Meitu, Inc. ($1357)

Good afternoon. Welcome to the Meitu 2025 Annual Results Presentation. We provide English simultaneous interpretation. If you'd like to listen to the interpretation, please log in through Zoom and click the Interpretation icon, select English channel. If you do not click on this channel, you will not hear the simultaneous interpretation. Today, the leaders participating include Mr. Xinhong Wu, Founder, Chairman and CEO of Meitu,

Greetings.

CFO and Company Secretary of Meitu, Mr. Gary Ngan; CPO and President of the Imaging Products Division, Mr. Chen Jianyi. A warm reminder, we include predictive statements, and many risk factors that we may not control may influence these predictive statements. Online participants, you need to rename and add your real name and affiliation name. Before giving your question during the Q&A session, please first clarify your affiliation and your real name. You may also provide questions through audio or text in the comment section. Firstly, we provide information about our company.

Investors, analysts and audiences, thank you for your participation. Before we formally start I would like to extend about the announcement yesterday. On behalf of the company, we found that some part of the results were published on social media. We investigated immediately after ensuring we found there may be some misoperations and functions in the process and some information was published on the account, and the responsible person deleted immediately. We took two effective matters. First, we deleted all content on the platform, and we applied for the suspension in the Hong Kong Stock Exchange with more relative information was just shortly spread on March 25, and we ensure the smooth function on 26. We feel sorry for all the inconveniences caused to our investors. Thank you all for joining today's earnings conference. Over the past few months, as generative AI technology has been evolving rapidly, there are various debates around the future of the AI industry. As you may have seen in the opening video through the QR code, [indiscernible] made the fastest moving trains, for example, from single model approach to model-agnostic strategy from AI-based apps to AI agents, from subscription to consuming tokens, from the form of our team, from mature teams to AI-driven teams. We reached a strong momentum. The adjusted net profit attributable to owners of the company grew 64.7% year-over-year to RMB 907 million, exceeding our latest thoughts on the AI applications. First, Meitu is an AI application company focused on the photo and video industry. Based on AI capabilities and efficiency-driven organization, we focus on high-value verticals and build industry-specific AI agent teams to help address users' end-to-end content creation needs, delivering high-quality output. In each specific use case, our AI agent teams are comprised of multiple agents with distinct worlds. They are responsible for efficiently executing different standardized repetitive text, users can focus on creative ideation and decision-making. The core advantage of the AI agent teams lies in their clear division of responsibilities and targeted training, breakdown into multiple stages and assign corresponding roles and responsibilities to each agent so we can ensure the teams perform better. Besides combining years of user insights, accumulated industry know-how and the ability to flexibly deploy models, we constantly translate AI technology into reliable product capability. Additionally, different models have different strengths. There is not a model that can cover in all the areas. Some are suited for e-commerce styles. Merchant companies combining different models, it will be more common for companies to deploy models. We will focus on more flexible and global things centered around that. We will build AI teams meeting industry needs. Now let me invite our Chief Product Officer, Xiao Bai, to elaborate on our AI agent teams.

