Ladies and gentlemen, good day and welcome to Yuan Bao Inc. second quarter 2026 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Stella Liu, Investor Relations and Strategy Associate Director. Please go ahead.

Thank you, Operator. Please note that today's discussion will contain four looking statements made under the safe harbor provisions of the U.S. private securities litigation Reform Act of 1995. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions, and other factors. Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and discussion. A general discussion of the risk factors that could affect Yuan Bao's business and financial results is included in certain filings of the company with the Securities and Exchange Commission. The company does not undertake any application to update this forward-looking information, except as required by law. During today's call, management will also discuss certain non-GAAP financial measures. For definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the earnings release issued earlier today. Joining us today on the call from Yuanbao Senior Management are Mr. Rui Fang, our Chairman and Chief Executive Officer, and Mr. Rui Wan, our Chief Financial Officer. Mr. Fang will deliver his remarks in Chinese, followed by an English translation. All figures will be in RMB, unless otherwise noted. We will conclude the call with a Q&A session. As a reminder, this conference is being recorded. In addition, a webcast replay of this conference call will be available on Yuanbao's investor relations website. I will now turn the call over to our chairman and CEO, Mr. Fang. Please go ahead, sir.

Hello, everyone. Welcome to Yuanbao's second quarter of the fiscal year. In the second quarter of the fiscal year, the company's business has maintained a steady growth pattern. In this quarter, the income and profit capacity have increased simultaneously. The total revenue of the company is RMB 13.92 billion, which is 30.1% of the net profit. The net profit is RMB 4.13 billion, which is 35.6% of the net profit. The net profit is 29.7%. As of the end of the second quarter, the company's cash reserves are RMB 51.6 billion, which continues to invest in AI technology research and development for us.

Hello everyone, thank you for joining us today for our second quarter 2026 earnings conference call. In the second quarter of 2026, we maintained steady growth momentum with both revenue and profitability improving in attendance. Total revenue for the quarter was 1.39 billion RMB, a year-over-year increase of 30.1%. at net income was 413.2 million RMB, up 35.6% year-over-year, with a net income margin of 29.7%. As of the end of the second quarter, our cash reserves totaled 5.16 billion RMB, providing solid support for our continued investment in AI technology. Our product innovation in collaboration with insurance carriers and our ability to capture structural opportunities within the industry.

在数据与模型能力建设方面,我们持续投入, 全市二级公司模型矩阵已超过5,100个模型, 可对超过5,900个特征进行分析, 覆盖从需求识别、产品推荐到理费协助的全流程产品, 服务效率与用户体验同步提升, We continued to invest in strengthening our data and modeling capabilities.

As of the end of the second quarter, our model matrix had accessed 5,100 models, which are capable of analyzing more than 5,900 labels, covering the full range of scenarios from needs identification and product recommendation to plans assistance, driving improvements in both service efficiency and the user experience. In addition, the $15 million US dollar share repurchase program We announced last quarter continues to progress steadily. As of August 31, 2026, we had repurchased approximately 114,000 ADFs for a total consideration of approximately 1.6 million U.S. dollars, reflecting our ongoing commitment to delivering capital returns to our shareholders.

近年來,三越政科省迎來廣闊的發展基因, The policy has continued to release good signals. In March this year, the government's work report in 2021 clearly proposes to accelerate the development of commercial health insurance, promote the high-quality development of innovative medicine and medical equipment, and better meet the needs of the people. In July, the State Council issued the National Health 1555 Dialogue, encouraging the increase of health intervention, special needs medicine, innovative medicine, etc. and others. In the past, the National Financial Supervision Bureau has clearly stated in its opinion on the development of high-quality health insurance, that it supports the development of commercial medical insurance and health insurance products for specific groups such as hospitals, hospitals, hospitals, hospitals, hospitals, hospitals, hospitals, hospitals, hospitals, hospitals, hospitals, hospitals, hospitals, hospitals, hospitals, hospitals, hospitals, hospitals, hospitals, hospitals, hospitals, hospitals, hospitals, hospitals, hospitals, hospitals, hospitals, hospitals, hospitals In recent years, commercial health insurance has seen both developing opportunities backed by a continuous stream of favorable policy signals.

