Yunji Inc.

Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to UG's second quarter 2024 earnings conference call. With us today are Mr. Sheng Li Zhao, Chairman and Chief Executive Officer, Mr. Yi-Qing Hu, Senior Financial Director, and Ms. Kay Liu, Investor Relations Director of the company. As a reminder, this conference call is being recorded. Now, I would like to turn the conference over to our first speaker, Ms. K. Liu, IRD of UG. Please go ahead, ma'am.

Hello, everyone. Welcome to our second quarter 2020 for earnings call. Before we start, please note that is covered content. Forward-looking statement within the meaning of the private security litigation reform act of 1995 that are based on our current expectations and current market approach conditions and relate to events that involve unknown risks, uncertainties, and other factors of unity in this industry. These forward-looking 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 related document filed with USFCC. Any forward-looking statement that we make on this call are based on assumptions as of today. and I expressly qualify in the entirely bi-quotient statement, risk factors, and details of the company's filing with SEC. Yunxi do not undertake any obligation to update this statement except as required on the applicable law. With that, I will now turn over to Shangrui Xiao, Chairman and CEO of Yunxi.

Hello, everyone. Welcome to Yunji's second quarter 2024 earnings call.

Yunji has been running the platform for nine years.

We have witnessed users from novice mothers to second-generation mothers, or to the next ladder of life. We hope to be able to accompany users for a long time, and to protect the health of their families and elders. At the same time, in order to adapt to the trend and innovate the economy of the Chinese population, we plan to further expand the user community.

Lingji has been operating for nine years. During this time, we have seen our users grow from new parents to those welcoming a second child or entering new life stages. Our goal is to be long-term partners for our users, supporting the health of their families. In light of China's aging population and the zero economy, we are looking to expand our user base further.

Now let's discuss some of our ongoing initiatives. As part of our initiative to provide our users with a holistic health solution, we plan to extend our presence into offline communities and establish wellness spaces

bringing our health care products directly to consumers.

This year in July, Yunji's first Chinese health care offline store is officially opened. This is a new exploration of Yunji's health sector. The offline store not only provides Yunji with online and offline close connections, but also sets the foundation for Yunji's future customer base expansion. We hope to build an offline location as the base of the portfolio, provide more services, and at the same time expand the customer base to 41 to 55 years old.

In July, we opened our first offline store focusing on traditional Chinese medicine and wellness. These marks a new chapter for us in the health sector. The offline store will strengthen the connection between our online and offline services and lay the groundwork for expanding our customer base. We aim to create a word-of-mouth network based on local communities offering retail services and expand our target customers' groups to those aged 41 to 55. These demographic values, personal connections, and can help us attract quality customers through referrals.

Back to online, as an extension of the health strategy, we plan to introduce more organic and green products. In addition to our offline expansion, we plan to increase more organic grain and health products. We remain committed to our product selection criteria

We do not offer mediocre products or attempt to be an all-encompassing platform. Instead, we carefully choose quality products, set reasonable prices, and ensure value for our users. This approach allows our service managers to earn a fair profit margin.

Yunji has been focusing on reducing the quality of products since its founding, following the product strategy of broadening and reducing the quantity. We use data-based indicators to evaluate, adjust, and update the product cycle according to the use situation. In addition to free brands, some of our leading key cooperation brands, especially food and health-related cooperation brands, we will also clean up the original production site and factories. We encourage the management of each business line of the company to personally bring their team to the plantation to learn deeply about the production process of excellent products. For example, I myself recently went to the original production site of all over the country with a monthly frequency.

Since our funding, we have focused on quality and follow an expensive but curated product selection strategy. We use data-driven metrics to evaluate and adjust our product launch cycles based on our user feedback. Additionally, we emphasize product traceability. Beyond our private label brands, we will visit the origins and factories of the key partner brands, especially in food and health. We encourage our managers to lead teams in these traceability efforts to understand the production processes of quality products. Personally, I visit various regions across the country multiple times each month to share my experience and build trust with our users and service providers.

In Shanghai Beauty Corridor, our brand, SUYE, celebrated its 14th anniversary last month. Over the past 14 years, SUYE and its loyal users have grown together. Our product development has also continued to grow in the field of anti-seize, which has been our main focus. Anti-seize is a high-end Corridor that examines the high-end technology and raw materials. Under this theme, we have developed a wide range of products, ranging from anti-fungal anti-fungal anti-fungal anti-fungal anti-fungal anti-fungal anti-fungal anti-fungal anti-fungal anti-fungal anti-fungal anti-fungal

Moving on to another important area, our beauty business. In the beauty sector, our private label brand, Suye, recently celebrated its 14th anniversary. Over the years, Suye has grown alongside our loyal users. Our product development continues to focus on anti-aging solutions, where we try to create exceptional products. Anti-aging is a high-end sector that has our technology and raw materials. We have developed a comprehensive product line, including UV-resistant sunscreen, collagen supplements, and eye care products. We are forming a complete anti-aging matrix to meet users' diverse needs.

