Operator: Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to Chargy's first quarter 2026 earnings conference call. At this time, all participants are in listen-only mode. We will be hosting a question and answer session after management prepared remarks. Please note that today's event is being recorded. With that, I'll now turn the call over to the first speaker today, Ms. Alicia Guo, Investor Relations Director of the company. Please go ahead, ma'am.
Alicia Guo: Thank you. Hello, everyone, and welcome to Chagi's first 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 NewsWare earlier today and are currently available online. Before we continue, I refer you to our safe harbor statement in the earnings release, which applies to this call. Any forward-looking statements that we make on this call are based on assumptions as of today, and CHAGI 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 a GAAP measure. With that, I will turn the call to our CEO, Mr. Junjie Zhang. Please go ahead, sir.
Junjie Zhang: Hello, everyone.
Alicia Guo: Welcome to Chagi's first quarter 2026 earnings call. As we enter 2026, our strategic direction is clearer than ever and our execution is more focused. The reflections and adjustments of the past several months have allowed us to develop a way of working that is closer to our consumers and more committed to long-term value creation.
Junjie Zhang: First of all, regarding the overall strategic focus, First, on our strategic priorities,
Alicia Guo: In 2026, we're dedicating all our efforts to operations, focusing on executing every detail that truly matters to our consumers' wealth. We believe that the ability of a company to navigate cycles ultimately depends on genuine consumer recognition. Therefore, our goal this year is very clear, to perfect every single consumer touchpoint.
Junjie Zhang: Next, organizational adjustment. The overall efficiency has been significantly improved. In the past few seasons, we have actively optimized the organization. Currently, it can be clearly stated that these adjustments have brought us a lot of real-time changes. The configuration of resources has become more precise, and the implementation of strategies has become more efficient. The cohesion and combat power of the team surrounding the main business has also been significantly enhanced. This has laid the foundation of persistence for us to continue to achieve high-quality growth.
Alicia Guo: Second, our organizational adjustments are delivering results, and overall efficiency has improved significantly. Over the past few quarters, we have proactively optimized our organization. These changes have delivered tangible results. Resource allocation is more precise. Decision making and execution are more efficient, and our team's cohesion and effectiveness around our core mission have strengthened significantly. This has laid a solid foundation for us to continue achieving high-quality growth.
Junjie Zhang: The third point is that the product and marketing plans have been clearly defined. The execution center has clearly confirmed that we have completed a set of clear, complete, and down-to-earth product planning and marketing guidelines. Our starting point is always around the needs of customers. and not from external competition. Next, all work should focus on product, service, environment, experience, and value. Every store, every cup of tea, and every interaction should be in place. This is the center of our work.
Alicia Guo: Third, our product and marketing plans are now clearly defined, and our execution priorities are highly focused. we have completed a comprehensive and actionable roadmap for both products and marketing. Our starting point has always been consumer needs rather than external trends. Going forward, all of our work will center it on five dimensions, products, service, environment, experience, and value proposition. Making every tea house, every cup of tea, and every interaction consistently well-executed is our only true priority.
Junjie Zhang: With the return of the business in the first quarter and the growth of the documents, the operating efficiency continues to improve. From the perspective of the capital market, we believe that the company's current stock price has been severely underestimated and will not reasonably reflect its long-term development prospects. Therefore, on behalf of the company and management, I would like to make a clear commitment. As our business returned to steady growth and operational efficiency continued to improve in the first quarter,
Alicia Guo: from a capital market perspective we believe our current share price is significantly undervalued and fails to properly reflect our long-term development prospects at this point on behalf of the company and the management team i would like to make a clear commitment our board has approved a share repurchase program authorizing us to repurchase up to a $150 million U.S. dollar ADS during a 12-month period as a concrete way to demonstrate our confidence and reward shareholders' trust.
Junjie Zhang: Finally, I would like to emphasize once again that the company's strategic direction is still very clear. The team has also begun to operate efficiently. The overseas layout is continuously advancing. Chaqi is entering a mature, stable, and sustainable stage of high-quality development.
