Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to Chaiji's second quarter 2026 earnings conference call. We will be hosting a question and answer session after management's prepared remarks. Please note that today's event is being recorded. With that, I will now turn the call over to the first speaker today, Ms. Alicia Guo, investor relations director of the company. Please go ahead, ma'am.

Thank you. Hello everyone and welcome to Chaiji's second quarter 2026 earnings call. With us today are Mr. Junjie Zhang, our CEO, Mr. Aiden Yin, our COO, and Mr. Aaron Huang, our CFO. The company's financial and operating results were released by the newswear earlier today and are currently available online. Before we continue, I refer you to our Safe Harbor Statement in the earnings rate price release, which applies to this call. Any forward-looking statements that we make on this call are based on assumptions as of today, and CHI does not undertake any obligations to update these statements. Also, this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release. which contains a reconciliation of non-GAAP measure to GAAP measure. With that, I will turn the call to our CEO, Mr. Junjie Zhang. Please go ahead, sir.

Hello, everyone. Welcome to Chagi's second quarter 2026 earnings call. We focus on doing everything the users care about. In the first quarter, we complete the organization, product, and marketing routes. In the second quarter, the external environment is a bit fluctuating for high-quality production. But this just verifies our judgment. The basis of the business cycle is still the recognition of users from the heart. The more complex the market, the more it has to return to its original nature. The more intense the competition, the more the focus of the user has to be on the mechanism. As we entered 2026, our strategy has stayed focused on the fundamentals.

of the business, centered on doing well by the things our consumers truly care about. In the first quarter, we completed a systematic review of our organization, product, and marketing roadmap, laying the foundation for high-quality growth. While the external environment saw some volatility in the second quarter, these changes have only reinforced our conviction. The ability to navigate cycles ultimately comes down to genuine consumer recognition. The more complex the market, the more important it is to return to the fundamentals. The more intense the competition, the more important it is to perfect every consumer touchpoint. All of our work in the second quarter was built around this logic. Not as reactive response, but as a more focused commitment to our proven path.

茶饮行业正在经历结构性的演变 供给端单权仙台茶赛道可以说是群雄逐鹿 核心玩家悉数入局 行业竞争格局已经从增量的共荣 现在转向了存量的博弈 竞争烈度极度上升 需求端代际价值 The whole values have been rediscovered. Brand narrative and logic must also be treated. The core logic of the past high-profile and big city has now been lost. What the users are pursuing is more self-expression, personality display, and return to the essence of psychological healing. So the brand should be the gentle starting point of harmony between the brand and the individual. With sincere, thoughtful, detailed, and delicate are all responding to users. At the channel end, there was a shift in consumer habits due to the delivery war. The apartment market has expanded significantly. It has now become one of the main battlefields of major brands. At the traffic flow end, the path of distribution is gradually diversifying and fragmented, requiring the brand to be more precise in tracking users' shifts and high-efficiency configuration resources.

The tea beverage industry is going through a structural change. On the supply side, the fresh milk tea category is now crowded with more players, and a competitive landscape has shaped from shared growth in an expanding market to competition over a fixed space, raising the intensity of competition. On the demand side, shifting generational value require brands to find new ways of telling their story. The old playbook built on high-profile positioning and loud marketing has lost its effectiveness. What consumers are looking for today is individual self-expression and a genuine sense of comfort. Brands need to become a gentle checkpoint that resonates with the individual, connecting through sincerity and responding to consumers with care. On the channel side, Intensified competition among delivery platforms is reshaping consumer behavior. The public domain has expanded meaningfully and become a key competitive arena for brands. Meanwhile, traffic distribution has become increasingly diversified and fragmented. Brands must closely track where consumers are moving and allocate resources efficiently.

In the face of these changes, we are mainly building our capabilities from four dimensions. First, to enhance core capabilities at the front desk. We will strengthen innovation capabilities. Go towards the positive and towards the negative. Fully demonstrate the creativity of brands and industries. At the middle desk, we are also exploiting our support capabilities. It is definitely not enough to rely on innovation. We also need strong organizational capabilities.

