Q1 2024 MINISO Group Holding Ltd Earnings Call

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Speaker 2: Hello everyone. Before the course starts, please mark your name and your institution. Thank you very much.

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Speaker 2: Ladies and gentlemen, thank you for standing by and welcome to Minnesota's Earnings Conference call for the September quarter that ended September 30, 2023. At this time, all participants are in a listen-only mode.

Ladies and gentlemen, thank you for standing by and welcome to many thoughts earning conference call for the September quarter that and at September 32023. At this time all participants are in a listen only mode.

Speaker 2: After the management prepare remarks, we will conduct a question and answer session. Before joining the question and answer section, please mark the name and institution and be kindly note that this event is being recorded. We have announced our quarterly financial result earlier today. An earnings release is now available on our investor relations website at ir.muniso.com.

Management's prepared remarks, we will conduct a question and answer session before joining the question and answer section. Please mark your name and institution and be kind of we know that this event is being recorded.

<unk> announced our quarterly financial result earlier today, an earnings release is now available on our Investor Relations website at IR documents, so dot com joining.

Speaker 2: Joining us today are our founder and CEO , Mr. Jack Yeh, and our CSO, Mr. Ethan Zhang.

Joining us today at our founder and CEO, Mr. Jack Yeah, and our CFO Mr. Ethan job.

Speaker 2: Before we continue, I would like to refer you to the safe harbor statement in our earning pressure list, which also applies to this call, as we will be making forward looking statements.

Before we continue I would like to refer you to the Safe Harbor statement in our earnings press release, which also applies to this call as we will be making forward looking statements.

Speaker 2: Please also know that we will discuss non-IFRIS financial measures today, which we will have explained and reconciled to the most comparable measures reported under the International Financial Reporting Standard in the company's earnings release and filings with the US SEC and Hong Kong Stock Exchange.

We also know that we will have gotten on ISR I X financial measures today, which we will have explained and reconciled to the most comparable measures before they and their international financial reporting standards in the company's earning release and filings with the U S. SEC.

And Hong Kong stock exchange inhibition, we have prepared a powerpoint presentation for today's call, which contains financial and operational information for this quarter. If you are using with meeting you should be seeing it right. Now we can also revisit it on our IR website later now.

Speaker 2: In addition, we have prepared a PowerPoint presentation for today's call, which contains financial and operational information for this quarter. If you're using Zoom meetings, you should be seeing it right now. You can also revisit it on our IR website later.

Speaker 2: Now, I would like to hand the conference over to Mr. Ye, and the operator will translate for Mr. Ye. Please go ahead, sir.

Now I would like to hand, the conference over to Mr. Yet and the operator would translate for Mr. Yang. Please go ahead Sir.

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Speaker 3: Hello, everyone. Welcome to this year's TSMC telephone conference. The overall performance of this quarter is a new high. Income and profits have continued to develop at a high quality in the previous quarter breakthrough.

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Speaker 3: In addition, the income record has been refreshed to 37.9 billion yuan, which is 37% higher than before. The interest rate also broke 40% for the first time, reaching 41.8%. Last year, Tencent raised

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Speaker 3: 6.1%. After adjustment, net profit is more than 6.4 billion yuan, growth rate is 54%. After adjustment, net profit is 16.9%, which is about 2% higher than last year.

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Speaker 2: Hello everyone and welcome to Minnesota Grips September 5, 2023. Our name is Conference Call.

Hello, everyone and welcome to the minutes of grid September 2020.

Earnings Conference call.

Speaker 2: Our overall performance once again reached new highs during this quarter, as both of our revenue and profitability maintains high quality growth, based on the breakthroughs we achieved in previous quarters.

Our overall because women's once again reached new heights during the quarter as part of our revenue and profitability maintained high quality growth based on the breakthrough we achieved in previous quarters total revenue hit to RMB, three 7 billion and set a new record increasing by 37% year over year gross margin exceeded 40% for the very first time, reaching body.

Speaker 2: Total revenue hits RMB 3.79 billion and set a new record, increasing by 37% year-over-year. Growth margin exceeds 40% for the very first time, reaching 41.8 with an increase of 6.1 percentage points compared to the same period last year. Adjustment profit exceeds RMB 640 million, with representing a year-over-year increase of 54%.

One eight with an increase of 611 percentage points compared to the same period last year and adjusted net profit exceeded RMB $640 million, representing a year over year increase of 54% net profit margin reached 16, 9% increasing by about two percentage points compared to the same period last year.

Speaker 2: Our joint net profit margin reached 16.9%, increasing by about two percentage points compared to the same period last year.

Speaker 2: Now, I will walk you through business updates for our three major segments, Miniso China, Miniso Overseas, and TopToy.

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Now I will walk you through business updates for our three major segments, maybe the China MISO overseas and top toy.

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Speaker 3: In terms of single chain, the average order volume has increased by more than 17%, and the average customer price has increased by more than 3%.

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Speaker 2: Let's start with Minnesota, China. During the peak season of summer vacation, GMB, the Minnesota upline store in China, achieved RMB 3.6 billion, refreshed its historical report, compared with an year-over-year increase of 5% in domestic retail sales of the customer goods, according to National Bureau of Statistics of China. On a per-stock basis, average transaction value increased by over 17%, and average transaction value increased by more than 3% year-over-year.

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Speaker 3: China's single-channel GMV has maintained a low level of 85% before the pandemic in 2019 and 100% in the same period in 2021. As expected at the beginning of the year, since entering the fourth quarter, most investors' concerns about domestic consumer returns have increased, but the closed-loop performance has remained consistent.

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Speaker 3: According to the statistics of domestic sales of our regional units, since July , the trend of domestic single-chain daily sales has been consistent with the normal level before the epidemic in 2019. More performance has been shown in terms of seasonal sales.

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Speaker 3: The company will continue to pay close attention to the trend of sales and take economic measures to deal with the complex and variable macro environment.

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During the first 10 months in 2023, <unk> dot of minutes of China recovered to 100% of 2021 level and around 85% of the pre call that level in the same period of 2019.

Speaker 2: During the first 10 months in 2023, GME per store of Minnesota China recovered to 100% of 2021 level and around 85% of the pre-COVID level in the same period of 2019, consistent with our expectation at the beginning of the year. Entering into the fourth quarter of calendar year 2023, some investors worried about the weak domestic consumption environment. However, Minnesota has maintained resilience as always.

And with our expectation at the beginning several years entering into the fourth quarter of calendar year 2023, some investor worried about the weak domestic consumption environment. However, many still have maintained with geely and ethical way according to our weekly self data.

Speaker 2: According to our weekly self data, the trend of personal self since July today this year was consistent with the normalized pattern in the same period of 2019. No witnesses were noted.

Crystal itself since July today, this year with consistent with a normalized pattern in the same period of 2019, no weakness that's worth notice.

Speaker 2: It is more about seasonality. We will keep tracking this trend and staying alarmed and taking positive measures to cope with the macro headwind.

It is more about seasonal seasonality it will keep tracking the strength and staying alarmed and taking positive measures to cope with the macro headwinds.

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Speaker 3: In terms of domestic power generation, we have continued the good power generation system in the last quarter.

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Speaker 3: Nearly 60% of new stores come from cities below the 3rd line. As the number of stores grows rapidly, we continue to pay attention to the health of our stores.

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Speaker 3: In this quarter, the number of official stores in China is only 1.4%, which is lower than ever before. As of September 30th, we have completed our annual goal of 350 to 450 official stores in China. We have also achieved the goal of 6,000 official stores worldwide. We hope that in the future,

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Speaker 2: We opened a total of 198 new Miniso stores on a net basis in China during September quarter, continuing on the trend of our store expansion, including 80 new stores in Tier 1 and Tier 2 cities, and around 60% new stores in Tier 3 and lower tier cities. While the number of stores is growing rapidly, we continue on a focus on unique economics of our operating stores, driven by the healthy growth rate of Miniso stores of only 1.4% in this quarter. We love history.

We opened a total of 198, new meaningful story on a net basis in China during September quarter.

