Here Group Ltd. Q2 FY2025 earnings call

• The established Online Learning business has a user base of 139.6 million registered users and is generating steady cash flow. In the financial literacy program, 22 new lecturers were added and major updates were completed to the financial report training camp. The calligraphy project for senior learners has seen remarkable results with the QianChi calligraphy program tailored to seniors' needs, increasing the conversion rate for advanced courses from over 40% last quarter to over 60% this quarter.
• The Consumer business revenues reached RMB64.5 million, a 39% increase year-over-year, driven by expansion into wellness products for the silver economy, with the Baijiu YUNTING brand performing well. The company has a strong balance sheet with RMB1,213.2 million cash and cash equivalents, restricted cash and short-term investments.
• The company is exploring new initiatives such as the offline service strategy with Beijing Nursing Home, the 2025 VIP Member Card for travel study with various benefits, and continues to focus on product innovation with a pipeline of health and wellness products for the silver economy.

In the second quarter of fiscal year 2025, QuantaSing's total revenues were RMB726.6 million. Individual Online Learning Services generated revenues of RMB601.3 million, accounting for 82.7% of total revenues. Revenues from enterprise services were RMB55.7 million, representing 7.7% of total revenues. Revenues from the Consumer business increased to RMB64.5 million in the second quarter of fiscal year 2025, which is a 39.0% increase compared to the same period of last year. Gross profit for the quarter was RMB604.1 million, with a gross margin of 83.1%. Total operating expenses were RMB465.9 million, a decrease of 36.5% from the same period last year. Net income was RMB126.8 million.

• The company is focused on a balanced approach to business development, transitioning from traffic-driven growth to higher-quality growth. It expects to continue diversifying revenue streams across multiple business lines. There may be short-term investments and restructuring costs in the coming 12 months as part of growth strategy, but is confident in long-term profitability through leveraging economies of scale, reducing operational risk and enhancing margin sustainability.

Q: As you look across the online education platform, any sense of how much the silver demographic currently accounts for in terms of the existing user base? And then just looking beyond, continuing to realign the course catalog, obviously with a focus on seniors, just wondering if you could flesh out some specific plans to leverage those clients to really drive accelerating sales of related products and services?

A: First of all, the silver demographic, people aged 60 and above, is an important and growing user group on our platform. To better serve them, we have updated our course catalog to include health and lifestyle courses, specifically for seniors. We are also offering health and wellness products tailored to their needs. To drive the sales of silver economy products and services, our strategy includes launching Consumer products related to our courses and offering specialized study tour services. This will enhance user engagement and create new revenue opportunities. Additionally, we will also focus on cross-selling and private traffic domain operations to promote higher value products. Furthermore, we plan to encourage in-person community engagement, set up and implement membership programs and establish strategic partnerships with silver economy brands. This will improve user interaction and encourage words-of-mouth marketing, leading to further sales growth.

Q: Just as the revenue profile continues to evolve through the transition, any perspectives on maintaining profitability, specifically as it relates to the adjusted net margin looking out over the next 12 months or so?

A: We are evolving and expanding our revenue streams, and particularly by moving beyond adult Online Learning Services into new areas while keeping a strong focus on the bottomline. In the coming 12 months, we expect some short-term investments and restructuring costs as part of our growth strategy. However, we are confident that our diverse approach will support long-term profitability. Introducing new business segments and innovative offerings may require significant resources efforts, but it will still help us leverage economies of scale, reduce operational risk and enhance margin sustainability. Furthermore, we are taking a disciplined approach to managing costs and expenses. We are prioritizing investments that have the potential to deliver high returns while also optimizing our existing resources for operational efficiency. We are also closely monitoring each business unit’s performance to balance growth with maintaining our margins. Regarding adjusting net margins, we expect some volatility during the transition phase, but we will continue to stay aligned with our profitability targets. Our focus is on stabilizing margins as new segments mature. We aim to balance strategic investments in growth with operational excellence, ensuring that profitability remains strong as our revenue profit evolves.