Alicia Guo: 我们对未来的每一步都是充满信心的。 Finally, I want to reiterate, our strategic direction is clear, and our team is operating with high efficiency. Chagi is entering a mature, stable, and sustainable phase of high-quality growth. We're confident in every step we take forward toward the future.
Junjie Zhang: 以上是我们整体的战略方向。 Next, our COO will give you a detailed report on the specific progress of the implementation of the first quarter. Thank you.
Alicia Guo: That concludes our strategic direction. Next, I will hand the call over to our COO, Aiden, who will walk you through the specific operational progress in the first quarter. Thank you.
Aiden Yin: Thank you, Junjie. I would also like to thank everyone for attending our press conference.
Alicia Guo: Thank you, Junjie, and thank you all for joining our earnings call today.
Aiden Yin: First of all, I would like to share the overall performance of the first quarter. The total income of RMB 35.46 billion, the same growth rate of 4.5%, the return growth rate of 19.2%, and the interest rate reached 55.6%. The net profit of Nungap is RMB 5.07 billion, the return growth is more than 4 times, and the net interest rate of Nungap has returned to 14.3%. The total GMV has reached RMB 79.18 billion, with a return growth of 8.1%. In China, the GMV has returned to 7.8%. The overseas GMV has returned to 14.6%, with a return growth of 139%. From the above data, it can be seen that the overseas market is becoming an increasingly important growth engine.
Alicia Guo: Let me begin by sharing our overall performance for the first quarter. Total revenue reached RMB 3,546 million, representing a 4.5% increase year-over-year and a 19.2% increase quarter-over-quarter. Gross margin came in at 55.6%. Non-GAAP net income was RMB 506.7 million, increasing more than four-fold sequentially. Non-GAAP net margin improved to 14.3%. Total GMV reached RMB 7,917.8 million, up 8.1% quarter over quarter. Greater China GMV grew 7.8% sequentially, while overseas GMV grew 14.6% sequentially and 139% year over year. It is clear that overseas markets are becoming an increasingly important growth engine.
Aiden Yin: The focus of the government is on continuous improvement of our operating quality. China's total power consumption has improved by 9.4% compared to the previous year. The total total power consumption has also improved by 9.5% compared to the previous year. We focus on the strategy of using the value of users to test the efficiency. The only strategy is this. This quarter,
Alicia Guo: More importantly, our operating quality continues to improve. Same-store GMV growth in Greater China improved by 9.4 percentage points sequentially. And overall same-store sales, same-store GMV growth improved by 9.5 percentage points sequentially. These results show that our strategy of focusing on consumer value is working in practice. This quarter, we concentrated our efforts on four key areas to drive performance recovery.
Aiden Yin: First, organization efficiency. After the first cycle of continuous optimization, our organization efficiency achieved a positive result. While the overall cost reduced, the implementation stage was pushed faster, more accurate, and more consistent. On the one hand, organization adjustment significantly improved the implementation efficiency. On the other hand, The goal is more clear and firm. From headquarters to the doorstep, the team has formed a high-level consensus on implementation. The limited resources will be focused on the most capable user value. From the data, the management cost of Nungap has decreased by 8.1% to 11.6%. The sales and marketing cost of Nungap has decreased by 3.6% to 8.6%.
Alicia Guo: First, our improved organizational efficiency. Through continued optimization in the first quarter, our organizational efficiency achieved a qualitative leap, making execution faster, more precise, and more coordinated, while overall expense ratio declined. On one hand, organizational adjustments improved execution efficiency. On the other hand, our goals became clearer and more resolute. with teams from headquarters to tea houses forming a strong consensus on executing priorities, channeling limited resources into activities that best create consumer value. In the first quarter, our non-GAAP GNA expense ratio declined by 8.1 percentage points, sequentially to 11.6%, and our non-GAAP sales and marketing expense ratio declined by 3.6 percentage points, sequentially to 8.6%.
Aiden Yin: Second, product expansion. In the first quarter, we have launched 12 new products. More importantly, our product line-up is expanding, gradually covering the tea field and tea specialties series. Product innovation rate and consumer recognition continue to increase. In February, Samsung's big bubble sales performance was excellent. The first week's GMV and cup war contribution ratio, the first week's recovery rate, All kinds of indicators, such as stargazing, are higher than historical new products. In this series of activities, the performance of Baiwu Hongcheng in this series has become a strong attraction. In addition, Yunjiao Camelot, with its unique caramel flavor and sweetness DIY participation, creates a distinct memory point and differentiates advantages, and is widely welcome. It shows the potential of becoming a long-term commercial unit.
