JOYY Inc.

Ladies and gentlemen, thank you for standing by and welcome to Joy, Inc.' 's first quarter 2026 earnings call. At this time, all participants are in listen-only mode. After the management's prepared remarks, there will be a question and answer session. I'd now like to hand the conference over to your host today, Jane See, the company's senior manager of investor relations. Please go ahead, Jane.

Thank you, Operator. Hello, everyone. Welcome to Joy's first quarter 2026 earnings conference call. Joining us today are Ms. Ting Lee, Chairperson and CEO of Joy, and Mr. Alex Liu, the Vice President of Finance. For today's call, management will first provide a review of the quarter, and then we will conduct a Q&A session. The financial results and webcasts of this conference call are available at ir.joy.com. A replay of this call will also be available on our website in a few hours. Before we continue, I would like to remind you that when we make forward-looking statements, including but not limited to the future development of our products and businesses, the expected future financial performance of the company, our share of purchases, and other future events which are inherently subject to risk uncertainties that may cause actual results to differ from our current expectations. For detailed discussions of the risk uncertainties please refer to our latest annual report on Form 20F and other documents filed with the SEC. We will also discuss certain non-GAAP financial measures. They are included as additional clarifying items to aid investors in further understanding the company's performance and the impact that these items and events had on the financial results. The non-GAAP financial measures provided above should not be considered as a substitute for or superior to the measures of the financial performance prepared in accordance with GAAP. You may find a reconciliation of the differences between GAAP and non-GAAP financial measures in our earnings release. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in U.S. dollar. I will now turn the call over to our Chairperson and CEO, Ms. Ting Lee. Please go ahead, Ms. Lee.

Hello, everyone. I'm Li Ting. Thank you for joining us today. I apologize, but I forgot a code recently, and my voice is quite weak. For efficiency of this meeting, I'm going to have our IR GM read through the prepared remarks for me. I'll be back to take your questions during the Q&A. Thank you for the understanding.

