Yatsen Holding Ltd (YSG) 2022 Q4 法說會逐字稿

Ladies and gentlemen, good day, and welcome to the Yatsen Fourth Quarter and Full Year 2022 Earnings Conference Call. (Operator Instructions)

女士們，先生們，美好的一天，歡迎來到 Yatsen 第四季度和 2022 年全年收益電話會議。 （操作員說明）

At this time, I would like to turn the conference over to Irene Lyu, Vice President, Head of Strategic Investments and Capital Markets. Please go ahead.

此時，我想將會議轉交給副總裁兼戰略投資和資本市場主管 Irene Lyu。請繼續。

Thank you, operator. Please note the discussion today will contain forward-looking statements relating to the company's future performance and are intended to qualify for the safe harbor from liability as established by the U.S. Private Securities Litigation Reform Act. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions, and other factors. Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion. A general discussion of the risk factors that could affect Yatsen's business and financial results is included in certain filings of the company with the Securities and Exchange Commission. The company does not undertake any obligation to update this forward-looking information, except as required by law.

謝謝你，運營商。請注意，今天的討論將包含與公司未來業績相關的前瞻性陳述，旨在符合美國私人證券訴訟改革法案規定的免責安全港條款。此類陳述不是對未來業績的保證，並受某些風險和不確定性、假設和其他因素的影響。其中一些風險超出了公司的控制範圍，可能導致實際結果與今天的新聞稿和本次討論中提到的結果大相徑庭。對可能影響 Yatsen 的業務和財務業績的風險因素的一般性討論包含在該公司向美國證券交易委員會提交的某些文件中。除法律要求外，公司不承擔任何更新此前瞻性信息的義務。

During today's call, management will also discuss certain non-GAAP financial measures for comparison purposes only. Please see the earnings release issued earlier today for a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results.

在今天的電話會議上，管理層還將討論某些非 GAAP 財務措施，僅供比較之用。請參閱今天早些時候發布的收益報告，了解非 GAAP 財務指標的定義以及 GAAP 與非 GAAP 財務結果的對賬。

Joining us today on the call from Yatsen's senior management are Mr. Jinfeng Huang, our Founder, Chairman, and CEO; and Mr. Donghao Yang, our CFO and Director. Management will begin with prepared remarks, and the call will conclude with a QA session. As a reminder, this conference is being recorded. In addition, a webcast replay of this conference call will be available on Yatsen's Investor Relations website at ir.yatsenglobal.com.

今天，我們的創始人、董事長兼首席執行官黃金峰先生應中成高級管理層的電話加入了我們的行列；以及我們的首席財務官兼董事楊東浩先生。管理層將從準備好的評論開始，電話會議將以質量檢查會議結束。提醒一下，這次會議正在錄製中。此外，Yatsen 的投資者關係網站 ir.yatsenglobal.com 將提供本次電話會議的網絡直播重播。

I will now turn the call over to Mr. Jinfeng Huang. Please go ahead, sir.

我現在將電話轉給黃金峰先生。請繼續，先生。

Thank you, Irene, and thank you, everyone for participating in Yatsen's Fourth Quarter and Full Year 2022 Earnings Conference Call today. 2022 was a year of transformation for Yatsen. Early in the year, we launched our new 5-year strategy plan with an eye towards long-term sustainable growth and began refining our product category mix -- channel mix and the business model accordingly. This road map guided our steps amid the myriad of challenges in 2023, including the recurrent COVID-19 outbreak and the related lockdowns.

謝謝 Irene，也謝謝大家今天參加 Yatsen 的第四季度和 2022 年全年收益電話會議。 2022年是逸仙轉型的一年。今年年初，我們啟動了新的 5 年戰略計劃，著眼於長期可持續增長，並開始相應地完善我們的產品類別組合——渠道組合和商業模式。這份路線圖指導我們在 2023 年的無數挑戰中前進，包括反复爆發的 COVID-19 和相關的封鎖。

China's beauty industry continues to struggle with this macro headwind, and the consumer sentiment remained weak overall. Nevertheless, our Skincare Brands remained a bright spot for 2022 recording solid growth in sales. We also achieved significant profitability improvements both increasing gross margin and narrowing net loss margin, and turned profitable under non-GAAP measures for the fourth quarter of 2022.

中國美容行業繼續在這種宏觀逆風中掙扎，整體消費情緒依然疲軟。儘管如此，我們的護膚品牌仍然是 2022 年的亮點，銷售額穩步增長。我們還實現了盈利能力的顯著改善，包括毛利率的提高和淨虧損率的縮小，並在 2022 年第四季度的非 GAAP 指標下實現盈利。

According to the adjusted data published by the China National Bureau of Statistics, China's total beauty retail sales in the fourth quarter of 2022 recorded a negative growth of 3.1% year-over-year, while for the full year 2022 China's beauty retail sales declined by 3.2% year-over-year. On Tmall, color cosmetic sales fell by double-digits and the sales of skincare products experienced a single-digit decline year-over-year in 2023. However, we have seen a light at the end of the tunnel with the resumption of offline activities and the adjustment of COVID restrictions. The consumer market is well on its way to a recovery in 2023.

根據中國國家統計局公佈的調整後數據，2022年第四季度中國美妝零售總額同比負增長3.1%，而2022年全年中國美妝零售額下降同比增長 3.2%。 2023年，天貓彩妝銷售額同比雙位數下滑，護膚品銷售額同比雙雙下滑。但隨著線下活動的恢復，我們看到了隧道盡頭的曙光以及 COVID 限制的調整。消費市場有望在 2023 年復蘇。

Against this backdrop, our overall sales slowed down throughout the year. Total net revenues declined by 34.2% year-over-year in the fourth quarter to RMB 1.01 billion. But we need to look at our revenue mix in detail to see the full picture. Net revenues for our Skincare Brands increased by 42.4% year-over-year to RMB 471.6 million, highlighted by outstanding performance among our fast-growing clinical and premium brands, including DR. WU, Galenic and Eve Lom, which recorded a robust growth of 73% year-over-year and the 99.3% year-over-year in combined net revenues for the fourth quarter and full year of 2022 respectively.

