Yiren Digital Ltd. (NYSE:YRD) Q1 2024 Earnings Call Transcript

Yiren Digital Ltd. (NYSE:YRD) Q1 2024 Earnings Call Transcript June 21, 2024

Operator: Good day, and welcome to the Yiren Digital First Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Keyao He, Investor Relations Officer. Please go ahead.

Keyao He: Thank you, operator. Good morning and good evening, everyone. This call features the presentation by the Founder, Chairman, and CEO of CreditEase, our CEO, Mr. Ning Tang, and our CIFO, Ms. Na Mei, and our SVP, Ms. Mei Zhao will also attend the Q&A session after the prepared remarks. Before beginning, we’d like to remind you that discussions during this call contain forward-looking statements made under the Safe Harbor provision of U.S. Federal Security Litigation Reform Act of 1995. Such statements are subject to risk, uncertainty, and factor, and can cause actual results to differ materially from those contained in any such statements. Further information regarding future risk, uncertainties, or factors is included in our filing with the U.S. Securities and Exchange Commission.

We do not undertake any obligation to update any forward-looking statements as required under the relevant laws. During this call, we will be referring to certain non-GAAP financial measures and supplemental measures to review and assess our operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For information about those non-GAAP financial measures and reconciliations of GAAP measures, please refer to our earnings press release. I will now pass it on to Ning for opening remarks.

Ning Tang: Thank you all for joining our earnings conference call today. We are pleased to record another solid quarter with stable growth in our top line and overall business scale during a traditional off season in the industry, while maintaining healthy profitability. Moreover, we are excited to announce that our AI Lab initiative has begun to yield early results, as AI integration continues to permeate all aspects of our operations. Before delving into our business performance, I would like to highlight our recent branding upgrade. As you may know, we’ve rebranded our Chinese company name from [Yiren Jinke] (ph) to Yiren Zhike. The term [Jinke] (ph) meaning FinTech, has been replaced with Zhike, signifying intelligent technology or AI technology.

This change underscores our commitment to ongoing technological innovation and our dedication to enhancing our customer experience. Our core mission of leveraging technology to deliver value to our clients remains unwavering. Now, I would like to go through our business highlights for this quarter. First, regarding our financial services business, the first quarter of 2024 saw a steady growth with total loan volume reaching RMB11.9 billion, marking an 86% increase year-over-year and the fifth consecutive quarter of growth. The number of borrowers experienced a slight decline to RMB1.35 million from RMB1.37 million in the prior quarter, influenced by seasonal factors, as well as our emphasis on quality growth and a strategic shift toward a higher quality borrower segment.

Additionally, our loan facilitation platform, the [indiscernible] app, has seen a surge in popularity. Its monthly active users grew to over 4.4 million in the first quarter of 2024, up from 3.5 million last quarter, representing a 26% increase. This impressive growth is due to our improved customer services and enhanced efforts to boost customer engagement. It’s also worth mentioning that our AI integration into loan facilitation business has shown concrete progress. Currently, our proprietary large language model-based intelligent voice interaction model has been applied into our telemarketing, asset management and customer service, which has brought visible improvement in efficiency. For instance, our intelligent robots used for customer acquisition are now able to make over 400,000 phone calls daily, doubling the previous volume.

In addition, our telemarketing team has seen an almost 40% improvement in customer conversion rate through the use of AI-powered robots. Currently, the voice recognition accuracy of our system has reached 92%, and this ratio is expected to increase as we continue to fine-tune our models and train them with more data. Meanwhile, our international business has been showing strong momentum with a 60% increase in total loan volume compared to the previous quarter. In the first quarter of 2024, our Philippine market achieved a milestone by surpassing RMB10 million in monthly loan volume, showcasing exceptional growth. Additionally, we’ve seen a continued decline in customer acquisition cost as we continue to optimize our products and enhance our conversion rate.

