Yatsen Holding Ltd (YSG) 2025 Q1 法說會逐字稿

Ladies and gentlemen, good day and welcome to the Yatsen first quarter earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Irene Liu, Vice President, head of strategic Investment in Capital Markets. Please go ahead.

Thank you. Please note that the session today will contains relating to the company's future performance and are intended to qualify for the safe harbor from liability as established by the US Securities Litigation Reform Act. Such statements are not guarantees of future performance and are subject to certain risks and uncertainty at some point and other factors.

Some of these risks are beyond the company's control and could cause actual results to differ from those mentioned in today's press release and this discussion. A general discussion of the risk factors that could affect Yain's business and financial results is included in certain filings of the company with the Securities Exchange Commission. The company does not undertake any obligation to update the information except as required by law.

During today's call, management will also discuss certain non-gap 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 and non-GAAP financial results.

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 Q&A session.

As a reminder, this conference is being recorded. In addition, a webcast replay of this conference call will be available on Yahoo's investor relations website at ir.yatsenglobal.com. I will now turn the call over to Mr. Jinfeng Huang. Please go ahead.

Thank you, Irene, and thank you everyone for participating in Yatsen's first quarter 2025 earnings conference call today. I will begin with the Yatsen overview, and our key financial results followed by insight into our key strategy, initiative and operational highlights.

Beauty markets for modest growth in the first quarter of 2025. According to the China National Bureau of Statistics. Beauty retail sales rose 3.2% year-over-year. Slightly trailing the 4.6% year over year growth in total retail sales of consumer goods.

Online beauty sales reflected a similar trend. Combined beauty sales on Tmall and Douyin, recorded low double-digit year over year growth. The Women's Day shopping festival delivering moderate performance. In terms of channels, (Eve Lom outperformed Galenic) in both skincare and the color cosmetics categories. Despite a soft market environment, we delivered results in line with our guidance.

Total net revenues increased by 7.8% year-over-year. Remarkably, our net revenues from skincare brands rose by 47.7% year over year, driven by a 58% year-over-year increase for our clinical and premium skincare brands including Galenic, DR.WU and Eve Lom

On the profitability front for the first quarter of 2025, our overall growth margin increased to 79.1% from 77.7% for the prior year period, given by the greater contribution from higher margin products. We also reduced our net loss margin by 15.5% points to 0.7% from 15.1% in the entire year. Through more strategic marketing spending and the streamlined general and administrative expenses.

Notably, we achieved a non-GAAP net income of RMB7.1 million, representing a significant Turnaround from the non-GAAP net loss of RMD 83.8 million for the pi year period.

Our solid performance for the first quarter marks another milestone in our strategic transformation, which particular progress on two key fronts. Accelerating the growth for our skincare brands and optimizing our cost structure to prepare us for profitable growth.

Now let me walk you through the key performance highlights this quarter that reflect the accomplishments we have achieved. Starting with skincare, our portfolio continued to show strong momentum. Primarily driven by Galenic and Dr. Wu, our skincare brands delivered year over year revenue growth of 47.7%. I saw another quarter of steady growth.

Its #1 vitamin C serum was the bestselling product in the premium vitamin serin category in Dr. WU's live streaming room. While the secret the excellent active cream ranked among the TOP6 anti-aging creams on (Tmall) in terms of retail sales value in the first quarter.

The Micro Mas series also contributed to the brands strong performance. In May, we hosted an offline event in Yunnan, China to officially launch the upgraded rejuvenating micro mask, which recently obtained the special cosmetic registration certificate for whitening products.

At the event, we also announced renowned actress Duling Chen as the brand ambassador for the mask. We aim to further elaborate that I mixed awareness and recognition through continued support innovation and targeted marketing efforts.

Dr. Wu also delivered robust revenue growth in the first quarter, supported by a broader port portfolio and a more balanced channel mix. We collaborated with a wide range of celebrities and QOLs to promote diverse products. Including the purifying renewal essence toner.