在此背景下，我們全年的整體銷售放緩。第四季度總淨收入同比下降 34.2% 至人民幣 10.1 億元。但我們需要詳細審視我們的收入組合以了解全貌。我們護膚品牌的淨收入同比增長 42.4% 至人民幣 4.716 億元，突出體現在我們快速增長的臨床和高端品牌（包括 DR）的出色表現。 WU 、 Galenic 和 Eve Lom ，它們在 2022 年第四季度和全年的合併淨收入分別同比增長 73% 和 99.3%。

In terms of revenue contribution, our Skincare Brands accounted for 46.9% of total net revenues in the fourth quarter and 33.5% for the full year of 2022, more than doubling compared with the prior year period in both cases. Our Color Cosmetics Brands, on the other hand, saw a decline of 56.9% year-over-year in sales to RMB 513.4 million, reflecting the continued softness in the market demand for color cosmetic products as well as intensified industry competition from both domestic and international brands. As we move into 2023, we will continue to build on our skincare portfolio success while addressing the challenges in the color cosmetics brands.

就收入貢獻而言，我們的護膚品牌佔第四季度總淨收入的 46.9% 和 2022 年全年的 33.5%，與去年同期相比增加了一倍多。另一方面，我們彩妝品牌的銷售額同比下降56.9%至人民幣5.134億元，反映了彩妝產品市場需求持續疲軟以及來自國內外的行業競爭加劇。國際品牌。隨著我們進入 2023 年，我們將繼續鞏固我們護膚產品組合的成功，同時應對彩妝品牌面臨的挑戰。

Turning now to profitability. Thanks to higher contribution from our Skincare Brands, more disciplined pricing and discount policies and continued cost optimization across all our brands, our gross margin increased by 6.1 percentage points to 71.1% for the fourth quarter from 55% a year ago. Net loss margin for the fourth quarter narrowed to 5.5% from 31.1% for the prior year period. Most importantly, we recorded a non-GAAP net income margin for 3.4% for the fourth quarter as compared with a non-GAAP net loss margin of 14.7% for the third quarter and the non-GAAP net loss margin of 21.9% for the prior year period. We have been striving to achieve non-GAAP profitability by elevating operational efficiencies and closing underperforming offline stores among other cost optimization measures.

現在轉向盈利能力。得益於我們護膚品牌的更高貢獻、更嚴格的定價和折扣政策以及我們所有品牌的持續成本優化，我們第四季度的毛利率從一年前的 55% 增長了 6.1 個百分點至 71.1%。第四季度的淨虧損率從去年同期的 31.1% 收窄至 5.5%。最重要的是，我們第四季度的非美國通用會計準則淨利潤率為 3.4%，而第三季度的非美國通用會計準則淨虧損率為 14.7%，上一季度的非美國通用會計準則淨虧損率為 21.9%年期間。我們一直在努力通過提高運營效率和關閉表現不佳的線下門店以及其他成本優化措施來實現非 GAAP 盈利能力。

Next, let me share some of our operational highlights from the fourth quarter and the full year 2022. Throughout the year, we created and delivered products tailored to Chinese consumers purposes. Galenic enjoyed broad success, including with 2 featured products at the China International Import Expo as its antioxidant #1 VC serum and its newly upgraded platinum LANEIGE serum. The latter also ranked among the top 5 imported serum on Tmall during the Double 11 Shopping Festival.

接下來，讓我分享一下我們從第四季度到 2022 年全年的一些運營亮點。在這一年裡，我們創造並交付了為中國消費者量身定制的產品。 Galenic取得了廣泛的成功，包括抗氧化#1 VC血清和全新升級的鉑金LANEIGE血清在中國國際進口博覽會上推出了2款特色產品。後者還躋身雙十一期間天貓進口血清前5名。

At the same time, in DR. WU's Mandelic's Daily Renewal Serum took the #1 position in both Tmall's [vacuum] treatment and Douyin's domestic serum categories. While its long iconic cleansing serum, cleanse inclusion ranked 1st among high-end cleanser products on Tmall. For our Color Cosmetics Brands, we focused on cost optimization given the overall softening in the color cosmetic market as well as our own strategy goals for the fourth quarter. And going forward, with a more sustainable business model in mind, we will continue to develop our color cosmetic product portfolio to capitalize on anticipated consumption will rebound in 2023.

同時，在DR。 WU 的 Mandelic's Daily Renewal Serum 在天貓[真空]治療和抖音國內血清類別中均排名第一。而其長期標誌性的潔面精華，Cleanse inclusion在天貓高端潔面產品中排名第一。對於我們的彩妝品牌，鑑於彩妝市場的整體疲軟以及我們自己的第四季度戰略目標，我們專注於成本優化。展望未來，考慮到更可持續的商業模式，我們將繼續開發我們的彩妝產品組合，以利用預期的消費將在 2023 年反彈。

In addition to product development, branding is another key pillar of our strategy transformation. We strive continually to enhance the brand image and the positioning of our various brands among our diverse consumer cohort. For example, Eve Lom hosted its [eternal gold cleanser] global luxury class, imported it globally, while also sharing offline thermal wax therapy serums with Chinese audience at its SpaChina Wellness Summit in October 2022. Furthermore, Perfect Diary's ReadMe Liquid Lipstick was awarded the 2022 national consumption word of mouth product by People's Daily, a powerful commendation of its brand influence.