Thank you, Xinhong. I will share our thoughts, mainly how we plan to build the AI agent teams going forward. Firstly, for e-commerce-related content creation, we've been thinking for a long time. We think that we're not limited to e-commerce providers providing integrated method, but rather helping the suppliers to deliver more tangible results. According to what we observed, many of the e-commerce agents can design well-designed photos and images, but that's it. Many e-commerce companies lack the sufficient judgments of market and business eventually causing the resulting product sales are often falling short of expectations. For instance, on Amazon, a product such as water bottles experience intense competition. For experienced e-commerce providers, we need to avoid the oversaturated competition of product background, such as home and living. Instead, they will pivot to fitness, to outdoor and other high-growth potential sectors. So based on this know-how, we designed building an e-commerce design specific agent teams. And this new agent team, aside from the original experts that have a good command in design, we have additional roles, such as for the verticals of e-commerce, we have market and data analysts. We have user research experts, copywriters, designers, et cetera, delivering high-quality visual and also establishing a more refined social media commerce video expert team. For instance, the AI marketing strategist, they can serve as Creative Director, helping users to know what to capture more to market. Or we can have AI commercial directors responsible for the storyboard coordination, helping users to address how to present the visuals. We may also have AI audio visual model experts acting as photographers, lighting specialists, actors, et cetera, helping users with their contents and their materials. Eventually, we have the AI smart editor compiling all of the editing and the distribution and the post production methods, helping the users to package and publish their products. So what we aim to do for the e-commerce is to transform the visually appealing images to images that drive sales and to commerce videos that boost conversion rates. The DesignKit new agent teams aim to help e-commerce service providers drive and achieve real business results. In addition, aside from DesignKit, for Kaipai, for the talking videos, we also hope to create high conversion rate video content. Based on this goal, we divided the 3 AI agent teams to assist with our eventual goal. For instance, we have the AI operations team. It helps with the trending topic research, account diagnostics and also content strategies. We also have the AI filming team helping with the teleprompter [indiscernible] the AI, et cetera. We also have AI team helping with the rough eventual cuts and editing. The entire workflow is coordinated by the AI director agents. Users only need to submit their industry know-how and their demands, and then the AI agent teams will take care of the rest of their work. For example, when an insurance broker asks for a AI-generated video about pensions insurance. Then once receiving this submission, the AI director agent will automatically break down the information and assign it to the corresponding teams, as mentioned before. And within a short time period, it can provide a ready-to-publish marketing video, and it can even generate social media covers and prompts alongside. So for small and medium-sized merchants, the advantage of this AI operations team is a 24/7 content providing team. And we aim for niche sectors, for instance, insurance, beauty solutions, local services, sectors that are heavily reliant on social content for customer acquisition. This not only lowers production costs, but also provides a reliable AI team that can have a high conversion rate so we can help the suppliers to focus more on creative judgment and business operations. The production [indiscernible] directions that we have been doing, we have some progress over the past couple of months. For instance, within DesignKit, we already deployed our 4 agents, the e-commerce trial poster and video agents. From December 2025, the agent function has become a primary driver of our revenue growth on both web and app portals. Our agent has a stable output quality. For instance, DesignKit, web-based DesignKit as e-commerce agent roughly has a 50% save rate, where users save at least 1 output per 2 output. Now furthermore, once the agent capabilities are integrated into Kaipai more. user experience continues to improve. Referring to the latest figures, the penetration rate of Kaipai agents have increased to approximately 11%. At the same time, the RoboNeo, from its official launch to current, it has topped the app stores across 6 countries and regions, demonstrating our globalization potential. Last but not least, as you may have noticed, we recently launched the main tools [ CRI ] capabilities on our AI open platforms. Meanwhile, the first group of Meitu AI skills have been officially integrated into the open cloud ecosystem, covering personal and commercial use cases in the global photo and video industry. We focus on the core skills. We hope we could have mature technologies around 8 core capabilities, and we transform them into reusable skills. Based on the [ CloudHub ] and [ ACI ], we can use Meitu AI's capabilities for photo and video production. We believe as open cloud community continues to grow, in the future, users do not need to switch between products. They simply need to have a single command and complete end-to-end creation. This can substantially increase productivity. Now I hand over to Gary to talk about the 2025 financial condition.