In response to these changes, we're building our capabilities across four dimensions. First, strengthening our core capabilities. At the front end, we're enhancing our innovation capabilities, striving for excellence. Embracing new directions and fully unlocking the creativity of our branding and product teams. In the middle office, we're reinforcing our support infrastructure. Innovation alone is not enough. We also need strong capabilities to mobilize resources and deliver our goals. We're therefore continuing to upgrade our operating system, channel capabilities, Consumer Operations and IT Infrastructure to support our growing scale.

第二,调整产品的结构。 我们在原鲜奶茶之外,积极在探索更多的品类。 比如二季度,大家看到上新的茶特调品类,Gilato品类的。 我们也希望可以通过更多尝试,更多产品的品类形态, 以满足用户日益多元的需求。 Second, broadening our product mix. Beyond loosely fresh milk tea, we're actively exploring additional categories.

including the Special Deals and Gelato recently launched in the second quarter. We want to test more product formats to meet our consumers' increasingly diverse needs. This requires us to continue reforming our supply chain capabilities and operating system to provide a solid foundation for category expansion.

Thirdly, we want to strengthen user interaction. On the one hand, through flexible and diverse Third, enhancing consumer reach. On one hand, we're using flexible and diverse content marketing to connect with consumers and expand our traffic funnel. On the other hand,

We are expanding our reach through penetration across more consumer scenarios.

第四是迭代价值主战,随着用户需求的变化,我们品牌的价值主战也需要顺应时代进行更迭升级。 通过价值共鸣和体验的沉淀,将用户真正留下来,这是根本。

Fourth, we're evolving our value proposition. As consumer needs evolve, our brand value proposition also needs to iterate with the times. Through emotional resonance and experience-driven retention, we aim to turn new consumers into loyal, long-term chai tea friends.

以茶惠友是我们始终不变的价值观,把茶做到极致。 We believe that the more complex the environment is, the more we have to return to the basics. Make good products, serve good users, and polish every store. As we innovate in product, marketing, and organization efficiency, Connecting through tea is our enduring value, perfecting the art of tea, bringing chai tea to the world, and building a premium brand with exceptional user experiences. This is our unwavering direction and standard.

We continue to build our capabilities towards this goal, with every step deliberate and grounded. We believe that the more complex the environment, the more important it is to return to the fundamentals, making great products, serving our consumers well, and refining every tea house. As we continue to deepen our capabilities across product innovation, Marketing Innovation, Organizational Efficiency, Consumer Operations, and Overseas Expansion. We're confident in achieving high-quality, sustainable growth in any market environment.

Last quarter, we announced a return of $1.5 billion. By August 24, we have already made a return of $0.3 billion. Last quarter, we announced a share repurchase program of up to $150 million. As of August 24th, we have executed approximately $30 million in repurchases. Through continued action,

We want to demonstrate the company's firm confidence in its long-term value and deliver a tangible return on our shareholders' trust.

Next, I will hand the call over to our COO, Aiden, who will walk you through the execution during the quarter. Thank you.

Thank you, Junjie, and thank you all for joining our earnings call today.

Let me begin by sharing our overall performance for the second quarter. Total revenue reached RMB 3,415 million, representing a 2.5% increase year over year.

and a 3.7% decrease quarter over quarter. GAAP net income was RMB 465 million, representing a net income margin of 13.6%, a substantial improvement from 2.3% in the same period last year. Non-GAAP net income was RMB 489 million. Non-GAAP net margin was 14.3%, stable on a sequential basis.

In the second quarter, the total GMV fell to RMB 76.6 billion, which is 33% lower than before. The Chinese region's GMV fell to RMB 71.56 billion, which is 10.5% lower than before. The overseas market performed well. The GMV reached RMB 5.04 billion, which is 18.2% higher than before, and 114.3% higher than before. It continues to be an important growth engine for us.