除了產品開發，品牌是我們戰略轉型的另一個關鍵支柱。我們不斷努力提升我們各個品牌在多元化消費者群體中的品牌形象和定位。例如，Eve Lom在2022年10月的SpaChina養生峰會上舉辦了【永恆黃金潔面乳】全球奢華班，全球進口，同時還與中國觀眾分享了線下熱蠟療法精華素。此外，完美日記的ReadMe液體唇膏榮獲人民日報2022全國消費口碑產品，對其品牌影響力的有力表彰。

In terms of channel optimization, we selectively closed offline stores and aggressively promoted our Douyin presence to diversify our online channels. As of December 31, 2022, we operated 158 offline serum stores for the Perfect Diary brand as compared with from 286 stores at the end of 2021. This strategy shift has enabled us to cut costs whilst enjoying brand exposure across the country. Among our major online channels, Douyin stood out with its relatively high growth. Sales of our products on Douyin grew rapidly throughout 2022.

在渠道優化方面，我們有選擇地關閉線下門店，並積極推廣抖音，以豐富我們的線上渠道。截至 2022 年 12 月 31 日，我們為完美日記品牌經營了 158 家線下血清店，而 2021 年底為 286 家。這一戰略轉變使我們能夠削減成本，同時享受品牌在全國的知名度。在我們的主要在線渠道中，抖音以較高的增長脫穎而出。整個 2022 年，我們在抖音上的產品銷量快速增長。

Next, I would like to share some highlights of the progress we have made with our continued investments in R&D, which provide vital support to new product launches and long-term development of our brands. For the full year 2022, our R&D expenses increased to 3.4% of total net revenues from 2.4% for the prior year period. In November, we officially signed a joint laboratory cooperation agreement with Sun Yat-sen University for skin health research, an exciting partnership that will enable us to further explore opportunities in both color cosmetics and skincare.

接下來，我想分享一些我們在研發方面持續投資取得的進展的亮點，這些進展為我們品牌的新產品發布和長期發展提供了重要支持。 2022 年全年，我們的研發費用佔總淨收入的比例從上年同期的 2.4% 增加到 3.4%。 11月，我們與中山大學正式簽署了皮膚健康研究聯合實驗室合作協議，這一激動人心的合作夥伴關係將使我們能夠進一步探索彩妝和護膚領域的機會。

We are also thrilled to announce the appointment of our new Chief Scientific Officer, Ms. Jing Cheng. She has over 25 years’ experience in research and development in the beauty industry. Prior to joining Yatsen, Ms. Cheng worked at the Estee Lauder for 17 years serving in a number of senior management and research position, including as Vice President of APAC R&D, since July 2014. And from July 2001 to January 2005, she worked at Revlon, leading technical, quality control, regulatory and manufacturing organizations. With our CFO on board, we will remain focused on strengthening our R&D capabilities as our core strategy for future growth and product differentiation.

我們也很高興地宣布任命我們的新首席科學官 Jing Cheng 女士。她在美容行業擁有超過 25 年的研發經驗。在加入中成之前，鄭女士在雅詩蘭黛工作了 17 年，擔任多個高級管理和研究職位，包括自 2014 年 7 月起擔任亞太區研發副總裁。2001 年 7 月至 2005 年 1 月，她曾在Revlon，領先的技術、質量控制、監管和製造組織。有了我們的首席財務官，我們將繼續專注於加強我們的研發能力，作為我們未來增長和產品差異化的核心戰略。

Before I wrap up, I would like to mention our environmental, social and governance performance in 2022. In the latest ESG rating published in December 2022 by the world's leading largest index company, MSCI, we were upgraded to Level A, leading China's cosmetic brands. This upgrade clearly reflect our endeavor to improve our products eco design and carbon footprint, our employee wellness initiative and our corporate governance, among other ESG enhancements.

在結束之前，我想提一下我們在2022年的環境、社會和治理表現。在全球領先的最大指數公司MSCI 2022年12月發布的最新ESG評級中，我們升級為A級，領先中國化妝品品牌.此次升級清楚地反映了我們在改善產品生態設計和碳足跡、員工健康計劃和公司治理以及其他 ESG 改進方面所做的努力。

We also devoted more resources to multiple social welfare programs at both the company and brand level. Galenic, for instance, launched a new pink October limited edition of its Aqua Infini Skincare Lotion in support of breast cancer research. As always, we remain deeply committed to upholding our corporate social responsibility and we will continue to seek new ways to support people and communities in need.

我們還在公司和品牌層面投入更多資源於多項社會公益項目。例如，Galenic 推出了一款新的粉紅色十月限量版 Aqua Infini 護膚乳液，以支持乳腺癌研究。一如既往，我們仍然堅定地致力於維護我們的企業社會責任，我們將繼續尋求新的方式來支持有需要的人和社區。

While we expect the retail environment to remain challenging for the first half of 2023, we remain confident about the progress of China's beauty industry. We made significant progress in our strategy transformation in 2022 and also reserved sufficient resources to achieve our strategy objectives in 2023. With growing contributions for our Skincare Brand, improved gross margin and streamlined operations, we are well positioned to execute these facilities and capitalize on rising opportunity as the consumer market recovers.

雖然我們預計 2023 年上半年零售環境仍將充滿挑戰，但我們對中國美容行業的發展仍然充滿信心。我們在 2022 年的戰略轉型方面取得了重大進展，並為實現 2023 年的戰略目標預留了足夠的資源。隨著我們護膚品牌的貢獻不斷增加、毛利率提高和運營精簡，我們有能力執行這些設施並利用不斷增長的機會消費市場復甦帶來機遇。

With that, I will now turn the call over to our CFO, Donghao Yang, to discuss our financial performance. Thank you, everyone.

有了這個，我現在將把電話轉給我們的首席財務官楊東浩，討論我們的財務業績。謝謝大家。

Thank you, David, and hello, everyone. Before I get started, I would like to clarify that all financial numbers presented today are in renminbi amounts and all percentage changes refer to year-over-year changes unless otherwise noted.

