Yunji Inc.

Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to Yungi's 4th Quarter 2023 Earnings Conference Call. With us today are Mr. Sean Lewis, Chairman and Chief Executive Officer, Mr. Yejin Kui, Tenured Financial Director, and Ms. Kaya Liu, Investor Relations Director of the company. As a reminder, this conference call is being recorded. Now, I would like to hand the conference over to our first speaker today, Mrs. Kayen Liu, IRD of Yungi. Please go ahead, man.

Hello, everyone. Welcome to our fourth quarter 2023 earnings call. Before we start, please note that this call will come to a forward statement within the of Private Security Litigation Reform Act of 1995 that are based on our current expectations, the current market operation conditions, and relate to events that involve known or unknown risk, uncertainties, and other factors of things in this industry. These forwarding statements can be identified by terminologies such as will, expect, anticipate, continue, or other similar expressions. For a detailed discussion of these risks and uncertainties, please refer to our latest document filed with the US SEC. Any forward-looking statements that we make on this call are based on assumptions as of today and are not necessarily qualified entirely by cautionary statements, risk factors, and details of the company filing SECC. Yunqi does not undertake any obligation to update this statement exact as required on the applicable law. With that, I will now turn over to Shangyue Xiao, Chairman and CEO of Yunqi.

Hello everyone, welcome to Yunji's 2023 Earnings Call. During 2023, and particularly in the fourth quarter's peak e-commerce promotion season,

the prevailing trends registered in the market with intense price competition. Major e-commerce and live streaming platforms adopted low-price strategies as norm, fostering a bargain-hunting mindset among consumers. However, ING is not merely an e-commerce platform. We are also a brand builder and a sales service provider. We understand the long-term repercussions of relying on low-price strategies, which can enroll brand identity over time. The value we deliver to users lies in our cost-effective products with low return rates, as well as in minimizing decision-making and wait times for our users. Our commitment to a carefully curated product selection ensures that Wingy maintains a stable average order value even enemies than the market's focus on low prices.

The stability of Ketanjia is closely related to our product capabilities. We have developed many high-cost, free-of-priced products around food, beauty, and health. We have broadened the range of original products and upgraded some popular products. Our free-of-priced products have gradually emerged in sales and development over the years. For example, collagen, hyaluronic acid, etc. We are trying successfully to gain the approval of consumers. We have developed other products for these raw materials. Different usage methods and different effects are the direction we are exploring. Based on the new products that have been established, these new products will make it easier for consumers to accept them quickly. We hope that consumers will not only become loyal users of three products, but also become loyal users of the whole consumer system,

The stability of our average ad value is intricately linked to our highly developed product capabilities. Centered around the theme of love for food, beauty, and health, we have developed a range of cost-effective private label products. We have not only expanded existing categories, but also desperately upgraded our lineup of mega-huge products. Over the span of many years of product development and sales, we have identified key end degrees that resonate strongly with our user base, such as collagen and probiotics. Building on successful trials and enthusiastic user feedback, we have introduced a variety of new products across multiple categories that enormously incorporate these popular ingredients while exploring different ways to harness these ingredients and enhance product functionality, leveraging the existing popularity of these ingredients. Our new offerings have been warmly embraced by our users. We aim to cultivate loyal users of individual products who appreciate our carefully selected ingredients. In doing so, we will develop a user base that is loyal to the entire vintage brand ecosystem, fostering a deeper trust in our brand.

We pursue a more transparent product and material table, a more real and healthy product. In the past 5,000 years, China has had many high-quality natural ingredients, such as Shihu, Saji, these well-known medicinal herbs in Chinese medicine, through the second polishing of technology, have become the source of absorption and absorption of health food. At RINGI, we are committed to trust policy in terms of our ingredients. And we absolutely please generally use the feedback we draw upon the rich heritage of RINGI.

over 5,000 years of Chinese history to source high-quality natural ingredients such as dendrobium and sea buckthorn. These renowned Chinese medicinal herbs are carefully processed, using advanced technology to produce healthier foods that are easier to digest and absorb. Over the past year, I've personally journeyed through mountains and to authenticate the quality of our ingredients and products, ensuring that our users can consume them with confidence and peace of mind.

In the sales section, we believe that sales capabilities are linked to service capabilities. In order to better serve our customers and promote sales, we constantly improve the capabilities of our service managers, providing them with a variety of professional training and technical support. In terms of marketing, we recognize the powerful link between exceptional service and strong sales performance. To enhance customer service and drive sales, we are committed to the continuous improvement

of our service managers' skills through comprehensive professional training and technical support. Furthermore, we have invited a number of our service managers to explore and trace product origins. These first-hand experience allows them to gather more product-related materials, which they can then share with users in our community.

During March, we rolled out a range of new products

as part of our healthcare brand upgrade. Alongside these products, we also unveil a novel product-plus service integrated sales model. Upon purchasing a product, users can gain access to Img's 28-day body image management program, which includes personalized one-on-one services and convenient online tracking via mini-programs. Our new healthcare products were are resounding to that with sales surpassing 8 million RMB on launch day.

When it comes to basic delivery customer service,

We focus on third-party merchant management, internal customer service training, and service policy optimization. We also conduct regular customer follow-up and online service to improve and ensure overall customer satisfaction.

AI is a popular topic in 2023. We have also made some new attempts in terms of AI technology. From basic customer robots Our AI health consultant will help the service manager to calculate calories more accurately and provide reasonable advice.