Thank you, Xinhong and Xiao Bai. In 2025 [indiscernible] the two cross of productivity and globalization. Our operational performance continued to improve with sustained user growth. As of December 2025, over monthly active users grew 3.8% year-on-year to 276 million. Paying subscribers grew 34.1% year-over-year to 16.91 million. Over the past year, we continue to deepen the productivity strategy. As of December last year, paying subscribers in productivity tools grew 67.4% year-on-year, primarily driven by DesignKit and Kaipai, among them. Paying subscribers from international markets doubled, benefiting from the rapid growth of Vmake. Subscription rate for productivity tools reached 9%, an increase of 3.1 percentage points from December 2024. This further validates that with the continual improvement of our products, the out quality, users' willingness to pay is also increasing. At the same time, the increase in subscription rate for productivity tools will help drive the increased proportion of high ARPU paying subscribers, providing support for our future revenue growth. On the globalization strategy front, 2025 was a year of significant milestones. Our MAU from international markets continue to grow, primarily driven by products for later. In the second half of 2025, we launched several global viral features, including 3D figurine, AI group photo, and AI snow. Among them, the AI group photo feature helped Meitu app MAU reach a record high and attracted over 3 million new users from the European markets. It also helped Meitu app top the U.S. category chart for the first time. Driven by these features collectively, Meitu app topped the overall app store charts in 52 countries and regions, and the category charge in over 110 countries and regions. With the rollout globally for products, we observed in the second half of last year paying subscribers in the international markets experience accelerating growth with the majority of new subscribers coming from high ARPU regions with mature subscription habits such as Europe, Americas and East Asia. Recently, in the top 50 global GenAI mobile apps list published by a16z, we ranked first in the photo video in this high end category with 4 apps on the list, further solidifying our position as a globally leading AI photo and video application company. Looking ahead, we will continue strengthen international markets. At the same time, we'll continue to launch highly effective features and optimize recommendation mechanisms, further enhancing users' stickiness. As a result, the oversubscription rate increased to 6.1% in 2025. Currently, the improvement in subscription rate remains our core growth drivers. Besides with the deepening of our two core strategies, ARPU growth will also gradually become an important growth engine in the coming years. Before I begin sharing the company's financial results, I would like to note that in November 2025, we have officially discontinued the cosmetic supply chain management services, previously under the solutions for beauty industry. On the IFRS, this business has been classified as a discontinued operation. Therefore, unless otherwise stated, all financial figures and the year-over-year comparisons for FY 2025 presented hereafter are on continuing operation basis. In 2025, overall revenue grew by 28.8% year-on-year to RMB 3.86 billion, first largest revenue. Our core business of photo, video and design products grew by 41.6% year-over-year to RMB 2.95 billion. Looking at performance by market. Revenue from international markets grew by 37.4% year-over-year in 2025, outpacing growth rate in Mainland China. Revenue from international markets accounted for 38% of total in 2025, an increase of 2 percentage points compared with the same period last year. From the product perspective, in 2025, revenue from products for leisure and productivity tools accounted for 81% and 19% overall photo video and design products revenue, respectively, Advertising next. In 2025, revenue from this part was RMB 840 million, largely in line with 2024. We continue to remain cautiously optimistic about this business, although it is worth noticing that we have pioneered and empowered an advertising formats in brand advertisements, collaborating with international brands such as McDonald's, Visa. This creative solutions have effectively enhanced the social interaction between users and advertisers. Last, revenue from others, which are mainly legacy and noncore businesses, was approximately RMB 62.11 million in 2025. Moving to the cost side. The total cost in 2025 was are 1.02 billion, a year-on-year increase of 42%. Specifically, the largest cost item was revenue-sharing fee to payment channels. The cost increase increases in line with revenue growth from photo, video and design products, rising 43.5% year-on-year, approximately are 620 million. The second largest cost was computing power and cloud-related costs, growing 16.4% year-on-year to RMB 230 million. The third is third-party API costs accounted only middle single digit of total cost of sales because we were able to use the vertical-specific models into open source