Here Group Limited

Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to Here's Earnings Conference Call. At this time, all participants are in aidless and only mode. We will be hosting a question and answer session after management's prepared remarks. Please note that today's event is being recorded. I will now turn the conference over to Ms. Tina Tang, the company's Manager of Investor Relations. Please go ahead, ma'am.

Thank you. Hello, everyone, and welcome to Hear's Earnings Call for the third quarter of fiscal year 2026. With us today are Mr. Peng Li, our founder, chairman, and CEO, and Mr. Tim Xie, our CFO. Mr. Li will provide a business overview for the quarter, then Tim will discuss the financials in more detail. Following their prepared remarks, Mr. Li and Tim will be available for the Q&A session. I will translate for Mr. Li. You can refer to our quarterly financials results on our IA website at ia.healgroup.com. You can also access a replay of this call on our IA website when it becomes available a few hours after its conclusion. Before we continue, I would like to refer you to our safe harbor statement in our earnings press release, which also applies to this call. as we will be making forward-looking statements. Please note that all numbers stated in the following management prepared remarks are in RMB terms, and we will discuss non-GAAP measures today, which are more thoroughly explained and reconciled to the most comparable measures reported in our earnings release and filing with the SEC. I will now turn the call over to the CEO and founder of HEAR, Mr. Li.