Total GMV for the second quarter was RMB 7,660 million, down 3.3% sequentially. Greater China GMV was RMB 7,156 million, down 4.5% sequentially. Overseas markets stood out, with GMV reaching RMB 504 million, up 18.2% sequentially. and 114.3% year-over-year, continuing to serve an important growth engine for us.

In this quarter, we continue to surround the high-quality growth strategy and continue to deepen the layout in four dimensions. First, the acceleration of new products. In this quarter, 17 new products will be put into stock. The number of new products is the highest in the year-over-year since history. The number of new products is the highest in the year-over-year Cha Te Tiao, Lemon Milk, Mocha, Gelato, etc. Among them, the two classic products of Yanyan Yanyan現任茶 successfully returned. Xiamen Beauty's first-hand Shouzhou store Japanese cup volume has reached 110 times. The cup ratio is nearly 20%. The first consumer membership penetration rate is also the highest for this year's new products. Another one, Xing Shi Shengshan, returned and led to a total growth of nearly 25% during the Qingming Festival.

This quarter, we continued to advance our high-quality growth strategy across four key dimensions. First, we accelerated new product launches. We launched a total of 17 new products this quarter, the highest number in a single quarter in our history. Our offerings have expanded from loose-leaf fresh milk tea to include Special Deals, Lemon Tea Latte, Matcha Latte, Gelato, and other series. Within Lu's Tea Fresh Milk Tea, we successfully brought back two classic products. Melon Oolong Tea Milk reached an average of 110 cups per teahouse per day in its first week, with a cup share of nearly 20%, and the highest first-time member penetration of any new product this year. The return of Longjing Tea Latte drove overall GMV up nearly 25% sequentially during the Tomb Sweeping Day period, outperforming last year.

品内拓展方面,茶特调走走序列精准匹配了周末休闲商品。 上行三日,电日均杯量达到124杯,带动了周末GMV涨幅达到双位数。 The first consumer member of Lemon Milk was increased by 45% on the first day of launch, and it has improved the productivity of the product. In addition, we combined the original tea with the original ice cream, and it has reached 190 stores in August. Gelato has received the welcome of a wide range of tea lovers. From the performance of the recent period, the performance of the four stores has significantly improved. On category expansion, the special deals designed for weekend leisure occasions averaged 124 cups per teahouse per day during its first three days and contributed to double the weekend GMB growth.

The launch of the Lemon Tea Latte also increased the first-time member acquisition by 45% during the launch period, underscoring for its effectiveness in attracting new customers. In addition, we piloted gelato in selected tea houses, combining loose tea leaves with Italian gelato craftsmanship. As of August, Gelato has been introduced in more than 190 tea houses and has been well received by our Chaiji friends. Recent pilot store performance indicates meaningful improvement, with average offline channel GMV increasing by more than 20%. Gelato has also demonstrated a strong ability to attract new customers reactivate dormant members and increase in-store traffic.

第二,营销持续构建高价值品牌内核。 深耕品牌质感与文化共鸣, 推进了一系列高影像力合作, 探索文化与茶影像结合的体验升级。 例如,6月份我们与阿拉亚西纪街达成战略合作, 并于7月开设了首个XG Magic茶空间, We have also joined hands with Hubei Provincial Museum to open the first national museum-hosted store, focusing on traditional culture and non-historical heritage, making tea and drinks a cultural heritage. The brand value is clearly conveyed in it, not only building emotional links with users, but also effectively transforming into member attraction and consumer connection. At the end of the second quarter, our total number of registered members has reached 25.7 billion, and the active member acquisition rate are still at more than 43%. The number of members who purchase more than twice has exceeded 78%.