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Speaker 2: As of September 30, we have accomplished our target of opening 350 to 450 stores in China on a net basis in calendar year 2023. Meanwhile, we celebrate the milestone of 6,000 Miniso stores worthwhile in this quarter. We do value both space and quality in growing a healthy global store network for Miniso brands. Going forward, we can

As of September 30, we have accomplish our target of opening 350 to 400 basis or in China on a net basis in calendar year 2023. Meanwhile, we celebrated a milestone of fixed thousands many of those for a while in this quarter, we do well in both state and quality and growing a healthy global store.

Networks for many sell brand going forward we continue.

Speaker 2: Currently expect to add another 100 and 200 new stores in China in the remaining calendar year 2023 on a net basis.

Currently expect to add another 100 200, new stores in China in the remaining calendar year 2023 on a net basis.

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Speaker 3: First of all, the overall revenue of overseas business is nearly 1.3 billion yuan. It has increased by nearly 41% compared with last year's high-speed growth. It also broke the highest record in the third quarter of overseas business sales.

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Speaker 3: China's gross domestic product is about 46% of the world's gross domestic product.

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Speaker 2: Moving on to our progress on the international front, firstly, overseas revenue was about RMB 1.3 billion, with standing in year-over-year increase of nearly 41% from a high-basis last year and setting a new record. Notably, revenue from directly-operated markets increased around 89% year-over-year, contributing around 46% of overseas revenue, compared to around 34% in the same period last year.

Moving on to our progress on the international fronts. Firstly oversee revenue was about RMB, one 8 billion, representing a year over year increase of nearly 41% from a high basic loss share and setting a new record, notably revenue from directly operated markets increase around 89% year over year contribute.

They are on 46% of oversea revenue compared to around 34% and the same period last year.

Speaker 3: Secondly, GMV has grown by 48% compared to foreign GMOs, while GMV has grown by 80% compared to direct market GMOs.

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Speaker 3: Overall, the overall GDP growth of single-channel GMOs is more than 27%, and the average power supply has increased by about 13%. The main overseas market still maintains the high-level growth of GMOs, which is nearly 1.6 times more than the growth in the North American region, 60% more than the growth in the Latin American market, and 50% more than the growth in the European market.

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Speaker 2: Secondly, GME in overseas markets increased by 48% year-over-year, including an 80% year-over-year growth in a directly operated market and 39% year-over-year growth in a distributor's market. Overall, GME per store in overseas markets increased by over 27% year-over-year, and average store accounts increased by about 13%.

Secondly, jam lean overseas markets increased by 48% year over year, including an 80% year over year growth in directly operated markets and 39% year over year growth in the distributors market.

Overall gms per store in oversea market increased by over 27% year over year in average store count increased by about 13%.

Speaker 2: Major overseas markets maintain rapid growth momentum, including a 160% growth in North America, a 60% growth in Latin America, and a 50% growth in Europe .

Overseas market maintain rapid grew momentum, including a 150 growth price and growth in North America at 60% growth in Latin America, and a 50% growth in Iraq.

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Speaker 3: What is surprising is that the overall recovery of this season's overseas single-story GMV has exceeded the statistical level of 2010.

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Speaker 3: 27%, especially the single-channel GMO in Dali has recovered to 107% in January .

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Speaker 3: The market has recovered to 93%. In terms of global markets, North America's single-chain GMV has reached nearly twice the level of the U.S.

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Speaker 3: The Latin American market has tripled from 1.1% to 1.1% in 2019. The Australian market has recovered by more than 100%.

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Speaker 2: Currently, we are encouraged that GME pre-store in overseas markets during September quarter recovered to 103% of 2019 level and achieving 27% year-over-year increase. The distributor markets recovered to 107% of pre-COVID level in 2019, while the directly operated markets recovered to 93%.

Currently we are in cars start Jeremy per store in oversea market theory September quarter recovered to 130% of 2019 level and achieving 27% year over year increase.

Distributor markets recovered to 107% of pre COVID-19 level in 2019, while the directly operated markets recovered to 93%.

Speaker 3: In our major overseas markets, GME per store in North America nearly doubled that of that insane period in 2019. GME per store in Latin America and Europe recovered to about 110% and over 100% of 2019 net levels, respectively. We will continue to focus on the major overseas markets. GME is in the top 20 overseas markets.

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Speaker 3: Therefore, the performance of these markets greatly represents the overall performance of our overseas markets. We will do some analysis for you from three dimensions.

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Speaker 3: First of all, in terms of the Japanese military sales volume, the first two markets have increased by 34% compared to the first two markets, and the overall balance rate has increased by 27% overseas. Compared to the first two markets in January of 2011, the Japanese military sales volume has recovered by 98%.

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Speaker 3: Secondly, in terms of the daily sales volume of single-storey electric vehicles, 18 out of the 20 major markets in this quarter have achieved a positive growth rate. The average growth rate is 38%, which is 32% higher than the overall overall growth rate overseas. Compared to 2019, there are 15 markets in the first two major markets that have comparable performance. Among them, the United States, Mexico,

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Speaker 3: Canada, Spain, Kazakhstan and Vietnam have seen more than 100% growth in 2019. The Southeast Asian market, Indonesia, India, the Philippines, Thailand, and Kobe have seen an average recovery of more than one point.

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Speaker 3: Third, in terms of door-to-door sales, the number of door-to-door sales in the first 20 overseas markets

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Speaker 2: 80% of overseas DMV were generated in top 20 markets, and their performance largely represents the overall business performance of our overseas markets. Let me tell you three things.

Speaker 2: Firstly, in terms of GMV, first-store sales in the top 20 markets increased by an average of 34% year-over-year, outpacing the average of 27% year-over-year growth for the overseas market as a whole.

Up 34% year over year outpacing the average of 27% year over year growth for the oversea market ethical compared with the same period in 2019 per store sales in the top 20 markets have recovered to 98%.

Speaker 2: Compared with the same period in 2019, per-store sales in the top 20 markets have recovered to 98%.

Speaker 2: Secondly, 80 of the top 20 markets achieved positive theme store sales growth in this quarter, with an average growth rate of about 38%, outpacing the average growth rate of 32% for the overseas market as a whole.

Secondly, 80 of the top 20 markets achieved positive same store sales growth in the quarter with an average growth rate of about 38% outpacing the average growth rate up 32% for the oversea market episodes.

Speaker 2: Among top 20 markets, 15 have comparable stores in 2019. Among them, six markets, including the US, Mexico, Canada, Spain, Kazakhstan, and Vietnam have recovered to more than 100% clean store sales. For Southeast Asia countries, such as Indonesia, India, the Philippines, and Thailand, clean store sales numbers were better than per store sales numbers.

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Speaker 2: Thirdly, top 20 overseas markets account for nearly 70% of the total overseas stores.

Thirdly top 20 oversea market accounted for nearly 70% of the total OSV source.

Speaker 2: and contribute nearly 75% of the new store year today.

And contributed nearly 75% of the new stores year to date.

Speaker 3: In the second half of 2023, China's foreign exchange market has increased significantly.

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Speaker 3: In Q3, there were 126 stores competing in the overseas market. This is the highest number of stores opening in the overseas market since 2020.

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Speaker 3: As of September 30, 2023, we will do our best to complete 350 to 450 overseas stores throughout the year.

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Speaker 2: Entering the second half of calendar year 2023, store openings in overseas markets have accelerated. During September quarter, we added 126 stores in the overseas market on a net basis, making it the best quarter since 2020. As of September 30, 2023, we accumulated 198 new stores in the overseas market on a net basis.

Entering the second half of calendar year, 2023 store openings in oversea market.

<unk> during September quarter, we added 102006 fourth in the oversea market on a net basis, making it the best quarter since 2020.

Our September 32023, we accumulated 198, new stores in the oversea market on a net basis.

Speaker 2: We will strive to deliver our target of opening 350 to 450 stores in the overseas market.

We strive to deliver at our target of opening 350 to 450 stores in the oversea market.

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Speaker 3: In September , the Ministry of Foreign Affairs and the People's Republic of China joined forces to create the Disney 100 smile patent.

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Speaker 3: First, Disney's four IPs are decorated with core elements, combining the super-luxury Wink of Mingchang Goods to create a immersive IP scene. Second, Mingchang Goods, which is the theme of the flower market, is a fast-growing product of the flower market. Mingchang Goods' master flower market products are combined with traditional festival culture.