Okay, thank you. Good morning, everyone. Thank you for joining us today. I'm very pleased to announce that we achieved about RMB 165 million in revenue this quarter. This exceeded the high end of our guidance. More importantly, we keep improving our IP and POPTOY business. We are consistently optimizing our operations and cost structure to build a stronger foundation for long-term growth. As we all know, the first half of the year, especially the first three months, is typically a slow season for the pop toy industry. Beyond working with our channel planners and selling through our own direct channels, we stayed focused on our core strategy, that means building internal capabilities, developing IP-related products and content, and optimizing our channels. The marketing environment remains challenging, but consumers' demand for emotional and experience-based spending persists. We build our IP products and services around what consumers actually need. Let me start with our IP performance. Wacoku remains our flagship IP. It contributed RMB 102 million in revenue in Q3, all around 62.2% of total revenue. Sedona's revenue grew 73.1% quarter over quarter. accounting for 20.2% of total revenue. Synorno launched in the second half of 2025. In less than a year, it has reached a meaningful scale. This is an early validation of our ability to incubate new IPs. More importantly, we are seeing a growing cross-IP engagement. While Google users are connecting with Zenono and other IPs, while new users are always discovering our increasingly rich IP portfolio. As we move forward, we keep coming back to one key insight. Short-term sales are not the real measure of success. The real question is whether an IP can win users and earn a lasting place in their hearts and lives. IP development and ongoing operations take time. They require long-term interaction between the IP and its users. Often in physical spaces, offline D2C stores are a key part of making that happen. Based on our deeper knowledge of the IP industry, we have refined our strategy. In 2025, our growth was mainly driven by our strong productive capabilities and the strength of our IP portfolio. At the same time, we benefited from favorable market circles, channel pair wins, and celebrity partnerships. These collaborations give us additional momentum and valuable experience. We will continue to benefit from our partnerships at the same time. We know that building lasting IPs requires strong building and solid operational capabilities. That means building our own systems to reach users directly. and engage with them deeply. Therefore, long-term IT momentum will always be our top priority. Revenue should follow from strong ITs, not the target. To achieve this, we have set the following key priorities. First, keep building ITs and brand operations create ongoing interaction between IPs and users through different formats deliver great emotional experiences We will stick to our strategy focusing on our core IPs while creating and growing new ones Around our core IPs we are speeding up the development of innovative products. This will take about three to six months. We expect to launch new products from our core IPs very soon. Second, keep expanding our offline D2C stores and the robot shops. This extends our brand reach and the user touchpoints. We treat our offline D2C stores as an extension of our IP products. The store itself is a product. It unifies the IP expression within our self-operated brand system. As of today, we have opened seven B2C brand stores. Each store serves as a space for brand user interaction. Our membership system has also been upgraded. We now have a full-chain membership management system in place. This lays the foundation for constant user engagement. Our RoboShop rollout has also recently begun. To date, we have developed around 15 RoboShops in three cities. Third, keep building Strong online operations. We want to note that online sales are not our goal. Online activities will serve as one of the tools for IP and product operations. This helps us deliver a great consumer experience. First, keep a measured and steady pace on global expansion in the near term. We plan to open a pop-up store in South Korea and participate in a trade show in the U.S. at the initial market test. Fifth, keep optimizing our business cooperation with China partners. We pursue mutual benefits and winning outcomes. work with them to promote our IPs and products, and to deliver great experiences to users. Building IP value and enhancing user experience is a long journey. But with efficient execution, we can move more steadily, better and faster. Our progress comes down to two things. First, IP ecosystem. we are moving from one of these to a repeat engine. As of March 31, 2026, our IP portfolio includes 20 total IPs. That includes 12 proprietary IPs and eight exclusive licensed IPs. This quarter, we focused on Diversifying our IP metrics, we introduced new IPs with unique styles and different target audiences. We also accelerated our new product launch pace for both flagship and emerging IPs. This quarter, we launched a new co-branded IP, Xiao. Its core spirit is defined by four words. cool, stubborn, brave, and free. This message resonates well with young consumers. To drive the launch, we run an integrated campaign across celebrity, social, and fun channels, leveraging our strengths in IT design, supply chain, and omni-channel sales. We completed pre-launch prep, including character development and mass production. We all gained strong market attention and a pre-launch buzz. The strong market response has validated and strengthened our portfolio. It proves that our IP incubation model is scalable and competitive. Beyond that, we have a strong product pipeline in preparation. We will launch them steadily according to our planned cadence. For Wacoku, we launched a new series. The handicraft world of Wacoku series vinyl flash store on March 28. As of March 31, the initial launch period, the series achieved strong results. Total omni-channel sales exceeded RMB 20 million. Peak concurrent online viewers reached 28,000. And the total new product, Explorer, topped 100 million. The series focused on handcrafted feel, friendship and warmth, healing vibes. This depends on our emotional connection with users. In May, we also released the 520 gift box, Wakuku Heartbeat Devil, as a hunting card set. Recently, we have also launched new products for other IPs. This includes new plush toys, vinyl figures, handing cards, and sandwich collections for IPs like Ziuli, Zenono, Kido, Kili Kili, and Awei. Each of these IPs speaks to a different audience with unique styles and labels. That's how we build a richer IP matrix. For Synanon, the new generation product moved on. Serious, vinyl plus dough, had its offline launch on May 30 and online launch on June 2. Second, omni-channel reach. We are boosting IP user interaction with a cleaner, with a clear focus. Offline first, online empowering. Offline, we operate through three channels, our D2C stores, RoboShop network, and partner channels. First, our self-operated brand stores and RoboShop. As of today, we have opened seven D2C stores in four cities. We recently opened two new D2C stores. One at Shenzhen, Uniwalk Qianhai on April 25, and another at Xi'an Saige on May 1. Both stores are in prime high traffic business areas and rank among the biggest in their respective cities. We are closely tracking store performance scouting locations for new stores. We are also expanding into automatic retail. As of June 4, we have rolled out about 15 robot shops across key cities nationwide. These unmanned vending machines are placed in high-traffic locations. They extend our offline reach without the higher cost of full-scale DOS. They serve as both sales channels and brand touchpoints. They make our IPs more accessible with collecting available data on product performance and purchasing habits. Second, partner channels. We continue to work with our channel customers This partnership helps us reach more consumers through established retail networks. They expand our IPs and brand elements at more offline touchpoints and help us interact with users. On the online side, our social media presence continues to grow as a green force Our community of followers across major platforms is approaching 800,000. We use online channels to build content and community. Doing so empowers our IP and brand operations. We have also run several brand marketing events to build brand awareness and drive user engagement. We partnered with ApolloGo, Baidu's autonomous driving platform, to integrate our APIs with AI technology and smart mobility. This partnership spans co-grounding in vehicle exposure and the use-focused content campaigns in May. We participated in the first China New Culture and Creative Market and Trendy Toy Carnival in Beijing. This is a nationwide-level event co-hosted by three central ministries. Hero Group was the only non-state-owned enterprise featured in media coverage, including BRTV. Our flagship IP, Mwakuku, was showcased alongside traditional culture as a new oriental aesthetics section. Going forward, we will accelerate the creation of more offline scenarios to give IPs and user and uses small spaces to interact. In Beijing, at Beijing airport, we plan to set up a store to enhance brand visibility. And we are actively exploring more similar scenarios. In Hong Kong, we plan to create a dedicated ride experience on the boat at a central pier using our keys, building a unique brand operational discipline is reflected in our capital allocation. We continue to align resource support and cost structure with our strategic adjustments. Whether investing in a new IP, opening a store, or launching a content initiative, we evaluate each potential investments against a clear ROI framework. We don't make guesses. We allocate capital based on the information and the data from IP momentum, our offline network, membership system, and the sales channels. Thank you for your continuing support. I will now turn it over to Tim for a detailed review of our financial results. Thank you, everyone.