Alicia Guo: Second, our product expansion. In the first quarter, we launched a total of 12 new products. More importantly, our categories are broadening, gradually extending into tea lattes, special deals, and others. Our product innovation and consumer recognition continues to improve. The Da Hong Pao series launched in February delivered strong performance with first week GMV contribution, cup contribution, repeat purchase rate, and direct to new customer acquisition, all exceeding historical averages for new product launches. During the Tianwen campaign, the products of Da Hong Pao Tea Latte from this series saw especially strong sequential growth and became an important growth driver. Caramel Pour Latte with its distinctive caramel flavor and interactive sweetness customization created a strong impression among consumers and was a clear point of differentiation. The product was well-received by our consumers and showed strong potential to become a long-term bestseller.
Aiden Yin: Thirdly, the growth of marketing. In terms of marketing, we have launched a series of early and late-season activities and successfully passed the early and late-season consumer scene. Since the beginning of the early-season activity, the share price has grown by more than half. Clearer and more effective marketing execution.
Alicia Guo: On the marketing side, we introduce a morning buy one get one free campaign. and launched a low-caffeine beverage section for the evening, successfully expanding consumption scenarios in both the early morning and late evening. Since the campaign began, the share of cuts sold in the morning has doubled. At the same time, we continue to strengthen our private domain traffic through in-store promotions. As a result, the share of orders from our mini-program channel and the share of new customers both improved, during the campaign period. This demonstrates steady progress in both private domain traffic conversion and new customer acquisition.
Aiden Yin: In the fourth year, the door-to-door network prioritizes quality. We pay great attention to customer experience and brand standards, and take the initiative to break the chain. We focus on single-point business quality and fully promote door-to-door upgrades. At the same time, the new business model is fully activated. Fourth.
Alicia Guo: Growing our tea house network with quality remains our top priority. We place great importance on customer experience and brand standards, so we have deliberately slowed our pace of tea house expansion and focused on improving operating quality while comprehensively upgrading our tea houses. At the same time, our new business model has been fully implemented, further aligning the interests of the company and our franchisees. We believe that only when every tea house delivers a consistent brand value can Chaiji truly earn consumer long-term trust. At the end of the first quarter, our global tea house network totalled 7,531 locations, including 7,157 in Greater China and 374 overseas.
Aiden Yin: Our overseas markets continue to expand steadily.
Alicia Guo: Currently, our tea house presence includes 36 in Singapore, 221 in Malaysia, 32 in Thailand, 41 in Indonesia, 13 in Philippines, 22 in Vietnam, and 9 in the United States. Our overseas tea house network maintains a steady growth pace with operating performance in line with our expectations.
Aiden Yin: Finally, I would like to return to the strategic direction that Junjie just mentioned. The core of our strategy is to make every little thing that concerns users a priority. Whether users really agree or not depends on what we say and what we do. In the last quarter, our total number of members has reached 248 million. The number of active members is close to 50 million, which is more than 11% compared to the growth of the fourth quarter. What makes us feel more at ease is that the number of active members The recovery rate remains at 42.3%. More than twice the number of members who purchased the product contributed more than 76% of the order volume. Every repurchase is a true recognition of the products and experiences of Cha You. 2.48 billion Cha You repurchased once to tell us that they trust this brand and are willing to return to our store again and again. This is our most precious asset. It is also the most valuable asset Finally, let me return to the strategic direction that Jingjie laid out earlier.
Alicia Guo: Our strategic core is to perfect every small detail that consumers truly care about. Whether consumers genuinely recognize this is not measured by what we say, but by what they do. At the end of the first quarter, the number of our total registered members reached 248 million, with nearly 50 million active members, an increase of over 11% quarter over quarter. What gives us even greater confidence is that the repurchase rate among active members remained stable at 42.3%, and members who made two or more purchases contribute over 76% of total orders. Every repeat purchase is generally recognition from our strategy friends. 248 million strategy friends are telling us through their repeated purchases that they trust this brand and are willing to return to our tea house again and again. This is our most valuable assets and our strongest foundation for navigating market cycles. Our strategy is clear. Our execution is delivery.
