarter.

Thanks, Albert. I will now provide a detailed overview of our first quarter financial results. Please note that all figures are presented in remaining B terms, and all comparisons are made on a quarter-over-quarter basis, unless otherwise stated. During the first quarter, the industry continued to navigate a period of adjustment. Again, this comes Complex backdrop of our diversified business ecosystem demonstrated continued operational resilience. Driven by the structural optimization of our business portfolio, we successfully grew our total loan volume. While our online consumer finance business faced pressure due to the macro uncertainties, our ecosystem segments, particularly the fintech empowerment service, achieved solid growth. Consequently, total revenue for the first quarter was $3.3 billion, representing a 8.7% sequential increase, with net income remaining relatively stable at $201 million. Now let's take a review of our first quarter financial results. First, net revenue of the credit business, which is derived by adding up credit facilitation service income and the tech empowerment service income, Net of credit costs, including provisions and fair value changes, and the funding cost was $1.5 billion, representing a 7.2% or 98 million increase quarter-over-quarter. The overall growth was largely driven by 382 million rise in tech empowerment service income. This was underpinned by revenue growth from lower provision top-ups for our capital life portfolio amongst improving asset quality. Since our capital life income is recorded net of credit costs, the material sequential decline in provisions directly boosted this revenue line. On the other hand, credit facilitation service income, our capital heavy business, declined by about 10 percent, or $253 million. This reflects the ongoing volume in the pricing headwinds in our online consumer finance business, partially offsetting the increase in our tech empowerment service income. Second, net income of the installment e-commerce business defined by installment e-commerce revenue net cost of inventory sold increased by 41 million to 208 million. So the total net revenue summing the credit and installment e-commerce business added up to $1.7 billion, a 9.1% or $138 million increase quarter over quarter. On the expense side, operating expenses including sales and marketing, research and development, general administrative expenses, and the processing and servicing costs increased by 13.8%, or $169 million to $1.4 billion. Tax and others decreased by 20.9%, or $18 million to $68 million. Consequently, total expenses added up to $1.5 billion, an increase of $151 million. By deducting the total expenses of $1.5 billion from the total net revenue of $1.7 billion, we arrive at a net income of $201 billion, a decrease of 5.9%, or $13 million quarter-over-quarter. One of the macro headwinds, our diversified ecosystem has successfully sustained our financial performance. Now let me walk you through three key business highlights behind these results. First, the resilience of our diversified business ecosystem. Amid continued industry consolidation in the first quarter of 2026, we proactively optimized our business mix to strengthen risk management and compliance. Anchored by our diversified ecosystem, we continue to demonstrate strong operational resilience. Consequently, non-online consumer finance GEV, which encompasses offline inclusive finance, fintech empowerment services, and our e-commerce businesses, grew to nearly 50% of our total GEV, up 42% sequentially, effectively offsetting the contraction in our online consumer finance business. This shift was largely fueled by our FinTech Empowerment, or SHUKE, model, where we partnered with leading internet platforms and banks on risk assessment and assumed the corresponding credit risk. With loan volume surging to around $21 billion, this model's financial contribution is not yet fully reflected due to its lower pricing and empathize the revenue recognition. However, the buildup of the Shulker model creates a robust revenue pipeline, and it will improve our long-term asset quality and ensures steady profitability across market cycles. The installment economy has maintained its positive momentum, supported by stable transaction volumes and improving the gross margins, which I will elaborate later. At the same time, our offline inclusive finance and overseas business advance steadily, serving as additional stabilizers and diversifiers for our broader business portfolio. Second, the steady development of our installment e-commerce business. Our installment e-commerce business continues to be deeply integrated into our ecosystem. providing seamless and convenient consumption scenarios and acting as a unique competitive advantage. Given the current macroeconomic environment, this segment continues to prioritize asset quality over rapid expansion. While demand remains strong in the first quarter of 2026, we deliberately moderated the growth to contain credit risk within our risk appetite. As a result, installment e-commerce GME remained steady at $2.2 billion. Gross profit from the e-commerce business reached $208 million, representing a 24% increase, with gross margin expanded by 169 basis points sequentially to 9.4%. The solid performance was largely driven by the continued refinement of our e-commerce operations. Ultimately, the steady development of this segment not only generates reliable gross profit, but also allows us to capture and serve the diverse consumption needs of our users, further diversifying our revenue streams and reinforcing our operational resilience. Third, prudent provision coverage. In the first quarter, our total credit costs which encompasses three provision line items and the fair value changes of financial guarantee derivatives in our income statement, stood at $1.3 billion, up 0.8% sequentially. This increase was primarily volume driven, aligning with the growth in our new loan origination. As Arvind noted, our risk indicators are stabilizing With risks for both existing and new loans trending downward from January through March, the supplementary provisions required for our existing portfolio were lower than in Q4. To highlight our provision strengths, let's look at our growth provision metrics. By stripping out the net economic impact of the fair value changes, Gross provision offers a true picture of the capital we have reserved against our loan portfolio. Specifically, our gross provision ratio for new capital-heavy loans stood at about 7.2%, comfortably exceeding our historical peak vintage charge-off rate.

