Q4 2024 Qifu Technology Inc Earnings Call

Operator: Ladies and gentlemen, thank you for standing by and welcome to the Kifu Technology fourth quarter and full year 2024 earnings conference call. All participants are in a listen-only mode.

Ladies and gentlemen, thank you for standing by and welcome to the key food technology fourth quarter and full year 'twenty 'twenty four earnings conference call.

All participants are in a listen only mode. There will be a presentation followed by a question and answer session.

Operator: There will be a presentation followed by a question and answer session.

Operator: If you wish to ask a question, you will need to press the star key, followed by the number one on your telephone keypad. Please also note that today's event is being recorded.

If you wish to ask a question you will need to press the star K, followed by the number one on your telephone keypad.

Please also note that todays event is being recorded.

Karen Ji: At this time, I'd like to turn the conference call over to Ms Karen Ji, Senior Director of Capital Markets. Please go ahead, Karen. Thank you, operator.

Speaker Change: At this time I'd like to turn the conference call over to MS. Karen G Senior director of capital markets. Please go ahead Karen.

Speaker Change: Thank you operator, Hello, everyone and welcome to her and she food technologies fourth culture of 'twenty 'twenty four earnings conference call. Our earnings release was distributed earlier today and is available on our IR website.

Karen Ji: Hello, everyone, and welcome to Qifu Technologies' 4th Quarter 2024 Earnings Conference. Our earnest release was distributed earlier today and is available on our iowa.org website. Joining me today are Mr. Wu Haisheng, our CEO, Mr. Alex Xu, our CFO, and Mr. Zheng Yan, our CIO.

Karen G: Joining me today are Mr. Watson, our CEO, Mr. Alex <unk>, our CFO and Mr. Jin Yan our C of O.

Karen Ji: Before we start, I would like to refer you to our Safe Harbor Statement in the Erdman Press release, which applies to this call as we will make certain forward-looking statements. Thank you. Also, this call includes discussions of certain non-gap financial measures. Please refer to our earnings release, which contains a reconsideration of the non-GAAP financial measures to GAAP financial measures. Also, please note that, unless otherwise stated, all figures mentioned in this call are in R&D.

Karen G: We've always thought I would like to refer you to our safe Harbor statement in the earnings press release, which applies to this call as we will make certain forward looking statements.

Karen G: Also this call includes discussions of certain non-GAAP financial measures.

Karen G: Please refer to our earnings release, which contains a reconciliation of the non-GAAP financial measures to GAAP financial measures.

Karen G: Also please note that unless otherwise stated all figures mentioned in this call are in RMB terms.

Karen Ji: Before we start, we would like to let you know that today's prepared remarks from our CEO will be delivered in English using an AI-generated voice.

Karen G: Before we start we would like to let you know that today's prepared remarks from our CEO will be delivered in English using an AI generated voice now.

Haisheng Wu: Now I will turn the call over to Mr. Wu Haisheng. Please go ahead. Hello, everyone. Thank you for joining us today. 2024 was an exceptional year for our company. Despite the macroeconomic headwinds, we focused on driving high-quality development and evolving our business. consistently hitting new quarterly milestones to close out the year on a strong note. As our business model gradually shifts to a platform model, our organizational capabilities have been upgraded alongside. as we look to the future. we will adopt a more open and collaborative approach to engaging and empowering our users and partners. further enhancing the health and resilience of our business.

Two Hashing: Now I will turn the call over to MS. Two hashing. Please go ahead.

Two Hashing: Hello, everyone and thank you for joining us today.

Two Hashing: 'twenty 'twenty four was an exceptional year for our company.

Two Hashing: Despite the macroeconomic headwinds.

Two Hashing: Focused on driving high quality development and evolving our business consistently hitting new quarterly milestones to close out the year on a strong note.

Two Hashing: As our business model gradually shifts to a platform model.

Two Hashing: Organizational capabilities have been upgraded alongside it.

Two Hashing: We look to the future we will adopt a more open and collaborative approach to engaging and empowering our users and partners further enhancing the health and resilience of our business.

Haisheng Wu: By the end of 2024, our platform empowered a total of 162 financial institutions. serve more than 56 million users with approved credit. on a cumulative basis. Throughout 2024, we maintained a disciplined approach, optimizing risk management, and enhancing operational efficiency. In Q4, our C to M2 metric, representing the delinquency rate after 30-day collection for our overall loan portfolio declined further sequentially, reaching its lowest level of the year and approaching a historical best. With our risk metric stabilizing, we strengthened our ability to address user needs through differentiated risk and pricing strategies. Total loan facilitation and origination volume on our platform have grown for two consecutive quarters, with Q4 loan volume increasing by 9% sequentially to RMB 89.9 billion.

Two Hashing: By the end of 2024 hour platform empowered a total of a 162 financial institutions to serve more than 56 million users with approved credit lines on a cumulative basis.

Two Hashing: Throughout 2024, we maintained a disciplined approach optimizing risk management and enhancing operational efficiency.

Two Hashing: In Q4, our C to M. Two metric representing the delinquency rate. After 30 day collection for our overall loan portfolio decline further sequentially, reaching its lowest level of the year and approaching our historical best.

Two Hashing: With our risk metrics stabilizing we strengthened our ability to address user needs through differentiated risk and pricing strategies.

Two Hashing: Total loan facilitation and origination volume on our platform have grown for two consecutive quarters with Q4 loan volume increasing by 9% sequentially to RMB $89 9 billion.

Haisheng Wu: Loan volume in the second half of the year regained positive growth, increasing by approximately 15% compared to the first half. With operational efficiency continuing to improve, our Q4 profitability hit a new record high with non-gap net income, increasing 71.5% year-over-year to RMB 1.97 billion, and non-gap net income per diluted ADS surging 91.3% year-over-year to RMB 13.7 billion. Despite macroeconomic headwinds, we have consistently improved upon our results over the year and outperformed our market commitments through the ongoing evolution and enhancements to our business. In 2024, with our take rate continuing to improve. full-year non-GAAP net income rose 44% year-over-year to reach an all-time high of RMB6.42 billion.

Two Hashing: Loan volume in the second half of the year regained positive growth.

Two Hashing: Creasing by approximately 15% compared to the first half with operational efficiency continuing to improve our Q4 profitability hit a new record high with non-GAAP net income increasing 71, 5% year over year to RMB 197 billion and non-GAAP net income per diluted ads.

Two Hashing: Searching 91, 3% year over year to RMB 13 seven.

Two Hashing: Despite macroeconomic headwinds we have consistently improved upon our results over the year and outperformed our market commitments through the ongoing evolution and enhancements to our business.

Two Hashing: In 2024, with our take rate continuing to improve full.

Two Hashing: Full year non-GAAP net income rose, 44% year over year to reach an all time high of RMB 642 billion.

Haisheng Wu: Additionally, we successfully executed USD 410 million share repurchase. buying back approximately 12% of our share count at the beginning of the year. This also contributed to improved non-GAAP net income per diluted ADS for 2024, which increased 55.7% year-over-year to RMB42.4. Coupled with ongoing improvements in profitability and capital allocation efficiency, our ROE for 2024 increased further to 27.9%, significantly outperforming most financial services and Internet companies in China.

Two Hashing: Additionally, we successfully executed USD 410 million share repurchase.

Two Hashing: Buying back approximately 12% of our share count at the beginning of the year.

Two Hashing: This also contributed to improved non-GAAP net income per diluted ads for 2024, which increased 55, 7% year over year to RMB 42.4.

Two Hashing: Coupled with ongoing improvements in profitability and capital allocation efficiency Roe.

Two Hashing: ROE for 2024 increased further to 27, 9% significantly outperforming most financial services and Internet companies in China.

Haisheng Wu: Now I'll walk you through the progress we made in 2020. First, we remain committed to driving quality growth. We enhanced user acquisition efficiency by proactively diversifying acquisition. The number of new borrowers in 2024 increased by 16.2% year over year, while average acquisition cost per credit line user declined by 5.3%. reflecting a significant improvement in user acquisition efficiency. Notably, the addition of 18 new channels to our embedded finance business. for over 26% increase in new credit line users and a remarkable 98% increase in loan volume from the embedded finance. with users acquired through this segment, now accounting for 41%.

Two Hashing: Now I'll walk you through the progress we made in 2024.

First we remain committed to driving quality growth.

Two Hashing: We enhanced user acquisition efficiency by proactively diversifying acquisition channels.

Two Hashing: The number of new borrowers in 2024 increased by 16, 2% year over year, while average acquisition cost per credit line user declined by five 3%.

Two Hashing: Reflecting a significant improvement in user acquisition efficiency.

Two Hashing: Notably the addition of 18 new channels through our embedded finance business drove a 26% increase in new credit line uses and a remarkable 98% increase in loan volume from the embedded finance channels with users acquired through this segment now accounting for 41%.

