Qifu Technology - Earnings Call - Q3 2025

Transcript

Speaker 1

Please also note today's event is being recorded. At this time, I'd like to turn the conference over to Ms. Karen Gee, Senior Director of Capital Markets. Please go ahead, Karen.

Speaker 0

Thank you, Ken. Hello, everyone, and welcome to Qifu Technology's Third Quarter 2025 Earnings Conference Call. Our earnings release was distributed earlier today and is available on our IR website. Joining me today are Mr. Wu Haisheng, our CEO; Mr. Alex Xu, our CFO; and Mr. Zheng Yan, our CRO. Before we start, I would like to refer you to our Safe Harbor Statement in the earnings press release, which applies to this call as we will make certain forward-looking statements. Also, this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of non-GAAP financial measures to GAAP financial measures. Also, please note that unless otherwise stated, all figures mentioned in this call are in RMB terms. In addition, today's prepared remarks from our CEO will be delivered in English using an AI-generated voice.

Now, I will turn the call over to Mr. Wu Haisheng. Please go ahead.

Hello, everyone. Thank you for joining us today. In the first nine months of this year, China's economy and the consumer finance sector have both faced persistent headwinds. The outstanding balance of short-term consumer loans has declined for three consecutive quarters on both a year-over-year and quarter-over-quarter basis. Going into Q3, the industry is undergoing a series of regulatory-driven adjustments to improve consumer financial inclusion. We believe these changes will strengthen the sector's long-term prospects and sustainability, paving the way for a healthier and more structured competitive landscape. As such, we view these adjustments not only as a challenge but also as an opportunity for Qifu Technology. As a leading credit-tech platform in China, we continue to prioritize risk management, advance our AI capabilities, and deepen collaboration with financial institutions. We believe these efforts will enable us to better serve inclusive finance needs and strengthen our leadership in the industry.

Now, I'll walk you through the progress we made in Q3. By the end of the quarter, our AI-powered credit decision engine and asset distribution platform served 167 financial institutions, delivering efficient, intelligent digital credit services to over 62 million credit line users on a cumulative basis. To navigate the evolving regulatory environment, we dynamically fine-tuned our risk strategies to maintain a healthy balance between risk and growth. As a result, total loan facilitation and origination volume on our platform reached RMB 83.3 billion in the quarter, broadly in line with Q2. Despite the macro headwinds, we delivered steady financial results. Non-GAAP net income reached RMB 1.51 billion, while non-GAAP EPADS, on a fully diluted basis, came in at RMB 11.36, reflecting our solid profitability and operating resilience.

On the risk front, funding liquidity in the high-priced segment continued to tighten in Q3, leading to an uptick in overall delinquency risk across the industry. To stay closely aligned with evolving market conditions, we further tightened our credit standards and optimized our customer mix by increasing the proportion of high-quality borrowers. In addition, we proactively refined our risk models and completed 611 iterations, implementing differentiated risk management and distribution strategies. On the collection front, we improved efficiency through smarter resource allocation and deeper technology integration. For example, we allocated more resources to high-performing collection partners to ensure sufficient capacity and better productivity. For customers willing to repay but facing temporary financial difficulties, we offered measured concessions and flexible repayment options. In addition, we were able to assess repayment intent and capacity in real time through large language model algorithms, enabling more precise segmentation and more agile resource deployment.

These efforts helped us maintain steady progress even as the broader industry faced rising collection pressure. Our FPD7, a leading risk indicator for new loans, declined in September versus August. Since October, given the new regulations and heightened industry self-discipline initiatives, we expect risk indicators to remain volatile in the near term, with current levels above historical averages. That said, having navigated multiple industry adjustment cycles in the past with prompt and effective responses, we remain confident that we can once again bring risk levels back within a reasonable range in a timely manner. On the funding front, we have been whitelisted by all of our active financial institution partners, ensuring a smooth and stable cooperation going forward. Despite the relatively tight funding environment driven by liquidity conditions and policy factors, we maintained industry-leading pricing power and secured ample funding supply at stable costs.