Aiden Yin: and consumer trust is our best answer. In terms of value, we insist on the purchase of goods and users to form a new public. In terms of store operation, China continues to prioritize quality. Overseas, we do not expand.
Alicia Guo: Looking ahead, our direction remains unwavering. On product, we will maintain a steady launch cadence while continuing to expand into new categories such as special deals. On service, we will continue to optimize our membership system, and consumer experience. On environment, we will continue to upgrade tea house differentiation through design. On experience, we will make the third place a place where consumers genuinely want to spend time. On brand value proposition, we will continue to embrace the spirit of connecting through tea, creating emotional resonance with our customers. On tea house operations, we will continue to prioritize quality in our greater China market while steadily expanding overseas.
Aiden Yin: That concludes my remarks.
Alicia Guo: Now let me turn the call over to our CFO, Aaron, who will walk you through the detailed financials. Thank you.
Aaron Huang: Thank you, Aiden. And hello, everyone. Excuse me for my voice. Thank you for joining our earnings call. Before we begin, please note that all amount in RMB and all comparisons are on year-over-year basis, unless otherwise stated. As Junjie and Aidan just outlined, 2026 was about disciplined execution, a sharper operating focus, and a visible progress in restoring growth quality. I'm delighted to say that this strategy is already translating into improved financial performance. For the first quarter of 2026, our total GMV was 7,917.8 million and 8.1% sequential increase from 7,322.9 million in the fourth quarter of 2025. As of March 31st, 2026, our tea house network totalled 7,531 locations across Greater China and overseas, up 12.7% from 6,681 a year ago. Of these, 6,741 were franchisee tea houses and 790 were company-owned tea houses, reflecting the continued conversion of selected locations in the company-owned store as a part of a networking optimization strategy. In Greater China, average monthly GMV per tier house was 356,080 RMB in the first quarter, representing a quarter-over-quarter increase of 5.5% from 337,358 yuan in the fourth quarter of 2025. At the same time, overseas total GMV for the first quarter grew 139% year-over-year and 14.6% quarter-over-quarter to 426.4 million. On the revenue line, Our net revenues for the first quarter of 2026 were $3,546 million compared to $3,392.7 million in the same quarter of 2025 and up 19.2% sequentially. Net revenue from franchisee tea houses were $2,743.9 million representing 77.4% of total revenue compared to $3,149.9 million a year ago and up 12.7% sequentially. Net revenue from company-owned tea houses were $802.1 million, up 230.4% from $242.8 million a year ago. mainly as a result of continued development of company-owned tea houses network across greater China and overseas markets. Turning to margin, our gross margin, our gross profit, calculated by excluding cost of materials, storage, and logistics from net revenue, reached 1,971.5 million this quarter, resulting in a gross margin of 55.6%. This marks an improvement from 53.1% a year ago. This improvement was primarily supported by increased revenue contribution from company-owned tea houses, which generate a higher gross margin. Operating expenses remained well controlled relative to the scale of business. Share-based compensation expenses this quarter were $59 million, reflecting our commitment to long-term employee engagement and aligning their goal with shareholders. To provide greater clarity on underlying operational performance, we will continue to reference non-GAAP operating results with full reconciliation available in our earnings release and the Form 6-K. Operating income was $547.2 million, representing an operating income margin of 15.4%, marking a sequential turnaround from an operating loss in the previous quarter. Excluding share-based compensation expenses, non-GAAP operating income was $606.2 million. representing a 17.1% margin compared to a 1% margin in the previous quarter. This sequential improvement reflects both the stronger operating leverage and the benefit of organization adjustment and the strategic investment we have made to support future growth. Operating costs for company-owned tier houses were $497.2 million. up 216.6% from $115 million a year ago. As of March 31st, 2026, we operated 790 company-owned tea houses, up from 615 in the fourth quarter of 2025 and 191 in the first quarter of 2025. Other operating costs decreased by 7.8%, to $159 million, largely due to lower payroll expenses driven by organizational restructuring