Q2 2026 Yiren Digital Ltd Earnings Call

September 30, 2026

Operator: Good day, and welcome to the Yiren Digital Q2 2026 earnings conference call. Please note that this event is being recorded. I would now like to turn the conference over to Ms. Stephanie Nan, Director of Investor Relations of Yiren Digital. Please go ahead, ma'am.

Speaker #2: Thank you, Apacha. Good morning and good evening, everyone. Today's call features presentations by our founder, chairman, and CEO, Mr. Ning Tao, and our CFO, Mr. William Hui.

Stephanie Nan: Thank you, Rachel. 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 would like to remind you that discussions during this call contain forward-looking statements made under the safe harbor provision of U.S. Private Securities Litigation Reform Act of 1995. Such statements are subject to risks, uncertainties, and factors that can cause actual results to differ materially from those contained in any such statement. Further 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.

Speaker #2: Before we begin, we'd like to remind you that discussions during this call may contain forward-looking statements made under the Safe Harbor provision of the U.S. Private Securities Litigation Reform Act of 1995.

Speaker #2: Such statements are subject to risks, uncertainties, and factors that can cause actual results to differ materially from those contained in any such statement.

Speaker #2: For information regarding such risks, uncertainties, or factors, it 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.

Speaker #2: 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.

Stephanie Nan: During the call, we will be referring to certain non-GAAP financial measures and supplemental measures to review and assess the company's operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For information about these non-GAAP financial measures and the reconciliation of GAAP measures, please refer to our earnings press release. As a reminder, this conference is being recorded, and investor presentation and the webcast replay of this conference call will be available on Yiren Digital's IR website. I will now turn the call over to the company CEO, Mr. Tom, for opening remarks.

Speaker #2: For information about those non-GAAP financial matters and the reconciliation to GAAP matters, please refer to our earnings release. As a reminder, this conference is being recorded, and investor presentations and the webcast replay of this conference call will be available on Yiren Digital's IR website.

Speaker #2: I will now turn the call over to the company's CEO, Mr. Tong, for opening remarks.

Speaker #3: 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 meaningful progress in our transformation.

Ning Tang: 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 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 towards 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.

Ning Tang: Thank you, Stephanie. Hi, everyone. Thank you all for joining us. The Q2 was a demanding period for Yiren Digital, but it also marked 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 towards 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: During this quarter, we made progress in three areas that are particularly important to this strategy. First, we continued to improve credit quality. Second, we further invested in technology and talent across our insurance platform to support long-term growth.

Ning Tang: 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 treatment 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.

Speaker #3: And third, we increased the application of AI across our operations. This development, along with our ongoing initiatives, is helping us build a more resilient, technology-driven, and diversified business.

Speaker #3: 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.

Speaker #3: While this was done, 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.

Speaker #3: 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 referral model.

Ning Tang: 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.

Speaker #3: Our AI capabilities are an important enabler of this transition. Our customer acquisition and precision marketing platform allows us to identify and match customer demand.

Speaker #3: We are able to operate more efficiently and direct 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.

Speaker #3: 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 82% of total loan facilitation volume.

Speaker #3: 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%.

Ning Tang: 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 one 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 reach of the platform. The number of insurance clients increased 14% from the fourth quarter and 281% year over year to approximately 453,000. We issued more than 918,000 new policies, up 177% year over year, while gross written premiums increased 2% sequentially to approximately RMB 839 million. The insurance brokerage revenue increased by 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.

Speaker #3: And the 91- to 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.

Speaker #3: 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.

Speaker #3: 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, up 177% year over year, while gross written premiums increased 2% sequentially to approximately RMB 839 million.

Speaker #3: 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.

Speaker #3: 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.

Ning Tang: 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 omnichannel 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 H2 of this year, we will continue to improve product matching, digital customer acquisition, ongoing engagement, and 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.

Speaker #3: We are demonstrating the value of our omnichannel strategy. The rapid expansion of our client base and policy issuance also gives us a larger customer pool from which to build recurring engagement.