models to fulfill the vast majority of our user demands, reflecting our in-house AI imaging companies. For gross profit because we discontinued the low-margin cosmetic supply chain management business in 2025, the financial data in 2024 has been restated accordingly. Gross profit in 2025 was RMB 2.84 billion, a year-on-year increase of 24.6%, corresponding to a gross margin of 73.6%. The restated gross margin for 2024 was 76%. On a like-for-like basis, the gross margin decreased slightly primarily due to two factors: one, the change in the revenue mix. Because the advertisement with high gross margins have decreased slightly and because to support our core imaging businesses and design businesses have continued to grow, the computing and API related costs have increased compared to 2024. However, as mentioned earlier, thanks to our model-agnostic strategy and proprietary vertical model capabilities, the gross margin of our core business remains healthy and stable and will remain so in the future. On the expenses, selling and marketing roughly accounted for RMB 600 million, a year-on-year increase of 25.5%. The increase in expense was primarily directed to the growth of productivity tools in China and products for leisure and international markets. If we include the portion of combined revenue from photo, video and design products and advertising business, this ratio remained stable at 16% in 2024 and last year. This is consistent with the statistics we previously communicated to the market in our earnings. The R&D expenses were RMB 950 million, a year-on-year increase of 3.8%. The relatively modest increase was primarily because the foundation of model training costs decreased in 2025 for two reasons. Firstly, our MiracleVision model foundational training was completed roughly in 2024. Secondly, as we are fully committed to the model-agnostic strategy with fine-tuning open source models, proprietary vertical models and third-party APIs, we delivered high-quality output for users and did not need to invest significantly into training foundational models. If we exclude the expenses related to foundational model training, the overall R&D expenses will increase 14.5% year-on-year, primarily driven by investment in our R&D talents. Looking ahead, we'll continue to optimize resource allocation between proprietary and external models and increase investment in vertical model training and R&D talents, continuing to enhance our product capabilities and competitiveness and delivering the users' diverse needs with precision. Administrative expenses were RMB 450 million, a year-on-year increase of 14%. On profitability, driven by sustained revenue growth, gross profit grew faster than operating expenses. This increased our operating leverage, further enhancing overall profitability. For ease of comparison with last year, the adjusted net profit includes discontinued operations. The 2025 adjusted net profit attributable to owners was around RMB 907 million, year-over-year increase of 64.7%. Under IFRS, our net profit attributable to owners of the company was around RMB 700 million in 2025, lower than around RMB 800 million in 2024. This change was primarily due to two factors. First, in 2024, we completed the disposal of all cryptocurrencies, generating a onetime gain of RMB 640 million, which elevated the prior year comparison base. Second, as we completed the issuance of convertible bonds to Alibaba at the end of 2025, we recognized a onetime noncash expense of approximately RMB 510 million under IFRS. This expense did not result in any actual cash outflow. Both items are not operating in nature and are not directly related to our business performance. Lastly, I would like to share with you the latest progress on the Alibaba strategic investment cooperation. On the business side, we are advancing collaboration across fronts, including large model e-commerce and cloud computing supply storage. In particular, in large models, we have deeply embedded, the capabilities of Alibaba's open source model series across model scenarios such as image editing and video generation to deliver better user experience. Meanwhile, our technology team and Alibaba's team have maintained close communication on the model training family. As the AI industry continues to evolve rapidly, starting with this year, in addition to our two regular earnings releases each year, we will provide quarterly updates on key operating metrics for our core business. We believe this will further enhance transparency and help the market better understand our operating progress. In addition, we just announced a share buyback plan of up to HKD 300 million valid for 1 year. This reflects the company's confidence in its future development, as mentioned by Xinhong. The market would consider large model might replace all AI applications. It's obvious in our industry that this might be a misunderstanding. Our growth is also very rapid. So I believe at this time point, it's proper and good for us to do the buyback, plus the 40% proportion. The overall cash return is around [ 62 ]. Thank you. Thank you all for participating today.

