momo.com Inc. ($8454)

Good afternoon, everyone. Welcome to momo First Quarter 2026 Earnings Conference. I'm Liu, IR Manager at momo. Joining me today is our President, Jeff; and our CFO, Gina. Today's agenda is as follows. First, Jeff will review our overall operating performance and key development of first quarter 2026. I will then present our first quarter financial results. Finally, we will open the floor for Q&A section, during which Jeff will address your questions. The financial statement, earnings presentation and operating report used in today's conference have all been published on our official website and are available for download. Before we begin, I would like to remind everyone that today's presentation may contain forward-looking statements. These statements involve risks and uncertainties, and actual results may differ materially from expectations. Please refer to the safe harbor section of the presentation for further details. With that, I will now turn the call over to Jeff.

Hi. Good afternoon. Welcome to momo's Earnings Conference. I'm Jeff Ku, President of momo. Moving on to the first quarter of the market outlook. Despite the impact of inflation and external uncertainties on the broader macro environment, supported by price adjustments and the seasonal effects, overall retail sales of general merchandise and e-commerce recorded year-on-year growth of 7.7%, 5.7% and 8%, respectively. As of first quarter '26, Taiwan's e-commerce penetration reached approximately 14.1%, representing an increase of 1 percentage point year-on-year. Compared with the major global market, Taiwan's e-commerce penetration still has significant room for further growth. We are observing structural shift in consumer behavior and competitive dynamics. Over the past 1 to 2 years, intensified competition driven by new entrants has led the industry to focus heavily on price-led promotion. However, as the market evolves beyond this phase, we believe that long-term success in e-commerce will increasingly depend on fulfillment experience, service completeness and the depth of member engagement. We believe that platforms with structural advantages will be better positioned to sustain and extend their leadership over time. Accordingly, our strategy remains focused on strengthening core capabilities, including deepening partnership with brand owners, continuous enhancing logistics and fulfillment quality, reinforcing customer loyalty and membership ecosystem and by investing in technology infrastructure. We believe this strategic priority will continue to drive sustainable long-term growth momentum. In our core business, during the first quarter, we continued to reinforce the platform's dual engines growth momentum. While improving monetization efficiency leading to further optimization of our profit structure. Driven by both 1P and 3P engines, core e-commerce GMV increased by 5.3% year-on-year, indicating a clear recovery in operating momentum. The 3P growth engine continued to accelerate, supported by progress in merchant governance and supply expansion. As a result, 3P GMV sustained a double-digit growth this quarter, further scaling the platform. At the same time, advertising monetization continued to strengthen as deeper retail media network deployment and integrated on and off-site traffic drove simultaneously improvement in conversion rates and overall monetization efficiency. Meanwhile, while the TV shopping business faced revenue pressure amid industry headwinds, it continued to deliver profitability and stable cash flows. This underscores our flexibility in capital and resource allocation and ensures that each business segment maintains discipline and resilient operating quality across different market cycles. In logistics planning, we continue to build structural competitive barriers through enhanced scale and operational efficiency. Currently, near 90% of the orders are fulfilled within the next-day delivery with ongoing effort to improve the overall customer experience. As self-delivery ratio of our fully owned subsidiary, Fu Sheng Logistics continued to rise. Service quality and operational stability have strengthened accordingly. Meanwhile, through the continued deployment of automation equipment, we have successfully improved the processing efficiency while maintaining effective control over unit costs. In addition, we continue to deepen our competitive moat through service differentiation by integrating fast delivery for large home appliances with premium installation. We have established a clear competitive advantage in high-ticket product categories. Next, we would like to update you on the latest development in our e-commerce business. In the first quarter, driven by our hybrid 1P and 3P models, core e-commerce GMV grew 5.3% year-on-year, showing a clear sign of gaining operating momentum. Growth was primarily driven by the 3C, health and leisure categories. And 3P continues its strong momentum with double-digit growth. Next, I would like to provide an update on latest development in our 3P and advertising businesses. Starting with the 3P through the ongoing enhancement in merchant governance alongside disciplined supply expansion, we ensure that consumers enjoy a consistently high-quality shopping experience across both 1P and 3P models. As of March 31, 2026, the number of curated 3P merchants reached approximately 9,000, while the number of listed SKU further expanded to around 3.5 million. In the first quarter, 3P GMV continued to deliver strong and sustained year-on-year growth. From a platform strategy perspective, the 3P business has significantly broadened and deepened our product assortment, attracted more diversified traffic and effectively optimized our overall user mix and shopping behavior. Turning to the advertising business. We are accelerating the deployment of both on-site and off-site advertising solution with continuously expanding our product offering. These initiatives not only help brands and merchants enhance brand exposure and conversion efficiencies within the momo ecosystem, but also deliver attractive return on ad spend for advertisers, further strengthening the platform's overall monetization capabilities. Next, we would like to update you on our latest progress in logistics and fulfillment capabilities, momo continues to upgrade its logistic infrastructure through enhancement in-house delivery and the deployment of automation, improving both service efficiency and cost structure while further raising competitive barriers. Currently, our northern and southern fulfillment centers are in full operation, and we plan to add a central fulfillment center in 2027. Together with regional warehouses across Taiwan, this will form a comprehensive and resilient national-wide fulfillment network, enabling fast, highly integrated warehousing and distribution services and enhancing delivery density and fulfillment stability. As our logistics footprint continue to expand, we are also optimizing service experience and cost efficiency in parallel. Meanwhile, we continue to upgrade our fulfillment and service capability, including ongoing expansion of next-day delivery coverage. Also by establishing differentiated service barriers through the integration of large item delivery and professional installation services, we are able to offer a more complete end-to-end fulfillment experience for large home appliances, further strengthening our competitive positioning. Now I will hand over to Liu to continue on the financial part.

