Here Group Limited American Depositary Shares 2026 Q4 Earnings Call

Hello, everyone, and welcome to Here's earnings call for the fourth quarter and the full 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 Ting will discuss the financials in more detail. Following their prepared remarks, Mr. Li and Ting will be available for the Q&A session. I will translate for Mr. Li. You can refer to our quarterly financial results on our IR website at ir.heregroup.com. You can also access a replay of this call on our IR 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 following management prepared remarks are in CNY 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 Here, Mr. Li.

Yeah, okay. Good morning, everyone, and thank you for joining us today. We closed out our fiscal year 2026 with fourth quarter revenues of CNY 127.7 million, representing a robust year-over-year increase of 94.1%, and bringing out our full-year revenue to CNY 596.8 million. Fiscal year 2026 marks our first full fiscal year dedicated to the pop toy business. Most importantly, this year has provided us with complete clarity about our corporation identity, our long-term strategic positioning, and the paths we must take to build lasting shareholder value. Before diving into our operational updates, I want to share the core strategic insights that are reshaping Here. We firmly believe that enduring a high premier IP company must anchor itself on distinctive products and constant creativity, not third-party distribution channels alone. Distribution expands market reach, but it cannot answer the fundamental question of user loyalty.

Why will customers remember you and consistently choose your brand? Historically, our product pipeline and release cadence were tightly coupled with wholesale channel demand. To protect our brand from external volatility, we are shifting our business model into a strategic closed loop. This model integrates proprietary IPs, adaptive product design, and direct-to-customer channels. This closed loop grants us autonomy over our go-to-market cadence, product presentation, and the customer experience. Our self-operated D2C channels serve as the premier theater to showcase these high-value portfolio extensions. An industry-leading IP house cannot merely churn out what the mass market passively accepts today. This is why our D2C retail network is far more than a point of sale. It is an IP incubator and a hub to test new ideas.

As a result, our capital allocation and operational priorities are focused on perfecting this D2C closed loop and optimizing our structural unit economics rather than maximizing short-term volume at the expense of brand health. This philosophy brings us to our core thesis on brand momentum. True brand momentum does not stem from chasing fleeting market trends or mindlessly copying customer performance. Real long-term brand momentum is forged through design conviction and artistic leadership. Furthermore, the long-term asset value of an IP is intrinsically linked into its perceived scarcity. Once market supply outpaces consumer interest, that scarcity dissolves and triggers structural devaluation of the IP. While we remain pragmatic about macro conditions, we maintain absolute control over our own operational cadence. We have made a deliberate strategic choice to prioritize long-term IP assets value over short-term wholesale sales volume. This choice is heavily driven by who we are.

Within the global pop toy landscape, true independent pure-play IP companies are exceedingly rare. Here Group stands as one of the very few enterprises that rigorously adheres to the path of proprietary IP incubation and self-operated execution. Over the past fiscal year, we have proven the scalability of this model. Navigating the current headwinds requires resilience, disciplined efforts, and a refusal to compromise our core strategy for short-term convenience. We will strictly adhere to the IP-first principle. Our mission is not to generate fleeting retail transactions, but to deliver long-term emotional companionship and lasting narrative value to our users. To fully realize this vision, we focused our execution across four strategic pillars during the fourth quarter. First, IP portfolio diversification and ecosystem monetization. We continue to curate our IP metrics across the entire asset's lifecycle, boosting product innovation and brand collaborations.

Our ecosystem is structurally engineered to mitigate single IP dependency. As of June 30, 2026, our total portfolio expanded to 22 IPs, compromising 13 proprietary IPs and nine exclusively licensed IPs. Our flagship IP, WAKUKU, generated CNY 47.7 million in the fourth quarter and CNY 369.3 million for the full year. This accounted for 61.9% of our annual revenue. Meanwhile, our next-generation powerhouse, SIINONO, has delivered a phenomenal trajectory. Launched only in the second half of 2025, SIINONO generated CNY 27.3 million in Q4 of fiscal year 2026 alone, rapidly growing to represent 21.4% of our total quarterly revenue. For its first full fiscal year, SIINONO generated CNY 92.7 million, contributing 15.5% to our annual top line. The meteoric rise of SIINONO from zero to a near CNY 100 million annualized scale in under 12 months confirms that we can systematically build and scale new proprietary IPs.