[Operator Instructions]

I'm from Hana Internet. Congratulations on our performance. Based on the latest statistics, the paying subscribers are slightly lower than the first half of the year and the MAU is slightly lower than those in June. So if you could give us a brief reflection about the AI fragmentation. What are its impacts on your businesses? That's the first question. The second question is how can we better tackle with this decrease in terms of the statistics?

Actually, we have another perspective. If we put statistics aside, the increase of model capabilities has the influence of -- it can help us give us some products that develop faster. In terms of DesignKit's growth in the second half of the year, there are positive outcomes. For instance, the AI agent functions. Once it's been rolled out, it gradually spread to all businesses of DesignKit and was taken up immediately. For Kaipai, for example, subscription permeation rate is already high. And the ARR of abroad, it's also increasing rapidly. So for us, we actually think from a longer perspective, from a business perspective, the positive outcome of AI agents is immense. As for you, what you saw in terms of the MAUs slight decrease, we've seen similar trends in past years because we need to bear in mind that the MAU is a snapshot of the past month, statistics of the past month. Last year, we had many blockbuster functions that came out in different months. So in December, we happened to have no blockbuster functions. So that's why there is a discrepancy between the statistics and our overall performance. For the actual numbers, the decrease in growth rates, to me, it's not caused by AI or large models or agents. But rather, if we look at it from a Chinese perspective, the products are maturing. So the growth rate was a large proportion and the large foundation would be slightly slower than before. But this is a positive signal because the productivity products or tools worldwide are growing fast. And these kinds of products are at the early stages of their product cycle. Put it in other words, in the second half of 2025, it seems our growth rate is declining. But we need to bear in mind that the products development are maturing from the early stages to the later stages. And we also need to bear in mind that the ARPU ratio with the subscription rates are better than we expected. Recently, we tested some new tools. The ARPU of new tools are already at $50 per month, translating to gross average income. So from this perspective, you may think that the growing capabilities of AI is leading to issues. But from our side, we think that the positives outweigh the negative signals. I'm open to suggestions.

We'll move on to the second question.

I'm from Morgan Stanley. Two questions. First, I would say about the expectations for the year 2026. Second, agent is integrated into our products. How do you refer to the subscription contribution and what do we have metrics to mirror its contribution?

I'm not talking about too detailed numbers. Also, what I've said before, the overall rate growing in 2026, the top line is basically the same with the 2025. But the underlying or its [ competition ] will include more productivity tools globally. In the coming several years, we'll also see a faster growth acceleration. This is the second curve, being mature. And the rising of the third curve, this might be a direction. The new adjusted net profit attributable to owners will be different. We'll control our expenses better because most of our operating expenses are about staff and personnel. We are actively tackling this problem by using AI to enhance our output. Meanwhile, with the rapid growth of operations, we will not increase the expenses for staff. I think these are positive directions, more about the agents. The final outcome, we felt happy for it because it solved the long-tail needs of many consumers. For example, the e-commerce, previously, the advertising total or picture, for example, the barbecue oven, you can only use the outdoor backgrounds in the past to actually not only use it. We will also need some meat, smokes, flakes. But it's different. It's hard to achieve in the past. With help of the agents, they can have the chance to express more details. Users can express in verbal language and the AI model can translate it into visual representations. For example, the cat. Especially, in the past, we have cat models, they are very hard to cooperate. We can only change the background in the past. I think we should have a very cute cat on the cat equipment. So with the agent, we can have a very cute cat of specific species. You also asked, why would you choose Meitu instead of other models? Whether we will be revolutionized by larger models. For the understanding of many vertical scenarios, I think we do better. For example, the cat tower, some cats are not satisfied with what you've chosen for it. So the sellers can better describe the characteristics of their products. For some nuanced parts we can cooperate with the traditional conventional agent models or style. The user utilization rate is much higher than the general large models. We can tackle some pain points. Another example, Adobe. While we think it will be revolutionized by AI, because we know the learning threshold is very high, we need to months or years to learn to use it. With the help of AI, it could be very fast. This is also in line with our mission. We want you to feel better using targeted models or the subscription rates or selling. I think this is the biggest meaning, integrating agents and also the point which satisfied our team. For paid subscription, agent is the top line function of all paid functions.

