Yunji Inc.

Q2 2021 Earnings Conference Call


spk01: Good morning and good evening, ladies and gentlemen. Thank you and welcome to Yunji's second quarter 2021 earnings conference call. With us today are Mr. Shang-Lui Hsiao, Chairman and Chief Executive Officer, Chen Qi Zhang, Vice President of Finance, and Ms. Kay Liu, Investor Relations Director of the company. Now, I would like to hand the conference over to first speaker today, Ms. Kay Liu, IRB of UNG. Please go ahead, Nam.
spk00: Hello, everyone. Welcome to our second quarter 2021 earnings call. Before we start, please note that this call will contain forward-looking statements within the meaning of Private Security Litigation Reform Act of 1995 that are based on our current expectations and current marketing operation conditions and relate to events that involve known or unknown risks, uncertainties, and other factors of the Chinese industry. These forward-looking statements can be identified by terminologies such as wealth, expense, anticipate, continue, or other similar expressions. For a detailed discussion of these risks and uncertainties, please refer to our related document filed with USFCC. Any forward-looking statements that we make on this call are based on assumptions as of today. and I especially qualified in the entirely by cautioning statement, risk factors, and details of the company filing with SEC. Yunji did not undertake any obligation to update this statement as required on the applicable law. With that, I will now turn over to Sheng Yuejiao, Chairman and CEO of Yunji.
spk04: Hello, everyone. Welcome to Yunji's second quarter 2021 earnings call. Thank you.
spk02: Based on product selection and social sharing, Linji's marketing model has established a complete and healthy life cycle. This cycle starts with the product selection, promotion by our service managers, and purchase facilitation. And while our service managers benefit from promotional incentives, Our members have a better understanding of the product through the service managers' introductions, receive cost-effective products that satisfy their needs, establish trust with Wingy's platform and our sharing-based model, and conduct repeat purchases. Meanwhile, our service managers will earn income by delivering services. Common prosperity has also been Wingy's only meeting vision since its establishment.
spk04: To create more user value and offer products with better quality, we remain focused on three core strategies. Highly curated product selection, differentiate supply chain, and specialize the retail system. In May of this year, we launched Yunji99 as one of the core sections of the platform that reflects the strategy of immediate selection. Yunji99 focuses on the core traffic of the platform and selects all-network rebates to create all-network rebate entrances. This section is in line with Yunji's usual marketing philosophy, the immediate selection of supply chain strategies, and the rebate marketing strategy to remove social elements, focusing on the immediate cost of goods, helping tens of millions of members to buy global goods.
spk02: In May 2021, we launched the Wingy99 special sales portal on our Wingy app as one of the core portals for our curated product selection strategy, aiming to become the portal for mega-heat products across all of the internet. Our Wingy99 portal funnels our platform's core traffic to a refined selection of the mega-heat products across all categories. The addition of this section reinforces our refined supply chain strategy, as well as the cultivation of the market product sales by connecting VNG members to quality items with viral appeal. By focusing on highly cost-effective products, we help millions of members access quality products from all over the world.
spk04: Yunji99 first passed a strict selection process and rules and get the basic selection words. Then, after repeated selection and filtering, 99 special products are available every day. Of the 99 products, the top 10 products will be highly recommended and have more community recommendation resources. Its brand effect and cost-effectiveness improve the consumer's shopping experience and better facilitate the purchase of consumer orders. At present, this version is still being improved and optimized according to user data, constantly improving user shopping experience,
spk02: The LinkedIn 99 special sales portal features a curated selection of up to 99 products each day. These 99 products are vigorously screened and selected through strict criteria and a basic product pool selection process. Of the 99 products, the top 10 best sellers will be highly recommended and provided with more resources of support. Providing such high quality brands and affordable prices enhances the UNG shopping experience and encourages purchases. We will continue to optimize our product selection and utilize data-driven insights to enhance the UNG shopping experience and provide our users with a true one-stop shopping solution.