The suncare (UVex) whitening lotion, and the newly launched targeted acne cleaning the. This approach helps us drive revenue growth on both (Tmall) and in addition to strong sales performance, we remain committed to scientific research and collaboration. In March, we launched the third Acne Research Fund project led by 14 renowned dermatologists from top institutions.

Since its inception in 2023, the project has reached over 20,000 doctors and it received more than 350 clinical research proposals. We look forward to the insight this fund will bring to the field of anti-acne treatment.

While continuing to invest in product development and brand building to boost revenue growth, we also made meaningful progress in improving profitability. Studying and marketing expenses as a percentage of total net revenues narrowed to 56.4% from 59.7% for the prior year period. The improvement was primarily due to more strategic marketing spending.

Particularly upset by higher traffic expenses as a result of growing revenue contribution from the Douyin channel. More notably, general and administrative expenses as a percentage of total net revenues were 7.8%, down by 10.3% points from 18.1% a year ago. This improvement reflected our disciplined cost management and to provide a solid foundation for our long-term growth.

Lastly, I would like to highlight a few milestones at the corporate level. Our global R&D Center in Shanghai, which we inaugurated last year, was officially accredited by the China National Accreditation Service for conformity assessment, placing it among the top tier of global testing institutions.

This accreditation alongside the CNAS recognition received by our R&D center in Guangzhou back in 2022 demonstrate our Continue to commitment to excellence in beauty. Also in April we were invited by the China show of Bloomberger and engaged in an in-depth interview on the topic of the future of beauty driven by technology. This opportunity reinforce our strategic focus on R&D as a core competitive advantage.

Before passing the call to Donghao, I would like to provide an update that our Board of Directors has approved a new share repurchase program under which we may repurchase up to US$30 million worth of our ordinary shares over the next 24 months, commencing on May16, 2025.

This further demonstrates our confidence in Yen's future potential. To conclude, while market conditions remain complex, we are encouraged by the progress we have made in executing our strategic transformation. We remain focused on delivering innovative and cultural products, building strong brand equity and driving operational excellence.

All of which we believe will proposition us well for long term sustainable growth. With that, I will now send the call over to our CFO, Donghao Yang, to discuss our financial performance. Thank you, everyone.

Thank you Jinfeng Huang and hello everyone. Before I get started, I would like to clarify that all financial numbers presented today are announced and all percentage changes referred to year over year changes and this otherwise noted.

Total net revenues for the first quarter of 2025 increased by 7.8% to RMB833.5 million from RMB773.4 million for the prior year period. The increase was primarily due to a 47.7% year over year increase in net revenues from skincare brands, partially offset by a 9.9% year over year decrease in net revenues from color cosmetics brands.

Gross profit for the first quarter of 2025 increased by 9.7% to RMB659.1 million from RMB600.9 million for the prior year period. Growth margin for the first quarter of 2025 increased to 79.1% from 77.7% for the prior year period. The increase was primarily driven. An increase in sales of higher gross margin products.

Total operating expenses for the first quarter of 2025 decreased by 8.6% to RMB693.2 million from RMB758.7 million for the prior year period as a percentage of total net revenues, total operating expenses for the first quarter of 2025 were 83.2%.

As compared with 98.1% for the prior year period, fulfillment expenses for the first quarter of 2025 were RMB51.8 million as compared with RMB51.4 million for the prior year period, and the percentage of total net revenues fulfillment expenses for the first quarter of 2025 decreased to 6.2% from 6.7%. For the 5-year period. The decrease was primarily due to further improvements in logistics efficiency.

Selling and marketing expenses for the first quarter of 2025 were RMB553.8 million as compared with RMB539.2 million for the prior year period as a percentage of total net revenues, selling and marketing expenses for the first quarter of 2025 decreased to 66.4% from 69.7% for the prior period. The decrease was primarily due to the company's more strategic marketing spending combined with the selective closure of offline stores.

General and administrative expenses for the first quarter of 2025 were RMB64.9 million as compared with RMB140.1 million for the prior year period as a percentage of total net revenues, general and administrative expenses for the first quarter of 2025 decreased to 7.8% from 18.1% to the prior year period.