Thank you. As we enter 2026, Our social entertainment business has returned to year-over-year growth, while our second growth curve, ad tech and smart commerce, is progressing with strong momentum. Our globally diversified ecosystem is taking shape with social entertainment, advertising, and smart commerce fostering one another in a self-reinforcing strategic flywheel. This flywheel is propelling joy into its next phase of growth. Let me begin with an overview of our Q1 results. Total revenues reached 556 million, up 12.4% year-over-year, marking our strongest year-over-year growth rate in recent years. Social entertainment revenue was 400 million, up 3.2% year-over-year. Legal ads contributed 125 million, up 55.6% year-over-year. among which our third party, Beagle Audience Network, delivered 78.8% year-over-year growth. Shopline revenue reached $31 million, up 16.1% year-over-year. Q1 non-GAAP operating profit and EBITDA reached $38 million and $46 million, up 22.5% and 13.2% year-over-year, respectively. Operating cash flow for the quarter was $46 million. As of March 31, 2026, we held $3.18 billion in net cash. Our strong cash generation continues to support meaningful shareholder returns. Since the start of 2026, we have accelerated our buyback program through May 22, 2026, we have repurchased a cumulative $88 million in shares and paid $69 million in dividends for a total return of $157 million to shareholders. In light of our solid operational performance and robust balance sheet, the Board has just approved an updated shareholder return program totaling $1.5 billion, under which we could repurchase up to $600 million worth of our shares and distribute approximately $900 million in dividends over the next three years. This underscores our strong confidence in the long-term potential of our business and demonstrates our continued commitment to delivering sustainable value to our shareholders and enabling shareholders to benefit from our operational improvements. This quarter marks the first quarter we are reporting results under our new three-segment structure, Social Entertainment, Beagle Ads, and Shopline. I'd like to take this opportunity to reaffirm our long-term strategic vision. We are building a global technology ecosystem driven by AI. This ecosystem is designed to unlock compounding returns from our data assets through the deep integration of social entertainment, programmatic advertising, and omnichannel e-commerce, creating a self-reinforcing growth flywheel. Social entertainment is our foundational business, providing the user base data assets, and cash flow that support the broader ecosystem. By building a highly engaged global user community, we have accumulated a valuable first-party data asset and a scaled global traffic pool supported by established technology infrastructure and localized operational networks across key markets. Social entertainment underpins our cash flow generation and serves as the long-term anchor of the group. Beagle Ads accelerates our flywheel, strengthening our data and algo advantages. Through advanced predictive models and algo optimization, we convert traffic into measurable, scalable advertiser ROI. Each iteration further enriches our data assets and deepens our algo mode, building our competitive advantage. Shopline is the engine of our one-stop omni-channel e-commerce offering and provides merchants with open, connectable infrastructure that puts data ownership back in their hands. This control empowers them to maximize business performance across the full customer lifecycle. AI is the backbone of this entire ecosystem, seamlessly connecting our social data assets algos, and e-commerce capabilities. Together, these three pillars form a closed-loop system that deepens our economic moat and drives long-term value creation for joy. Now, let me walk through our Q1 performance and share our outlook on the future. In Q1, social entertainment revenue returned to year-over-year growth of 3.2%. with live streaming revenue up 2.4% year-over-year. Core live streaming paying users grew 5.9% year-over-year. On the traffic side, global average mobile MAUs reached 276 million, up 6.1% year-over-year and 1.5% QOQ. Driven by high user stickiness and fully organic growth, traffic from instant messenger increased by 3.1% QLQ. For our flagship products, we improved our streamer incentive structure, launched targeted support programs for high-quality content categories, and integrated new AI capabilities. These initiatives drove ongoing gains in both content engagement and payment conversion. Streamer activity improved sequentially despite seasonal impacts. number of active streamers increased 1.5% QOQ, and average effective streaming hours per streamer rose 1.4% QOQ. We have now fully rolled out our AI smart tools for streamers across key markets, meaningfully improving interaction efficiency. As of April, AI-generated interactive virtual gifts accounted for 34% of total virtual gift consumption on BeagleLive. Our new product lineup continues to gain traction with revenue up over 500% year-over-year and 45% QOQ, setting new monthly revenue records. Our current Q2 guidance implies low to mid single-digit year-over-year growth for social entertainment revenue. Building on this momentum, We are confident that our social entertainment business will achieve full-year revenue growth in the 26th