Coverage ratio was 258% in the first quarter.

To summarize, Our diversified ecosystem has proven its value as a structural stabilizer. The solid progress in our FinTech empowerment and e-commerce segments effectively offsets the near-term pressure of consumer finance business, building a sustainable revenue pipeline for future quarters. Coupled with our conservative provision strategy, we have established resilient foundations to navigate current and potential market uncertainties ensuring steady operations across all cycles. Now let's move on to our operating expense line items. On the cost and expense side, total operating expenses increased by 14%, or $169 million to $1.4 billion, mainly due to the increase of sales and marketing expenses of $124 million primarily reflecting our investment in ecosystem user engagement alongside the upgrading of our service infrastructure to further improve consumer protection and overall user experience. For balance sheet items, as of March 31st, our cash position, which includes cash, cash equivalents, and restricted cash, was approximately $3.3 billion. Shareholder's equity remained solid at about We expect a gradual recovery trend we saw in the first quarter to carry into the second quarter. Modest in pace, but trending in the right direction. That said, as the lingering impact of macroeconomic uncertainties have not yet fully dissipated, we will strictly maintain our prudent operational approach. As such, we expect the total low originations for the second quarter to remain relatively stable. That's all our prepared remarks for today. Operator, we're now ready to take questions.

Thank you. To ask a question now, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. A moment for our first question. We will now take our first question from the line of Alex Yeh from UBS. Please ask your question. Alex, your line is open.

Thank you for giving me the opportunity to ask this question. I have two questions. The first one is about supervision. We have seen a lot of new supervision policies in recent years. Can you give us an overview of the future of supervision and how we will deal with it? Now, the other question is regarding the recent rollout of various new regulations. What's the company's outlook on this front and what What are the variety of measures that you are taking to adapt to those changes? Second question is regarding the asset quality. Could you provide some update on the latest asset quality trend for your loan portfolio? And how do we think about the risk outlook for the coming quarters?

Thank you. Okay, let me answer the first question. In the recent policy landing, We believe that the industry is moving towards a more mature and standardized direction. In the future, the whole thing will also emphasize the experience of regular operations and users. For us, this is a challenge and also an opportunity. With the whole of a macroeconomic warm-up, the whole of the recovery, plus some of the same industry is gradually shrinking and even withdrawing from the market. The space of the industry is actually still there. This is also for us. The whole development of the future provides more possibilities. In such an environment, we will continue to deepen and use it as the center of a full-fledged management strategy. Specifically, we will continue to optimize the user experience. At the same time, we will further optimize the asset structure and improve the ability of the overall risk resistance. In addition, we will continue to collectively promote the stable development of diverse ecological businesses. At the same time, we are accelerating the exploration of new customer groups, new products, and new business models, such as further deepening the small and medium-sized groups, and improving the service capabilities of the best users, and so on. In terms of consumer protection, we will also completely block, prevent, and design from product design, information disclosure, to back-to-back service, and implement compliance requirements throughout the process. In the long term, I think the company is still very close to the concept of implementing compliance management. Together, we have a diverse ecosystem of the entire business system, This is the translation for Jay's remarks.

Overall, the new industry is evolving more mature and standardized with a greater focus on compliance and user experience. For us, that's both a challenge and an opportunity Market space and opportunities remain. This gives us more room to grow in healthy and high-quality ways. In this environment, we will continue to deepen our customer-centric approach to serve different customer segments. More specifically, we will keep improving customer experience grow our high-quality assets, further optimizing our asset mix, and strengthen the overall risk resilience. At the same time, we will steadily promote the healthy development of our diversified ecosystem businesses. We are also accelerating our efforts to explore new customer segments, new products, and new business models. For example, going deeper into serving small and micro business owners. and improving services for all prime customers. On consumer rights protection, we will put more focus on compliance process, covering the whole process from product design, disclosure, to post-launch services. Over the long run, we will stick to compliance operations and leverage our diverse business ecosystem to further enhance our operational resilience. We believe this Strategic positioning will help us navigate external changes and achieve stable operations and long-term sustainable growth.