Our average funding cost for Q3 held steady from last quarter, remaining at historical lows. In the ABS market, we issued RMB 4.5 billion during the quarter, up 29% year-over-year, with issuance costs down by another 10 basis points. For the first nine months of 2025, total ABS issuance grew 41% year-over-year to RMB 18.9 billion, further optimizing our funding structure. Looking ahead, we expect our funding costs to remain largely stable in the coming quarters. For user acquisition, we continue to diversify our channels, enhance targeted operation, and improve efficiency. Compared with last quarter, the number of new credit line users grew by 9% to 1.95 million, while average cost per credit line user declined by 8%. The number of new borrowers also grew 10% sequentially to 1.35 million.

We have seamlessly integrated convenient and efficient credit services into diversified channels and scenarios, including short-form videos, e-commerce, mobility, food delivery, and financial services. In Q3, we further expanded our embedded finance network, adding seven new strategic partners and extending our presence across internet and financial institution platforms. As a result, the number of new credit line users from the embedded finance channels increased by 13% sequentially, while loan volume was up by 11%. For placement strategy, we remain focused on onboarding high-quality users and optimizing our overall user mix. As such, our long-term strategic priority will focus more on our high-quality customers. Supported by AI-driven data models, we expect to gain deeper insights into user needs and behaviors, and further refine products and services. This approach will allow us to deliver a superior user experience and improve both our unit economics and user lifetime value.

We believe this focus is critical to strengthening our long-term competitive edge and cementing our leadership position in the industry. In our technology solutions business, we continue to advance our AI+ banking strategy, empowering financial institutions in their digital and intelligent transformation. During the quarter, loan volume supported by this business achieved exponential growth, up by roughly 218% on a sequential basis. Our collaboration with banks continued to deepen, expanding from their proprietary channels to a broader range of internet scenarios, where we provide end-to-end technology support in customer acquisition and risk management. Powered by our Focus Pro Credit Tech platform, our proprietary solution for SME lending, which is built on a three-tiered credit assessment system, was adopted by several new banking partners and received positive feedback for its industry-leading performance.

As part of our AI+ banking initiative, our two proprietary AI agents, the AI Credit Officer and AI Loan Officer, entered pilot testing with our first bank client. The engagement rate among the activated user base has reached around 50%, providing initial validation for the AI agent's practical effectiveness in core credit scenarios. Looking ahead, we will focus on strengthening our capabilities in multimodal recognition, voice data collection, lead management, and feedback loops, while expanding pilot programs and further improving user engagement. At the same time, we are seeing growing interest from financial institutions, laying a strong foundation for broader commercial rollout and scaled adoption in the next phase. On October 1, the new rules officially came into effect. As a leading player in the industry, we have always held ourselves to the highest compliance standards, with no exception this time.

Working closely with our financial institution partners, we quickly optimized our business structure and product experience. While these measures may temporarily impact our loan volume and profitability, we believe that prioritizing value for users will eventually strengthen their trust and help us maintain more sustainable and resilient growth over the long term. Meanwhile, certain new industry-wide regulatory measures may have some impact on the industry dynamics. That said, we believe our diversified business model and ample funding capacity will help position us to navigate these changes with limited disruption. Given the current phase of industry-wide adjustment, we will prioritize risk management over near-term growth, focusing on improving user quality and collection efficiency. Since mid-October, we have already seen encouraging early signs of stabilization in asset quality.

Over the years, we have a proven track record of emerging stronger from past challenges, including multiple industry-wide adjustments, and we are confident that this time will be no different. Looking ahead, we will continue to advance our one body, two wings strategy, further strengthen our AI capabilities, and empower financial institutions in their digital transformation, driving efficient, healthy, and sustainable development of our core business. On the international front, we are actively exploring opportunities across multiple overseas markets. After extensive research, we are even more convinced that our fintech capabilities are among the best in the world. We view the international expansion as a challenging yet strategically sound path. Quality always comes from deliberate execution, and we are confident we will deliver. In closing, short-term industry headwinds will not alter our long-term trajectory or our fundamental commitment to giving back to our shareholders.