and the continued headcount optimization. On a non-GAAP basis, other operating costs account for 4.3% of revenue, compared to 5.1% a year ago. Sales and marketing expenses for the quarter were $306.2 million, up 2.3% from $299.3 million a year ago, mainly due to our investment in strategic brand activities, new product launch, and marketing campaigns. On a non-GAAP basis, sales and marketing expenses representing 8.6% of revenue compared to 8.8% a year ago and 12.2% in the previous quarter. General and administrative expenses reached $462 million, up 30.9% year-over-year from $352.8 million. The increase in G&A is primarily reflecting our continued investment in global corporate infrastructure as we've further expanded our international business footprint. On a non-GAAP basis, G&A expenses represented 11.6% of revenue compared to 10.4% a year ago and 19.7% in the previous quarter. Income tax expenses represented 21.2% of income before income tax, slightly higher than 19% a year ago. This was primarily driven by the impact of share-based compensation expenses recognized during the quarter. Notably, we continued to deliver profitability on both GAAP and the non-GAAP basis, extending our track record of 13 consecutive quarters of positive net income. GAAP net income was $447.7 million. Non-GAAP net income is including $59 million of share-based compensation expenses. was $506.7 million with a non-GAAP net margin of 14.3% compared to 20% a year ago and 3.4% in the fourth quarter of 2025. For the first quarter, basic and the diluted net income per ordinary share was RMB 2.36 yuan and RMB 2.34 yuan respectively. On a non-GAAP basis, basic net income per ordinary share was RMB 2.67 and the diluted net income per ordinary share was RMB 2.65 yuan. Turning to liquidity, we ended the quarter with 7,146 points $3 million in cash and the cash equivalent, restricted cash, and the time deposit. Compared to $7,892.4 million as of December 31, 2025, we maintained a robust balance sheet, which provides us with the flexibility to fund expansion plan and the continued return value to our shareholders. As we move through 2026, we remain focused on executing our established strategy, strengthening our brand value and maintaining disciplined investment to support sustainable growth. We are always committed to creating long-term value for our shareholders. With that, I will turn the call back to the operator to begin Q&A. Operator, please go ahead.
Operator: Thank you. We will now begin the question and answer session. To ask a question, please press star 11 and wait for a name to be announced. When asking a question in Chinese, please translate your question in English for the convenience of everyone on the call. Our first question comes from the line of Lillian Low of Morgan Stanley. Please go ahead.
Lillian Low: Hello, thank you for the opportunity to ask this question. I'm Lillian, an analyst at Morgan Stanley. Thank you for the introduction, Mr. Junjie, Mr. Aden, and Mr. Adrian. I'm also very happy to see that the company has achieved a very stable recovery in the first quarter and the accuracy of all the measures. You have just explained in more detail some of the mistakes we made in our strategy. So I might want to talk about the first quarter Let's take a look at the details of the recovery of the single-storied GNV. We want to understand what factors drive the improvement of the single-storied GNV, which is relatively good in the first quarter. Especially in the industry, in fact, after the entire high-tech industry slowly entered the second quarter, we also saw some pressure from the same industry. How did we achieve a counter-turn in this situation? Let me translate my question. So thanks to everyone's management of the detailed explanation of FirstQ performance. I just want to follow up on the more detailed factors that has driven the good sequential improvement on the unit GMV improvement in China and overall. trying to understand what factors have been put in place in terms of the new product, the traffic, pricing, et cetera, and what can be sustained. Thank you very much.
Aaron Huang: Thank you, Liliana. Let me answer this question. It's a very good question. In the first quarter, we paid a total of 16% of the electricity bill, but compared to the fourth quarter last year, it was about 10 points less. Overall, it also showed a clear recovery trend. Mainly, we also did some rebates, and then the rules were a few mobilizations.
Alicia Guo: Thank you, Lillian, for the question. In Q1, our overall theme store GMV growth was down 16%, but that was about 10 percentage points better than Q4 last year. So the trend has clearly improved, and the recovery was mainly driven by a few things.