謝謝你，大衛，大家好。在開始之前，我想澄清一下，除非另有說明，否則今天提供的所有財務數據均為人民幣金額，所有百分比變化均指同比變化。

Total net revenues for the fourth quarter of 2022 decreased by 34.2% to RMB 1.01 billion from RMB 1.53 billion for the prior year period. The decrease was primarily attributable to a 56.9% year-over-year decrease in net revenues from Color Cosmetics Brands, partially offset by a 42.4% year-over-year increase in net revenues from Skincare Brands. Gross profit for the fourth quarter of 2022 decreased by 28% to RMB 714.6 million from RMB 993 million for the prior year period. Gross margin for the fourth quarter of 2022 increased to 71.1% from 65% for the prior year period. The increase was driven by increasing sales of higher gross margin products from our Skincare Brands. And second, stricter pricing and discount policies. And third, cost optimization across all of our brand portfolios.

2022 年第四季度的總淨收入從去年同期的人民幣 15.3 億元下降 34.2% 至人民幣 10.1 億元。下降的主要原因是彩妝品牌淨收入同比下降 56.9%，但被護膚品牌淨收入同比增長 42.4% 部分抵消。 2022 年第四季度的毛利從去年同期的人民幣 9.93 億元下降 28% 至人民幣 7.146 億元。 2022 年第四季度的毛利率從去年同期的 65% 增至 71.1%。這一增長是由於我們的護膚品牌毛利率較高的產品銷量增加所致。其次，更嚴格的定價和折扣政策。第三，我們所有品牌組合的成本優化。

Total operating expenses for the fourth quarter of 2022 decreased by 47% to RMB 792.9 million from RMB 1.49 billion for the prior year period. As a percentage of total net revenues, total operating expenses for the fourth quarter of 2022 were 78.9% as compared with 97.8% for the prior year period. Fulfillment expenses for the fourth quarter of 2022 were RMB 62.5 million as compared with RMB 123.1 million for the prior year period. As a percentage of total net revenue, fulfillment expenses for the fourth quarter of 2022 decreased to 6.2% from 8.1% for the prior year period. The decrease was primarily attributable to a decrease in warehouse and logistics cost due to the outsourcing of most of our warehouse and handling operations.

2022 年第四季度的總運營費用從去年同期的 14.9 億元人民幣下降 47% 至 7.929 億元人民幣。 2022 年第四季度總運營費用佔總淨收入的百分比為 78.9%，而去年同期為 97.8%。 2022 年第四季度的履行費用為人民幣 6250 萬元，而去年同期為人民幣 1.231 億元。 2022 年第四季度，履行費用占淨收入總額的百分比從去年同期的 8.1% 降至 6.2%。減少的主要原因是由於我們將大部分倉庫和裝卸業務外包，導致倉庫和物流成本減少。

Selling and marketing expenses for the fourth quarter of 2022 were RMB 535.2 million as compared with RMB 1.08 billion for the prior year period. As a percentage of total net revenues, selling and marketing expenses for the fourth quarter of 2022 decreased to 53.2% from 70.7% for the prior year period. The decrease was primarily attributable to the closure of underperforming offline stores, reduction in marketing event-related expenses and higher efficiency of online marketing activities.

2022 年第四季度的營銷費用為人民幣 5.352 億元，上年同期為人民幣 10.8 億元。 2022 年第四季度，銷售和營銷費用佔總淨收入的百分比從去年同期的 70.7% 下降至 53.2%。減少的主要原因是關閉表現不佳的線下門店、減少與營銷活動相關的費用以及提高在線營銷活動的效率。

General and administrative expenses for the fourth quarter of 2022 were RMB 170 million as compared with RMB 248.7 million for the prior year period. As a percentage of total net revenues, general and administrative expenses for the fourth quarter of 2022 increased to 16.9% from 16.3% for the prior year period. The increase was primarily attributable to the deleveraging effect of lower total net revenues in the fourth quarter of 2022.

2022 年第四季度的一般和管理費用為人民幣 1.7 億元，上年同期為人民幣 2.487 億元。 2022 年第四季度，一般和行政費用占淨收入總額的百分比從去年同期的 16.3% 上升至 16.9%。這一增長主要歸因於 2022 年第四季度總淨收入下降的去槓桿效應。

Research and development expenses for the fourth quarter of 2022 were RMB 25.1 million as compared with RMB 43.3 million for the prior year period. As a percentage of total net revenues, research and development expenses for the fourth quarter of 2022 decreased to 2.5% from 2.8% for the prior year period. The decrease was primarily attributable to the planning of research and development activities to maintain research and development expenses at a reasonable level relative to net revenues. Loss from operations for the fourth quarter of 2022 decreased by 84.4% to RMB 78.2 million from RMB 501.8 million for the prior year period. Operating loss margin was 7.8%, as compared with 32.8% for the prior year period.

2022 年第四季度的研發費用為人民幣 2510 萬元，上年同期為人民幣 4330 萬元。 2022 年第四季度，研發費用佔總淨收入的百分比從去年同期的 2.8% 降至 2.5%。減少的主要原因是研發活動的規劃，以將研發費用相對於淨收入保持在合理水平。 2022 年第四季度的運營虧損從去年同期的人民幣 5.018 億元下降 84.4% 至人民幣 7820 萬元。營業虧損率為 7.8%，而去年同期為 32.8%。

Non-GAAP income from operations for the fourth quarter of 2022 was RMB 11.5 million as compared with non-GAAP loss from operations of RMB 360.9 million for the prior year period. Non-GAAP operating income margin was 1.1%, as compared with non-GAAP operating loss margin of 23.6% for the prior year period. Net loss for the fourth quarter of 2022 decreased by 88.4% to RMB 55 million from RMB 475.1 million for the prior year period. Net loss margin was 5.5%, as compared with 31.1% for the prior year period. Net loss attributable to Yatsen's ordinary shareholders per diluted ADS for the fourth quarter of 2022 was RMB 0.09 as compared with RMB 0.75 for the prior year period.

