Meitu Inc. (MEIUF) Q4 2025 Earnings Call Transcript

Good afternoon and welcome to Meitou's 2025 annual results presentation. Simultaneous English interpretation is available for this meeting. If you are joined via Zoom and would like to listen to the English channel, please click the interpretation icon at the button of your screen and select English. Please note that the English audio will only be accessible through this function.

Today, the leaders participating include Mr. Wu Xinhong, founder, chairman, and CEO of Meitu. Greetings. CFO and company secretary of Meitu, Mr. Gary Nan, CFO and president of the imaging products division, Mr. Chen Jianyi. 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 your 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 announcements 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. What's more, relative information was just shortly spread on March 25th, and we ensure the smooth function on 26th. We feel sorry for all the inconveniences caused to all the investors. Thank you all for joining today's EARNEST 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 itself, amid the fast-moving trends, for example, from single-model approach to mongrel 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 that adjusted net profits attributable to owners of the The company grew 64.7% year over year to $9700 million, exceeding our latest thoughts on the AI applications. First, Meitool 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-specificity. specific AI agent teams to help address users' end-to-end content creation needs, delivering high-quality outputs. In each specific use case, our AI agent teams are composed of multiple agents with distinct roles. They are responsible for efficiently executing different standardized repetitive texts 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. Break down 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 all the areas suited for e-commerce styles. Vertical 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 on 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 an integrated method, but rather helping the suppliers to deliver more tangible results. According to what we observe, 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 often falling short of expectations. For instance, on Amazon, a product such as water bottles experience intense competition. For For experienced e-commerce providers, you need to avoid the oversaturated competition of product backgrounds such as home and living. Instead, they would pivot to fitness, to outdoor, and other high growth potential settings. Based on this know-how, DesignKit is building e-commerce design-specific AI agent teams. In 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, prompt designers, etc., delivering high-quality visual and also establishing a more refined social media commerce video expert team. For instance, the AI marketing strategist can serve as a creative director, helping users to know what to capture, what 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, etc. 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 Design Kit's new agent teams aim to help e-commerce service providers drive and achieve real business results. In addition, aside from Design Kit for Kaipai for the talking videos, we also hope to create high conversion rate video contents. Based on this goal, we divided the three 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-assisted filming, the AI avatars, etc. We also have AI team helping with the rough and eventual cuts and editings. 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 short AI-generated video about pensions insurance, then once receiving this mission, 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 contents 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 those suppliers to focus more on creative judgment and business operations the production handed over more few directions that we have been doing. We have some progress over the past couple months. For instance, within DesignKit, we already deployed our four agents, the e-commerce, try-on, 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 design kit, its e-commerce agent roughly has a 50% save rate, where users save at least one output per two outputs. And furthermore, once the agent capabilities are integrated into Kaipi more, user experience continues to improve. According to the latest figures, the penetration rate of Kaipi agents have increased to approximately 11%. At the same time, the robo-neo, from its official launch to current, it has topped the app stores across 26 countries and regions, demonstrating our globalization potential. Last but not least, as you may have noticed, we recently launched the Meitou CLI capabilities on our AI open platforms. Meanwhile, the first group of Meitou AI skills have been officially integrated into the open call ecosystem, system, covering personal and commercial use cases in the global photo and video industry. We focused on the core skills we hoped we could have from mature technologies around eight core capabilities, and we transformed them into reusable skills. Based on the Cloud Hub and ACLI, we can use Me2AI's capabilities for photo and video production. We believe as the OpenClaw 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 Xiaobai. In 2025, centered around the two cross-stages of productivity and globalization, our operational performance continued to improve with sustained user growth. As of December 2025, overmonthly active users grew 3.8% year-over-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 of productivity tools grew 67.4% year-on-year, primarily driven by DesignKids and Kaipi, among them. Paying subscribers from international markets doubled, benefiting from the rapid growth of WeMake. 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 output 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 continued to grow, primarily driven by products for leisure. 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 me to MAU reached a record high and attracted over 3 million new users from the European markets. They also helped me to up top the US iOS category chart for the first time. Driven by these visitors collectively, me to up top the overall App Store charts in 52 countries and regions and the category charts in over 110 countries and regions. With the rollouts globally for products, we observed in the second half of last year. Paying subscribers in the international market experience accelerating growth with the majority of new subscribers coming from high upper regions with mature subscription habits such as Europe, Americas, and East Asia. Recently, in the top 50 global GNI mobile apps list published by A16, we ranked first in the photo, video, and design category with four apps on the list, further solidifying our position as a globally leading AI photo and video application company. Looking ahead, we will continue to strengthen international markets. At the same time, we will continue to launch highly attractive features and optimize recommendation mechanisms, further enhancing users' thickness. 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, ARPA growth will also gradually become an important growth engine in the coming years. Before I begin sharing the communist 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 Building Industry. Under the IFRIs, this business has been classified as a discontinued operation. Therefore, unless otherwise stated, all financial figures and year-over-year comparisons for FY 2025 presented hereafter are on a continuing operation basis. In 2025, overall revenue grew by 28.8% year-on-year to R&B $3.86 billion. First, the largest revenue contributor of our core business of photo, video, and design products grew by 41.6% year-over-year to R&B $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 two 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% of overall photo, video, and design products revenue, respectively. Advertising next in 2025, revenue from this part was R&B $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 in our creative advertising firm in brand advertisements. Collaborating with international brands such as McDonald's and Visa, these creative solutions have effectively enhanced the social interaction between users and advertising. Lost revenue from others, which are mainly legacy and non-core businesses, was approximately R&B $62.11 million in 2025.