In March this year, the 2026 report on the work of the government explicitly called for accelerating the development of commercial health insurance and promoting the high-quality development of innovative drugs and medical devices in order to better meet the public's diverse needs for medical treatment and medication. In July, the State Council issued the National Health Plan for the 15th five-year plan period. encouraging an increased supply of innovative health insurance products covering areas such as health intervention, specialized medical care, and innovative drugs. Prior to that, the National Financial Regulatory Administration explicitly stated in its guiding opinions on promoting the high-quality development of health insurance that it supports the development of commercial medical insurance products targeting specific groups such as individuals with pre-existing conditions and rare diseases. Against this backdrop, we continue to deepen collaboration with insurer carriers and accelerate product iteration, adhering to a strategy built on affordable pricing, comprehensive coverage, and quality service. We are working to further improve the quality and expand the reach of the inclusive health protection by lowering enrollment barriers, enriching coverage benefits, and enhancing the service experience.

At the end of the product, Yuanbao X-Yi Bao series medical insurance, according to the consumer needs, has been in service for many years. To achieve the coverage from basic to general medical care to quality medical care, it allows users of different ages, different needs, and different budgets to find their own insurance plan. In June this year, Rui Fang, Ying Li, Ying Li, Huirui Wan, Bo Wang

On the product side, Yuanbao's Super Medical Insurance Series has evolved over many years in response to consumer needs and now offers tiered coverage for many basic outpatient and emergency care, general medical treatment, and premium medical care. so that users of different ages, needs, and budgets can all find a plan that fits them. In June this year, our super medical insurance theorist underwent a comprehensive upgrade, focused on addressing pain points across users' full treatment journey. This upgrade advanced simultaneously across three dimensions, good doctors, good medicine, and good rehabilitation. It added access to Special needs medical resources at public hospitals, extended coverage for advanced drugs and medical devices, and introduced coverage for inpatient rehabilitation for specific conditions, extending health protection further across the full cycle of treatment plus rehabilitation. Notably, even as we substantially upgraded our coverage, We stayed true to our principle of affordable pricing, improving quality without raising prices.

今年,元宝也积极探索带病人群的保障性目的, 响应国家鼓励带病体保险的政策方向。 五月,我们联合保时推出了全守护百万医疗刑, 实现免健康告知,责任范围内一般基本证可赔, 确实 have reduced the threshold of hair loss in the population. In terms of intensive care, we have jointly launched the protective insurance million-dollar medical intensive care insurance. In the non-health insurance version, we will further promote the intensive care insurance to cover more people who need it. From medical insurance to intensive care insurance, Lianbao uses product innovation to continuously expand the feasibility of health insurance.

Next year, Yuanbao has also been actively exploring new approaches to protection for individuals with pre-existing conditions, responding to national policies that encourage insurance for this population. In May, we partnered with insurers to launch Complete Guardian Million RMB Medical Insurance, which with health disclosure requirements and covers and others. On the Critical Illness side, we launched a no-health disclosure version of Guardian Insurance Million RMB Critical Illness Insurance, further extending Critical Illness protection to more people who need it. From Medical Insurance to Critical Illness Insurance, We continue to use product innovation to broaden access to health protection, directly addressing the real protection needs of the more than 400 million people in China living with pre-existing conditions.

在技术创新方面,公司持续推进多模态人工智能技术在保险用户场景中的应用,建设了面向保险领域的多模态理解与分析能力。 On the technology innovation front,

We continue to advance the application of multimodal AI technology across insurance business scenarios, building multimodal understanding and analysis capabilities tailored to the insurance industry. Insurance operations involve large volumes of unstructured information, including images, documents, videos, and tips. By leveraging our multimodal models and proprietary knowledge systems, Yuan Bao enables AI to more accurately recognize, understand, and analyze this complex content, turning unstructured data that was once difficult to put to use into truly usable data assets.