Haisheng Wu: With improved user profiling accuracy on partner platforms, both credit costs and operational efficiency further improved, driving an ROA increase of approximately 2.48 percentage points from last year. Additionally, our embedded finance model further expanded its reach and now covers the majority of leading internet traffic platforms in China, with penetration rates also increasing. Simultaneously, we deepened collaboration with financial institutions to engage with their existing customer bases, leveraging their proprietary traffic and our precise user identification capabilities, and differentiated risk strategies to extend our credit product offering. As we expand into more channels and strengthen our presence across platforms, we expect loan volume from our embedded finance business to maintain rapid growth momentum in 2020.

Two Hashing: With improved user profiling accuracy on partner platforms, both credit costs and operational efficiency further improved driving in a row a increase of approximately $2 48 percentage points from last year.

Two Hashing: Additionally, our embedded finance model further expanded its reach and now covers the majority of leading internet traffic platforms in China with penetration rates also increasing.

Two Hashing: Simultaneously, we deepened collaborations with financial institutions to engage with their existing customer bases, leveraging their proprietary traffic and our precise user identification capabilities and differentiated risk strategies to extend our credit product offerings.

Two Hashing: As we expand into more channels and strengthen our presence across platforms. We expect loan volume from our embedded finance business to maintain rapid growth momentum in 2025.

Haisheng Wu: Additionally, we are developing our intelligent marketing capability. 74% of the graphics and 27% of the videos we deploy are now generated by AIGC technology, resulting in a 25.1% improvement in user outreach efficiency. and an approximately 10% reduction in average cost per credit line user. Furthermore, with 40% of our ad placements now automated, we achieved a 9% improvement in ROI compared to manual placement.

Two Hashing: Additionally, we are developing our intelligent marketing capabilities.

Two Hashing: 74% of the graphics and 27% of the videos. We deploy are now generated by AIG see technology, resulting in a 25, 1% improvement in user outreach efficiency.

Two Hashing: And an approximately 10% reduction in average cost per credit line user.

Two Hashing: Are there more with 40% of our AD placements now automated we achieved a 9% improvement in ROI compared to manual placements.

Haisheng Wu: Second, our asset quality improved significantly in 2024 following the decisive initiatives we implemented to optimise our loan portfolio and prioritise high quality growth. We upgraded our application scorecard, or A-scorecard. by integrating AI to enhance credit data analysis. This allowed us to lower risk metrics back to target levels and establish a foundation for continuous improvement. within our post-lending process. We enhance overall collection efficiency by upgrading our collection scorecard, or C-scorecard. with large language models for real-time analysis of user communication data and refining partner management and case assignments. in the second half of the year. Despite a moderate recovery in market We maintained a disciplined risk strategy and focused on differentiated user operations.

Two Hashing: Second our asset quality improved significantly in 2024, following the decisive initiatives, we implemented to optimize our loan portfolio and prioritize high quality growth.

Two Hashing: We upgraded our application scorecard or a scorecard by integrating AI to enhance credit data analysis.

Two Hashing: This allowed us to lower risk metrics back to target levels and establish a foundation for continuous improvements.

Two Hashing: Within our post lending processes, we enhanced overall collection efficiency by upgrading our collection scorecard or see scorecard.

Two Hashing: With large language models for real time analysis of user communication data and refining partner management and case assignment strategies.

Two Hashing: In the second half of the year.

Two Hashing: Despite a moderate recovery in market demand.

Two Hashing: We maintained a disciplined risk strategy and focused on differentiated user operations.

Haisheng Wu: driving further improvements in our risk. In Q4, our D1 delinquency rate decreased by 0.21 percentage points year-over-year, while 30-day collection rate increased by 3.23 percentage points. This robust asset quality has laid a solid foundation for our 2025 strategic plan. and with optimized risk strategies now firmly in place. We expect risk performance to remain stable in the coming quarter. Benefiting from a favourable interest rate environment and robust asset quality, we maintained our negotiating leverage on the funding side and drove a continuous decline in funding costs throughout the year. Our ABS issuance for the year increased by 21.6% to RMB 15.2 billion, further optimising our funding strategy.

Two Hashing: Driving further improvements in our risk indicators.

Two Hashing: In Q4, our day, one delinquency rate decreased by 0.21 percentage points year over year, while 30 day collection rate increased by three three percentage points.

Two Hashing: This robust asset quality has laid a solid foundation for our 2025 strategic planning and with optimized risk strategies now firmly in place.

Two Hashing: We expect risk performance to remain stable in the coming quarters.

Two Hashing: Benefiting from a favorable interest rate environment and robust asset quality, we maintained our negotiating leverage on the funding side.

Two Hashing: And drove a continuous decline in funding costs throughout the year.

Two Hashing: Our ABS issuance for the year increased by 21, 6% to RMB 15, 2 billion further optimizing our funding structure.

Haisheng Wu: We also issued the first domestic exchange-traded ABS with a AAA international rating, which attracted subscriptions from multiple international institutional investors and expanded our funding channels globally. Our leadership in ABS issuance has given us a distinct competitive advantage in funding. In 2025, we plan to ramp up ABS issuance and increase the share of ABS in our funding. Although there has been a slight uptick in interest rate uncertainty this year, We are confident in our ability to drive a moderate decline in our funding costs in the coming year. The proportion of loan volume from our Capital Light segment increased by approximately 10 percentage points to 53% throughout 2024.

Two Hashing: We also issued the first domestic exchange traded ABS with a triple a international rating, which attracted subscriptions from multiple international institutional investors and expanded our funding channels globally. Our leadership in ABS issuance has given us a distinct competitive advantage in funding.

Two Hashing: In 2025, we plan to ramp up ABS issuance and increase the share of ABS and our funding mix.

Two Hashing: Although there has been a slight uptick and interest rate uncertainty. This year, we are confident in our ability to drive a moderate decline in our funding costs in the coming year.

The proportion of loan volume from our capital light segment increased by approximately 10 percentage points to 53% throughout 2024.

Haisheng Wu: We are the first mover to adopt this model and now boast the highest ratio when compared to our industry peers, a direct result of our strong asset quality and precise asset allocation capability. Our flexible asset structure ensures that our loan portfolio remains significantly more resilient during market Over the past year, by onboarding funding partners with more diverse risk appetites, we have strengthened our ability to serve various loan segments and further optimized our asset allocation strategy. This has driven continuous improvements in our ROA under the Capital Light Model.

Two Hashing: We are the first mover to adopt this model and now boasts the highest ratio when compared to our industry peers.

Two Hashing: A direct result of our strong asset quality and precise asset allocation capabilities.

Flexible asset structure ensures that our loan portfolio remains significantly more resilient during market cycles over.

Two Hashing: Over the past year by Onboarding funding partners with more diverse risk appetites.

Two Hashing: We have strengthened our ability to serve various loan segments and further optimized our asset allocation strategy.

Two Hashing: This is driven continuous improvements and our ROA under the capital light model.

Haisheng Wu: Our technology solution business reached meaningful scale in 2020. We continue to enhance and upgrade our credit tech solution, FocusPro, to meet the diverse needs of financial institutions. Over the year, we added 11 new partners. bringing the total to 16, with 11 already live on our planet. Loan volume under the Focus Pro model grew at a compound monthly growth rate of 17% in 2024. By extensively engaging with our partners, we have seen strong demand from financial institutions for AI-driven solutions. In response, we plan to develop an AI plus bank agent platform to help banks address pain points in their core business processes and improve operational efficiency.

Two Hashing: Our technology solution business reached meaningful scale in 2024.

Two Hashing: We continued to enhance and upgrade our credit tech solution focused pro to meet the diverse needs of financial institutions.

Two Hashing: Over the year, we added 11, new partner institutions, bringing the total to 16 with 11 already live on our platform.

Two Hashing: Loan volume under the focused promo grew at a compounded monthly growth rate of 17% in 2024.

Two Hashing: By extensively engaging with our partners, we have seen strong demand from financial institutions for AI driven solutions.

Two Hashing: In response, we plan to develop an AI plus bank agent platform to help banks address pain points in their core business processes and improve operational efficiency.

Haisheng Wu: We look forward to sharing more updates on this initiative in the coming quarter. AI is deeply embedded in our DNA, empowering every stage of our operations. Over the past year, AI has driven significant efficiency improvements across our business, from AI co-pilot models in loan collection and telemarketing, to automating the development of marketing materials with AIGC technology and assisting developers with coding. As large language models increasingly mature, and DeepSeek significantly improves inference efficiency, We will allocate more resources to the application of AI across credit scenarios going forward. First and foremost, risk management is the cornerstone of our business.

Two Hashing: We look forward to sharing more updates on this initiative in the coming quarters.

Two Hashing: AI is deeply embedded in our DNA empowering every stage of our operations over the past year AI has driven significant efficiency improvements across our business from AI co pilot models and loan collection and telemarketing to automating the development of marketing materials with Aig's see technology and assisting developers.

Two Hashing: With coating as large language models increasingly mature and deep sea significantly improves influence efficiency, we will allocate more resources to the application of AI across credit scenarios going forward.

Two Hashing: First and foremost risk management is the cornerstone of our business.