Going forward, we will continue to pursue efficient capital allocation and deliver value to our shareholders through compelling shareholder returns. With that, I will now turn the call over to Alex. Okay, thank you, Haisheng. Good morning and good evening, everyone. Welcome to our third quarter earnings call. Unexpected chain of events in the last few months put significant pressure to our operations, and such headwinds may persist through the next couple of quarters as the consumer finance industry faces a new round of regulatory scrutiny and the participants try to settle in a vastly different environment. Total net revenue for Q3 was RMB 5.21 billion versus RMB 5.22 billion in Q2 and RMB 4.37 billion a year ago. Revenue from credit-driven service, capital heavy, was RMB 3.87 billion in Q3 compared to RMB 3.57 billion in Q2 and RMB 2.9 billion a year ago.

The sequential and year-on-year increase was mainly driven by higher capital-heavy loan balance. Overall funding costs remained stable Q1Q despite some liquidity shortage later in the quarter. In the first three quarters, we issued a record-breaking RMB 18.9 billion ABS, an increase of over 40% year-on-year. Revenue from platform service, capital light, was RMB 1.34 billion in Q3 compared to RMB 1.65 billion in Q2 and RMB 1.47 billion a year ago. The year-on-year and sequential decline was mainly driven by lower capital light facilitation and ICE volume. Platform service accounts for roughly 48% of quarter-ending loan balance. We will continue to make timely adjustments to the business mix through the rest of the year to reflect the changing market dynamic and regulatory guidelines. During the quarter, average IRR of the loans we originated and/or facilitated was 20.9% compared to 21.4% in Q2.

Looking forward, we may see further pricing decline as a new regulatory environment requirement being fully implemented across the industry, although the pace of the decline should be modest. Sales and marketing expenses remained stable Q1Q, but unit costs declined by about 8% sequentially. We added approximately 1.95 million new credit line users in Q3 versus 1.79 million in Q2. We will likely adjust the pace of the new user acquisition in the coming months given the volatile micro-condition and further optimize our user acquisition channels and improve user engagement and retention. 90-day delinquency rate was 2.09% in Q3 compared to 1.97% in Q2. Day-one delinquency rate was 5.5% in Q3 versus 5.1% in Q2. 30-day collection rate was 85.7% in Q3 versus 87.3% in Q2. C-M2, which represents the outstanding delinquency rate after 30 days collection, increased Q1Q to 0.79% from 0.64%.

As overall portfolio risk continued to increase in the last few months, we took additional measures to tighten the risk standard in September and October. While it's still a bit too early to reverse the trend, we start to see marginal improvement in new loans quality. It may take a few more months to see overall portfolio risk improve as the mix of the loans becomes more favorable. In such a challenging backdrop, we took an even more conservative approach to book provisions against potential credit loss. Total new provisions for risk-bearing loans in Q3 were approximately RMB 2.58 billion versus RMB 2.5 billion in Q2, despite lower risk-bearing loan volume quarter on quarter. Provision booking ratio hit another historical high. Write-backs of previous provisions were approximately RMB 785 million in Q3 versus RMB 1.18 billion in Q2.

Provision coverage ratio, which is defined as total outstanding provisions divided by total outstanding delinquent risk-bearing loan balance between 90 and 180 days, remained near historical high at 613% in Q3. Non-GAAP net profit was RMB 1.51 billion in Q3 compared to RMB 1.85 billion in Q2. Non-GAAP net income per fully diluted ADS was RMB 11.36 in Q3 compared to RMB 13.63 in Q2 and RMB 12.35 a year ago. At the end of Q3, total outstanding ADS share count was approximately 130.2 million compared to 132.4 million at the end of Q2 and 144.2 million a year ago. Effective tax rate for Q3 was 20.9% compared to our typical ETR of approximately 15%. The higher-than-normal ETR was mainly due to withholding tax provision related to the cash distribution from onshore to offshore.