In Li Pei's assistive service, the company uses multi-modal models, intelligence, analysis of cases, diagnosis certificate, medical certificate, inspection report, and other types of materials. and others. The system can also carry out related analysis of key information in different sources to form a structure-based compensation action file and combine the insurance knowledge library to assist in the analysis of responsibility and user service to improve the efficiency of the compensation process, to reduce the consistency and user experience. At present, the relevant capabilities have been developed in the medical In cleanse assistance service scenarios, we applied multimodal models to intelligently parse various types of materials including medical records

Diagnostic Certificates, Medical Invoices, and Examination Reports, enabling document recognition, information extraction, fact consolidation, and review assistance. The system also analyzes key information across materials from different sources to generate structured, clean case files and combines with our insurance knowledge base to support liability analysis and user service thereby improving insurance carriers' claims processing efficiency, consistency in review standards, and user experience. These capabilities have already been deployed in medical insurance claims assistance scenarios, achieving material classification accuracy of 95% and average key field extraction accuracy of approximately 94%, compared to the wind door solutions previously tested Our current solution shows improvement in both processing efficiency and accuracy.

在用户生产场景,公司利用多模态模型对业务内容进行智能理解和分析。 我们能有效识别图片、视频、文本等内容中的产品信息,表达特征和用户反馈等。 在结合业务效果数据辅助内容分析和特别优化,提升了 and others. At the same time, the company continues to build professional support centers in the field of insurance. We have formed a professional support center that supports AI applications by structuring the core content such as insurance product terms, medical knowledge, service process, topic rules, and history cases. The company has also integrated the support center with multi-modal models, In user growth scenarios, we applied multimodal models to intelligently understand and analyze business content. In this way, we effectively identify product information

Expression Characteristics and User Feedback Across Images, Views, and Texts and combine this with business performance data to support content analysis and strategy optimization, improving user outreach efficiency and business operations. At the same time, we continued to build our insurance domain knowledge base. We structured core content covering product terms, medical knowledge, service workflows, clearance rules, and historical cases into a professional knowledge foundation that underpins our AI applications. We also deeply integrated the knowledge base with multimodal models and agent technology, further enhancing the accuracy, interpretability and business adaptability of AI in complex insurance scenarios and driving the evolution of insurance services from a traditional manual processing model toward an AI-assisted human-machine collaborative model.

最后,在行业影响力建设与前沿实践上, 我们持续与专业研究助力行业发展, 以科技创新推动保险服务升级。 一方面,我们持续捍持行业影响力, 依托深度洞察,把握行业结构性基因。 五月,我们... and Qinghua University's Wudaokou Financial College, China Insurance and Old Age Financial Research Center, released a report on China's Internet insurance consumers in 2025. The report systematically tracked the behavior of consumers, and revealed the consumer trend of online, smart, and rationalization, and completely sorted out the direction of industry progress and AI upgrade. This is not only for the development of high-quality industry, Finally, turning to our industry influence and frontier practices, we continue to support industry development through professional research and drive insurance service upgrades through technology innovation.

We also continue to strengthen our industry influence, throwing on deep insights to capture structural opportunities in the industry. In May, together with the Research Center for China Insurance and Pension Finance at Tsinghua University's PBC School of Finance, we published the 2025 China Internet Insurance Consumer Insights Report. The report systematically tracked shifts in consumer behavior took an in-depth look at the trends toward online, intelligent, and more rational consumption and comprehensively examined the direction of industry evolution and AI-driven upgrades. This provided an important reference for high-quality development across the industry, and more importantly, we have channeled these insights deeply into our joint product innovation with insurers and service upgrades. further strengthening our overall competitiveness in internet insurance.

另一方面,我們將技術優勢轉化為卓越的運營效能。 兌現服務承諾,公司7月發布的2026年理賠半年報顯示, 智能助賠推動合作保釋實現了萬年以下小額賠償案件的檢案實效, 縮短了百分之41。 同時,我們還推出了

We are also translating our technological advantages into strong operating efficiency and delivering on our service commitments. According to our 2026 first half cleanse report released in July, intelligent cleanses assistance helped partner insurance carriers shorten the clan settlement time for small clans under 10,000 RMB by 41%. At the same time, we introduced our clan's follow-up service and upgraded our clan's mediation service, bringing greater warmth to our service through technology and achieving a dual improvement in user experience and operating efficiency.