AI was a significant trend in 2023, and we have been exploring new ways to apply it in our operations. During the year, our capabilities evolved significantly, and we now integrate AI into a range of functions, from basic customer service chatbots and handling routine call center tasks, to more advanced support for service messages. For example, users of our 28-day body image management program can now consult with service managers regarding their daily nutritional needs and calorie intake. Our AI health consultants seamlessly support service managers by rapidly and accurately calculating personalized recommended calorie intake in real time and providing informed and insightful advice.

That concludes our strategic summary and reflections for 2023. Moving forward, we remain committed to our strategy of curative product selection

ensuring product cost effectiveness, enhancing brand image, and actively exploring diverse marketing avenues to further elevate the energy brand.

With that, I will take the floor over to our senior financial director to go through the financial results. Okay, thank you, Shangrui.

Hello, everyone. Before I go through our financial results, please note that all numbers started in the following remarks are in RMB terms, and all calculations and percentage changes are on a year-over-year basis, unless otherwise noted. During the fourth quarter of 2023, our operations remained relatively stable, and we continued to reinforce our core operational process. Our refinement to inventory management practice allowed us to generate stable gross profit. We maintain a strategic focus on inventory management, actively monitoring various product categories on a weekly or monthly basis to ensure optimal stock levels. This approach not only optimize our assets utilization but also effectively manages our cash flows. Meanwhile, we are actively pursuing more efficient cash flow management. Now, let's take a close look at our financials. Total revenues were $149 million compared to $289 million a year ago. Revenues from sales of merchandise were $112 million and the revenues from our marketplace business were 34 million. These changes were primarily driven by ongoing refinement to our product range across all categories. This coupled with the optimization of our supplier and the merchant network result in a short-term impact on sales. Despite these changes, our gross margin remained relatively solid at 46.6%. This was due to sustained customer loyalty towards our private labels and our effective product creation strategy. Now let's take a look at our operation expense. Fulfillment expense was 25 million compared to 32 million years ago. This was primarily driven by a decrease in warehousing and logistics expense stemming from lower merchandise sales. reduced the present cost due to staffing structure optimization and decreased the service fee charged by third-party payment segment platform. Sales and market expense were $29 million compared to $59 million a year ago. This was primarily a result of a decline in member manager fee and a decrease against promotion expense. Knowledge and content expense were $12 million compared to The decrease was mainly due to a reduction in personal costs resulted from staffing structure optimization and reduced service costs. General and administrative expenses were $44.5 million compared to $44.9 million years ago. This was mainly due to the reduction in personal costs as a result of staffing structure refinements and the share-based compensation expense. partly offset by an increase in allowance for credit loss. Total operation expense in the first quarter decreased to $110 million from $153 million in the same period of 2022. Loss per operation was $40 million compared to $33 million a year ago. Net loss was $66 million compared to $68 million a year ago, while adjusted net loss was $65 million compared with Basic and diluted net loss attributable to ordinary shareholders were both $0.03 compared with $0.02 in the same period of 2022. Turning to the liquidity, as of December 23, we had a total of $552 million in cash and cash equivalents, which is cash as a short-term investment on our balance sheet compared to $669 million as of December 31, 2022. Our liquid assets were sufficient to cover our payable obligations and we do not hold any long-term bank loans or debits on our balance sheet. In addition, we are dedicated to making the most of our working capital and smart managing our assets to better support our operations. In summary, the fourth quarter so as taking significant strides towards our long-term strategic objectives. Our ongoing efforts to refine our inventory management system coupled with our commitment to sustainable and effective asset management were key to this progress. Looking ahead, our focus remains on continuously enhancing our efficiencies thereby ensuring our company's resilience and adaptability. Our strategy equips us to effectively confront future challenges and capitalize on opportunities involving economic environment. This concludes our prepared remarks for today. Operator, we are now ready to take questions.

Thank you. We will now begin the question and answer session. If you have a question, please press the star Y. When asking a question, please state your question in Chinese first, then repeat your question in English for the convenience of everyone on the call. Please hold while we poll for questions. Our first question comes from Ivan Yu with First Trust China.

I just heard you mention customer service. We have observed that in recent months, major e-commerce platforms have launched a series of policies such as seven-day no reason return, free shipping in remote areas, etc. What do you think of these new policies which are biased towards consumers? Will the strategy have any impact on our performance? Thank you.

This question relates to the two aspects of product itself and user consumption habits. First, we believe that to make a good platform, your product cannot be sold for 9.9 yuan. The consumer behavior of the user cannot be based on impulsive consumption. Especially cloud-based self-sufficiency products have always maintained the policy of relaxation and customer-first service. But our quality return rate is very low compared to other platforms. This is because we are not able to separate our user-friendly education. We think that the policy of relaxation is important, but in the end, it is still a unique product and cost ratio that attracts consumers to buy. Our average customer unit price covers enough of our customer maintenance expenses.

This issue involves the nature of a product and user consumption habits. First of all, we believe that to be a good platform, the selling point of your product cannot be for 9.9 RMB within free shipping, and the user's consumption behavior cannot be based on impulse consumption. Winji, especially Winji's merchandise sales and private label products, has always maintained a loose and customized service policy. However, our quality refund rate is very low compared to other platforms, which is inseparable from our sufficient user education. We believe that loose terms are important, but what ultimately attracts consumers to repurchase is unique product offering and, of course, effectiveness. Our average order value is enough to cover our customer maintenance expenses. And we also have many lawyer users in remote areas. Thank you for your question.

Once again, if you have a question, please press star 1.

to remove yourself from the question and queue, please press star then two. Please hold. As there are no further questions at this time, I'd like to hand the conference back to the management for closing remarks.

Thank you for joining us today. Please do not hesitate to contact us if you have any further questions. We look forward to talking with you next quarter. Bye.

This conference is now concluded. Thank you for attending. You may now disconnect. Thank you.