spk04: Under Yunji's strategy of diversifying supply chain, our free brand, Suye, has been around for 11 years. Over the past 11 years, Yunji's unique social characteristics have allowed the brand to express itself better. Since 2020, Suye has grown into a service brand with a sales of more than 1 billion. It has created multiple first-class products. In the process of diversifying the supply chain of Yunjie, many different types of unique products have been developed and on the market. Our newly developed beauty products, the first batch of 58,000 bottles, will be delivered in 57 seconds and will be delivered quickly. Currently, we are optimizing the supply and delivery speed of our products. Our company is looking forward to the performance after the improvement of the production capacity.
spk02: As for our differentiated supply chain strategy, we recently celebrated the 11th anniversary of our private label, skincare brand, Solo Life. By utilizing our social sharing capabilities, we have helped Solo Life to better express its brand value and accumulate a large group of loyal users over the years. By the end of 2020, SolarLights had become a skincare brand with annual sales of more than 1 billion items on the UNG platform and cultivated multiple mega-heat products with hundreds of millions in unit sales. Within our differentiated supply chain matrix, we also introduced a number of unique products in various categories. For example, the first batch of our newly developed line of beauty drinks, which included 85,000 products, was sold out within just 57 seconds of its launch. We are currently optimizing production capacity and shipping speed and look forward to this product line's performance after our production capacity has improved.
spk04: We chose the health industry because we believe that the health industry is a new start and can provide a rich value to users. At the same time, we hope that our service managers and users will gain health and beauty. We hope that the service managers will find a new career in the cloud and benefit the families behind the service managers.
spk02: We chose to differentiate our strategic focus on the health industry for a number of reasons. First, we believe that the tailwind generated by the health industry brings tremendous value to not only us but also our members. More importantly, we want to provide our service managers and members with methods to improve their physical strength and ability. It is also our sincere hope that our service managers will develop a lifelong career on our platform that benefits not only themselves but also their families.
spk04: Next, let's talk about Yunji's professional sales. We do professional sales to help millions of women change their fate, train our service managers, and also hope that they can gradually grow and earn tens of thousands of dollars a month. They are not only service managers, but also leaders in various fields. They are entrepreneurs who want to change their fate. We provide them with health management courses, sales skills courses, and train them to become experts in the field of beauty and health. These trainings can help them better reach consumers by marketing with professional attitude. Next, let me share
spk02: the initiatives we have taken to utilize a specialized retail system and online traffic. These have helped millions of service managers discover and develop life-changing career opportunities. Most often, our service managers are women. We train our service managers to deliver professional services to our members and hope that they can gradually earn a decent monthly salary of $10,000 of RMB. They are not only service managers, but also experts in various fields. They are entrepreneurs who hope for a change in their lives. We offer them many training programs in areas such as health management and marketing so that they can become experts in the fields of cosmetics, health, and sales. These trainings enable them to reach customers with a more professional attitude and improve their marketing skills. The professional marketing skills are practical in use and also boost our sustainable development. Going forward, we hope that more leaders will emerge from within our service manager group, and we will focus on supporting these leaders while making our specialized retail system more complete and efficient.
spk04: In this quarter, we maintain the spirit of entrepreneurs and continue to make new attempts. At the user flow level, we set up a project team to better reach users, wake up sleeping users, and improve user consumption. In order to cooperate with the development of the new traffic channel, the project team has put a lot of effort into the content marketing, doing the original content of Yunji in the form of short videos. At the same time, we are also preparing live broadcasts on the external live broadcast platform. I will also participate in the live broadcasts on the external platform and become the host of the goods.
spk02: During the second quarter, we maintained the entrepreneurial spirit and continued to conduct innovative initiatives. In terms of user retention, we set up special work to better reach users, engage inactive users, and strengthen users' consumption frequency. In addition to developing new chapter channels, this group worked hard on content marketing and created their own original short-form video content. Meanwhile, we have also been preparing for our own live streaming sessions on third-party live streaming platforms, where I will host the session myself. I will turn the call over to Mr. Chen Zijun, our Vice President of Finance, to go through the financial results.