and sustain this positive trajectory going forward. Moving to Beagle Ads. In Q1, Beagle Ads generated $125 million in advertising revenue, up 55.6% year-over-year. Our third-party business, the Beagle Audience Network, delivered 78.8% year-over-year, despite the seasonal softness of Q1. Broader traffic coverage, multi-vertical advertiser expansion, and ongoing algo optimization fueled this momentum. On the supply side, SDK traffic maintained strong growth, of 109% year-over-year and 7% QOQ in Q1. On demand side, our strategic presence across multiple verticals, including lead generation, e-commerce, and IAA drove an enrichment of our advertiser mix and enhanced ecosystem density. This multi-vertical approach not only accelerated data accumulation and algorithm iteration, but also strengthened our traffic bidding capabilities Notably, web-based demand, primarily from lead gen and e-commerce advertisers, grew 90% year-over-year and delivered positive sequential growth. Incremental spend from both new and existing advertisers fully offset the typical seasonal softness of Q1. IAA spending sustained 97% year-over-year growth. Geographically, we prioritize high-value developed markets, North America remains our largest market for Beagle ads, while Western Europe delivered notable momentum with revenue up 27% QOQ. On the algo side, we're steadily and prudently scaling our computing infrastructure and strengthening our R&D talent base by integrating data feedback from advertisers across channels and leveraging the dual growth of traffic scale and advertiser density we have built a rich behavioral data layer. This enables multi-dimensional precise user profiling and real-time model iteration, which in turn improves app delivery efficiency. The fact that we're seeing positive feedback across multiple verticals validates the generalization capabilities of our model framework. As our data scale accelerates and the vertical-specific models mature, We expect our algo flywheel will increasingly serve as the primary engine of our revenue growth going forward. We reiterate our strategic commitment to reaching $1 billion in legal audience network revenue by 2028. As our third-party advertising business continues to scale, we expect a steady structural improvement in profitability. Turning to ShopLine. This is the first quarter we're reporting Shopline as a standalone segment. The decision to do so now reflects our belief that Shopline has reached a critical mark in terms of its importance to the group and that Shopline will become an increasingly meaningful contributor to our growth going forward. As global commerce enters the omni-channel era, merchants increasingly desire autonomy and full funnel data ownership. we have built ShopLine as AI-native, one-stop, omnichannel e-commerce infrastructure. What we offer merchants is not simply a storefront building tool, but a fully open, connectable retail operating system. Through deep integration with payments, logistics, and marketing modules, we empower merchants across every stage of their journey, from store setup and transactions to fulfillment and full lifecycle customer retention. Globally, very few vendors are capable of delivering this kind of OS-level closed-loop solution. We are also accelerating the integration of a suite of AI-powered capabilities. The tools will drive ShopLine's ongoing evolution from an enablement tool to an AI-driven commerce engine and represent a fundamental shift in how merchants operate. AI-powered traffic allocation and automated decision-making will unlock new growth opportunities and new levels of precision across omnichannel retail. On monetization, beyond high retention subscription fees, we generate revenue through transaction-based value-added services and payment and marketing. These reflect a fundamental distinction from traditional seed-based software tools. This monetization model, deeply aligned with merchants' full lifecycle growth, will fuel Shopline's ongoing accelerating performance. Q1 is traditionally a serve season for e-commerce, yet Shopline delivered solid results. Revenue was $31 million, up 16.1% year-over-year, with gross margin expanding further to 51.5%. revenue growth from cross-border merchants remain robust, sustaining over 60% year-over-year growth. Our Q2 guidance implies ShopLine's revenue growth accelerating to above 25% year-over-year in Q2. This meaningful progress marks ShopLine's transition from incubation to a phase of scaled growth Propelled by accelerated revenue and gross profit growth, Shopline is on a clear and visible path to achieve break-even by 2028. Additionally, as VGOAS makes steady progress in the DTC e-commerce vertical and moves past its cold start phase, we anticipate increasingly tangible synergies between these two businesses going forward. These mark a crucial long-term strategic objective of Joy, and we are committed to solid execution to unlock this untapped potential. Finally, in summary, our strategic layout and the unlocking of our ecosystem's value remain in their early stages. Looking ahead, we expect our three business segments to generate stronger structural synergy, further deepening our competitive mode, and driving Joy's long-term value to its next level. With that, I will now hand the call over to Alex Liu, our Vice President of Finance, to walk you through our financial results in detail.

