Welcome to Meitu's 2025 Interim Results Presentation. We have English simultaneous interpreting. If you want to listen to it, please click the button below the Zoom "More Interpretation" and then select the English channel. The management present today includes the Founder, Chairman of the Board, and the CEO, Mr. Wu Xinhong, CFO, and Company Secretary, Mr. Yan Jinliang. We warmly remind you that our speech may include some forward-looking statements. The risky factors we cannot control may lead to a difference from our statements. For online participants, please rename with your real name and affiliation name. In the Q&A session, online participants can question via audio or text. For those onsite, please inform your name and affiliation before you speak your questions. Next, please welcome Mr. Wu Xinhong to share the development of the company. Thank you all for joining us today. Under the Productivity and Globalization Strategy and the subscription-based business model, we have achieved growth in both user scale and profitability during the first half of 2025. Financially, in the first half, our total revenue is RMB 1.82 billion, a year-on-year growth of 12.3%, among which our photo, video, and design products segment grew 45.2% year-on-year to RMB 1.35 billion, making it our largest revenue contribution business. The overall gross profit increased by 27.3% because the operating expenses are lower than gross profit expenses, so the adjusted net profit attributable to owners of the company reached RMB 470 million, a year-on-year increase of 71.3%. Operationally, our MAU of June 2025 grew 8.5% to 280 million. Those outside mainland China reached 98 million, growing even faster at 15.3%. From the users' needs and AI technology, we launched several hot functions. For example, the AI Wardrobe in February made BeautyCam top iOS free charge across Southeast Asia, while AI Flash in June gained popularity across Asia and Europe, reaching approximately 1.9 million users in its first month globally. At the same time, AI improved our core functions significantly, increasing users' willingness to pay. By the end of June this year, our overall subscription rate reached 5.5%. We consider AI not only enhancing our product capability and monetization, but also unlocking a brand new interactive experience. Transformation in user interaction has often been the first driving technological innovation. For example, the rise of smartphones began with the shift from buttons to touch screens. As AI technologies become more mature, we think it's time to redefine user interaction. So on July 14, we launched RoboNeo, our AI agent dedicated to the photo and video industry. It is a multimodal AI assistant that combines computer vision, natural language processing, and generative AI. It aims to be a smart company for users. No matter if you need a logo, a live poster, or an interior design sketch, you just need to type some words, and you can get high-quality video or images. It even has aesthetic judgment, as good as designers. It can evaluate balance, audience relevance, and other factors, and can propose improvements. You can refine outputs from text prompts or reference images, or use Meitu's existing tools for further fine-tuning. Although RoboNeo was initially positioned as a productivity tool, many users have already discovered its use in daily life. For example, they turn their daily photos into different memes and spread them on social media. So without leveraging any of our existing products, RoboNeo has surpassed 1 million MAUs, while topping the category charts in app stores across China, Vietnam, and Spain. Looking ahead, RoboNeo will not only be a standalone product. We plan to integrate its core function into other products to further empower vertical use cases. Additionally, I would like to share a few updates on our strategic collaboration with Alibaba. In the era of large models, we will leverage Alibaba's Tongyi Multimodel and Wanxiang Video Model to enhance our vertical-specific training, further refining product capabilities, such as the new version of live emojis. They are rich in details and more blended in colors. Alibaba also provides us with specialized support for training frameworks, data processing, and parameter selection, helping us to shorten the iteration cycles and deliver better results. As for e-commerce, we advance in two key areas. First, we want to launch an AI trial feature, combining Meitu's AI capability and the apparel resources on Alibaba to create a better online shopping experience. Second, we will integrate some DesignKit functions into AI product image into Taobao and Tmall's merchant portal, helping sellers to discover and experience our tools and capabilities. For cloud services, RoboNeo's computing needs continue to increase. Alibaba Cloud can provide a responsive and sample computing supply to ensure stability. Besides, our model coordination server has been on Alibaba's Bailian platform. Alibaba is also assisting with promoting our image and video editing. Now, I'll give Gary the floor to talk about the detailed business and financial analysis. Thank you, Xinhong. The first half of our total revenue reached RMB 1.82 billion, a