Investors, good afternoon. Welcome to Xtep International Holdings Limited's 2025 annual results announcement investors session.

I am Sophia, Director of IR of Xtep. Let me introduce to you our management in attendance.

They are Group Chairman and CEO Mr. Ding Shui Po, Group President Mr.

Tian Zhong, Group CFO Ms. Dona Ding.

In today's event, well we will conduct this event in Mandarin with English simultaneous interpretation. The management will present the annual results for 2025 followed by a Q&A session.

Before our management speaks, please enjoy the following concluding video clip for the year 2025. Now, I would pass the floor to Group Chairman and CEO Mr.

Ding Shui Po. Please, Mr.

Ding.

Honorable investors, friends, good afternoon. Thank you for joining Xtep's 2025 annual results announcement.

In 2025, the global economic environment was complex and volatile, with uncertainty prevailing throughout the year. Nevertheless, we still achieved steady growth.

This is largely due to the strategy of focusing on running that we adopted several years ago. Running has been one of the most promising sectors in recent years.

The number of runners in China has grown from fewer than 90 million to 300 million in 2025, and for marathons, the number of participants has grown by over 20% annually. In 2025, Xtep continued to lead the way in this sector.

In the seven flagship marathon events in China, including Beijing, Shanghai, Guangzhou, Xiamen, Chengdu, Wuxi, and Lanzhou, Xtep ranks first in overall wear rate, and it has been number one in the men's top 100 for four consecutive years and in the women's top 100 number one for three consecutive years. At the Tokyo Marathon in early March, Feng Peiyou, wearing the 160X 7.0 PRO, led the Chinese marathon team into the 2:05 era.

Shortly afterwards, we're launching the Chinese Speed Upgrade Program, introducing the first-ever prize for breaking Asian records. This marks a milestone in Xtep's effort to drive forward China's historical evolution of faster marathon times.

Xtep core brand expanded our product range. We have successfully extended our professional expertise to the wider mass market.

Xtep Kids, by refining its brand positioning, Xtep Kids is helping children and teenagers reach new heights in sports and driving rapid business growth. Saucony is a century-old running shoe brand.

We have successfully established a premium sports brand image. This year, we will continue to step up our effort to invest in and enhance the brand experience and store performance to drive rapid business growth.

In the past five years, Xtep has transformed from a single-brand company into a multi-brand group with a clear strategic focus on running. Over the next five years, we'll continue—actually in 2025, we made new high in terms of both revenue and profit.

Over the next five years, we'll continue to focus on running, and guided by our strategy of brand enhancement and improving quality and efficiency, we'll further strengthen a consumer-centric operational approach that has effectively driven the development of D2C and channel optimization. We'll cement our position as China's number one running brand.

By 2030, the national sports industry is set to exceed RMB7 trillion in total value, and the sector continues to hold significant potential for growth. We'll capitalize on policy benefits and growth opportunities in niche sectors, whilst leveraging the synergies of the group's multi-brand strategy to achieve high-quality growth.

Now, I will pass the floor to Donna and Mr. Tian, who will present the financial and operational analysis.

Thank you.

Good afternoon. Welcome to Xtep's 2025 annual results presentation.

In 2025, the consumer market as a whole remained stable. The group's various brands also achieved steady growth.

The performance of professional sports division was particularly impressive. Please turn to second slide.

Our group's total revenue was up 4.2% to 14.151 billion. Of this, revenue from Xtep core brand was up 1.5% to 12.515 billion.

Revenue from the professional sports segment comprising Saucony and Merrell grew by over 30% to 1.636 billion. Our group's net profit stood at 1.372 billion, up 10.8% year-on-year.

Our balance sheet remains in good health. During the year, net cash increased 73.4% to 1.707 billion.

Net asset value per share rose 12.3% to RMB3.64. Annual shareholder return stood at 14.5%, up 0.4 percentage point year-on-year.

In light of our strong financial performance, the board recommended the payment of final dividend of 9.5 Hong Kong cents per share. Together with the interim dividend of 18 Hong Kong cents per share, the annual dividend payout ratio is 50.4%.

Since listing, our group has maintained a dividend payout ratio of no less than 50% for 18 consecutive years. We remain committed to creating long-term value for shareholder return.

Page 4, our profit and loss statement. Our group's total revenue was up 4.2% to 14.151 billion.

Gross profit rose by 3.4% to 6.063 billion. Gross profit margin 42.8%.

SG&A expenses up 6.2%. The reasons for the changes in gross margin and expense ratio will be explained in detail later.

Operating profit rose 2.7% to 2.019 billion, whilst operating profit margin fell 0.2 percentage point to 14.3%. Excluding the combined loss of RMB67 million from K-Swiss and Palladium last year, our group's net profit rose 10.8% to RMB1.372 billion.

