Yiren Digital Ltd.

Thank you for standing by, and welcome to the Year in Digital fourth quarter and fiscal year 2023 earnings conference call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Ms. Keauha, IR officer. Please go ahead.

Thank you, Rita. Good morning and good evening, everyone. Today's call features the presentation by the founder, chairman, and CEO of Credit East, our CEO, Mr. Ming Tang. Our SVP, Ms. Mei Zhao, will join us in the Q&A session after the prepared remarks. Before beginning, we would like to remind you that discussions during this call contain forward-looking statements made under the safe harbor provision of U.S. private securities litigation reform act of 1995. Such statements are subject to risk uncertainties, and factors that can cause actual results to differ materially from those contained in any such statement. Further information regarding future risks, uncertainties, or factors is included in our filing with the U.S. Securities and Exchange Commission. We do not undertake any obligation to update any forward-looking statements as required under the relevant laws. During the call, we will be referring to certain non-GAAP financial measures and supplemental measures to review and assess our operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared as presented in accordance with the U.S. GAAP. For information about these non-GAAP measures and representation to GAAP measures, please refer to our earnings strategy.

I will now pass it to Lin for opening remarks.

Thank you all for joining our earnings conference call today. In the year of global economic uncertainties, we wrapped up 2023 stronger than ever, showcasing the strength and the resilience of our business. The year also marked a pivotal moment for us as we firmly established ourselves as a pioneering AI-driven financial and lifestyle services platform. Through the strategic recategorization of our business line, we streamlined our operations, focusing on the most significant growth drivers. Our proactive integration of AI into our daily operations catalyzed a significant shift, propelling our business forward amid a dynamic economic landscape. This strategic embrace of technology not only optimize our efficiency, minimize labor costs, and enhance our customer service, but also underscore our dedication to innovation and strategic advancement. Our achievements in developing and deploying AI highlight our ability to adapt and excel, setting new benchmarks for operational excellence and resilience. First, On our financial services business segment, the fourth quarter witnessed continued robust growth, with total loan volume reaching RMB 11.6 billion, a 72% increase year over year, marking the fourth consecutive quarter of double-digit growth. The number of borrowers served rose to 1.4 million, a 59% increase year-over-year, highlighting our eighth consecutive quarter of growth. The MAU of our Yi Xianghua APP increased from 2.9 million last quarter to more than 3.5 million this quarter, presenting an impressive annual growth rate of 77%, demonstrating the app's growing popularity and user engagement. This growth is underpinned by our advanced and continuously evolving AI system. For instance, in the fourth quarter, our AI telemarketing robot assisted over 10 million borrowers, facilitating more than RMB $1 billion in loans. Regarding our international financial services business, we achieved a 49% increase in loan volume facilitated in the Philippines in the fourth quarter compared to the third quarter of 2023. With the automation of information review processes driven by our AI LLM, we expect accelerated growth and expansion into additional overseas markets in 2024. Another operational highlight that I would like to address is our strategic shift to the RTA, or real-time analysis, customer acquisition model. This approach integrates risk screening at the customer acquisition stage, attracting higher quality customers and improving our customer mix. As a result, the proportion of new high-quality borrowers served this quarter increased by 4 percentage points compared to the previous quarter. Turning to asset quality, the fourth quarter saw a slight increase in 15 to 89 days delinquency rates to 3.5% due to industry-wide credit quality fluctuations. However, with the ongoing optimizations to our customer mix and the fine-tuned risk-controlled standards, Empowered by AI analysis, we've observed a 15 basis point decline in our FPD 30 plus delinquency rate in the fourth quarter from prior quarter, along with a further downward trend going into the fourth quarter 2024. On the funding front, we are glad to see a continued decline in our funding costs. by another 20 basis points compared to the prior quarter. As our institutional funding partnerships continue to expand nationwide, we expect a further 60 basis points decrease in the funding cost in 2024 compared to 2023. Now, shifting to our insurance brokerage business. The year of 2023, saw continued strong growth in our business volume, with total premiums reaching nearly RMB 4.9 billion, representing a 24% annual increase, significantly outperforming the industry average of 9.1%. The full-year insurance commission revenue reached nearly RMB 1 billion, a 32% year-over-year increase. However, in the fourth quarter alone, due to new pricing regulations capping product returns at 3%, life insurance premiums saw a 24% decline year over year, mirroring the broader industry trend. This was partially offset by a 26% annual growth in our property insurance premiums. for the fourth quarter of 2023. As we've previously discussed, our strategic focus remains on agent development, product innovation, and the digitization. For life insurance products, we will continue to enhance our capabilities in serving high net worth groups via our growing lead team. In 2023, there was a notable 45% rise in the number of large-ticket life insurance policies, with premiums over RMB 3 million per policy, as well as a 70% increase in policies exceeding RMB 10 million. Currently, we are expanding our elite agent team and getting ourselves fully prepared for the rebound in the life insurance market, which is expected to occur in the second or third quarter of this year, as the industry fully adjusts to the new regulations and the product changes. On property insurance, we will continue to focus on higher margin business through product innovation and the channel partnerships in health and the medical care, engineering and construction, and the travel and transportation. For example, the 2023 full year premiums of our overseas construction insurance products increased by 13% year over year. Moreover, we have also strengthened our cooperation with high quality social platforms, such as Little Red Book. Since the start of the fourth quarter of 2023, We've closed nearly 100 high-end medical insurance policies on that platform, marking an efficient new acquisition approach. On consumption and lifestyle services, the growth momentum continues as the fourth quarter saw another 23% quarterly increase in our total GMB to RMB $693 million. The number of transactions reached 3.4 million, up 13% from the previous quarter. The robust growth reflects our continued effort to address our customers' non-financial needs and our commitment to enhancing their overall quality of life, which in turn improves user engagement and stickiness. creating a reinforcing cycle within our ecosystem. Looking forward, there will be more attractive lifestyle and entertainment products and services driven by AI and high-tech coming onto our shelves. Last but not least, I would like to emphasize our AI strategy atop our long-term strategic directions. Through our AI lab initiative, we have been training and fine-tuning our large language models and developing our own large language model operations, or the so-called LLM ops platform. This endeavor will firstly deepen AI integration across our operational spectrum, boosting efficiency, and enhancing customer experience. Secondly, we aim to expand our AI expertise beyond the FinTech verticals to more select sectors, empowering both B2B and B2C clients and partners with advanced technological capabilities. Moreover, we have recently encountered high-quality AI companies and plan to expand our AI ecosystem through strategic partnerships and investments. The horizon is brimming with exciting prospects. Originally, our CFO was scheduled to participate in this meeting. Due to unexpected travel commitment, she is currently on the road and unable to join us online. In her absence, I will be taking the lead to share the prepared remarks with everyone. For this part, I will only focus on the key financial highlights. Please refer to our earnings release and IR deck for further details. First of all, we are glad to report a solid full year of 2023, with both our top line and the bottom line realizing double-digit annual growth. beating our previous guidance. Specifically, in the fourth quarter of 2023, our total revenue reached RMB 1.3 billion, representing a 17% increase year over year. For the year of 2023, total volume reached RMB 4.9 billion, up 43% year over year. Now, on financial services, we saw a continued healthy growth with total bonds facilitated this quarter reaching RMB 11.6 billion, representing a 72% growth over prior year. Revenue from this segment reached RMB 781.3 million for the fourth quarter, representing an increase of 22% year over year. On insurance, growth return premiums reached RMB 1.2 billion, representing a 9% decrease year-over-year and a 15% decrease from the prior quarter. This decrease was mainly due to the new regulations capping life insurance return at 3%, down from previous 3.5%, with sales peaking for legacy products in the second and third quarters of 2023, the market responded to the newly-priced products with low interest. Consequently, we saw a substantial decline in the first-year premiums of live insurance products. Therefore, revenue from insurance brokerage services in the fourth quarter decreased by 51% year-over-year to RMB 98.2 million. Given that first-year premiums overall have a higher commission rate as compared to renewal premiums, the decline in revenue was greater than that of the premiums. As mentioned earlier, we expect a gradual recovery in the second or third quarter of 2024 Meanwhile, our property insurance remained solid, with the fourth quarter premiums increasing by 26% year-over-year. On consumption and lifestyle services, total GMB for the quarter reached RMB 692.7 million, increasing 23% from prior quarters. The customers for this segment come from our existing users across all business lines. The growth rate of GMB is aligned with the increase in the number of our combined customers across diverse business segments. On the expense side, sales and marketing expense increased 99% year-over-year to RMB 205.7 million, mainly due to the intensified promotional activities as we see a continued growth in our financial services business volume. Research and development expenses increased 44% year-over-year to RMB 47.6 million as we persist in ramping up our investments in AI and technological innovation throughout the company. Origination and servicing costs decreased 13% year-over-year to RMB 184.7 million, mainly driven by a decrease in origination and servicing costs related to our insurance brokerage sector amid the current regulatory headwind. G&A remained stable year-over-year as RMB 50.5 million. Allowance for contract assets and receivables was RMB 98.7 million for the quarter, translating into 0.8% of loans facilitated, 10 basis points lower than prior quarter. Onto our bottom line, we continue to deliver a strong profit of RMB 571.3 million this quarter. increasing 18% from prior year. We generated approximately RMB 417.2 million net cash from operations in the fourth quarter, a decrease of 12% from prior year. On the balance sheet side, our balance sheet remains strong with total cash and cash equivalents of RMB 5.8 billion by the end of this quarter. providing a sufficient buffer for us to respond to any business opportunities in institutional operations, international expansion, and strategic AI deployment. This quarter, we deployed USD 1.9 million to buy back shares in the public market. As of fourth quarter end, the company has cumulatively deployed close to USD 7.4 million for its share repurchase program. We remain optimistic about the core strengths and the future growth opportunities of our company. Given our evaluation of the current state of our business and market trends, we expect our 2024 full-year revenue to stand between RMB $5.8 billion, and RMB $6.8 billion, with a healthy net profit margin. This reflects our current and preliminary view, which is subject to change and uncertainty. With that, we conclude our remarks. Operator, we are now open for questions. Thank you.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Marco Zhang with Water Tower Research. Please go ahead.

