Yiren Digital Ltd.

Good day and welcome to the year-end digital second quarter 2024 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Qiyao Ha, Investor Relations Officer. Please go ahead.

Thank you, operator. Good morning, good evening, everyone. Today's call features the presentation by our founder, chairman, and CEO, Mr. Ning Tang, and our CFO, Ms. Nan Mei. our new CFO, Mr. Yu-Ning Feng, who also attended Q&A session at TED remarks. Before beginning, I'd like to remind you that discussions during this call contain forward-looking statements made under the safe harbor provision of U.S. Private Security's Legislation Reform Act of 1995. Such statements accept risks, uncertainties, and factors that can cause actual results to differ materially from those contained in any such statement. Certain information regarding future risks and certainty of factors is included 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 law. During the call, we will be referring to certain non-GAAP financial measures and supplemental measures to review and assess our operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with the U.S. GAAP. For information about these non-GAAP measures and related consultation to GAAP measures, please refer to our Earnings Policy. I will now pass it to Ninh for opening remarks.

Thank you all for joining our earnings conference call today. Despite the evolving market environment, we are pleased to report another solid quarter with strong unit economics, reflecting the resilience of our business structure and operational strategies, as well as our commitment to quality control, to quality growth over mayor expansion. Additionally, our strategic investments in AI and the seamless integration of technological innovation into our operations have fostered dual growth in both technological advancements and operational efficiency. Our strategic direction positions us well to evolve into a leading AI-driven platform, paving the way for groundbreaking solutions and setting new industry standards. Now, I would like to go through our business highlights for this quarter. First, our financial services business. The second quarter of 2024 saw a steady growth with total loan volume reaching RMB 12.9 billion, marking a 59% increase year over year and maintaining a resilient consecutive quarterly growth despite an industry slowdown. The momentum is largely driven by the concrete growth of our new customers with higher credit quality as we continue to optimize our asset quality of loan portfolios. Since the second half of 2023, when the entire industry experienced substantial credit risk fluctuations, we started to proactively upgrade our customer mix and diversify our online acquisition channels. The strategy has proven effective, leading to secure growth and improved asset quality. Meanwhile, we have refined our proprietary RTA credit model for borrower acquisition, which has notably enhanced our overall credit approval efficiency. In this quarter, the number of borrowers served increased by 47% year-over-year to 1.5 million. Moreover, our loan facilitation platform continues to gain popularity with monthly active users rising by 88% year-over-year. to 4.5 million in the second quarter of this year, showcasing strong customer engagement and loyalty. As we maintain our focus on attracting high-quality borrowers and note that existing high-value borrowers repeatedly use our revolving loan products, we expect this growth momentum to continue throughout the year. Meanwhile, our international business is showing exciting progress. The total loan volume overseas nearly doubled in the second quarter of 2024 compared to the prior quarter. In the Philippines, monthly loan volume facilitated exceeded RMB 20 million milestone with the growth rate remaining robust as we move into the second half of the year. Moreover, as our business continues to grow, we are benefiting from economics of scale, with customer acquisition costs decreasing by 18% quarter over quarter. In June 2024, our business in the Philippines achieved a positive net profit margin. It's worth mentioning that our rapid growth is closely tied to our AI development and integration. Our proprietary large language models have been implemented across various operations, including customer acquisition, customer service, risk management, and asset management. For instance, in our international operations, our anti-fraud AI models have processed over 10 different types of identification documents this quarter, achieving a 93% accuracy rate and significantly enhancing our risk management efficiency. Additionally, to standardize our services, our large language models are used in our overseas call centers to translate local languages detect sensitive words and analyze service quality and assurance, thereby boosting customer satisfaction. As more data are processed, we expect continued enhancement of our models in both accuracy and their applicability to a wider range of scenarios and uses. Turning into asset quality, delinquency rates continue to show an encouraging trend as assets from upgraded borrowers increase. Specifically, the 15 to 89-day delinquency rate for the second quarter of 2024 declined to 3.8%, down 10 basis points. The FPD 30-plus delinquency rate decreased for the third consecutive quarter, and the M1 collection rate for the second quarter of 2024 increased by 290 basis points quarter over quarter to a historic high. We expect a sustained improvement in asset risk performance in the second half of this year as we continue to optimize our customer mix and retune our credit risk models. Now, on funding cost, our effort in building an efficient funding management system is showing results. In the second quarter of this year, our funding cost decreased by 82 basis points quarter over quarter, reaching a historic low and exceeding our internal target. The downward trend will continue in the third quarter. Moreover, given the current market funding conditions, we are strategically increasing our loan volume under the risk-taking model to better balance risk management and profitability. Regarding our insurance brokerage business, we have focused more on property insurance and expanded our customer acquisition channels. to hedge against the ever-changing regulatory environment and uncertainties in the life insurance sector. In the second quarter, growth return premiums totaled RMB 1.1 billion, reflecting a year-over-year decrease of 20% and a quarter-over-quarter increase of 16%. The annual decline was primarily due to the impacted life insurance business. which experienced limited sales of first-year premiums as a result of product changes and the new regulations. The quarter-over-quarter growth in premiums is largely attributable to the property insurance business, where premiums reached $557 million, marking a 19% increase from the previous quarter and setting a new record. Going forward, we will continue to focus on three key areas in our insurance business. First, strengthening channel partnerships and expanding the scale of property insurance, optimizing our product mix, and continuously increasing the proportion of higher profitability products, such as liability insurance. Second, in life insurance, we will focus more on high-net-worth clients, addressing their comprehensive protection needs for retirement and savings. Thirdly, we will enhance online customer acquisition by utilizing AIGC tools to improve market outreach and boost sales volume. In our consumption and lifestyle service segment, our GMB increased by 40% year-over-year to RMB 554.6 million. However, due to the high penetration rate of these services among our current customer base, we are observing a moderation in growth rates. Moving forward, the company will focus on acquiring new customers and refining customer profiles to better understand and address their comprehensive needs. Moreover, with the aim to enhance shareholder returns and boost market confidence, we are pleased to announce that the board has approved a new dividend policy. Under this policy, The board plans to declare dividends amounting to no less than 10% of the company's anticipated net income after tax for each half year, starting from the first half of this year. The cash dividend for the first half of 2024 set at US dollars 0.2 per American depository share is expected to be paid on or about October 15th, 2024 to holders of the company's ordinary shares and ADS of record as of the close of business on September 30th, 2024, Hong Kong time and New York time respectively. We would like to express our gratitude to our shareholders and investors for their ongoing support. Finally, we have a management change to announce. First, let me introduce our newly appointed CFO, Mr. Yuning Feng. Yuning possesses over a decade of experience in venture capital investment, investment banking, and financial control. Before joining us, he was a partner at CE Innovation Capital, where he led investments in fintech, enterprise solutions, and AI sectors. Prior to that, Yuning was also served as an investment banker at China Renaissance and a financial controller at Goldman Sachs and UBS. We are confident that Yuning's extensive experience and proven track record will enhance our global strategy and AI focus. and we look forward to the positive impact this will bring. Also, on behalf of the board, I would like to extend our deep gratitude to Na for her significant contributions and outstanding work during the past years. With that, I will pass it to Na, who will go through the financial performance for this quarter. As this marks her final earnings call with us, We once again thank her for her leadership and wish her continued success.