OK.

Regarding the loan risk, let me answer this question. In the first quarter, whether it is the FPD30, which is the FPD30 that increases or decreases the total assets, we have maintained a continuous downward trend. In the first quarter, the outflow rate has also improved significantly, and there is a continuous recovery. From the specific risk performance, our inflow rate decreased by about 170% compared to Q4. Our 3,000-day inflow rate rose rapidly. The FPD30 decreased by about 160%. The overall risk showed a positive trend of continuous improvement. Then, looking at the second quarter of 2026, we will continue to strengthen the recognition and control of risk, So overall, in the first quarter of 2026, the quality of both our new loans and existing loans became a improving change.

Regarding the specific metrics, compared to Q4 of 2025, day one delinquency ratio of total assets decreased about 7% in Q1. 30-day collection. FTD30 for new loans originated in Q1 is expected to decline around 6%. So you can see the overall risk attainment is beginning to improve. Looking ahead to the second quarter of 2026, we will continue to optimize our asset mix and strengthen risk management over new loans by enhancing risk identification, risk disposal, and maintaining the quality of new loans. This will help us to further reinforce the current downward trend that we have already seen in the risk metrics. Our overall goal is to keep our rates steadily in the second quarter, which will set us up for recovery and high-quality growth for the rest of the year.

Thank you. We will now take our next question from the line of Judy Zhang from Citi. Please ask your question. Judy, your line is open.

Thank you for letting me ask a question. This is Judy Zhang from Citi. So in light of the changing regulatory environment, what's your outlook for the companies' free financial performance? Thank you.

Okay, I will take the question. As a summary, if we look ahead to 2026, there are still a lot of uncertainty in the macro environment. So we'll continue to take a prudent approach and keep strengthening our operational resilience. I really, at this time, can't really provide specific numbers. Maybe I can quickly walk you through a few key metrics and its trend. First, on the volume side, the online consumer finance business may remain pressure, but thanks to the solid growth of our ecosystem business, like our FinTech empowerment and e-commerce platform, we would expect the total loan volume to stay relatively stable over quarter. Second, on the revenue side, because the FinTech empowerment business recognizes revenue more gradually due to the accounting policy, so it will fully offset the near-term revenue impact from the contractions of the online consumer finance business. However, in the longer run, having a larger contribution from these businesses will give us more stable revenue base. Our asset quality continues to improve, resulting in lower provision top-ups on the existing capitalized businesses. which led to the increase in our tech empowerment service revenue. So I would expect this trend to contribute positively to our revenue in the near term. Third, on the credit card side, they should come down as risk continues to decline, assuming no major macro or regulatory changes. With that said, we'll remain prudent with our provisions. Fourth, on the expense side, Due to the expansion of our equal system business, our continued investment in customer experience of expenses increased slightly on the sequential basis into one. So going forward, we'll keep driving operational efficiency, reduce costs where we can, and aim to steadily optimize our expense ratio. So put all of these together as a summary, overall for 2026, We continue to focus on making steady progress while navigating the uncertainties, so we'll keep building a strong foundation for the long-term, high-quality business.

Thank you. We will now take our next question from the line of Zihan Wang from Goldman Sachs. Please ask your question, Zihan. Your line is open.

Thank you for taking my questions. This is Zihan Wang from Goldman Sachs. Would you please elaborate on the corporate plans to enhance shareholder returns? Thank you.

Okay, let me answer this question. We have always placed shareholder returns in an important position. In recent years, the company has planned to cancel 20 million ADS, which accounts for 12% of the company's total issuance and circulation of shares. Of course, up to now, there is a certain uncertainty in the market environment. We have temporarily stopped the purchase of new shares. We have always adhered to shareholder returns and the efficiency of capital use. In the future, we believe that based on the changes in the market environment, we will flexibly restart the return plan. We have always put it on shareholder time.

the company plans to cancel 20 million ADS, which represents about 12% of our total outstanding shares. That said, given the ongoing macro uncertainty, we have temporarily suspended new share repurchases for now. We always try to balance shareholder returns with capital efficiency. Going forward, we will stay flexible After we complete this research program, we will actively consider launching a new one based on how our business Our goal is to steadily improve long-term returns for our shareholders. Through consistent and practical steps and initiatives, we want our shareholders to share in the value we create.

We have now reached the end of the question and answer session. I would now like to turn the conference back to Will for closing comments.

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

Thank you for your participation in today's conference. This concludes the program. You may now disconnect your lines.