Questions on site.

I'm from [indiscernible] Capital. I would like to ask some questions related to AI. Firstly, as mentioned earlier, the agent function, it has become the main driving factor of Meitu's business. So I would like to ask, the agents businesses in terms of the ARPU enhancements, can you elaborate more on the relationship? The second is, in the future, do you hope for the different vertical sectors to set differentiated pricing for the AI agent or the tiered pricing? Another question is that nearly 19% or 20% of the photo and imaging center cost is taken up by the production tools. So as AI becomes more prevalent in the near future, 3 to 5 years, what do you think will be the proportion of the revenue or production tools in terms of the overall revenue? Thirdly, what are your outlooks on the gross profits in the future?

Because the ARPU rate is mainly provided in the latter half of next year, there will be fluctuations. But if you look at the DesignKit, we already have RMB combo. We did this combo is because we see there is tangible demand among the consumers. We have other combos at 30% to 35% in terms of the pricing. So the total consumption brought by agents is manifested more profoundly across many products. Of course, the increases in ARPU will need time. So in the future, you may see that different products will have more pricier subscription choices. Additionally, in the future, there will be different tiers of basic substitutions. But in different sectors, it will be based on the token consumption. In our prices, we discovered that there are drastic different token consumptions. So we use the appropriate skills choice. For instance, if we do consulting, we know that the consulting prices of different sectors are different. For instance, for high barrier sectors, we need to pay more for consultations. And for the meta prompts for instance, we just mentioned, it's based on sector experience. For the senior practitioners, his or her understanding of the sector have more insights, more personalized insights helping companies to stand out among the homogeneous competition. So that's why we do have the meta prompts and all of the field trial and paid consultations, eventually helping us to gain more insights into how to develop our vertical sectors. So eventually, we base on the different sectors different values and providing more returns for our consumers. In terms of the gross profits, we dropped by 1 to 2 percentage points, but the greatest reason is because of the changes in the revenue mix. Because in the past, advertisement took up a lot. But as advertisements proportion continue to decline, in the short term, the gross profit will decline as well. This year, the advertisement proportion will decrease, but it's already taking up a lower proportion. So its influence on the gross profits will be lower compared to 2025. Additionally, this year, because Apple in China is reducing its fees in China, it's helping with our gross profit. As for your concern, I think you may be concerned about third-party API use and deployments. You may think it influence our gross profits. But at present at least, because we only have a mid-single digit of our third-party API so it won't influence our gross profit that much. Overall, our gross profit will remain stable this year, around higher than [ 70% ]. We haven't had the specific statistics for the proportion of production tools in our overall revenue. If we look 5 years into the future, production tools will take up a higher revenue proportion than leisure tools. Put it in this way, production tools has discussed for 2.5 years or 3 years from 2023 until present. Now it takes up around 19% of our overall revenue. But actually, for the vertical sectors, we managed to integrate industry know-how into the products through the AI agents. So there is a scenario that I believe in the future, I think the growth rate will be different from 3 years before. It will be faster. But as for the specific statistics, I have yet to collect them.

An analyst, Sara. I have two questions. First, as mentioned by the management, the cooperation with Alibaba especially for the products for leisure, what about the user [ portals ] who will have more AI-powered phones that would be integrated with many AI-powered functions. So how we see the changes in user [ portals ] for products for later? Question two, the productivity tools ARPU is more valuable or promising than of the products for leisure. We are the model-agnostic strategy. We want to build the model to tackle the pain points of users. The models are evolving rapidly. How does the management view the extension of models, this possibility into the photo, video and design vectors? For example, will the foundational large models be extended into the e-commerce area or sector?

