Yunji Inc.

Good evening, ladies and gentlemen. Thank you for standing by and welcome to UNG's third quarter 2024 earnings conference call. With us today are Ms. Sheng Lu Zhao, Chairman and Chief Executive Officer, Mr. Yeh Shing-Twee, Senior Financial Director, and Ms. Kay Lu, Investor Relations Director of the company. As a reminder, this call is being recorded. Now, I would like to hand the conference over to our first speaker today, Ms. K. Liu, IRD of Yunji. Please go ahead, ma'am.

Hello, everyone. Welcome to our third quarter 2024 earnings call. Before we start, please note that this call will contain a 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 operating conditions and relate to events that involve known or unknown risks uncertainties, and other factors affecting the energy industry. This forward-looking statement can be identified by terminology 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 US SEC. Any forward-looking statement that we make on this call are based on assumptions as of today and are expressly qualified entirely by cautionary statements, risk factors, and details of the company's filing with SEC. Yunqi does not undertake any application to apply the statement expected as required on the applicable law. With that, I will now turn over to Zhang Yuexiao, Chairman and CEO of Yunqi.

Hello everyone, and welcome to Yunji's third quarter 2024 earnings call. In the future, it will be the headquarters of a global digital marketing center that will create, educate, develop, and operate products, and focus on the restoration of consumer brands such as Group Health, makeup, etc. The new headquarters will become an important pillar of corporate culture and brand image, and will also be the new starting point for enterprises to sell to higher targets. The headquarters project is the assets bought and sold in the second quarter of this year. So let me start with a significant milestone in our company's growth.

On November the 8th, we broke ground on our new headquarters, the Yunji Innovation Center. This 15-move campus strategically located in the heart of the economic and technology development zone. represents more than just a new office space. It is designed to be an integrated facility that brings together our marketing, training, R&D, and operational teams under one roof. The center will serve as an incubator for expanding health and beauty brands while embodying our corporate culture and vision for the future. We secure this property at an Attractive valuation in the second quarter this year, which aligns with our strategy of the strategic asset diversification to strengthen our market position and optimize returns in today's dynamic environment.

Big health is one of the important directions for the next ten years. We firmly embrace health knowledge, choose organic food, and strive to make organic health enter 10,000 families. Due to the high cost of production, organic food is usually more expensive than regular food. Under the sensitive price of consumers, Yunji has played a key role in promoting organic food. Our team has visited and excavated the excellent health industry supply chain across the country. As the eyes of the user, we have created Yunji Health Certification System. After the product is certified, it will still receive irregular drawbacks. In line with the global wellness trend, we are reinforcing our decision to health and wellness as a key pillar of our 10-year strategy. Our mission is to democratize

access to healthy living, particularly in the organic food space. While organic products traditionally come with premium price tags, we've leveraged our procurement expertise to make these products more affordable without compromising quality. Our team has traveled nationwide to discover and connect with top-notch health product supply chains. acting as eyes for our consumers by ensuring true traceability, authentic experiences, and genuine sharing. Additionally, we've established a robust quality control process through our proprietary health certification system, which includes random inspections of certified products, even after they receive certification. These initiatives have garnered positive feedback from our users. For example, our autumn-moon pairs have become an annual favorite for many parents who eagerly return each October to make their family purchases.

This year in July, Yunji's first Chinese health and wellness online store opened. This will further expand the customer base to the people aged 41 to 55 years old. The online store quickly opened up an online store that is based on geographical location and provided new services. We've also made significant progress in our offline expansion. In July, we launched our first rolling store, featuring traditional Chinese medicine practices. This initiative has helped us tap into the growing

demographic for customers aged 41 to 55, through word-of-mouth referrals in our standardized offline systems. We've successfully replicated this business model with our second location opening in October.

At Meili Saitou, we've been running our business for 14 years. This month, we've sold over 100 million units in total. We're continuing to grow our business. Our private label brand, Suye, has celebrated the 14th successful year in the beauty arena in November.

Our cumulative sales on the platform have exceeded the R&D 100 million for the year. We are particularly excited about our expansion in the premier anti-aging segment, where we align ourselves with top global brands and consistently launch outstanding products within our age recovery series. The upcoming release of specialized eye care products marks another significant advancement in our high-end eye care lineup.

Digitalization is a key engine for the modernization and development of the fast-tracking industry. Construction of a modernized marketing system is inseparable from the development and application of large-scale data. The rapid acceleration of cloud-based systems uses innovation as the main guide and support, and AI as the main support tool for digital platforms, to realize the integration and sharing of public resources and trading platforms. On the technology front, digitalization is vital for advancing the fast-moving consumer goods industry. Building a modern marketing infrastructure requires effective big data strategies.

We are pushing forward with the development of an innovative digital platform powered by AI tools that support the integration and sharing of public resources on trading platforms. Our AI applications focus on improving customer service, generating content, sharing materials, and delivering educational training, which helps lower costs while enhancing operational efficiency and service reliability.