Specifically, the cost of acquiring borrowers in March decreased by double digits compared to January. Furthermore, our overseas operations extensively leverage AI technology. For example, our anti-fraud AI models are highly effective in detecting image fraud. Our black and white document detection model boasts an accuracy rate of over 97%. And our mobile screenshot detection model achieved an accuracy rate of 99%. These AI models have significantly enhanced our risk management efficiency, reducing potential fraud losses. Now, turning to asset quality. In the first quarter of 2024, the overall delinquency rates of our loan portfolio increased, with the 15 to 89 day delinquency rate rising to 3.9% due to industry-wide credit quality fluctuations.

However, we are actively upgrading our customer base and fine-tuning our risk control standards through AI analysis. As a result, the asset quality of new customers continues to improve. The [M1] (ph) collection rate in the first quarter of 2024 has increased by 67 basis points compared to the prior quarter. As the proportion of assets from our new borrowers continues to increase, the risk indicators of our overall loan portfolio started to decline in May and continue to trend downward. On the funding front, we’ve experienced a consistent decrease in cost as our network of funding partners grows. In the first quarter of 2024, our funding costs decreased by 43 basis points compared to the previous quarter, a trend we expect to continue throughout the year.

Moreover, to achieve a better balance between risk management and profitability, we began engaging more in risk-taking model where the company takes the credit risk of the loan facilitation. Therefore, the proportion of loans and the risk-taking model is expected to grow in the coming quarters. Now, regarding our insurance brokerage business, recent regulatory changes have impacted the overall growth of the life insurance sector. In response, our strategy emphasizes prioritizing quality over quantity, improving profitability, and shifting towards a stronger focus on property insurance. In the first quarter of 2024, our total premiums reached RMB112 million, indicating a slight 1% decrease year-over-year. Specifically, life insurance premiums declined by 16% annually, consistent with industry trends.

However, property insurance premiums increased by 19% year-over-year, generating RMB118 million in revenue, a 12% rise compared to the previous year and marking a peak over the past two years. Notably, we have optimized our business structure by reducing the proportion of low-margin products such as auto insurance and focusing on liability insurance and overseas construction insurance. By prioritizing gross profit margin as a key performance indicator for the team, we substantially enhanced the profitability of our property insurance segment, achieving a 5.5% improvement in average commission rates. Moreover, our product innovation and customization capabilities have been recognized within the industry, resulting in a steady stream of high-quality orders in our pipeline.

During the first quarter of 2024, Hexiang Insurance secured contracts with Xinjiang Transportation Investment Group and ranked the top among its three major suppliers. This achievement sets a strong foundation for our future expansion in providing customized services within the construction insurance sector. In the realm of AI integration, our insurance business is actively exploring innovation — innovative applications, and currently developing our proprietary AI-driven insurance renewal reminder robot. Following rigorous voice training, program testing, and data segmentation, we’ve already begun initial deployment in our operations. Additionally, we are making significant progress in customer acquisition through social media channels. In the first quarter of 2024, we converted leads from our social media efforts into RMB2.2 million in premiums.

This momentum remains strong as we enter into the second quarter. Moving forward, we will continue to focus on strengthening our channel partnerships and overall profitability. However, we maintain a conservative attitude toward the life insurance sector as the regulatory impact is expected to continue in the foreseeable future. In the consumption and lifestyle services segment, our total GMV reached RMB625 million in the first quarter of 2024, making a remarkable 103% year-over-year increase, largely driven by our existing and expanding customer pool. As we continue to deepen penetration within our current customer base, we anticipate the growth rate of this segment will gradually normalize, aligning with our other business segments. To wrap up my prepared remarks, I would like to reiterate our AI strategy as the foundational direction for our future development.

It is structured in three comprehensive phases or three steps. Firstly, empowering existing business. We are leveraging AI to enhance and optimize our current operations, driving efficiencies and improving outcomes across all segments as we are currently doing. Secondly, building advanced AI capabilities and ecosystem. While we integrate AI into our existing business, we have developed many high-value tools, capabilities, and partnerships. For example, our proprietary DiTing Intelligent Decision Making System had made over 1 billion decisions by the end of the first quarter of 2024 and has earned industry-wide recognition with a prestigious award. Another example is our AI-driven Intelligent Customer Service solution, which was honored with Outstanding Solutions Award at the National Industrial Financial Collaboration Data Modeling Algorithm Competition, among others.

