QuantaSing Group's Q4 2025 Earnings Call: Contradictions Emerge on Revenue Growth, Pop Toys Strategy, and Strategic Shifts

The above is the analysis of the conflicting points in this earnings call

Date of Call: September 17, 2025

Financials Results

• Revenue: RMB 617.8M; Pop Toy revenue RMB 65.8M (10.6% of total). Segment YOY: Individual Online Learning RMB 456.9M vs RMB 906.7M; Enterprise Services RMB 35.7M vs RMB 56.6M; Consumer RMB 50.5M vs RMB 33.3M; Others RMB 8.9M vs RMB 3.5M.
• EPS: RMB 0.65 per diluted share (GAAP); adjusted diluted EPS RMB 0.67.
• Gross Margin: 75.7%, compared to 85.9% in the same period last year.
• Operating Margin: Approximately 20.0% (operating income ~RMB 123.4M on RMB 617.8M revenue); no prior-period comparison provided.

Guidance:

• Pop Toy revenue expected at RMB 100–110M in Q1 FY2026.
• Pop Toy revenue expected at RMB 750–800M for FY2026.
• Plan to open 3–5 flagship stores by December (offline expansion).
• International expansion (SE Asia, North America) progressing faster than expected.
• Considering divestiture of non-Pop Toy businesses; details upon completion.
• May update annual forecast next quarter based on business momentum.

Business Commentary:

* Pop Toy Business Growth: - QuantaSing Group Limited's Pop Toy business contributed RMB 65.8 million in revenue for Q4, representing the core growth engine for the company. - The growth in this segment was driven by strong market validation across the IP portfolio, unique product designs, and emotional storytelling that resonated with consumers, particularly young and digitally savvy ones.

• Strategic Restructuring and Focus:
• The company announced its potential business restructuring to divest non-Pop Toy businesses, aiming to focus exclusively on its high-growth Pop Toy segment.

• The decision to restructure was made to concentrate resources, talent, and capital on the Pop Toy market, where the company sees substantial growth opportunities, while ensuring a smooth continuation of the established non-Pop Toy business.

• Financial Performance and Profitability:

• Total revenue reached RMB 617.8 million, with a net income of RMB 108 million, achieving a strong net profit margin of 17.5%.

• The improvement in financial performance was attributed to the strategic transformation from traffic-driven growth to a more sustainable product-focused business model, which led to a significant reduction in sales and marketing expenses.

• Global Expansion and Channel Development:

• The company's international expansion momentum was strong, with significant breakthroughs in North America and Southeast Asia through independent e-commerce sites and flagship stores on platforms like TikTok and Shopee.
• The expansion was supported by established wholesale networks and initiated self-operated stores, aiming to enhance brand visibility and deepen brand engagement in new markets.

Sentiment Analysis:

• Company delivered RMB 617.8M revenue and RMB 108M net income (17.5% margin) with RMB 1,040.9M cash/investments. Sales & marketing expenses improved to 47.6% of revenue from 69.2% in the prior quarter. Pop Toy revenue was RMB 65.8M (10.6% of total) with guidance of RMB 100–110M for Q1 FY26 and RMB 750–800M for FY26. Management plans focused investment (3–5 flagship stores by year-end) and potential divestiture of non-Pop Toy businesses.

Q&A:

• Question from Yijing Cai (Citigroup Inc., Research Division): What is the recent Pop Toy revenue run rate (July–September) and can you quantify the confirmed order backlog?
  Response: WAKUKU growth is explosive and SIINONO surpassed 300k boxes; delivery rate on ordered products is under 50%, implying a large pipeline and strong visibility, with more details next quarter.

• Question from Yijing Cai (Citigroup Inc., Research Division): How should we view Letsvan’s valuation and the structure/vesting of the 18M share consideration?
  Response: Founder Zhan took shares only: ~60% as newly issued shares and ~40% as long-term incentives vesting over ~8 years; other holders were bought out in cash at a valuation not exceeding RMB 1B; more details after settlement.

• Question from Yijing Cai (Citigroup Inc., Research Division): Are Pop Toy guidance targets conservative, and when will toy revenue surpass education?
  Response: Guidance is prudent; performance is outpacing plans driven by hit IPs, channel buildout, and international traction; restructuring is underway and management may raise forecasts next quarter; no timing given for surpassing education.

• Question from Yijing Cai (Citigroup Inc., Research Division): On restructuring, are you pursuing a sale of the education segment and what does the pipeline look like?
  Response: Yes; the pipeline is very strong, reflecting confidence in Pop Toy performance and the ongoing restructuring process.

• Question from Liping Zhao (China International Capital Corporation Limited, Research Division): What is your Pop Toy product strategy and category roadmap, and how will the Yuehua collaboration work?
  Response: IP launches are scheduled through next year; new smaller figures and plush (including mini versions) debut in Q4; JV with Yuehua pairs QSG’s IP/design/supply chain with Yuehua’s entertainment promotion to co-create and operate exclusive IPs.