Haisheng Wu: We have gained valuable insights from over 200 million users and developed more than 2,400 models with 590,000 data dimensions. In 2024 alone, we iterated our models more than 670 times. We believe DeepSeq will revolutionise how data is mined and analysed in risk management, transitioning us from a single-modal to a multi-modal approach, and driving exponential growth in data domain. These powerful reasoning capabilities will enable us to further enhance user profiling and improve the accuracy of end-to-end risk identification. Second, we are fully committed to advancing our AI plus strategy. We plan to build an agent platform that will empower core lending.

Two Hashing: We have gained valuable insights from over 200 million users and developed more than 2400 models with 590000 data dimensions.

Two Hashing: In 2024 alone reiterated our models more than 670 times.

Two Hashing: We believe deep sequel, revolutionize, how data is mined and analyze and risk management transitioning us from a single modal to a multimodal approach and driving exponential growth in data dimensions. It's.

Two Hashing: It's powerful reasoning capabilities will enable us to further enhance user profiling and improve the accuracy of end to end risk identification.

Two Hashing: Second we are fully committed to advancing our AI plus strategy.

We plan to build an agent platform that will empower core lending processes.

Haisheng Wu: Leveraging the memory, planning, and collaboration capabilities of AI agents, this platform will fundamentally reshape how we operate, boosting efficiency. while unlocking greater potential within our teams to drive even more business forward. We have assembled a dedicated team to execute this strategy and expect one-third of our core business process... to be powered by this agent platform in the next one or two years. This initiative has already gained strong traction among our financial institution partners. And we believe AI plus Bank will become a key pillar of our technology solution business moving forward. In the second half of 2024, we saw marginal improvements in the macroeconomic environment and a modest recovery in credit demand.

Two Hashing: Leveraging the memory planning and collaboration capabilities of AI agents. This platform will fundamentally reshape how we operate boosting efficiency.

Two Hashing: While unlocking greater potential within our teams to drive even more business value.

Two Hashing: We have assembled a dedicated team to execute this strategy and expect one third of our core business processes to be powered by this agent platform in the next one or two years.

Two Hashing: This initiative has already gained strong traction among our financial institution partners.

Two Hashing: And we believe AI plus bank will become a key pillar of our technology solution business moving forward.

Two Hashing: In the second half of 2024, we saw marginal improvements in the macroeconomic environment and a modest recovery in credit demand.

Haisheng Wu: The 2025 Government Work Report emphasised a commitment to supporting technological innovation, boosting consumption and advancing the AI plus initiative, including the widespread adoption of large language We will continue to observe the impact these initiatives will have on our...

Two Hashing: 2025 government work report emphasized our commitment to supporting technological innovation boosting consumption and.

Two Hashing: And advancing the AI plus initiatives, including the widespread adoption of large language models.

Two Hashing: We will continue to observe the impact these initiatives will have on our business.

Haisheng Wu: From a long-term perspective, our vision is to become a globally respected fintech company. To achieve this vision, we are executing a one-core, two-wings strategy, where our domestic credit business serves as the core, and our technology solutions business and international expansion serve as the two wings. This strategy will allow us to continuously expand business boundaries and drive digital financial inclusion on a larger scale. Looking ahead to 2025, we remain cautiously optimistic and expect our core credit business to maintain high-quality development, while our technology solutions business will expand the depth and breadth of our partnerships with banks through our AI Plus strategy.

Two Hashing: From a long term perspective, our vision is to become a globally respected Fintech company.

Two Hashing: To achieve this vision, we are executing a one core to wing strategy, where our domestic credit business serves as the core and our technology solutions business and international expansion and serve as the two wings.

Two Hashing: This strategy will allow us to continuously expand business boundaries and drive digital financial inclusion on a larger scale.

Two Hashing: Looking ahead to 2025, we remain cautiously optimistic and expect our core credit business to maintain high quality development, while our technology solutions business, we will expand the depth and breadth of our partnerships with banks through our AI plus strategy.

Haisheng Wu: For international expansion, we will maintain a disciplined approach. focusing on markets with stable regulatory environments and solid infrastructure. We will start small, move quickly, and iterate continuously as we progress.

For international expansion, we will maintain a disciplined approach.

Two Hashing: Focusing on markets with stable regulatory environments and solid infrastructure.

Two Hashing: We will start small move quickly and iterate continuously as we progress.

Haisheng Wu: We look forward to sharing more updates on our journey in the future.

Two Hashing: We look forward to sharing more updates on our journey in the future.

Haisheng Wu: In 2024, we further optimize capital allocation to enhance shareholder executing our share repurchase plan at a pace significantly ahead of market expectations. Our dividends and buybacks for 2024 amounted to USD$180 million and USD$410 million respectively. total shareholder returns reaching 100% of our 2023 gap. As of the end of 2024, we had repurchased a total of 24.5 million ADSs and have begun executing a new repurchase plan of up to USD $450 million in 2020. We are confident in the future of our company and remain dedicated to delivering long-term value to our shareholders. Moving forward, we will continue to prioritize efficient capital allocation and shareholder value creation through recurring share buybacks and dividends.

Two Hashing: In 2024, we further optimized capital allocation to enhance shareholder returns executing our share repurchase plan at a pace significantly ahead of market expectations.

Two Hashing: Our dividends and buybacks for 2024 amounted to USD 180 million and USD 10 million, respectively with total shareholder returns, reaching 100% of our 2023 GAAP net income.

Two Hashing: As of the end of 2024, we had repurchased a total of $24 5 million and <unk> and have begun executing a new repurchase plan of up to USD $450 million in 2025.

Two Hashing: We have confidence in the future of our company and remain dedicated to delivering long term value to our shareholders. Moving forward, we will continue to prioritize efficient capital allocation and shareholder value creation through recurring share buybacks and dividends.

Alex Xu: With that, I will now turn the call over to Alex. Thank you, Haisheng. Good morning and good evening, everyone. Welcome to our fourth quarter earnings call. We close the year with a strong Q4 as microenvironments start to see tentative indication of modest improvement in user activity. Our continuous effort to optimize operation, improve efficiencies, and manage risk exposures generates healthy financial results and operating metrics. Total net revenue for Q4 was $4.48 billion versus $4.37 billion in Q3, and $4.5 billion a year ago. Revenue from credit-driven service Capital Heavy was $2.89 billion in Q4, compared to $2.9 billion in Q3, and $3.25 billion a year ago.

Alex: With that I will now turn the call over to Alex.

Two Hashing: Okay.

Alex: Thank you Hi, Sean Good morning, and good evening, everyone welcome to our fourth quarter earnings call.

Two Hashing: We closed the year with a strong Q4.

Two Hashing: Micro environment start to seek tentative indications of modest improvement in user activities.

Two Hashing: Continuous effort to optimize operation improved efficiencies and manage risk exposures January as housing financial results and operating metrics.

Two Hashing: Total revenue for Q4 was $4 four 8 billion versus $4 three 7 billion in Q3, and $4 5 billion a year ago.

Two Hashing: Revenue from credit driven service capital heavy was 289 billion in Q4 compared to $2 9 billion in Q3, and 3.25 billion a year ago.

Alex Xu: The year-on-year decline was mainly due to significant decline in off-balance sheet loans, despite strong contribution from on-balance sheet loans and other value-added services. Overall funding cost was stable peer-on-peer in a seasonally tightening funding environment. Revenue from platform service Captain Light was $1.59 billion in Q4 compared to $1.47 billion in Q3 and $1.25 billion a year ago. The year-on-year growth was mainly due to strong contribution from ICE and other ready-to-add service, more than offsetting the decline in capitalized loan facilitation. For the full year 2024, platform surveys account for roughly 53% of the total loan volume and 58% of the year-end loan balance.

Two Hashing: Year on year decline was mainly due to significant decline in off balance sheet lungs. Despite strong contribution from on balance sheet loans and other value added services.

Two Hashing: Overall funding costs were stable Q on Q in the seasonally tightening funding environment.

Two Hashing: Revenue from platform service kept on light was 159 billion in Q4 compared to 147 billion in Q3, and 125 billion a year ago.

Two Hashing: The year on year growth was mainly due to a strong contribution from ICD and other value added service more than offsetting the decline in capitalized loan facilitation.

Two Hashing: For the full year 2024 platforms surveys accounts for roughly 53% of our total loan volume and 58% of a year end loan balance we expect the ratio to be roughly stable in the near term.

Alex Xu: The expected ratio to be roughly stable in the near term. During the quarter, average IRR of loans we originated and or facilitated was 21.3% compared to 21.4% in prior quarter. Looking forward, we expect pricing to be fluctuated around this level for the coming quarter. Sales and marketing expenses increased 25% queue-on-queue but declined 5% year-on-year. The sequential increase was mainly due to increased customer activity and the typical Q4C dynamic. We added approximately 1.69 million new credit line users in Q4 versus 1.58 million in Q3. We will continue to make timely adjustment to the pace of a new user acquisition based on micro conditions from time to time and further diversify our user acquisition channels and improve user engagement and retention.

Two Hashing: During the quarter average IRR of loans, we originated <unk> facilitated was 21, 3% compared to 21, 4% in the prior quarter looking forward, we expect pricing to be fluctuate around this level for the coming quarters.