Hi, congrats on your strong Q4 and 2023 results. My first question is your AI strategy. So what are your specific AI strategies for each business line? And regarding the development of an AI ecosystem, as mentioned in your remarks earlier, could you elaborate on the latest progress And are there any specific investments or collaborations with other technology companies that you can disclose? Thanks.

Thank you.

And first of all, we are utilizing AI in our fintech businesses, including like credit tech, yeah, and insurance tech. and lifestyle consumption services. For example, in our risk management, yeah, we use AI to do like collection. Yeah. And we use AI for our international businesses, quality control, like in the Philippines and in Mexico. We can monitor from remote how teams in those markets conduct businesses. according to local regulations through AIs like translation and intelligence. And for our insurance tech business, for example, we are helping clients analyzing their insurance policies from us and from other insurance companies and agents. For example, we are developing AI content for our lifestyle and consumption services. To be exact, we are developing models for each of our fintech business lines through open source-based large language model, plus each business line's proprietary data and business know-how. Through this process, we've developed strong capabilities, in our view, to train and fine-tune model. Yeah. And this capability is very, like, in high demand in the market. Yeah. So we are now working closely with a strategic partner on building a product for this model, large language model training capability. So this LLM Ops platform will go live soon. Yeah, and so on that platform, we can continue to train our models while others can come train theirs. So we welcome customers from all sectors to come train their models. We will offer open source functions to them. But for those who are interested in further developing their models, and if they need our help, we can provide additional help on a paid basis. So this will be our new business in AI, part of our new AI business. At the same time, we are leveraging this AI capability to try and work with industry leaders in legal, in like psychology, social companion, like such sectors, yeah, who have great data and great business know-how for their respective verticals, but don't have great AI capabilities. So we will try and work with them strategically, bringing AI capability to their businesses. So we are in the process of closing a number of strategic investments and partnerships in AI. And yeah, when the time is right, when we close each of those initiatives, we will make additional announcements.

Oh, got it. That's good to hear. My second question is a little bit broader regarding your international business. So what are your expansion plans for 2024 regarding your international business and what is the expected growth rate for loan facilitations overseas?

Let me first offer my Yeah, more strategic, more macro view. And then colleagues, May and colleagues, please add to it. And so our international expansion strategy is key to our future growth. Yeah, and we've made very solid progress so far. but a long way to go because the base is still quite small. And so any new business on top of that will likely represent a very high growth rate. But we will continue to grow our international business. We are doing work in Southeast Asia first in the Philippines but more countries to go in Southeast Asia we've got started in Latin America with Mexico to be the first so we are very hopeful about that market and subsequently I hope and we do have a plan to to, yeah, explore like Africa. Yeah. But, yeah, step by step. Yeah. Can May and, yeah, please provide more details?

Yes. Yes. Just like you mentioned, our overseas geology is very key. Just in the Last year, our objective is to understand the overseas market and to build up our team. And I think we successfully meet the targets in the last year. And for 2024, I think we're going to target our international business as the double in 2024. I think we have very confident this year because we have very solid foundation on the international business. Just like Ming said, we leverage some AI capabilities and we already built up our international team and very localized. So I think we have very confidence this year on our international business. Thank you.

Okay, thanks. So my third question is regarding your loan facilitation business, not just overseas, but also domestic. So in the total, so for 2024, what's your expected growth drivers for this business in 2024? And can you offer any guidance on the growth rate for new loan volumes for the year of 2024? Thanks.

Can May please take that question?

Yes, yes. Okay. For the 2024, I think that for the overall economic landscape, I think although we have very optimism, but it's cautiously, you know, for this year. So we have to balance our business expansion and our assets equality. So our target for this year is the growth is about 30%. I think that's for the 24 years is our target, the growth rate. And meanwhile, I think we have to optimize our risk capabilities and this is to refine our customer acquisition strategy And also our credit score, modeling, so on and so forth. And also we do enhance our AI capabilities as well. So although I think, you know, we have some very confidence on this year, but we do have very cautious on our assets and the business, the healthy and the assets and qualities. Thank you.

Oh, got it.

Yeah, congrats again on your strong results, operator. I don't have any more questions. Thank you.

Thank you. Your next question comes from Bruce Oren with Black Lab Fund. Please go ahead.

Yes, hello. Congratulations on another successful year, especially the increase in overseas loans and their great future potential. I have two questions. The first is concerning the life insurance segment. Can you further address the 17.1% drop and how you plan to adjust to the new regulations? And secondly, just do you further plan to have share repurchases? Thank you.

Thank you. Regarding the first question, yeah, because the first half of the year or first part of the year saw quite a great business volume due to the fact that people were expecting the regulation change. So put it in another way, most of the work of the year was done actually in the first part of it. So the second part, including fourth quarter, wasn't great. But yeah, we expect that like, you know, around middle of this year, things will, yeah, stabilize and show new promise. And, yeah, the market sentiment will be back. But, yeah, May, can you please provide more details regarding insurance?

Yes. Yes, yes. Just like, yeah. Yeah. The fourth quarter, I think the whole market is under pressure on the regulatory impact. But I think that although this impact, the players in the market have some sort of the pause, you know, but I think we are very confident because the need is there just, you know, the market just needs some time to, uh, uh, consume this impact. Um, so I think it's for just like a name mentioned, you know, for the new year, um, we're going to expect some new products. And also, I think our customers are very neat just because the whole market, the customers still have this kind of insurance demand. So I'm pretty much confident we have a rebound and that we're going to have some new of growth as well. Just like life insurance is the majority of our business, but still we can see the lots also demand from the property insurance as well, such as employer duty insurance, so on and so forth, we can see the booming demand. So I think for the 2024, our insurance products, we're going to have more property insurance as well. So I think that's going to help us to more balance our insurance brokerage business as well. Thank you.

As for the repurchase program, this quarter we have deployed USD 1.9 million to buy back our shares in the public market. And as for the fourth quarter, the end of the fourth quarter, the company has accumulatively deployed close to USD 7.4 million for our repurchase program. And we will still do some buying back, and we are very confident on our core strength and future growth.

Yeah, we'll do more share repurchase.

Thank you very much. Have a good evening. Thank you.

Your next question comes from Matthew Larson with Fincadia Capital. Please go ahead.

Thanks for taking my call and congratulations on another really great year. I've been following your company since you went public through Morgan Stanley back in 2015 where I participated on your IPO. It's nice to see the recovery in your business and the expansion. The valuation is just really astounding. Your companies cash position is almost twice what your market capitalization is. Uh, and your earnings, uh, uh, you know, establish yourselves at, uh, trading it just one and a half times earnings roughly. So, you know, if one just put a five multiple on that, you're looking at a stock that could be 16 or $18. Some of your competitors do trade at that multiple. they also pay dividends, um, And that's usually received well by investors here in the United States. In fact, one competitor, Lufax, just announced today a $2.42 special dividend, and the stock is up dramatically. You know, with all your cash, you've been buying back some shares. Not a lot of them, no. The volume was picked up in the first quarter, which would allow you, from volume restrictions, to probably buy some more, and you're trading well below book value. So I would recommend you perhaps institute a dividend, but accelerate your buyback because it's totally accretive to you all. And in addition, I like your guidance. It It's looking to be 20% to 40% greater for 2024 from 2023, and I think you should highlight that. So you're in a very strong growth pattern. Now, AI has been discussed a number of times on this call and on your news release, and I'm not sure the market really understands that you are a pioneering artificial intelligence investment opportunity. because you don't put out many news releases and in fact today's just announced the earnings. In my judgment, so that the investment buy side would understand your story better and give your company a higher valuation, would be to put out news releases that highlight your artificial intelligence capabilities. If, for example, you had put out that earnings were $3.29 helped by our artificial intelligence capabilities, that would, you know, highlight that you are an AI firm. And investors, certainly here in the United States, are hungry for exposure to the AI sector. So if that is a possibility, I would recommend it because your company is not widely known because no analysts follow you and you don't do roadshows and what have you, and it's a smaller price stock. But now that you're above $5, it puts you in a different arena where investors that might have a minimum stock price to be able to employ their capital into your firm can do so. So I look forward to another great year. Thank you for the last one. And just if you could take some of my advice and consider it, I think it could be very helpful. Thanks for taking my call. Thank you.