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Speaker 3: and partner with the generation of customers and customers. IP-Lpn OnePlus and Tokyo I equipped concepts are contributing to the growth of IPO activities by Qi Pe and other companies. And we not only develop brand potential through the never-ending experience but also c ????re our short-term passion that has led to the most innovative innovation for the IOP.

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Speaker 2: In September , Minnesota cooperated with Disney to create a Disney themed train to celebrate the 100th anniversary of Disney by decorating the carriages with the Disney's four famous eyepieces and integrating Minnesota's super symbol, Minnesota Wings, to create an immersive environment for the passengers. We also launched a market campaign to promote awareness of our flagship fragrance and perfume products.

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Launched a market campaign to promote awareness of our flagship <unk> and <unk> products, which combine the master fragrance serious product, we had fixed traditional festival culture to cater for social behavior and consumption preference of our young target customers.

Speaker 2: which combined a master fragrance series product with the traditional festival culture to cater for social behavior and consumption preference of our young target customers. As an industry-leading IP powerhouse, the key difference between our IP strategy from other companies' lives in our continuous effort in developing IP products to elevate our brand

The industry, leading IP powerhouse the key statements between our IP strategy from other company's life in our continuous effort in developing IP product to elevate our brand.

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Speaker 2: on cultural phenomenon or influential trends by featuring their elements in our product design and adding exciting diversity to our products.

On cultural phenomenon are influential trend by featuring their elements in our product design and adding exciting diversity to our products.

Speaker 2: which is different from the occasional marketing efforts of other players. Meanwhile, with more

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Speaker 2: margin profile of IP products, we are positioned well to leverage their huge RAM space to grow both our top line and bottom line.

The margin profile of IP products, we are positioned well to leverage their huge fan base to grow both our topline and bottom line.

Speaker 3: At the same time, based on our continuous user survey and fast response from the supply chain, NISO's high-quality products have not only created a huge impact on our business, but also created a huge impact on our business.

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Speaker 3: In the short term, we have witnessed a sales volume of over 100 million yuan and a sales volume of more than 10 million yuan. For example, we have accelerated the trend of offline travel recovery and quickly launched one-off products. This is the first time we have recorded a sales volume of more than 100 million yuan. Of the domestic sales volume of more than 10 million yuan, about 60% came from strategic products such as interest consumption. And the success rate of product development

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Speaker 2: Meanwhile, by leveraging our capability in capturing customer insights in our fast supply chain, our highly refreshed assortment and continuous innovation have created huge sales opportunities. During this quarter, we have witnessed the birth of 100 million sales products and a new batch of best-selling products with more than 10 million sales.

Meanwhile, by leveraging our capability in capturing customer insight and our fast white team are highly refreshed assortment and continuous innovation upgrade itself opportunity. During this quarter, we haven't seen it the breadth of 800 million cell product and a new batch of that selling product.

With more than 10 million cells. For example, we see the trend of offline travel recovery to quickly launch and need this possible travel category generating more than 100 million self in the quarter. In addition, about 60% of our best selling product comes from strategic Heather categorize.

Speaker 2: For example, we see the trend of offline travel recovery to quickly launch a new disposable travel category, generating more than 100 million sales in this quarter.

Speaker 2: In addition, about 60% of our best-selling products come from strategy categorization.

Speaker 2: a strategy category such as our interest-driven product with improved hit rate.

Our strategy categories, such as our interest driving product.

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Speaker 3: This quarter, we will have a series of opening ceremonies in Xi'an, Dachang, Buye City, Wuhan, Shuhe, Hanjie, Wanda, etc.

Speaker 3: In the future, we will encourage and prepare more tens of millions of large stores, establish brand standards, and realize the true value of stores, with the good performance of super stores in domestic business.

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Speaker 3: We are also starting testing in foreign markets. The third-gen secret English brain cotton shop was opened in the streets of UK Global Cruise Shipping Company. 24 thoroughly **

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Speaker 3: It is only 30 square meters, but its opening year, performance, and reputation have exceeded our expectations. MISO's first IP-limited flagship store in Indonesia is now open in a popular shopping center in Indonesia. The store is located in the city of Chengshe, a wide range of MISO IP joint-stores. It is the first store in Indonesia to be listed as a listed store in Southeast Asia. We look forward to the deep implementation of the Super Store strategy, and we look forward to the global influence of overseas performance improvements and MISO's brand.

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Speaker 2: This quarter, Minnesota also made progress in the Superstore Initiative. Our newly opened Xi'an Datang All-Day Mall Stores and Wuhan Chuhe Hanjie Wanda Stores gained a positive response from customers. In the future, we will encourage and prepare for more superstores to test different store formats and improve store unit economics.

Positive response from customers in the future, we will encourage and prepare for more superstores to test different store format and improve store unit economics with initial success in China with test the water in some overseas markets and this quarter. The very first many films blind box star in the U K rental.

Speaker 2: With initial success in China, we test the water in some overseas markets. In this quarter, the very first mini blind box store in the UK randomly opened in Chinatown, with more than 50 kinds of IP-related blind boxes co-branding with Disney, Sanrio, Winnie the Pooh, and other popular IP.

We opened in Chinatown with more than 50 kinds of IP related black boxes.

Branding with this meet sanrio leaning to port and other popular IP.

Speaker 2: Although only 30 square meters, its total sales and sales per square meter on its first day far exceeds our expectations.

The only 30 square meters at total sales and belts.

Mirrors on its birthday far exceeds our expectation.

Speaker 2: Minnesota's first Sanrio themed IP store opened in one of the most popular shopping centres in Indonesia, featuring a spacious Sanrio IP co-branding display area.

<unk> first Sam real theme IP store opened in one of the most popular shopping centers in Indonesia, featuring spacious Sanrio IP co branding display area.

Speaker 2: The sales on its first day set a new record in Southeast Asia. We'd expect that with the implementation of the Superstore strategy, it will strongly promote overseas performance and enhance the global influence of the Miniso brand.

The south on its first day set a new record in southeast Asia, We would expect that with the implementation of the superstar strategy. It was strongly promote overseas performance and enhance the global influence up the many sub brands.

Speaker 3: Next, I'd like to introduce the progress of TopToy to you. This season's income has increased by 4.6% compared to the previous year. Among them, single-channel GMV has increased by 30% compared to the previous year. Average power supply has increased by 4.2% compared to the previous year.

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Speaker 4: Let's move on to top story. quarterly revenue achieved a 46% year-over-year increase with an about 30% year-over-year strong growth in GME per store and a 70% year-over-year growth in average store count. Yeah. Yeah.

Let's move on to top toy.

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Speaker 3: Although there is an unfavorable external environment such as the epidemic, Taobao has not only explored the development direction of Taiwan's business, but also become a new consumer brand with a annual sales of nearly 1 billion yuan. In the industry, the influence is not limited to Taiwan, but also to other countries. Taobao is a brand with a long history. It is a brand with a long history. It is a brand with a long history. It is a brand with a long history. It is a brand with a long history. It is a brand with a long history.

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Speaker 3: In September , we held a meeting of TopToy's partners, and we reached a new cooperation with important partners such as Wanzai, Nanmenggong, and WorldToy, which will continue to optimize the product structure of TopToy.

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Speaker 3: At the same time, the Taobao store is also opening in Shanghai Disney Town. It will be the only place to stay in 2023.

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Speaker 2: SOPTOY will celebrate its third anniversary next month. Although most of the past three years was covered by the pandemic, SOPTOY managed to be the unicorn with an annual GME approximated to be $1 billion and in large influence in this sector. During its partner conference in September , SOPTOY renewed its cooperation relationship with important partners, such as Bandai Namco and 52Toys.

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Speaker 2: which lay a solid foundation to future optimize its product structure. Meanwhile, the grand opening of Top Choice Store in Shanghai gives me becoming the only new customer brand to settle here in 2023.

Which laid a solid foundation for future optimized its product sector.

While the Grand opening of top toy store in Shanghai, Disney, becoming the only new customer brand to settle here in 2023.

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Speaker 3: This is my speech. Next, I would like to ask the doctor to introduce the financial situation of this company to you.

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Speaker 2: I will now turn the call over to Ethan for a review of our financial performance in September quarter of 2023.