year-on-year growth of 12.3%. It's similarly moderate, but we initially scaled down our non-core business solutions for the beauty industry. If we look at the biggest contributing segment, PVD products, it reached RMB 1.35 billion, a year-on-year growth of 45.2%. Basically, from the rise of paying subscribers, as of June 30, 2025, the total number increased to 15.4 million, a year-on-year increase of 42%. For products for leisure, the total number is 13.6 million, a year-on-year growth of 39%. With generative AI technologies, we can efficiently and comprehensively tackle pain points that cannot be solved by traditional tools, further increasing users' willingness to subscribe. For example, the AI Flash launched in June. A backlight lets portrait photos. Traditional users may just adjust the brightness or contrast, which could often lead to overexposure. Advanced users may use free tools to enhance based on their understanding of light and shadows, but the process is still time-consuming and requires a certain level of artistic background. Now, with AI Flash, we leverage large models' understanding of photos to simulate realistic interactions based on photos' elements, generating authentic effects. We can see the AI features can help for both beginner users and advanced users to drive their subscription. For productivity tools, the paying subscribers is 1.8 million, a year-on-year increase of 69%. Our talking video production, Kaipai, achieved 330% year-on-year growth. His success underscores the effectiveness of our strategy in vertical use cases, and it is now customized to industries like insurance, education, and training skincare influencers, so we can help our users more targetedly. Besides, the DesignKit subscribers reached 56% year-on-year growth. Besides the AI features, our detailed operation also helped our retention. The advertising segment revenue from this part increased 5% to RMB 434 million, primarily from programmatic advertising. We are still cautiously optimistic about this part. As we mentioned in the beginning, we contracted the solutions for the beauty industry segment on purpose, so it declined by 89% year-on-year to RMB 30.1 million. We want to focus more resources and energy to our core PVD segment. From the regional perspective, the part outside mainland China grew by 35.9%, outpacing mainland China. The revenue from outside mainland China accounted for 36.6% of our total revenue, showcasing our progress in globalization initiatives. For the gross profit, total reached RMB 1.34 billion, representing a year-on-year increase of 27.3%. It is 8.7% higher than last year. It is because of the change of our revenue mix or structure. The high-rate PVD continues to increase while the solutions part continues to contract. The overall operating expenses reached RMB 290 million, grew at 43.1%. This ratio is 3.5% lower, higher than last year, but it's because the solutions for beauty industries are meaningful revenue, which would continue to decrease because we shift our focus. I suggest we can analyze the selling and the marketing expenses at a percentage of combined revenue from PVD products and advertising segments only. The proportion of selling and marketing expenses was 16.4%, an increase of 1.2%. Among these, the majority of promotional costs are spent on products for leisure outside mainland China, followed by productivity tools and products for leisure in mainland China. The R&D expenses were RMB 451 million in the first half, representing an increase of 6.1%. The relatively low-scale increase was primarily due to lower expenses related to foundational model training, a result from two factors. First, we largely completed the training of our large vision model. Second, we have adopted a model container strategy, leveraging open-source models, third-party APIs, and self-developed vertical models to provide optimal experiences to users. We can avoid dedicating too much resources into foundational model training. If excluding costs related to foundational model training, overall R&D expenses would have increased 14.4% year-on-year due to investment in talents. Administrative expenses grew by 23.2% to approximately RMB 220 million. This was primarily due to increasing share awards-related expenses and additional grants to better align employee incentives. As previously mentioned, the growing contribution of our high gross margin, photo, video, and design products segment led to expansion in our overall gross profit margin. Meanwhile, operating expenses grew slower than gross margin, further increasing our operating leverage and improving overall profitability. Our adjusted net profit attributable to owners was approximately RMB 470 million, representing a year-on-year increase of 71.3%. Taking into account certain non-cash and non-operating items, the impact is that our IFRS net profit attributable to owners of the company grew by 30.8% year-on-year to approximately RMB 400 million. Our Chairman wants to enlarge the dividend. We used to divide it annually, but this time we do it twice a year. We will maintain the same ratio, but we do it in the middle of the year, and the ratio is consistent. Next, we will have a special conference discussing