HERE — Here Group Limited

HERE Q2 2026 Earnings Call Summary

1. Key Financial Results and Metrics:

• Total Revenue: RMB 177.3 million, a 35.4% increase quarter-over-quarter and exceeding guidance.
• Gross Profit: RMB 55 million, with a gross margin of 31%, down from 41% in the previous quarter.
• Net Loss from Continuing Operations: RMB 25.4 million, slightly improved from RMB 25.8 million in Q1.
• Adjusted Net Loss: Narrowed to RMB 16.1 million from RMB 17.1 million in the prior quarter.
• Operating Expenses: RMB 93.2 million, with sales and marketing expenses at RMB 52.8 million (29.6% of revenue).
• Accounts Receivable: Decreased to RMB 32.6 million, indicating improved collections.
• Inventories: Increased to RMB 111.8 million, reflecting proactive inventory management for upcoming demand.

2. Strategic Updates and Business Highlights:

• The company is focused on an "IP-first" strategy, with flagship IP WAKUKU contributing RMB 129.4 million (73% of revenue).
• Launched five offline D2C stores, enhancing brand interaction and user experience.
• Significant omnichannel marketing efforts, integrating online and offline strategies to boost user engagement.
• Collaborations with Enlight Media to enhance IP development and content creation.
• Continued refinement of operational systems to improve efficiency and support long-term growth.

3. Forward Guidance and Outlook:

• Q3 Revenue Guidance: Expected to be between RMB 140 million to RMB 150 million, reflecting a seasonal decline of 15-20%.
• Full Year 2026 Revenue Guidance: Anticipated to be in the range of RMB 750 million to RMB 800 million, supported by a robust pipeline of IP releases.

4. Bad News, Challenges, or Points of Concern:

• Decline in gross margin from 41% to 31% due to lower margins from offline sales channels.
• Anticipated revenue decline in Q3 attributed to seasonal factors and distributor inventory adjustments.
• Increased operating expenses, particularly in sales and marketing, which could pressure profitability if not managed effectively.
• The company faces competitive pressures in the pop toy market, requiring continuous innovation and engagement strategies.

5. Notable Q&A Insights:

• Management confirmed that the expected revenue decline in Q3 is primarily seasonal and part of proactive inventory management for upcoming product launches.
• The joint venture with Enlight Media is aimed at enhancing the cultural significance of IPs and expanding into content areas like film and television.
• Future strategies will focus on systematic IP operations and marketing, aiming for a replicable model that enhances product excellence and user engagement.
• Recent offline store openings have met expectations, serving as critical touchpoints for brand interaction rather than just sales channels.

Overall, HERE demonstrated strong revenue growth and strategic initiatives in Q2 2026, though it faces challenges regarding margin pressures and seasonal fluctuations in sales. The outlook remains positive with a focus on expanding IP and enhancing user engagement through innovative strategies.