Such tools, together with our large language model training, fine tuning, and optimization capabilities can serve not just us, but many other industries and enterprises as well. We are keen to explore such business opportunities. Furthermore, we are actively seeking strategic investment and partnership opportunities and have built a healthy pipeline for execution. They can help build better access to top talents and technologies. Lastly, for the long run, long-term goal exploring future AI commercialization, we endeavor to build AI native businesses as our business expansion and company transformation strategy. We believe the high-value tools, capabilities, and the relationships as mentioned above serve as a solid foundation. Our AI strategy is not a sudden shift in business direction, but a solid step-by-step approach to upgrading and sharpening our core competitive strength that we’ve built over the past decade of operations.

We are excited to continue this journey with our partners and shareholders to embrace a bright future. Now, I will pass it to Na, who will go through the financial performance for this quarter.

Na Mei: Thank you, Ning. And hello, everyone. On this call, I will only focus on our key financial highlights. Please refer to our earnings release and IR deck for further details. First of all, we are glad to deliver a solid partner with a [high-weight] (ph) margin. In this quarter of 2024, our total revenue reached RMB1.4 billion, representing 40% increase year-over-year. In the financial service segment, our total loan facilities continue to grow rapidly, reached RMB11.5 million, an increase of 86% year-over-year, driven by the strong demand of our smaller revolving loan products. Revenue from financial service business increased 53% year-over-year to RMB738.1 million. In the insurance sector, our gross written premium reached RMB 912 million, representing a decrease of 1% year-over-year.

As mentioned by Ning earlier, the decline in our premiums is mainly driving the essential drop in our life insurance sales, followed by the local regulation change, which was outside an increase in our property insurance products. Consequently, the portion of our property insurance in our overall [indiscernible] increased sharply, compared to our life insurance products. The average commutative rate in the property insurance sector is lower, resulting in a 36% year-over-year decrease in the revenue from our insurance brokerage segment, to RMB125 million for this quarter. However, going forward, it will also impact our life insurance business to greatly rebound in line with marketing recovery. But the revenue [indiscernible] is tied to the system in the short term.

In the consumption of lifestyle segment, the total GMV for this quarter reached RMB625 million, representing an increase of 103% year-over-year, drive by our large consumer base. As mentioned previously, [indiscernible] was launched a year ago to serve our users across our business lines. Therefore, as far its penetration goes [indiscernible] GMV of this segment grows strong to align with our business [indiscernible] combined customers across diverse business segments. On the expense side, sales and marketing expense equates to 161% year-over-year to RMB275 million. This growth was partly driven by the rapid penetration of our financial service segment and it caused our marketing efforts to gain and acquire new high-quality customers as we continued to optimize our customer mix.

Research and development expense increased 39% year-over-year to RMB31 million due to our continuous investment in AI and technological innovation. Origination and service costs increased 70% year-over-year to RMB233 million. The growth is primarily contributed to our high channel base in the private insurance business compared to our life insurance. As a portion of private insurance primaries increase, there is a corresponding increase in final settlement costs. Moreover, our G&A costs increase by [32%] (ph) year-over-year to RMB84 million, primarily due to necessary personal adjustment, which is an involving personal staff and providing additional incentives. The allowance for contract assets and receivables was RMB102 million for the quarter, representing a 150% year-over-year, mainly due to the growth in our loan facility.

Moreover, as we mentioned earlier, we need to improve the balance between our overall risk management costs and the profitability. We have started to gradually increase the loan-volume facility under the risk-taking model. Therefore, we have a new item named provision for contagion liability to reflect the provision under this model. Additionally, like the loan volume under this model grows, we expect a gradual increase in our revenue from our guaranteed service in the coming quarters. Onto our bottom line, we continue to deliver a strong profit of RMB486 million this quarter, representing a 14% increase from the prior year. We generated approximately RMB632 million net cash from operations this quarter, a increase of 62% from the previous year.

