Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to the QuantaSing's Earnings Conference Call. [Operator Instructions] Please note that today's event is being recorded. I will now turn the conference over to Ms. Leah Guo, Investor Relations Associate Director of the company.

Thank you. Hello, everyone, and welcome to QuantaSing's Earnings Call for the Fourth Quarter and Fiscal Year 2025. With us today are Mr. Peng Li, our Founder, Chairman and CEO; and Mr. Dong Xie, our CFO. Mr. Li will provide a business overview for the quarter, then Xie will discuss the financials in more detail. Following their prepared remarks, Mr. Li and Xie will be available for the today's session. I will translate for Mr. Li. You can refer to our quarterly financial results on our IR website at ir.quantasing.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 the following management's 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 filings with the SEC. I will now turn the call over to CEO and Founder of QuantaSing, Mr. Li.

Okay. Good morning, everyone. Thank you for joining us today for our Q4 and full fiscal year 2025 earnings call. I'm excited to share some really encouraging results with you today, along with significant strategic announcement that marks a new chapter for our company. As many of you know, we've been transforming from a traffic-driven to a product-driven business. And furthermore, we have consolidated a controlling stake in Letsvan since March 31 and have reached an agreement to acquire the remaining equity for a full 100% merger. Before diving into our quarterly results, I want to share important news about our strategic direction. We are announcing our potential business restructuring to divest all our non-Pop Toy business to focus exclusively on our high-growth Pop Toy business. This represents a decisive step forward in our transformation. We have been in negotiations with buyers, who are interested in acquiring this established business. The restructuring will allow us to concentrate all our resources, talent and capital on the tremendous opportunities we see in the Pop Toy market, while ensuring that our all established non-Pop Toy business found the right home with a buyer who can continue maintaining the operation of this business and achieve potential further development. We will share further details on timing and transaction terms once they are finalized, subject to final negotiations and customary closing conditions. This quarter marks our first full period with Letsvan's consolidation. From April through June, the quarter was defined by both challenge and accomplishment, yet I'm incredibly proud of what we have achieved with our strategic transition. Let's look at the numbers. Our revenue reached RMB 617.8 million. Most importantly, our Pop Toy business contributed RMB 65.8 million, representing our core growth engine moving forward. Beyond that, as of June 30, 2025, we held over…

Thank you. Before I go into the details of our financial results, please note that all amounts are in RMB terms, that the reporting period is the fourth quarter of fiscal year 2025 ended on June 30, 2025, and that in addition to GAAP measures, we will also be discussing non-GAAP measures to provide greater clarity on the trends in our actual operations. We are pleased to report solid financial performance this quarter, making our first full reporting period since completing the Letsvan acquisition in March 2025. Total revenue reached RMB 617.8 million with net income of RMB 108 million, achieving a strong net profit margin of 17.5%. These results reflect our intentional strategic transformation from traffic-driven growth to a more sustainable product focused business model. This transition is already showing clear results with sales and marketing expenses, improving significantly to 47.6% of revenue from 69.2% in the previous quarter. Our Pop Toy business now accounts for 10.6% of total revenue as it's becoming a significant part of our revenue base. Breaking down our revenue composition. Revenues from the Pop Toy business totaled RMB 65.8 million. With a continued momentum in this business, we expect it to drive meaningful growth in future quarters. Individual online learning services generated revenues of RMB 456.9 million compared to RMB 906.7 million in the fourth quarter of 2024. This change was primarily due to decreases in skills upgrading courses, financial literacy courses and recreation and leisure courses. Revenues from enterprise services was RMB 35.7 million compared to RMB 56.6 million a year ago. The change was primarily due to a deliberate reduction in the marketing services provided to a customer. Revenues from our consumer business was RMB 50.5 million compared to RMB 33.3 million a year ago. The change was primarily driven by the…

[Operator Instructions] First question today comes from Alice Cai of Citi.

I have several topics to cover. And let me begin with what I think most investors care most about, which is the toy revenue trajectory recently. Given that WAKUKU contribute RMB 43 million in Q4 and SIINONO, that's launched in July. And you now have 15 IPs in total. Could you please share the recent revenue run rate for July to September? And management mentioned that the demand so far is outpacing supply with order book through Q1 next year. So could you please quantify the confirmed order backlog in dollar terms?

Thank you, Alice. I'll answer this question. Regarding the growth curve, WAKUKU began operations last December, and we saw sustained volume expansion starting in March, right after the spring festival of China. Its growth rate can be described as explosive, out of the gate, gaining momentum very rapidly. By August, its monthly production capacity had reached approximately 20x the level at the beginning of the year. Strong demand from channels, our distributor partners and also the online and high user repurchase behavior provide strong visibility for our performance over the next several quarters. Also regarding the new IP, SIINONO, launched in July, SIINONO demonstrated our accelerating growth momentum as a completely new IP that has been on the market for only a few months. Its initial sales were exclusive. And recently, the sales of SIINONO have exceeded 300,000 boxes. This reflects our continuous evolution in product design, marketing and channel execution. When viewed together, the combined effect of these two engines, explosive new releases and sustained classic performance, is accelerating our overall revenue growth rapidly. This powerful momentum is the core reason for our confidence in future performance, and we look forward to sharing more detailed figures in the next earnings report. Regarding confirmed order value, our front-end sales team schedules production based on market feedback. For products already ordered by sales, the current delivery rate is less than 50%. That means a huge pipeline in process. Production and planning for future quarters is proceeding in an orderly manner. Yes, I think that will help to answer your question.

It's helpful. And my last question is on the valuation of Letsvan because some investors are calculating its valuation at RMB 1.7 billion based on the 8x 18 million common shares divided by 20%. But these 18 million shares are granted in 3 tranches with a vesting period over several years, right? So could you please walk us through the specific arrangements for these three tranches? And are they tied to performance markdown? And if performance targets cannot be met, will later tranches be adjusted or canceled?