2022 年第四季度非美國通用會計準則運營收入為人民幣 1,150 萬元，上年同期非美國通用會計準則運營虧損為人民幣 3.609 億元。非 GAAP 營業利潤率為 1.1%，而去年同期的非 GAAP 營業虧損率為 23.6%。 2022 年第四季度的淨虧損從去年同期的人民幣 4.751 億元下降 88.4% 至人民幣 5500 萬元。淨虧損率為 5.5%，而去年同期為 31.1%。 2022 年第四季度每股攤薄 ADS 歸屬於逸仙普通股股東的淨虧損為 0.09 元人民幣，而去年同期為 0.75 元人民幣。

Non-GAAP net income for the fourth quarter of 2022 was RMB 34.7 million as compared with non-GAAP net loss of RMB 335.1 million for the prior year period. Non-GAAP net income margin was 3.4%, as compared with non-GAAP net loss margin of 21.9% for the prior year period. Non-GAAP net income attributable to Yatsen's ordinary shareholders per diluted ADS for the fourth quarter of 2022 was RMB 0.06 as compared with non-GAAP net loss attributable to Yatsen's ordinary shareholders per diluted ADS of RMB 0.53 for the prior year period.

2022 年第四季度非美國通用會計準則淨收入為人民幣 3470 萬元，上年同期非美國通用會計準則淨虧損為人民幣 3.351 億元。非 GAAP 淨利潤率為 3.4%，而去年同期的非 GAAP 淨虧損率為 21.9%。 2022 年第四季度，非美國通用會計準則歸屬於中成普通股股東的每股攤薄美國存託股淨利潤為 0.06 元人民幣，而去年同期非美國通用會計準則歸屬於中成普通股股東的每股攤薄美國存託股淨虧損為人民幣 0.53 元。

Now I'd like to briefly walk through the highlights of our full year results. Total net revenues for the full year of 2022 decreased by 36.5% to RMB 3.71 billion from RMB 5.84 billion for the prior year period, primarily attributable to the decline in net revenues from Color Cosmetics Brands, partially offset by the increase in net revenues from Skincare Brands.

現在我想簡要介紹一下我們全年業績的亮點。 2022 年全年淨收入總額從去年同期的人民幣 58.4 億元下降 36.5% 至人民幣 37.1 億元，這主要是由於彩妝品牌的淨收入下降，部分被護膚品淨收入的增長所抵消品牌。

Gross profit for the full year of 2022 decreased by 35.4% to RMB 2.52 billion from RMB 3.9 billion for the prior year period. Gross margin for the full year of 2022 was 68%, as compared with 66.8% for the prior year period. The increase was primarily attributable to: first, increasing sales of higher gross margin products from Skincare Brands; and second, stricter pricing and discount policies; and third, cost optimization across all of the company's brand portfolios. Loss from operations for the full year of 2022 was RMB 928.9 million as compared with loss from operations of RMB 1.62 billion for the prior year period. Non-GAAP loss from operations for the full year of 2022 was RMB 539.3 million as compared with non-GAAP loss from operations of RMB 1.05 billion for the prior year period.

2022 年全年毛利從上年同期的人民幣 39 億元下降 35.4% 至人民幣 25.2 億元。 2022 年全年毛利率為 68%，上年同期為 66.8%。增長主要歸因於：一是護膚品牌毛利率較高的產品銷量增加；二是更加嚴格的定價和折扣政策。第三，公司所有品牌組合的成本優化。 2022 年全年運營虧損為人民幣 9.289 億元，上年同期運營虧損為人民幣 16.2 億元。 2022 年全年非美國通用會計準則運營虧損為人民幣 5.393 億元，而去年同期非美國通用會計準則運營虧損為人民幣 10.5 億元。

Net loss for the full year of 2022 was RMB 821.3 million as compared with net loss of RMB 1.55 billion for the prior year period. Net loss attributable to Yatsen's ordinary shareholders per diluted ADS for the full year of 2022 was RMB 1.37 as compared with RMB 2.44 for the prior year period. Non-GAAP net loss for the full year of 2022 was RMB 452.9 million as compared with non-GAAP net loss of RMB 980.6 million for the prior year period. Non-GAAP net loss attributable to Yatsen's ordinary shareholders per diluted ADS for the full year of 2022 was RMB 0.76 as compared with RMB 1.54 for the prior year period.

2022 年全年淨虧損為人民幣 8.213 億元，上年同期為淨虧損人民幣 15.5 億元。 2022 年全年每股攤薄美國存託股歸屬於逸仙普通股股東的淨虧損為 1.37 元人民幣，上年同期為 2.44 元人民幣。 2022 年全年非美國通用會計準則淨虧損為人民幣 4.529 億元，上年同期非美國通用會計準則淨虧損為人民幣 9.806 億元。 2022 年全年每股攤薄美國存託憑證歸屬於中成普通股股東的非美國通用會計準則淨虧損為 0.76 元人民幣，而去年同期為 1.54 元人民幣。

As of December 31, 2022, the company had cash, restricted cash and short-term investments of RMB 2.63 billion as compared with RMB 3.14 billion as of December 31, 2021. Net cash generated from operating activities for the fourth quarter of 2022 was RMB 106.6 million as compared with net cash used in operating activities of RMB 250 million for the prior year period. Net cash generated from operating activities for the full year of 2022 was RMB 136.2 million as compared with net cash used in operating activities of RMB 1.02 billion for the prior year period.

截至2022年12月31日，公司持有現金、受限制現金和短期投資為人民幣26.3億元，截至2021年12月31日為人民幣31.4億元。2022年第四季度經營活動產生的現金淨額為人民幣1.066億元，上年同期經營活動使用的現金淨額為人民幣2.5億元。 2022 年全年經營活動產生的現金淨額為人民幣 1.362 億元，上年同期經營活動使用的現金淨額為人民幣 10.2 億元。

Looking at our business outlook for the first quarter of 2023, we expect our total net revenues to be between RMB 623.7 million and RMB 712.8 million, representing a year-over-year decline of approximately 20% to 30%. These forecasts reflect our current and preliminary views on the market and operational conditions, which are subject to change.

從我們對 2023 年第一季度的業務展望來看，我們預計我們的總淨收入將在人民幣 6.237 億元至人民幣 7.128 億元之間，同比下降約 20% 至 30%。這些預測反映了我們對市場和運營狀況的當前和初步看法，這些看法可能會發生變化。

With that, I would now like to open the call to Q&A.