We have also built out a diversified long tail flywheel. Revenue from our authors IP category, which includes emerging proprietary stars like Xiao, Mimimo, Funi, Fila, Inpoppo Pigs, and more, surged by extraordinary 661% year-over-year to CNY 39.8 million in the fourth quarter. This is up from just CNY 5.2 million in the same period last year. Combined with ZIYULI's solid contribution of CNY 12.8 million in the fourth quarter. This portfolio of IPs now collectively amounts from over 41% of our quarterly revenue. Our product expansion and lifestyle integration front, we recently accelerated several high impact initiatives. Recently, we aggressively expanded our IPs into premium daily consumer scenarios. SIINONO launched a limited edition co-brand sparkling water with Genki Forest, and partnered with the French fashion house IRO Paris on an exclusive plush pendant collection.

Meanwhile, we evaluated our cultural positioning while exclusive partnership with the Museum of Fine Arts, Boston, co-developing five premium artistic works from across three core IPs. Furthermore, we have formalized our partnership with the 2026 China Open, establishing SIINONO as the headline IP for this year's tournament. New IP pipelines were another part of our strategy. We officially introduced Yuna, a noble IP, alongside with seasonal collection for Inpoppo Pigs and Fluffy Lily. Notably, Fluffy Lily captured strong youth engagement during the Qixi Festival, where a collaboration with CASETiFY, and served as an official event partner for the prestigious 38th Hundred Flowers Awards. Finally, in Hong Kong, our landmark cruise project at Central Pier is undergoing final decoration. We have transformed the ship into a multilayered vertical experiential space on Victoria Harbor. Ticket sales officially launched on Ctrip on September 21, ahead of the maiden voyage on October 1.

This will allow us to capture the peak tourist flows of the upcoming National Day Golden Week. Second, disciplined D2C network expansion and scenario optimization. Our offline direct-to-customer footprint remains the primary avenue for deepening user intimacy and validating product market fit. At this stage, our network strategy prioritizes high ROI unit economics and qualitative location premium over share store count. We continue to manage our permanent footprints with strict capital discipline to optimize our assets portfolio. As of today, we operated seven D2C stores across four core metropolitan areas. During the quarter, we successfully inaugurated our new store at Beijing Daxing International Airport. This marks our strategic entry into high-traffic premium transit hub retail scenarios. We leverage agile pop-up store fronts as a dual-purpose strategic vehicle Beyond de-risking prominence site selection, these pop-ups function as IP centers for IP activation and immersive user interaction.

Prime example is our successful activations in September at PRISMA Xinjia Center in Shanghai and Hangzhou Tower. In addition, our automated retail network is expanded to 25 Roboshops across six cities, having completed our initial structural layout. We shift our operational mandate from aggressive deployment to maximizing same machine efficiency and data extraction. Third, operational refinement and digital integration. On the supply chain, we are optimizing our procurement, warehousing, and logistics frameworks by strengthening our bargaining leverage with manufacturers and suppliers. We have shortened our supply chain response times. This enables faster, higher quality replenishment and boosts our supply chain resilience. We are also consolidating data streams across our physical stores, Roboshops, and online commerce to build omnichannel data infrastructure. Our upgraded membership ecosystem tracks customer behavior, allowing predictive insights which help us optimize our inventory. On partner channels, our operational metrics is evolving towards deeper integration.

We are transitioning channel partner relationships with traditional transaction-led distribution into high value, customized strategic alliance and working closely with partners to ensure our premium IP products are placed in environments that respect our brand integrity and pricing. On the digital front, our cumulative social footprint continues to scale in a positive flywheel, and we have shifted our KPIs from vanity followers metrics to deep engagement quality. Our online platforms function as a strategic bridge, converting digital community engagement into physical D2C foot traffic and reinforcing offline experience with online knowledge. Fourth and finally, talent acquisition and organizational capability building. To execute our closed-loop strategy, we continue to build our team, onboarding top-tier industry experts across premium store operations, product design, and core brand operations. Before I hand the call over to our CFO for a granular financial review, I want to address our bottom line results directly.

Our financial loss this quarter was heavily impacted by a one-time non-operating income statement item driven entirely by market valuation adjustments. This historical accounting revaluation is non-cash in nature, separated from our ongoing core operations. Operationally, our performance reflects our necessary upfront investment in design capability, next-generation product innovation, and targeted brick-and-mortar storefront and pop-up expansions. Currently, as we proactively optimized our business model and navigated a challenging retail sales environment, our revenue scale was affected by lower sales through traditional channels. Cost and expense optimization is underway across all operational segments. While revenue and cost trends are not yet fully aligned, we expect that gap to close over time as our revenue stabilizes and our cost structures are optimized. Looking forward, we are committed to balancing capital stability with operational momentum, with a near-term mandate to drive towards sustainable profitability at an early date.