So looking ahead, we will continue to drive innovation, enhance our core competence, and try to create greater social value for Chinese families.

With that, I will hand it over to Mr. Tsui, our Senior Financial Director, to go through the financial results.

Thank you, Shangrui. Hello, everyone. Before I go through our financial results, please note that all numbers start in the following remarks in RMB terms and all comparisons and percentages changes on year-over-year basis, unless as was noted. During the third quarter of 2024, we face the market dynamics that impact our operations. Nevertheless, our financial position enables us to support our strategic initiatives. We continuously evaluate the profitability of both new and exciting business lines, making informed adjustment in response to evolving market conditions This strategy enables us to uphold a solid financial foundation amidst a changing business environment During the quarter, we observed a notable improvement in our comparables underscoring our dedication to effective cash management Additionally, we successfully narrowed our operating and net losses reflecting our commitment to fostering sustainable growth At the same time, we refined our product offering and optimized our supply network to best meet customer demand Looking ahead, we will continue to carefully seek growth opportunities while prioritizing our financial stability. Now let's take a close look at our financials. Total revenue were 86.6 million compared to 145.1 million a year ago. Revenue from sales of merchandise were 17 million and the revenues from our marketplace business were 14.8 million. Changes were mainly due to software consumer confidence and ongoing refinement to our product range across all categories. Furthermore, the optimization of our supplier and merchant network also has a short-term effect on sales. Despite these changes, Our gross margin remained relatively strong at 54.1%, mainly due to continued customer loyalty towards our private labels and our effective product creation strategy. Now let's take a look at our operating expense. Fulfillment expense was 17.2 million compared to 25.6 million a year ago. The decrease was mainly due to lower warehousing logistics costs resulting from decreased merchandise sales as well as reduced personal costs from staffing optimization sales and marketing expense decreased to 19.3 million from 29.6 million years ago. This was primarily a result of a decline in member management fees. Technology and contact expense were 11.6 million compared to 13.9 million years ago. This was largely due to lower personal cost of staffing optimization. General and administrative expense were 25.8 million compared to 28.1 million years ago. This was mainly due to a reduction in professional service. Total operation expense in the third quarter decreased to $73.9 million from $97.2 million in the same period of 2023. Loss for operations was $26.2 million compared to $38.3 million a year ago. Net loss was $30 million compared to $34.8 million a year ago, while adjusted net loss was $29.5 million compared to $34 million at scope. Basic and diluted net loss per share attributable to ordinary shareholders was about $0.02 compared to $0.02 in the same period of 2023. Turning to liquidity, as of September 30, 2024, we had a total of $268.4 million in cash and cash equivalent restricted cash and short-term investments on our balance sheet Our liquid assets are sufficient to cover our payable obligations, and we did 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 best support our operations. Looking forward, we are dedicated to improving our operational and adjusting our strategies to effectively navigate the changing market landscape. We are confident that our condition enhancement of inventory management and cost optimizations leave us well positioned for further growth. By continuously innovating and refining our product offering, we believe that we can boost our momentum and create long-term shareholder value. This concludes our prepared remarks for today. Operators, we are now ready to take questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, 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, then two. 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. At this time, we will pause for a moment to assemble our roster. And our first question today will come from Ethan Yu of First Trust. Please go ahead.

Thank you for your question.

First of all, in terms of market demand and customer base, the offline health store is the extension of the current customer base of Yunji. Yunji was established for the 9th year to the 10th year of next year, the 10th anniversary. Some of the earliest batch of baby users have also reached the age range of offline health key customer base, which is from 40 to 55 years old. We continue to pay attention to the needs of users, and at the same time, we also hope to integrate the development of the middle and old age economy to expand the user width of Yunji and really do our best to serve the entire family of users.

Thank you for your question. Firstly, regarding market demand and target customers, offline wellness stores are an extension of UNG's existing customer base. Over the past nine years, and next year is the 10 years since UNG's establishment, some of our earliest customers, such as young mothers, have now transitioned into the key demographic for offline wellness services. which is the 40 to 55 age group. By continuously addressing user needs, we aim to align with the development of the Asian economy, broaden Yunji's customer base, and truly provide services for the entire family.

We focus on 500 meters of offline community. The offline wellness business differs significantly from online marketing. We focus on offline communities within the 500-meter radius, combining ground promotion with online campaigns.

This approach allows us to receive user feedback more directly and promptly during the service process.

In the future,

After establishing loyalty and trust among offline wellness users, we plan to integrate online sales and services. This is especially true for the promotion of our own brand and organic food products. The synergy between our people network and land network will deliver exciting opportunities for our curated and health-focused business line.

Thank you for your question.

There are no further questions at this time. This will conclude the question and answer session, and I'd like to turn the conference back over to 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're looking forward to talking with you next quarter. Bye.

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.