Da Wang Mei Lan, shui ze 155 kui hua sheng mu tui jin, The multi-level medical insurance system continues to be perfect, as well as artificial intelligence, acceleration of renewable energy, and sky-high performance. The insurance industry is approaching a new phase of technological innovation to upgrade the supply and demand of insurance. How to make more consumers get affordable, quality, and temperature-saving health insurance? It is the key to the development of the industry, and it is also the direction of long-term exploration of Yuanbao. Looking forward to the future, Yuanbao will continue to work with AI technology, and many more. We will also continue to polish, copy and preserve, fully protect, and repair products. We will also continue to make sure that insurance can be bought, can be bought, and can be satisfied. With the goal of stable management, Looking ahead as the 15th five-year plan continues to advance, the multi-tiered healthcare security system continues to improve.

The artificial intelligence rapidly empowers industry across the board. The insurance sector is entering a new phase where technology innovation and the rising protection needs converge. How to give more consumers access to health protection that is affordable, high quality, and compassionate is both a defining question for the industry and a direction Yuanbao has long pursued. Going forward, we will continue to strengthen our AI technology foundation, bringing technologies such as AI agents and multimodal models into end-to-end use across our insurance business and upgrading core capabilities, including user insights, product recommendations, user consulting, and client assistance service. We will also continue to refine our inclusive product matrix, including super medical insurance and complete guardian. Putting into practice our service philosophy of accessible, affordable insurance with high-quant satisfaction backed by stable operations, our accumulated technology capabilities, and a deep understanding of user needs, Yuanbao will seize the opportunities presented by the insurance industry's high-quality development, drive innovation in commercial health insurance, support the development of the multi-tiered healthcare security system and create long-term value for consumers, partners, and shareholders. Now I'll turn the call over to our CFO, Rui Wan, to present our financial results for the second quarter of 2026. Thank you, everyone.

Thank you, Mr. Fang, and thank you, everyone, for joining today's earnings conference call. I'm pleased to share an overview of our second quarter 2026 financial results. All figures below are in RMD and less noted otherwise. We carried strong momentum into the second quarter, delivering robust growth across our core business lines while continuing to deepen AI integration across our operations. Total revenues for the second quarter reached $1.39 billion, representing a 30.1% year-over-year increase. This growth was primarily driven by strong increases in both our insurance distribution and system service revenues. Breaking down our revenue mix, revenues from insurance distribution services reached $457.4 million, a 30.4% year-over-year increase driven by a continued increase in the number of policies purchased through our platform, supported in part by our enhanced targeting marketing efforts. System services revenue reached $881.9 million, up 22.8% year-over-year, reflecting continued improvements to our full consumer service cycle engine. which strengthened our ability to deliver more effective marketing analytics and customer related services to our insurance carrier partners along with expended system services to both existing and new carrier partners. We also generated 52.8 million revenue this quarter from advertising services, a new revenue stream we began offering this quarter. The newly provided advertising services powered by the company's proprietary intelligent marketing platform offered customers integrated intelligent marketing and traffic optimization solutions. Turning to expenses, total operating costs and expenses increased by 21.9% year-over-year to $941.3 million. Operations and support expenses were $97.8 million, up 139.1% year-over-year, primarily due to costs associated with our newly launched advertising services. Selling and marketing expenses increased 12.8% year-over-year to $679.3 million, consistent with our ongoing focus on consumer growth and retention. General administrative expenses were $64.8 million, up 36.3% year-over-year, primarily driven by higher professional service fees and increased personnel related costs. Research and development expenses increased 21.7% year-over-year to $99.5 million, driven by continued headcount growth in our R&D organization and ongoing investment in technical capability building, which remain key pillars of our positioning as a technology-driven online insurance distributor. Below the operating line, income tax expense for the quarter was $59.9 million compared with $11.1 million a year ago, primarily driven by a higher effective tax rate during the quarter. Net income for the quarter was $413.2 million, a 35.6% year-over-year increase, with a net income margin of 29.7%. Non-GAAP adjusted net income reached $431.2 million, up 32.6% year-over-year, with a non-GAAP adjusted net income margin of 31%. Our cash position grew during the quarter. As of June 30, 2026, our cash and cash equivalents, time deposits, restricted cash, and short-term investments totaled $5.16 billion, up 50.9% year-over-year and 8.8% from the end of first quarter. Net cash provided by operating activities in the quarter was $419.1 million. Before I close, let me provide an update on our shareholder return progress. Under our US $15 million share repurchase program, as of August 31, 2026, we have repurchased approximately and Huirui Wan for a total consideration of approximately $1.6 million, reflecting our continued commitment to returning capital to shareholders. To conclude, our second quarter results reflect the durability of our growth model and our ability to scale with discipline. Looking ahead, we will remain focused on high-quality growth, operational efficiency, and a healthy liquidity position, giving us the flexibility to invest and our strategic priorities while continuing to deliver long-term value for our shareholders. Thank you. And I would now like to open the call to Q&A. Operator, please go ahead.