Our net profit margin was up 0.6 percentage point year-on-year to 9.7%. Page 5, group balance sheet.

Our balance sheet remains in good shape. Cash and deposits totaled 4.14 billion.

Operating cash inflow 950 million, remaining stable. Last year, we repaid most of our Hong Kong dollar loans, reducing our bank borrowings by 930 million, whilst issuing HK$500 million convertible bonds.

Excluding bank loans and convertible bonds, net cash increased 73.4% to 1.707 billion. Current ratio rose to 2.4 times, whilst net asset value per share increased by 12.3% to RMB3.64.

Page 6, our group's operating capital analysis. Total working capital days increased by 23 days to 110 days compared with the end of 2024.

Inventory turnover days increased by 9 days from the end of last year, reaching 77 days. However, this represents a significant decline from the 91 days recorded in the first half of the year, and inventory value also down to below 1.9 billion for those within 14 days.

This year, we'll focus on improving operational efficiency. With regards to payables, we selectively settle payments early in order to secure discounts from suppliers.

Payable turnover days has fallen by 14 days compared with the end of last year to 87 days. Payable days remain stable at 120 days.

Then on page 7, performance of the business sectors. First, mass market, Xtep core brand, revenue rose 1.5% to 12.515 billion, with e-commerce continuing to drive growth.

Gross profit 5.156 billion, similar to last year. Gross margin fell 0.6 percentage point.

Last year, particularly in the second half, industry pressure was greater, and so there is a bigger e-commerce discount. Operating profit fell 1.8% year-on-year to 1.92 billion.

Operating profit margin fell 0.6 percentage point year-on-year to 15.3%, mainly due to decline in gross margin. Next, professional sports sector.

Revenue from Saucony and Merrell rose 30.8% to 1.636 billion, with Saucony being the main driver of this growth. Gross profit rose by 27% to 908 million.

Gross margin down 1.7 percentage points to 55.5%, primarily due to the product mix. Last year, proportion of sales accounted for by apparel, footwear, and lifestyle products increased, but as the sales scale remains small, this has resulted in a lower gross margin.

Operating profit rose by 46.4% year-on-year to 114 million. Operating profit margin up 0.7 percentage point to 7%.

With regards to the strategy of positioning the Saucony brand as a premium brand, we'll continue to invest in marketing, product development, and channel expansion this year to increase market share and scale. Page 8, expense and cost analysis.

Our group's total expenses rose 6.2% to 4.562 billion, accounting for 32.2% of revenue, up 0.6 percentage point a year on year. For A&P, through refined marketing management, we effectively controlled A&P expenses at a healthy level.

Now it accounted for 12.9% of revenue, down 0.5 percentage point year-on-year. R&D expenses accounted for 2.9% of revenue, more or less the same as last year.

R&D expenses was primarily driven by the Xtep core brand, the iterative development of its professional running shoe range, and ongoing expansion of mass market product portfolio. Saucony, adding products such as apparel and lifestyle items.

In the future, R&D expenses will be capped at around 3% of revenue. Staff costs up 5.9%, accounting for 5.2% of revenue.

This percentage was similar with last year's. Other expenses up 14.2%, mainly due to strong e-commerce sales, which led to higher platform fees and logistics and warehousing cost increase, and there is also system upgrade arising from digitalization strategies.

This year, we'll continue to improve efficiency and achieve sustainable growth through more refined operational management. That concludes my financial part.

I will now pass the floor to Mr. Tian.

Thank you.

Thank you, Dona. Honorable investors, good afternoon.

Now I will review for you our group's operations in 2025. The core of our group's strategy: our group remains firmly committed to our core strategy of continuing to focus on running.

Xtep core brand: we target at the mass market and use flagship products as a growth engine to achieve professional to mass influence. Saucony: upholding its brand positioning as a century-old running shoe dynasty, deepening the perception of an elite sporting lifestyle, and strengthening its premium offering.

Merrell: we continue to focus on professional outdoor sports. We continue to strengthen synergies and resource integration among the three major brands, consolidating our position as China's number one running brand in the market to drive high-quality growth.

For brands, Xtep core brand and Saucony, last year at major marathon events, the Xtep brand maintained number one position among all brands in terms of wear rate, and for Saucony, it is within top three. Then if you look at the 160 series in the past three years, they helped our marathon runners to break Chinese marathon records four times.

Just now you heard that our marathon record was broken again, we are into the 2:05 era already in terms of China marathon. In terms of products for Xtep core brand, we upgraded our professional product matrix.

Flagship products are to lead our overall growth. Then for our champion running shoe families in 2025, sales was doubled that of 2024, especially 160X 7.0, as what Mr.

Ding said. Then in terms of sales results, we achieved a new high.

At the same time, we will continue to expand our product mix. Just now in our display, you can see our anti-shock running shoes.