With higher contribution from capital-heavy model, our leverage ratio, which is defined as risk-bearing loan balance divided by shareholders' equity, was 3.0 times in Q3, still near the low end of historical range. We expect to see leverage ratio fluctuated around this level in the near term. We generate approximately RMB 2.5 billion cash from operation in Q3 compared to RMB 2.62 billion in Q2. Total cash and cash equivalents and short-term investments was RMB 14.35 billion in Q3 compared to RMB 13.34 billion in Q2. Our strong cash flow and financial position should give us sufficient resources to navigate through the challenging environment and allow us to satisfy the commitment and obligations to the market. We start to execute the $450 million share repurchase program in January 1st.

As of November 18th, 2025, we had in aggregate purchased approximately 7.3 million ADSs in the open market for the total amount of $281 million, inclusive of commissions, at the average price of $38.7 per ADS. We intend to resume the repurchase program after the window opens after this earnings call. Finally, regarding our business outlook, given the persistent economic uncertainty and fast-changing market dynamic, we will continue to take a cautious approach in business planning for the next couple of quarters, focusing on risk control of our operation. For the fourth quarter of 2025, the company expects to generate non-GAAP net income between RMB 1 billion and RMB 1.2 billion. This outlook reflects the company's current and preliminary view, which is subject to material changes. With that, I would like to conclude our prepared remarks. Operator, we can now take some questions. Thank you.

If you wish to ask a question, please press star then one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two, and if you are on a speakerphone, please pick up your handset before asking your question. For those who can speak Chinese, please start your question in Chinese followed by English translation. To allow enough time to address everyone on the call, please keep it to one question and one follow-up, and return to the queue if you have more questions. Thank you. Your first question today comes from Qiao Huang from Morgan Stanley. Please go ahead. 好的，感谢观众朋友的提问。我想先请教一下监管方面的问题，就是这一套新规落地，我们对于我们的银国会有什么样的改进？也想请教一下观众朋友，2026年。呃，Qiao，我看不清楚。哈喽，可以听到吗？请问可以听到吗？可以，现在可以。可以，好的，行。我想先请教一下关于这个住贷新规落地之后对业务盈利模式会有什么变化。那么在此基础之上，观景层对这个2026年的taker有什么样的预期？如果再展望长一点的话，我们觉得常态化水平之后贷款的这个利润率水平大概在什么位置？这是第一个。第二个问题也是想请教关于这个住贷新规生效之后管理层如何看待行业竞争格局。 So basically, two questions from me.

One is after the new loan facilitation coming to effect in October, how should the management think about the change to the business model or population model of the loans? What's the expectation for the take rate in 2026? Maybe over the long run, how should we think about the loan economics when they normalize? Number two is how do management think about the competitive landscape after the loan facilitation rules take effect? Thank you. Okay, thank you, Qiao. In terms of regulation and take rates, with the new rules in place, both on loan facilitation space and the broader consumer finance industry will need some time to adjust. In the near term, the rules will have some impact on market size, risk levels, and profitability. This is for sure.

In the long run, we believe the competitive environment will become more sustainable and healthier, which is good to our industry. As for the near-term impact, let me talk about what we are seeing right now. First, as the entire industry is lifting the risk bar, funding capacity for our ICE and referral businesses will come down. This means some users will no longer be served, and this will have some impact on our loan volume. For the rest of ICE business, as we adjust pricing, the take rates will decline. Also, on the positive side, we expect to see better conversion, higher loan amounts, and less early repayments. This will help reduce some of the pressure on the net take rate. Second, the liquidity pressure in the market is pushing overall risk higher for the broader consumer finance space.