Moving to the cost side, the total cost in 2025 was $1.02 billion, a year-on-year increase of 42%. Specifically, the largest cost item was revenue-sharing fee to payment channels. The cost increases in line with revenue growth from photo, video, and design products, rising 43.5% year-on-year, approximately $620 million. The second largest cost was computing power and cloud-related costs, growing 16.4% year-on-year to $230 million RMB. The third is third-party API costs accounted only a middle single digit of total cost of sales. because we were able to use the vertical-specific models and fine-tuned 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 2.84 billion RMB, an 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, a change in the revenue mix. Because the advertisements 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 600 million RMB, 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 proportion 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 range we previously communicated to the market in our earnings. The R&D expenses were $950 million RMB, an increase of 3.8%. The relatively modest increase was primarily because the foundational model training costs decreased in 2025 for two reasons. Firstly, our Miracle Vision model foundational training was completed roughly in 2024. Secondly, as we're fully committed to the model agnostic strategy with a fine-tuned open-source models, proprietary vertical models, and third-party APIs, we delivered high-quality outputs 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 would 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 talent. Continuing to enhance our product capabilities and competitiveness and delivering the users' diverse needs with precision. Administrative expenses for 450 million RMB, a near-end increase of 14%.

Unprofitability. Driven by system revenue growth, gross profit grow 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 R&B 970 million, year-over-year increase of 64.7%. Under IFRS, our net profit attributable to owners of the company was around R&B 700 million in 2025, lower than around R&B 800 million in 2024. This change was primarily due to two factors. First, in 2024, we completed the dispose of all cryptocurrencies, generating a one-time gain of RMB 640 million, which elevated the prior year comparison base. Second, as we completed the issuance of convertible bounds to Alibaba at the end of 2025, we recognized a one-time non-cash expense of approximately RMB 510 million under IFRS. This expense did not result in any actual cash outflow. Both items are non-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 and corporation. On the business side, we are advancing collaboration across multiple fronts, including large model e-commerce and cloud computing supply assurance. In particular, on large models, we have deeply embedded the capabilities of Alibaba's open-source model series across multiple 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. Finally, 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 buy-back plan of up to HK$300 million, valid for one year. This reflects the company's confidence in its future development, as mentioned by Xinhong. The market would consider a 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 6 to 60. Thank you. Thank you all for participating today.