They are having high value for money so as to achieve professional to mass influence. Then for channels, well we will continue to optimize our retail channels and upgrade store image.

We'll continue to open bigger and better stores. At the same time, we will accelerate the layout in shopping malls and outlets, and then in municipality-grade cities, we will plan to open bigger stores.

In 2026, we will get into boutique stores. As of 31st December 2025, Xtep operates 6,357 adult stores, 70% of them are new image stores.

For our Xtep main brand's e-commerce, in 2025, it continued to lead the way, achieving double-digit growth and accounting for over 30% of Xtep's core brand revenue. For e-commerce, we will continue to focus on having flagship products to lead.

For example, our 2,000 km fifth generation, it was launched in December last year, market response has been excellent. Sales have topped the new product chart for domestic brands on Tmall.

In 2025, sales was doubled that of 2024. Looking at the current trend, we believe that this trend will continue into 2026.

E-commerce, we will continue to focus on running-first brand strategy, we'll continue to enrich best seller matrix, enhance our product capability to drive growth. X-young, in 2025, X-young was relaunched from Xtep Kids, this is a new name, X-young.

We adopt a more precise brand positioning and focus on seizing opportunities to drive business growth. In 2025, for offline growth stores, well they are well-received by consumers, and for main stores there is double-digit year-on-year growth.

As of the end of 2025, X-young has 1,488 stores in China. Then for overseas development, in 2025, we achieved very good results.

Business growth nearly doubled, especially in cross-border e-commerce business, there is year-on-year growth exceeding 220%. In 2025, we accelerated offline layout in Southeast Asia.

Last September, we opened our first overseas running club in Singapore, we provided for local runners a full range of running products and specialized service. In the future, we will also make use of this runners club approach to build a wider network in Southeast Asia.

In December last year, we entered into a strategic partnership with a Malaysian group, Bonia, and now we have already opened a 300-square-meter store. In the future, we'll invest more in cross-border e-commerce and we'll focus on emerging markets such as in Southeast Asia.

Saucony, in 2025, will continue to uphold the brand positioning as a century-old running shoe brand. We have successfully established an elite active lifestyle mindset, and with a premium brand positioning we'll strengthen marketing and product portfolio, channel distribution, and operations.

At the same time, we're continuously strengthening the sharing of global and marketing resources with Wolverine, further enhancing Saucony's competitiveness in China. For Saucony's products, first of all, we will still focus at professional products, especially running shoes, will continue to refine the product matrix of running shoes.

Last year, we launched Feiyi and also Triumph 23. Thanks to our outstanding product quality and marketing campaigns, we have received very positive market response, thereby strengthening the brand's professional status.

Apart from professional products, we have increased investment into our apparel. Last year, we launched a wool collection, and we got very positive feedback from consumers for the wool series.

It had also promoted rapid growth for our apparel products. Then apart from professional products and apparel, we have increased some lifestyle product categories.

Running culture is included in elite living scenarios so as to expand business scale. We increased lifestyle products and OG products.

We launched co-branded products with Nathan Bell so that consumers will have a very fresh impression. Then for Saucony's channels, we will focus on opening large stores in core business districts and high-tier cities.

By opening new image stores, we will penetrate into high-tier cities so that we can reach consumers in a precise way. As of 31st December 2025, Saucony had 175 stores in our country.

For Merrell, we'll continue to focus on professional outdoor area, and we will focus on mountaineering, trail running, and outdoor lifestyle so as to achieve strong growth. For sustainable development, our group continues to protect the environment, maintain sustainable value chain, and be people-centric.

Now for sustainable development, well we launched a special initiative to recycle waste textiles, using recycled yarn to produce the official uniform for Xiamen Marathon. In the future, we'll continue to do clothing recycling, and total weight of clothing production scraps collected in the year exceeded 50 tonnes.

We have started environmental protection and social responsibility training, and ESG audits were conducted on over 140 suppliers with compliance rate of 99%. For social responsibility, our group donated cash and goods worth over RMB64 million throughout the year, demonstrating corporate responsibility through concrete actions.

For 2025, I think we have made an outlook for our group. Basically, for our group, we'll continue to focus on running and harness synergies between our brands so as to drive sustained growth.

For Xtep core brand, we will continue to focus on running. We will use our flagship products as a growth engine and expand product matrix, will accelerate the professional to mass influence strategy.

Saucony, we will continue the positioning as a century-old brand. It will be positioning towards the premium side, and core strategy will be product marketing and premium channel development.

Then Merrell is an outdoor brand, will make plans in relation to product and channel so as to seize market opportunities in the outdoor segment. We'll seize the opportunities of robust sports development in China, and then we'll expand the leading advantage in running so as to continue the high-speed growth of our group.

Thank you.