this. Looking ahead, we will stay focused on productivity and globalization and continue to embrace AI technology to deliver more extreme experiences and accelerate our own growth. That concludes our presentation. We can now begin the Q&A session. Thank you all. Now we'll move into the Q&A session. The questioners onsite can raise their hand. Our staff will give you the microphone. For participants online, you can click the "Raise Your Hand" button. After you are unmuted, you can speak your questions. You can also text your questions in the chatting box to Meitu's QA assistant. We will read your questions aloud. For investors in the English room, you can also raise your hand. If you call in, please press the button "Ask the Risk and Want" and wait to be called. And please inform your name and affiliation before you speak your questions. Thank you. Now we move into the onsite QA session. The first question. I would like to note two questions. First, about the first half. We can see products for leisure. The AI brought so many users and profits. We recognize it and know the acceleration. We would like to know, will we would have more strategies for the second half and for the adjustment for the expectations for the whole year? Answers. For products for leisure, it is the base of our users. 17 years ago, until the release of the Meitu app, until today, it contributed to consistent profits and revenues. And we also discovered the productivity tools are phasing out the market. Our core products like the Meitu app, we can accurately touch the targeted users, thus lowering the cost for acquiring customers. So we have a relatively good channel advantage. This is not what we can see in the startups. Based on this conclusion, we will continue to invest in products for leisure. We will not overall transition to productivity tools. The second question. We would like to know, we collaborated with Alibaba. What is the update? Is it fitting our expectations, and when can we see some significant outcomes? Our collaboration with Alibaba is basically meeting our expectations. We just mentioned we developed for the last 17 years. Our products grew for a long term, and they regenerate. Our collaboration still takes a process. Not we just announce we can see something. We cannot witness immediately a large profit increase or user increase. Teams from two sides may build trust and find the match. I also mentioned in the speech, we collaborated in some foundational level. It is overall positive. Thank you. As for time, we don't have a clear judgment about the rise of users. We are not so sure about this. Considering our own products, we cannot even give out some expectations very accurately. We can only look into the overall situation. I believe it's good. Next question. I'm Lydia from Morgan Stanley. Our collaboration with Alibaba, what's the interaction with Tmall and Taobao? Would Alibaba take a part of the dividend? What about the productivity tools outside mainland China? About the MAU and the subscription rate, what are our further plans? Our AI Wardrobe collaboration with Alibaba uses Taobao's advantage in the garment sector. We followed the trend, the seasonal trend of Taobao, and recommended users with the best and most fashion styles and matches. Besides, we also have a similar AI Wardrobe function, but this new function can allow users to purchase directly because it's linked to the detail page of the end product. It can transition some profits. The dividend or the ratio, we didn't talk about it too much. Just a standard portal. In the future, I believe if we have quantity, we will see whether the business model can advance. For outside China, the productivity tools we can see. We mainly focus on Vmake. We are focusing on talking videos. The MAU outside mainland China is higher than that of mainland China. Our productivity tools outside China didn't transition a lot of profits, but if we refer to Kaipai in mainland China, it is quite high. I believe the cachability and the subscription rate outside mainland China is still very confident. Next question. With the generative artificial intelligence progressing, how to define the competition with the generative general AI companies and the factories? We collaborate more, match our advantages. Just mentioned by Gary, RoboNeo, it is fundamentally a model container, not only to Ali, Tongyi Qianwen, and Wanxiang. These basic models, we integrate our vertical trained models and other external models and the APIs from business models. We can see which works the best, which costs the lowest to make flexible adjustments. We widely collaborated with these AI companies. We can see it is gaining very good effects. We focus on what we are good at, the polishment for products and functions. We don't pour resources to something we are not good at, for example, training a foundational model. We also saw the technical companies and the applicational companies are different. For some companies focusing on models, they want to enter this industry, but they may be not that suitable. We're just making up each other's disadvantages. Next question. About the cost, you just mentioned our user growth is not definite. Our goal is not that