Our C-M2 was up to 0.79% in Q3 from 0.64% in Q2, and net provisions were up about 36% compared to Q2. We expect this trend to continue, at least in the next one or two quarters. Based on our Q4 guidance, we are roughly talking about a take rate of 3-4% because of pricing and risk impact. Over the next two quarters, we expect the industry to remain volatile, and we are still trying to get a better understanding on our take rate floor in the new loan. For 2026 and beyond, the take rate will depend on how things evolve from the Q4 baseline. Specifically, our focus will be a few things. First, we will continue to optimize our risk strategies and improve collection efficiency to enhance our risk performance. Second, we will further optimize costs in user acquisition and operations to improve overall efficiency.

Third, we will also explore some new service offerings to further improve user conversion and retention. We hope these efforts could help improve our take rate over time. For your second question, for the competitive landscape, since the new rules came out in April, we have seen a major shakeout in the high-pricing segment. New loan volumes in that market decreased a lot. Some smaller platforms may not survive in the future. The rest of the platforms are also shrinking their loan book. Entering Q4, we are actually seeing less competition for traffic. Looking ahead, some of the platforms currently operating in the high-pricing segment may also try to move into the 18-24% range. It is very difficult for them to be profitable in that band, given their disadvantage in funding, risk management, and operation efficiency.

In the longer term, we think some of these players will eventually leave the market. We think that the market consolidation will benefit us in a few ways. With fewer smaller platforms competing for traffic, our marketing efforts will be more effective. We can acquire higher-value users more accurately with lower acquisition costs. In a new market environment, as users' multi-borrowing situation improves, we should be able to expect lower credit risk and a better conversion rate. As such, users' lifetime value will improve in the longer term. Overall, we think the longer-term competitive environment will become more in our favor, and we see room to take more market shares over time. Thank you. Thank you. Your next question comes from Lincoln Yu at J.P. Morgan. Please go ahead. 好的，好的，呃，感谢管理层给我这个提问机会，然后我想呃询问一下关于股东回报方面的问题。呃，也是因为近期我们看到这个因为政策啊，或者宏观一系列影响，我们股价有一所波动。呃，所以公司现在想请问一下公司现在的一个股份回购的方案的执行方面会不会有什么变化？因为我看到就是截止到现在，我们其实 $450 million 的 plan 其实还有 $170 million 左右还没有开展。呃，然后另外的话，长期来看的话，公司对于呃股东回报是怎样的一个考虑？ Okay, I'll translate my question. My question is on shareholder return.

Given the recent share price volatility and the regulatory uncertainties, whether it be any change in the company's execution of the existing buyback plans, as I see, we still have about $170 million remaining from the plan announced in last November. Also, in longer term, what is the company's consideration on shareholder return? Thank you. Okay, Lincoln, I will take this question then. Just like you said, as of now, we still have about $170 million left under our $450 million program designed for this year. We took a temporary pause during the third quarter, just given the incoming regulatory update and all the risks associated with that. Now, after today's earnings call, the new window will open in terms of repurchase. We will resume the execution of this program to fulfill our commitment for the rest of the year.

Regarding the dividend, we have stated that our goal is to gradually increase dividend per ADS through each semi-annual kind of a dividend payout. Right now, the board-approved dividend payout ratio is 20-30%, which still gives us enough room to maintain that kind of a progressive dividend trend, even with the volatile kind of earnings movement for the next few quarters. Eventually, we still aim to achieve that progressive dividend target for the foreseeable future. In the long run, we still put the shareholder return as one of the top priorities for this company, although the mix between the buyback and dividend payout may change from time to time, depending on the situation that we are facing at any given time. Okay, thank you. Thank you.