Thanks, Misty and Jay. Hello, everyone. Beginning this quarter, we are reporting social entertainment, legal ads, and supply as stand-alone segments. This reflects a strategic inflection point. Legal ads and supply have evolved from incubation projects into scalable growth engines. Now, let's turn to financial overview of the quarter. In the first quarter of 2026, we recorded total net revenues of 555.7 million, securing a year-over-year growth of 12.4%. Our strongest year-over-year growth rate in recent years. Our non-GAAP EBITDA for the quarter was 45.7 million. Our operating cash flow was 46 million in quarter one, and we ended the quarter with roughly 3.18 billion in net cash. As previously communicated, we accelerated share buyback since we entered into 2026. Buying back 87.9 million worth of our shares as of May 22. In light of our solid operational performance and robust balances, we have just announced an updated shareholder retention program, totaling $1.5 billion, in which we could repurchase up to 600 million worth of our shares and distribute up to 900 million in dividends over the next three years. We represent a 67% expansion from the previous program, showing our strong confidence in the company's long-term prospects. I will now dive deeper into our detailed financial performance. Social entertainment revenues were $400.4 million for the first quarter, delivering its first year-over-year recovery of 3.2% year-over-year. In particular, live streaming revenues retained 2.4% year-over-year growth. This marks an inflection point and a result of the strategic adjustments We've executed over the past several quarters. Call live streaming paying users increased by 5.9% year over year, while live streaming venues from developed countries increased by 11.2% year over year. Legal Edge continued to deliver exceptional growth. with its revenue up by 55.6% year-over-year to $124.8 million. In particular, our Sure Party Edge Renewal Big Audience Network delivered outstanding results, recording 78.8% revenue growth year-over-year. On the traffic front, SDK network and request was up by 109% year-over-year and 70% quarter-of-quarter in quarter one. Our multi-industry strategy has helped us capture broadened market opportunities. Web-based demand was up by 90% year-over-year. Mobile-based demand continued to be strong. with RAA spending up by 97% year-over-year. We are right on track to achieve our three-year strategic goal for Beagle Audience Network, which is maintaining high-velocity growth and reaching three-year revenue milestone of $1 billion. While we are prudently investing in the expansion for our R&D and sales capabilities, As well as our network and computing infrastructure, all these networks' economics remain healthy. We are confident that as we scale, we will remain profitable and potentially further enhance all these networks' economics in the mid-term. So, my kickoff is the new quarter. generating revenue of $30.5 million, delivering a 16.1% year-over-year revenue growth. Cross-border merchant's revenue was up by 66%, with its revenue contribution up by 8% compared to Q1 last year. they expect cross-border merchant revenue to maintain a high-velocity growth going forward. While lasting revenue contribution from this merchant segment will lead to gradual acceleration of Softline's overall revenue growth. Group's gross profit was $189.3 million in the quarter, with a gross margin of 34.1%. BeagleEd's gross margin was down quarter over quarter due to a safety in our revenue mix, which saw an increased contribution from our lower margin network and revenues. Softline's gross margin was up by 6.8 percentage points year over year to 51.5%. primarily due to growth in high-margin subscription revenues, as well as improving gross margin for its value-added service revenues. Our group's operating expenses for the quarter were $183.4 million. Sales and marketing expenses were higher year-over-year, consistent with revenue increase. G&A expenses were also higher year-over-year, primarily due to increased share-based compensation expenses. Our group's non-GAAP operating income for the quarter was $38 million. Non-GAAP net income attributable to controlling interest of Joy in the quarter was $55.9 million. The group's non-GAAP net income margin was 10.1% in the quarter. Our non-GAAP net income was lower due to higher FX loss of $13.6 million due to the weakening US dollar. Excluding the impact of FX losses, our non-GAAP net income was $69.5 million, up by 8.7% year-over-year. For the first quarter of 2026, we booked net cash inflows from operating activities of 46 million. Our balance sheet remains healthy with a strong net cash position of 3.18 billion as of March 31st, 2026. As of May 22, We have retained 156.8 million to our shareholders through dividends and share buyback. Our share buybacks in the past quarters and the newly introduced three-year shareholder return program reaffirms our previous statement. Shareholder return has been and will continue to be an important component of our capital allocation strategy. We will remain focused on delivering strong results, actively executing our new programs, and enable our shareholders to benefit from our operational improvements. Turning now to our business outlook. At the group level, we expect our net revenues for the second quarter of 2026 to be between $562 million and $581 million. This implies a 10.7% to 14.4% year-over-year growth for the group's revenue. With social entertainment sustaining positive growth year-over-year, Google Ads delivery made double this year's growth, while supply growth accelerating in the second quarter. To summarize, Q1 2026 marks a pivotal milestone for Joy. We have delivered our strongest year-over-year revenue growth in recent years. realigned our reporting structure to match our strategic priorities, and accelerated our commitment to capital returns through enhanced buybacks. Looking ahead, we are extremely excited about the tremendous synergy potential and the powerful flat-bill momentum that our business segments will deliver in the medium to long term. That concludes our prepared remarks. Up later, we would now like to open up the call to questions. Thanks.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, Please pick up the handset to ask your question. When asking a question, please state your question in Chinese first, then repeat your question in English for the convenience of everyone on the call. Your first question comes from Thomas Chong with Jefferies. Please go ahead.