I will now turn the call over to Ethan for a review of our financial performance in September quarter of 2023.

Speaker 5: Thank you, Jack. Hello, everyone. Thank you again for joining us today. I will walk you through our financial results for the September quarter. Please note that all numbers are in RMB unless otherwise noted. And I will also refer to some IFRS measures which have excluded share-based compensation expenses.

Thank you Sir.

Thank you again for joining us today I will walk you through our financial results for the September quarter. Please.

Note that all numbers are in reminbi unless otherwise noted.

I will also refer to some measures, which have excluding share based compensation expenses.

Speaker 5: Revenue was $3.8 billion, representing an increase of 37% year-over-year. Revenue from China was RMB$2.5 billion, up 35% year-over-year. The increase was driven by, number one, a growth of 41% in revenue from online stores, and number two, a growth of 46% in revenue from top toys.

Revenue was three points.

Representing an increase of six 7% year over year revenue from China was RMB, two 5 billion up six 5% year year. The increase was driven by number one grow saw 41% in revenue from offline stores and number two gross or 46%.

And revenue from top toward.

Speaker 5: 41% worldwide growth of the Ministry of Foreign Business was the result of 14% growth in average store counts and 24% growth in personal sales.

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Speaker 5: The 46% EVU growth of top toy was a result of high teens growth in average stock count and mid-20s growth in personal sales.

The 46% year over year growth of top toy was a results of a high teens gross average per pound sand mid twenty's grossing personal service.

Speaker 5: Revenue from the overseas market was around $1.3 billion, up 41% year-over-year, driven by an increase of loadings in average store counts and a growth of mid-20s in personal sales in the overseas market.

Revenue from overseas market interest Renminbi, one 3 billion.

41% year over year, driven by an increase so low teens arbor use short term Janet Graham So mid twenty's in principle shelves in overseas markets.

Speaker 5: Revenue from distributed markets was RMB$304 million, an increase of 60% every year. Revenue from directly operated markets was RMB$592 million, an increase of 90% every year, accounting for 46% of overseas revenue, as compared to 34% during the same period of last year.

Revenue from distributed market Reminbi Street, a $4 million, an increase of 60% year over year revenue from directly operated markets.

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Speaker 5: Gross profit in September quarter was RMB1.6 billion, up 61% every year. Gross margin was RMB1.6 billion, up 61% every year.

Gross profit.

In September quarter was renminbi, one 6 billion up 61% year over year gross margin was.

Speaker 5: to 1.8 percent, increasing by about six percentage points in the same from the same period of last year. The EOU increases due to

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Year over year increase was due to three reasons number one GP margin in overseas markets increased as we made meaningful progress in optimizing our product structure and the slow revenue contribution from IP products increased from less than 30% to more than 40%.

Speaker 5: Number one, QP margin in overseas market increased as we made meaningful progress in optimizing our product structure and sole revenue contribution from IP products.

Speaker 5: increased from less than 30 percent to more than 40 percent.

Speaker 5: In addition to that, cheap margin in overseas markets in this quarter also benefited from increasing revenue contributions from our directly operated markets.

In addition to that GP margin in overseas markets and this quarter also benefited from increasing revenue contribution from our directly operated markets.

Speaker 5: which contributed 46 percent of revenue. As we enter the peak season of our directly operating market,

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Enter the peak season, all directly operated markets. We may expect its revenue contribution surpassing 2% for the first time come in December quarter, and number two GP margin in China increased by low single digits scented corns, thanks to our continued.

Speaker 5: we may expect its revenue contribution surpassing 50% for the first time in the coming December quarter. And number two, GP margin in China increased by low single-digit centered coins thanks to our continuous growth of merchandise GP margin and a better control of promotional discounts.

Gross merchandise margin and better control promotional mortgage terms.

Speaker 5: Number three, GP margin of top toy continue to increase as planned.

And number three GP margin of top toy continued to increase as planned.

Speaker 5: SG&A expense as a percentage of revenue is around 20.8% up from 19.3% in the same period of last year.

SG&A expense as a percentage of revenue is around.

28%, our fourth up from 19, 3% in the same period of last year.

Speaker 5: Selling and distribution expense will be 220 million, increasing by 67% year-over-year, driven by, number one, increased personnel-related expense. Number two, increased.

Selling and distribution expense smart RMB 220, Minto, increasing by 67% year over year, driven by number one increased personnel related expense number two increased.

Speaker 5: marketing expenses related to brand upgrade projects. As we mentioned in our last earnings conference call, as we are executing our brand upgrade strategy both in China and overseas markets, we expect to see marketing expenses increase a little bit for a while. But this is totally.

Marketing expenses related to brand upgrade projects as we mentioned in our last earnings conference call.

We are executing our brand upgrade strategy, perhaps in China and overseas markets, we expect to see marketing expenses and Chris a little bit of for a while.

But this is totally controllable.

Speaker 5: marketing expenses percentage of total revenue just increased by one percentage points in this quarter compared to the same period of 2021 and number three increased ip licensing expenses

Marketing expense as percentage of total revenue just increased by one percentage points in this quarter.

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Speaker 5: Licensing expense is more variable cost as we offer more IP products. IP licensing expense as percentage of revenue increases by less than one percentage points in this quarter compared to the same period of 2022.

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Speaker 5: G&A expenses were RMB 167 million flat year-over-year, something to profitability. Operating profit in the September quarter was RMB 788 million, representing increase of 55% year-over-year. Operating margin was nearly 21%, compared to 18% in the same period of last year.

G&A expenses for maybe $167 million flat year over year, turning to profitability operating profit in the September quarter was RMB.

788 million, representing increase of 55% year over year operating margin was nearly 21% compared to 18% in the same period of last year.

Speaker 5: Adjusted net profit in September quarter was RMB 642 million, increasing by 54% every year. Adjusted net margin was 16.9%, compared to 15% in the same period of 2022.

Adjusted net profit in the September quarter.

642 million, increasing by 54% year over year adjusted net margin was 16, 9% compared to 15.

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Speaker 5: on a quarter-over-quarter basis, our margin profile improved because we

On a quarter over quarter basis, our margin profile improved gross room.

Speaker 5: enjoyed a significant foreign exchange gain in June quarter.

Enjoyed a significant foreign exchange gains in June quarter.

Speaker 5: If we exclude, for instance, impact.

If we exclude.

Foreign exchange impact.

Speaker 5: Adjusted net margin in this quarter would be 7.1% compared to 15.5% in the previous quarter. Turning to cash position, as of September 30, we have strong cash position of $6.7 billion.

Just enough margin in this quarter would be seven 1% compared to Apple.

10, 5% in the previous quarter.

Turning to cash position as of September 30, we have strong cash position.

$6 7 billion.

Speaker 5: September quarter has once again witnessed breakthroughs and new hits in each major aspect of our operations. Looking forward into the December quarter, we expect our sales continue to grow strongly on a year-over-year basis, driven by better store-level performance and store network expansion. Meanwhile, our margin profile will continue to optimize on a year-over-year basis. Thank you, and that concludes our prepared remarks. Operator, we are now ready to take questions.

September quarter has once again witnessed breakthroughs and you're hedged majors aspects of our operations looking forward to the December quarter. We expect our sales continued to grow strongly on a year over year basis, driven by better store level performance and store network expansion.

Meanwhile, our margin profile will continue to optimize on a year over year basis. Thank you that concludes our prepared remarks, operator, we're now ready to take questions.

Thank you Sir.

Speaker 2: Your first question today comes from the lines of Michelle Chen from Goldman Sachs. The line is open, please go ahead.

Your first question today comes from the line Michelle Cheng from Goldman Sachs Line is open. Please go ahead.

Speaker 6: Hello, Mr. Yeh. First of all, congratulations to the company for having such a good performance. I have three questions to ask. The first question is about the trend of copper or GMB per store. We know that this year is the recovery after the pandemic. Some countries in China and Asia have shown good performance. Can you share with us, if we look at the 4Q or next year, because everyone is worried about the pressure of domestic consumption, how do we look at copper rating now?

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Speaker 6: Second question, I'd like to ask about the opening of stores overseas. We just mentioned that the goal of opening stores this year will be achieved. Indeed, in the first half of the year, we saw that the opening of stores was slower. Can you share with us what the improvement situation is now? If we look at the future, we know that there are more opportunities overseas. But are there any market areas, including direct sales or distribution models, that are important in terms of opening stores overseas?