Two Hashing: Sales and marketing expenses increased 25% Q on Q, but declined 5% year on year.

Two Hashing: Sequential increase was mainly due to increased customer activity and the typical Q4 seasonality.

We added approximately 169 million new private line users in Q4 versus 1.58 million in Q3.

Two Hashing: We will continue to make timely adjustments to the pace of new user acquisition based on micro conditions from time to time and further diversify our user acquisition channels.

Two Hashing: Improved user engagement and retention.

Alex Xu: Meanwhile, we will also continue to focus on re-energizing existing user base as repeat followers historically contribute the vast majority of our business. 90-day delinquency rate was 2.09% in Q4 compared to 2.7% in Q3. Day one delinquency was 4.8% in Q4 versus 4.6% in Q3. 30-day collection rate was 88.1% in Q4 versus 87.4% in Q3. Another key risk matrix, C-M2, which represents the outstanding delinquency rate after 30-day collection improved slightly, Q on Q, to 0.5.7% with higher loan volume. We are comfortable with our current risk exposure and we expect to see relatively stable risk metrics in the coming months.

Two Hashing: Well, we will also continue to focus on re energizing existing user base as repeat borrowers historically contributed vast majority of our business.

Two Hashing: 90 day delinquency rate was 2.19% in Q4 compared to two 7% in Q3 day, one delinquency was four 8% in Q4 versus four 6% in Q3 sorry.

Two Hashing: So already the collection rate was 88, 1% in Q4 versus 87, 4% interest rate.

Two Hashing: Another key risk metrics.

Two Hashing: I'm too, which represents the outstanding delinquency rate after 30 day collection improved slightly Q on Q2, 0.57%.

Two Hashing: It was higher loan volume.

Two Hashing: We are comfortable with our current risk exposure and we expect to see relatively stable risk metrics in the coming months.

Alex Xu: Under current market conditions and geopolitical uncertainties, we continue to take a prudent approach to book provisions against potential credit loss. Total new provision for risk-bearing loans in Q4 were approximately $2.07 billion versus $1.63 billion in Q3. The increase in new provision was mainly due to increase in risk-bearing loan volume Q1Q and higher provision booking ratio. Writebacks of previous provisions were approximately 1.02 billion in Q4 versus 910 million in Q3. provision coverage ratio, which is defined as total outstanding provisions divided by total outstanding delinquent risk-bearing loan balance between 90 and 180 days, or 617 percent in Q4, a historical high compared to 482 percent in Q3.

Two Hashing: Under current market condition.

Two Hashing: And the geopolitical uncertainties, we continue to take a prudent approach to book provision against potential credit losses.

Two Hashing: Hold on new progression for risk bearing loans in Q4, or approximately 2.07 billion versus $1. Six 3 billion in Q3. The increase in your provision was mainly due to increase in risk bearing loan volume Q on Q and a higher provision booking ratio.

Two Hashing: Yes.

Two Hashing: Write backs off previous provisions were approximately one point, though to get in Q4 versus 910 million in Q3.

Two Hashing: Provision coverage ratio, which is defined as total outstanding provision divided by total outstanding talent.

Risk bearing no imbalance between 90, and 180 days or 617% in Q4, a historical high compared to 482% in Q3.

Alex Xu: Non-debt net profit was $1.97 billion in Q4 compared to $1.83 billion in Q3. The significant improvement in profitability was mainly due to favorable year-end tax adjustment. non-gap net income per fully diluted ADS was 13.66 RMB in Q4 compared to 12.35 in Q3 and 7.14 a year ago. as strong earning growth and proactive share repurchase create a significant EPADS equation. Effective tax rate for Q4 was 1.0% compared to our typical ETR of approximately 15%. The lower than normal ETR was mainly due to benefit from withholding tax provision adjustment as withholding tax rate was lower to 5% in Q4.

Two Hashing: non-GAAP net profit was $1 97 billion in Q4 compared to one <unk> billion in Q3, a significant improvement in profitability was mainly due to favorable year end tax adjustment.

Two Hashing: non-GAAP net income per fully diluted <unk> was searching for six six RMB in Q4 compared to <unk> 12.35 in Q3, and a 7.14 a year ago.

Two Hashing: Our strong earnings growth and the proactive share repurchase create a significant EPS accretion.

Two Hashing: The effective tax rate for Q4 was 100% compared to our typical ETR of approximately 15%.

Two Hashing: A lower than normal ETR was mainly due to benefit from withholding tax provision adjustments as withholding tax rate was lower at two 5% in Q4.

Alex Xu: With solid operating result and higher contribution from capitalized model, our leverage ratio, which is defined as risk-bearing loan balance divided by shareholders' equity, was 2.4 times in Q4, near historical low. We expect to see leverage ratio fluctuate around this level in the near future. We generated approximately $3.05 billion cash from operations in Q4, compared to $2.37 billion in Q3. The sequential increase in operating cash flow was mainly due to better operating results and lower tax payout. Total cash and cash equivalent and short-term investment was $10.36 billion in Q4, compared to $9.77 billion in Q3. As we continue to generate strong cash flow from operations, we will further optimize our capital allocation to support our business initiatives and to return our shareholders.

Two Hashing: With solid operating result, and higher contribution from capital light model, our leverage ratio, which is defined as risk bearing loan balance divided by shareholders equity was two four times in Q4 near historical low we expect to see leverage ratio fluctuate around this level in the near future.

Two Hashing: We generated approximately $3 5 billion cash from operations in Q4 compared to <unk>.

Two Hashing: Three 7 billion in Q3 the.

The sequential increase in operating cash flow was mainly due to better operating results and lower tax payout.

Two Hashing: Total cash and cash equivalents and short term investment was <unk> three 6 billion in Q4 compared to $9 77 billion in Q3.

Two Hashing: As we continue to generate strong cash flow from operations, we will further optimize our capital allocation to support our business initiatives and to return our shareholders.

Alex Xu: During Q4, we in aggregate repurchased approximately 3.1 million ADS in open market for a total amount of approximately US$1.07 million, inclusive of commissions, at the average price of US$34.5 per ADS. As such, we have completed substantially all of the $350 million share repurchase plan we announced on March 12, 2024. Furthermore, on November 19, 2024, our Board of Directors approved a new share repurchase plan to buy back up to $450 million worth of ADS over a 12-month period starting January 1, 2025. As of March 14, 2025, we have in aggregate purchased approximately 2.2 million ADSs in open market for a total amount of approximately US$86 million, inclusive of commissions, at the average price of US$39.7 per ADS under the new share repurchase model.

Two Hashing: During the call for Q4, which in aggregate repurchase approximately $3 1 million as an open market for a total amount of approximately one U S. Dollar $1 7 million in Khrushchev up commissions added the average price of 34.5 U S dollar per avs.

Two Hashing: As such we have completed substantially all of the 350 million share repurchase plan, we announced on March 12 2024.

Two Hashing: Furthermore, on November 19, 2024, our board of directors approved a new share repurchase plan to buyback up to $450 million worth of our ABS or trauma period, starting January one 2025.

Two Hashing: As of March 14th 2025, we have in aggregate to purchase approximately $2 2 million a day access in open market for a total amount of approximately USD 86 million inclusive of commissions and the average price of U S dollars 39, seven per avs under the new.

Share repurchase.

Alex Xu: The proactive execution of the share repurchase plan demonstrates management confidence and commitment to the future of the company. and the management intend to further use share repurchase to accelerate EPADS acquisition.

Two Hashing: The proactive execution at Sherry.

Two Hashing: Purchase plan demonstrates management's confidence and commitment to the future of the company.

Two Hashing: And the management intend to further use share repurchase to accelerate EPS accretion.

Two Hashing: Accretion.

Alex Xu: In accordance with our current dividend policy, our board has approved a dividend of U.S. dollar 35 cents per Class A ordinary share, or U.S. dollar 70 cents per ADS for the second half of 2024 to holders of record of Class A ordinary shares and ADSs as of the close of the business on April 23, 2005, Hong Kong times and New York time, respectively. We intend to gradually increase the dividend per ADS on a semi-annual basis.

Two Hashing: In the card in.

Two Hashing: With our current dividend policy. Our board has approved a dividend of U S. Dollar 35 cents per class a ordinary share or <unk> 70 cents per <unk> for the second half of 2024 to holders of record of class a ordinary shares and as of the close.

Two Hashing: Other business on April 23, 2005, Hong Kong Times, and New York Times, respectively.

Two Hashing: We intend to gradually increase the dividend per avs.

Two Hashing: Semi annual basis.

Alex Xu: Finally, regarding our business outlook, where we start to see some tentative sign of marginal improvement in users' activity, we'll continue to take a prudent approach in business planning for 2025 and focus on enhancing efficiency of our operations. For the first quarter of 2025, the company expect to generate non-gap net income between RMB 1.8 billion and 1.9 billion, representing a year-over-year growth between 49% and 38%. This outlook reflects the company's current and preliminary view, which is subject to material changes.

