And welcome to QuantaSing's earnings call for the third quarter of fiscal year twenty five. With us today are mister Peng Li, our founder, chairman, and CEO. And mister Jing Kueh, our CFO, Mr. Lee will provide a business overview for the quarter then Tim will discuss the financials in more details Following their prepared remarks, Mr. Li and Tsing will be available for the Q and A 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 access a replay of the 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 the CEO and Founder of QuantaSing, Mr.

Li.

Okay. Good morning, Thank you for joining us Q3 twenty twenty five earnings call. I'm pleased to share an update on our performance and strategic direction as we continue our transformation journey. This quarter marked a significant milestone in our evolution. We achieved revenue of 570,700,000.0. This reflects our ongoing strategic shift from traffic driven to product driven business models. More importantly, we completed the consolidation of LifeOne on on March 31. This positions us at the forefront of the high growth pulp toy market. I should note that our Q3 results include only balance sheet from this acquisition Profit consolidation began on April 1, and will be reflected in our Q4 results. Before I discuss our existing new venture, let me update you about our existing businesses. They continue to demonstrate the strength of our disciplined approach to growth. We maintain strict ROI assessments across all results allocation decisions. This ensures we invest promptly in promising opportunities while maintaining financial discipline. In our financial literacy program, our offerings remain well received by users. We expanded our community outreach with three major financial anti fraud education initiatives this quarter. These programs not only fulfill our social responsibility, commitments, but also strengthen our brand [indiscernible] among the general public and the broader society.

Our senior focused recreation and leisure courses continue to excel with strong retention rates. Particularly noteworthy is our calligraphy program. Which has achieved repeat purchase rates existing [indiscernible] 55%. We also developed an innovative combination of online learning and offline graduation trips. [indiscernible] delivering our first trip to over 60 participants with 100% satisfaction rate Our second cohort of over 50 participants demonstrates the growing demand for this integrated approach. Building on this success, the sixth Annual Change Cup Calligraphy Competition. Attracts over 800 participants Selected works were featured at national education events [indiscernible] Expanding beyond calligraphy, our study tour business now spans 16 cities across [indiscernible] Categories. We delivered over 60 sessions early presales for our 2025 tour packages generated a strong initial response. This validates strong market for our integrated approach. Meanwhile, our health and wellness products business through Zhijutan continues to deliver stable performance. While serving senior customers with an expanding portfolio of tailored products and services. Enhancing our revenue diversification And depending engagements with the key cohorts. Our existing business continued to generate positive cash flow. Providing a solid foundation for our strategic expansion. The solid performance in our existing business [indiscernible] From fundamental philosophy. This philosophy has guided us throughout our history We identify missing market opportunities through careful analysis and disciplined execution.

Our proven formula combines through market evaluation test and scale methodology [indiscernible] and data driven decision making. What sets us apart? Is our commitment to sustainable growth We build on brand strength and product excellence rather than traffic driven models. We have true long term value creation comes developing core competitions. There are in product development and the brand [indiscernible] This approach ensures more stable sustainable growth compared to businesses we launched primarily on marketing [indiscernible] This [indiscernible] disciplined approach has preserved our robust cash position. It enables us to [indiscernible] capitalize on strategic opportunities like the last one acquisition. While maintaining financial [indiscernible] We continually evaluate all our business lines based on ROI performance and the strategic fit This ensures optimal [indiscernible] This brings us to our most significant strategic move this year. Our entry into the pop toy market represents the nature evolution of our strategic philosophy. Let me share why this market captured our attention. According to Frost and Sullivan, the global top market is massive and is expanded to experience steady growth in the future. In terms of GMV, the global toy markets grew at CAGR of 5.2% from 631,200,000,000.0. In 2019. To $773,100,000,000.0. 2023. And this is expected to further grow at CAGR of 5.1% to reach RMB 93,700,000,000.0.

In 2028. The Pop Toy business [indiscernible] [indiscernible] Our product driven growth strategy. With SuccessFactors, such as premium IP quality, innovative product design and sustained investment in IP cultivation and operations. When amplified through precision marketing and operational strategies. The fundamentals collectively forge enduring brand loyalty and long term IP vitality. After careful market evaluation, we identified the LAS1 as ideal platform to enter this high growth market. What made this partnership so compelling? Was how Les Vans product development [indiscernible] [indiscernible] complements our strengths in market operations. This creates powerful synergies. That's why I had demonstrated excellence in IP development and event guard design This perfectly complements our established P tenses in marketing and operations ecosystems Private traffic [indiscernible] [indiscernible] [indiscernible] omni channel [indiscernible] together, we create a complete value chain from IP creation to monetization. I'm pleased to report that we are already seeing promising results. Since our management team began executing WestOne's growth strategy in December 2024. Let me walk you through our two pillar approach to building this business. Starting with product excellence, and brand development, LASONE has built a strong IP metrics These features popular characters such as wakuku, yori, Funini, Among other distinctive IPs, since our investment in December 2024, we've focused on operating IP, Wakuku.