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Speaker 6: The third question is about the product side. This year, IP and Xiangxun have had good feedback. Can you share some highlights or directions we can look forward to in this product next year? This is my third question.

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Speaker 6: Now I have three questions for management. First one is regarding the GMV store versus central sales growth upside. Given this year we already benefited from the post reopening, so how do we think about the 2024 and long-term central sales growth?

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Speaker 6: And secondly, regarding the overseas store expansion, given we are a little bit left behind in the first half, but we still target to achieve the guidance for the full year. So can you share with us where do we see the improvement and how should we think about the focus for expansion overseas next year?

And secondly regarding the overseas expansion, given we are little bit behind the first half, but we still target to achieve our guidance for the full year. So you are still with us.

Ah well, where do we see the improvement and how should we think about the whole cultural expansion overseas next year and thirdly on the product. So we have a very good progress on Ikea and up our glass products.

Speaker 6: And thirdly, on the product, so we have a very good progress on IP and fragrance products, et cetera. So how do we think about, or is there anything we can expect for next year's product? Thank you.

How should we think about or is there anything we can expect for next year. Thank.

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Speaker 3: First of all, let me introduce the latest Tencent's recovery situation. From January to September this year, Tencent's sales volume in China has recovered to 93% in 2019. Tencent has grown by 9% compared to 2021, and has grown by more than 20% compared to 2022.

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Speaker 3: We have just introduced the situation of overseas power generation in the market. The overall power generation recovery rate is 94%. The first two overseas power generation markets have seen positive growth.

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Speaker 3: In the long run, our goal is to achieve sustainable growth in Tencent, and I think there are several key factors.

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Speaker 3: I also wanted to highlight another important point. China has a 93% recovery rate, but this recovery rate is significantly different on weekdays, weekends and holidays.

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Speaker 3: This year, China's electricity recovery rate is around 90%. China is also higher, at around 95%. Compared to May 1st and 11th, the electricity recovery rate has even increased by a few digits.

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Speaker 3: The reason behind this is that the holiday is still higher than the weekend, and the weekend is still higher than the working day, so we must stick to opening big stores.

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Speaker 3: Secondly, we need to upgrade our products. We need to upgrade our brand. In the past one year, the price of Ketan has increased significantly. The city has maintained a stable annual rate and has supported the growth of our Tendian well. Thirdly,

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Speaker 5: Okay, thank you, Michelle. This is Ethan. I will translate for Mr. Ye, and then I will make some add-up. So first, Mr. Ye introduced the latest update of our SimStore sales.

Okay. Thank you Michelle this is Lisa I would translate for Mr. Yeah, and then I will make some add up so.

First Mr introduced the latest update on the same store sales.

Speaker 5: So for this year, year to date, in China, our same store sales has recovered to 93% compared to 2019 level. So compared to 2021, same store sales has increased by nine percentage points. And compared to 2022, same store has more than 20% of year-over-year increase.

So for this this year year to date in China. Our same store sales has recovered to 93% compared to 2019 level compared to 2021 same store sales has increased by nine percentage points and compared to 2022.

Same store has more than 20% year over year increase and for overseas market. As we mentioned on our prepared remarks. The same store sales have recovered to about 94% as a whole in overseas market.

Speaker 5: And for the overseas market, as we mentioned in our prepared remarks, the same-store sales have recovered to about 94% as a whole in the overseas market, among which the top 20 overseas market has positive same-store sales growth.

Among which top 20 overseas market has also has no pause to same store sales growth.

Speaker 5: In the long term, our major target here is if we want to have sustainable same-store sales growth, I think there are a few several key factors here. Number one is the traffic. Our business performance is positively related to traffic.

In the long term.

Our major target here.

If we want to have sustainable same store sales growth I think.

A few several key factors here.

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Speaker 5: Take this year as an example, as I mentioned, in China we reached 93% of same-store sales recovery, but this recovery varies among weekdays, weekends, and holidays.

Take this year as example, as I mentioned in China, We reached non just read the central same store sales recovery.

This recovery varies among no weekdays weekends and holidays.

Speaker 5: So in this year, in weekdays, the same store sales was 90%. In weekends, it's a little bit higher at 95%. But when we have, you know, public holidays, such as Labor's Day, National Day, and so on, our same store sales have low single digits, positive growth compared to 2019 level.

So in the in this year in weekdays the same store sales rose 19% in.

In weekends.

A little bit higher at 95%, but when we have no public holidays, such as Labor day National day and saw our same store sales have low single digits positive growth compared to 2019 level.

Speaker 5: The reason behind this is that when we have public holidays, we have more traffic. When we have weekends, the traffic is obviously higher than weekdays. So that is why we promote, we launched the Superstore strategy. I repeated a lot of times internally, only by opening Superstore can we make better performance.

The reason behind this is that when we have public holidays, we have more track beach, we have weekends. The traffic is obviously inspired them weekdays.

So that is why we promote we launched the Super store strategy.

I repeated a lot of times internally only by opine superstore can we make better performance so with the brand upgrade all.

Speaker 5: So with the brand upgrade strategy, we want to improve and optimize our store network by continuously introducing more superstores. And second, I think the key here lies in the innovation of product.

Brent upgrade strategy, we want to improve and optimize our store network.

By containers, introducing more superstores and second I think the key.

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And the innovation of our products.

Speaker 5: By introducing brand upgrade during the past year or so, our ASP has improved.

By brand, but ex that.

Introducing brand upgrades during the past year or so ESP has improved.

Speaker 5: uh a lot where we had a you know stabilized cross-selling rate so these

Large well, we had stabilized cross selling reach so this.

Speaker 5: has been very key in supporting our same store sales growth.

Has been very key in supporting our same store sales growth and assert is all about the branding only by becoming a super brands. So we can.

Speaker 5: or about the branding, only by becoming a super brand, so we can get more market share from the traffic under the backgrounds of the reducing traffic in China's shopping mall. So, and I also want to add one point that, you know,

Get more market share from the traffic on the.

The backgrounds of the reducing traffic in China shopping more so.

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Speaker 5: Just now, Ms. Tia talked about the same-store sales growth.

Just know Mitch you talked about same store sales growth.

Speaker 5: But before that, Michelle, you know us, we disclosed our GMB per store. So GMB per store is more an average.

Before that.

Michelle you know us we just closed our GMB per store so Jimmy per store has more than average, but the same store sales is more related with comparable sales. So if you look at it year to date, the Jimmy per store in China recovered to 85% of pre COVID-19 level.

Speaker 5: But the same score sales is more related with comparable sales. So if you look at a year to date, the GME pre-score in China recovered to 85% of pre-COVID level because we have opened a lot of new stores in lower tier cities in China, which has some dilution to our average score performance. But if you look at the comparable sales.

Because we have opened a lot of new stores in lower tier cities in China, which has some dilution to our average store performance, but if you look at the comparable sales.

Speaker 5: our symptom cells have recovered to 93% and which is very encouraging to us.

Our same store sales have recovered to 93% and which is very encouraging to us.

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Speaker 3: I went to a lot of overseas markets this year and proposed that we should focus on big cosmetics, big IP, big toys, these three big categories.

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Speaker 3: Currently, the foreign market consumption ratio has reached 60%, and it is likely to increase to 70% in the future. The three main representative products are blind box, doll, and perfume. Next, we will continue to feed the market.

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Speaker 3: In these three categories, supply and demand are originally the strongest categories for our overseas sales contribution. We will continue to strengthen them. In the past few quarters, the growth trend in China and overseas has been very obvious. We are rapidly challenging the market share through cooperation with large IPs.

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Speaker 5: For your third question about product innovation, so in this year I have traveled around the major overseas markets of Minnesota and I brought out an idea that we should focus on three strategic categories, that is big beauty, big IP, and big toys.

For your third questions about the product innovation. So in this year I have traveled around the major overseas market is still meaningful and I bring out brought out the idea that we should focus on three strategic a category that is big beauty peak.

And big poised for these three strategic categories, B and now contributing about 60% of overseas sales and hopefully we may see increased to more than 70% in the new future.