Speaker #3: 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 service efficiency across the insurance platform.

Speaker #3: 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.

Speaker #3: Now, let me turn to AI, which is increasingly becoming an integral part of how Yiren 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.

Ning Tang: Now let me turn to AI, which is increasingly becoming an integral part of how Yiren Digital operates. Over the past several years, we have built proprietary AI models, our MagiCube 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 is 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 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%.

Speaker #3: 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.

Speaker #3: We are seeing that impact across multiple areas. We have also started generating external commercial traction, including initial sales of our customer acquisition and precision marketing technology and consulting services to insurance partners.

Speaker #3: 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 text-based agents increased from approximately 60% to nearly 80%.

Ning Tang: In customer operations, the autonomous resolution rate of text-based agents increased from approximately 60% to nearly 80%. 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 ESG report, which was published in July 2026, our HawkEye fraud detection system and the Beijing 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 operating risk indicator rather than a financial metric, it demonstrates the practical value of our AI capabilities in strengthening risk identification and operational control.

Speaker #3: An 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 judgement.

Speaker #3: AI is also strengthening risk diversification and control. As disclosed in our 2025 ESG report, which was published in July 2026, our Hot-Eye fraud detection system and the Deep-In multi-model verification engine helped the company avoid approximately RMB 165 million in potential losses associated with borrower fraud during 2025.

Speaker #3: While this is an operational risk indicator rather than a financial metric, it demonstrates the practical value of our AI capabilities in strengthening risk identification and operational control.

Speaker #3: 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.

Ning Tang: During the H2, 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.

Speaker #3: 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.

Speaker #3: ...into AI-native opportunities beyond the financial services sector. We believe our established businesses give us real operating scenarios, engineering capabilities, data, proprietary know-how, and risk management experience.

Speaker #3: 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.

Speaker #3: Through our technology capabilities, AI expertise, and the value-added support, which includes AI infrastructure, engineering resources, business development, and the 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 the market expansion while creating strategic connectivity with our broader platform.

Ning Tang: 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 products 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 exercise prices. The AI application companies with which we have entered into warrant agreements are primarily focused on education and entertainment use cases.

Speaker #3: During the period between May and July, we identified four high-potential AI-native companies that we believe have differentiated products 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 excess prices.

Speaker #3: The AI application companies with which we have entered into warrant 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.

Ning Tang: 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 warrant 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: This relationship did not begin with the warrant 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.

Speaker #3: 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 entrepreneur partners, who have chosen to explore a deeper, more strategic relationship with us.

Ning Tang: 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 provides a disciplined and a capital-efficient way to build our AI application portfolio.

Speaker #3: 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 revenue mix over time.

Speaker #3: 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 provides a disciplined and capital-efficient way to build our AI application portfolio.

Speaker #3: 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.

Ning Tang: 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 exercise 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.

Speaker #3: Earlier this week, we served a notice to exercise our warrant to acquire a controlling stake in one of the AI-native companies we previously backed through a warrant agreement.

Speaker #3: 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.

Speaker #3: 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.

Ning Tang: It has established a strong presence in several Southeast Asian markets, where it is positioned among the leading AI entertainment platforms. It 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 this 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 engagements. The company is also developing a proprietary vertical large language model designed to enhance customer experience and improve operational efficiency and margin.

Speaker #3: And has expanded its user acquisition efforts across multiple international markets, including Vietnam, Thailand, the Philippines, Taiwan, Hong Kong, South Korea, Japan, the U.S., Canada, and Brazil.

Speaker #3: We believe its combination of AI-native content creation, user-generated content, and international distribution provides an opportunity to extend our AI ecosystem into consumer entertainment. The target companies have demonstrated strong growth and are already operating profitably.

Speaker #3: Leveraging the high-volume, high-quality data generated through its customer engagements, the company is also developing a proprietary vertical large language model designed to enhance customer experience and improve operational efficiency and margin.

Speaker #3: 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.