Thank you, management. We will now begin the question and answer session. To ask the questions on the phone, please press star 1 and 1 and wait for our name to be announced. For the benefit of all participants on today's call, if you wish to ask your questions to management in Chinese, please immediately repeat your question in English. One moment for our first question. Our first question comes from the line of Amy Chen of CT. Your line is open. Please go ahead.

Thank you for the opportunity to ask me these questions. I have two questions. The first one is in Chinese and the second one is in English. How do you think of licensed celebrities promoting insurance products via live streaming? Will you adopt similar approaches going forward? And will this lead to more intense market competition in terms of online distribution of insurance products going forward? 第二个问题是想提到一下, 公司认为未来智能体经机是否会重塑整个高线的分销? 公司后续计划如何抢抓这个赛道的机会? Do you think a Gentic economy would reshape the insurance distribution industry? And how do you plan to capture the opportunities that's related to GenticPay? Thank you.

Thank you, Amy. Let me answer your first question. In recent years, the new rule clearly states that financial products and network sales must be managed by institutions, staff, and shareholders. In this framework, we use public influence to conduct customer education and flow transformation. We believe that live broadcast is just a flow entrance, and the core barrier of insurance sales lies in the back-end product interpretation and the right product match. Therefore, we try our best to infuse the flow into Yuanbao's own service system, and not rely on external personal IP. As for industry competition, tomorrow's entry will gradually increase the popularity of flow exposure. Thank you very much.

have made clear that online marketing of financial products must be conducted through licensed institutions and by licensed individuals. Licensed celebrity live streaming is essentially a new form of customer education and traffic conversion within this compliance framework. Leveraging public influencers which We believe that live streaming is merely a traffic entry point. The real barrier to insurance sales lies in back-end product interpretation and matching consumers with the right products. Therefore, we focus on funneling traffic into Yuanbao's own service ecosystem rather than relying on external personal IP. As for industry competition, celebrity participation may temporarily raise the intensity of traffic exposure and intensify customer acquisition cost competition for standardized products. However, stringent regulatory restrictions have limited how far FAN economy monetization can go. Over the long term, competition will continue to center on industry know-how, proprietary data assets, and ecosystem signatures. What matters more to us is that as this industry expands and the public's awareness of insurance works through live streaming and other formats, overall market penetration will continue to rise, and we can capture shares through differentiated technology and service.

第二個關於智能體的問題,我們認為AI agent可能會成為保險銷售的新入口。 In terms of Yuanbao, we are currently relying on mainstream Internet platforms to distribute. In the foreseeable future, these super platforms will still be the absolute occupants of the user market. Therefore, the current distribution standard is still stable. The current users use AI mainly for information consultation. E-commerce, insurance, and other transaction transformation chains are still relatively weak. It is difficult to form a complete investment and return. But from the report of the Chinese Internet insurance consumer, it was found that AI intelligence uses Thank you. Thank you. We believe that this is an important link between the flow entrance and the user interface.