Second, our marketing continues to build a high-value brand core, deepening brand character and cultural resonance through a series of high-impact collaborations, exploring upgrades at the intersection of culture and tea. In June, we formed a strategic partnership with the Oriya Theater Festival and opened our first Chaiji Imagine Tea Space in July. We also partnered with the Hubei Provincial Museum to launch the country's first museum-themed tea house Drawing on traditional culture and intangible cultural heritage to position tea as a meaningful cultural medium. By clearly communicating with our brand values and philosophy, we have strengthened emotional connections with consumers and translated that engagement into consumer acquisition and loyalty. As of the end of June, our total registered members reached 257 million. The repurchase rate among active members remained about 43%, while members who made two or more purchases accounted for more than 78% of total orders.

第三,组织效能持续释放。 本季度我们实现了Non-GAAP管理费用率为9.1%, 较去年同期的13.2%下降了4.1个百分点, 环比也下降了2.5个百分点。 The sales and marketing cost of this quarter has dropped from 10.6% in the same period last year to 8.8%, stabilizing the health condition of all numbers, and maintaining a basic consistent level of 8.6% in the first quarter. We optimize the cost efficiency, not simply compress the expenditure, but improve the efficiency of resource investment. We become faster, more accurate, and more consistent on the execution side, and many more.

Third, we continue to benefit from our more streamlined and efficient organizational structure. In the second quarter, our non-GAAP G&A expense ratio declined to 9.1% compared with 13.2% in the prior year and down 2.5 percentage points sequentially. Our non-GAAP sales and marketing expense ratio narrowed down to and Xiaofei Wang. We're executing faster with greater precision and stronger coordination while focusing our resources on an initiative that creates the most value for consumers.

第四,国内门联网络以质量为先,海外扩张保持稳健节奏。 截止二季度末,全球门联总计7639家,较上季度末竞争108家,其中中国区7240家,海外399家。

Fourth, we continue to prioritize high-quality growth across our tea house network while advancing our tea house expansion. As of the end of June, our global network totaled 7,639 tea houses representing a net increase of 108 locations from the prior quarter. This includes 7,240 tea houses in Greater China and 399 overseas. We're now present in eight overseas markets, including Singapore, Malaysia, Thailand, Indonesia, the Philippines, Vietnam, and the United States and South Korea.

We entered the Korean market for the first time this quarter. The total sales volume of the first three days of the three-day opening of Seoul was more than 16,000 times. The download time of the app before the opening was more than 46,000 times. On May, the volume of the Japanese military was reached by 1648 times. This has fully verified the regional competitiveness and attractiveness of Bawang Tea's brands. During the World Tea Day, we updated the new products of Boya in Asia. The first 15 days, This quarter marked our first entry into South Korean market. Our three Seoul tea houses sold over 16,000 cups combined in their first three days. With pre-opening app downloads,

exceeding 46,000. Average daily cup volume per teahouse reached 1,648 in May, demonstrating the strong regional appeal and competitiveness of the Chai Ju brand. During World Tea Day, we introduced new offerings under the Boya Tea Latte series across the Asia-Pacific region. The series increased average cups sold per teahouse across the region by 52% during its first 15 days. In Vietnam, Thailand, and in Indonesia, the Boya Tea Latte Series accounted for more than 30% of cup volume, underscoring the cross-market appeal of our core product offerings.

Looking forward to the future, our direction is clear and firm. As for the products, we maintain a steady up-and-coming rhythm, continue to expand new products, and promote sugar, chicken breast milk, etc. We will continue to optimize the member system and user experience of the service unit. At the doorstep, we insist that the quality of the Chinese area is limited, and overseas we do not exaggerate. At the same time, we carry our equipment to ensure the quality of the product and improve the operation efficiency. At the space environment, we continue to upgrade the doorstep difference design, allowing the third space Looking ahead, we remain focused on a clear set of priorities. On products, we will maintain a consistent launch cadence.

expand into new categories and continue enhancing ingredients, including sugar and dairy bases, to lead the development of healthier tea beverages. On service, we will further optimize our membership program and overall consumer experience. Across our tea house network, We will prioritize high-quality growth in Greater China while expanding overseas in a disciplined manner. We will also upgrade equipment to help ensure product consistency and improve operating efficiency. On experience, we will continue to differentiate our tea houses through thoughtful design, creating a third space where consumers genuinely want to spend time. Finally, on brand, we will stay closely aligned with market trends and continue elevating the tea experience through brand enhancements, consistent product quality, and improve consumer experience, and an involving training system. That concludes my remarks. Now, let me turn the call over to our CFO, Aaron, who will walk you through the detailed financials. Thank you.