On the balance sheet side, our balance sheet remains robust with RMB5.9 billion in cash and catch equivalent as of the end of this quarter. We have already $2.1 million to perform our share repurchase shares in the public market for the first quarter of this year, bringing our total deployment for the share repurchase program to $9.5 million by March 31, 2024. We will continue to do our share repurchase and maintain confidence in the fundamental direction of our company business and its growth potential. Based on our assessment of current business and the marketing condition, we spent our revenue for the second quarter this year to stand before RMB1.4 billion to RMB1.6 billion with healthy net profit margin. This refers to our current and preliminary view, which would subject to change and uncertainty.

With that, we conclude our remarks. Operator, now we are open for questions. Thank you.

Q&A Session

Operator: And thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question today will come from Matthew Larson of Fincadia. Please go ahead.

Matthew Larson: Good evening, you all. Thanks for taking my call. Just a couple of comments. I mean, another good quarter. You guys generated quite a bit of cash and earnings and you do quarter after quarter and I’ve been involved in and out of your company’s stock since you went public. I’ve mentioned that in previous conference calls and I’ve done quite well over the last year or so. Stocks have done very well. I’m hoping it can break out to kind of a more mainstream price level. Working against you is the — just lack of interest is the lack of interest in Chinese securities here in the United States. Your local markets, the Hang Seng and Shanghai markets have not done well. So you’re kind of got the wind in your face, so to speak, versus the wind at your back.

But — and I will give you guys tremendous credit for improving your public relations over the last few months. You’ve put out updates on your business and you’ve used catchwords like artificial intelligence quite often, which I think are accurate. Your company has used algorithms and some level of AI for years to determine your lending activities and acquiring new customers and things like that. So it’s quite legitimate and I’m glad that you are highlighting that sort of technology that your company has used for years. And it hasn’t helped the stock recently but it your stock has remained elevated and I’m hoping the next move gets us significantly higher. So thank you. However, an area that we’ve talked about — I have one other thing, also your earnings announcement today was a lot better.

It was broken out in two or three parts, you are comparing it from the year before. It wasn’t just a one line thing. So whoever you’re using to get your news out is a great improvement. But we’ve talked in the past about maybe instituting a dividend. Many of your peers that are listed in the United States do have a significant dividend. QFIN, Qifu, if I’m pronouncing it correctly, or XYF, just announced a tender offer and a dividend. And then GIN, JFIN, just announced another large dividend. So they’re returning cash to their investors and like your company they traded a very low multiple between 1 times and 2 times earnings. I wish you would do that. You have a huge amount of cash on your balance sheet. $30 million or $40 million presumably wouldn’t change your business model or your growth prospects, but that would really be great for shareholders and it could very well raise the value of your stock several times that amount.

So I continue with that suggestion. Your peer group is doing it. And then also your share buyback is still pretty small. But outside of that, thank you for another good quarter. I have confidence in your company and if more interest in the Chinese stock market is created here, I think your stock could do well. So I’ll leave it there. Thank you.

Ning Tang: Thank you, Matthew. A couple of thoughts following your very nice remarks. One is that, indeed, yes, we have improved the way we communicate with the public. Thank you. And some other shareholder friends making this great suggestion. And we’ll continue to do that. And secondly, artificial intelligence is for us very, very real. And this time is the new, new thing and it’s the real thing. So for all the industries and the companies — and we have strong conviction that we will — we are well positioned to capture this great change element opportunity. So we’ve already seen like a very exciting initial results as we embrace AI strategy. So we will continue doing that and also talking about that. And thirdly, regarding the dividend suggestion, while we continue to believe share buyback and investing into the future, like AI can best serve our shareholders, we hear you and other shareholder friends regarding this issue.

And we are evaluating — further evaluating this issue. And this is where we are and we will report more as there is additional progress. And it is our intention to really serving — serve our shareholders with great value creation in many different ways. And I appreciate the suggestion you and some other shareholder friends have given us. And lastly, regarding China, so indeed, there is this impact. But we are also growing internationally. And so — and we are in more markets. So the business is more balanced. And so the story is not just a China story, but a global story. It’s not just a FinTech story, but an AI story. So, I think what we are doing is really in terms of a business strategy, transforming the company to an AI player. And in terms of a capital market strategy, we are like recategorizing the company, you may say.