有了這個，我現在想打開問答環節。

(Operator Instructions) The first question comes from Dustin Wei with Morgan Stanley.

（操作員說明）第一個問題來自摩根士丹利的 Dustin Wei。

My first question related to the balance between the sales and the profit. So I think it's pretty encouraging to see the profitability for the fourth quarter at a non-GAAP definition. But looking into '23, how should we think about the growth kind of for the business? Especially, I think the first quarter seems to be -- remain a little challenging I think partly because of the recovery is not very fast, but partly seems to be also company's strategy continue to maybe lower the discount promotion in order to have still very high gross margin. But the result of down like 20% to 30% for fourth quarter, it seems that we are still sort of want to hear from the management what's the process, where we are in terms of that balance between the growth and the profitability.

我的第一個問題與銷售額和利潤之間的平衡有關。因此，我認為以非 GAAP 定義看到第四季度的盈利能力是非常令人鼓舞的。但是展望 23 年，我們應該如何考慮業務的增長方式？特別是，我認為第一季度似乎 - 仍然有點挑戰，我認為部分原因是複蘇不是很快，但部分原因似乎也是公司的戰略可能會繼續降低折扣促銷，以便仍然非常高毛利率。但是第四季度下降了 20% 到 30% 的結果，似乎我們仍然有點想听聽管理層的意見，我們在增長和盈利能力之間取得平衡。

And the second question is also related to the first quarter. Wondering if you could provide some of the break down by, for instance, by the Skincare Brands or call it makeup brands in that 20% to 30% year-on-year decline. And standing at this point, compared to maybe December last year when the reopened just happened was early this year, do you think actually that trend is -- beat management's expectation or a little behind expectation? And what do you observe in terms of consumers' behavior, the demand after the reopening?

第二個問題也與第一季度有關。想知道您是否可以提供一些細分數據，例如護膚品牌或稱其為化妝品品牌，同比下降 20% 至 30%。站在這一點上，與去年 12 月剛剛重新開放的時間相比，今年早些時候，你認為這種趨勢實際上是 - 超出管理層的預期還是略低於預期？您對消費者的行為、重新開放後的需求有何觀察？

And the third question is sort of, it would be great if you can talk about some of the growth target or strategy for your major brands, including Perfect Diary, Pink Bear, DR. WU, Galenic, so what would you like them to grow or which channel you can quantify some of the numbers, that would be very helpful.

第三個問題是，如果你能談談你的主要品牌的一些增長目標或戰略，那就太好了，包括完美日記、粉紅熊、DR。 WU，Galenic，那麼你希望他們增長什麼，或者你可以通過哪個渠道量化一些數字，這將非常有幫助。

All right. Thank you very much, Dustin for your questions. Your first question, the relationship between sales and profitability, and we would strongly encourage you to actually look at our color makeup business separately from our skincare business. So if you look at our skincare business actually, our major skincare brands are actually growing with decent profitability with pretty high gross margin and decent operating profit. But our color makeup business is actually a different story. We're trying to -- if you look at Perfect Diary, for example, we're trying to turn around that brand and hopefully the open up of the lockdown policy will help us in our effort to turn around Perfect Diary this year at some point in time down the road Perfect Diary brand and return to its growth trajectory.

好的。非常感謝 Dustin 提出的問題。你的第一個問題是銷售額和盈利能力之間的關係，我們強烈建議你將我們的彩妝業務與護膚業務分開看待。因此，如果你看看我們的護膚業務，我們的主要護膚品牌實際上正在以相當高的毛利率和可觀的營業利潤實現可觀的盈利能力增長。但我們的彩妝業務實際上是另一回事。我們正在努力——如果你看看完美日記，例如，我們正在努力扭轉這個品牌，希望封鎖政策的開放將幫助我們在今年某個時候扭轉完美日記的局面。完美日記品牌順勢而下，重回成長軌蹟的時間點。

And first quarter, I'm sorry, we're not providing that kind of detailed breakdown. But as I said earlier, our skincare products brand, we will continue to try to grow the brands and while at the same time maintaining a decent probability. For the color makeup brands, we're working very hard to try to turn around our biggest brand, Perfect Diary, and hopefully, we can show you guys some positive results in the next few quarters.

第一季度，對不起，我們沒有提供那種詳細的細分。但正如我之前所說，我們的護膚品品牌，我們將繼續努力發展品牌，同時保持良好的可能性。對於彩妝品牌，我們正在努力扭轉我們最大的品牌完美日記，希望我們能在接下來的幾個季度向大家展示一些積極的成果。

Yes, let me just add a little bit more on the guidance behind our Q1. So we've provided guidance for first quarter top line of 20% to 30% year-over-year decline. Even though it's still declining, but you can see the level of decline has been sequentially narrowing down for the second quarter of 2022 as our strategic transformation plan carries out.

是的，讓我再補充一點關於第一季度背後的指導。因此，我們為第一季度收入同比下降 20% 至 30% 提供了指引。儘管它仍在下降，但你可以看到隨著我們戰略轉型計劃的實施，2022 年第二季度的下降幅度已經連續收窄。

And secondly for Q1, we think the guidance reflects 3 main drivers. First is, we see a stronger seasonality pattern due to the higher contribution from our skincare brands. And first quarter usually is a low season for the skincare business after the Double 11 shopping festival in Q4. So that is number one. And secondly, we're still continuing our cost optimization, especially for the color cosmetics business. And our primary -- our major new product pipeline for the color cosmetics is expected in the second half this year.

