Yiren Digital Ltd.

Good day, and welcome to the eREN Digital Second Quarter 2026 Earnings Conference Call. Please note that this event is being recorded. I would now like to turn the conference over to Ms. Stephanie Nunn, Director of Investor Relations of eREN Digital. Please go ahead, ma'am.

Thank you. Pleasure. Good morning and good evening, everyone. Today's call features presentations by our founder, Chairman and CEO, Mr. Ning Tang, and our CFO, Mr. William Hui. Before we begin, we'd 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 risks, uncertainties, and factors that can cause actual results to differ materially from those contained in any such statement. For the information regarding such risks, uncertainties, or factors is included in the company's filings with the U.S. Securities and Exchange Commission. We do not undertake any obligation to update any forward-looking statement except as required under applicable law. During the call, we will be referring to certain non-GAAP financial matters and supplemental matters to review and assess the company's operating performance. These non-GAAP financial matters are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For information about these non-GAAP financial matters and the reconciliation of GAAP matters, please refer to our earning process list. As a reminder, this conference has been recorded. An investor presentation and the webcast replay of this conference call will be available on UN Digital's IR website. I will now turn the call over to the company's CEO, Mr. Tong, for opening remarks.

Thank you, Stephanie. Hi, everyone. Thank you all for joining us. The second quarter was a demanding period for Yiren Digital, but it also marked the meaningful progress in our transformation. We are encouraged to see broad improvement in the credit environment, with credit conditions recovering more quickly than we had anticipated. At the same time, we are using this period of recovery to accelerate an important transition in our business model. Across our lending and insurance businesses, we are moving toward a more technology-driven asset-light revenue model that relies increasingly on AI, digital distribution, and our ability to deliver higher-value services to customers and partners. This transformation is about more than improving our existing business. We are building the foundation for a broader technology and AI ecosystem that can apply our AI capabilities across new industries and diversify our sources of revenue over time. During this quarter, we made progress in three areas that are particularly important to this strategy. First, we continue to improve credit quality. Second, we further invested in technology and talent across our insurance platform to support long-term growth. And third, we increased the application of AI across our operations. These developments and our ongoing initiatives are helping us build a more resilient, technology-driven, and diversified business looking at each of our businesses in more detail. In the credit solution business, we facilitated RMB 6.3 billion in loans in the second quarter. While this was down 29% quarter over quarter, the outstanding balance of performing loans declined 30% to RMB 15.1 billion. As I mentioned, The credit environment has improved substantially. We are taking this opportunity to further evolve our lending model. Rather than returning to the previous scale of our risk-taking business, we are increasingly focused on an asset-light and a referral model. Our AI capabilities are an important enabler of this transition. Our customer acquisition and precision marketing platform allow us to identify and match customer demand more efficiently and direct the qualified traffic to our lending partners. More importantly, the same customer acquisition capabilities can also support other financial services. creating opportunities to increase the value of our customer relationships beyond lending. This shift allows us to focus more on our technology and customer acquisition capabilities while reducing our reliance on capital and the credit cycle. Turning to the operating results. Repeat borrowers accounted for a record of 82% of total loan facilitation volume, compared with 78% in the first quarter and 77% in the same period last year. The 31 to 60 day delinquency rate declined to 2.0% from 2.7%. and the 61 to 90 day rate declined to 2.4% from 3.2%, while the 1 to 30 day rate remained stable at 2.5%. These trends reflect the broader recovery in credit conditions, together with our combined focus on acquiring and serving higher quality borrowers in a more efficient manner. Turning to our insurance brokerage business, we continue to expand both the scale and the reach of the platform. The number of insurance clients increased 14% from the first quarter and 281% year-over-year to approximately 453,000. We issued more than 918,000 new policies. are 177% year-over-year, while gross return premiums increased 2% sequentially to approximately RMB 839 million. Insurance brokerage revenue increased 16% year-over-year, supported by the continued expansion of internet insurance distribution and the steady growth in traditional insurance operations. particularly in new business. On a sequential quarter basis, revenue was affected by lower than estimated renewal rates. However, this was offset by stronger new policy production across both traditional and digital channels, demonstrating the value of our omni-channel strategy. The rapid expansion of our client base and policy issuance also gives us a larger customer base from which to build recurring engagement. The next phase of our strategy is to translate this customer reach into stronger retention, renewal, and revenue quality. In the second half of this year, we will