Two Hashing: Finally regarding our business outlook, while we start to see some tentative sign a marginal improvement in user activity. We will continue to take a prudent approach and business planning for 2020 five and focus on enhancing the efficiency of our operations for the first quarter 2025, the company expects to generate non-GAAP.

Two Hashing: Net income between RMB, one 8 billion and $1 9 billion.

Two Hashing: Presenting a year over year growth between 49 and 58%.

Two Hashing: This outlook reflects the company's current and preliminary view, which is subject to a material changes.

Alex Xu: With that, I would like to conclude our prepared remarks.

Two Hashing: Is that I would like to conclude our prepared remarks, operator, we can now take some questions.

Operator: Operator, we can now take some questions. 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.

Thank you if you wish to ask a question. Please press star one on your telephone and wait for your name to be announced if you wish to cancel your request. Please press star two.

Two Hashing: If you're on a speaker phone please pick up the handset to ask your question.

Operator: For those who can speak Chinese, please start your question in Chinese, followed by an English translation. To allow enough time to address everyone on the call, please keep to one question and one follow-up. And return to the queue if you have more questions. Thank you.

Taken speak Chinese please start your question in Chinese followed by an English translation.

Two Hashing: Low enough time to address everyone on the call. Please keep to one question and one follow up and return to the queue. If you have more questions.

Two Hashing: Thank you.

Richard Xu: Your first question comes from Richard Xu with Morgan Stanley. Please go ahead. Thank you, Guancheng, for giving me the opportunity to answer your question.

Richard Xu: Your first question comes from Richard Xu with Morgan Stanley. Please go ahead.

Richard Xu: Hey, Glenn it's I'm going to go to Vancouver, Washington, Morgan Stanley Morgan Stanley.

Richard Xu: I'm Morgan Stanley, Director of Analytics. I'd like to ask about the progress of AI, because everyone has been paying a lot of attention to it recently. I'd like to ask, in which areas can we use DeepSeek or AI to bring some obvious results? In the future, which aspects of efficiency improvement will be more obvious? How is the progress now? Another question I'd like to ask is, last year, 9.24 was also a policy change. Have you seen the user demand increase? First, let's take a look at the economic demand or the current demand. Can you also give us a general idea Two questions from me.

Richard Xu: Joe Shan Shan Shan.

Richard Xu: <unk> you may begin.

Richard Xu: So we've got Guangzhou industrial manufacturing.

Richard Xu: Now shouldn't you women Crazy you won't be the deep sea quoted.

Richard Xu: And I think that means.

Richard Xu: Asia shall Gaba showed a few songs.

Richard Xu: So I'm going to come down going into this year same day.

Richard Xu: Yeah.

Speaker Change: Th somebody's out Joe Torre M.

Richard Xu: Dan.

Richard Xu: You go to Australia.

Richard Xu: Sure.

Richard Xu: Sure <unk>.

Richard Xu: Did you guys see holes so.

Richard Xu: Do we send that Jacob.

Richard Xu: <unk> did take a seizure or what have you noticed you told them yet.

Richard Xu: And David financial among them pneumonia give one day they'll get a T shirt.

Richard Xu: Two question from me.

Richard Xu: Number one on the AI. Could management discuss what areas we're seeing the most potential to integrate it, maybe DeepSeek and other AI modules, and what type of efficiency gain could be achieved and any progress so far? Second of all, there's been some, obviously, policy support since September of last year. Are we seeing any credit demand recovery at the moment? And what's the credit demand at the moment? Outlook for 2025. Any improved credit outlook as well as maybe credit growth outlook? Thank you. Okay, Richard, thank you. for your first question about AI and DeepSea. And actually, it's a really hot topic for now.

Richard Xu: One on the AI can management discuss what areas. We are seeing the most potential to integrated maybe deep seek another AI modules.

Richard Xu: Modules and what type of efficiency gains could be achieved.

And any progress so far.

Richard Xu: The ball.

Richard Xu: There's been some obviously policy support since September of last year are we seeing any credit demand recovery at the moment and what's.

Richard Xu: What's the.

Richard Xu: Credit demand at the moment our outlook for 2025 any.

Richard Xu: Improved credit outlook as far as the supply of time, maybe credit growth outlook. Thank you.

Richard Xu: Okay.

Richard Xu: Thank you.

Richard Xu: Uh huh.

Richard Xu: First question about the AI engine.

Richard Xu: Do you think.

Richard Xu: And that's really it.

Richard Xu: So really a hot topic for now.

Haisheng Wu: And over the past year, we are happy to see the great improvement in large language model technology, especially in its reasoning efficiency. We believe credit is a perfect scenario for AI application. because this industry has a strong data foundation and a high degree of digitalization. Last year, we had a lot of AI practice and efficiency work, like sales, loan collection, intelligence marketing, and R&D. For example, we launched the Copilot system to empower our collection team. by analyzing our historical phone calls. The system can effectively read user's intent and suggest how to effectively communicate with the user.

Richard Xu: And over the past year, we are happy to see the great improvements in launch language module technology.

Richard Xu: Especially in its revenue efficiency.

Richard Xu: We believe credit.

Richard Xu: A perfect scenario before AI applications.

Because this industry has a strong business foundation and.

Richard Xu: A high degree of digitalization.

Richard Xu: Last year.

Richard Xu: We had a lot of them.

I practice.

Richard Xu: Efficiency work life sales.

Richard Xu: Global collection, intelligent marketing and R&D.

Richard Xu: Example.

Richard Xu: We launched the co pilot system to empower our collections team.

Richard Xu: Analyzing our historical full course.

Richard Xu: The system can effectively reach.

Richard Xu: User intent.

Richard Xu: And so just how to effectively <unk>.

Richard Xu: You could with the users.

Haisheng Wu: So far, the adoption rate of the Cobala system among our collection team have reached about 84 percent. Daily usage is roughly 30 times per person. And this year, we will allocate more resources to applying AI into our credit assessment. leveraging the AI reasoning capabilities to enhance our ability to analyze credit reports. One example is when we use feature recognition during the loan application process. AI will recognize additional information from the pictures or videos. such as users' clothing or their surroundings. This information can be cross-checked with the identity information provided by the users. to reduce the fraud rate.

Richard Xu: So far yes.

Richard Xu: Adoption rates.

Richard Xu: The Cabela's system, among our collections team.

Richard Xu: It has reached about.

Richard Xu: 84%.

Richard Xu: It was roughly 30 times per person.

And in this year.

Richard Xu: We'll allocate more resources to apply them.

Richard Xu: Into our credit assessment.

Richard Xu: Averaging the reasoning capabilities too.

Richard Xu: Hence our ability to analyze credit reports.

Richard Xu: One example of it.

Richard Xu: When reviewed creates a recognition they are in the loan application process.

Speaker Change: Yeah, we have recognized additional information from the picture or video.

Speaker Change: Such as clothing, all their surroundings.

Speaker Change: This information can be cross sugar.

Speaker Change: The identity information provided by the users.

Speaker Change: To reduce the fraud risk.

Haisheng Wu: This year, we will put a small portion of our traffic into the end-to-end AI-driven decision-making process. We are really looking forward to the results of this test. In addition... We are fully committed to advancing our AI. EA Plus strategy. We plan to build a technology platform that will empower our whole company. This AI agent could become our digital employee, working together with us. We have built a dedicated team to execute this AI cloud strategy, and by the end of the year We expect this team to grow to around 150 people. in the next one year.

Speaker Change: This year.

Speaker Change: We will put us more person off our topic in.

Speaker Change: To the end to end AI driven risk.

Speaker Change: Sufficient making process.

Speaker Change: We are really looking forward to the results of this test.

Speaker Change: In addition.

Speaker Change: We are fully committed to advancing now.

Speaker Change: Yeah.

AA plus strategy.

Speaker Change: We plan to mute.

Speaker Change: Trading platform that too will empower our whole company.

Speaker Change: This AI agent could become more digital employees working together with us.

Speaker Change: We have built a dedicated team to execute.

Speaker Change: Our cloud strategy and by the end of the year.

Speaker Change: We expect this team to grow to around 150 people.

Speaker Change: And the next one years.

Haisheng Wu: We expect one third of our core business prospective. will be powered by this aging platform. We have seen strong interest for the aging platform among our financial institution partners. and WeBelieve, and Yale Plath Bank. will make our technology solution business more competitive. And I want to say, over the past decade, We have captured the growth opportunities in the next class era. We are confident that based on our scenario, technology, and data, we are also at a good position to capture the AI plus opportunity. That's where I'll ask the first question.

Speaker Change: We expect one Philadelphia.

Speaker Change: Our core business processes.

Speaker Change: We will be powered by this agent platform.

Speaker Change: We have seen strong interest for the.

Speaker Change: The engine platform among our financial institution partners.

Speaker Change: And we believe.

Speaker Change: Bank.

Speaker Change: We have made how can technology solution business more competitive.

Speaker Change: And I wanted to say over the past decade.

Speaker Change: We have captured the growth opportunities.

Speaker Change: And the net plus Iran.

Speaker Change: We are confident that our.