Good morning, thank you for accepting my question. We saw that this is the company's first time to disclose our performance according to social media advertising technology and soft line. We saw that the income of live broadcasts in social media business in Q1 also achieved the same growth. Can we further talk about whether this loss can continue? This is the first question. Hi, good morning. Thanks, management, for taking my question. My first question is that this is the first time the company disclosed its performance in three business segments, namely social entertainment, B2S, and shoplines. So for social entertainment, live streaming revenue achieved positive year-on-year growth in Q1. Can management further elaborate whether this is a sustainable recovery? And my second question is about our full-year outlook. Can management comment about our 2026 revenue and profit guidance for each business line this year?

Thank you. Thank you, Thomas. The first question will be answered by me. In the first quarter, as expected, our social entertainment income increased by 3.2% in the same ratio. Among them, the live broadcast income increased by 2.4% in the same ratio, which officially returns to the same rate of growth. In fact, since the second quarter of the second half of the year, a series of adjustments have been pushed, especially the adjustment of the anchorage mechanism, which continues to play a role in the repair of the live broadcast ecosystem. EZ度本應該是主播開播的幹子,但我們仍然實現了有效開播主播數和人均有效開播時長的環比正增長。優質的內容品類,比如音樂主播的開播人數也獲得大幅度的上漲。在整體的內容供應和主播能動性的提升的基礎上,我們繼續推動了精細化的用戶分層運營和激勵體系升級。 and improved the distribution of content and paid experience through AI and other functions. These improvements have also further promoted the increase in paid conversion rate, and the growth of the core live paid users has increased by nearly 6%. In terms of the approval of new products, the first quarter has also achieved significant progress, with the same increase of more than 500%, and the revenue continues to be innovative. Thank you, Thomas. Mrs. Linsing, I will answer your questions.

So for the first question, for so far in Q1, as expected, our social entertainment revenue was up by 3.2% year-over-year, with live streaming revenue up 2.4% year-over-year, returning to a positive year-over-year growth trajectory. Well, we have been executing a series of structural enhancements since the second half of 2024 particularly with our streamer incentive mechanisms. And these, we believe, have continued to strengthen our live streaming ecosystem. Despite Q1 typically being a low season for streamer activity, we still achieve a sequential increase in the number of active streamers and also the average effective streaming hours per streamer. notably the music streamers, which is one of our key quality content genre, also saw a meaningful uptake in streamer participation. Building on the improved content supply and streamer engagement, we continue to refine our user segmentation and also upgrade our tiered paying user benefit system, combined with AI-driven optimization on content distribution and also payment experience. These efforts drove further improvement in paying conversion with core live streaming paying users growing nearly 6% year-over-year. Our new product lineup also continued to gain traction in Q1 with revenue up over 500%, selling new monthly records and contributing incremental revenue to social entertainment. Looking ahead, Our current Q2 guidance implies a low-to-mid single-digit year-over-year growth for social entertainment revenue, which represents an acceleration from Q1. Building on this momentum, we are confident that live streaming revenue and also social entertainment revenue will achieve steady positive growth in 2026.

Hello, Thomas. I'm Alex. Let me answer your second question. In the second quarter of 2020, we have achieved a growth of 10.7% to 14.4%. In terms of social entertainment, We expect that the revenue of the second quarter will achieve a similar growth in each position. Then, the Bico Edge will continue to perform strongly to achieve a similar growth in the middle position. In addition, the revenue of the second quarter will increase to more than 25%. In the whole year, we expect social entertainment to achieve a steady growth. In terms of big ads, as the flow size continues to expand, the coverage of multi-type advertisers and our algorithm model continue to optimize. This effect will promote big ads to maintain a strong double-digit growth throughout the year. In terms of supply, cross-border trade, rapid penetration, and expansion of the new market, we expect that the supply business will also maintain a two-digit revenue growth. As the three business lines are close to the上升通道, we are full of confidence in the full-year revenue growth of the group in 2026. In terms of net profit, in the second quarter, we expect that the company's net profit will also increase with the growth of the right-hand side income. In the past year, the social media business has returned to the growth of the live broadcast business. At the same time, the overall profit of the live broadcast will remain stable and small. The three-way advertising of BQS is currently at a stage of rapid expansion. This year, we will continue to invest in the development, construction of sales teams, and support facilities. But considering that the models that are good at this stage are already very healthy, we are confident that on the basis of maintaining profitability, with the improvement of the scale, the medium-term profitability capacity is expected to continue to increase. The operating cost is relatively fixed in terms of inflation. Under the drive of income and labor growth, I believe losses can continue to shrink. So in summary, we expect that the 26-year Group Nongap net profit and EBITDA will continue to improve for 25 years to achieve a steady improvement of the same ratio. Of course, at the level of net profit, we want to make a supplementary explanation to the foreign exchange market. This is Alex. I will take your second question.