This was incubated in twenty twenty four and achieved excellent market performance in Q1. 2025. The market validation has been remarkable. Our Wakuku [indiscernible] [indiscernible] released on March 29, achieved the second highest single day sales record in our key distributor [indiscernible] store history. This exceptional performance demonstrated both our market strategy and innovation capabilities. Build on this momentum, the launch of second generation Wakuku fuzzy series The Fox and Bunny trick or treat collection on May 11, at key distribution partner locations in Shanghai and Nanjing achieved record breaking single day sales at our flagship partner store in Shanghai. This performance highlights our product's strong customer appeal in China's premium premium urban markets. Including major economic hubs and their rapidly developing [indiscernible] The [indiscernible] online released on [indiscernible] On leading Chinese customer platforms generated immediate purchase momentum. With impressive [indiscernible] figures and sustained growth in user engagement and organic content creation. BakuKu has a built breakout cultural momentum through its [indiscernible] [indiscernible] design and [indiscernible] [indiscernible] The brand has earned on solid [indiscernible] [indiscernible] from A List Celebrate Today, artists actors, and athletes are showing [indiscernible] This approach is driving deep engagement and user generated content. UGC. Across social media platforms.

What makes this even more, impressive is Wakuku semi which has now surpassed 1,000,000,000 organic impressions across digital platforms. Yuri, another significant IP in our preferred portfolio. [indiscernible] made significant strides stress in establishing itself as culturally relevant IP through variety of initiatives, such as honoring with contemporary luxury women's wear. [indiscernible] To create limited edition within [indiscernible] This were launched through exclusive pop up events at PrestaSure PRES T G shares [indiscernible] Taibori sanctuary in Beijing, and SKP in Xi'an This collaboration significantly evaluated the IP's artistic [indiscernible] credentials Additionally, our groundbreaking blue and white ULE series has successfully bridged the gap between heritage and modernity. We will first [indiscernible] intangible cultural heritage with contemporary design. Create [indiscernible] [indiscernible] [indiscernible] And lifestyle products that bring traditional craftsmanship to modern customers. Moving to our second pillar, distribution and the market expansion. We are [indiscernible] comprehensive omni channel strategy. We are exploring innovative direct to customer retail formats through expansional pop ups, and I'm excited to share some progress. Our first pop up store debuted on May 24, at Beijing Choyang, Joy City. Consistently ranked among the capital's most visited shopping [indiscernible] Isn't just retail place. It's an immersive space that brings together four key elements. [indiscernible] [indiscernible] art installations, exclusive product drops, and social sharing environments At the same time, we attracted semi IP showcase at Beijing Solana lifestyle shopping park.

As of our earnings disclosure date, That's why I have established the summit sections in key distribution partner stores. Across multiple core commercial districts nationwide. We will complete it product coverage and standard light test display pillars in key cities and major commercial areas. Will initiative the initiative initially formed natural light network of offline consumer touch points and brown display presence. Simultaneously, we enhancing our online capabilities to empower LifeOne. Our multi platform approach now includes self operated channels on social media platforms. Which are driving a strong initial response and encouraging user generated content engagement. Looking beyond China, we are expanding international internationally with new [indiscernible] Indonesia Thailand, and Malaysia. Our calibration on June 2 with key distribution partners at their Bangkok flagship store marks significant step in our global partnerships strategy. And our first international offline pop up. In Southeast China. We are partnering with top tier local local [indiscernible] Generating bus and sales through social platforms. Which is boosting brand awareness in the region. Moving forward, we will focus on advancing our IP driven products international expansion plan. To strengthen our presence in global markets and enhance our content and product reach. Our first international collaboration demonstrates [indiscernible] global appeal of our IP portfolio.