Speaker 5: For these three strategic categories, they are now contributing about 60% of overseas sales. And hopefully, we may see an increase to more than 70% in the near future.

Speaker 5: And for these three categories, I think there are three products that can represent them. That is blind box, plush toy, fragrance, and perfume.

And for these three categories I think there are street, a product SBU Provost soup story products can represent them that is buying books plush toy fragments and puffy inch. So our next step is that we want to.

Speaker 5: So our next step is that we want to cooperate with more famous IPs, more big IPs to enhance our ability in product development in these three areas. So hopefully, next year, you can expect our newer cooperation relationship with a lot of new IP partners. Among these three.

Cooperative with more famous IP is more you know.

A big Guy piece to it.

Hence our ability in your product development industry areas. So hopefully next year.

We expect we are all newer cooperation relationship with a lot of new IP partners among those three categories.

Speaker 5: PlushToy has always been one of our best sellers in overseas markets, and we shall continuously enhance our leadership position. For BlindBox, during the past several quarters, no matter in China or in overseas markets, it's increasing.

Plus corn is always being wrong, our bachelors shareowners in overseas markets and we show continuous enhance our leadership position.

Our inbox during the past several quarters no matter in China or in overseas markets.

It's increasing is fabulous.

Speaker 5: So our key strategy here in Blind Box is that by cooperating with these established IP licensors, we are getting market share.

Our our key strategy here in volume Bulks is that by cooperating with this established IP.

Licenses, we are gaining market share.

Speaker 5: And Michelle, this is Ethan. Let me answer your second question about the overseas store expansion.

And Michelle This is let me answer your second question about the overseas store expansion.

Speaker 5: Yes, we have mentioned, talked about the overseas store opening strategy. So for the first half of this year, because, you know, when we just reopened, when our people, our team come to overseas market, we realized that in some overseas market need to, you know, need to some, you know, upgrade of their operations. So we paused.

Yes.

We have mentioned talked about the overseas store opening strategy. So for the first half of this year because you know when.

When we just reopened where our people our team come to overseas market, we realized that in some overseas markets mid to mid.

To sum up upgrade of their operations. So we post a little bit of our store expansion plans Bob during the September quarter, we have been accelerating all of our store expansion in overseas markets and hopefully in the fourth quarter in the December quarter.

Speaker 5: a little bit of our store expansion plan, but during the past September quarter, we have been accelerating all our store expansion in overseas markets. And hopefully in the fourth quarter, in the December quarter,

Speaker 5: uh we are we will strive to achieve the 350 to 450 a year beginning plan and then next year hopefully hopefully

We will strive to achieve that through 52 450, our year beginning plan and then next year.

Hopefully hopefully.

Speaker 5: because the directly operated market has been a key driver not only in overseas business but also for the whole core municipal business. So we'll see.

Because directly operated market has been a key driver not only in overseas business, but also for the <unk>.

In our whole coal municipal business, So we don't see.

Speaker 5: strengths in regions like North America, including the U.S., including Canada. We also see Indonesia, you know, gaining strength in opening new stores because we are kind of, you know, one of the countries that is more into larger cities in this country.

Strange in.

In regions like North America, including the U S, including Canada, and we also see Indonesia beginning.

Getting strange in opening new stores, because we are kind of warm to penetrating more and larger cities.

Ms countries.

Speaker 5: So next year, in general, our big opportunities will lie in overseas directly-operated markets. But that doesn't mean our distributed markets will not open new stores. We still see a lot of chances in distributed markets because we have so many markets.

So next year in general our.

Our big opportunities will lie.

In overseas directly operated market, but that doesn't mean, our distributor market.

We're not open new stores, which you'll see a lot of chances and direct and distributor markets. Because we have so many markets. We have so manage distributor partners. So in next year we.

Speaker 7: We have so many distributed partners. So in next year, we, hopefully, we are very confident that we will open more stores in overseas market than this year. Thank you. Thank you, Yedong. Thank you, Yisa.

Hopefully we are very confident that we will open more stores in overseas market has been this year. Thank.

Thank you.

Uh huh.

Okay cool.

Thank you.

Speaker 2: So the next question is from the line of Lucy Yu from Bank of America, Marine Lynch. Line is open. Please go ahead.

So the next question is from the line of Lucy Yu from Bank of America Merrill Lynch line is open. Please go ahead.

Speaker 6: Thank you, Mr. Ye. Thank you, Ethan. I'm Lucy. I have a few questions. First, if you look at the income from overseas, the direct income has increased a lot. But if you look at the agent market, the income increase in this quarter is about 16%. So it can be understood that because there was less opening in the first half of the year, so the import may be slower. But considering that the third quarter is actually already in the process of opening up and accelerating, how do we consider the fourth quarter,

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Speaker 6: What will be the level of the share market increase in the fourth quarter?

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Speaker 6: The second question is about the profit margin. Can you tell us about the profit margin of various domestic products? In the future, how much room do you think Mao's profit margin has in China?

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Speaker 6: The third question is about the sales cost. If we look at the sales cost in the same or even ratio,

We want to supply due to the total sales of about <unk> <unk>.

Speaker 6: In fact, the rate is quite fast. As Dr. Wang just said, some of them are related to marketing costs, some of them are related to labor costs. Can you help us analyze in more detail how much of this is caused by one-time factors or temporary factors? Then look forward to the fourth quarter and the increase in sales costs next year. What should we consider? Thank you.

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Yes.

Speaker 6: I'll do the translation first. So the overseas distributor revenue this quarter growth is lagging behind the direct sales growth, partially because of the slower store opening in the first half of the year. So with the third quarter store expansion started to accelerate, how should we expect the growth in the fourth quarter for distributor market in the overseas market?

Uh huh.

Ill do the translation for us so.

Overseas distributor revenue this quarter growth is lagging behind the dark southwest partially because of the smaller for opening in the first half of the year. So with the third quarter ethanol expansion started to accelerate how should we expect the growth in the fourth quarter or distributor market.

In the overseas market.

Speaker 6: And secondly, it's about the productivity margin in China. Could you please give a little bit breakdown or by category, and how should we think about the GDP margin in China going forward? And lastly, it's on the selling expense, which has been increased a lot on both YOY and a Q on Q basis. Could you please elaborate the breakdown? Thank you.

And secondly is about the <unk>.

<unk> GP margin in China could you. Please given that breakdown by category and how should we think about GP margin in China going forward and lastly is on the selling expense, which has been increase in loss of both YY and accounting basis could you. Please elaborate that breakdown. Thank you.

Okay.

Speaker 5: This is Yixin. So for your first questions about the

This decision so for your first question was about the.

Speaker 5: uh the the upcoming uh gross or distributed market

The upcoming <unk>.

Gross saw distributor markets.

Speaker 5: I'd say hopefully we can see an improvement in the December quarter, in the December quarter.

I say hopefully we can see.

Improvements in net.

In the December quarter, and the December quarter.

Speaker 8: compared to the past two quarters.

Compared to the past.

Positive two quarters.

Speaker 8: But at this moment, I cannot comment too much because.

At this moment I cannot comment too much because.

Speaker 8: For the first half of this year, the distributed market as a whole, its net new stores was apparently fewer than our expectation. So we will wait and see how the distributed market, how the need from our distributors ramp up during the fourth quarter.

No for the first half of this year.

The distributor market as a whole where each net new stores for us probably.

Fewer than our expectation, so we will wait and see how the <unk>.

Distributed market how the no.

From our distributors ramp ups during the fourth quarter, but hopefully we can reasonably expect that each grow improve on a quarter over quarter basis.

Speaker 8: But hopefully, we can reasonably expect that it will improve on a quote-on-quote basis.

Speaker 5: And for the GP margin by categories, I'd say we now have more than 11 product categories, but we categorize them into three words. The first is big beauty, the second is big toys, and the third is big IPs, as we mentioned. So for the IP-related products, so it's...

For the GP margin by category. So I'd say, we now have more than 11 product categories, but we categorized them into <unk>.

First is big beauty, the second is victorious and the third as you know.

Peak IP as we mentioned so for the IP related products.

Speaker 8: a high single digit and average of the average of GP margin. So our average GP margin is like 60%. So for toys, it's the same case. It's just the same case with this IP product. And we have small parts of our products. We call them general merchandise.