Products for leisure, from the perspective of user, I think we have an advantage because we have an MAU of over 280 million. Many new products of ours published in recent years have performed very good with rapid growth for DesignKit and Kaipai and also Vmake, Wink, we have access advantage. So we can be top-tier players in this sector. Other giants, including the smartphone producers, they, of course, will try new functions related to photo, video and design. It's always a very essential part of them. For example, many smartphone producers focus on the imaging capabilities of the phone. Of course, we feel the challenge. But we will find many corresponding room where they left or they overlooked because there is no one company that could serve the users' all needs. This is a marathon for innovation. We view this trend very objectively. This challenge, in turn, makes us feel the warning and have the spirits to challenge is good. And second question, what about the extension of large models into other sectors, I think the answer is yes, but it's similar to the answer of the first question. No large model companies can solve all factors on use, especially vertical sectors pertaining certain areas. A large amount of energy and expense should be devoted. So at present, we are digging into these perspectives and we saw the things that these models could not do. I believe this is also another marathon of innovation, different ecosystems for models and applications. Models cannot cover all applications. Actually, it's empowering applications. We know we would do something about it. They develop some independent targeted apps or software. For our team, they make us feel pressured and also urge us to increase our competency.

I'm from Citibank, Internet analyst, Vicky. I have an AI-related question. I look forward to your thoughts. I don't know what are your thoughts about this.

Indeed, we saw this trend as well. Xiao Bai has elaborated over the AI teams. How we build the teams and how to deliver high-quality results, we also mentioned earlier that the business models have been changing from the subscription to the consumption of tokens. So to deliver high-quality results, so we think there's an opportunity for us. I suppose we roll out some new production tools that have a relatively high barrier, but users are willing to buy because they can deliver high-quality results. As a result, we see our ARPU rates increasing fast, especially production-related. Therefore, in June this year, we will post the Meitu Imaging Festival, and that will be launched, focusing on the AI agent teams' establishment and how to deliver high-quality results for our users. I believe, by then, we will have a better understanding.

I would like to add some more thoughts. I think an interesting thing is that there are many store apps through the subscription revenue. So after you subscribe to something, you may not use it for 99% of the time. So that is an issue of overpayment. It can't be like this. So there are many inefficiencies in the previous conventional model. But this cannot be applied to us because, in the past, we've been providing services that needs to be subscribed to be used. We don't have a model where we subscribed and the users do not use it for most of the time. So even though some people regard us as traditional imaging and photo industry, but we actually have some differences in terms of the conversion rate. For the subscription, I think the token consumption, a part of our revenue will be generated by subscription. It's just that in the past, by subscribing, we provide a group of tools. But now by subscribing, we have a bunch of tokens. After you consume all the tokens, you may need to buy higher-tier subscriptions that gives you more tokens. I think for the two models, they are not dichotomous. They are a combination.

Due to the time limit, we will continue with the remaining two questions. Before online questions, we will have another question on site.

I'm an analyst, Xixi from [indiscernible]. My first question is that globally, last year, when we're expanding production tools, we mainly focus on vertical sectors,; for instance, the restaurants, et cetera. I wonder, in 2026, do we expand our vertical sectors to more sectors? Secondly, when we look to the production tools of users abroad, their habits may be different from those in China. Thirdly, I would like to ask more about your cooperation with Alibaba. Alibaba's users in terms of production tools, what are the percentage in terms of the contribution to the revenue? In 2026, the driving of production tools mainly come from ARPU or the paying tools.