Thank you, Aiden, and hello everyone. Thank you for joining our earnings call. Before we begin, please note that all amounts are in RMB and all comparisons are on a year-over-year basis, unless otherwise stated. As Junjie and the agent outlined, the second quarter presented a softer macro backdrop and a more challenging competitive landscape across the industry, and our results reflect that environment. What I want to emphasize is that even as top-line growth moderated, we maintained the operating discipline we established earlier this year, and our profitability held largely intact. We view this as evidence that our cost structure and organizational efficiency gains are durable, not one time, and that they give us a stable foundation to keep executing our strategy priority regardless of the external environment. With that in mind, let me walk through the portal in detail. Total GMV was 7,660.3 million in the second quarter, down 3.3% sequentially from 7,917.8 million in the first quarter. As of June 30, 2026, our tea house network totalled 7,639 locations across Greater China and overseas. up 8.5% from 7,038 a year ago. Of these, 6,756 were franchisee teahouses and 883 were company-owned teahouses. In Greater China, average monthly GME per teahouses was 338,259 in the second quarter. compared to 356,080 in the first quarter. Meanwhile, overseas, total GMV growth 114.3% year-over-year and 18.2% quarter-over-quarter, from 426.4 million in the first quarter to 504.0 million in this quarter. Overseas markets remain our clearest growth engine. Since the GMV growth in Greater China improved by 7% points year-over-year and was broadly flagged sequentially. Overall, same-store GMV growth improved by 6.9% points from a year ago and remained relatively stable compared with the prior quarter. On the revenue line, our net revenues increased by 2.5% year over year to $3,414.6 million in the second quarter. Net revenue from franchisee to tea houses were $2,474 million, representing 72.5% of total net revenue. compared to $3,020.7 million a year ago. Net revenue from company-owned tea houses were $940.6 million, up 202.2% from $311.2 million a year ago. mainly as a result of continued development of the company-owned tea houses network across Greater China and overseas markets. Turning to margin, our gross profit calculated by excluding cost of material, storage, and logistics from net revenue, reached $1,843.4 million this quarter. resulting in a gross margin of 54% flat year over year. Our organizational enhancements drove a meaningful year-over-year decline in operating expenses. Share-based compensation expenses totaled $23.9 million in the quarter, and they reflect our focus on retaining and motivating employees while aligning their interests with those of shareholders. To provide greater clarity on underlying operational performance, we will continue to reference non-GAAP operating results, with full recommendations available in our earnings release and Form 6-K. Operating income was $524.7 million, representing an operating income margin of 15.4%, increased significantly from 3.2% in the same period of a year ago, benefiting from our strategic organizational adjustment and the continued disciplined cost management. Excluding share-based compensation expenses, Non-GAAP operating income was $548.6 million, representing a 16.1% margin compared to a 17.1% margin in the first quarter of 2026. Operating costs for company-owned tea houses were $566.8 million, up 207.8% from $184.1 million a year ago, consistent with the continued build-out of our company-owned network. Other operating costs decreased by 33.3% to 115.8 million, largely due to a decrease of RMB 30.2 million in payroll expenses driven by organizational structure enhancement and headcount optimization. On a known gap basis, other operating costs account for 3.4% of revenues compared to 4.7% a year ago and 4.3% in the first quarter. Sales and marketing expenses for the quarter were $301.5 million, down 21.7% from $385 million a year ago, mainly due to a more streamlined branding and marketing team, together with improved efficiency in advertising placement and precision marketing. On a non-GAAP basis, sales and marketing expenses represented 8.8% of revenue compared to 10.6% a year ago and 8.6% in the previous quarter General and administrative expenses reached $334.5 million down 64.6% year-over-year from $944.6 million. The decrease primarily reflected low share-based compensation expenses, reduced payroll, facility, and professional service costs, and absence of IPO-related expenses incurred in the prior year period. On a non-GAAP basis, G&A expenses represented 9.1% of revenues compared to 13.2% in the same period a year ago and 11.6% in the first quarter. Income tax expenses represented 20% of income before income tax, compared to 62.1% a year ago and 21.2% in the first quarter. The year-over-year normalization primarily reflecting a reduced impact from share-based compensation expenses. Notably, we continued to deliver Profitability on both GAAP and the non-GAAP basis, extending our track record to 14 consecutive quarters of positive net income. GAAP net income was $464.8 million Non-GAAP net income excluding $23.9 million of share-based compensation expenses was $488.7 million with a non-GAAP net margin of 14.3% compared to 18.9 a year ago and a flat sequentially. For the second quarter, Basic and Diluted Net Income Per Ordinary Share was RMB 2.44 and RMB 2.42 respectively. On a non-GAAP basis, Basic and Diluted Net Income Per Ordinary Share was RMB 2.57 and RMB 2.54 respectively. Turning to liquidity, We ended the quarter with $6,795.5 million in cash and cash equivalent restricted cash and time deposits. This reflects the impact of our share repurchase program commencing on June 1, 2026 alongside our continued investment in Tea House Network. We maintain a healthy balance sheet that gives us flexibility to keep executing our strategic priorities while returning capital to shareholders. As we move through the remainder of 2026, we will execute against our new product pipelines, enhancement memberships, and the service experience. and maintain a focus on quality as we expand our tea house network in Greater China and overseas. Our confidence in the company long-term value remains firm and we are committed to return value to our shareholders in a meaningful way. With that, we are ready to begin Q&A.