The decrease was primarily attributable to lower share-based compensation expenses as a result of using the graded vesting method over the vesting term of the company's awards and lower payroll expenses resulting from a reduction in general and administrative head caps.

Research and development expenses for the first quarter of 2025 RMB22.6 million as compared with RMB27.9 million for the prior year period. As a percentage of total net revenues, the third development expenses for the first quarter of 2025 decreased to 2.7% from 3.6% for the prior period. The decrease was primarily due to lower lease expenses resulting from more favorable terms under a lease agreement renegotiated during the first quarter of 2025 and lower share-based compensation expenses.

Lots of operations for the first quarter of 2025 was RMB34.1 million as compared with RMB157.7 million for the prior year period. Operating loss margin was 4.1% as compared with 20.4% for the prior year period. Non-GAAP loss from operations for the first quarter of 2025 was RMB14.9 million as compared with RMB107 million for the prior period.

non-GAAP operating loss margin was 1.8% as compared with 13.8% for the priorly period. Net loss for the first quarter of 2025 was RMB5.6 million. As compared with RMB124.9 million. For the prior net margin was 0.7% as compared with 16.1% for the priorly period. Net loss attributable to ordinary shareholders for diluted EPS for the first quarter of 2025, with RMB0.06 as compared with RMB1.16 for the prior year period.

non-GAAP net income for the first quarter of 2025 was RMB7.1 million as compared with non-gap net loss of 83.8 million for the prior year period. Non-gap net income margin was 0.9% as compared with non-GAAP net loss margin of 10.8% for the prior year period.

Non-GAAP net income attributable to Yeltsin's ordinary shareholders for diluted EPS for the first quarter of 2025 was RMB0.07 as compared with non-gap net loss attributable to Yan's ordinary shareholders for diluted EPS of RMB0.78 for the prior year period.

As of March 30 , 2025, we had cash and short-term investments of RMB1.28 billion as compared with RMB1.36 billion as of December 31, 2024. Net cash generated from operating activities for the first quarter of 2025 was 23.8 million as compared with net cash used in operating activities of RMB121.8 million for the prior period.

Looking at our business outlook for the second quarter of 2025, we expect our total net revenues to be between RMB810.4 million and RMB889.9 million, representing a year over year increase of approximately 2% to 12%. These forecasts reflect our current and preliminary views on the market and operational conditions which are subject to change. With that, I would now like to open the call to Q&A operator.

Thank you. We will now begin the question-and-answer session. (Operator Instructions) The first question today comes from Maggie Huang with CICC. Please go ahead.

Well, thanks for taking my question. This is Maggie Huang from CICC, and firstly, congratulations on achieving non-GAAP net income in this quarter and I have two questions.

My first question is that, how do we plan to promote the new products of Perfect Diary organic? Especially the foundation products of Perfect Diary and the anti-aging products organic and my second question is about our performance of this June 18, shopping festival up to now. Is that in line with our expectation? That's my two questions. Thank you.

Thank you, Maggie, for the question. So for your first question regarding the proper diary and the galanic new products, so we think innovation and efficacy are the most important in driving consumers, a repeat purchase and then then the favorite.

So basically right now all our pipelines are really worth. Strong innovation and are backed by very strong R&D capability, deep consumer insights, and a very strong com consumer communication.

So right now, for perfect Diary and Galenic, so far we have seen, very good initial, achievement results from the consumer feedback in terms of the facial makeup products and the anti-aging product which is the foundation and also our VA.

So once we receive more positive feedback from the consumer and fine tune our consumer communication, then we can begin to enlarge our channel distribution and also further view into, further view this product into the product.

All right, let me take your second question. Well, it's still a bit too early for us to protect our overall performance for the June 18, festival, but so far so good. I think the sales so far is pretty much in line with our with our expectations. Thank you.

It's very clear. Thank you very much, and I have no more questions.

(Operator Instructions)

Thank you again for joining us today. If you have any further questions, please feel free to contact us at (JPY) directly. Our contact information for IR in both China and the US can be found in today's press release. Thank you and have a great day.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.