And I hope by doing this well for some time, yeah, we can best serve our shareholders, including ourselves. Thank you.

Operator: Our next question today will come from Marco Zhang of [indiscernible] Research. Please go ahead.

Unidentified Analyst: Hi. Thanks, management, for taking my question. This is Marco from [indiscernible] Research. So following Mr. Tang’s answer to Matthew’s question earlier, not just a Chinese story. So my first question is, about your international business. So as you mentioned in your last earnings call, you have a pretty big plan for expansion, international expansion this year into Southeast Asia, Latin America, and also Mexico. Just for our modeling purpose, I don’t know if you can disclose how much of your revenue this quarter came from your international business and what’s your target percentage by the end of 2024?

Ning Tang: Thank you. Again, going global, being truly global is our clear strategy. And so, we are making very solid progress in Southeast Asia and also Latin America. And I mentioned certain information in my prepared remarks. And let me see whether or not I can provide more details at this point.

Unidentified Analyst: Got it. Yes, maybe we can talk offline and get this out. Yes.

Ning Tang: Okay. Yes. [Multiple Speakers]

Na Mei: [Multiple Speakers] I can give you [indiscernible] information for your reference, our international business [indiscernible] for this year. As mentioned in our — each college as mentioned, [indiscernible] oversees business is nailing one of our main business strategies for our company. And from 2022, after we acquired our licenses [indiscernible] actually our overseas business volume increased with digital clients. And in this quarter, our overseas value is about RMB32 million, representing 52% growth compared to the last quarter of 2023. And for the second quarter of this year, we also have the confidence in our overseas business. And we think that we will maintain the high growth rate easily, same as the first quarter, as maybe higher than the first quarter.

And for the full year of this year, we expect our overseas loan volume is increased about 5 times to 6 times compared to the last year. So we can look forward our future business. Of course, for the revenue, actually for the first quarter of this year, due to we have only RMB32 million loan volume sales, the total revenue is not just significantly compared to our total revenue. But for the whole year, based on our forecast and we plan to do the total revenue of our overseas, it’s about 3% to 5% of our overall financial service for the whole year. Of course, except for the loan volume and the revenue, we also put more attention to our probability, our overseas product. Actually, in this quarter, our overseas product, especially in the Philippines, our margin has got a positive result.

And so, we hope we ever have the confidence in our overseas department and always think that by the end of this year overseas business can contribute more profit including the revenue and profit margin as well [indiscernible] revenue. Okay, thank you. I hope the information is useful for your question. Thank you.

Unidentified Analyst: Perfect, yeah, that answers my question about your international business. Yes, and my second question is about AI. So congratulations on your successful launch of AI Lab last quarter. And you also mentioned in your last learning call that you aim to expand your AI expertise beyond the FinTech verticals to more selected sectors. Is there any progress there that you can disclose? And also as you have a much stronger cash position and you change your Chinese name from Yiren FinTech to Yiren SmartTech, so do you have any strategic plans in AI, such as acquisitions in the near future?

Ning Tang: Thank you. And so the new Chinese name is more Yiren AI Tech or Yiren intelligent tech, but it’s smart. Thank you. And so, what we’re doing right now is that, as I mentioned, there are three steps. The first step is that, we utilize AI really well in our existing businesses and in our company management operations. And because it’s really not an easy, easy thing to do our existing business well. As you know, given the risk situation, we need to do better risk management. So long there’s always competition, so on. And so we need to utilize AI really well in our existing business. At the same time though, we are preparing for the future. For example, we train our models, right, like the capability of training like our own models, fine tuning them, optimizing them, and it’s actually quite valuable for many other companies and industries.

So — and also many of the agents, you’d say — we use in our own business, the way we build the agents, the way we use them, it’s also very valuable for other companies and industries. So we are productizing, is that the right word? Like productizing, yes. So making such capabilities, such tools into products which we can sell to other companies, industries. So that’s like one key thing we are doing right now. At the same time, as I mentioned, we are looking to do some like incubation and strategic investment work, like focusing on AI native business opportunities. So we are still in early stage of exploration and implementation. But there will be more coming out. We will report in a timely way. And so, regarding acquisition, we are interested in doing smart M&A.