Ning Tang: 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 Earnout 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, fintech 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 discipline in capital allocation.

Speaker #3: 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, fintech capabilities, and AI-native applications complement one another and create additional opportunities for distribution, commercialization, and innovation.

Speaker #3: 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.

Ning Tang: 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 US $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 selected strategic opportunities. As we enter the H2 2026, our priorities are clear. In credit solutions, we 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 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.

Speaker #3: 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.

Speaker #3: In July, the board authorized a US$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 selected strategic opportunities.

Speaker #3: As we enter the second half of 2026, our priorities are clear: credit solutions. We will protect asset quality, while further transitioning toward a technology-driven and asset-light borrower referral model.

Speaker #3: We believe our AI-powered customer acquisition capabilities can help us deliver higher-quality traffic and better matching for lending partners, while reducing our reliance on capital-intensive lending.

Speaker #3: In insurance, we will continue to integrate our online and offline channels to expand our customer base and improve retention and revenue quality. Across the company, we will continue to deepen the application of AI.

Ning Tang: 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 a pivotal stage of our transformation. Our established fintech businesses provide the operating foundation and 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 a 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 Earnout Exercises based on their individual performance, strategic fit, and capital requirements.

Speaker #3: Throughout our existing operations, while selectively expanding our AI ecosystem through partnerships, incubation, and strategic investments, we are in a pivotal stage of our transformation.

Speaker #3: Our established fintech businesses provide the operating foundation and real-world application scenarios, while our AI capabilities are increasingly becoming the technology layer connecting these businesses and enabling new applications.

Speaker #3: By applying these capabilities and expanding them across a 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.

Speaker #3: 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 warrant exercises based on their individual performance, strategic fit, and capital requirements.

Speaker #3: This disciplined approach is important as we build new sources news as we build new sources of growth while preserving the strength and flexibility of our core business.

Ning Tang: This disciplined approach is important as we build new sources of growth while preserving the strength and 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 will now pass the call to William, who will provide more details on our financial performance.

Speaker #3: 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 this demanding period.

Speaker #3: 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.

Speaker #1: Thank you, Naim. Before I review our financial performance for the second quarter, I would like to point you to our IR website for our earnings release and quarterly IR deck for your reference and additional details.

Ka Chun William Hui: Thank you, Ning. Before I review our financial performance for Q2, I would like to point you to our IR website for our earning release and quarterly IR pack for your reference and additional details. Let me reiterate what Ning just said. This year has been a transformation year for us. We took necessary measures to strengthen our revenue quality and preserve financial flexibility while continuing to invest in digital insurance and AI capabilities. We are now beginning to see these investments translate into technology-related revenue streams. At the same time, our lending business has stabilized as credit conditions have improved, which has resulted in lower provisions for contingent liabilities and contributed to our net loss narrowing by 9% sequentially in Q2. Excluding the allowance for the long-age legacy receivables and related party loan receivable, adjusted operating income turned around to approximately breakeven this quarter.

Speaker #1: So let me reiterate what Naim just said. This year has been a transformational year for us. We took necessary measures to strengthen our revenue quality and preserve financial flexibility.

Speaker #1: While continuing to invest in digital insurance and AI capabilities, we are now beginning to see these investments translate into technology-related revenue streams. At the same time, our lending business has stabilized as credit conditions have improved, which has resulted in lower provisions for contingent liabilities.

Speaker #1: And contributed to our net loss narrowing by 9% sequentially in the second quarter. Excluding the allowance for the long-aged legacy receivables and related party loan receivable, adjusted operating income turned around to approximately break-even this quarter.

Speaker #1: Overall, we believe these developments demonstrate that we are making steady progress toward a more diversified, technology-driven, and financially resilient business model. I will now walk through our revenue mix, operating expenses, credit costs, and earnings.