continue to improve product matching, digital customer acquisition, ongoing engagement, and the service efficiency across the insurance platform. We are also encouraged by the diversification of revenue streams within our insurance segment. Besides the traditional commission-based revenue, We are beginning to generate revenue from our technology and consulting services provided to our insurance partners. Now, let me turn to AI, which is increasingly becoming an integral part of how Eden Digital operates. Over the past several years, we have built proprietary AI models. our Magic Cube multi-agent platform and specialized capabilities across customer acquisition, customer service, risk management, asset recovery, and internal operations. At this stage of our AI transformation, the most important measure is not the number of tools we have launched, It's whether these technologies are producing measurable improvements in real business processes. We are seeing that impact across multiple areas. We have also started generating external commercial traction, including initial sales of our customer acquisition and the precision marketing technology and consulting services to insurance partners. For asset recovery, the level of automation reached a record high, with the human handling rate declining from 45.0% to 24.9%. In customer operations, the autonomous resolution rate of tech-based agents increased from approximately 60% to nearly 80%. and automated quality inspection now covers more than 2 million service records each day. These applications reduce repetitive work, improve consistency and allow our employees to focus their time and expertise on situations that require human judgment. AI is also strengthening risk diversification and control. as disclosed in our 2025 DSG report, which was published in July, 2026. Our Hawkeye fraud detection system and the DT multi-model verification engine helped the company avoid approximately RMB 165 million in potential losses associated with borrower fraud during 2025. While this is an operation risk indicator rather than a financial metric, it demonstrates the practical value of our AI capabilities in strengthening risk identification and operational control. During the second half, we will continue to expand AI deployment across customer acquisition, service, risk management, asset recovery, compliance, and internal decision making. Our approach remains focused on practical applications with clear objectives, measurable performance indicators, appropriate accountability, and human oversight. As these systems become more capable, we will also continue strengthening data governance, model monitoring, and security controls. The next stage of our strategy is to expand the capabilities and experience we have developed internally into AI-native opportunities beyond the financial services. We believe our established businesses give us real operating scenarios, engineering capabilities, data, proprietary know-how and risk management experience. We can then combine these capabilities with external innovation through select partnerships, investments, and, where appropriate, potential acquisitions. Over the past several quarters, we have used this approach to identify and support a number of AI-native companies across different application areas. including education, entertainment, and other emerging sectors. Through our technology capabilities, AI expertise, and value-added support, which includes AI infrastructure, engineering resources, business development, and corporate governance, we seek to provide these companies with more than capital. Our goal is to help promising AI businesses accelerate product development, commercialization, and market expansion while creating strategic connectivity with our broader platform. During the period between May and July, we identified four high-potential AI-native companies that we believe have differentiated product and attractive application potential. We have entered into warrant agreements with the founders of these companies that provide us with the option subject to specified terms and milestones to acquire a controlling stake at pre-agreed access prices. The application AI application companies with which we have entered into warrants agreements are primarily focused on education and entertainment use cases. We believe that as the AI industry continues to evolve beyond the current focus on infrastructure and computing investment, AI applications will become an increasingly important area of value creation. Education and entertainment are among the areas where we see particularly strong potential for AI to deliver more personalized, engaging, and differentiated experiences to users. By combining AI with proprietary content, user data and domain-specific applications, these companies have the potential to develop new ways of delivering value to consumers and create scalable AI-native businesses. This is consistent with our broader strategy of building an AI ecosystem that extends beyond infrastructure into applications with direct user engagement and commercial potential. These relationships did not begin with the word agreements. We began working with these four companies in 2024. when they were still at an early stage of development and had limited or virtually no revenue. Since then, we have provided early stage support beyond capital, including assistance with strategy, team development, technology, product definition, distribution, and risk management. Through years of closely working together, we have established a deep trust with these entrepreneurial partners who have chosen to explore a deeper, more strategic relationship with us. We believe this approach can create a pipeline of long-term strategic partnerships and where appropriate, deeper