There is actually indeed one idea we are currently evaluating. As it progresses to a certain stage, we will be in a position to share more. But overall, I think we are doing the first step, which is utilizing AI in our own business. And the second step, which is developing, like advanced — building advanced AI capabilities and the ecosystem through like productizing the tools and the solutions we use in our own use in our own business for the future like business opportunities. And also, yes, we are looking to do — like to build a strategic relationship through investment and smart M&A. Hope I can share more next time.

Unidentified Analyst: Okay. Great. Yes. That’s great to hear. And congratulations again on another strong quarter, and we look forward to hearing more good news from the company. Operator, I have no more questions.

Operator: Thank you. Our next question today will come from [indiscernible], a Private Investor. Please go ahead.

Unidentified Analyst: Hello, Mr. Ning Tang and the company. Thank you for your great result and great work on the company. I wanted to first start with a remark that YRD is trading at 1.4 or even it was 1.5 price earnings, but the net profit increased quarter-on-quarter. So it’s lower right now. And my question is — my question — first question is how did the net cash from operations increased by 62% from the previous quarter one 2023 and why?

Ning Tang: I beg your pardon. What about the 60%?

Unidentified Analyst: The net cash from operations, it increased by 62% from last year. I was wondering why this happened? Or should we expect this in quarter two, quarter three, quarter four, better cash performance, better net cash — net cash provided by operations, should we expect it to be 30%, 40% roughly in quarter two, quarter three, quarter four?

Ning Tang: [Multiple Speakers]

Na Mei: Yes, I will answer your question. Yes, as you mentioned, in this quarter, our R&D is RMB41 million and also its reprice increase trying to compare to the fourth quarter of last year, but actually, it’s a little decrease compared to last year — in the last — in the 2023. In the first quarter of last year, the total research and development is RMB48 million. The decrease in this quarter is mainly due to we take active action to do some staffing adjustments. For example, maybe replace some lower technical staff to replace some higher technical staff. So there is some staff cost of the technical staff will be a little decrease in this quarter. However, although this quarter as comprised to last quarter, it’s a little decrease.

We still have our — more R&D enrollment and expense in the next future. And in our R&D plan, we hope in this whole year, our R&D expense is about RMB100 million and RMB200 million and compared to the last year, the total R&D is RMB149 million. So comprised the whole year, we still put our [indiscernible] to R&D expense.

Unidentified Analyst: Okay. Again, I asked about net cash provided by operations. So it’s like cash from operations. It increased a lot, and I was happy about it. But okay. Second question is, your guidance is, again, I think, reiterated in 2023 last quarter in 2023, Q4. You provided a guidance — middle guidance, a mid-bound guidance of RMB6.4 billion. With the current projections in Q2 of RMB1.4 billion to RMB1.6 billion, if you continue doing RMB1.6 billion in Q3 and Q4, you should achieve the mid-bound target of RMB6.4 billion. I think you’re expecting that, right, on the revenue guidance. So my question is actually the revenue guidance which you provided in 2023 Q4, if you will reach mid-bound to upper bound of that guidance because you succeeded better? Or how are you feeling in Q2, Q1?

Ning Tang: And, Na, Can you please — yes.

Unidentified Analyst: Sorry. So you gave a guidance…

Ning Tang: I’m asking my colleague to respond.

Unidentified Analyst: My apologies. If you don’t understand anything, I can repeat.

Ning Tang: I got it.

Na Mei: Yes. I think for the volume of the 2023, [indiscernible] is our current assessment, we can meet our the total outlook of the total revenue we released in the third quarter of the last year. But for this quarter, because this [indiscernible] in China Mainland because like the [indiscernible] and for [indiscernible] not our business peak season. And it’s a low season. That is why you can see our revenue cannot increase much. But in the future, we think — generally, we can lead the guidance onwards on local release before. We have the confidence in our business to have the contribution for the whole year.

