Yatsen Holding Limited

Ladies and gentlemen, good day, and welcome to the Jackson First Quarter 2023 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 and Capital Markets. Please go ahead.

Thank you, Operator. Please note the discussion today will contain four looking statements. relating to the company's future performance and are intended to qualify for the safe harbor of liability as established by the U.S. Private Security Litigation Reform Act. Such statements are not guarantees of future performance and are subject to certain risks and alternatives, assumptions, and other factors. Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion. A general discussion of the risk factors could affect Yat-sen's business and financial results is included in certain filings of the company with the Securities and Exchange Commission. The company does not undertake any obligation to update this forelooking information except as required by law. During today's call, management will also discuss certain non-GAAP financial measures for comparison purposes only. Please see the earnings release issued earlier today for a definition of non-GAAP financial measures and the reconciliation of GAAP with non-GAAP financial results. Joining us today on the call from Yasmin's senior management team are Mr. Junfeng 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 the Q&A session. As a reminder, This conference is being recorded. In addition, a webcast replay of this conference call will be available on Yasen's investor relations website at ir.yasenglobal.com. I'll now turn the call over to Mr. Jinzong Huang. Please go ahead, David.

Thank you, Irene, and thank you, everyone, for participating in Yasen's first quarter 2023 earnings conference call today. The first quarter of 2033 showed a positive trend for the beauty industry. Total beauty retail sales achieved year-over-year growth of 5.9% in a quarter, according to the adjusted data published by the China National Bureau of Statistics. An improvement in market sentiment and the gradual recovery of offline consumption following the lifting of pandemic restrictions were major drivers of this outward trend. While we are pleased to see signs of recovery in the retail environment, we expected a rebound in our revenue to take time as consumers gradually engage in travel, social activities, and general consumption in the post-COVID era. Our sites remain focused on long-term sustainable growth as we continue to refine our business model. For the first quarter of 2023, our total net revenue declined by 41% year-over-year to RMB 765.4 million, beating the guidance we provided previously. Net revenues from skincare brands increased by 34.2%, year-over-year to RMB 245.1 million. Our clinical and premium brands, including Dr. Wu, Galantique, and Yves Long, recorded a solid growth of 58.6% year-over-year for the first quarter of 2023. In terms of revenue contribution, Our skincare brands accounted for 32% of total net revenues in the first quarter, up from 20.5% for the previous year period. Net revenues from our color cosmetic brands declined by 29.1% year-over-year to RMB 508 million. In terms of profitability, we achieved ongoing improvement in our growth margin and the net margin. Growth margin increased significantly by 5.3 percentage points to 7.3% for the first quarter of 2023 from 69% for the prior year period. Reflecting our persistent efforts to fine-tune our product mix, implement disciplined pricing and discount policies, and optimize production cost. Most importantly, we recorded a net income margin of 6.6% for the first quarter of 2023, as compared with the net loss margin of 32.7% for the prior year period. In addition to our efforts in cost optimization, The net income we recognized for the first quarter of 2023 was primarily to a reversal of recognized share-based compensation expenses of RMB 109.4 million and a decrease of RMB 42.2 million in recognition of share-based compensation expenses using the graded vesting method over the vesting term of the company's awards. Non-GAAP net loose margin narrowed to 3.4% for the first quarter of 2023 from 7.2% for the same period last year. Moving on from our financial highlights, we made progress in our product development and brand awareness improvement initiatives. Inflon launched its Radiance Faith Oil, featuring 10 precious plant extracts that provide a spa-level skin nourishment combined with five major reparative ingredients to firm and plump the skin. We also hosted a major brand event for Galenique in France to explore the legendary benefits of the brand's Platinum Snow Algae series with international fashion and beauty QLs. During the quarter, our color cosmetic brands also introduced Valentine's Day themed gift sets with campaigns to celebrate the vibrant colors and the passionate emotions associated with the holiday. In terms of channel optimization, we completed most of our adjustments in our offline footprint in 2022. As offline consumption recovered due to the lockdown policies, performance at our offline stores improved in terms of possibility during the first quarter of 2023. However, the market situation is still evolving, and the consumption activity has not fully returned to normal. Going forward, we will closely monitor market dynamics focus on identifying the appropriate product mix and a growth strategy to drive sales into offline business and adjust our approach to optimizing our offline channels as needed. Next, I would like to share some of our recent R&D endeavors and accomplishments. Our R&D expenses as a percentage of total net revenue were 3.2%. demonstrating our continuous commitment to scientific advancement and product development. Furthermore, to promote applied research and clinical innovation in treating acne, we officially launched the Dr. Wu Acne Research Fund and established the Dr. Wu Asper Committee. Together, these organizations will integrate expert resources across multiple medical fields and regions to conduct cutting-edge exploration and applied research with the goal of discovering solutions for the refined and comprehensive management of acne prone skin. Before I conclude, I want to share an update on our environmental, social, and governance performance. which continues to be a great source of inspiration for Yasen. In January, we participated in the 2023 World Economy Forum Annual Meeting in Davos, Switzerland, where we highlighted Yasen's implementation of sustainability practices through Perfect Diaries, Little Steelers , and other Yasen products at events, sustainability In summary, the first quarter of 2023 was a promising start to gradual recovery of China's beauty market in the post-pandemic era. We are cautiously optimistic about the outlook for the remainder of 2023, yet aware that uncertainties remain. We will continue to focus on brand building and product development as we work to draw upon our skincare brand's strong growth momentum and prepare to launch new color cosmetic products in the second half of 2023. With that, I call over to our CFO, Dong Hao, to discuss our financial performance. Thank you, everyone.