And our systematic approach to international expansion. I know many of you have questions about potential risks to this long term viability of the pop toy industry. Me address the key concerns we are hearing from investors. The reason we are confident in the long term viability of this country industry. Comes down to fundamental customer behavior, [indiscernible] Pop toys have become powerful vehicles for sales [indiscernible] Particularly among [indiscernible] The sector has proven resilient with key players sustaining strong growth even in economic downturns. This stems from the industry's collector driven model and accessible pricing. Which for for lasting engagement. Today's consumer [indiscernible] [indiscernible] Emotional value over pure functional functionality. They are seeking comfort They identity, affirm affirmation. And connection through their purchases. And the POP! Toys deliver exactly that. As we look to the future, Q4 will reflect full [indiscernible] Giving clear a clearer visibility into our combined performance potential. While maintaining steady operations in existing businesses We are a fairly accelerating POPTOY business growth through dedicated teams. And strategic results allocation. All of this is guided by consistent ROI tracking to ensure that we maximize returns on every every investment. Our proven test and scale approach remains key.

We expect a positive cash flow. [indiscernible] anticipate some near term [indiscernible] dt as we continue to optimize and scale our options. Beyond all operational strategies and the market tactics What truly matters for long term success are two key elements. Product excellence and brand power. These are essential for fueling sustainable growth and delivering long term value to shareholders. Thank you for supporting our transformation journey. We are exactly about the road ahead and we will keep you updated on our progress. I will now turn it over to Tim for detail review of our financial results. Thank you, everyone. Thank you. Before I go into the details of our financial please note that all amounts are in RMB terms. That the reporting period is the third quarter of fiscal year twenty twenty five. Ending on June 30, 2025. And that in addition to GAAP measures, we'll also be discussing non GAAP measures to provide greater clarity on the trends in our actual operations. In March we completed the acquisition of a 61% equity stake, in Shenzhen Yiqi culture also known as Lei Fang. Total cash consideration of RMB235 million, through a multi step transaction. We began consolidating LAS1 results into our financial starting April 1, and then assets and liabilities have been included at fair value in our consolidated balance sheet as of March 31, Please note that the income statement discussion that follows does not include Net one's operating results.

Results for the quarter. For the third quarter of fiscal year twenty twenty five, our total revenues were $570,700,000 representing a 39.6% decrease year over year. This reflects our deliberate approach to business development, as we transition from traffic driven growth to high quality growth. Among our revenues, Individual Online Learning Services generated revenues of $467,200,000.0 accounting for 81.9% of total revenues. This business line continues to operate effectively generating steady cash flow that supports our strategic initiatives. Our gross billings from individual online learning services were 515,600,000.0 representing a decline of 7047.5% year over year. We view this as a natural progression [indiscernible] strategic transformation of our product mix. Revenues from enterprise services were 48,100,000.0 a decline of 26.1% from a year ago. And representing 8.4% of total revenues. The decline was mainly due to fewer marketing services for enterprise customers. Revenues from our customer consumer business were 48,700,000.0 down slightly from 49,400,000.0 a year ago. The slight change was primarily attributable to the decline in Baidu revenue. Partially offset by a modest increase in valvulose products revenue. And finally, revenues from others were 6,700,000.0 up significantly from $3,000,000 in the same period last year. Primarily due to revenue from the company's newly initiated business Gross profit for the quarter was $474,200,000.0 with a gross margin of 83.1% compared to 84.6% in the same period last year.

This margin change reflects our strategic shift towards more product focused offerings. Which naturally carry a deep carry a different cost structure. On the operational front, we continue to prioritize effective cost management while investing in our strategic initiatives. Total operating expenses were $441,100,000.0 a decrease of 45.2% from 800 of 4,900,000.0 in the same period of last year. To break this down, sales and marketing expenses decreased by 45.8% to $395,200,000 primarily due to reductions in marketing and promotion expenses labor outsourcing costs, and staff costs. As a percentage of total revenue, non GAAP sales and marketing expenses, which exclude share based compensation, decreased to 6069.1% from 76.9% a year ago. Research and development expenses declined by 46.2% to 20,900,000.0 reflecting our focused approach to product development and decreased staff costs. As a percentage of total revenue, non GAAP R and D expenses which exclude share based compensation, decreased to 3.6% from 3.7% a year ago. General and administrative expenses decreased by 31.2% to 25,000,000 mainly due to lower staff costs and a subsequent decline in share based compensation expenses as a percentage of total revenue. Non GAAP G and A expenses, which excludes share based compensation, is 3.9% compared to 33% a year ago.