We believe AI agents could become a new entry point for insurance sales. Yuanbao currently distributes primarily through mainstream internet platforms, and for the foreseeable future, these super platforms will remain the dominant holders of user time, so our existing distribution base remains solid. At present, Thank you for your time today. large language model technologies have significantly lowered the barrier for users to access insurance information and meaningfully improved efficiency in the consultation experience. For standardized, relatively simple insurance inquiries, there is no question that AI's capabilities now rival those of human agents. That said, we are also clear-eyed that for Thank you very much. acknowledge that the application of AI agents in insurance scenarios is still at an early stage with both the ecosystem and our capabilities still maturing. At the same time, we firmly believe this represents an important shift in traffic entry points and how users interact, and it is an emerging trend and market that deserves close attention. Thank you. Your next question.

One moment for our next question. The next questions will come from the line from China Security. Your line is open. Please go ahead. Hello.

I'd like to ask if this has a positive impact on our platform's low cost-effectiveness or ROI? Yes, and the short-term trend has seen some trend changes, and the demand has some trend improvements. Then the second question is about overseas expansion, because in the second half of last year, it should have taken the Hong Kong insurance economic signage. I'd like to ask if you can update the overseas business expansion update. Okay, so my first question is in regards of the digital admin software on major internet platforms lately. How is that impacting our customer acquisition ROI? And also, are you seeing any shifts in demand for short-term insurance? My second question regards to overseas business progress. Could management team update on Hong Kong brokerage business since securing license last summer?

Thank you for your question. The first question is about recent advertising. In terms of quantity and scale, we are constantly optimizing the model of the product. The ROI can go up and down, but the company is still expanding the size and expansion of the user interface. The external traffic competition will reach a certain level of ROI. At present, our ROI is still at a relatively stable level, and we have not seen any negative effects on the demand for advertising. If customer skills were held constant, continuous optimization of our models and products would keep driving ROI higher.

However, we continue to grow ad spend and ad spend into new user segments and external traffic competition dilutes ROI to some extent. Currently, our ROI is holding at a fairly stable level and we have not seen any negative impact from software advertising demand yet. The demand base for short-term insurance products in China remains substantial. The key is whether we have We will continue to iterate on coverage terms and upgrade deductible rules to serve different tiers of user needs and keep unlocking incremental growth.

关于海外拓展,公司仍在探索不同新业务赛道,也会严格管控新项目的二岸线,目前没有其他的更新。

We continue to explore various new business life while strictly managing the ROI performance of new initiatives. Currently, we don't have any other new updates. Thank you.

Next question, please. The next question comes from Thomas Wang of Goldman Sachs. Your line is open. Please go ahead.

Two questions, thank you for the opportunity. So firstly on the advertising business, you want to see Initial expense is quite high, but I want to see what spenders will view on median to long-term margin. And the second point is on the trend in terms of never policies sold during the quarter and also the average ticket size. Thank you. Thank you, Pao. Regarding our advertising business, the overall margin is not disclosed yet, but it is still very healthy. This is a new project to help us and Bao Si to have a deeper understanding of the product and value of this user. The second question is about our customer service. The customer service is not disclosed now, but the overall trend has not changed significantly in the past.

For the advertising new business, right now, we don't disclose any details. But right now, it's a healthy trend. As for the average price of our product, also we don't disclose any details in our quarterly report. But our momentum continues healthy. Thank you. Next question, please.

One moment for our next question. Next up, we have the line from Lin Tan from Hightone International. Your line is open. Please ask your question.

Thank you for giving me the opportunity to ask this question. I have two questions here that I would like to ask. The first question is about advertising service revenue. Can you please explain in detail what this advertising service project is about? The second question is about AI. The company has been landing more and more AI in the first half of the year. Li Pei, Li Pei, Li Pei, Li Pei I have two questions. Thank you, management, for taking my question. My first question is regarding the new advertising service revenue. What exactly is the new advertising service revenue this closing this quarter's revenue breakdown? And then my second question is regarding AI. In first half, the company continued to roll out its multi-engine AI claim system and step up investment in AI across claim underwriting and user conventions. What quantified improvement have this AI capability actually delivered in customer acquisition cost, policy quality, and claim cost? And what's the cap-ass plan for R&D investment going forward? Thank you.

Thank you, Lin Tan. Advertisement Advertising services are a new service offering that was introduced during this quarter, specifically referring to services provided to insurance carriers.