Thank you very much. Yeah. Let me share my thoughts and then May can add to it. And first of all, thank you very much for the long time trust. And yeah, so as we previously mentioned, we will continue to do share buyback. And yeah, but regarding dividend, it has been discussed. And yeah, we put some serious thoughts As a matter of fact, we've done that before, so it's not new to us, the concept and the practice. And we've also studied best practices around the world and in our peer group. So the idea is that we believe we have like great growth opportunities where we can deploy capital rather than issuing a dividend. For example, like, you know, our AI work has been done on a very low cost basis because we want to be prudent we want to be like you know very careful but as we develop our capability further we may yeah be able to deploy a larger amount of capital yeah so so so so that's our strategic thinking and so yeah please yeah give us a bit more time we will show that yeah our strategy regarding yeah paying or not paying a dividend is better and regarding yeah AI strategy, definitely we will communicate with the market more. This time, yeah, basically we just gave our strategic thinking a work in progress. In my view, there are two types of AI work. One is the so-called plus AI, meaning existing business, plus AI. This is great. This is something we must do. As a fintech leader, pioneer, Like we need to utilize the most cutting-edge technology, which is AI right now. So AI has been going into our fintech businesses and our company management like, yeah, big time. But at the same time, we are thinking like about like really doing AI-native kind of work, meaning like – developing this model training platform, starting to serve customers from other sectors, like open sourcing, much of the platform, and so on, and also strategically building vertical models for psychology, social companion, so on. So this is like more kind of AI native, like AI first opportunities. So as they come along, we will definitely communicate with the public more and more. And frankly, it's my vision that, yeah, three, five years down the road, we are not just a fintech player. We are a FinTech player and an AI kind of leader and FinTech business utilizing AI big time. It's like that's our showcase, right? We can utilize AI great, but our AI capability is also open to all. So not just our own like a FinTech business. So that's the strategic thinking. It's very like, in my view, a great, great moment for us to do that. And yeah, I hope to make that happen. And yeah, that's our thinking behind.

Okay, great. Thanks for sharing illuminating that. And I look forward to, again, uh, hopefully seeing some, uh, more communication with the investment community here in the United States about your, uh, AI, uh, initiatives, uh, your pioneering, uh, you know, embrace of, uh, of AI. And frankly, uh, you know, you've been employing AI or algorithms, uh, to a certain degree for years, uh, to make your credit decisions. So, uh, This is nothing new for you, and if investors understood that, there's no question in my mind that your company stock would be given a significantly higher valuation. So thanks again, and have a good evening.

Well, thank you. But I'd like to add, Matt, that previous big data work was great, but current AI is a whole new ballgame. Yeah, but we are mastering that capability, so we have this confidence.

Okay, great. Thank you.

Your next question comes from Peter Ra with Bluebird Advisory. Please go ahead.

Thank you. Good morning. The elephant in the room is your capital structure. If you gave a $50 million dividend, that would be about 5%. You would still have over 700 million U.S. dollars to buy an AI company. In America, we say, show us the money and quit talking about AI every other sentence because you're a Cayman-based Chinese company. You don't have a lot of credibility. Mr. Tang... did not have enough respect for his shareholders to be on this call today. I have great respect for the big company he's built, but he evidently doesn't want, or maybe this is my question, do you need to ask the Chinese government to distribute a cash dividend or to buy back shares? Is there some legal Chinese reason where you cannot distribute the money? Because an American shareholder who's looking at your balance sheet, makes no sense why you do not have a dividend. Last quarter, Ms. May said you want to be considered a growth company, which is why you didn't want to do a dividend. But you're not even considered a value company right now. And paying a dividend would restore some credibility in the American economy among shareholders. Because right now, Chinese companies don't have a lot of credibility among American investors. and you did lift on the American exchange. So you did access American capital and you need to respect that. And I'm wondering, is there a legal reason why you cannot distribute a dividend or do a bigger buyback than a few million dollars?

Thank you for your question and for you joining the call. And I respectfully disagree with some of your points. But let me say the following. First of all, there's no such restriction whatsoever. And it's our decision to put our funding, money into higher value generating And as a matter of fact, we did a dividend before. So as I mentioned, it's not new to us. And so, yeah. And we've been doing cash, like a share buyback, and we'll do more. But we're also aware that our floats is not that great. So if we buy more and more, there will be limited float for larger institutional investors. Yeah. So I'm not buying this kind of, yeah, I respect like American investors, global investors, and yeah, actually I felt no good when our share price declined due to many factors out of our control. But we've been trying so hard in the past years to produce great results quarter over quarter. And I believe with our new strategy, with our ongoing dedication, yeah, the company will do great. And as a matter of fact, last year, the value of the company grew over 100%. Of course, it's from a very humble base. We were not happy about, but we've also been happy about its recent development. Yeah. So that's my feedback to you, sir. And yeah, so I think we will just have to work harder to build a solid company for our shareholders and partners.

Thank you. Well, last quarter, Ms.

May said that you would do a more proactive approach to speaking to retail investors since you really have very few institutional investors. And I don't think in the past three months that you've had any event where you've reached out to the retail American investment community. And instituting a small percentage dividend, whether it's $20, $30 million a year, would and state would instill some confidence in the investing public and even the institutions that you respect your shareholders, that it's not just a company from Mr. Tang, that you respect the shareholders and are willing to share some of the revenue as a display of strength. You bounce from lending to insurance. Now your insurance is down 50%. from last quarter so evidently you're not really going to be a big insurance player now you're trying to pivot and you're looking to buy another company to try a different direction so there's a lot of lack of confidence in strategic direction of this company and instituting a dividend as a prior person said like some of your competitors have would would instill some good confidence and probably would get the stock price up significantly and on the radar screen. You need to learn to walk before you can run and having a dividend would instill some confidence among American investors. Thank you.

Thank you. Let me elaborate a bit more regarding the point you just made. First of all, let me report that we've done quite a bit of work regarding communications with retail investors. For example, we rebuilt our website, investor communications content, and I was part of it. And I personally wrote our AI strategy, and there are three pages that I'm very excited about. So if you can go, please take a look at them. And I'd love to have your comments. And also, yeah, we've taken some, yeah, remarks from like KOLs in the U.S. Like, yeah, we are incorporating their suggestions in our communications. And so what the retail investor communication work is being done in a thoughtful way. And secondly, let me say, insurance business is our core business. And as a whole, it grew nicely last year 2023. And we expect the insurance business will grow nicely this year and in future years. And lastly, I'm not sure where the concept of us buying a company to do AI came from, probably due to my like not doing great communication or making clear, no, we're not going to buy any company. We're going to develop our own AI capability, and also we're going to make some strategic investments and strategic partnerships in a smart way. So this is how we're going to build our AI capability because there are just so few great AI native guys out there. Like Microsoft had to invest in open AI to develop its capability. It didn't really just do AI in-house. So I think Microsoft did the right thing. We are doing the right thing doing it in-house at the same time, doing strategic partnerships and investments together. That's really going to serve the shareholders and the company well, in my view. But of course, as I mentioned earlier, we're going to report our progress in a thoughtful way. Hope, yeah, when there's more visibility, yeah, you will feel more comfort. Thank you.

Just one more thing about retail investor communications. In fact, we have been increasing our retail investor communications for recent months. If you look at our website, we have been publishing more news regarding to the latest business update to the public. So we are statistically being more active in encountering or exposing the public, especially in the U.S. market. And apart from the news that will be released If you look at our website, you can see it, and if you can search Google it, you can see the latest business updates from us. Apart from that, we also build out our own social media platform, and we have an online official accounts on LinkedIn and also at Twitter. And welcome to follow us on that. And we will publish the latest business news on that as well. And if you have any questions, please follow us and you can ask us questions on that as well. And apart from that, in the future, we will release more news and enhance our communication with retail investors, but not only retail investors, but institutional investors as well. I will attend more international conferences, some of them in domestic China and some of them in Hong Kong, and also hopefully in the U.S. as well. So there's a lot of things happening around, and just stay tuned. Thank you.