Speaker Change: Our scenario.

Speaker Change: And Paypal.

Speaker Change: We are also at a good position to capture them.

Speaker Change: The AI plus opportunities.

Speaker Change: That's where a lot of FERC question.

Haisheng Wu: And for the second question about... customer demand. Yes, we did observe some improvements in user activities after September 21st. For example... The Loan Application Ratio. was 10% higher in Q4 versus Q3. and generous. We also noticed seasonal pickup in credit demand ahead of Chinese New Year, especially from SME users. Then credit demand declined in February due to the holiday. but rebounded in March. Based on the current situation, we expect Q1 loan volume to grow by more than 10% year-over-year. At this stage, I think it is still too early for us to call. for Macro Recovery.

Speaker Change: And before.

Speaker Change: The second question about it.

Speaker Change: Customer demand.

Speaker Change: Yes.

Speaker Change: Some improvement in <unk>.

Speaker Change: He was a activities after September 21.

Speaker Change: For example.

Speaker Change: The loan application ratio.

Speaker Change: It was 10% higher than Q4.

Speaker Change: Worst of Q3.

Speaker Change: In January.

Speaker Change: We also noticed.

Speaker Change: There's no pickup in credit demand.

Speaker Change: Chinese new year.

Speaker Change: Especially from the many users.

Speaker Change: And then kind of demand behind it.

Speaker Change: Due to the holiday.

Speaker Change: <unk> rebounded in March.

Speaker Change: Based on the current if the duration.

Speaker Change: We expect Q1 low volume grow by more than 10% year over year.

Speaker Change: And at this stage.

Speaker Change: I think it is still too early for us to call on.

Speaker Change: Macro recovery.

Haisheng Wu: We still want to adopt a prudent approach. to plan our business for this year. But if the market environment improves, We will adjust our strategy timely. to capture the growth opportunities. Thank you.

Speaker Change: Yeah.

Speaker Change: We still want to adopt a prudent approach.

Speaker Change: To plan our business for this year.

Speaker Change: Got.

Speaker Change: If the market environment to improve meaningfully.

We will adjust our strategy timely.

Speaker Change: To capture the growth opportunities.

Speaker Change: Thank you.

Speaker Change: Okay.

Alex Yee: Your next question comes from Alex Yee with UBS. Please go ahead. Thank you, Dr. Guan, for giving me the opportunity to ask questions. I have two questions. The first one is about the indicators of our early asset volume. We saw the two different directions of change in the return rate of Day One and Day Three. What are the main reasons for this? And what is the trend in Q1 so far? And what are the prospects for the future? And the second question is about... Dr. Guan also gave an indication of a net kick rate of slightly higher than 5% in 2025.

Speaker Change: Your next question comes from Alex <unk> with UBS. Please go ahead.

Speaker Change: Okay.

Speaker Change: Gotcha.

Speaker Change: Yes, Glenn.

Speaker Change: Yeah.

Speaker Change: <unk>, two 5 billion business at scale.

Speaker Change: Now they wouldn't have under 10 years old.

Speaker Change: Peter.

Speaker Change: Got it.

Speaker Change: So somebody you.

Speaker Change: But on the whole Q1, Domino can't wait till theyre going to choose.

Speaker Change: Hopefully at that one.

Speaker Change: I hope everyone's views upon you.

Danielle: Thanks Danielle.

Speaker Change: Oh, yes.

Speaker Change: Good way to go to sleep.

Percent.

Alex Yee: Do you need to adjust this forecast for the latest business progress? Let me translate. So my first question is about what's the drivers for the movement of the two early asset quality indicators in Q4, including Day One delivery ratio and Day Three collection ratio. What's the latest trend in Q1 so far and the outlook going forward? And the second question is about the net kick rate outlook, which was guided by management previously at around slightly above 5% for four years. So based on your latest results and your operation into this year so far, is there any adjustment to this guidance?

Speaker Change: Jason.

Speaker Change: Hi, Julien.

Speaker Change: It tells them quite a huge.

Speaker Change: No.

Speaker Change: So my first question.

Speaker Change: What's the drivers for the movement to too early I think what you can pick up in Q4, including day one.

Speaker Change: The integration of insulating collection ratio, what's the latest trend in Q1, so far and the outlook going forward and second question is about the <unk> outlook.

Speaker Change: What's the 95 management previously at around slightly above 5% for full year. So based on your ladies yourselves and your operations so far from what the.

Speaker Change: Any adjustment.

Alex Yee: Thank you.

Speaker Change: Got it.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: Yeah.

Haisheng Wu: Let me answer the question about the risk first. First of all, I would like to explain that our internal risk monitoring indicators are a combination of the dew point rate and the 30-day recovery rate. Because there are various reasons for the fluctuation of the single indicator, we value more the CWMR indicator, which is the expected rate after 30 days of blowing. It is equal to the dew point rate times the recovery rate of 1-30 days. At present, the CWMR indicator is very stable. Secondly, I would like to explain the change of Day 1.0%. In comparison with the autumn market, the reason why the dew point rate and the recovery rate have shown a small increase compared to the autumn market is that the main reason for the change in the trend is that we have implemented some optimizations for the customer repayment forecasting strategy.

Speaker Change: It will simply they have concerns.

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Speaker Change: Okay.

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Speaker Change: You do see <unk> accordingly.

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Speaker Change: So the cigar matter for Dallas is our Ddos.

Speaker Change: This is <unk>.

Speaker Change: They want to increase it or you know what this is.

Alex Schwartz: The truth is Santa Cruz, Alex Schwartz <unk> currency isn't true.

Speaker Change: We will treat itself with sensor facility itself of Santander.

Speaker Change: Ching corner and it should be largely other means that will be coupon, indicating trulia lithium.

Haisheng Wu: In order not to affect the loss rate, in order to optimize the customer's experience, we have reduced the proportion of repayment customers by 30%. In this way, some of the better customers may misappropriate the repayment on the day and cause the dew point rate to rise. However, some customers will quickly make a normal repayment, which causes the dew point rate and recovery rate to rise again. However, this does not have a substantial impact on the actual loss rate. The risk situation in January and February is relatively similar to the autumn market. The overall risk level is relatively stable.

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Speaker Change: Into the.

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Speaker Change: That's it.

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Speaker Change: No.

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Haisheng Wu: However, we would like to emphasize that we do not pursue extremely low risk. Because the lowest risk does not mean that the company's interests are maximized. Therefore, our current take-away rate is still relatively high. We have enough security boundaries to make some new attempts. In this way, we can make a better balance Thank you very much.

Speaker Change: Ms Shen <unk> candela.

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Speaker Change: We'll go to the heart of Pizza.

Speaker Change: That's the kind of things.

Haisheng Wu: Okay, let me do the translation for Mr. Zheng. First, let me explain how we monitor our risk internally. We usually look at both the day one delinquency rate and the 30-day collection rate together because individual metrics can fluctuate for various reasons. What we focus on more is the C2N2 ratio, which is the delinquency rate after a 30-day collection period. Based on this matrix, our risk level is very, very stable. Now, about the slight increase of our Day 1 delinquency rate and the collection rate compared to Q3, it was mainly due to the optimization we've made to our repayment reminders.

Speaker Change: Okay, Let me take the cancer.

Mr. Chen: But Mr. Chen.

Mr. Chen: First let me explain how we monitor our internally, we usually look at that and could you make any day.

Mr. Chen: Data collection made together because individuals matrix can fluctuate.

Mr. Chen: What we're still kind of more featured entry ratio, which if the delinquency make app to stretch it a correction period based.

Mr. Chen: Based on this matrix our risk level is very very stable.

Mr. Chen: Now about the slight increase of our day ramping increasing rate and traction compared to Q3. It was mainly due to the.

Mr. Chen: Optimization, we made to our independent minded question.

Haisheng Wu: We reduced the coverage of our early reminder by about 30% to improve user experience without compromising our loss. As a result, some of our high-quality users missed the repayment on the due date, but today quickly caught. That's why you will see a small increase in both day-one delinquency rate and collection rate. But it didn't have any meaningful impact on our actual credit loss. Our risk performance in January and February was pretty much in line with Q4, with overall risk levels remaining stable. I also want to emphasize that we are not aiming to reduce our risk to the absolute lowest level as it doesn't serve the best interest of the company.

Mr. Chen: Reduced the coverage of our early reminders about sketching entry into <unk> without compromising.

Mr. Chen: Compromising our loss rate.

Mr. Chen: And there's no doubt some of our high quality music lifting the payment on the due date.

Mr. Chen: Date quickly caught up.

Mr. Chen: That's why you see a small increase in both day, one delinquency rate and collection rates.

Mr. Chen: It didn't have any meaningful impact our actual credit losses.

Mr. Chen: Our risk performance in January and February it was pretty much in line with Q4 with overwhelming level the maintenance component.

I also want to emphasize that we are not aiming to reduce our risk to the absolute lowest level.

Mr. Chen: As it did in the.

Mr. Chen: The best interest of the company.