spk03: Thank you, Shanglue. Hello, everyone. Before I go through our financial results, please note that all numbers stated in the following remarks are in RMB terms. and all comparisons and percentage changes are in a year-over-year basis, unless otherwise noted. Starting this year, we committed to enhancing our supply chain differentiation strategy, upgrading our product selection with our UMAT-HIT product curation strategy, and refining our membership management system. We have also shifted our mindset to focus on sustainable long-term growth as we further improved our efficiency and employee structure. After several quarters of adjustments, our refined operations have resulted in significant improvements in our profitability despite some fluctuations in our quarterly sales. During this quarter, we recorded our operations income of $16 million and our net income of $17 million. compared with the operating loss of $45 million and the net loss of $17 million a year ago. Now, let's take a closer look at our financials. Total revenue was $571 million compared to $1,487 million a year ago. Revenue from sales of merchandise was $472 million and revenue from our marketplace business was $88 million. In line with our renewed long-term growth strategy, we further optimized our selection of suppliers and merchants, which caused revenue decrease in both our marketplace business and merchandise sales during this quarter. As a result, growth margin improved to $75 million a 75% percentage compared to a 29% percentage a year ago. During this quarter, we improved our operating efficiency by carefully selecting quarterly suppliers and products, removed certain products that were more included to face pricing and subsidy competition, and focused on our depreciation supply chain and market product offerings. As a result, growth margin improved accordingly. Turning to our operating expenses, fulfillment expenses were $15 million, or 8.8% of total revenues, compared to $129 million, or 8.7% of total revenue a year ago. Sales and marketing expenses were $61 million, compared to $228 million a year ago. As a percentage of total revenues, sales and marketing expenses were reduced to 10.8% from 15.4% in the same period last year. This decline was due to decreased business promotion expenses and reduced member management fee, resulting from the improvement of our member management efficiency. Technology and accounting expenses were $32 million, or 5.7% of total revenues compared to 59 million or 3.9% of total revenue a year ago. General and administrative expenses were 43 million or 7.5% of total revenues compared to 71 million or 4.8% of total revenue a year ago. This decrease was mainly due to a decrease in share-based compensation expenses. Total operating expenses in the second quarter decreased to $187 million. We recorded an income from operation of $16 million as compared to a loss of $45 million a year ago. Net income was $17 million compared to a net loss of $17 million a year ago. The adjusted net income was $24 million compared with $20 million a year ago. Basic kind of diluted net income per share attributable to ordinary shareholders were both 0.01 compared to basic kind of diluted net loss per share attributable to ordinary shareholders of one cent in the same period of 2020. Moving on to liquidity, as of June 13, 2021, we had a total of $1.1 billion in cash and cash equivalents, restricted cash, and short-term investments on our balance sheet. Our liquid assets were sufficient enough to cover our payable obligations, and we did not hold any long-term bank loans or debt on our balance sheet. As we continue to execute our supply chain depreciation and product curation strategy, we remain focused on our long-term growth objectives and the profitability. We are confident that our innovation strategy and the refined operation capability will continue to drive our sustainable development going forward. This concludes our prepared remarks for today. Operator, we are now ready to take questions.
spk01: Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, you may press the pound or hash key. When asking the question, please state your question in Chinese first, then repeat your question in English for the convenience of everyone in the call. Once again, to ask a question, please press star 1 on your telephone keypad. Once again, please press star 1 should you wish to ask a question. Once again, to ask a question, you may press star one on your telephone. It seems we don't have any questions from the line yet. Presenters, please continue. So for anyone who would like to ask a question, please press star one on your telephone keypad. I don't see any questions from the line yet. Presenters or management, please continue.
spk00: Thank you for joining us today. Please do not hesitate to contact us if you have further questions, and we look forward to talking with you next quarter. Thanks. Thank you.
spk01: Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now all disconnect.

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Q2YJ 2021