Thank you, Aaron. We received a number of questions ahead of today's call. We will now address some of the key topics raised. Our first question relates to the outlook of the second half of the year. How does management view the second half of the year amid the current competitive market environment? Our CEO Junjie will address this question.

好的,谢谢大家的提问。正如我们刚刚分享的, The current market environment has indeed undergone profound changes. The competition in the industry is getting more and more intense. But we still think that the more complex the market, the more it highlights the strategic value of high-quality growth. We will define 2026 as the year of adjustment and corporate stability. In the first quarter, we completed the systematic processing of organizational structure adjustment and growth strategy. Thanks for the question. As we just shared, the market environment has changed significantly and competition in the industry

have become more intense. But we have always believed that the more complex the market becomes, the more important high-quality growth is. We see 2026 as a year of adjustment and stabilization. In Q1, we completed the organizational restructuring and conducted a systematic review of our growth strategy. In Q2, We have started to explore areas such as new product category expansion and user experience upgrades. Our core objective this year is not to pursue rapid expansion in scale, but to build a stronger foundation for sustainable growth in the next stage.

进入到下半年,我们的工作将更加聚焦和务实, 沿着调整与探索的主线, In the second half, our work will become more focused and practical

along the direction of adjustment and exploration. We'll put into execution the results and learnings from the first half, one by one. No matter how external environment changes, we'll stay focused on the fundamentals, making good products and doing things that matter most to our members.

We remain confident in steady development in the second half.

Our next question relates to theme store trends Could you share how same stores have trended so far in the third quarter? Our COO Aiden will address this question.

Thank you for the question. In the third quarter of the year, we saw a positive return signal. In July, the same store has shown a low number of sales. In the first half of the year, the price dropped significantly. According to the current data, the same store is expected to achieve a short-term return in August. This trend of improvement shows that the performance of our previous strategic adjustment is gradually coming to an end.

