HERE Group reported a strong second quarter of fiscal 2026 as the company completed its first full quarter operating as a dedicated IP-trend business, with management emphasizing an “IP-first” strategy focused on long-term brand vitality rather than near-term sales alone. The company highlighted growth driven by offline channel expansion, continued traction in flagship IPs, and ongoing work to build a more systematic pipeline for IP development and commercialization.
Revenue growth exceeded guidance as flagship IPs led sales
Management said total revenue for the quarter reached RMB 177.3 million, representing 39.4% quarter-over-quarter growth and exceeding the high end of the company’s guidance. CEO Peng Li characterized the quarter as a milestone, calling it the first full quarter as a “pure-play IP company” and a “dedicated IP-trend company.”
Offline channel push weighed on margin but supported IP engagement goals
CFO Tim Xie said the quarter’s sequential revenue growth was “primarily driven by our offline channel sales.” The company expanded its offline distributor channel contribution and continued to build out its direct-to-consumer footprint.
Gross profit was RMB 55 million with a 31% gross margin, compared with gross profit of RMB 52.4 million and a 41% gross margin in the prior quarter. Xie attributed the margin decline to the company’s strategic expansion of offline channels, which generate lower per-unit margins than direct online sales. Management framed the tradeoff as an investment intended to deepen customer loyalty by allowing consumers to experience products in physical settings.
Product pipeline and IP ecosystem: expanding beyond “creative hits”
Li said the company is working to move “from creative hits to a systematic pipeline,” and described the firm’s IP and product development as increasingly driven by a data-informed engine and end-to-end mechanisms spanning planning, production, and promotion.
As of December 31, 2025, HERE said it had 18 IPs in total:
- 11 proprietary IPs
- 5 exclusive licensed IPs
- 2 non-exclusive licensed IPs
Management highlighted several recent launches and performance metrics. The “Wakoku on the Road” series, launched in late November 2025, delivered total omni-channel sales of more than RMB 18 million within one week, alongside over 84,000 pre-sale registered participants, over 56,000 peak concurrent online users, and over 100 million in total new product exposure, according to the company. For Kinomo, management said the “Whispers of Series” vinyl plush doll recorded over RMB 11 million in omni-channel sales within a week, with total exposure reaching 170 million.
Beyond product sales, Li pointed to brand-building initiatives, including Wakoku being invited by the Tianjin Municipal Bureau of Culture and Tourism to serve as a promotion ambassador, and a co-branding collaboration with Lukfook Jewellery. The company also discussed plans to expand IP narrative development through a “live content strategy,” described as short-form storytelling intended to deepen emotional connections and extend IP influence beyond physical retail touchpoints.
Omni-channel strategy: D2C stores, social growth, and smart retail terminals
On the omni-channel front, management described channels as “portals for IP user interaction and experience,” not just points of sale. As of February 26, 2026, HERE reported approximately 700,000 cumulative followers across major social platforms in China and cumulative social media exposure exceeding 1.8 billion.
Offline, the company said it has opened five D2C stores since December 2025 in Beijing, Shenzhen, and Chongqing, with two additional stores in preparation. Li cited the opening of a Shenzhen Upper Hills flagship store on February 1, where a celebrity appeared as store manager for a day, generating approximately RMB 250,000 in same-day sales. The company also referenced a Shanghai K11 pop-up that generated significant social media attention and was described as a driver of foot traffic and sales, as well as New Year’s Eve exhibitions and light shows in commercial districts including Wangfujing in Beijing, Gulou in Tianjin, and K11 in Shanghai.
In addition, management said it is leveraging “the powerful and creative tools of the AI era” and expects to deploy intelligent sales robots to more offline locations for user interaction in the near future.
Costs, balance sheet items, and guidance for Q3 and fiscal 2026
Xie reported total operating expenses of RMB 93.2 million, including sales and marketing expenses of RMB 52.8 million, research and development expenses of RMB 9.1 million, and general and administrative expenses of RMB 31.3 million. The company also discussed certain expense ratios on a non-GAAP basis.
Net loss from continuing operations was RMB 25.4 million, compared to RMB 25.8 million in the previous quarter. Adjusted net loss from continuing operations “continued to narrow” to RMB 16.1 million, down from RMB 17.1 million in the prior quarter, according to the CFO.
On the balance sheet, management said accounts receivable were $32.6 million as of December 31, 2025, primarily tied to offline channel sales, and noted the balance declined compared with September 30, 2025 despite higher offline revenue, citing strengthened collections discipline. Inventories rose to RMB 111.8 million, which the company attributed to expanded supply chain capacity and proactive inventory build ahead of Chinese New Year factory closures and upcoming product launches.
Looking ahead, the company guided for pop toy revenue of RMB 540 million to RMB 550 million for the third quarter of fiscal 2026, and RMB 750 million to RMB 800 million for full fiscal 2026. In Q&A, management attributed the implied sequential revenue decline for the third quarter to seasonality tied to Spring Festival impacts on distributor operations and to product launch timing, noting major new products are expected to launch successively starting from the end of March.
Management also addressed cooperation with Enlight Media, describing it as part of a “product and content dual drive strategy” intended to enhance IP cultural meaning and emotional connection, with potential exploration in areas such as film and television content and derivative development. The company said it would disclose specific plans when there is substantial progress.
QuantaSing Group (NASDAQ:QSG) also discussed organizational and operational initiatives during the call, including refining its cost structure and building an integrated operating system. Li said production capacity is now approximately 50 times higher than at the beginning of 2025, positioning the company to support scaled product creation during the year.
About QuantaSing Group (NASDAQ:QSG)
QuantaSing Group Limited provides online learning services in the People's Republic of China. The company offers online courses, including financial literacy, short-video production, personal well-being, electronic keyboard, and meditation courses. It also offers marketing and enterprise talent management services to enterprise customers. In addition, the company provides online and literacy course to adult learners under various brands, including QiNiu, JiangZhen, and QianChi. QuantaSing Group Limited was founded in 2019 and is headquartered in Beijing, the People's Republic of China.