In the marketing stage, we combined our own technology and AI development to create new content for short videos. The day-to-day is no longer in line with the era of short videos. We can get more traffic support by creating our own content. We have made new attempts in short video projects with this opportunity. We hope to serve and train more people, from teaching them to shoot original content, to supporting AI technology and marketing skills sharing, so that they can gradually become content creators with various features. At the same time, we are also improving our own service capabilities,

Another key number of the focus for us is marketing innovation. We are also innovating in our marketing efforts. We are combining our technology and AI development with short video content creation. Denier content no longer works in the short video era. We believe that creating unique content is key to driving traffic. We are seizing this opportunity to explore new avenues in our short video projects. Our goal is to nurture talent by teaching users how to create original content. We provide AI support and share marketing skills to help them become distinctive content creators. At the same time, we are enhancing our service capabilities to offer content creators more resources and useful tools.

While the challenges remain, we are committed to our long-term strategic goals. We are focused on improving our operations and adapting to the evolving market landscape.

With that, I will turn the call over to Major Trey, our Senior Financial Director, to go through the financial results.

Okay, thank you, Sean Ray. Hello, everyone. Before I go through our financial results, please note that all numbers starting in the following remarks are in R&D terms. and all comparisons and percentage changes are year-over-year basis unless otherwise noted During the same quarter of 2024 we encountered some market dynamics that influenced our operations However, our current financial positions allow us to support our strategic initiatives as we regularly assess the profitability of both new and existing business lines making thoughtful adjustments in response to market changes This approach helps us maintain a stable financial position in a shifting business landscape While we continue to refine our inventory management protocols which contribute to a growth margin of 46.6% We are also focused on optimization our product range and supplier network to better align with customer preferences As we move forward we will continue to pursue growth opportunities prudently while ensuring our financial stability Now let's take a close look at our financials Total revenues were $106 million compared to At $67.1 million a year ago, revenues from sales of merchandise were $83 million, and revenues from our marketplace business were $21.1 million. The changes were primarily driven by softer consumer confidence and ongoing adjustment to our product range across all catalogs. Additionally, the optimization of our supplier and merchant network contribute to a short-term impact on sales Despite these changes, our growth margin remained relatively strong at 46.6% This strength is attributed to continued customer loyalty towards our product labels and our effective product creation strategy Now let's take a look at our operation expense Fulfillment expense was $20.7 million compared to $29.9 million years ago. This was mainly due to low warehousing and logistics costs resulting from decreased merchandise sales, as well as reduced processing costs from staffing optimization. Sales and marketing expense decreased to $21.7 million from 30th $3.4 million a year ago. This was primarily a result of a decline in member manager fee. Technology and content expense were $12.2 million compared to $14.3 million a year ago. This was largely due to lower personal costs from staffing optimizations and a reduction in server service costs. General and administrative expense were compared to $33.2 million a year ago. This was mainly due to a reduced allowance for credit loss and a lower personal cost for staffing adjustments. Total operation expense in the second quarter decreased to $73.3 million from $110.8 million in the same period of 2023. Loss from operations were $23.1 million compared to $11.8 million a year ago Net loss was $11.9 million compared to $41.5 million a year ago while adjusted net loss was $9.7 million compared with $39.8 million a year ago Basic and diluted net loss per share attributed to Ordinary shareholders were both $0.01 compared to $0.02 in the same period of 2023. Turning to liquidity, as of June 30, 2024, we had a total of $324.5 million in cash and cash occurrence, restricted cash, and short-term investments on our balance sheet compared to $551.9 million as of December 31, 2023. Our liquidity 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 smartly managing our assets to better support our operations. Looking ahead, we remain committed to enhancing our operational efficiencies and adapting our strategy to navigate the evolving market landscape. We believe that our ongoing improvements in inventory management and cost optimization will position us favorable for future growth. As we continue to innovate and refine our product offerings, we are confident in our ability to regain moment and driving long-term value for our shareholders. This concludes our prepared remarks for today's operation. We are now ready to take questions.

We will now begin the question and answer session. When asking a question, please state your name in Chinese first, then repeat your question in English for the convenience of everyone on the call. To take a question, you may press star Then one on your touch tone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star and then two. Our first question comes from Ethan Yu with First Trust China. Please go ahead.

Hi, good evening. Thanks for taking my question. I have a question about our business operation. Mr. Hsiao just mentioned that you have participated in numerous product traceability efforts. Could you share more color from this experience and how will this insight be applied to our product selection and operation at Vinci? Thank you for your question.

I have been traveling across the country almost every week for check-up traceability.

In fact, there are many good merchants and supply chains in China, especially for high-demand and high-repurchase-rate products like meat, eggs, and dairy.

More authentic, more cost-effective, more suitable for the Chinese system, more healthy products can bring value to our users. This requires our team to dig and experience it ourselves. The real experience of originating from the plant, sharing the material, can further

However, we cannot simply rely on inspection reports, historical sales data, and various promotional materials to confidently introduce those merchants to our platform. Only more authentic, cost-effective, and healthy products, which are better suited to the physique of the Chinese people, can bring real value to our users. This requires our team to explore an experience personally This generous sharing material from WMG's traceability activities can gain more consumer trust.

Additionally, along with offline traceability, we can host more offline salons and tasting events, leveraging the advantages of face-to-face communication to acquire loyal customers. With such offline saloon and offline traceability activities, we are going to create the products that are going to go to the deep heart of the consumers.

And those products and the related materials are going to encourage the consumers to buy on our platform. Thank you.

Thank you for your question. Great, thanks. I have no more questions. Thanks.

As there are no further questions at this time, I'd like to hand the call back over to the management for any closing remarks.

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

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