We achieved a net income of $41,100,000 representing a net margin of 7.2%. Despite the decline in revenues. Our adjusted net income which excludes share based compensation, was $37,800,000 representing an adjusted net margin of 6.6% Basic and diluted net income per share were both 0.25 during the quarter. Adjusted basic and diluted net income per share were both $0.23 during the quarter. Regarding our balance sheet position, as of 03/31/2025, we held $1,134,900,000.0 dollars in cash and cash equivalents, restricted cash and short term investments. Representing an increase of $108,600,000 from 1,022,300,000.0 as of 06/30/2024. This enhanced liquidity position demonstrates our ability to generate cash in this period of transition. And our financial foundation remains robust as we fought ahead with our strategic evolution. Looking ahead, our disciplined capital allocation strong cash generation capabilities and ROI focused assessment methodology provide us with a solid foundation during this transformative phase in our business. As we move into the next quarter, our financials will provide greater visibility into the results of our strategic transformation. As we will be consolidating Last One's operating results. For full quarter period. [indiscernible] resource allocation away from traffic driven businesses and improved operational focus give us confidence in our ability to execute We remain committed to maintaining our robust financial position.

Transparent communication with our shareholders as we progress in our strategic evolution. That concludes my prepared remarks. Operator, let's open up the call for questions. Thank you.

Thank you. We will now begin the question and answer session. To ask a question, please press star and one. To withdraw your question, please press star then 2. Asking a question in Chinese, please translate your question in English for the convenience of everyone on the call. Please ask one question at a time. Our first question today comes from Michael Kim with Zacks. Please go ahead.

Great. Good morning, and good evening, everyone. Thanks for taking my questions. First, just curious if you could speak a bit more to the strategic vision for Let's Van and just how you plan to leverage the company's marketing expertise to enhance growth going forward? Thanks.

Yes, sure. Thank you for your question. I will answer in Chinese. Okay.

Since since it's launched in 2020, LedFund has built its presence across global artist discovery [indiscernible] copyright commercialization, prompting pop toy culture and related industry investments, Our goal is to become a global leader in IP and cultural innovation as well as a top player in the pop toy industry. Industry. [indiscernible] portfolio and proven operational expertise in pop toys, QuantaSing will drive Lifetime's omni channel expansion, We will share our fundamental capabilities [indiscernible] In corporate leadership, business operations digital infrastructure development, and user growth. To bridge online and offline retail channels, Our collaboration will establish a complete ecosystem spanning IP development through immersive consumer experiences. This collaboration represents modern resource [indiscernible] It's powered by the QuantaSing's two core competencies honed in adult online learning that it translates perfectly into pop toys. First, our data driven marketing approach lets us precisely target consumers using our proven brand management system, creating comprehensive brand impact. Second, with our extensive community management expertise, will enhance user experience to drive community engagement and loyalty. Through fully integrating product development operations and marketing capabilities we are confident that Xue will successfully upgrade its brand while expanding this business in the pop toy market. [indiscernible] To be specific, [indiscernible] world class operational competencies across the following dimension.

To ensure a flawless execution and tangible business outcomes The first is our original IP incubation. We've developed a systematic IP cultivation framework and methodology that identifies emerging cultural trends execute targeted creation development and implement rapid market validation. This data informed approach has already used 10 distinctive IP assets as of March 2025. [indiscernible] Second is holistic product innovation strategy.

We merged cutting edge trend sensibilities with artistic integrity. [indiscernible] into market defining IP products fortifying the cornerstone of our enduring IP ecosystem. Third is our IP influence expansion initiative. We run a smart social network connect online offline channels smoothly, and launch creative campaigns creating a complete promotion look that keeps our IPs hot and trending. Both is Andrew and supply chain optimization. We came up with the best factories in the business, building strong partnerships to build top quality projects, always finding ways to speed up production and improve quality. We can keep up with what consumers want. Fifth and finally is our omnichannel growth strategy. We are deepening ties with trusted distributors while rolling our own direct sales channel. Both online stores and physical retail spots to build a complete flexible sales network. Our IP pop toys business runs as one complete system, We always put products products first, constantly improving how we work, to quickly boost the last one's performance and bring fresh energy into the industry.

Okay. That's all for the questions. Thank you. Great. That's very helpful. And then just maybe to follow-up any sense of what the current sales mix for LETZVAN looks like just in terms of products, IP, channels or maybe geographies?

Michael, I'll take your question. Yeah, that's a good question. As mentioned by Matt, our Chairman and CEO just now, As of end of this quarter, LIFE FAN has already created 10 original IPs. Since our investment in LifesOne in December, we are focusing this year on building two to three standard IP based pop toy products. To establish our brand in the market. We are growing our IP portfolios through continuous in house development and licensing, third party IPs constantly upgrading both our product quality and business scale. LifeOne has strong IP development capabilities and well established partnerships with major top toy retailers. This year, we are doubling down on this relationships. Working closely with key partners to launch HitIP products, through co marketing and joint operations This approach will boost both brand recognition and sales performance this year And also, we are rapidly expanding our POPTOY IP lineup while building our own retail network.