Our newly launched advertising services are built on our proprietary intelligent marketing platform, which provides clients with integrated intelligent marketing and traffic optimization solutions. Advertising services represented a small share of total revenue in this quarter.

Li Pei, Li Pei, Li Pei, Li Pei,

This quarter, in our claims assistance scenarios, we used multimodal models to intelligently parse a variety of materials, including medical records, diagnosis certificates, Medical Invoices and Examination Reports, enabling document recognition, information extraction, fact consolidation, and review assistance. These capabilities have now been deployed in medical insurance claims assistance scenarios, achieving a document classification accuracy of 95% and an average key field extraction accuracy of approximately 94%. As of the end of the quarter, Our AI team continues to account for over 10% of the total workforce. Moving forward, we will continue to prioritize deep, consistent investment in our core technology capabilities. Thank you. Next question, please.

Our next question will come from the line of Sing Tao Chen of CICC. Your line is open. Please go ahead.

So I have two questions. The first question is, in the first quarter, Earning release, Yan Bao announced a dividend and share buyback program. So could you provide some guidance on the dividend and buyback policies for 2026 and 2027? The second question is, besides focusing on improving new customer conversion efficiency, how does Yan Bao leverage AI to enhance the retention of existing customers? Thank you.

Thank you, Xintang. In the future, the share price ratio will be analyzed and approved by the board based on the profit situation. In the case of stable profit growth, we will continue to strive to create long-term value for shareholders. In the future, we plan to maintain or increase the share price level of shareholders. In terms of repurchase, we have announced a $15 million repurchase plan for 12 months. In the future, we will also evaluate whether we need to increase or adjust the repurchase plan based on the actual repurchase situation.

Our future dividend payout ratio range will need to be assessed based on profitability and approved by the Board of Directors. While maintaining robust profit growth, we will remain committed to creating long-term value for our shareholders. Subject to our healthy cash flow and strong profitability, going forward, we plan to maintain or grow shareholder dividends On the buyback side, we have announced a $50 million share repurchase program over a 12-month period. Moving ahead, we will evaluate whether to extend or adjust the program based on how it is actually executed.

Regarding the conversion rate, on the one hand, we use the AI engine not only before the user exposure, for example, to reduce the conversion rate, The more important thing is to understand and operate the user behavior after the exposure. On the other hand, as mentioned in this quarter, the company uses multi-magnet technology to assist the insurance company in improving the efficiency and user experience. The company also continues to build insurance-related professional knowledge base, forming a professional knowledge base that supports AI applications. We will transform the technical advantage into the best operating performance, serve and promise, and strengthen the consumer experience.

On one hand, we use our AI engine to optimize user conversion and retention directly, both before user exposure, for example, by reducing the number of impressions needed to convert a user, and more importantly, after exposure. On the other hand, as mentioned, we use multimodal technology to help insurers and Huirui Wan. We also continue to build out our proprietary insurance knowledge base, forming the professional knowledge foundation that supports our AI applications. By converting our technology advantages into superior operational efficiency, we can better deliver on our service commitment and enhance the consumer's experience. which in turn improves user retention and drives repeat repurchase. Next question, please. Thank you.

One moment for our next question. Our next questions will come from the line of Jackie Sun from Shen Wan Hong Yuan. Please go ahead.

Good evening, everyone. I am Fei Ying from Shunhua Hongyuan Securities. Thank you for giving me this opportunity to ask a question. I have two questions to ask. The first question is to ask about the management of online marketing of financial products. We see that this method will be implemented at the end of September. I would like to ask what is the biggest challenge the company faces in the transformation of the marketing rule? How to smooth the transition period after the new rule is passed? Thanks for the opportunity. This is Jackie Sun from Shenwang Hongyuan Securities. I have two questions. With the administrative measures of the online marketing of financial products scheduled to take effect in September, What does management see as the greatest challenge in the company's marketing compliance transition? How do you plan to ensure a smooth transition? The second question is with the company's current ample cash reserves, how does the management assess the sustainability of its future dividend policy? Is management considering establishing a regular dividend mechanism tied to net income or free cash flow? Thank you.