At a high single digits and outreach.

Average <unk> margin so.

Average chicken margins like 60%, so for toys disengage with chefs and cases.

Yes.

This IP.

IP products and we have a small parts of our products, we call them merchant general merchandise.

Speaker 5: general merchandises, the products, including

General merchandise the products, including.

Speaker 5: home cleaning, seasonal food, snacks, stationery and gifts, some small electronics, and lifestyle products and so on. For these general merchandise products, it now accounts for about 40% of our total sales. And apparently, you just

You know home cleaning.

There's no food snacks stationery and gifts.

It's more electronics.

In our livestock products and so on.

<unk> for this.

General merchandise products, which now accounts for about 40% of our our total sales and apparently.

Speaker 5: gp margin, merchandise gp margin is lower than IP products and toys.

GP margin merchandize chicken margins lower than IP products and points and now we also have about 40% so Paul.

Speaker 5: And now we also have about 40% of our sales in China comes from Big Beauty.

Sales in China comes from EQT.

Big beauty.

Speaker 5: GP margin is low single digits, higher than general merchandise.

GP margin is.

Low single digits higher than general merchandise and our.

Speaker 5: and our big toys account for about 20% including blind box, including plush toys, including children's toys, and so on. So these three together account for about 20% of total sales and its GPU margin is low single digits, higher than the previous two categories.

Our Victoria's accounts for about 2%, including volume bulks, including <unk>, including children's toys and so all.

<unk>.

Together accounts for about 10% of total sales.

GP margin.

Low single digits higher than the previous two categories.

Speaker 5: and for your questions about the selling and distribution expenses. So in this quarter, S&D expenses was about 60% of our revenue.

For your questions about the <unk>.

Selling and distribution expenses so in this quarter.

<unk> expenses for about 16% of our revenue.

Speaker 5: The major part of our selling and distribution is staffing, which is about 5% of revenue, next by marketing expenses.

The major part of our selling on this distribution is stuffing, so which is about 5% of revenue next part by marketing expenses about a stream.

Speaker 5: about three percent and then depreciation another three percent the licensing expense at just about two to

And then depreciation another 3% and license expense.

About 2% to 3%.

Speaker 5: So the year-over-year increase in S&D expense was related to three business updates that is noticeable. The first one is our rapid growth of our directly operated markets. So we have increases in staffing, you know, in terms of, you know, store staffing and so on, and including hiring more people in overseas directly operated stores and bonus accrual.

So the year over year increase in essence, the expense was related to <unk> business up is that just no noticeable. The first trial is a rapid growth of our directly operated markets. So we have increasing staffing in terms of store staffing and so on and including.

Hiring more people eating overseas directory operated stores and the bonus accrual.

Speaker 5: and increase in depreciation and amortization related to these new directly operated stores.

An increase in depreciation and amortization related to the this new directly operated stores and the second is related to our brand upgrade so we invested a little bit more in branding, but its total controllable.

Speaker 5: And the second is related to our brand upgrade. So we invested a little bit more in branding, but it's total controllable.

Speaker 5: And the third is our IP offering, so it's with IP licensing expenses.

And the third is our IP offering.

With IP licensing expenses.

Speaker 5: This licensing expense, as I said, is more variable and it will increase with the increase of our IP sales.

This licensing expense as I said, it's more of a ratable and it will increase with the increase of our IP Soc. So going forward. If you look at the next few quarters as we open more direct to stores in overseas some expenses will increase such as.

Speaker 5: So going forward, if you look at the next few quarters, as we open more direct stores in overseas, some expenses will increase, such as staffing, such as depreciation of, you know, our OU in PPE and so on. But in general,

Stopping such as depressed station or no.

Or are you in PPE and so on but in general.

Speaker 5: As we promised, we are confident that the total S&D expenses is controllable because, in overall, we are still enjoying a significant operating leverage.

As we promised we are confident that the total ash and expenses is controllable because in overall, we asked during enjoying a significant operating leverage.

So thank you.

<unk>.

Thank you.

Speaker 2: So the next question is from the lines of Samuel Wong from UBS. Line is open. Please go ahead.

So the next question is from the lines of Samuel Wong from UBS. Your line is open. Please go ahead.

Speaker 9: Thank you for the opportunity to ask questions. Congratulations to the company for achieving such a good performance in a volatile market. My first question is about our American business. I don't know if it's convenient for our management team to update investors about the profitability situation in the 9.30 quarter of September in the United States and how to improve some of the future profitability plans, including some strategic issues for some expansion plans next year.

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Speaker 9: This is my first question. My second question is about TopTrick.

The events, notably our convention Nash going top toy.

Speaker 9: This year, I don't know what is the profit target of TopToy. And I see that the free brand ratio of TopToy has dropped in the 9.30 quarter. And I see that we are cooperating with free brand companies like WarToy. So I don't know if our company has made some adjustments to the strategy of free IP.

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Speaker 9: So I will translate briefly on my questions. My first question is regarding U.S. markets. So could you update on the U.S. markets profitability for September quarter and also introduce about the strategies how to improve in the future and also the store opening plans next year. And then my second question is regarding TopToy. What's the management's target on profitability this year for TopToy business?

So I'll translate briefly on my questions. My first question is regarding U S markets.

So could you update on the U S market's profitability for September quarter, and also introduce about those strategies how to improve in the future and also the store opening plans next year.

And then my second question is regarding top toy.

What's the management's target on profitability this year for top toy business and also whats the strategies going forward I saw that in September quarter the owned.

Speaker 9: And also, what's the strategies going forward? I saw that in September quarter, the phone brands mix has been a little bit lower than June quarter. Also, I saw cooperation with other brands like 52Toys. So, is there any strategy changes on self-developed IP percentage point in the future? So, thank you. Xièxiè guàn y?c?ng.

Owned brands.

Mix has been a little bit lower than June quarter also I saw cooperation with other brands like 52 toys.

So is there any strategy changes on <unk>.

Self developed IP.

I'll just point in the future.

So thank you and physical anytime.

Somehow this decision.

Speaker 5: So for your first question about the U.S. business, I would say everything is evolving very fast and is very encouraging. For example...

So for your first question about the U S business I would say is everything is evolving very fast and is very encouraging for example.

Speaker 5: In the September quarter, we saw GMV in this market increased by more than 180% on a year-over-year basis. And the best part, personally, I think that it's accelerating from 120% year-over-year growth from the June quarter.

In the September quarter, we saw Jim the English markets increased by more than 108% on a year over year basis and.

The best part of personally I think that it's accelerating from 120% year over year grows from the June quarter.

Speaker 5: And entering in the hottest season for the past several weeks, we still see this market maintain this triple-digit growth on a year-to-year basis. So we can expect a fruitful hottest season this year in the U.S. And we also just celebrated the 100th new stores in the U.S.

And entering in the holiday season.

The past.

Several weeks, we still see this market maintained triple digits growth on a year over year basis. So.

We can expect a fruitful harvest season this year in the U S and we also justice calibrated the weyerhaeuser hundreds from new stores in.

In the U S market was next year, although we are still in the making internally and internally, we're making plans and budgets for next year, but we do believe that the major driver of the overseas business will come from DTC market and the DTC market major driver will be.

Speaker 5: For next year, although we are still making plans and budgets for next year, but

Speaker 5: We do believe that the major driver of the overseas business will come from DTC market and the DTC market's major driver will be in North American market, including the U.S. market. And we also include the Canada market here. It's more like, you know, U.S. market one year ago. So it's in the, in the door of ramping up and everything is very promising.

In North American market, including the U S market and we also incur.

Includes the Canada.

Canada market here.

More like the U S market one year ago. So it's in the in the door all ramping up and everything is very promising.

Speaker 5: And for top toy, to be frank, last year, you know, top toy, you know, it's lost, it was lost making in CY22, right? If you can remember, it's, it's net lock margin is nearly about, you know, more than 20%. So for

And for top point.

To be Frank last year.

Top toy.

No.

It was loss, making in C Y tended to Ray if you can remember it.

On the <unk> margin is nearly about.

More than 20% so far this year.

Speaker 5: uh i'll say top toy is hopefully it will close very close to breakeven to be breakeven

I would say.