Both online and offline. Our successful pop up store at Beijing Beijing Toyang Joy City that launched in May, proved the model. And based on its strong performance, metrics, we are now accelerating the rollout of more branded stores. We expect our direct retail sales to grow significantly through late twenty twenty five. And into 2026. Concurrently, we are optimizing our omni online operations by integrating social media traffic e commerce platform resources, and proprietary online channels to create a seamless integrated online to offline marketing ecosystem. From a regional perspective, currently Mainland China remains our primary revenue source. We have begun expanding internationally this year.

Especially since the acquisition and consolidation of the business. Launching in Southeast Asia and laying the groundwork for North America. We are committed to growing globally. And while 2025 marks our first step, overseas.

We expect our geographic mix sales mix to become more diversified diverse in the coming years.

Thank you.

Great. Thanks for taking my questions.

The next question comes from Alice Kai with Citibank. Please go ahead.

Hello. Thank you, management, for taking my [indiscernible] And I have two questions. Specifically, what revenue contribution do you expect from Zeppelin in Q4? And second, given the decline in education revenues how will you balance the profit allocation between the largest business and new initiatives? And will you continue reducing education marketing spend spending [indiscernible] And finally, when do you expect overall revenue to return to growth in the fiscal year 2026? Thank you so much.

Thank you, Alice. I'll take your question. Yes, it's very very important. So as we have just disclosed, the profit and loss statement of last one business will be merged and consolidated into QSG Group's consolidated financial statements starting from April 1. And also, Bakuoku and our key IP and also other IPs all of the financial statements will be merged in the future. Starting from April 1. And we will disclose specific information in a timely manner. Since investing in LifeOne, based on its excellent product [indiscernible] we'll continue to focus on operating Wakuku and one, two, other core IPs, as I just mentioned in the last question. Currently, the overseas the overall sales process of LAS1 is is very good with a significant year on year improvement.

Since our acquisition.

Our and also currently we are cooperating with key channel partners. [indiscernible] the shipping price have a certain discount on the terminal price because of this sales model. At the same time, this year, we will increase the proportion of our own self operated channels and overall income level and also the price level will gradually improve. And in terms of the Q4 estimate and forecast, I think with deepening of our strategic adjustment of the business model, and also the improvement of our integrated operation with Life One.

It is expected that the Pop Toil business will account for a very significant level of overall revenue. At the consolidated level in in the next quarter. Starting from the next quarter.

In fiscal year twenty twenty twenty five Q4 We will continue to optimize the operating system of the top toy business and we also disclose revenue guidance as soon as possible at proper time. In terms of the traditional education related business, We continue to search for and explore high quality growth business models. And we view and we are independently evaluating their performance based on specific business types from a fundamental perspective. I think the current decline in revenue from the education related businesses. It's also our deliberate result of the strategic transformation from traffic driven to product driven business model. As you can see, although our revenue has declined, we still maintain stable profit performance. And a solid balance sheet. Next, we will continue to evaluate the ROI, UE of such kind of KPIs, and especially the long term user value of this type of business. In order to optimize the overall business foundation. For last month's pop toy business, [indiscernible] it has a great growth potential and business model. And it seems that the funds operating resources and foundation we have accumulated are sufficient to support the development of our of this business maybe we will disclose at a separate business segment in the next quarter.

And this business, we see a very independently, we see that has a very bright future in terms of both the revenue and the mid term and long term bottom line. For the revenue recovery or maybe in the next quarters or next year, we will still independently evaluate the optimization of business models and revenue growth arrangements for different types of [indiscernible] For the overall revenue growth of the group, we expect the revenue of the PopToy business to continue to show a strong growth trend which we will be seeing in the relevant figures in the subsequent quarterly disclosures. We will evaluate the revenue growth of other business segments, specifically. And only attempt to start growth again On the basis of meeting conditions, such as product quality driven good UE performance, [indiscernible] good user feedback such kind of product driven based KPIs. Yeah, so that's my answer. [indiscernible] Hope that helps. Thank you.

Thank you, team, for your updates. Very helpful.

Thank you, Alex.

As there are no further questions, I'd like to hand the conference to management for any closing remarks.

Thank you again for joining our call today. If you have any further questions, please feel free to contact us or submit a request through our IR website. 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.