Thank you.

The next question comes from Boyd Hintz with ACI. Please go ahead.

Hi. Thanks for squeezing me in here. I had some questions about your e-commerce segment. That appears to be the fastest growing segment within the company right now. And I was wondering if you could just kind of give us a little bit more details about what are the What are the things that are driving that growth? And what are your expectations for the growth in 2024? And if you could also talk about its margins and how they compare with the margins in your other divisions, that would be great. Thanks.

Thank you. I'll first offer some big-picture strategic thoughts, and May can please... add to it and so basically this is our strategy to like yeah enhance strengthen our customer relationship and also basically cross selling to a ever growing and happy customer base and also by selling them more and more things they really need they really like We know them better. So, yeah, so this is the strategic rationale. Since this business had a low base, of course, the growth rate has been, yeah, quite stellar. I'm not sure it can grow as fast. going forward. But yeah, it seems like our products cross-sold to our customers are quite well-received. But I hope also with AI content, we will be able to please them more. But can Mei please provide further details?

Hello, Mei?

Yes, for our lifestyle business line, I think we have a very good growth in the last year. I think the key driver is our customer. They just have more and more MAU. They're going to have more attachment on our app. I think that we have launched some very interesting services like some self-development because we have some programs. Our customers can learn some courses. They are interested. even including financial planning and AI even. And also, I think in the future, as growth of the customer acquisition, I think this part of the business has a very healthy growth as well, especially for... AI empowers a new kind of services as well, I think. So we have a very confident on this new year. And that's going to help our customers will just spend more time on our app. And I think that would be even better understand our customer behavior and to have a better judgment on their payment habits as well. I think that's going to be very key to our part-time services. Thank you.

It's great. I'd like to add a channel to sell digital goods like video like content, like membership, like, you know, IT membership, so on. So yeah, with some good discount or Yeah.

Can can you speak to my question about the margins? I know that you know, your your overall margin for the year in all divisions, your pre-tax margins are approximately 54%, which is a stunning number in terms of its profitability. You also sort of referenced in your guidance that you expect the healthy net margins to continue, although you didn't really give us a numerical value So I guess this is sort of a two-part question. One is like asking about what are the kind of margins you're getting in your e-commerce division and how is that going to contribute to fiscal year 24? And then in general, as part of your guidance for the healthy margins to continue, does that mean that you expect margins to exceed what you achieved in fiscal year 23?

Do we have such details?

And can you please... Yeah, just like Mr. Ning just mentioned, we have some kind of membership, like ITV or some sort of... I think that the margin, just like you just mentioned, like $40 or something, I think that's a range.

Thank you. Okay, thanks. I have nothing further.

Your next question comes from David Tufts, a private investor. Please go ahead.

Yeah, good morning from Santa Barbara. So my question really is very similar to two other callers before. And just to put a fine point on it, you've got roughly $800 million in cash. You're selling at less than two times earnings. I'll repeat what both of these callers said. If you instigated a dividend, the last caller said, you know, 50 cents, something like that. What effect would that have? It would diminish your capital by 5%, by nothing. But it would telegraphed to the world that you were a real company that you did not have, and I was happy to hear this from the last caller, you were not constrained by your government to not pay out that money. So that's good. I mean, I hope that's true. But what it would do would be to attract a great deal number more of investors to which would enable you to buy back more stock, which would dramatically accelerate the price of your stock. Now, you say, well, you know, you want to attract institutional investors. Well, institutional investors would get interested if that happened. But right now, they're less than 5% of your shareholders, less than 5%. Focus on the 95% of your shareholders and everything else will follow. All the good stuff you say, and you're doing a great job with the AI and all that stuff. All of that will become known if you do this simple thing. And beyond me, why you're not doing that. Other than that, you know, Keep on doing what you're doing, but please consider this other change.

Okay? Thank you.

We took your point.

Thank you.

Your next question comes from Andre Ullian Hudu with Ullian. Please go ahead.

Hello, so great results. Congratulations. I have been a shareholder for some time also.

I wanted to clarify for other investors and also pass with some questions, but looking at the other earnings polls and the transcripts, which I've been present also too, you have two speakers, mostly two questions. So clearly there are newer investors which found your company as you already, I think I'm the 10th for the eighth person asking a question. And usually you have one person or two people asking questions. Also, the fact that Mr. Ning Tang is not here and I want to congratulate him also is not a problem in my opinion because maybe he has personal life issues or other stuff. But the idea is that in the last quarter, as I'm looking, and all earnings are called transcripts. You can check it online. Mr. Ning Tang, the CEO, was present for all of them. So now maybe he sees the stock price, it increased a bit, so he's free to, I don't know, go to a vacation or something, which is rightfully so. So for newer investors, because they are in this call, I would like to state that Mr. Ning Tang was in every earnings call and he had quite insightful questions and answers with the one analyst which was talking, a guy from Morgan Stanley, which I really appreciate also. Now, as the questions part, I want to also, before asking you stuff, I want to state that this is a Cayman-based company, but also Tencent, Alibaba, which Charlie Munger owns, Warren Buffett's partner, they're all Cayman-based companies. So this is a trait of Chinese companies. So it's not a problem that YRD, Iran Digital, is a Cayman-based company because all the major companies are Cayman-based companies. Furthermore, I would like to congratulate the fact that you're still growing at 30% even to 28% actually growth in the middle range is the guidance and 39% is the growth in revenue for 2024 at the upper bound. So that's great growth after growing 50, 100% per year in the last two years or something like that. And I would like to ask you, and the last thing, sorry, I'm stating facts, 2,100 employees or something like that, 2,500 employees you had. I would like investors also to search in Chinese or on the Chinese site, there are posts of the employees having team building and other activities. So this company is legit and it has tons of employees, 2,500 or something, if you can clarify, but legit. I found it on a Chinese site of your investor relations, and it's quite hard to find, but you can search LinkedIn and all that, and you will see that this company is very nice. Okay, my last question, and my question actually is the dividend. Of course, everybody stated about the dividend. I appreciate how your performance financially, and I understand that you want to invest into... growth opportunities and also into AI. You're an AI company and you're already using AI before it was popular. Now, my only thing is, could you talk with Mr. Ning Tang for a 5% dividend? The last caller said that it would decrease your cash not even by 4% or 5% for a 10% dividend, but a 5% dividend would decrease it by 2%. It's just a confidence thing. Do a symbolic dividend. I understand you want to continue growing 40% and it's better for you to reinvest in the business. I clearly agree. But you could consider, if you want, and my question is, would you consider a smaller dividend just for the sake of pleasing or becoming it to the eyes of investors?

Thank you. And this is Ming-Tang speaking.

And, yeah, frankly... I didn't quite catch the first part of your remarks, yeah, due to line quality, but sounded like you expressed, yeah, a comfort about the business, but thank you. And the second part I got, and yeah, again, about dividend and contracts, point taken and we will surely consider all remarks, suggestions, ideas from shareholders and also interested parties.

I'm a long-time shareholder, by the way. I think not as long as the person from Morgan Stanley, but from the depths of the company. Anyways, my question, actually statement I want to say is I think there are many new investors here or actually if you would look at competitors or similar companies in the FinTech area, So as you've seen, so Giant Tech, a fintech company, it increased three times, so 200% growth in the stock price after in March 29 of last year, it issued the dividend, which is 15% dividend for the year 2023. So it increased 15% for the current stock price, by the way, for the old stock price, sorry, currently it's smaller. No, for the current stock price, 60%. So the idea is that they issued a dividend in 29 March last year, so same period as today, let's say, and stock price increased two times, sorry, three times. So 200%, three times from $2 to $7 after they issued the dividend. So the news of the dividend. So that's the impact that a dividend can do. And today in the pre-market Lufax, LX on NASDAQ, I think, It increased 45% in the pre-market because they issued a huge dividend. And these are companies which have less cash and they're generating less cash than you're generating. And you could do just a symbolic one or like they're doing less cash, but they have quite high dividends, not sustainable for some, but whatever. But not my comments to say, but your company is the best financially and it has $800 million in cash, which increased $240 million increase in cash from last year in December 2022. So from Q4 to Q4, year on year, you increased $240 million, your cash, and also your book value increased $210 million. If you take total assets minus total liabilities. So your company is trading below cash and it's growing at 40%. And yeah, a dividend would bring confidence. And again, your competitors, they increase widely after dividends.

Three times.

Clear. We got the point. Thank you. Thank you very much also. And a wonderful day.

Thank you. There are no further questions at this time. If you do have further questions after the call, please direct them to our investor relations team. That does conclude our conference for today. Thank you for participating. You may now disconnect. Bye. you Okay. Thank you. Thank you. you Thank you. Thank you for standing by and welcome to the year in digital fourth quarter and fiscal year 2023 earnings conference call. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Ms. Keauha, IR officer. Please go ahead.