Top toy hopefully will close very close to breakeven to be breakeven.

Speaker 5: or significantly reduce its net loss status.

All in all the significant completely reduces net loss status.

Speaker 5: So if you look at CY23, as Misty just mentioned in his prepared remarks, TAPTOE in the past three years has become a unicorn with annual sales of 1 billion RMB.

So if you look at <unk> as Mr. You just mentioned in his prepared remarks, some point in the past three years has become.

No.

Uh huh.

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Speaker 5: So increasing by nearly 50% compared to last year. And if you look at the bottom line, hopefully the net loss for top 40 this year will be like 1% or 2%, something like that.

So increasing by nearly 50% compared to last year and if you look at the bottom line hopefully.

The net loss the net loss for four top 40, this year will be like.

One points or two 1% or 2% something like that.

Speaker 5: And you are right that in the September quarter, the exclusive products of Top Toys decreased a little bit.

And Youre right that in the September quarter, the exclusive products top toy decreased a little bit when we talk about exclusive product top toy with women aren't you know.

Speaker 5: When we talk about exclusive products of Top Toys, we mean our in-house-designed China bricks or our

Our in house.

Designed designed to China rigs all you know.

Our.

Speaker 5: in-house developed, blind box and so on. We are in the middle way in building an internal designer team and the product manager team and so on. So it takes time for this whole team to get mature, to get more connected. So we have enough patience to wait this business to get more mature.

Our in house developed.

Applying box.

And so we have.

We are in the middle way in building, our internal design team and the product.

Project product management team and so on so it takes time for this whole team too.

Debt mature to get more connected so we have enough patients to show to weight. This this business to get more mature.

Speaker 5: and we do not have any adjustment in terms of our self-branded strategy in TopToy.

And we do not have any adjustments in terms of hours.

<unk> brand data strategy and top toy.

Speaker 8: In the next couple of quarters, we are planning to launch more exclusive products. Thank you.

In the next couple of quarters, we are planning to launch more no.

Exclusive products. Thank you.

Yeah.

Speaker 2: This next question is from the line of Anne Ling from Jaffray. Line is open. Please go ahead.

Next question is from the lineup and Ling from Jefferies. Your line is open. Please go ahead hi. Thank you. Thank you management team sound well.

Speaker 6: Hi, thank you. Thank you, management team. First, I would like to know if there is any additional growth. Second, I would like to know if there is any division in the direct sales market. How much sales are coming from our direct sales store? How much sales are coming from our direct sales market? Can you tell us about this? Third, I would like to know if there is any division in the domestic and foreign markets. I would like to know if there is any division in the domestic and foreign markets. I would like to know if there is any division in the domestic and foreign markets. I would like to know if there is any division in the domestic and foreign markets.

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Yes.

So I'll translate in English first the first question is on the.

Occ's market.

If we are looking at the offices of direct operates that market are there any additional markets that we have for this quarter.

And like you know can we also alright.

Alright.

<unk>.

Provides a breakdown in terms of like the same day direct operating markets.

What is the sales mix between.

The franchise sales are wholesale sales versus the direct operated store shelves.

Speaker 10: Secondly, on the operating margin side, is there any granular trend in terms of how this quarter performs for mainland China's OP margin versus the overseas market?

Secondly is on the operating margin side is.

Is that any like a gradual trend in terms of like the house this quarter performed for mainland China mainland China's Ob module versus the.

The overseas market and then my last question is on the year 2024 calendar year Tradeshows in touch of the Celsis Salt Lasalle Bristol Celgene, what should what sort of like a broke rate we should be expecting them. Given the fact that you know we were like retail like industrial opening more stores. Thank you.

Speaker 10: And then my last question is on the year 2024 calendar year, 24th, in terms of the sales to store essential sales, what sort of growth rate we should be expecting given the fact that we're likely to still opening more stores? Thank you.

Thank you Ann this is vision.

Speaker 5: Thank you, Anne. This is Li-Hsuan. So for your first questions about the BTC market, is there any new members? I've seen no in the past two quarters.

So for your first question is about the DTC market is there any new members I've seen in the past two quarters. So there is no re class between the distributor markets into our DTC markets in the past one quarter or two.

Speaker 5: So there is no reclass between the distributor markets into our DTC market in the past one quarter or two.

Speaker 11: So the 8% year-to-year growth.

So the 8% year over year gross.

Speaker 5: 80% year-over-year growth you have seen in this quarter was substantially all organic growth. Of course, in this year, we have some small markets such as Hong Kong, China reclassed from the distributor market to our DTC market, but its revenue contribution is insignificant. But going forward,

8% year over year growth. So you have seen in this quarter was substantially all organic growth of course in this year, we have some small markets such as Hong Kong, China request from <unk>.

The distributor market to our DTC market, but its revenue.

Contribution has been significant but going forward as we've talked a lot right in general we believe if we want to penetrate more and do battery in overseas markets, we should enroll more into local local markets. So all of the ways to turn them into direct.

Speaker 11: As we talked a lot, right, in general, we believe if we want to penetrate more and do better in overseas markets, we should involve more into local markets. So one of the ways to turn them into direct operating market, the other is to invest in them or get ourselves more involved into their operation decisions. So I...

The operating market, the others to invest in them or get ourselves more involved in the operation decisions.

I would say.

Speaker 11: I'm not surprised if we are going to see more distributed markets turning to DHC market in the upcoming few quarters.

I'm not surprised you.

If we are going to see more distributor markets.

Turning to teach the market in the upcoming few quarters.

Speaker 11: and for the revenue contribution of our directly operated stores in the overseas market.

Yeah.

And therefore, the revenue contribution of our direct directly operated stores in overseas market I'll say.

Speaker 5: now we have about 700 stores in our directly operating markets. Among them, about 200 stores are directly operated. So considering the average store performance, there is no such significant difference. You can calculate the contributions about 60%. We do not have exact numbers. That's my rough estimate.

Now we have about 700 stores in our directly operated markets among them about 200 stores our directly operated so.

Considering the average store performances.

No.

Such significant difference so you can calculate that.

But the contribution is about 6%, we do not have the exact number but that's my rough rough estimates and for the.

Speaker 5: open margin of overseas market as the

Ah Okay margin of overseas market I assume.

Speaker 11: investors' big concentration is for our overseas direct operating markets. I'd say its margin profile has been improving in this quarter. So in this quarter, the OP margin for our BTC market, it was mid-10.

Investors.

Big Big.

Big concentration is for our overseas direct operated markets I see.

Its margin profile has been improving in this quarter. So in this quarter the op margin for our DTC market. It was mid teens. So on <unk> level, so compared to last years, one year ago, which was just breakeven so its a significant improvement.

Speaker 11: so on OP level. So compared to last year, one year ago, it was just breakeven. So it's a significant improvement. And compared to last quarter, so it increased by low single digits.

And compared to last quarter, so it increased by low single digits.

Speaker 5: on a quote-unquote basis. And in the long term, I think it's too early at this moment to decide to project the OP margin of our direct model.

Quarter over quarter basis.

And then long term I think it's too early at this moment to decide to project the op margin.

Our direct model.

Speaker 11: So it's all dependent on our store model in the DTC market. I.e. if we adopt more franchisee model or if we adopt more directly operating model. So it's dually to project.

So it's all dependent on our store model.

The PTC market.

If we adopt more franchisee model.

Got more directly operating model. So it's too early to project.

Speaker 5: And for the fourth question about the same store sales growth in next year in China, I would say

And for the first question about the same store sales growth next.

Next year in China.

I would say.

Speaker 5: I'd say, as we answer Michelle's question, in the long term, our target should be maintaining both store network expansion and reasonable same-store sales. So we will strive to achieve that goal. Thank you. Okay, thank you. Thank you.

I see.

As a as we answered.

Answered Michels question in long term our target should be.

Turning Bose.

Don't know broke expansion and reasonable same store sales. So we're going to strive to achieve that goal.

Thank you.

Okay. Thank you. Thank you.

Speaker 2: So now the conference call has come to an end. Thank you all for joining our call today. We look forward to seeing you in the next quarter. Have a nice day and goodbye.

Now the conference costs come through and then thank you all for joining our call today, we look forward to seeing you in the next quarter of a nice day and goodbye.

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