accurate. How do we make the budget for R&D? Our marketing budget remains about 16% of the PVD products because every half a year, it will not expand this ratio. For a long term, if you tear apart the combination of our products, we have mainland China's productivity tools and that outside of mainland China. Their requirement for marketing expense is not the same. For those in China, we don't need too much additional marketing expenses. Why? I say we can maintain this ratio with higher subscription. We don't need marketing to drive it. It can release some resources for mainland China's productivity tools and those outside Chinese mainland. The ratio is overall fixed, but the detailed subject may be different. We don't do training for our foundational models. The left R&D expense goes to talents and also smaller training for smaller models. We just said if we take this part out, it is 14%. For the next three years, this ratio may be around 15% of the total revenue. We don't think it's necessary to increase talent to increase more staff. We focus on how to use AI to create better AI models. For example, in the R&D sector, if we want to make a new effect, 10 people to 20 or 30 people, two weeks. RoboNeo, just five minutes to create it, and it is online. You can choose to publicate, advertise it. We just equipped our past existing more than 100 capabilities in our apps. It can allow our internal designers or designers external to quickly do something to test it. This is revolutionary of the traditional makeup of the company. Next question. What is the business progress of RoboNeo? Now its subscription is for a day, RMB 12 without time limit, just for a day. What is your thought behind it, but not a monthly plan? It is established, released for more than a mile. What about the MAU and the revenue statistics? First, because this product is quite a rush, it is not that perfect. We just made a daily plan. By the end of August or the beginning of September, we will have a complete subscription or single purchase plan. Up to now, the MAU is more than 1 million. The total revenue? We are on the initial phase, so we didn't calculate this part separately. The overall outcome is very cheering up because we don't use any existing metrics to share traffics, and it is of zero budget initially, but it gained a million users now. Next question. Congratulations to strong performance. About video generating, how can we regard the future space for it and how to integrate with our existing tools? Will you have some plans for products in this regard? The video generating, we apply it in many Meitu products. For example, Wink Enhancer and Portrait Beautification. After that, it is behind it, it's generative AI. Just Kaipai mentioned by Gary also deploys tool and models to do it. RoboNeo, many users use it to do video generating. In Brazil, in Japan, they use it to make video. Omochi, another product. The video and the design are two aspects we will focus very much more on because it is based under the vertical PVD sector, but we will focus more on these two parts. Why? Our input into video grew faster. It ranked second in China's market. It is faster than the picture products. The cachability is still progressing, we can do some applications. Our input in the video products can also be used by image products. Indirectly, imaging products benefit from this part. Question. What is the model for video channel rating? Is it from the third party or self-developed? Our foundational model are from external. Basically, or accurately speaking, it is Tongyi Wanxiang by Alibaba. It is more about video and imaging. For Qianwen, it is multimodal and language. Based on this, we have many vertical models. We train very many of them because we don't need to invest a large number, but they can perform very well and efficiently. Besides these vertical models, we train expert models from the perspective of the expert. For example, Kaipai as a talking video tool. Can it be a director to help users? We train in this part. In the future, our productivity tools are likely to be equipped with an expert model. They are beyond most of us, our imagination. Next question about markets outside mainland China. The AI Flash is beyond the expectations of the market. What are our R&D of the new tools or products? Can it refer to the previous successful ones? Because some are very vertical and very good, very good performing. Do we refer to existing products and do we have methodologies or what plans do we have to promote better products? For outside mainland China, we have products for leisure and productivity tools. For the leisure part, we are closer to social media. We fit the need to make content or some underlying hot topics. This is the mainstream. We market with KOL as the base of our marketing. If we can grasp the needs very well and catch the hashtags, and we can see very good performance, we will continue to expand investments in this regard, including further cooperation and increased volume. For productivity, it is not that fancy. We will see very, very vertical scenarios and pinpoint. For the productivity tools outside mainland China, we retain the scale, not like Meitu app. It is equipped with many