Aaron Huang: One is the increase in the number of questions. We will be hosting the event from February 6th to 10th, although it will be very short. During the peak period of this event, the entire Q&A channel has contributed about 3 million orders to our brand. First, we got an incremental lift from the Qianwen campaign.
Alicia Guo: During the peak period from February 6 to 10, the Tianwen channel contributed about 3 million orders per day on average. Our ability to effectively capture this traffic and convert it into performance results was driven by two factors. First, a more agile response mechanism, and second, the continued improvement in executing efficiency following the earlier adjustments.
Aaron Huang: . . . . . . . . . . . . . . . For example, the clouds we just mentioned, Camelot and Spring Mountain, during the activity, the ratio of the early-time time has reached 45%, which has led to a more dangerous increase in quantity contribution.
Alicia Guo: Second, our new product launch helped as well. As Aiden mentioned, we launched 12 new products in the first quarter, which helped to drive sequential growth in both car volume and GMV. In addition, recently we continue to expand morning and evening consumption scenarios, taking Caramel Pour Tea Latte and Longjing Tea Latte as examples. Their combined cup contribution during morning hours reached 45% during the campaign period, representing a relatively significant incremental contribution.
Aaron Huang: Finally, in terms of overseas markets, we can also see that the share price has decreased significantly, especially in the Malaysian market. In fact, the whole market is questioning the introduction of local limited products. For example, Singapore's Shanta Oolong, and Huodong Jijian, Lastly, in the overseas markets, the decline in same-store GMV growth has also narrowed significantly.
Alicia Guo: We launched locally tailored products in different markets For example, the caramel oolong tea latte in Singapore captured an 18% cup share during the campaign period. The houjicha in Chiang Mai launched in multiple markets in March, generated an average of 440 daily cups per teahouse in Singapore during its first week of launch. These initiatives all played a positive role in improving overall same-store performance. Thank you. Next question, please.
spk08: Next question.
Operator: The next question comes from the line of CJ Lin from CICC. Please go ahead.
CJ Lin: Thank you, Director Junjie, Director Yin, Director Allen. I'm Director Junjie, and this is Sister Lin. Congratulations. We have achieved a good performance from the main committee. So thank you, management. Congrats on stabilizing earnings results again. My question is, will the new business model, which is the tech rate based on GMB, affect profitability and how to evaluate the impact? Thank you.
Aaron Huang: Thank you, Shijie, for your question. Just like what we just revealed in the last annual report, at the beginning of the year, we officially adopted a new business model and switched to the income division model based on GNV. And then our brand company has increased the rate of collection. However, the increase in the price of materials has been significantly reduced. At the same time, there is also a discount rate guarantee for Jiameng Store. Under the new model, our income structure has also changed. Our product sales, that is, raw material product sales, including raw materials, food raw materials, packaging raw materials, including store equipment and other consumables, this part of the income will definitely be significantly reduced. Then the increase in the income of Jiameng Service fee, Thank you for the question. As previously disclosed in our annual report,
Alicia Guo: Since the beginning of the year, we officially switched to a GMV-based revenue sharing model for our franchise, the Tea House in Greater China. Under the new model, the brand takes a higher fee rate based on the franchise, the Tea House GMV, but the markup on materials has come down significantly and also lock up or secure the discount rate for our franchisees. As a result, our revenue mix has changed accordingly. The proportion of revenue from product sales, including raw materials and packaging, tea house equipment, and other supplies has declined, while the proportion of revenue from franchising services has increased. However, this change in revenue mix does not affect the company's profitability, based on our Q1 results. Our gross margin remained at 55.6% with a slight sequential increase. I would like to make a few comments.
Aaron Huang: The increase in the return ratio, the main contribution is more about the increase in the proportion of our direct power stores. Because the probability of direct power stores is relatively high. Because it does not involve some processing such as collection and division. It is not from the more income gap between the wholesalers. So I think it is better to understand that we are basically on the same level as the first quarter of the wholesalers. There is a decline, but there is a part of the benefit because we gave our wholesalers a discount.
Alicia Guo: Let me further explain the reason of the gross margin increase, which is a result from the increase of the self-owned T-house GP margin increase. If we exclude the self-owned T-house GP margin, the franchisee T-house GP margin is flat versus the sequentially versus Q4 and also or a little bit slightly decrease from the previous GP margin. Yep.