其次，對於第一季度，我們認為該指引反映了 3 個主要驅動因素。首先，由於我們的護膚品牌貢獻更大，我們看到了更強的季節性模式。而一季度通常是四季度雙十一之後護膚品業務的淡季。所以這是第一。其次，我們仍在繼續優化成本，尤其是彩妝業務。而我們的主要 - 我們主要的彩妝新產品線預計將在今年下半年推出。

And the third reason is still last quarter -- first quarter, we still have a high base of comparison, which was the result of a larger fear of offline business. So if we look at last year year-end, you still have 486 stores for Perfect Diary and versus last year 2022 year-end of only 158 stores. So that's for guidance. And then I think talking about the third question of the development of our brands, we still look at them by the 2 categories. The first one is our skincare brands. Right now, you can see for our 3 major skincare brands, which is the clinical and the premium brands, the growth rate has been really high consecutively over the past 3 quarters.

第三個原因仍然是上個季度——第一季度，我們的比較基數仍然很高，這是對線下業務的更大恐懼的結果。因此，如果我們看看去年年底，完美日記仍有 486 家門店，而去年 2022 年年底只有 158 家門店。所以這是指導。然後我覺得說到第三個問題，我們品牌的發展，還是分2個品類來看。第一個是我們的護膚品牌。現在，你可以看到我們的 3 個主要護膚品牌，即臨床和高端品牌，在過去 3 個季度中的增長率一直非常高。

If you look at the whole year, Dr. WU, Galenic, plus Eve Lom in total grew by 99% for the full year. Even though those 3 brands experienced high rates, we think all of these brands will have high growth potential given the market size and also market share of the core category is still relatively low. And currently for each brand, we only have 1 to 2 hero products. So what we are planning to do for all the 3 brands are 2 things: first, continue to increase the current existing hero product market share and the continued development of the brands with those focus. And then secondly, a healthy new product pipeline by introducing the second or third hero products while also increasing cross-sales of adjacent products. So that's for skincare.

如果看全年，Dr. WU、Galenic 和 Eve Lom 總共增長了 99%。儘管這三個品牌的增長率很高，但鑑於市場規模和核心品類的市場份額仍然相對較低，我們認為所有這些品牌都具有高增長潛力。目前對於每個品牌，我們只有 1 到 2 個英雄產品。所以我們計劃為這三個品牌做的是兩件事：第一，繼續增加現有的英雄產品市場份額，並繼續發展那些專注的品牌。其次，通過引入第二或第三個英雄產品，同時增加相鄰產品的交叉銷售，建立健康的新產品線。所以是為了護膚。

And for our color cosmetics business, Perfect Diary is still the largest brand. So what we are planning for Perfect Diary, as mentioned earlier, we do see a recovery of consumption in the makeup business. So we think the recovery will be more prominent in the second half of this year. So for that we have a healthy new product pipeline and we're still adjusting the product mix and channel mix for this brand. So for product mix, we would like to increase the contribution from the facial makeup. So we do have some new products on that area in later half of this year. And of channel mix adjustment, for offline business, we think we have already done most of the adjustments. And depending on the development of the offline market this year, we will continue to do some adjustments to accommodate the new trends. And for online, we will continue to capitalize on the new channels to attract new customers.

而對於我們的彩妝業務，完美日記仍然是第一大品牌。所以我們對完美日記的規劃，正如前面所說，我們確實看到了彩妝業務的消費復甦。所以我們認為今年下半年復蘇會更加突出。因此，為此我們擁有健康的新產品線，我們仍在調整該品牌的產品組合和渠道組合。因此，對於產品組合，我們希望增加面部彩妝的貢獻。因此，我們在今年下半年確實在該領域推出了一些新產品。而在渠道組合調整方面，對於線下業務，我們認為我們已經完成了大部分調整。並且根據今年線下市場的發展情況，我們會繼續做一些調整以適應新的趨勢。而在線上，我們將繼續利用新渠道來吸引新客戶。

(Operator Instructions) The next question comes from Qianye Lin with CICC.

（操作員說明）下一個問題來自中金公司的林千葉。

This is Qianye Lin from CICC and I've got 2 questions. The first one regarding skincare, we have seen a continuous increase in sales contribution from our skincare brands. So what are our expectations for future sales contribution and normalized profitability in the skincare category?

我是 CICC 的林千葉，我有兩個問題。第一個關於護膚品，我們看到我們的護膚品品牌的銷售貢獻持續增加。那麼我們對護膚品類未來的銷售貢獻和常態化盈利能力有何預期？

And the second question regarding offline channels. As of December 31, 2022, so the company operates over 150 offline stores. How will have these stores performed in terms of top line revenue and profitability this year? And furthermore, what is the company's outlook and plan for developing our offline channels?

第二個問題關於線下渠道。截至2022年12月31日，公司經營著150多家線下門店。這些商店今年的收入和盈利能力如何？另外，公司對我們線下渠道的發展前景和計劃是什麼？

All right. Well, thanks for your question. Your first question, we do expect revenue contribution from our skincare brands to exceed at least 50% or maybe even higher in the longer term and the probability. And for our clinical and premium skincare brand, I believe over the long-term, operating margin can be in the mid-teens, if not higher, I mean, operating margin.

好的。嗯，謝謝你的問題。你的第一個問題，我們確實預計我們的護膚品牌的收入貢獻在長期和概率上至少會超過 50% 甚至更高。對於我們的臨床和優質護膚品牌，我相信從長遠來看，營業利潤率可以在十幾歲左右，如果不是更高的話，我的意思是營業利潤率。

Offline channel, we downsized our offline stores significantly last year from close to 300 to about 150. And obviously, the stores we're still running are those who -- are those that are relatively -- with relatively better profitability. So if we look at the offline store performance for January and February this year, and thanks to the recovery of offline consumption due to the opening up of the lockdown policies, most of our offline stores have actually come back in terms of same-store sales. And most of the stores, at least for the first 2 months of this year, were profitable. And we do hope that this trend will continue well into the lower part of the year and we'll continue to see profitability from the offline channel.