Thank you, Rita. Good morning and good evening, everyone. Today's call features a presentation by the founder, chairman, and CEO of Credit East, our CEO, Mr. Ming Tang. Our SVP, Ms. Mei Zhao, will join us in the Q&A session after the prepared remarks. Before beginning, we would like to remind you that discussions during this call contain forward-looking statements made under the Safe Harbor Provision of U.S. Private Securities Delegation Reform Act of 1995. Such statements are subject to risk uncertainties, and factors that can cause actual results to differ materially from those contained in any such statement. Further information regarding future risks, uncertainties, or factors is included in our filing with the U.S. Securities and Exchange Commission. We do not undertake any obligation to update any forward-looking statements as required under the relevant laws. During the call, we will be referring to certain non-GAAP financial measures and supplemental measures to review and assess our operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared as presented in accordance with the U.S. GAAP. For information about these non-GAAP measures and representation to GAAP measures, please refer to our earnings strategy.

I will now pass it to Lin for opening remarks.

Thank you all for joining our earnings conference call today. In the year of global economic uncertainties, we wrapped up 2023 stronger than ever, showcasing the strength and the resilience of our business. The year also marked a pivotal moment for us as we firmly established ourselves as a pioneering AI-driven financial and lifestyle services platform. Through the strategic recategorization of our business line, we streamlined our operations, focusing on the most significant growth drivers. Our proactive integration of AI into our daily operations catalyzed a significant shift, propelling our business forward amid a dynamic economic landscape. This strategic embrace of technology not only optimize our efficiency, minimize labor costs, and enhance our customer service, but also underscored our dedication to innovation and strategic advancement. Our achievements in developing and deploying AI highlight our ability to adapt and excel, setting new benchmarks for operational excellence and resilience. First, On our financial services business segment, the fourth quarter witnessed continued robust growth, with total loan volume reaching RMB 11.6 billion, a 72% increase year over year, marking the fourth consecutive quarter of double-digit growth. The number of borrowers served rose to 1.4 million, a 59% increase year-over-year, highlighting our eighth consecutive quarter of growth. The MAU of our Yi Xianghua APP increased from 2.9 million last quarter to more than 3.5 million this quarter, presenting an impressive annual growth rate of 77%, demonstrating the app's growing popularity and user engagement. This growth is underpinned by our advanced and continuously evolving AI system. For instance, in the fourth quarter, our AI telemarketing robot assisted over 10 million borrowers, facilitating more than RMB $1 billion in loans. Regarding our international financial services business, we achieved a 49% increase in loan volume facilitated in the Philippines in the fourth quarter compared to the third quarter of 2023. With the automation of information review processes driven by our AI LLM, we expect accelerated growth and expansion into additional overseas markets in 2024. Another operational highlight that I would like to address is our strategic shift to the RTA, or real-time analysis, customer acquisition model. This approach integrates risk screening at the customer acquisition stage, attracting higher quality customers and improving our customer mix. As a result, the proportion of new high-quality borrowers served this quarter increased by 4 percentage points compared to the previous quarter. Turning to asset quality, the fourth quarter saw a slight increase in 15 to 89 days delinquency rates to 3.5% due to industry-wide credit quality fluctuations. However, with the ongoing optimizations to our customer mix and the fine-tuned risk-controlled standards, Empowered by AI analysis, we've observed a 15 basis point decline in our FPD 30 plus delinquency rate in the fourth quarter from prior quarter, along with a further downward trend going into the fourth quarter 2024. On the funding front, we are glad to see a continued decline in our funding costs. by another 20 basis points compared to the prior quarter. As our institutional funding partnerships continue to expand nationwide, we expect a further 60 basis points decrease in the funding cost in 2024 compared to 2023. Now, shifting to our insurance brokerage business, the year of 2023 saw continued strong growth in our business volume, with total premiums reaching nearly RMB 4.9 billion, representing a 24% annual increase, significantly outperforming the industry average of 9.1%. The full-year insurance commission revenue reached nearly RMB 1 billion, a 32% year-over-year increase. However, in the fourth quarter alone, due to new pricing regulations capping product returns at 3%, life insurance premiums saw a 24% decline year over year, mirroring the broader industry trend. This was partially offset by a 26% annual growth in our property insurance premiums. for the fourth quarter of 2023. As we've previously discussed, our strategic focus remains on agent development, product innovation, and the digitization. For life insurance products, we will continue to enhance our capabilities in serving high net worth groups via our growing lead team. In 2023, there was a notable 45% rise in the number of large ticket life insurance policies with premiums over RMB 3 million per policy, as well as a 70% increase in policies exceeding RMB 10 million. Currently, we are expanding our elite agent team and getting ourselves fully prepared for the rebound in the life insurance market, which is expected to occur in the second or third quarter of this year, as the industry fully adjusts to the new regulations and the product changes. On property insurance, we will continue to focus on higher margin business through product innovation and the channel partnerships in health and the medical care, engineering and construction, and the travel and transportation. For example, the 2023 full year premiums of our overseas construction insurance products increased by 13% year over year. Moreover, we have also strengthened our cooperation with high quality social platforms, such as Little Red Book. Since the start of the fourth quarter of 2023, we've closed nearly 100 high-end medical insurance policies on that platform, marking an efficient new acquisition approach. On consumption and lifestyle services, the growth momentum continues as the fourth quarter saw another 23% quarterly increase in our total GMB to RMB 693 million. The number of transactions reached 3.4 million, up 13% from the previous quarter. The robust growth reflects our continued effort to address our customers' non-financial needs and our commitment to enhancing their overall quality of life, which in turn improves user engagement and stickiness. creating a reinforcing cycle within our ecosystem. Looking forward, there will be more attractive lifestyle and entertainment products and services driven by AI and high-tech coming onto our shelves. Last but not least, I would like to emphasize our AI strategy atop our long-term strategic directions. Through our AI lab initiative, we have been training and fine-tuning our large language models and developing our own large language model operations, or the so-called LLM ops platform. This endeavor will firstly deepen AI integration across our operational spectrum, boosting efficiency, and enhancing customer experience. Secondly, we aim to expand our AI expertise beyond the FinTech verticals to more select sectors, empowering both B2B and B2C clients and partners with advanced technological capabilities. Moreover, we have recently encountered high-quality AI companies and plan to expand our AI ecosystem through strategic partnerships and investments. The horizon is brimming with exciting prospects. Originally, our CFO was scheduled to participate in this meeting. Due to unexpected travel commitments, she is currently on the road and unable to join us online. In her absence, I will be taking the lead to share the prepared remarks with everyone. For this part, I will only focus on the key financial highlights. Please refer to our earnings release and IR deck for further details. First of all, we are glad to report a solid full year of 2023, with both our top line and bottom line realizing double-digit annual growth. beating our previous guidance. Specifically, in the fourth quarter of 2023, our total revenue reached RMB 1.3 billion, representing a 17% increase year-over-year. For the year of 2023, total volume reached RMB 4.9 billion, up 43% year-over-year. Now, on financial services, we saw a continued healthy growth with total bonds facilitated this quarter reaching RMB 11.6 billion, representing a 72% growth over prior year. Revenue from this segment reached RMB 781.3 million for the fourth quarter, representing an increase of 22% year over year. On insurance, growth return premiums reached RMB 1.2 billion, representing a 9% decrease year-over-year and a 15% decrease from the prior quarter. This decrease was mainly due to the new regulations, capping life insurance return at 3%, down from previous 3.5%, with sales peaking 3%. for legacy products in the second and third quarters of 2023, the market responded to the newly priced products with low interest. Consequently, we saw a substantial decline in the first year premiums of life insurance products. Therefore, revenue from insurance brokerage services in the fourth quarter decreased by 51% year over year to RMB 98.2 million. Given that first year premiums overall have a higher commission rate as compared to renewal premiums, the decline in revenue was greater than that of the premiums. As mentioned earlier, we expect a gradual recovery in the second or third quarter of 2024. Meanwhile, our property insurance remained solid, with the fourth quarter premiums increasing by 26% year over year. On consumption and lifestyle services, total GMB for the quarter reached RMB 692.7 million, increasing 23% from prior quarter. The customers for this segment come from our existing users across all business lines. The growth rate of GMB is aligned with the increase in the number of our combined customers across diverse business segments. On the expense side, sales and marketing expense increased 99% year-over-year to RMB 205.7 million, mainly due to the intensified promotional activities as we see a continued growth in our financial services business volume. Research and development expenses increased 44% year-over-year to RMB 47.6 million as we persist in ramping up our investments in AI and technological innovation throughout the company. Origination and servicing costs decreased 13% year-over-year to RMB 184.7 million, mainly driven by a decrease in origination and servicing costs related to our insurance brokerage sector amid the current regulatory headwind. G&A remained stable year-over-year at RMB 50.5 million. Allowance for contract assets and receivables was RMB 98.7 million for the quarter, translating into 0.8% of loans facilitated, 10 basis points lower than prior quarter. Onto our bottom line, we continue to deliver a strong profit of RMB 571.3 million this quarter, increasing 18% from prior year. We generated approximately RMB 417.2 million net cash from operations in the fourth quarter, a decrease of 12% from prior year. On the balance sheet side, our balance sheet remains strong with total cash and cash equivalents of RMB 5.8 billion by the end of this quarter. providing a sufficient buffer for us to respond to any business opportunities in institutional operations, international expansion, and strategic AI deployment. This quarter, we deployed USD 1.9 million to buy back shares in the public market. As the fourth quarter ends, the company has cumulatively deployed close to USD 7.4 million for its share repurchase program. We remain optimistic about the core strengths and the future growth opportunities of our company. Given our evaluation of the current state of our business and market trends, we expect our 2024 full-year revenue to stand between RMB $5.8 billion to an RMB $6.8 billion with a healthy net profit margin. This reflects our current and preliminary view, which is subject to change and uncertainty. With that, we conclude our remarks. Operator, we are now open for questions. Thank you.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Marco Zhang with Water Tower Research. Please go ahead.