So for Q2, our current guidance implies 10.7% to 14.4% year-over-year growth for our group revenue. By segment, we expect social entertainment to deliver low to mid-single-digit year-over-year growth. We go out to sustain mid-double-digit year-over-year growth and shop lines revenue growth to accelerate to about 25% year-over-year. For the full year of 26, We expect social entertainment to deliver steady year-over-year growth rate for Google Ads with continued traffic expansion, deepening multi-vertical advertising coverage, and ongoing algorithm optimization. We expect a strong mid-double-digit year-over-year growth for the full year. For ShopLine, with accelerating cross-border merchant penetration and also new market expansion, we expect it to sustain double-digit revenue growth. all three segments now entering into an upward trajectory, we are confident that the group will deliver positive, solid revenue growth for the full year of 2026. Turning to operating profit, for Q2, we expect sequential improvement in the group operating profit in line with our QOQ revenue growth across all segments. For the full year, On social entertainment side, with live streaming revenue back to growth, we expect live streaming profit to remain stable or grow modestly. For Beagle Ads, our audience network is rapidly scaling, and we will need to continue to invest in R&D, sales, and also our network infrastructure. But given the healthy economics of the audience network at this stage, we are confident that as we scale, we will remain profitable and we expect to see further improvement in its economics over the medium term. For Shopline, with its operating expenses relatively fixed on revenue and gross profit growth, we'll drive continued narrowing of its operating losses. Overall speaking, we expect the group's non-gap operating profit and EBITDA to continue the improving trend that we achieved in 2025 delivering a steady teens year-over-year growth in 2026. At the net profit level, I do want to provide some additional context on FX fluctuations. Due to the continued weakening of the US dollar against RMB, we recorded significant unrealized FX losses in Q1, and we expect similar impact from FX in Q2. However, we'd like to remind you that these are non-operational, mark-to-market fluctuations So when the dollar strengthens, they will be reversed. Next question, please.

Thank you. Your next question, it comes from CC Cheng with CLSA. Please go ahead.

Hey, hey, 管理层,感谢接受我的提问,然后也恭喜公司强劲业绩。 我想再追问一下关于广告业务方面, 因为我们一季度的话一般是一个传统的淡季, 但是 Bigger Ads 它的表现是明显好于预期的, 然后请问这个核心的驱动力是什么? 另外目前公司已经介入了像 Max, 还有 Levelplay这两大头部的聚合平台, 能不能再介绍一下我们目前跟其他的聚合平台的合作进程, 以及对业务有什么潜在的影响? 谢谢。

Thank you for your question. This question will continue to be answered by me. In the first quarter, BigoAIDS achieved a growth of 55.6% in the same ratio. Among them, the three advertising platforms increased 78.8% in the same ratio. The return ratio also achieved a slight increase. The overall performance is better than expected. The core driving force will come from the following aspects. First, the implementation of a multi-layer strategic layout. By collecting clues, D2C e-commerce, IAEA, and other deep-rooted sources, the external budget of the first quarter increased by 90.1%, and the return was also a positive increase. The budget of IAEA increased by 97%, which is the core reason why we can hand out better than expected results in the traditional period. Second, the improvement of the ability to calculate. Through continuous promotion of advertising and full channel data return, with the addition of the label of AI model, and more comprehensive user behavior data, we realized the collection and delivery of user images, and significantly improved the advertising distribution efficiency on the platform. In addition, we also completed the framework upgrade of the medium-range model. According to the characteristics of different advertisements, targeted upgrade and delivery are carried out for models, and for clues, IAA, independent station, e-commerce, etc. have been specialized and optimized to improve the efficiency of the algorithm. With the accumulation of data and the action of the algorithm, the flow rate and the efficiency of the transformation have been continuously improved. The flow of advertisers and the increase in the average investment budget have formed a flying wheel effect. Next, we will continue to optimize the algorithm of the algorithm. From the effect point of view, the positive and negative feedback of the multi-channel industry has verified the ability of the medium-sized model frame to be optimized. With the rapid accumulation of data and the continuous elaboration of the hammer type model, the algorithmic performance is accelerating, and will gradually become the main engine of the next stage, the second half of the year, and even next year's advertising revenue growth. Regarding the flow chart, we are still actively promoting and investing in the cooperation of the brand. Currently, there is a cooperation project that has entered the internal chart stage. We expect to complete the formal connection within 2026. We expect to help advertisers reach a wider range of high-quality traffic in the global range after formal intervention. We will further improve our traffic coverage depth and breadth, and introduce new acceleration for the non-wheel effect. We are very confident in the continued high-speed growth of Big O AID's three-way advertising business.