Haisheng Wu: Right now, with a decent level of take rates, we have a solid margin of safety to experiment with new strategies and find a better balance between growth and risk.

Mr. Chen: Right now with a decent level of take rates, we have a slot at Martin uplifting to experiment with new strategy and find a better balance between growth and risk.

Alex Xu: Okay, and Alex, I will respond to your second part of the question about the take rate. As you know, throughout 2024, we have been on a steady improvement trend in take rate as we reduce the risk and with the funding costs continue to trending lower around last year. So by the end of the last year, in Q4, our take rate metric really approached to 6%. So that's the trend for last year. And obviously, there are some one-off factors, as you guys know. For example, the mixed change regarding the revenue recognition, different between the second half and first half.

Alex Schwartz: Okay, and Alex I will respond to your second part of the question about the take rate.

Mr. Chen: As you know.

Mr. Chen: Throughout 2024 would have been on a steady improvement trend in take rates as we reduce.

Mr. Chen: Reduced risk and.

Mr. Chen: With the funding cost continue to trend lower from last year. So by the end of last year.

Mr. Chen: In Q4, our take rate metric wherever they approached two 6%.

Mr. Chen: So that's the trend for last year and obviously there are some one off factors as you guys know for example.

Mr. Chen: The mix change in the ER.

Mr. Chen: Revenue recognition.

Mr. Chen: During the second half the first half.

Alex Xu: But excluding all these kind of one-off factors, I think we're looking at for this year, it's a reasonable assumption. As you mentioned, we achieved sort of a 5% above kind of a take rate for the year. And overall, as our CRO just mentioned, we have enough sort of a cushion in our take rate or our risk metrics that enable us to actually do a little bit around the margin. You know, if we see the opportunity, which could be resulted by the micro environment change or could be resulted by the user activity change. If we see the opportunity, we will take that and try on the margin to see whether we can bring the incremental marginal probability on top of our sort of a base case.

Mr. Chen: Excluding all these kind of one off factors I think.

Mr. Chen: We were looking at for this year, it's a reasonable assumption.

Mr. Chen: As you mentioned we achieved.

Mr. Chen: Sort of a 5% above kind of a take rate.

Mr. Chen: For the year and.

Mr. Chen: Overall, you know.

Mr. Chen: Uh huh.

Mr. Chen: Our CIO just mentioned.

Mr. Chen: We have the enough sort of book.

Mr. Chen: <unk> in our take rate or our risk metrics that enable us to actually do a little bit.

Mr. Chen: Testing.

On the margin.

Mr. Chen: If we see the opportunity.

Mr. Chen: Which could be resulted by the micro environment change or could be read allowed by the user activity changed if.

Mr. Chen: If we see the opportunity we will take that and try on the margin.

Mr. Chen: See whether we can bring the incremental marginal profitability on top of all that are sort of a base case.

Alex Xu: So that will be the process we will continue to pushing throughout 2025. The end results or the ultimate goal is to really drive a higher profit, total profit on top of the sort of the base case there. So that's our approach to looking at this year's profitability and this year's kind of a take. Thank you.

Mr. Chen: That will be the process, we will continue to pushing.

Mr. Chen: Throughout 2025.

Mr. Chen: The end results or the or the ultimate goal is to really drive a higher.

Mr. Chen: Profit a total profit.

Mr. Chen: On top of the sort of the base case there. So that's the our approach to looking at this years profitability and this year is kind of a take rate.

Cindy Wang: Your next question comes from Cindy Wang with China Renaissance. Please go ahead.

Mr. Chen: Thank you. Your next question comes from Cindy Wang with China Renaissance. Please go ahead.

Mr. Chen: Yeah.

Speaker Change: Just to go ahead and go on to the Q&A now.

Cindy Wang: 谢谢管理层给我这个提问的机会 那我这边有一个问题想请教是关于监管方面 因为上周金融监管总局印发了一个通知 要求金融机构发展消费金融助力提振消费 那请问这个文件对于行业和公司有什么的一个影响? 那我很快地翻译一下我的问题 Thanks for taking my question So I have a question related to the regulation side So last week National Financial Regulatory Administration issued a notice requiring financial institutions to promote consumer finance and to boost consumption in China So how do you see the new policy impact to the overall industry and the company? Thank you Okay, Cindy.

Josh: Hudson, Josh Mclane with Jim Bob Tom Yes.

Speaker Change: So Tien tsin, Guangdong team and finally the Thompson.

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Speaker Change: A question.

Speaker Change: Thank you Jason.

Speaker Change: Quantifying Michelle with that one.

Speaker Change: Thanks for taking my question. So I have a question related to the regulation side.

Speaker Change: So last week National financial regulatory administration issue noticed with pilot in financial institutions to promote customer find us.

Speaker Change: And the boost consumption to boost consumption in China. So how do you see the new policy impact to the overall industry and the company. Thank you.

Felipe: Okay Felipe.

Haisheng Wu: I'm glad you mentioned this, it's really a big news for our industry. And we believe this document... and a very positive beginner. And we are very encouraged. It is very clear that the government's direction is to boost consumption by encouraging the development of consumer credit industry. And I think there will be a series of policies to support that direction.

Felipe: I'm glad you mentioned this is really a big news for our industry.

Felipe: We believe this document.

Felipe: Sends a very positive figure now.

Felipe: But yes very encouraged.

Felipe: It is very clear that's the.

Felipe: The government direction to boost consumption by incurred.

Encouraging the development of the consumer credit industry.

Felipe: And I.

Felipe: And then I think there will be a serious health policies.

Felipe: That direction.

Haisheng Wu: I think we noted three details in the document. The first... increasing the supply of consumer loans, which means support in terms of monetary policy and liquidity. And secondly, they encourage financial institutions to increase loan volume and set reasonable terms for loan products. which means that the regulator will provide more flexible space for financial institutions. And thirdly, they emphasize the consumer protection and providing support for users who have difficulty in repayment. In a word, the regulators have fully recognized the value of consumer finance in both gene consumption. Therefore, we expect that the regulator environment will remain relatively stable, leaving us more room to innovate and serve our customers.

I think we noted three detail in that document.

Speaker Change: The FERC.

Speaker Change: Increasing the supply of consumer loans, which means the port and Tim without monetary policy and liquidity.

Speaker Change: I.

Speaker Change: I can do it.

Speaker Change: <unk> encourages financial institutions to increase loan volume.

Speaker Change: And so unreasonable in terms of.

Speaker Change: For long products.

Speaker Change: Which means that the regulator will provide more flexible space.

Speaker Change: For financial institutions.

Speaker Change: And thirdly, they emphasize the consumer protection and.

Speaker Change: Providing support for users who have.

Speaker Change: Difficulty in repayment.

Speaker Change: And the word.

Speaker Change: The regulators have fully recognized the value of all consumer finance and boosting consumption.

Speaker Change: Therefore, we expect that the regulator environments will remain relatively stable, but giving us more room to innovate and.

Speaker Change: Third a viable customer.

Haisheng Wu: Thank you.

Speaker Change: Thank you.

Emma Xu: Your next question comes from Emma Xu with Bank of America Securities. Please go ahead. Thank you for giving me the opportunity to ask this question. Congratulations to the company on gaining a very strong performance again. I have a question here about the cost of funding. I would like to ask whether the cost of funding for the fourth quarter and the first quarter will continue to go down or will be affected by some liquidity. Maybe the current decline will be slowed down. And I would like to ask what level the cost of funding can be reduced to at the lowest level.

Speaker Change: Your next question comes from MSA with Banc of America Securities. Please go ahead.

Speaker Change: Thanks. This is real identity with a D C coastal counties.

Speaker Change: So why did you tell them then you can always ask you to do that.

Speaker Change: Yeah.

Speaker Change: It just sounds that answer your question about ECA. Thank God I don't think so okay.

Okay now what James has talked to Joe you also it sounds like the wholesale ways that Jake.

Speaker Change: Could you talk about the demand goes down ballot. The Andaz J P. So I have a question about the funding cost is continuing to decline and what's the allowance level. You think baffled me cost could go to.

Emma Xu: So I have a question about the funding cost. Is your funding cost continuing to decline? And what's the lowest level you think the funding cost can go to?

Speaker Change: Okay.

Alex Xu: Okay, thank you, Emma. In terms of funding cost, over the past few years, our funding cost has continued to decline. and even much faster compared to the LPR. This is partially driven by the rate cuts, but more driven by the demand over supply of consumer credit as assets. In the future, if the macro improves, The supply and demand situation will also change, and we always emphasize that. financial institutions have their operating costs. The current cost of funds has already approached the bottom line of financial institutions. Institutions. And so there's limited room for further decline. and in addition to the funding provided by financial institutions.

Speaker Change: Okay. Thank you Emma.

Speaker Change: In terms of the funding costs.

Speaker Change: Over the past few years, our funding cost.

Speaker Change: Continued to decline.

Speaker Change:

Speaker Change: We've been much faster compared to the.

Speaker Change: The LCR.

This is partially driven by the rate cuts, but more driven by the demand over supply of consumer credit asset.

Speaker Change: In the future.