Thank you, Jeff. Next, we would like to review our operational performance for the first quarter of 2026. Driven by our dual engine strategy across 1P and 3P platform, overall operating momentum continued to improve with a consolidated revenue reached TWD 26.59 billion for this quarter. Despite a competitive market environment, our take rate remained stable at 13.3% supported by the continued expansion of the 3P business and steady contribution from advertising revenue, which effectively offset promotional pressure in the market. In terms of the profitability, operating profit amounted to TWD 790 million in the first quarter, thanks to one-off investment tax credits of about TWD 218 million in first quarter 2025. This result in a relatively high comparison base for our first quarter. Excluding this onetime impact, earnings for the current period continued to deliver solid year-on-year growth, indicating an ongoing improvement in our core operating fundamentals. Net income attributable to the owner of the parent reached TWD 644 million, with earnings per share of TWD 2.43. This result demonstrates our ability to maintain strong operating disciplined and monetizations efficiency amid intensified competition while also highlighting our exclusions capabilities in advancing platform transformation initiatives and delivering sustainable long-term growth. Next, in the first quarter of 2026, our financial positions remained sound and resilient. As of March 31, we held cash and cash equivalent of TWD 3.22 billion, reflecting momo's strong liquidity profile and financial flexibility. Our solid balance sheet and capital structure enable us to continue advancing long-term growth initiatives while maintaining strict capital discipline and safeguarding shareholder interest. With that, we conclude our first quarter presentation. We would now like to open the floor for your questions. [Operator Instructions].

So our first question is, what is the company's strategic roadmap for the next 2 to 3 years? And what will momo platform look like 3 years from now? And additionally, could management provide a long-term outlook for GMV and the expected contribution of the 3P segment?

Okay. But first, we have to say that because we don't provide the formal financial guidance. However, speaking of our operational blueprint, I can say that our strategic target is to expand our GMV market share with the help of the 1P plus 3P dual engine growth mentioned earlier. We would like to see our 3P segment GMV contribution surpassed 25% of the total GMV in 3 years, while we still grow our 1P businesses. This expansion is designed to leverage 3P's broaden -- to broaden our assortment and customer segments. On top of that, with our promising advertising business, RMN will optimize our overall profit structure and provide support for the future growth. From my point of view, I think if we're talking about 3 years from now, I think the most important thing to me is to maintain our status as the most trusted e-commerce platform in Taiwan. We are building a model centered on customer experience, anchored in our logistics infrastructure and amplified by AI-driven technology efficiency. I think this will create a resilient and sustainable profitable ecosystem that foster a good long-term growth trajectory.

Okay. Thank you, Jeff. The next question is, what are the company's strategy regarding 3P product assortment and the management of 1P supplier relationship?

Right. Since we -- the GMV growth is our most important thing, and that is mainly supported by 1P plus 3P as a dual engine strategy. So yes, we have to make sure the 1P and 3P can work with each other or in other words, complement to each other. So for 3P segment, our focus is on expanding the category depth and the long-tail supply. Beyond providing a marketplace, we empower high-quality merchants through integrated platform tools, optimize traffic allocation and operational support. This enhances our operational efficiency and platform stickiness, fostering a vibrant product ecosystem. For 1P, on the other hand, our strategy is centered on a long-term partnership with co-brand. We prioritize supply stability, high precision merchandising and synchronized marketing road map to ensure our quick responsiveness to the market and the brand channel collaboration in key product categories. Broadly speaking, our goal is to leverage 3P to drive assortment best practice and to attract new customer segment while utilizing 1P brand strength to attract customers. This will allow us to offer a one-stop shopping experience, serving as a foundation for our future development.

Thank you, Jeff. Okay. Our next question is, does the company currently posses high entry barriers or core competitive advantage that are difficult for competitors to replicate or breach in the short term?

Well, there are a few things we think is really key to our competitive advantage. I think the first is our logistics capability. Currently, our northern and southern fulfillment center are fully operational. So become a backbone of our logistic infrastructure. We plan to further strengthen this network with additional central fulfillment center in 2027. Together with a broader network of regional warehouses across Taiwan, this structure will create a comprehensive and resilient national fulfillment network. This integrated footprint enables a fast and reliable fulfillment services as our logistics network continues to expand and mature. I think we are gaining the scale and efficiency in parallel by continuously optimizing the service quality and the cost structure, ensuring that operational upgrades translate into both a better customer experience and operational efficiency. At the same time, Fu Sheng Logistics, our fully owned subsidiary has handled more than 50% of our warehouse shipments. It allows to have a better management of overall customer service quality. And that percentage will continue to grow. So we have a better manage of the end-to-end delivery service. However, I think the other key competitive advantage to us is beyond -- besides the logistics, I think I mentioned in my previously, momo's brand equity is a unique differentiator. We are the most trusted e-commerce platform in Taiwan by many customer surveys. This trust is built on product quality, price, technology, customer service, et cetera. We believe this trust will serve as a foundation for our future development.

Okay. Thank you, Jeff. If there are no further questions, we will conclude today's meeting here. So thank you, everyone, for your participation, and we look forward to see you again next quarter. Thank you.