Hi, congrats on your strong Q4 and 2023 results. My first question is your AI strategy. So what are your specific AI strategies for each business line? And regarding the development of an AI ecosystem, as mentioned in your remarks earlier, could you elaborate on the latest progress And are there any specific investments or collaborations with other technology companies that you can disclose? Thanks.

Thank you.

And first of all, we are utilizing AI in our fintech businesses, including like credit tech, yeah, and insurance tech. and lifestyle consumption services. For example, in our risk management, yeah, we use AI to do like collection. Yeah. And we use AI for our international businesses, quality control, like in the Philippines and in Mexico. We can monitor from remote how teams in those markets conduct businesses. according to local regulations through AIs like translation and intelligence. And for our insurance tech business, for example, we are helping clients analyzing their insurance policies from us and from other insurance companies and agents. For example, we are developing AI content for our lifestyle and consumption services. To be exact, we are developing models for each of our fintech business lines through open source-based large language model, plus each business line's proprietary data and business know-how. Through this process, we've developed strong capabilities, in our view, to train and fine-tune model. Yeah. And this capability is very, like, in high demand in the market. Yeah. So we are now working closely with a strategic partner on building a product for this model, large language model training capability. So this LLM ops platform will go live soon. Yeah, and so on that platform, platform, we can continue to train our models while others can come train theirs. So we welcome customers from all sectors to come train their models. We will offer open source functions to them. But for those who are interested in further developing their models and if they need our help, we can provide additional help on a paid basis. So this will be our new business in AI, part of our new AI business. At the same time, we are leveraging this AI capability to try and work with industry leaders in legal, in like psychology, social companion, like such sectors, yeah, who have great data and great business know-how for their respective verticals, but don't have great AI capabilities. So we will try and work with them strategically, bringing AI capability to their businesses. So we are in the process of closing a number of strategic investments and partnerships in AI. When the time is right, when we close each of those initiatives, we will make additional announcements.

Oh, got it. That's good to hear. My second question is a little bit broader regarding your international business. So what are your expansion plans for 2024 regarding your international business, and what is the expected growth rate for loan facilitations overseas?

Let me first offer my... Yeah, more strategic, more macro view. And then colleagues, May and colleagues, please add to it. And so our international expansion strategy is key to our future growth. Yeah, and we've made very solid progress so far. but a long way to go because the base is still quite small. And so any new business on top of that will likely represent a very high growth rate. But we will continue to grow our international business. We are doing work in Southeast Asia first in the Philippines, but more countries to go in Southeast Asia. We've got started in Latin America with Mexico to be the first. So we are very hopeful about that market. And subsequently, I hope, and we do have a plan to, yeah, explore like Africa. Yeah. But, yeah, step by step. Yeah. Can May and, yeah, please provide more details?

Yes. Yes. Just like you mentioned, our overseas geology is very key. Just in the Last year, our objective is to understand the overseas market and to build up our team. And I think we are successfully meeting the targets in the last year. And for 2024, I think we're going to target our international business as the double in 2024. I think we have very confident this year because we have very solid foundation on the international business. Just like Amin said, we leverage some AI capabilities and we already built up our international team and very localized. So I think we have very confidence this year on our international business. Thank you.

Okay, thanks. So my third question is regarding your loan facilitation business, not just overseas, but also domestic. So in the total, so for 2024, what's your expected growth drivers for this business in 2024? And can you offer any guidance on the growth rate for new loan volumes for the year of 2024? Thanks.

Can May please take that question?

Yes, yes. Okay. For the 2024, I think that for the overall economic landscape, I think although we have very optimism, but it's cautiously, you know, for this year. So we have to balance our business expansion and our assets equalities. So our target for this year is the growth is about 30%. I think that's for the 24 years is our target, the growth rate. And meanwhile, I think we have to optimize our risk capabilities and to refine our customer acquisition strategy And also our credit score, modeling, so on and so forth. And also we do enhance our AI capabilities as well. So although I think, you know, we have some very confidence on this year, but we do have very cautious on our assets and the business, the healthy and the assets and qualities. Thank you.

Oh, got it.

Yeah, congrats again on your strong results, operator. I don't have any more questions. Thank you.

Thank you. Your next question comes from Bruce Oren with Black Lab Fund. Please go ahead.

Yes, hello. Congratulations on another successful year, especially the increase in overseas loans and their great future potential. I have two questions. The first is concerning the life insurance segment. Can you further address the 17.1% drop and how you plan to adjust to the new regulations? And secondly, just do you further plan to have share repurchases? Thank you.

Thank you.

Regarding the first question, yeah, because the first half of the year or first part of the year saw quite a great business volume due to the fact that people were expecting the regulation change. So put it in another way, most of the work of the year was done actually in the first part of it. So the second part, including fourth quarter, wasn't great. But yeah, we expect that like, you know, around middle of this year, things will, yeah, stabilize and show new promise. And, yeah, the market sentiment will be back. But, yeah, May, can you please provide more details regarding insurance?

Yes. Yes, yes. Just like, yeah. Yeah. The fourth quarter, I think the whole market is under pressure on the regulatory impact. But I think that although this impact, the players in the market have some sort of the pulse, you know, but I think we are very confident because the meat is there just, you know, the market just needs some time to, uh, uh, consume this impact. Um, so I think it's for just like a name mentioned, you know, for the new year, um, we're going to expect some new products. And also, I think our customers are very neat just because the whole market, the customers still have this kind of insurance demand. So I'm pretty much confident we have a rebound and that we're going to have some improvements of growth as well. Just like life insurance is the majority of our business, but still we can see the lots also demand from the property insurance as well, such as employer duty insurance, so on and so forth, we can see the booming demand. So I think for the 2024, our insurance products, we're going to have more property insurance as well. So I think that's going to help us to more balance our insurance brokerage business as well. Thank you.

As for the repurchase program, this quarter we have deployed USD 1.9 million to buy back our shares in the public market. And as for the fourth quarter, the end of the fourth quarter, the company has accumulatively deployed close to USD 7.4 million for our repurchase program. And we will still do some buying back, and we are very confident on our core strength and future growth.

Yeah, we'll do more share repurchase.

Thank you very much. Have a good evening. Thank you.

Your next question comes from Matthew Larson with Fincadia Capital. Please go ahead.

Thanks for taking my call and congratulations on another really great year. I've been following your company since you went public through Morgan Stanley back in 2015 where I participated on your IPO. It's nice to see the recovery in your business and the expansion. The valuation is just really astounding. Your companies cash position is almost twice what your market capitalization is. Uh, and your earnings, uh, uh, you know, establish yourselves at, uh, trading it just one and a half times earnings roughly. So, you know, if one just put a five multiple on that, you're looking at a stock that could be 16 or $18. Some of your competitors do trade at that multiple. Uh, they also pay dividends, um, And that's usually received well by investors here in the United States. In fact, one competitor, Lufax, just announced today a $2.42 special dividend, and the stock is up dramatically. With all your cash, you've been buying back some shares. Not a lot of them, no. The volume was picked up in the first quarter, which would allow you, from volume restrictions, to probably buy some more, and you're trading well below book value. So I would recommend you perhaps institute a dividend, but accelerate your buyback because it's totally accretive to you all. And in addition, I like your guidance. It It's looking to be 20% to 40% greater for 2024 from 2023, and I think you should highlight that. So you're in a very strong growth pattern. Now, AI has been discussed a number of times on this call and on your news release, and I'm not sure the market really understands that you are a pioneering artificial intelligence investment opportunity. because you don't put out many news releases. And in fact, today's just announced the earnings. In my judgment, so that the investment buy side would understand your story better and give your company a higher valuation, would be to put out news releases that highlight your artificial intelligence capabilities. If, for example, you had put out that earnings were $3.29 helped by our artificial intelligence capabilities, that would, you know, highlight that you are an AI firm. And investors, certainly here in the United States, are hungry for exposure to the AI sector. So if that is a possibility, I would recommend it because your company is not widely known because no analysts follow you and you don't do roadshows and what have you, and it's a smaller price stock. But now that you're above $5, it puts you in a different arena where investors that might have a minimum stock price to be able to employ their capital into your firm can do so. So I look forward to another great year. Thank you for the last one. And just if you could take some of my advice and consider it, I think it could be very helpful. Thanks for taking my call. Thank you.