Ka Chun William Hui: Overall, we believe these developments demonstrate that we are making steady progress toward a more diversified, technology-driven, and financially resilient business model. I will now walk through our revenue mix, operating expenses, credit costs and earnings, and cash flow and capital allocation. On the revenue side, the total net revenue was RMB 890 million, down 3% quarter over quarter and down 46% year over year. Loans facilitated during the quarters were RMB 6.3 billion, down 29% quarter over quarter, while outstanding balance of performing loans declined 30% to RMB 15.1 billion over the same period. The year over year decrease in credit solution revenue primarily reflected lower loan facilitation volume as the industry implemented the new regulatory requirements for online loan facilitation imposed last year.

Speaker #1: And cash flow and capital allocation. On the revenue side, the total net revenue was RMB 890 million, down 3% quarter over quarter and down 46% year over year.

Speaker #1: Loans facilitated during the quarter were RMB 6.3 billion, down 29% quarter over quarter. The outstanding balance of performing loans declined 30% to RMB 15.1 billion over the same period.

Speaker #1: The year-over-year decrease in credit solution revenue primarily reflected lower loan facilitation volume, as the industry implemented new regulatory requirements for online loan facilitation imposed last year.

Speaker #1: Despite an improving overall credit environment, we maintain a conservative approach to credit risk management by moderating loan facilitation activity and increasingly focusing facilitated loan volume on established, repeat borrowers.

Ka Chun William Hui: Despite an improving overall credit environment, we maintain a conservative approach to credit risk management by moderating loan facilitation activity and increasingly focusing facilitated loan volume on established repeat borrowers. On a sequential basis, the impact of lower loan facilitation volume was partially offset by guarantee services revenue recognized over the terms of underlying loan originated in the prior periods. Beyond near-term volume management, we are advancing the transitions from capital-intensive risk-taking model toward a more asset-light technology-led operating model. Over time, we expect greater contributions from technology-enabled borrower acquisitions, loan facilitations, and related technology service revenue, with lower reliance on guarantee-related exposure under the old risk-taking model. The pace of these transitions will depend on funding partners' demand, regulatory requirements, and our executions. Turning to insurance, the number of insurance clients increased 14% quarter over quarter to approximately 453,000, while gross written premiums increased 2% to RMB 838.9 million.

Speaker #1: On a sequential basis, the impact of lower loan facilitation volume was partially offset by guaranteed services revenue recognized over the terms of underlying loans originated in a prior period.

Speaker #1: Beyond near-term volume management, we are advancing the transition from a capital-intensive risk-taking model toward a more asset-light, technology-led operating model. Over time, we expect greater contributions from technology-enabled borrower acquisitions, loan facilitations, and related technology service revenue.

Speaker #1: With lower reliance on guarantee-related exposure under the all-risk-taking model, the pace of this transition will depend on funding partners' demands, regulatory requirements, and our execution.

Speaker #1: Turning to insurance, the number of insurance clients increased 14% quarter-over-quarter to approximately 453,000, while gross written premiums increased 2% to RMB 838.9 million.

Speaker #1: Insurance brokerage revenue was RMB 67.3 million, down 23% compared to the first quarter, but up 16% year over year. The year-over-year increase in insurance brokerage revenue was supported by the continued expansion of internet insurance distributions and steady growth in traditional insurance operations.

Ka Chun William Hui: Insurance brokerage revenue was 67.3 million RMB, down 23% compared to the first quarter, but up 16% year-over-year. The year-over-year increase in insurance brokerage revenue was supported by the continued expansion of internet insurance distributions and steady growth in traditional insurance operations. The quarterly decrease mainly reflected lower renewal rate for certain internet insurance products and an adjustment to commission revenues from the existing portfolios. However, we are encouraged to see growth in new business from both traditional and digital lines. The growth from our technology revenue is encouraging. Our technology service revenues increased by 5.9% compared to the second quarter of 2025, but declined modestly by 2.3% quarter-over-quarter. The year-on-year growth reflects the increasing contributions from technology services within the non-lending business.

Speaker #1: The quarterly decrease mainly reflected a lower renewal rate for certain internet insurance products, and an adjustment to commission revenues from the existing portfolios. However, we are encouraged to see growth in new business from both traditional and digital lines.