Unidentified Analyst: Okay. Just if you reach this mid bound guidance, you have 31% or 30.6% growth increase in revenue with 1.4% [indiscernible] for anybody here in this call and you are also AI powered. Okay. My last question or one of the last is, your prepaid expenses and other assets in the balance sheet, it increased quite a lot. It’s the current assets from what I know. My question is what caused this increase year-on-year and also from quarter four from last quarter, they increased, I think, by RMB800 million or RMB900 million. The prepaid expenses, they increased a lot the current assets, prepaid expenses and other assets. What caused that? It’s a good thing, I think. Yes. It’s like accounts receivables increasing. It’s a hard question.

Ning Tang: Na is probably looking into the details.

Na Mei: Yes, I was [Multiple Speakers]

Unidentified Analyst: Okay. Yes. So prepaid expenses have increased a lot.

Na Mei: Yes. Yes. So to compare to the — by the end of the last year, our prepaid expense and other presents some increase compared to the end of last year because consider our business development, we — some of our suppliers [indiscernible] lifestyle AI investment wishing prepayment some among our channel customers to suppliers. So to — for the purpose of our prepayment to our suppliers because we can handle our cooperation with our partners and can fix some good asset releases and other good channel customer. So you can see there is some increase in our [indiscernible]. That is mainly due to our prepayment to our supplies in advance about three or four months to fix some of the sources and to the supply service.

Unidentified Analyst: Okay. Again, I want to congratulate for the results. I’m not — I’m actually very happy and you’re executing great. A question for Mr. Ning Tang or actually a suggestion, if you change the name in Chinese company to AI or whatever from even digital to AI — even AI or something, AI in the name. Could you change also the New York stock exchange name or the LTD, which appears when you say search, where destock on the Google or whatever, you see Yiren Digital LTD. Could you change the name of the LTD also to Yiren AI? Maybe it will catch more eyes of investors. If the name change or name change in Chinese.

Ning Tang: Yes. I really like the Yiren Digital English name. Yes. Digital is a great…

Unidentified Analyst: But the investors see the Chinese name, investors don’t see the Chinese name. You must Google translate the Chinese name. So American investors on New York stock exchange see digital we don’t see AI in the name.

Ning Tang: I see. Okay.

Unidentified Analyst: If you did the name change in China maybe you think about it. Thank you very much. And if you have one more question.

Ning Tang: Yes. I really want our interested prospects investors, shareholders to look a bit further into all the details, right? And not just the name, but I will say investment banker on [indiscernible]. So I experienced like if you just added dot-com, your name is like all of the sudden your market cap, it goes up like [indiscernible] my sense is, yes, so it’s probably good for the short term, but really — yes, I’m not so…

Unidentified Analyst: You said in the Chinese in Chinese, Yiren artificial something or you said to the previous guy who asked the questions that the name…

Ning Tang: The change made in China is mainly because the original Chinese name suggested fintech, if we are more than fintech, we better change the name, but the English name even digital doesn’t suggest the fintech. Yes, my sense is, digital includes certain include fintech notion, but also includes like AI notion, but I took your point and I’ll think about it.

Unidentified Analyst: Okay. Maybe Yiren fintech and AI or small AI capital, I don’t know, whatever, as you wish. Thank you very much, sir. And the last question also about AI. You said I will have to read the transcript. You have so many achievements this quarter, but you said 400,000 call were provided by an AI-powered language model. So there was like an AI language model, smart language model selling or doing the sales rep — as a sales rep, but it was AI? Did I understand correctly? 400,000 calls?

Ning Tang: Yes. Yes, I think it’s outbound call — automated intelligent call to prospect customers.

Unidentified Analyst: Okay. So customers joined or they bought your — whatever, they entered the AI digital because of this 400,000 calls, which were powered by AI, very interesting.

Ning Tang: Yes, yes. We made this number of calls to try and sign them on.

Unidentified Analyst: Very nice. Okay. And thank you, sir. And thank you also for the $2 million repurchases, and I hope they will continue even though there are peanuts compared to your cash balance but whatever. I hope you continue to grow and continue to execute and build something so good for your team, features of it, they’re very nice. And thank you very much for you being also a great shareholder of the company and see you. Have a wonderful day. Bye-bye.