Thank you, Jackie. Let me answer these two questions. The first one is about the management of financial product network marketing. So far, the current management method has not had any real impact on our back-end model. This is mainly due to two aspects. One is that we have always adhered to the rule of law in order to build a perfect marketing behavior management system and adapt to implement a forced rule of law review process. The second is that our core business logic is to To date, the introduction of this regulation has not had a material impact

on our customer application model. This is mainly due to two factors. First, we have always prioritized compliance and have already built a comprehensive marketing management system, paired with a mandatory compliance review process. Second, our core business model is deeply tied to licensed insurance carriers, and all of our product terms go through strict regulatory approval for filing procedures to ensure our operations remain compliant. At the same time, we maintain ongoing proactive communication with regulators, striving to keep our corporate strategy closely aligned with the latest policy direction.

As Sun Hong said, we will continue to create long-term value for Kutong. In the future, We plan to maintain robust profit growth.

We will remain committed to creating long-term value for our shareholders. Subject to our healthy cash flow and strong profitability going forward, we plan to maintain or grow shareholder dividends. Thank you. Next question.

Please hold for our last question. Our last question comes from the line of Liao Yuan of Citix. Please go ahead.

The first one is about our AI. Previously, we also launched a tool based on a multi-agent consumer intelligence insurance consultation plan. I would like to ask about the current situation of this tool's penetration and how much improvement it has brought to our efficiency. In the case of the B-end scenarios, such as compensation, assistance, and customer inspection, is there any data that can be shared about the improvement of the efficiency of the AI agent? The second is that we see that the company's cash reserves are also very sufficient. At the same time, it also announced the regular return plan. What other funds can be shared with us in the future? Let me translate it myself. Thanks management for taking my questions. I have two questions. The first one is about your AI. So could you share the penetration and the touch rate of your multi-agent AI insurance advisor too? and the efficiency in gain from AI agent in B2B client support and quality monitoring scenarios. And second question is about your giving the strong cash position and last quarter shareholder return program. So could management share more detail about your future capital allocation plan? Thank you.

In fact, AI has been further improved by the company by combining the AI technology with the multi-magnetic model of the knowledge library. In complex security scenarios, it has the accuracy, technological implementation, and the capacity to adapt to business. This type of security support has a traditional artificial processing mode that advances to the AI-supported human-machine coordination mode. From a long-term value point of view, AI support or replacement and many more. In July, we published the half-year report of LiPay in 2026, which shows that the AI-assisted LiPay system of self-reliance and self-reliance can be used to analyze, review, and conclude the three most intelligent high-efficiency systems, By combining our knowledge base with multimodal models and agent technology,

We have further improved AI's accuracy, interpretability, and business adaptability in complex insurance scenarios, driving the evolution of insurance services from traditional manual processing towards an AI-assisted human-machine collaborative model. From a long-term value perspective, using AI to assist or replace manual customer service and client support can improve the user service and Grace User LTV. Automating our modeling and development workflows also accelerates the pace of model iteration. According to our 2026 first half Client Report we released in July, this was driven by our proprietary AI-assisted Client Assistant, which relies on three AI agents working together efficiently for case organization preliminary liability review, and conclusion interpretation. It works alongside our intelligent claims assistance feature to empower our insurance carrier partners, helping insurance carriers shorten claim settlement time for small claims under 10,000 RMB by 41%, at the same time by launching value-added services such as claims follow-up and continuously upgrading others We brought more warmth to our service through technology, achieving improvements in both user experience and operating efficiency.

关于资金,我们打算继续保持严谨的资本配置策略,在现有的业务投资,潜在的新增长机会和选项的流动性管理以及股东回报之间做好平衡。

We intend to maintain a disciplined capital allocation strategy, striking a balance among investments in our existing business, potential new growth opportunities, prudent liquidity management, and shareholder return. Thank you.

And that concludes the question and answer session. I would now like to turn the conference back over to management for any additional or closing comments.

Thank you once again for joining us today. If you have any further questions, please feel free to contact us directly. We are presenting financial communications. Our contact information for IR in both China and the US can be found in today's press release. Have a great day. Thank you.

Today's conference call, thank you for your participation.