Your next question comes from Alex Yee at UBS. Please go ahead. 好，关于呃感谢给我这个提问机会，然后呃这个问题主要关于资产质量的，嗯想请问一下这个10月到11月，嗯可能月度的一个变化趋势呃如何，对比三季度，呃目前有看到加速恶化的一个趋势吗？然后嗯假如说监管这边我们预期呃没有新的一些变化的话，那呃管理层目前预期资产质量在什么时候能够有一个见顶的回落，呃然后有可能有哪些因素会可能导致这个呃时间点或者这个比如说有哪些upside或者downside的一些风险吧？ so my question is regarding the asset quality trend, so just wondering how has been the trend monthly trend for October and September, and and November have have we seen any accelerated deterioration in versus Q3 and assuming there's no further change in regulatory framework, so how when does management expect the asset quality to stabilize and peak? what are the upside or downside we should be aware of? Thank you. 嗯好的，我先用中文回答，然后请我们同事帮忙翻译一下。呃，十十月，就在新规落地以后呢，高定价的资金供给进一步的有一些收缩，呃加上三季度以来呢，整个行业都处于风险上升的一个趋势啊，所以无论是哪个定价区间的平台，近期都会以风控为首要的任务，会收紧风控政策啊，而这会进一步的加剧了行业流动性的问题，导致行业整体风险会进一步的提升。嗯，但同时呢，我们在11月份，呃我们也看到一些好的变化，呃一块是新增资产的早期风险表现，已经有逐步企稳且好转的迹象。我们看到7月的新放款FPD7逾期率指标，相较7月已经有了一个8%的下降。啊，从存量的资产风险表现来看呢，11月份已经有表现的7天逾期率，呃和10月相比，呃目前来看也是呃基本持平的。 so let me let me do the translation. since the new rules started to take effect on October 1st, high-cost fundings have tightened further. At the same time, industry risk levels have been going up in Q3, so pretty much all platforms, no matter the price level, have made risk management first and tightened their risk policies.

This has made liquidity even tighter and pushed overall risk levels further up. But we are also seeing some positive signs in November. The early risk indicators of new loans are showing signs of stabilization and slight improvement. The FPD7 delinquency rate for new loans in September decreased by 8% compared to that of July. In terms of the risk performance of overall loan portfolio, the seven-day delinquency rate observed in November has remained broadly flat compared to October, with no further upward trend. 嗯，目前我们在压降风险的政策上面呢，主要体现在两个方面。嗯，一块呢是在投放侧以及带前带中的策略上，我们适度提升了优质用户的一个占比，优化整体资产包的风险结构。此外，我们在加加大对于低风险用户的场运资源的一些投入，呃使用大模型统筹算法优化定价，呃通过精准的定价，加上独有的资产权益，再加上简约的对客表达，提升优质客户的转化及留存。啊，那第二是在催收方面，我们增加了自营资源的能力建设，对合作催收机构加大资源投放，吸引更多的优质坐席。我们也对客户进行了差异化的分群，进行精细化的能按匹配，呃也利用大模型算法能力，对客户还款行为，呃进行意图识别，判断客户还款能力和意愿，动态去调整了客户的分群，灵活快速的做了一些快，做了一些换手的动作，最大化催收效能。 Mm-hmm, so right now we mainly focus on two areas to lower risk. For pre and in-loan processes, we are modestly increasing the share of high-quality users to optimize overall risk structure. We are also increasing operation resources for low-risk users and use large language model algorithms to improve pricing.

With more tailored pricing, exclusive benefits, and a simpler user journey, we intend to improve user conversion and retention. For collection, we are adding more in-house capacity and increasing support for our partner agencies. We are also improving how we profile users and match cases, so each case can go to the right team. Powered by large language algorithms, we can now get a better read on borrowers' ability and willingness to repay, adjusting their grouping and tailor our approach to drive better section results. 嗯，说到未来的展望，呃虽然我们在最近看到诸多指标企稳转好，呃但11月份的表现时间还是比较短的，还需要进一步的观察。我们的借款周期一般是在9到10个月，呃因此呢，通过优化新放款的风险策略，通常需要2到3个季度的时间来改善整个资产包的结构，实现大盘风险的改善。但是行业环境一直发生很多新的变化，目前我们新放款的早期风险指标还没有压降到我们认为的，呃非常理想的水平。因此这次的风险调整周期可能会比预计的要来得更久一些，呃但是无论是波贝计提还是业务本身的利润安全垫，都是非常充足的。相信我们可以有效地应对行业的短期挑战。过去我们经历了非常多的挑战，每次都应对得比较及时和有效，呃所以这次我们还是有信心把风险控制在合理的范围内。 Mm-hmm, so looking ahead, although we have seen some early signs of stabilization, it's only been about two weeks into November, so we will need some more time to tell if the trend will hold.