ownership relationships that have the potential to broaden Yiren Digital's capabilities and its revenue mix over time. These are not isolated minority investments. They form part of a consistent strategy that we are executing with discipline. We believe the warrant and acquisition strategy provide a discipline and a capital efficient way to build our AI application portfolio. It allows us to establish strategic relationships and participate in the potential development of these companies today while preserving the flexibility to increase our ownership as the companies mature and demonstrate further commercial progress. Earlier this week, We served a notice to access our warrant to acquire a controlling stake in one of the AI-native companies we previously backed through a warrant agreement. The company is an interactive entertainment platform focused on AI-powered, user-generated role-playing content and digital character experiences. The platform enables users to create and interact with AI characters through immersive content supported by proprietary image, video, and voice creation tools. At the same time, its creator-driven model helps generate a scalable and engaging content ecosystem. The platform has accumulated approximately 3.8 million users, including more than 120,000 paying users. It has established a strong presence in several Southeast Asian markets where it is positioned among the leading AI entertainment platforms. and has expanded its user acquisition efforts across multiple international markets, including Vietnam, Thailand, the Philippines, Taiwan, Hong Kong, South Korea, Japan, the US, Canada, and Brazil. We believe its combination of AI-native content creation, user-generated content, and International Distribution provides an opportunity to expand our AI ecosystem into consumer entertainment. The target company has demonstrated strong growth and is already operating profitably, leveraging the high volume, high quality data generated through its customer engagement. The company is also developing a proprietary vertical large language model designed to enhance customer experience and improve operational efficiency and margin. Subject to the completion of the transaction, we believe the company will become a meaningful contributor to our revenue base over time, with the potential for its contribution to increase as the business continues to scale globally. The completion of the warrant exercise is subject to the execution of definitive agreements. We expect to continue selectively exploring similar opportunities. Our goal is not simply to build a portfolio of individual AI investments, but to develop an ecosystem where our technology infrastructure, syntax capabilities, and AI native applications complement one another and create additional opportunities for distribution, commercialization, and innovation. The areas we are exploring span multiple application layers, including financial services, education, entertainment, and other consumer and enterprise applications. We believe this ecosystem approach gives us the flexibility to participate in the AI value chain while maintaining disciplined capital allocation. Importantly, each investment will continue to be evaluated on its own strategic rationale, commercial potential, capital requirements, and risk profile. Capital discipline remains central to everything we do. In July, the Board authorized a U.S. $20 million share repurchase program. We will evaluate repurchases together with the liquidity required for customer obligations, credit volatility, normal operations, internal AI development, and the selected strategic opportunities. As we enter the second half of 2026, our priorities are clear. In credit solutions. will protect asset quality while further transitioning toward a technology-driven and asset-light borrower referral model. We believe our AI-powered customer acquisition capabilities can help us deliver higher quality traffic and a better matching for lending partners while reducing our reliance on capital-intensive lending. In insurance, We will continue to integrate our online and offline channels to expand our customer base and improve retention and revenue quality. And across the company, we will continue to deepen the application of AI throughout our existing operations while selectively expanding our AI ecosystem through partnerships, incubation, and strategic investments. We are in the pivotal stage of our transformation. Our established fintech businesses provide the outcleaking foundation and the real-world application scenarios, while our AI capabilities are increasingly becoming the technology layer connecting these businesses and enabling new applications. By applying these capabilities and expanding them across the broader range of financial and non-financial industries, we are creating a more diversified growth platform with lower capital intensity and less exposure to the credit cycle. The AI ecosystem we are creating is still in its early stage, and we will continue to approach it with discipline. Some initiatives will require time to develop, and we will evaluate future investments and award exercises based on their individual performance, strategic fit, and capital requirements. This disciplined approach is important as we build new sources of growth while preserving the strength and the flexibility of our core business. We remain focused on disciplined execution and building sustainable long-term value for our shareholders. Before I close, I want to thank our employees for their commitment and adaptability during a demanding period. I also want to thank our customers, partners, and shareholders for their continued trust. With that, I'll now pass the call to William, who will provide more details on our financial performance.