Here Group Limited Q2 FY2026 earnings call

Good morning everyone, and thank you for joining us today. Just over three months ago, we held our first earnings call as a pure play portfolio company. We shared our vision of focused acceleration. Today, we have maintained that momentum and began translating it into durable, long-term value. This quarter marks a significant milestone as it's our first full quarter operating as a dedicated FP-trained company. We continue to focus our flagship IPs to create ultimate product appeal. Building on Q1 outperformance, Q2 delivered strong results. We expanded the sales contribution from offline distributor channels and opened five offline D2C stores. Our two-pillar growth strategy: Pillar one, IT ecosystem, with diversified IP portfolio and successful product launches like Wacoku on the Go series and Zenono's latest release. Pillar 2, Omni-channel reach, with growing social media followers, opened offline D2C stores and leveraging AI era tools for smart sales terminals. We also continued to optimize our organizational structure and core operating platform.

Total revenue reached 177.3 million RMB, representing 39.4% quarter-over-quarter growth. Our flagship IP, Makuku, contributed RMB 129.4 million, accounting for 73% of Q2 revenue. Zenono generated over 19.2 million RMB in revenue this quarter.

We expect revenues from our pop toy business to be in the range of 540 million to 150 million RMB for the third quarter of fiscal year 2026, and in the range of 750 million to 800 million RMB for the full fiscal year 2026. Regarding the revenue guidance for third quarter suggesting a quarter-over-quarter decline of about 15% to 20%, it's due to both seasonality (distributors slow down during Spring Festival holiday) and proactive arrangement based on annual planning with major new products expected to launch successfully starting from the end of March.

Q: The revenue guidance for third quarter suggests a quarter-over-quarter decline of about 15% to 20%. Is it primarily due to seasonality, or are there any specific adjustments due to your IP launch schedule for the upcoming quarter?

A: Indeed, both factors have contributed, but the core message is that we are actively building momentum for subsequent growth. Firstly, regarding seasonality, Given that our current business primarily operates through a distributor model, distributors naturally slow down their operations and inventory and stocking during the Spring Festival holiday. This is within our expectations and represents a common seasonal fluctuation in this industry. And secondly, regarding the reason and pace of our product launches, this is not an adjustment but rather a proactive arrangement based on our annual planning. Our products are typically planned three to six months in advance, with dynamic optimizations made based on market feedback. Currently, we are fully prepared for our product pipeline in the coming quarter and beyond, with major new products expected to launch successfully. successively starting from this end of March. Therefore, what we are seeing in the short term is a normal seasonal dip from a medium to long-term perspective. This is proactive management on our part to welcome a new product cycle and optimize inventory and channel pace.

Q: Hello, Mr. Liu, Mr. Kim, thank you for accepting my question. First of all, congratulations to the company for obtaining a very good quarter. I have a question about the future of this company cooperation. We noticed that the company below that Shenzhen一起, Also, Light Media has recently established a partnership. I would like to ask if this partnership indicates that the company will work with Light Media in the field of content creation and IT development in the future.

A: Thank you very much for your question. I think this cooperation actually shows that Thank you for your interest. Regarding our cooperation with Enlighten Media, it is a key part of our efforts to deepen our IP strategy. First, over the past year, we have successfully tested and confirmed commercial paths from IP images to pop toys. By focusing on our core IPs to create heat products, we have built a solid foundation centered on the product gen. 其次呢,我们一直都强调 IP的一个生命力 其实在于要有持续的一个内容的赋能 那这个就好像是一把刀的这个刀刃和刀背一样 所以我们不光是关注就是毛盒,毛绒这些我们的实际产品 We also want to focus on the long-term development of this IP. So, while we are introducing excellent content talent, we also need to work with top partners in the industry, such as Guangxian, and use appropriate content to enhance the IP, and then add cultural connotations to the IP to deepen the emotional interaction between users and the IP. Second, we have always stressed that vitality of IP comes from continuous contact support. And both is very important to this. We focus not only to selling the physical products like the blend boxes and the plush toys, but also in the long term, develop our IPs. So we are now enhancing our IPs through the suitable contact forms. We're doing this by bringing in excellent contact talents like the Enlight Media and cooperating with the top industry partners. Our goal is to add a cultural meaning to our IPs and strengthen the emotional connection between users and IPs. OK. Finally, the joint venture with EnlightMedia you mentioned is exactly one of the specific projects to carry out our product and contact dual job strategy. We hope to explore more possibilities for our IPs in areas like the film and television contact and derivative development through such cooperation. As for specific future plans, we will disclose them to the market when there is substantial progress.

