Yatsen Holding Limited

Ladies and gentlemen, good day and welcome to the Yatsen Third 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 Investments and Capital Markets. Please go ahead.

Thank you, Operator. Please note the discussion today will contain four local statements relating to the company's future performance. and are intended to qualify for the safe harbor from liability established by the US private security litigation reform act. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, 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 factor could affect Yashin'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 a reconciliation of GAAP to non-GAAP financial results. Joining us today on the call from Yasin's senior management team are Mr. Jingfeng Huang, our founder, chairman, and CEO, and Mr. Zhonghao Yang, our CFO and director. Management will begin with prepared remarks, and the call will conclude with a Q&A session. As a reminder, this conference is new recorded. In addition, a webcast replay of this conference call will also be available on Yasin's investor relations website at ir.yasinglobal.com. I'll now turn the call over to Mr. Sunfeng Huang. Go ahead, sir.

Thank you, Irene. and thank you everyone for participating in Yat-San's third quarter 2023 earnings conference call today. In the third quarter of 2023, China's building industry remained in the mild recovery phase that began as the country emerged from the pandemic earlier this year. According to the National Bureau of Statistics of China, total retail sales of consumer goods grew by 4.2% year-over-year, and the total beauty retail sales increased by 2.6% year-over-year, both representing a deceleration in year-over-year growth rate from the second quarter. Online beauty sales showed a similar pattern in the third quarter. For both color cosmetics and skincare, combined total sales on Timor and Douyin recorded a slower growth rate than in the second quarter of 2023. Amid uncertainties in consumer demand, Yasan remained committed to its strategic transformation plan. We continuously strive to build strong brand equity based on superior product performance and consumer satisfaction. For the third quarter of 2023, We recorded total net revenue of RMB 718.1 million, in line with our previous guidance. Net revenue for our skincare brand declined by 4.1% year over year, mainly attributable to our strategy decision to phase out the AB's Choice brand. Our clinical and premium skincare brands, including Galanique, Dr. Wu, and Yves Long, delivered another solid performance, recording 7.4% year-over-year growth in combined with net revenues, and a further increasing debt contribution to total net revenues as compared with the prior year period. Net revenues from color cosmetics brands decreased by 21.5% year-over-year, primarily due to the decline in perfect diary sales, as a result of the timing of new product launches near the end of the third quarter and the closure of underperforming offline stores. The number of Perfect Diaries offline stores totaled 123 as of the end of the third quarter, compared with 198 a year ago. Net revenue from Little Undine and Pin Bear continued to grow as both brands raise their brand awareness among targeted consumers. YesSense growth margin improved to 71.4% in the third quarter from 68.9% in the prior year period. Due to the rising contribution from higher growth margin skincare brands and ongoing cost optimization across our brand portfolio, Net lose and the non-GAAP net lose margin expanded to 27.6% and 80.1%, respectively, as we increased investment in the Perfect Diary brand upgrade and the preparation for the Double 11 Shopping Festival. Turning now to our brands and products. During the third quarter of 2023, We repositioned the Perfect Diary brand, carrying out a series of campaigns with the refreshed visual identities and new product launches. The brand's new hero product, BioLip Essence Lipstick, leverages our exclusive BioLip technology, which creates a bionic sebum film upon application to protect the lips' fragile skin barriers. BioList's strong efficacy in lip line reduction was validated by the prestigious Ruijin Hospital and the SGS testing agency. Our two other color cosmetics brands, Little Ondine and PinBear, both formed co-branding partnerships with popular IPs that deeply resonated with young consumers. For our skincare brand, we continued to engage deeply in brand building, further cultivating each brand's distinctive audience. Galanique marked its 45th anniversary with a gala celebration that hosted an array of celebrities, media, and scholars in Paris. The brand also officially announced its scientific research cooperation with Hospital St. Louis. a well-known dermatology hospital in Paris, and established the Galenic Dermatology Research Foundation. In addition, Dr. Wu celebrated his 20th anniversary. His reputation as a high-quality clinical brand and a pioneer in the use of a magnetic acid continued to strengthen as the brand was honored as Asia's leading mandelic-based skincare brand by U.N. Monitor, the world's top independent provider of multi-research and industry analysis. Furthermore, Yif Long introduced renowned singer and actor Xiao Zhan as his brand ambassador to increase brand awareness and establish a broader customer base. Moving on to R&D, R&D expenses as a percentage of revenues were 3.4%. In September, Yasen and Galanick Brand attended the IFSCC conference in Barcelona, Spain, and presented a scientific paper on the brand's patent no-algae peptide. At the conference, Galanick also announced that it has entered into strategy cooperation with the global peptide leader, Lubizol, to jointly research new ingredients, collaborate on anti-aging product research, and expand YASEN's open lab research and development boundaries. Before handing the call over to Dong Hao, I would like to provide an update on our share repurchase program. As announced earlier today, our board of directors has approved and authorized a change to the size and term of our share repurchase program, increasing the aggregate value of shares that may be repurchased under the share repurchase program from US$150 million to US$200 million, and extending the effective term of the share repurchase program through November 19, 2025. This further demonstrates our confidence in Yasheng's process. To summarize, China's beauty market is still in the process of a modest recovery this year. Looking forward, we will continue to adapt flexibly and are confident in our resources and ability to advance our strategic transformation plan. With that, I will now turn the call over to our CFO, Donghao Yang, to discuss our financial performance. Thank you, everyone.