Thank you, CC. This is Li Ting. I will take your question. In Q1, Beagle has delivered 55.6% year-over-year growth with third-party Beagle audience network growing by 78.8% year-over-year and also delivering a modest positive sequential growth. The overall performance was ahead of our expectations, and I would attribute it to the following key drivers. First of all, our multi-vertical strategy is definitely delivering clear results, leveraging our established capabilities and lead generation direct to customer e-commerce and also IAA. Our web-based demand grew by 90% over the year in Q1 and delivered positive sequential growth despite Q1 being a slow season. IAA demand grew by 97%. And this was the primary reason that we were able to deliver better than expected results during Q1. Secondly, the continuous upgrade of our algorithm capabilities. We have been driving broader cross-channel data feedback from advertisers, combined with AI-powered labeling and richer user behavioral data. which significantly enhance our user profiling and add delivery efficiency on the platform. We've also completed a framework upgrade to our core predictive model with specialized optimizations across eGen, IAA, and eCommerce verticals. As data accumulates and algorithms iterate, we are seeing sustained improvements in monetization efficiency with higher advertiser retention and also a growing average spend per advertiser, forming a self-reinforcing effect. Going forward, we will continue to optimize and iterate our algo models. The positive results that we have already achieved across multiple verticals have validated the generalization capability of our model framework. As data continue to accumulate at an accelerating pace and vertical-specific models continue to mature, The algo flywheel is gaining momentum, and we expect it to increasingly serve as the primary engine for our advertiser revenue growth in the following stage, particularly in the second half and also even beyond. Regarding the question on mediation partnerships on traffic side, we're actively advancing integrations with industry-leading mediation platforms. One of our partnerships has already entered the beta testing phase, and we expect to complete official integration within 2026. One slide, it will enable advertisers to reach a broader pool of high-quality traffic globally, further expanding our traffic coverage in depth and breadth, and injecting new momentum into the flywheel. We have very strong confidence in sustaining rapid growth for Beagle Audience Network. Thank you. Next question, please.

Thank you. Your next question comes from Raphael Chen with BOCI Research. Please go ahead.

Thanks, management, for the opportunity to ask questions. Noticing that Shopline made it first, Noticing that Shopline made its first and a long disclosure, could management elaborate more insights on the latest business update and the path to break even the profitability? Thank you.

Thank you for your question. I will continue to answer this question. Yes, this is our first time to expose Shopline as an independent platform. As we mentioned in the presentation, Shopline's positioning is based on AI as the base for all e-commerce infrastructure. What we do is not a simple construction tool, but a set of open, expandable, all-channel retail operating system. Here, the payment, logistics, and marketing are deeply integrated together, allowing the business to complete the process from construction, trading, booking, to user acquisition, and the whole life cycle. In the global scope, there are very few service providers that can provide this operating system-level solution. From the income model, SHOPLINE has built a high-performance subscription machine and a high-explosive, differentiated business transformation model. On the one hand, the stable subscription has become the base of the business, and has accumulated the basis of the business, and has formed a regular income. On the other hand, SHOPLINE has realized the deep-seated GNV transformation of the transaction wall through high-speed payment, marketing, and other increased services. This transformation mode, which is deeply tied to the growth of the business group chain, will become the engine that drives the shop line's performance to continue to explode. Our business group can be divided into two parts, one-to-one and cross-border business. The cross-border business income, which is dominated by large customers, has maintained high-speed growth since last year. Currently, our main investment in R&D costs has been stabilized. Thank you, Raphael, for your question. This is Li Ting.