Thank you very much. Yeah. Let me share my thoughts and then May can add to it. And first of all, thank you very much for the long time trust. And yeah, so as we previously mentioned, we will continue to do share buyback. And yeah, but regarding dividend, it has been discussed and yeah, we put some serious thoughts As a matter of fact, we've done that before, so it's not new to us, the concept and the practice. And we've also studied best practices around the world and in our peer group. So the idea is that we believe we have like great growth opportunities where we can deploy capital rather than issuing a dividend. For example, like, you know, our AI work has been done on a very low cost basis because we want to be prudent we want to be like you know very careful but as we develop our capability further we may yeah be able to deploy a larger amount of capital yeah so so so that's our strategic thinking and so yeah please yeah give us a bit more time we will show that yeah our strategy regarding yeah paying or not paying a dividend is better and regarding yeah AI strategy, definitely we will communicate with the market more. This time, yeah, basically we just gave our strategic thinking a work in progress. So in my view, there are two types of AI work. One is the so-called plus AI, meaning existing business, plus AI. So this is great. This is something we must do. As a fintech leader, pioneer, Like we need to utilize the most cutting-edge technology, which is AI right now. So AI has been going into our fintech businesses and our company management like, yeah, big time. But at the same time, we are thinking like about like really doing AI-native kind of work, meaning like – developing these like model training platform, starting to serve customers from other sectors like open sourcing, much of the platform, so on, and also strategically building like a vertical models like for psychology, social companion, so on. So this is like more kind of AI native, like AI first opportunities. So as they come along, we will definitely communicate with the public more and more. And frankly, it's my vision that, yeah, three, five years down the road, we are not just a fintech player. We are a fintech player and an AI kind of leader and fintech business utilizing AI big time. It's like that's our showcase, right? We can utilize AI great, but our AI capability is also great. open to all. So, not just our own, like, FinTech business. So, that's the strategic thinking. It's very, like, in my view, a great, great moment for us to do that. And, yeah, I hope to make that happen. And, yeah, that's our thinking behind.

Okay, great. Thanks for sharing illuminating that. And I look forward to, again, uh, hopefully seeing some, uh, more communication with the investment community here in the United States about your, uh, AI, uh, initiatives, uh, your pioneering, uh, you know, embrace of, uh, of AI. And frankly, uh, you know, you've been employing AI or algorithms, uh, to a certain degree for years, uh, to make your credit decisions. So, uh, This is nothing new for you, and if investors understood that, there's no question in my mind that your company stock would be given a significantly higher valuation. So thanks again, and have a good evening.

Well, thank you. But I'd like to add, Matt, that previous big data work was great, but current AI is a whole new ballgame. Yeah, but we are mastering that capability, so we have this confidence.

Okay, great.

Thank you.

Your next question comes from Peter Ra with Bluebird Advisory. Please go ahead.

Thank you. Good morning. The elephant in the room is your capital structure. If you gave a $50 million dividend, that would be about 5%. You would still have over 700 million US dollars to buy an AI company. In America, we say, show us the money and quit talking about AI every other sentence because you're a Cayman-based Chinese company. You don't have a lot of credibility. Mr. Tang, did not have enough respect for his shareholders to be on this call today. I have great respect for the big company he's built, but he evidently doesn't want, or maybe this is my question, do you need to ask the Chinese government to distribute a cash dividend or to buy back shares? Is there some legal Chinese reason where you cannot distribute the money? Because an American shareholder who's looking at your balance sheet, makes no sense why you do not have a dividend. Last quarter, Ms. May said you want to be considered a growth company, which is why you didn't want to do a dividend. But you're not even considered a value company right now. And paying a dividend would restore some credibility in the American economy among shareholders. Because right now, Chinese companies don't have a lot of credibility among American investors. and you did lift on the American exchange. So you did access American capital and you need to respect that. And I'm wondering, is there a legal reason why you cannot distribute a dividend or do a bigger buyback than a few million dollars?

Thank you for your question and for you joining the call. And I respectfully disagree with some of your points. But let me say the following. First of all, there's no such restriction whatsoever. And it's our decision to put our funding, money into higher value generating And as a matter of fact, we did a dividend before. So as I mentioned, it's not new to us. And so, yeah. And we've been doing a cash, like a share buyback, and we'll do more. But we're also aware that our floats is not that great. So if we buy more and more, there will be limited float for larger institutional investors. Yeah. So I'm not buying this kind of, yeah, I respect like American investors, global investors, and yeah, actually I felt no good when our share price declined due to many factors out of our control. But we've been trying so hard in the past years to produce great results quarter over quarter. And I believe with our new strategy, with our ongoing dedication, yeah, the company will do great. And as a matter of fact, last year, the value of the company grew over 100%. Of course, it's from a very humble base. We were not happy about, but we've also been happy about its recent development. Yeah. So that's my feedback to you, sir. And yeah, so I think we will just have to work harder to build a solid company for our shareholders and partners.

Thank you. Well, last quarter, Ms.

May said that you would do a more proactive approach to speaking to retail investors since you really have very few institutional investors. And I don't think in the past three months that you've had any event where you've reached out to the retail American investment community. And instituting a small percentage dividend, whether it's $20, $30 million a year, would and state would instill some confidence in the investing public and even the institutions that you respect your shareholders, that it's not just a company from Mr. Tang, that you respect the shareholders and are willing to share some of the revenue as a display of strength. You bounce from lending to insurance. Now your insurance is down 50%. from last quarter, so evidently you're not really going to be a big insurance player. Now you're trying to pivot and you're looking to buy another company to try a different direction. So there's a lot of lack of confidence in the strategic direction of this company. And instituting a dividend, as a prior person said, like some of your competitors have, would instill some good confidence and probably would get the stock price up significantly and on the radar screen. You need to learn to walk before you can run, and having a dividend would instill some confidence among American investors. Thank you.

Thank you. Let me elaborate a bit more regarding the point you just made. And first of all, let me report that we've done quite a bit of work regarding communications with retail investors. For example, we rebuilt our website, investor communications content, and I was part of it. And I personally wrote our AI strategy And there are three pages that I'm very excited about. So if you can go, please take a look at them. And I'd love to have your comments. And also, yeah, we've taken some remarks from like KOLs in the U.S., Like, yeah, we are incorporating their suggestions in our communications. And so the retail master communication work is being done in a thoughtful way. And secondly, let me say insurance business is our core business. And as a whole, it grew nicely last year, 2023. And we expect the insurance business will grow nicely this year and in future years. And lastly, I'm not sure where the concept of us buying a company to do AI came from, probably due to my like not doing great communication or making clear, no, we're not going to buy any company. We're going to develop our own AI capability, and also we're going to make some strategic investments and strategic partnerships in a smart way. So this is how we're going to build our AI capability because there are just so few great AI native guys out there. Like Microsoft had to invest in open AI to develop its capability. It didn't really just do AI in-house. So I think Microsoft did the right thing. We are doing the right thing doing it in-house at the same time, doing strategic partnerships and investments together. That's really going to serve the shareholders and the company well, in my view. But of course, as I mentioned earlier, we're going to report our progress in a thoughtful way. Hope, yeah, when there's more visibility, yeah, you will feel more comfort. Thank you.

Just one more thing about retail investment communications. In fact, we have been increasing our retail investment communications for recent months. If you look at our website, we have been publishing more news regarding to the latest business updates to the public. So we are statistically being more active in encountering or exposing the public, especially in the U.S. market. And apart from the news that will be released If you look at our website, you can see it. And if you can search Google it, you can see the latest business updates from us. Apart from that, we also build up our own social media platform. official accounts on LinkedIn and also at Twitter. And welcome to follow us on that. I will publish the latest business news on that as well. And if you have any questions, please follow us and you can ask us questions on that as well. And apart from that, in the future, we will release more news and enhance our communication with retail investors, but not only retail investors, but institutional investors as well. I will attend more international conferences, some of them in domestic China and some of them in Hong Kong, and also hopefully in the U.S. as well. So there's a lot of things happening around, and just stay tuned. Thank you.