線下渠道，去年我們將線下門店從近 300 家大幅縮減至約 150 家。顯然，我們仍在經營的門店是那些盈利能力相對較好的門店。所以如果我們看今年1、2月份的線下門店表現，得益於解封政策的開放，線下消費的回暖，實際上我們大部分線下門店的同店銷售額都已經回來了.大多數商店，至少在今年的前兩個月，都是盈利的。我們確實希望這種趨勢將持續到今年下半年，我們將繼續看到線下渠道的盈利能力。

And going forward, I think in the future it really depends on whether we can find appropriate growth strategy for our offline stores and the appropriate product mix in order to drive the growth of the offline business. So we will make definitely changes to our growth strategy for the offline channel as we see fit as the market situation continues to evolve.

展望未來，我認為未來這真的取決於我們能否為我們的線下商店找到合適的增長策略和合適的產品組合，以推動線下業務的增長。因此，隨著市場形勢的不斷發展，我們將在我們認為合適的情況下明確改變我們的線下渠道增長戰略。

That's very helpful. May I just add one more question. So what do you see the operating margin for the color cosmetics in the long run?

這很有幫助。我可以再補充一個問題嗎？那麼從長遠來看，您如何看待彩妝的營業利潤率？

Well, for color makeup business, generally, the margin profile is lower compared to that of skincare brands. So if you look at those major international color makeup brands, typically, the operating margin could be in the low to mid-teens and net margin mid to high single-digits as a reference point.

嗯，對於彩妝業務，一般來說，與護膚品牌相比，利潤率較低。因此，如果你看看那些主要的國際彩妝品牌，通常，營業利潤率可能在中低至十幾歲，淨利潤率可能是中高個位數作為參考點。

The next question comes from Olivia Tong with Raymond James.

下一個問題來自 Olivia Tong 和 Raymond James。

This is Devin Weinstein on for Olivia and I appreciate you taking our questions. I wanted to start out asking you perhaps a bit more broadly what you're seeing on the consumer front as China continues to reopen? What you're seeing across the beauty category across the different sub categories makeup, skincare? And perhaps how the consumer is shifting their spending behavior between channels?

我是奧利維亞的德文溫斯坦，感謝你回答我們的問題。我想開始問你，隨著中國繼續重新開放，你在消費者方面看到了什麼？您在美容類別的不同子類別化妝、護膚品中看到了什麼？或許消費者如何在渠道之間改變他們的消費行為？

And second question would be your view on promotion as travel continues to recover and consumer mobility improves? And perhaps how your expectations for promotion across e-commerce and brick and mortar channels would vary?

第二個問題是，隨著旅行的持續復甦和消費者流動性的提高，您對促銷有何看法？也許您對電子商務和實體渠道促銷的期望會有何不同？

So the first question on -- the outlook of the beauty market in China. So we're currently cautiously optimistic about the outlook in 2023 and probably more confident in the long-term growth of China beauty market. So the recent lift of the quarantine and travel restrictions definitely create more social activities, which is a positive factor for both the makeup and skincare categories. However, there is still uncertainty on the path to full recovery. So as it reopened in last December, followed by an outbreak of the pandemic and the rebound of the consumption of beauty have really been very clear in the first quarter of 2023.

那麼第一個問題——中國美容市場的前景。因此，我們目前對 2023 年的前景持謹慎樂觀態度，可能對中國美妝市場的長期增長更有信心。因此，最近檢疫和旅行限制的解除無疑創造了更多的社交活動，這對彩妝和護膚品類都是一個積極因素。然而，全面復甦的道路上仍存在不確定性。所以去年12月重新開張，緊跟著疫情的爆發，美妝消費的回暖在2023年第一季度確實非常明顯。

We do see a rebound of traffic in offline, plus the consumption level and the spending falls back to the pre-COVID situation. But we think as the reopen continues and people's disposable income continues to recover, we do expect a rebound of the beauty market probably happen in the later half of this year. That's why we plan to allocate more marketing resources and also new launches in the second half of this year.

我們確實看到線下流量的反彈，加上消費水平和支出回落到 COVID 之前的情況。但我們認為，隨著重新開放的繼續和人們可支配收入的持續恢復，我們確實預計今年下半年美容市場可能會出現反彈。這就是為什麼我們計劃在今年下半年分配更多營銷資源並推出新產品。

So regarding your second question on promotions. So we think we've talked about this couple of times in the past earnings call. We still expect the international players to continue their heavy promotions, which began during the pandemic because we think it's still one of the key drivers for their growth in China, and China growth is the key driver for the global growth. So if they still continue with the heavy promotions, they may lose the pricing competitiveness, and as a result, losing market share. And also as the travel retail channel is likely to accelerate, the international players may adjust their price policy to balance the travel retail e-commerce in the China market. That's our current -- on the [GE] outlook and the current competitive landscape in China.

那麼關於你關於促銷的第二個問題。所以我們認為我們在過去的財報電話會議上已經談過幾次了。我們仍然預計國際公司將繼續他們在大流行期間開始的大規模促銷活動，因為我們認為這仍然是他們在中國增長的關鍵驅動力之一，而中國的增長是全球增長的關鍵驅動力。因此，如果他們仍然繼續大力促銷，他們可能會失去價格競爭力，從而失去市場份額。並且隨著旅遊零售渠道的加速發展，國際企業可能會調整價格政策以平衡中國市場的旅遊零售電子商務。這就是我們目前對 [GE] 前景和中國當前競爭格局的看法。

And that concludes the question-and-answer session. I would like to turn the conference back over to management for any additional or closing comments.

問答環節到此結束。我想將會議轉回管理層以徵求任何其他或結束意見。

Thank you, once again, for joining us today. If you have any further questions, please feel free to call at Yatsen directly or at Piacente Investor Relations. Our contact information for IR in both China and the U.S. can be found in today's press release. Thank you and have a great day.

再次感謝您今天加入我們。如果您有任何其他問題，請隨時直接致電 Yatsen 或 Piacente 投資者關係部。我們在中國和美國的 IR 聯繫信息可以在今天的新聞稿中找到。謝謝你，祝你有美好的一天。

The conference has concluded. You may disconnect your line.

大會圓滿結束。您可以斷開線路。