Ning Tang: Thank you.

Operator: Our next question today will come from Peter Ruh of BlueBird Advisory. Please go ahead.

Peter Ruh: Thank you. Good evening. It’s disappointing that the CEO and Founder is not on the call for the second consecutive quarter.

Ning Tang: I’m the Founder and the CEO of the company. This is Ning Tang speaking.

Peter Ruh: Thank you. I apologize, Mr. Tang.

Ning Tang: I’ve been doing a lot of talking. I did the prepared remarks, and then I answered the — a number of the questions.

Peter Ruh: Okay. Thank you.

Na Mei: Our CEO is hear. Yes.

Ning Tang: I have actually participated in every earnings conference call since the company went public.

Peter Ruh: Were you on last quarter? I thought you were traveling.

Ning Tang: Yes. No, the CFO — our CFO, my colleague, was traveling and she is with us now.

Peter Ruh: Yes. And I do have trouble understanding your CFO, but it could be my phone. My question is the reason your stock is so low as people don’t have faith in you because of all the changes, I think having a dividend, you have a lot of cash. It’s not a good use of shareholder cash. I know you’re the main shareholder, and I know if I don’t really care what [indiscernible] little people say. But you — just having money in the bank is not good. It hurts your return on invested capital, so it’s hurting your fundamentals. And you should either put that to better use or return it to shareholders? And like Matthew said, a small $50 million dividend would probably greatly increase your overall market capitalization by that or more, and it would instill some confidence in the market that you treat your fellow small shareholders with respect.

My second question is, even though you made $90 million of cash, your cash balance did not increase at all. In fact, it went down a little bit. And as the prior gentleman said, your prepaid expenses and other assets went up 200%. It’s the second largest item — second largest asset on your balance sheet. And I did not understand what your CFO was saying, prepaid expenses and other assets, what are prepaid expenses and other assets that went from RMB400 million to RMB1.2 billion, an increase of over RMB800 million, a 200% increase. Could you, the Founder, Mr. Tang, tell us because I can understand you better than your CFO.

Ning Tang: First of all, thank you very much for your — yes, asking again about the dividend. So we understand the importance of this issue, but did you — were you there at the beginning of the Q&A session, was that clear about my — yes.

Peter Ruh: Yes, yes. I heard your answer to Matthew, and you said that it is under consideration. I was hoping you would announce that this month since you’ve had three months to hear our feedback from the last conference call. And I don’t know if I should sell your stock or keep it for another three months. If you’re just going to tell us in another three months that you’re still investigating it. You’ve had three months to think about it and you did nothing today with regard to the dividend.

Ning Tang: So I don’t have to repeat my answer at the beginning of the Q&A session. And yes, we will try and do a good job evaluating this issue. And regarding the prepaid expenses, I don’t know what additional color can Na provide, but Na, can you please help out if you can?

Na Mei: Yes, I can add some information about our cash management we can do currently. And so, we now use our front row service, our current business, for example, used to our fund to cooperate with the trust company to set up the [indiscernible]. And in the first quarter of this year, our cooperation [indiscernible] is about RMB500 million. And we also plan to use our fund to acquire some financial license, which our financial services required. The first focus. And the second focus, as I mentioned in my script, we also continue to do our share payback continue and set up inventory [indiscernible] for our staff and for this quarter, we have a [indiscernible] to do our share purchase in the marketing and accumulated [indiscernible].

And we also keep on continuing our share courses in the future and we’re also confident in our business development. And finally, but not last, as you mentioned, any gain that — we will keep on one thing in our lab and RMP is [indiscernible] sell technical development, we offer from our external [indiscernible] AI. So also, it’s preliminary review, we can see if something finalized about our investment policy and external are finding time to show the public over. Okay. I hope I can give you some more information for you. Thank you.

Operator: Thank you. And ladies and gentlemen, at this time, we will conclude our question-and-answer session, and we will also conclude the Yiren Digital conference call. If you have further questions, please contact the Investor Relations team at Yiren Digital. Thank you for attending today’s presentation. You may now disconnect.