Thank you.

The next question comes from Boyd Hintz with ACI. Please go ahead.

Hi. Thanks for squeezing me in here. I had some questions about your e-commerce segment. That appears to be the fastest growing segment within the company right now. And I was wondering if you could just kind of give us a little bit more details about what are the What are the things that are driving that growth? And what are your expectations for the growth in 2024? And if you could also talk about its margins and how they compare with the margins in your other divisions, that would be great. Thanks.

Thank you. I'll first offer some big-picture strategic thoughts, and May can please... add to it and so basically this is our strategy to like yeah enhance strengthen our customer relationship and also basically cross selling to a ever growing and happy customer base and also by selling them more and more things they really need they really like We know them better. So, yeah, so this is the strategic rationale. Since this business had a low base, of course, the growth rate has been, yeah, quite stellar. I'm not sure it can grow as fast. going forward. But yeah, it seems like our products cross-sold to our customers are quite well-received. But I hope also with AI content, we will be able to please them more. But can Mei please provide further details? Hello, Mei?

Yes, for our lifestyle business line, I think we have a very good growth in the last year. I think the key driver is our customer. They just have more and more MAU. They're going to have more attachment on our app. And I think that we have launched some very interesting services like some self-development because we have some programs, you know, our customers can learn some courses. They are interested. even including financial planning and AI even. And also, I think in the future, as growth of the customer acquisition, I think this part of the business has a very healthy growth as well, especially for... AI empowers a new kind of services as well, I think. So we have a very confident on this new year. And that's going to help our customers will just spend more time on our app. And I think that would be even better understand our customer behavior and to have a better judgment on their payment habits as well. I think that's going to be very key to our product and services. Thank you.

It's great. I'd like to add a channel to sell digital goods like video like content, like membership, like, you know, IT membership, so on. So, yeah, with some good discount or, yeah.

Can you speak to my question about the margins? I know that, you know, your overall margin for the year is in all divisions, your pre-tax margins are approximately 54%, which is a stunning number in terms of its profitability. You also sort of referenced in your guidance that you expect the healthy net margins to continue, although you didn't really give us a numerical value So I guess this is sort of a two-part question. One is like asking about what are the kind of margins you're getting in your e-commerce division and how is that going to contribute to fiscal year 24? And then in general, as part of your guidance for the healthy margins to continue, does that mean that you expect margins to exceed what you achieved in fiscal year 23?

Do we have such details?

And can you please... Yeah, just like Mr. Ning just mentioned, we have some kind of membership, like ITV or some sort of... I think that the margin, just like you just mentioned, like $40 or something, I think that's a range.

Thank you. Okay, thanks. I have nothing further.

Your next question comes from David Tufts, a private investor. Please go ahead.

Yeah, good morning from Santa Barbara. So my question really is very similar to two other callers before. And just to put a fine point on it, you've got roughly $800 million in cash. You're selling at less than two times earnings. I'll repeat what both of these callers said. If you instigated a dividend, the last caller said, you know, 50 cents, something like that. What effect would that have? It would diminish your capital by 5%, by nothing. But it would telegraphed to the world that you were a real company, that you did not have, and I was happy to hear this from the last caller, you were not constrained by your government to not pay out that money. So that's good. I mean, I hope that's true. But what it would do would be to attract a great deal number more of investors to which would enable you to buy back more stock, which would dramatically accelerate the price of your stock. Now, you say, well, you know, you want to attract institutional investors. Well, institutional investors would get interested if that happened. But right now, they're less than 5% of your shareholders, less than 5%. Focus on the 95% of your shareholders and everything else will follow. All the good stuff you say, and you're doing a great job with the AI and all that stuff. All of that will become known if you do this simple thing. And beyond me, why you're not doing that. Other than that, you know, Keep on doing what you're doing, but please consider this other change. Okay?

Thank you. We took your point.

Thank you. Your next question comes from Andre Ullian Hudu with Ullian. Please go ahead.

Hello. So, great results. Congratulations. I've been a shareholder for some time also.

I wanted to clarify for other investors and also pass you some questions, but... Looking at the other earnings polls and the trash feeds, which I've been present also to, you have two speakers, mostly two questions. So clearly there are newer investors which found your company, as you already, I think I'm the 10th for the eighth person asking a question. And usually you have one person or two people asking questions. Also, the fact that Mr. Lin Tang is not here and I want to congratulate him also. It's not a problem in my opinion because maybe he has personal life issues or other stuff. But the idea is that in the last quarter, as I'm looking, and all earnings are called transcripts. You can check it online. Mr. Lintang, the CEO, was present for all of them. So now maybe he sees the stock price has increased a bit. So he's free to, I don't know, go to a vacation or something, which is his rightful result. So for newer investors, because they are in this call, I would like to state that Mr. Lintang was in every earnings call and he had... quite insightful questions and answers with the one analyst which was talking, a guy from Morgan Stanley, which I really appreciate also. Now, as the questions part, I want to also, before asking you stuff, I want to state that this is a climate-based company, but also Tencent, Alibaba, which Charlie Munger owns, Warren Buffett's partner, they're all climate-based companies. So this is a trait of Chinese companies. So it's not a problem that YRD, Iran Digital, is a Chinese climate-based company because all the major companies are climate-based companies. Furthermore, I would like to congratulate the fact that you're still growing at the 30% even to 28% actually growth in the middle range is the guidance, and 39% is the growth in revenue for 2024 at the upper bound. So that's great growth after growing 50%, 100% per year in the last two years or something like that. And I would like to ask you, and the last thing, sorry, I'm stating facts. 2,100 employees or something like that, 2,500 employees you had. I would like investors also to search in Chinese or on the Chinese site. There are posts of the employees having team building and other activities. So this company is legit and it has tons of employees, 2,500 or something, if you can clarify. But I found it on a Chinese site of your investor relations, and it's quite hard to find, but you can search LinkedIn and all that and search. you will see that this company is very nice. Okay, my last question and my question actually is the dividend. Of course, everybody stated about the dividend. I appreciate how your performance financially and I understand that you want to invest into growth opportunities and also into AI. You're an AI company and you're already using AI before it was popular. Now, my only thing is Could you talk with Mr. Nintang for a 5% dividend? The last caller said that it would decrease your cash not even by 4% or 5% for a 10% dividend, but a 5% dividend would decrease it by 2%. It's just a confidence thing. Do a symbolic dividend. I understand you want to continue growing 40% and it's better for you to reinvest in the business. I clearly agree. But you could consider, if you want, and my question is, would you consider a smaller dividend just for the sake of pleasing or becoming it to the eyes of investors?

Thank you.

And this is Ming-Tang speaking. And yeah, frankly, I didn't quite catch the first part of your question. remarks, yeah, due to line quality, but sounded like you expressed, yeah, a comfort about the business, but thank you. And the second part I got, and yeah, again, about dividend and point taken, and we will surely... consider all remarks, suggestions, ideas from shareholders and also interested parties. Please, yeah, believe we... I'm a long-time shareholder, by the way.

I think not as long as the person from Morgan Stanley, but from the depths of the company. Anyways, my question, actually statement I want to say is... I think there are many new investors here. Or actually, if you would look at competitors or similar companies in the fintech area, as you've seen, so Giant Tech, a fintech company, it increased three times, so 200% growth in the stock price. After in March 29 of last year, it issued the dividend, which is 15% dividend for the year 2023. So it increased 15% for the current stock price, by the way. for the old stock price, sorry, currently it's smaller. No, for the current stock price, 60%. So the idea is that they issued a dividend in 29 March last year, so same period as today, let's say, and stock price increased two times, sorry, three times. So 200%, three times from $2 to $7 after they issued the dividend. So the news of the dividend. So that's the impact that a dividend can do. And today in the pre-market Lufax, LX on Nasdaq, I think, it increased 45% in the pre-market because they issued a huge dividend. And these are companies which have less cash and they're generating less cash than you're generating. And you could do just a symbolic one or like they're doing less cash, but they have quite high dividends, not sustainable for some, but whatever. But not my comments to say, but your company is the best financially and it has $800 million in cash, which increased $240 million increase in cash from last year in December 2022. So from Q4 to Q4, year on year, you increased $240 million, your cash, and also your book value increased $210 million. if you take total assets minus total liabilities. So your company is trading below cash and it's growing at 40%. And yeah, a dividend would bring confidence. And again, your competitors, they increased widely after dividends three times.

Clear. We got the point. Thank you. Thank you very much also. And a wonderful link.

Thank you. There are no further questions at this time. If you do have further questions after the call, please direct them to our investor relations team. That does conclude our conference for today. Thank you for participating. You may now disconnect.