Q: Good evening, management. Thank you for taking my question. And my question is about our operations strategy. The company was very successful in IP operation last year. So are there any new strategies for IP operation and marketing in this year?

A: Okay, thank you for the question. I'll take this. This year, the core keyword for our IP operations and marketing strategies is a comprehensive upgrade from Maybe we can call that opportunistic creativity to a systematic IP factory. This is reflected in three key areas. The first one is on the product front. We have built a replicable assembly line for IPs. Extreme product excellence is the foundation of everything. Through our product committee mechanism, we rigorously select IPs based on three dimensions, the visual distinctiveness, story potential, storytelling potential, and audience resonance, ensuring that every character we launch has a generic makeup to become a classic. Concurrently, we have established a complete process from discovery and incubation to development and launch, and then to fulfill the full lifecycle management, making it possible to replicate and sustain HIT products. A great product in itself is the best nourishment for IP. We continuously strengthen our in-house teams and integrate outstanding external resources, injecting vitality into our IPs with product excellence. And secondly, on the operations front, we have developed an iterable omni-channel marketing methodology. Over the past year, we have continuously summarized and optimized our operational experience, forming a replicable pre-book that we constantly refine and iterate. This year, we will flexibly deploy differentiated marketing strategies based on the unique characteristics of different IPs and products Whether it's celebrity collaborations, branding, crossovers with major sports events, or integrated online to offline user engagement activities, our goal is to leverage pre-set operational support to ensure great products are seen and loved by more people. And third, on the content front, as just discussed by Mr. Li and the City Analyst, we are opening a new chapter of light content empowerment for IPs. And this is a crucial step in our journey from purely physical space to narrative space and from product moments to sustained storytelling. Through appropriate content, we infuse our IPs with cultural substance and emotional depth, transforming them from mere trendy toys into cultural symbols. with stories and vitality. This multi-dimensional empowerment across products, content, operations, and branding has one ultimate goal to build truly enduring evergreen IPs.

Q: OK, thank you, for this opportunity. And my question is about our channel expansion. I wonder how is the performance of our region's offline stores as we may reach our expectation and what's the channel expansion plan in year 2026?

A: OK, I've answered your question. Thank you for your interest in our store operations. Regarding our offline stores, I will address this from three dimensions, the short-term performance, strategic positioning, and future plans. Firstly, regarding short-term performance, our newly opened stores have generally met or even slightly exceeded our internal expectations. Since late last December in last year, 2025, They have opened five D2C stores in Beijing, Shenzhen, and Chongqing. Although they have been operating for just over one month, their overall performance has been solid, and they have broadly achieved nearly break-even, a commendable result for newly opened stores in their initial phase. Of course, due to differences in customer profiles across various shopping districts, we are continuously fine-tuning the operational strategies for individual stores. And second, regarding strategic positioning, we value these stores not only for their sales contribution, but also, and more importantly, for their role as brand landmarks and user touchpoints. Our offline direct sales stores are core scenarios for fostering deep interaction between our IPs and users. To this end, we recently established a user operations center, the organization in our company, aiming at integrating online and offline data and user and planning more cohesive interactive activities with our IP platform and the product launch pace. As a crucial component of this strategy, the value of our stores for brand showcasing and user connection far exceeds mere sales figures.