Speaker #1: The growth from our technology revenue is encouraging. Our technology service revenues increased by 5.9% compared to the second quarter of 2025, but declined modestly by 2.3% quarter over quarter.

Speaker #1: The year-on-year growth reflects the increasing contributions from technology services within the non-lending business. While technology services in the lending business are undergoing a transition to the new business model, as this transition progresses, we expect technology services to play a bigger role in diversifying our revenue base and supporting the evolution of our business model.

Ka Chun William Hui: While technology services in the lending business are undergoing a transition to the new business model. As this transition progresses, we expect technology services to play a bigger role in diversifying our revenue base and supporting the evolutions of our business model. Revenue from other businesses was 45 million RMB, up 40% compared to the previous quarter, primarily due to higher consulting, network, and marketing services revenue. On a year-over-year basis, revenue declined 57%, mainly reflecting the termination of the e-commerce business in 2025. As for our operating expenses and investment in AI, sales and marketing expenses were 126.9 million RMB, up 12% from the first quarter, but down 63% year-over-year. The year-over-year decrease primarily reflected lower customer acquisition costs for the credit solution business as loan facilitation volume declined and the repeat borrower percentage increased.

Speaker #1: Revenue from other businesses was RMB 45 million, up 40% compared to the previous quarter. This increase was primarily driven by higher consulting, network, and marketing services revenue.

Speaker #1: On a year-over-year basis, revenue declined 507%, mainly reflecting the termination of the e-commerce business in 2025. As for our operating expenses and investment in AI, sales and marketing expenses were $126.9 million RMB.

Speaker #1: Up 12% from the first quarter, but down 63% year over year. The year-over-year decrease primarily reflected lower customer acquisition costs for the credit solution business.

Speaker #1: As loan facilitation volume declined, the repeat borrower percentage increased. The quarterly increase mainly reflected higher internet-based marketing costs for new customers in the internet insurance business.

Ka Chun William Hui: The quarterly increase mainly reflected higher internet-based marketing costs for new customers in the internet insurance business as it grew to the next phase beyond leveraging the existing user traffic. Origination servicing and other operating costs were 189.6 million RMB, down 4% quarter-to-quarter and up 18% year-over-year. The quarterly decrease primarily reflected lower credit solution operating costs as the loan facilitation volume and the outstanding loan balance moderated. The year-over-year increase was mainly attributable to higher collection costs resulting from strengthened collection effort, as well as higher operating costs associated with increased new business volume from the traditional insurance business. Research and development expenses were 113.1 million RMB, up 4% sequentially and 5% year-over-year, reflecting our continued investment in AI-related personnel and engineering capabilities. We are focusing these investments on practical applications with measurable operating value, clear accountability, and appropriate governance.

Speaker #1: As it grew to the next phase beyond leveraging the existing user traffic, origination servicing and other operating costs were RMB 189.6 million, down 4% quarter to quarter.

Speaker #1: And up 18% year over year. The quarterly decrease primarily reflected lower credit solution operating costs, as the loan facilitation volume and outstanding loan balance moderated.

Speaker #1: The year-over-year increase was mainly attributable to higher collection costs resulting from strengthened collection efforts, as well as higher operating costs associated with increased new business volume from the traditional insurance business.

Speaker #1: Research and development expenses were RMB 113.1 million, up 4% sequentially and 5% year over year, reflecting our continued investment in AI-related personnel and engineering capabilities.

Speaker #1: We are focusing these investments on practical applications with measurable operating value, clear accountability, and appropriate governance. Turning to our credit cost and earnings, provisions for contingent liabilities declined 63% compared to the first quarter.