functions, but for outside mainland China productivity tools, we want to make it small but targeted, more vertical. I can share a previous one. For those shops, we provide tools for them to design the whole visual effects and designs. Maybe we don't have many shops, but if we look at globally, the small shops can transition to small companies. They can do it offline, but also online. Many needs are connected with each other. Thanks for the answer. An online question from Tencent Meeting. Still about the market outside mainland China. The Kaipai performs well. What about the difference? Is there a difference between in China or outside China? For example, the division, the European, American, and East Asian, and different divisions, do we have different plans for Kaipai? First, answers. We focus mainly on European and American markets. We have a new brand called WeMake. We do some distinctions. For those inside mainland China, they use mobile, but for those outside mainland China, they use it on the web, web browser. So we can see overseas users focus more on productivity because they use it on computers. For users of different regions, American users, they have very high requirements for subtitles. Not only it should be synced with what we really see, it should be quick and smooth, and they also have requirements for visual effects of subtitles. It is more professional, but for Asian users, still for subtitles, they may not require the real-time with more stylistic requirements, but not that professional. I think this is caused by cultural difference as well. For the editing part, the Euro, American markets, they do not have so much need for it. They do not do too fancy effects, but in Asia, they will use some effects from the shows, TV shows alike. Asian users underscore the first several seconds of the video. They will do very explosive statements or something, but for Euro, American users, they do not have to catch eyes for the first few seconds. Next question from Tencent Meeting. About the subscription rate, what about the 5.5%? What is 2B or 2C overseas or mainland China? Can we see more details? Which part is beyond expectations for the annual payment rate? What is the picture? For the first half, it slightly decreased than that of last year. What is the future trend or what we view it now? We reviewed this part in the report. For the products for leisure, it is around 5.3%. For productivity, it is 8%. Based on the figure, I think it is stable. It is the question of the mixed business functions. The leisure part accounts for a big part in China. It will decrease. It is just about the question of the mixed combination of our business or functions, the RPU value. Next question from Zoom, Karen from JetNet Global. We are unmuting you. You can start your question, Karen. Thank you, management, for taking my question. It has become apparent in the West that chat LLM apps such as ChatGPT are going to imminently monetize various forms of closed-loop e-commerce, either directly via transaction commissions or by advertising. Meitu seems to be in an interesting position to serve as an enabler of that in China through video and photo asset creation and management in a similar way that perhaps Shopify has done in the West. So if one were to believe that search-based e-commerce were to fragment in China, my question is, is Meitu open and willing to work with other e-commerce platforms? Should that happen? Is DesignKit aiming for a much broader set of merchants than just Alibaba merchants in the event that there is a fragmentation of search-based e-commerce perhaps to the LLM apps in China? I think the answer is yes. We are actually open to work with any e-commerce platforms. In fact, within the cooperation agreements with Alibaba, we have very specifically agreed that this is not going to be an exclusive cooperation. So if you look at the number of monthly active users, DesignKit has in China tens of millions of users. I think Alibaba is the estimate, Taobao and Tmall sellers are only 6 million- 7 million. We are already serving sellers from outside of Alibaba, Taobao, and Tmall. I think to your question relating to how we will work with these e-commerce platforms, we don't have a current plan to do that, what you are suggesting, which is very interesting. We'll keep our options open, but as long as it's something that is related to photo, video, that would be something we would want to watch. We do set our boundaries within the imaging and video sections. Next question from Tencent Meeting. From the perspective of investors, I vote Meitu in for several years. The highest market value can reach around more than RMB 100 billion. Are you confident for a short term or what's your plan and what do you think for market value? Answers. We never evaluated our market value and gave instructions based on it, but it doesn't mean we are not confident in our functions and business. Our philosophy is to make our products good, to build world-class products, to make the product capability drive the growth of users and revenue and profit. So all the stock price or market value is just a sign of we do our basic functions well. I cannot say we cannot reveal too much about it, but thank