Okay. The acquisition of the remaining equity is currently still in the settlement process and further details will be disclosed in due course. I think I can give you some key points to help everyone to understand the transaction. First, Mr. Huiyu Zhan, the Founder and CEO of Letsvan, he represents the product strength of our Pop Toy business. And he himself is a seasoned entrepreneur with years of experience in this sector. He is highly optimistic about the future of the pop toy market and believe in the long-term value of fully committing to this field together with us. For this transaction, Mr. Zhan opted to receive shares as consideration for his remaining equity with no cash involved. The second point is that approximately 60% of the consideration was paid in newly issued shares in exchange for Mr. Zhan's remaining equity, while the remaining 40% was granted as long-term incentives, which will vest gradually over a period of about 8 years. So it's a very long time, and it means the commitment with us, and we can do that in a long time. I think the third one is this structure reflects our shared commitment to long-term collaboration and value creation. And also for the remaining one, except Mr. Zhan's shares, the remaining equity held by other shareholders was acquired for cash, for pure cash, at a valuation not exceeding RMB 1 billion. This portion of the transaction has been completed as of today. I think that's the information I can give to the market. Maybe we can give details when we fully complete the transaction.

I have another question. Looking at the time line going forward, because you are guiding for RMB 100 million to RMB 110 million in Q1 and around RMB 750 million for the full year guidance, right? So given that Q4 already hit some RMB 66 million with just 3 months of contribution, are these targets conservative? When does the management expect the top revenue to -- toy revenue to surpass the education business?

Okay. I think first, our guidance for FY '25 and FY '26 were made based on the prudent assessment of the market environment and the piece of product and channel development when we formulated our strategy earlier this year. As you can see from the performance figures just released, growth across several key metrics has already outpaced our earlier expectations. Based on the recent business process and our updated market outlook, we are issuing our first formal earnings guidance for the Pop Toy business. And this guidance is supported by the following factors: The first is better-than-expected performance of hit products and mature IP matrix. Our established IPs, such as WAKUKU and ZIYULI have demonstrated strong longevity, and new generations of these IPs are already in the pipeline. In addition, the successful launch of our new IP SIINONO in July has been very well received with robust ongoing sales momentum. The next generation of products is already scheduled. This success validates our exclusive artist IP partnership model and sets a solid foundation for continuously introducing new artist IPs. In addition to the 15 IPs we had as of June 30, we recently signed two additional new exclusive licensed IPs. We have initially established a healthy product vision and pace, combining new explosive releases and sustained classic performance, driven jointly and by product strength and brand power. This indicates our IP operation capabilities and user loyalty are reaching a new level. The second is continuous expansion of online and offline sales channels. Our online GMV reached over RMB 18 million in August. We continue to deepen partnerships with offline distributors and self-operated pop-up stores as well as permanent flagship stores either under negotiation, all in the process of opening. We expect to open 3 to 5 flagship stores by end of…

And I have a follow-up question on the restructuring. It seems that you are considering a sale on the education segment, right? And if so, what's the pipeline looking like?

Yes, the pipeline is very strong. So as I just mentioned in several situations to the market, we will consider the different development direction of our existing business based on the performance of the Pop Toy business and other performances of the existing business. As we announced, since we have started the process of this restructuring, that means we are very confident that of the existing Pop Toy business' performance and also the development of this performance so that we can deliver a long-term value based on the solid foundation we have set up during the past months and since the acquisition and controlling of the Pop Toy business.

Next question comes from Brenda Zhao with CICC.

I got 2 questions here. So first, relates to the Pop Toy business because we've recently seen that Pop Mart launched its Mini Labubu. So could management introduce your product strategy and whether we will introduce more product categories in the future and what's our pipeline for new categories? And my second question is related to the collaboration with Yuehua. I'm wondering whether there will be new business model and innovations. If so, could you elaborate more on that side?

Okay. Thank you for your question. I will answer in Chinese. [Foreign Language] [Interpreted] We have a clear and structured road map for IP launches. Our IP pipeline is already scheduled through the end of next year. Both our fundamental art library and product design reserves ensure a consistent and well placed rollout of our new products. In terms of the category innovation, we're also actively exploring and developing new directions. In addition to our core blind box series, some other categories will increase smaller sized line of figures and plush products, which will also include mini versions featuring more durable designs and accessible price. This will cater to wider user reverences for collecting and consumption, further expanding our market presence. Products in these new categories are set to debut in next fourth quarter. We can't wait to share them with you soon. Okay. That's the answer for the question one. And about the question two, first, in terms of the cooperation with Yuehua Entertainment, as you can see that our partnership with them is strategic initiatives build on the complementary strengths. We have established a joint venture with Yuehua Entertainment. In terms of the business model, we primarily provide joint venture with IP design, supply chain support and sales operation capabilities, while Yuehua Entertainment will leverage its extensive cross-industry resources in the film, television and celebrities field to drive promotion and strengthen IP breakout and enlarge the user engagement. In the future, we are planning to develop more IPs exclusively for the joint venture. These IPs will also incorporate Yuehua Entertainment's strength and also their capabilities. We will also continue to utilize these IPs and to promote them and operate using both companies' resources, we'll focus on IP design and product development while jointly building a close-loop ecosystem, causing the IP incubation, promotion and formalization.

That is all the time we have for Q&A. I'd like to hand the conference back over to management for any closing remarks.

Thank you, everyone, for joining our call today. If you have any further questions, please feel free to contact us. Also make a request through our IR website. We look forward to speaking with everyone in our next call. Have a good day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.