Our loan tenor is usually nine to ten months, so when we tighten risk stretches for new loans, it usually takes two to three quarters for the improvements to show up in the overall portfolio. The market dynamic is still evolving, and the leading risk indicators for new loans have not been down to our desired levels yet, so this adjustment cycle will likely take a bit longer than we expected. On the financial side, our provisions and profit buffer of our business are both very solid. This gives us plenty of room to manage through the short-term industry headwinds. We have been through many challenges before, and each time we were able to respond quickly and effectively, so we are confident we can bring risk levels back to a reasonable range once again. Thank you. Our very next question comes from Emmet Xu at BofA Securities. Please go ahead.

监管的问题就是最近有媒体报道称，呃监管机构正在研究针对消费金融公司的新规，拟将新发放贷款的平均年化利率下调到20%。虽然这个新规不适用于住贷公司，但想请问一下管理层是否评估过，如果平均的这个APR降至20以下，可能带来的影响，这是否会导致贷款增长放缓及信贷成本上升。在这种情况下，公司有没有，呃任何对冲措施以缓解对盈利的影响？呃那我翻译一下我的提问。 So according to recent media reports, regulators are starting new regulations for consumer finance companies that will lower the APR of newly issued loans to 20%. Although these regulations will not apply to loan facilitation firms, has the management evaluated the potential implications if the average APR will fall to below 20%? Could this lead to a slowdown in loan growth and an increase in credit? In such a scenario, does the company have any measures in place to hedge against the impact on profitability? Okay, okay, Emma, let me take this one. Yes, on the pricing guidance for consumer finance companies, there's no formal document that is at this point, just informal communication. As we understand, consumer finance companies are required to keep their average pricing below 20%. We think the logic behind this is quite close to the new rules on loan facilitation sector.

As the regulator's intention is also to reduce the borrowing cost for consumers and make credit more accessible. In the near term, yes, it will have some impact on market size, risk levels, and profitability. Over time, we think it will help create healthier competition and improve asset quality. In terms of funding, our direct exposure to consumer finance companies is small, so the direct impact on us is limited. First, the consumer finance companies source their business from diverse channels. Industry-wide, about 40% of their loans is self-operated, and about 60% from API channels, mostly platform under other internet companies. Our cooperation with them just accounts for a very small part. In terms of funding, they only account for about 15% of our loan mix. Most of our funding comes from banks, so we are flexible to shift our funding structure if needed.

As such, we think the direct impact on us is quite limited, but there is indirect impact. As consumer finance companies adjust their pricing, we may expect further pressure on liquidity in the short term, leading to risk volatility. In that case, we may continue to lift our bar to mitigate the risks. Our average APR in Q3 was 20.9%. Going forward, we need to strengthen our ability to serve higher-quality users with a broader user base and a better mix. We should be able to optimize pricing and keep our risk well-balanced. In the meantime, we will fund term our operation to improve overall profitability. The point is we care more about our users' long-term value than short-term profitabilities. Thank you. Your next question comes from Cindy Wang at China Renaissance. Please go ahead.