you for your support. Due to the time limit, the last one question. I would like to know from AI-oriented industry for overseas models, no matter large or small, they are generating at a faster pace. It is a bluesy, but we see fierce competitions. If we see from the industry barriers, for example, the data insight or community operation, these regards, they are core KPIs, or do you think it is more about winning all this? We see some vertical scenarios which just are coming, and then the tier second, tier third may be difficult to get in that path. Answers. We have competitions inside our company, not inside our company, but inside China. We also need to think for our overseas competitors. The generative AI products, what opportunities or challenges do they bring to Meitu? We also see the traditional workflow or even organizational structure may be challenged. We do some revolutions inside. We hope to be like other AI startups. We hope to be very streamlined and agile, high efficiency in human resources. Everyone in the team can be versatile. This is our organizational adjustment to make the organization more flat, reduce reports or authorization, or we can make the whole process for decision-making faster or smoother. We hope to act fast and be more compatible. We canceled the Meitu Image Festival held every year previously because it is not that functional, the core functional. We want to grasp the opportunity like AI agent. For competitiveness, I would like to mention some points. First, you just mentioned Meitu developed for 17 years. We constructed the 280 million MAU. This is a very strong market channel advantage. Our cost for acquiring customers is much lower than our counterparts. Besides our technical power, we know the competition of AI agent is fundamentally the engineering competition. So if you have scaled investment into engineering, I believe you are competitive. That's why we launch new projects and products so fast, because we made preparations for the last few years. We deploy our core functions into the MTP server for external and internal use and deliver. This is the engineered scaling. Next aspect, our insight into aesthetics. This may seem like emotional or ethereal, but I think it counts, it matters. Our slogan is to unite art and technology elegantly. We will transition it into the competitiveness of our apps in vertical scenarios. It is not about the order or rank. We need to really know the pain points of the users inside this vertical channel, no matter UI or experience, what are most satisfactory. The generative AI may not do their business this way. They want to find the biggest common points inside their users, but some valuable vertical scenarios are missed this way. So an interesting point is that if we do something, it's not targeted to any common user. They can say, "Oh, some model can do, ChatGPT can do, or some other models can do." But if you really ask those who need, they will say, "Meitu does better." It is to some extent they rank the order, but it is not because the order you came, it is because you know the pain points. Next question. Gary mentioned previously, a non-exclusive cooperation with Alibaba. We also heard our AI applications are based on at least Qwen and Wanxiang Model. So why among all these open-source models like DeepSeek and closed-source, why we chose at least models for applications? What's the reason behind it? Is there an agreement? Answers. If we see the big picture about the competition of AI, first, we must exclude those closed-source models. We just do API. We don't have many open-source models. For DeepSeek, very popular during the Chinese Spring Festival, compared with at least Qwen and Wanxiang, DeepSeek doesn't do multimodal. It can't generate video or image. So for us, it's basically impossible for us to use DeepSeek because verbal interactions, multimodal comprehension, and image creation, they are not separate. They are a whole, like RoboNeo. It interacts and it does something those can do. So we need a model to synthesize. Besides the scale for investment, Ali pays more than RMB 10 billion annually. This is a rare thing in open-source models, and it tops very often in the charts. Let alone we have or don't have an agreement on this part, it's an ideal option, but we can cooperate deeper. We can do detailed and specialized training. They can open-source the latest version to us because we know the open-source version is usually later than their advanced ones. So we are more competitive. About the concept of model container, we also contain other models outside of Alibaba. For different effects, we may use different models. So it's basically about how we understand which model fits the best scenario. We just introduce it into our own model container, and we let them compete. The best ones will be selected, and used by users. We also gained valuable experience from this process. Thanks to questions from investors and analysts. If you want to know more about the commonly used results, you can contact our team. The presentation for investors ends here. We will not provide further simultaneous interpreting. Thank you for your support. Hope you can focus and support Meitu in the future.