Yes, this is the first quarter that we are reporting Shopline as a standalone segment, as we mentioned in our prepared remarks. we have positioned Shopline as an AI-native, one-stop, omni-channel commerce infrastructure. What we are building is not a simple storefront building tool, but rather an open and connectable, extensible retail operating system that deeply integrates payments, logistics, and marketing modules, allowing merchants to manage everything from store setup and transactions to fulfillment and full lifecycle customer retention operations. on one single platform. Globally speaking, very few vendors are capable of delivering this kind of OS-level closed-loop solution. In terms of revenue model, we have built a differentiated monetization framework anchored by high-stakenness subscription fees and accelerated by high-growth value-added services. On one hand, a stable subscription revenue serves as the foundational entry point building a robust merchant base and generating recurring revenue. And on the other hand, through deeply penetrating the transaction route and monetizers, GMV, through rapidly growing value-added services, including payment and also marketing. This monetization model, which is deeply aligned with the full lifecycle growth of merchants will serve as the primary engine driving the continuous growth in Shopline's financial performance. When we look at Shopline's merchant base, we currently serve two major categories, local merchants and also cross-border merchants. Revenues from cross-border merchants, predominantly key accounts, the larger brands, have maintained high-velocity growth since last year. Our R&D spend, which has been our primary OPEX, has largely stabilized, and the improvement in revenue and gross profit is generating operating leverage, and ShopLine's losses are narrowing meaningfully. Looking ahead, we see a clear and achievable path for ShopLine to reach break-even by 2028, and we are fully committed to delivering on that. Thank you. Maybe one last question, please.

Thank you. Your next question comes from Zwei Qingzhang with the ICC. Please go ahead.

Thank you for accepting my question. My question is about shareholder feedback. Thanks, management, for taking my question, my question about shareholder returns. The company announced a new three-year shareholder return plan of US dollar 1.5 billion this quarter. including $600 million in share buyback and $900 million in dividends. I commend you to share the thinking behind the significant increase in shareholder returns. Thank you.

Thank you for your question. My name is Alex. Let me answer it. This year, we are very happy to announce a new three-year shareholder return plan. The total amount reached $1.5 billion. It covers the fiscal year from 1926 to 1928. This new plan actually replaced the $3.9 billion stock recovery plan in the past three years. The overall scale has increased by about 67%. Specifically, the new plan is two-step B, annual dividend of $3 billion per year. Compared to the previous year-end inflation plan, it has increased by 50%. The second is the return of $200 million per year. It has doubled compared to the previous return. To make this decision, there are a few core considerations behind us. First, our three major business lines have entered a clear growth track. In fact, it is a very solid foundation for the return of higher-level shareholders. Secondly, the company maintains a strong reserve of cash until the end of March, which is about $3.3 trillion. It is fully capable of supporting the execution of this promise. Thirdly, we believe that the current stock price is still significantly underestimated by the company's long-term value. So the continued increase in the return on purchase itself is also the most direct bottom line of management information. Thank you, Xie Qing, for your question.

This is Alex. We are very pleased to announce this quarter our new three-year shareholder return plan, totaling $1.5 billion, covering fiscal years through 2028. This replaces our previous program totaling $900 million, representing a roughly 67 percent expansion in our total commitment. Specifically, the new plan comprises two components, annual dividend of $300 million per year that would be up by 50% from our previous $200 million per year. And our annual share buybacks, the share repurchase authorization per year, the annualized buyback quota would be $200 million and that would be nearly doubling the average quota of $100 million under the previous plan. There were several key considerations behind our decision. First of all, all three business segments are now on a clear growth trajectory, providing a very, very solid foundation for a higher level of shareholder returns. At the same time, our strong net cash position, as of the end of Q1, we still have around $3.2 billion of net cash on hand. This gives us a full financial capacity to execute this commitment, and And we do believe that the current share price still materially undervalues our long-term potential. And our commitment to increasing buyback is a very direct expression of the management's strong conviction in the future of the company. Looking ahead over the next three years, we are firmly committed to executing this plan and enabling our shareholders to benefit from improving operations. that was the last question and thank you so much for joining us today we look forward to speaking with everyone next quarter thank you thank you this conference is now concluded thank you for attending today's presentation you may now disconnect