啊，谢谢管理层给我这个提问的机会。那我这边有两个问题想请问。第一个就是刚才CEO在opening remarks的时候有提到说这个季度金科业务的放款量环比超过了200%的一个增长。那可不可以跟我们说一下请问具体的原因是为何，然后以及对未来这个金科业务的一个展望？那第二个的话想请教，因为我们看到第三季capital light大概是占了42%的new loan volume，呃和第二季度大致上持平，但是loan balance这一块又进一步的下滑到48%。所以可不可以跟我们展望一下，就是说第四季度我们怎么看这个轻重资产的一个比例，以及明年这个业务上面的一个结构的变化，大概轻重资产可能会占怎么样的一个比重？那我很快翻译一下我的问题。 Thanks for taking my call. I have two questions here. First, during the opening remarks, CEO mentioned technology solutions loan volume up more than 200% quarter over quarter in Q3. What's the main drivers behind it, and what is the outlook of this business? Second, in Q3, capital light accounted for 42% of the new loan volume, largely the same as Q2, but down 3 percentage points quarter over quarter to 48% of loan balance. So how do you expect the ratio of capital heavy and capital light business to new loan volume and loan balance in Q4 and 2026? Thank you. Okay, thank you, Cindy. I can take the first one, and Alex, you can take the second one. So far, yes, so far our tech solution business has partnered with over 20 financial institutions.

In Q3, we facilitated around RMB 5.4 billion in loan volume through this model, up 200% and 218% quarter on quarter. The outstanding balance has exceeded RMB 10 billion lately. Two main factors are driving this growth. First, loan volume with our signed partners is steadily ramping up. Second, we are expanding the ways we collaborate with financial institutions. Not only can we facilitate credit business within their ecosystem, but also across a broader set of online scenarios. This really highlights the value we bring in customer acquisition and risk management across diverse channels. We are also seeing strong demand from financial institutions for AI agents. Because of that, our solution is more than technology infrastructure. We are currently upgrading our Focus Pro product into our Super Credit AI Agent. Take our AI Credit Officer as an example. Traditional offline credit products in banks have long, complicated processes.

Powered by large language model capabilities, AI Credit Officer can use one single model to handle all kinds of document processing tasks during due diligence and the credit approval stages. This will streamline the process by removing overlapping models running in parallel. As a result, users do not need to resubmit their materials. The whole process can be accelerated, and the approvals can be completed within the same day. On the risk assessment side, by leveraging our trailing level risk decision data set and multimodal large language model technology, the agent can identify risk in seconds, generate more precise user profiles within minutes, and keep iterating based on feedback. In the pilot run with our bank partners, our AI agents are already making an impact in key areas like customer acquisition and approvals. The market feedback has also been very positive.

We are also seeing interest from several other financial institutions in their products. We believe the future upside of our Super Credit AI Agent is very huge. Thank you. Cindy, to your second question regarding the mix between cap heavy and cap light, in the short term, as we're facing very volatile kind of market condition, you know, that we discussed earlier, we may need to make some flexible adjustments to the mix. On one hand, for example, in these kind of a generally higher risk environment, we intend to do more capital light versus capital heavy. On the other hand, the price cap on the 24 also limited our capability to do the IC side of a business. You know, those two forces probably will work together, you know, in the fourth quarter in particular.

But directionally, I would say you probably will see a little bit more on the capital light side in the fourth quarter, as we intend to reduce the risk exposure. Then in the longer term, I think we still need to make, from quarter to quarter or time to time, timely adjustments based on the conditions we're facing, based on the risk level the market presents, and also based on the funding sources we're getting, to decide what's the best solution or best mix for us in terms of mix. I do not think there will be, at least for 2026, a directional movement toward the light or toward the heavy. Most likely, it will be sort of bouncing around the 50/50 line throughout the next year. Thank you. Operator.

Thank you. That concludes our question and answer session for today. I'd like to hand back for closing remarks. Thank you. Okay. Thank you again for everyone to join us for the call. If you have additional questions, please feel free to contact us offline. Thank you. Have a good day. Thank you. Thank you. That does conclude our call for today. You may now disconnect your lines. Thank you.