Ka Chun William Hui: Turning to our credit costs and earnings, provisions for contingent liabilities declined 63% compared to the first quarter and declined 40% year-over-year to 233.3 million RMB. The decrease primarily reflected lower than expected net charge-off rate on newly originated loans as the credit performance improved. Lower loan facilitation volume under guarantee arrangement also contributed to decrease in the contingent liabilities. Allowance for contract assets receivable and others was 502.8 million RMB, compared with 176.4 million RMB in the first quarter and 214.7 million RMB in the same period last year. The increase mainly reflected a higher provisions for credit loss related to aging receivable balances and certain related party loan receivables following a reassessment of their recoverability.

Speaker #1: And a 40% decline year over year to 233.3 million RMB. The decrease primarily reflected a lower than expected net charge-off rate on newly originated loans as the credit performance improved.

Speaker #1: Lower loan facilitation volume under guarantee arrangement also contributed to a decrease in the contingent liabilities. Allowance for contract assets receivable and others was RMB 502.8 million.

Speaker #1: Compared with RMB 176.4 million in the first quarter, and RMB 214.7 million in the same period last year. The increase mainly reflected higher provisions for credit losses related to aging receivable balances.

Speaker #1: And certain related party loan receivables following an AV assessment of their recoverability. These increases were partially offset by lower credit losses on financing and guarantee receivables.

Ka Chun William Hui: These increases were partially offset by lower credit losses on financing and guarantee receivables, reflecting lower loan origination volume and lower than expected net charge-off rate on newly originated loans as credit quality improved. The allowance for these receivables is a non-cash charge based on our current assessment of recoverability. We are strengthening collection efforts, closely monitoring the relevant counterparties, and updating our assumption as additional information becomes available. Fair value adjustment loss was 97.8 million RMB, compared with 89 million RMB in the first quarter, primarily due to a fair value loss in Ethereum as of 30 June 2026. As you may know, Ethereum prices have recovered substantially beginning in August.

Speaker #1: Reflecting lower loan origination volume and lower than expected net charge-off rate on newly originated loans as credit quality improved. The allowance for these receivables is a non-cash charge based on our current assessment of recoverability.

Speaker #1: We are strengthening our collection efforts, closely monitoring the relevant counterparties, and updating our assumptions as additional information becomes available. The fair value adjustment loss was RMB 97.8 million.

Speaker #1: Compared with RMB 89 million in the first quarter, primarily due to a fair value loss in Ethereum as of June 30, 2026. As you may know, Ethereum prices have recovered substantially beginning in August.

Speaker #1: Assuming the price remains at or above this level through the end of the third quarter, we would expect to recognize substantial fair value gains in the third quarter.

Ka Chun William Hui: Assuming the price remains at or above at this level through the end of the third quarter, we would expect to recognize a substantial fair value gains in the third quarter, significantly offsetting the fair value loss this quarter. Net loss narrowed by 9% compared to the first quarter, to 449.6 million RMB, primarily reflecting the lower provisions for contingent liabilities. This benefit was partially offset by higher allowances for credit loss related to contract assets, receivables, and others. Excluding the allowance related to contract assets, receivables, and others, our operating income was approximately breakeven. Compared with net income of 357.5 million RMB in the same period last year, the change to net losses mainly reflected lower credit solution revenue, higher allowance, and a fair value loss instead of a gain, partially offset by lower sales and marketing expenses on a year-over-year basis, and lower provisions for contingent liabilities.

Speaker #1: Significantly offsetting the fair value loss this quarter, net loss narrowed by 9% compared to the first quarter to RMB 449.6 million, primarily reflecting the lower provisions for contingent liabilities.

Speaker #1: These benefits were partially offset by higher allowances for credit loss related to contract assets, receivables, and others. Excluding the allowance related to contract assets, receivables, and others, our operating income was approximately flat.

Speaker #1: Compared with net income of RMB 357.5 million in the same period last year, the change to net losses mainly reflected lower credit solution revenue, higher allowance, and a fair value loss instead of a gain, partially offset by lower sales and marketing expenses on a year-over-year basis.

Speaker #1: And a lower provision for contingent liabilities. Looking into cash flow, balance sheet, and capital allocation, net cash used in operating activities was RMB 1.03 billion, compared with RMB 655.6 million in the first quarter.