Thanks for the question. Since the start of Q3, we have seen positive signs of recovery. Same-store sales in July showed a low single-digit decline, representing a meaningful improvement from the first half. Based on trends so far, we expect same-store sales in August to turn positive year over year. We believe the improvement reflects that the benefits of our earlier strategic adjustments are gradually coming through.

In general, the first is the continuous contribution of new products. In the third quarter, we still continue the upward trend of the second quarter, and launched many new products such as champagne, palatine, and lemon milk, and returned the popular large-scale products such as Yi Ji Hong Cheng and Qing Mo Guan Yi. At the same time, due to the loss of consumption of limited tea in the third quarter, we have recently launched new products such as gelato and tea tea, which are more suitable for the summer high-temperature weather and effectively attract

There are a few drivers behind this trend. First, our new product strategy continues to contribute. In Q3, we maintained the pace of new launches from Q2, introducing several new products, including Guava Peach Iced Tea and Lemon Tea Latte, while also relaunching popular bestsellers such as Lychee Black Milk Tea and Tieguanyi Milk Tea. At the same time, since Q3 falls in peak season for tea consumption, recently launched products such as gelato and special deals are also better suited to the summer heat, effectively driving in-store traffic and overall performance.

其次是门店服务体现的持续因应,我们始终强调回归本质,今天以来持续在门店端打磨服务细节,提升出品效率,强化用户体验。

Second, we continue to refine in-store service and customer experience. We have consistently emphasized a return to fundamentals, and throughout this year, we have continued to refine service details at the tea house level, improving preparation efficiency and strengthening customer experience. We're translating these seemingly small details into real, tangible outcomes in the form of repeat purchases and world of miles.

Overall, the business improvement trend in July and August makes us more confident about the same trend in the second half of the year. Although there is uncertainty in the external market environment, our product reserves are more solid and our business direction is more firm. We believe that this hot and warm trend has continuity.

Overall, the improving trends in July and August gave us greater confidence in same-store performance for the second half of the year, while uncertainty remains in the external environment. Our product pipeline is stronger and our strategic direction is clearer, and we believe this recovery is sustainable. The last question relates to payout. Does the company have any further payout plans? Our CFO Aaron will address this question. Thanks for the question. Shareholder returns have always been one of the key considerations in our capital allocation strategy. In the fourth quarter of last year, we paid a special dividend of 177 million U.S. dollars, which reflects our commitment to returning value to shareholders.

Entering the year of 2026, as the organization's price optimization and operating efficiency continue to improve, Our free cash flow is also healthy. This is because we have explored a more common and sustainable shareholder return mechanism to establish a solid foundation. At present, the board of directors and management are combining the long-term strategic planning of the company, the financial needs of domestic and foreign business development, and the change in market environment to actively and thoroughly study the diversified return plan, including the regular bonus debt. We fully understand that while maintaining high-quality growth, it is extremely important for shareholders to share the company's operating results. Therefore, continuing to increase the level of shareholding is our undeniable direction. The management team is currently discussing the distance program. We will report the distance situation to the board of directors at any time and disclose the situation to the market after its approval.

Entering 2026, with the organizational optimization and continued improvement in operating efficiency, our free cash flow has remained healthy. This provides a solid foundation for us to explore a more regular and sustainable shareholder return mechanism. Currently, the board and management are actively and prudently reviewing different options, including regular dividends, while considering our medium- to long-term strategy, funding needs for tea house development, and changes in the market environment. We fully understand that it is important for shareholders to share in the results of the company while we maintain high-quality growth. Therefore, continuously enhancing shareholder returns remain a firm direction for us. Management team is currently evaluating the specific details. We will bring a proposal to the board at the appropriate time, subject to the board's review and approval, provide an update to the market. That concludes today's Q&A session. If you have any further questions, please feel free to contact us. Thank you all for your time today. We look forward to reconnecting on our next call. Have a wonderful day.

This concludes today's event. Thank you for participating. You may now disconnect.