Aaron Huang: We believe that under the new model, the real realization of the company and the joiner is a common interest. For the joiner, the cost of raw materials and equipment purchases has dropped significantly, and the shared risk of the group has contributed to the improvement of the company's profitability and anti-discrimination capabilities. For the company, income and door-to-door performance are deeply tied. When door-to-door sales are improved, it is also conducive to the improvement of the company's income and net profit, and thus achieve a win-win effect. We also hope to continue to optimize our model model through closer cooperation with Jiameng, and create a long-term and continuous profit model.
Alicia Guo: Lastly, we believe that under the new model, the company and its franchisees truly become a community of shared interests. For franchisees, lower raw material and equipment procurement costs, along with shared risk with the brand, should help improve tea house profitability and resilience. So for the company, revenue is now more closely tied to tea house performance. So when tea house sales improve, both our revenue and gross margin can benefit, creating a willing outcome. Our goal is to build a long-term sustainable profit model through closer collaboration. I hope this answers your question. Next question, please. Upward. Our next question, please.
Operator: Yeah, one moment, please, for the next questions. Our next question comes from Jessie Xu from JPMorgan. Please ask your question.
Jessie Xu: Thank you. Good morning, everyone. Thank you for answering my question. I'm Jessie Xu from JPMorgan. Congratulations to the company for getting a good opening. Since this year, we have been able to feel that the company has put a lot of effort into product promotion and operation. The activity and volume have been significantly improved compared to last year. We can see that the efficiency of our operation has improved after the change of the organization. And especially this time, the return of $1.5 billion is also a very big surprise. Can you please share with us the reason why we decided to do the return and the future in terms of shareholder return? Thanks for taking my question. This is Jessie Xu from JP Morgan. Very happy to see visible improvement in product launches, consumer engagement, and also market impact in the first quarter. The US$150 million repurchase program is indeed a positive surprise. What's your thoughts behind this decision? Would you prefer repurchase or cash dividend in the future? Anything we can share on shareholder return would be great.
Alicia Guo: Thank you.
Junjie Zhang: Thank you for the question.
Alicia Guo: As we just shared, the board has approved a share repurchase program authorizing the company to purchase up to $150 million of the ADS over the next 12 months. We will adjust the pace of repurchases depending on market conditions and valuation during the authorization period.
Junjie Zhang: 第二个是公司目前的资产和负债的结构情况是非常健康的 Second, our balance sheet structure remains healthy and our liquidity position is strong.
Alicia Guo: At the end of March, we had about RMB 7.15 billion in cash, restricted cash and time deposits, or roughly 1.04 billion U.S. dollars.
Junjie Zhang: Thirdly, we believe that the stock price of the company alone does not fully reflect the basic aspects of our company's business and the trend of continuous recovery, and the space for long-term growth has not been reflected. Therefore, our rebate this time Thirdly, we believe the current share price does not fully reflect the continued recovery in our business fundamentals or our long-term growth potential.
Alicia Guo: Through this buyback, we want to show the board and management strong confidence in the company's future growth prospects, as well as our commitment to create value and delivering better long-term results for shareholders.
Junjie Zhang: In the future, we will continue to optimize the asset configuration strategy to ensure the healthy development of core business, and ensure that the market fully understands our value.
Alicia Guo: Looking ahead, we will continue to optimize our capital allocation strategy while ensuring the health development of our core business. We aim to deliver a tangible improvement in shareholder returns and ensure that the market fully understands our value.
Junjie Zhang: Thank you. That's it from, that's my answer.
Alicia Guo: And thank you all the shareholders and investors to join our call today.
Operator: Thank you. As there are no further questions, I would like to hand the conference back to management for closing remarks.
Alicia Guo: Thank you. As there are no further questions, I'd like to hand the conference back to management. to the management, and thank you for the call today. We look forward to speaking with everyone again on our next call. Have a great day. Thank you.
Operator: Thank you all.
Aaron Huang: Have a great day.
Operator: This concludes today's event. Thank you for participating. You may now disconnect.