Ka Chun William Hui: Looking into cash flow, balance sheet, and capital allocation. Net cash used in operating activities was 1.03 billion RMB, compared with 655.6 million RMB in the first quarter. The increase primarily reflected lower service fee collection due to reduced business volumes, increased prepayment for collections, system support and marketing services, and continued indemnity payment from the existing loan under the risk-taking model. As of 30 June 2026, the cash and cash equivalents were 1.7 billion RMB, compared with the 2.45 billion as of 31 March 2026. Financial investments were 252 million RMB, compared with 507.5 million RMB at the end of the first quarter. Our first priority remains maintaining sufficient liquidity to meet customer obligations, manage credit volatilities, and support normal operations.

Speaker #1: The increase primarily reflected lower service fee collection due to reduced business volumes, increased prepayment for collections system support and marketing services, and continued indemnity payment from the existing loan under the risk-taking model.

Speaker #1: As of June 30, 2026, cash and cash equivalents were RMB 1.7 billion compared with RMB 2.45 billion as of March 31, 2026. Financial investments were RMB 252 million compared with RMB 507.5 million at the end of the first quarter.

Speaker #1: Our first priority remains maintaining sufficient liquidity to meet customer obligations, manage credit volatilities, and support normal operations. We will also continue to fund internal AI developments and selectively evaluate M&A opportunities through exercising more in agreements in any of the contracted companies that meet our financial, strategic, and governance standards.

Ka Chun William Hui: We will also continue to fund internal AI developments and selectively evaluate M&A opportunities through exercising warrant agreements in any of the contracted companies that meets our financial, strategic, and governance standards. In July, the board authorized a share repurchase program under which the company may repurchase up to 10% of its total issue and outstanding ordinary shares and ADSs for an aggregated amount of up to US $20 million over the following 12 months. We will continue to explore various ways to create value and reward our shareholders. Looking ahead, our near-term priorities is to stabilize the core business while preserving financial flexibilities. In credit solutions, we will continue to transform our loan facilitation models to leverage our existing customer base, technologies and lending expertise to advance our transition toward a more asset-light, technology-led operating model.

Speaker #1: In July, the board authorized a share repurchase program under which the company may repurchase up to 10% of its total issued and outstanding ordinary shares.

Speaker #1: And ADSs for an aggregated amount of up to $20 million over the following 12 months. We will continue to explore various ways to create value and reward our shareholders.

Speaker #1: Looking ahead, our near-term priority is to stabilize the core business while preserving financial flexibility. In credit solutions, we will continue to transform our loan facilitation model to leverage our existing customer base, technologies, and lending expertise to advance our transition toward a more asset-light, technology-led operating model.

Speaker #1: In our insurance, our focus is to convert more existing clients and drive more policy growth through improved product matching, renewal management, and digital distributions.

Ka Chun William Hui: In our insurance, our focus is to convert more existing clients and drive more policy growth through improved product matching, renewal management, and digital distributions. Across the company, we will continue to grow our technology revenues by investing in AI applications that deliver measurable improvement in operating efficiencies, risk control, and customer services while evaluating external opportunities under disciplined financial and governance standards. We remain focused on disciplined execution as we advance Yiren Digital's transformation. Thank you. This concludes our prepared remarks. Operator?

Speaker #1: Across the company, we will continue to grow our technology revenues by investing in AI applications that deliver measurable improvements in operating efficiencies, risk control, and customer services.

Speaker #1: While evaluating external opportunities under disciplined financial and governance standards, we remain focused on disciplined execution as we advance Yiren Digital's transformation. Thank you. This concludes our prepared remarks. Operator.

Speaker #2: There will be no Q&A session on today's call. If you have any further questions, please contact Yiren Digital's Investor Relations team or PSNT's Financial Communications.

Operator: There will be no Q&A session on today's call. If you have any further questions, please contact Yiren Digital's investor relations team or Piacente Financial Communications. This concludes today's conference call. Thank you for your participation. You may now disconnect.