Speaker Change: Macro improves.

Speaker Change: Supply and demand situation, we're also cheap.

Speaker Change: And do we always emphasize that.

Financial institutions have their operating costs.

Speaker Change: The current cost of funds has already approved the bottom line and all the financial institutions.

Speaker Change: Institutions.

Speaker Change: And so.

Speaker Change: There is limited room for further decline.

Speaker Change: And in addition to the funding provided by financial institutions.

Alex Xu: A significant portion of our funding comes from ADF. We will continue to issue more ideas this year to further optimize our funding structure. So, hope we can achieve further decline in overall funding costs.

Speaker Change: A significant depression.

Speaker Change: Our funding funding comes from ABS.

Speaker Change: We will continue to issue more EPS this year to further optimize our funding structure.

Speaker Change: So how big can see a further decline in overall funding costs.

Alex Xu: Thank you.

Alex Xu: Yeah, just, Emma, I just want to add a couple of points. So basically you can see there are three factors to really drive the funding cost, two external and one internal. The two external are, one, you know, the LPR obviously is, you know, if you see the reduction in the LPR, it will more or less kind of pass through to us a little bit. But at the same time, the supply and demand situation will also have the impact on the funding cost. In particular, you know, if the macro situation is getting a little bit hot, then you may run into a, you know, short of a fund kind of environment overall that certainly will put some pressure on our funding cost there.

Speaker Change: Yeah just.

Speaker Change: Just wanted to add a.

Speaker Change: A couple of points. So basically you can see there are three factors.

Speaker Change: Factors to really drive the funding cost.

Speaker Change: Two externally and one internal.

Speaker Change: To extend our one you know the LPR. Obviously is that you know if you see the reduction in <unk>.

Speaker Change: L. P R. It will more or less kind of a.

Speaker Change: Kind of a.

Speaker Change: Pass through to us a little bit.

Speaker Change: But at the same time the supply demand situation.

Speaker Change: We'll also have the impact on our funding costs in particular.

Speaker Change: Of course situation getting a little bit hot.

Speaker Change: And you will you may run into a you know.

Speaker Change: Short of a fund kind of a environment overall that certainly will put some pressure on our funding costs. There. So thats two external factors the internal one.

Alex Xu: So that's two external factors. The internal one, on the ABS side, you know, last year we did about hundred, I'm sorry, $15 billion, a little bit over $15 billion in ABS issuance, and which should represent about 20-some percent increase over the year before. I think, at least from our planning perspective, we try to maintain this kind of a year-over-year growth pace for this year. If we can achieve that, that will certainly help us, from mixed perspective, reduce the overall funding cost a little bit. But net-net, given how low we are already be, so there's a limited, the space in terms of downward movement will still be quite limited.

Speaker Change: S side.

Last year, we did about 100.

Speaker Change: Sorry 15 billion.

Speaker Change: A little bit or if it had been in the ABS issuance.

Speaker Change: And which should represent about 27% increase over the year before I think at least from a planning perspective.

Speaker Change: Try to maintain this kind of a year over year.

Speaker Change: Gross pace.

Speaker Change: <unk> for this year, if we can achieve that and that will certainly help us from a mix perspective reduce the overall funding cost.

Speaker Change: Right.

Speaker Change: But net net given how low we are already would be so there that limits at the space in terms of downward movement will still be quite limited.

Speaker Change: Thank you.

Speaker Change: Yeah.

Yada Li: Your next question comes from Yada Li with CICC. Please go ahead. Hello, Guan Yiceng. Congratulations on your outstanding performance and thank you for giving me the opportunity to ask you this question. Today, I would like to ask if the company will maintain a relatively high shareholding return, how to consider the sustainability of future shareholding returns, and whether there is room for improvement in the future. Thank you, Guan Yiceng.

Speaker Change: Your next question comes from Yodlee with CIC. Please go ahead.

Speaker Change: Oh great.

Speaker Change: Yes.

Speaker Change: Can see again, we have a few in the Jupiter.

Speaker Change: And don't worry.

Speaker Change: Great. Thanks.

Speaker Change: Thank you Bob.

Speaker Change: We realize we need to buy the picture you see dividends people didn't seem to see it.

Speaker Change:

Yada Li: Then I'll do the translation. Hello, management. Thank you for taking my question. A question is about a shareholder's return. I was wondering, do you expect to deliver more value to the shareholders and how to view the sustainability and their still potential for future growth? That's all.

Speaker Change: Then I'll do the translation Hello management. Thank you for taking my questions.

Speaker Change: My question is about our shareholders' return.

Speaker Change: I was wondering do we start to deliver more value to the shareholders and how to view the sustainability and there's still potential for future growth and that's all thank you.

Alex Xu: Sure. Thank you, Yada. I'll take this one. You know, we have been very committed to return values to our shareholder in the past couple years. And, you know, we're looking at, if you look at the 2024, the actual payout almost represent 100% of our earnings for 2023 there. And so going forward, we have been saying that we try to maintain a 70 plus percent payout ratio for the next few years. And given that we also have a target to kind of shrink our share base by a significant percentage, so we put the current priority and also maybe the next year's priority into the share buyback side.

Speaker Change: Sure. Thank you.

Speaker Change: I'll take this one.

Speaker Change: We have been very committed to returning values to our shareholders in the past couple of years and.

Speaker Change: You know we are looking at or if you look at the 2024.

Speaker Change: The actual payout almost represent 100% of our earnings for 2023, there and so.

Speaker Change: Going forward, we have been saying that we try to maintain a 70% payout ratio for.

Speaker Change: For the next few years and given that we also have a target to kind of shrink our share base by a significant percentage. So we put the current priority and also then maybe the next year's priority into the share buyback side.

Alex Xu: And we have the current 450 million share buyback program running. So far in the first quarter, even though our share price have been moving up quite significantly, we still maintain a very consistent pace in terms of executing the current 450 million buyback program. And we intend to continue to do so for the remainder of the year. If there's an opportunity to rise, we also may consider to accelerate the buyback program down the road. On the dividend side, given the priority for now is on the buyback, we try to achieve a continued increased per share dividend on the semi-annual basis.

Speaker Change: And we have the current 450 million share buyback program running.

Speaker Change: So far in the first quarter, even though our share prices have been moving up quite significantly.

Speaker Change: We still maintain a very consistent pace in terms of executing the current $450 million buyback program.

Speaker Change: And we intend to continue to do so for the remaining the remainder of the year. If there is the opportunity arise we also.

Speaker Change: You may consider to celebrate accelerate the buyback program.

Speaker Change: Down the road on the dividend side.

Speaker Change: Given the priority for now is on the buyback we try to achieve a continued increased per share dividend on a semi annual basis. For example, this quarter, we declared a <unk>.

Alex Xu: For example, this quarter, we declared a $0.70 per ADS dividend versus six months ago, that's only about $0.60. So, it's a pretty significant raise in dividends, and you should expect that the dividend per share number to continue to increase over the course of the next few dividends, given that we are shrinking our share base quite significantly. And we also have to meet the board authorized at least 20% dividend payout ratio. So mathematically, you have to see an increased DPS in the going forward basis there. And in the long run, once we achieve our sort of a share repurchase target, which may be about two years down the road, we will at that time reconsider the mix between the buyback and the dividend, but that's still a little bit long time away.

Speaker Change: 70 cents per <unk> dividends.

Speaker Change: Uh huh.

Speaker Change: Versus two.

Speaker Change: Six months ago, that's only about 60 cents, so it's a pretty significant raise.

Speaker Change: In dividends.

Speaker Change: And you should expect that.

Speaker Change: And that the dividend per share number to continue.

Speaker Change: Increase over the course of next few dividends given that we are shrinking our share base.

Speaker Change: Quiet significantly and we also have to meet the board authorized.

Speaker Change: These 20% dividend payout ratio. So the mathematically you have to see increased dps.

Speaker Change: In the going forward basis, there and you.

Speaker Change: In the long run Westwood, we achieved our sort of a share repurchase target.

Speaker Change: You know, which maybe about two year down the road, we will at that time reconsider the mix between the buyback and dividends.

Speaker Change: They are a little bit long time away. So for now the priority is still be on the buyback side.

Alex Xu: So for now, the priority is still be on the buyback side. Thank you.

Speaker Change: Thank you.

Operator: There are no further questions at this time.

Speaker Change: Thank you there are no further questions at this time I'll now hand back to management for closing remarks.

Haisheng Wu: I'll now hand back to management for closing remarks. Okay, thank you everyone to join us for today's conference. We are very efficient to make the call going very quickly than we thought. But if you have any additional questions, feel free to contact us offline. Thank you.

Speaker Change: Okay. Thank.

Speaker Change: Thank you everyone to join Us for today's conference.

Speaker Change: Our very efficient to make the call going very quickly and then we saw it but if you have any additional questions. Please feel free to contact us offline. Thank you.

Operator: That does conclude our conference for today. Thank you for participating.

Speaker Change: That does conclude our conference for today. Thank you for participating you may now disconnect.

Operator: You may now disconnect.

Speaker Change: [noise].