We're now doing extensions in vertical applications. As you may have seen, you have saw the financial results video and some AI agent studio functions. Besides what's mentioned, we saw very vertical sectors where there are opportunities for us. Under these scenarios, traditional services, they may spend over USD 10,000 to USD 20,000, but we can achieve this with 10% to 20% of that with same or even better quality. There are scenarios like this. Meitu will try to avoid the directions of manage giants, their core paths and strategies, so that we would not be greatly influenced. But we'll try to discover the parts where they may neglect or didn't consider it very important. So actually, we have many opportunities to lead in very vertical sectors. So we may try to avoid some popular or hot choices. For example, we still have a large user base in the off-line market. Traditional expense is high, but now it's just maybe 1% of the previous expense. In detail, I can't expose too much, disclose too much. But you will see our future products. And about the user habits of the productivity tools in international markets, we may observe different vertical scenario preferences and [indiscernible]. Last month, our RoboNeo topped in the photo video category in 15 countries, including Brazil. For example, the South American users, they have a strong desire to express on social media. This is different from Asian markets. And we'll do more language and operation support in Southern American market. We cannot express too much about it, but I want to say that we have different orientations and directions. We will segment very carefully and precisely. We will try to serve well. a certain need and extend to more categories and markets.

As an additional reminder, as what Xinhong have said, the critical point is that the users demand on visuals because there are different cultures, they're vastly different than us in the past. But now due to the cultural differences, we need to have many different and AI adaptation. For instance, the same e-commerce platform, Chinese users may perform tests. They have less coherence but have more visual stimulation. But for overseas users, they may prefer more simplified accounts that look more high end. So there are great differences. For instance, Brazil, many Brazilian users would like the e-commerce platforms to stand out more. Some countries like light colors, for example. In our main business areas, we have all the compatibilities and adaptations. After the adaptation, we also observe the different subscription habits. For Chinese users, because we would like to subscribe low-cost orders, in China, the per week subscription is more preferred than monthly subscription. But for the U.S. market, the reverse is true because they think weekly subscriptions, it's is hard to experience the value of products in the short run. We need to have a longer time period to understand what values can the product bring. Because they are less sensitive on the price, they hope that they would pay to create value and then decide whether to subscribe. So for us, in the past, many of our products were based on the demand and habits of the Chinese market and then we ready it to the rest of the world. But now we hope we cater to the specific demands of each area in the world. In the past, we may have 100 products in China, but only 50 to 60 overseas. But now we look at the overall demand, and we have products that are 90% available and also 90% available in China and also overseas. That is our biggest change.

And due to the time limit, we will have the last question. If we have investors on site that have questions, please raise your hand. So we'll have a question online from the meeting.

First, about the ARPU value. We mentioned we can saw increase of the ARPU value. The main drivers are productivity tools in Chinese Mainland and international markets. And also, the third-party CPI are single digits. Which directions we use the third-party API? And why would we consider this of high, low status of proportion?

Management answers the elevation of ARPU value, the main driver is that the introduction of agent. Many delivery of outputs will consume tokens. After the consumption increases the purchase more expensive packages, due to high-quality, they do not mind that much because this cost is much lower than in the past, nearly 10% or 1%. So the main ARPU growth are contributed by this partner, productivity tools. Products for leisure, I will not consider a dramatic increase in ARPU value. But with the higher proportion of international markets, this part certainly increases, but still not that huge. About the API part, compared with other model companies, you know we pay attention to quality or effector. We have an evaluation team of over 200 people. Many designs are outsourced. They comply to teams, but ultimately it's up to R&D team. But in Meitu, they are competing. If the design team do not consider it good, it's not published or aligned. For example, Xinhong himself also paid great attention to it, one, because the evaluation of the effect of different models. When we come up with a case, we first evaluate all models about their effects and outcomes. For example, 10 models, the winner, does it meet the expectations of the real users? If it's good, we use then the API. But after the competition, if we cannot find a very good winner, we self-develop. So our understanding about the external API, first, we evaluate. And if it meets our standard, we use it or we choose to self-develop. We hope they cooperate and build the industry's top standard.

Thank you for your questions of investors and the detailed response. If you have more demand for our tools for statistics, you may contact the IR teams. Now we'll enter the media Q&A. This session will not have simultaneous interpretation. For the participants on Zoom, you may feel free to log off. Thank you for your participation and attention once again. [Statements in English on this transcript were spoken by an interpreter present on the live call.]