Release Date: August 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Yatsen Holding Ltd (YSG, Financial) reported a gross margin increase to 76.7% from 74.7% in the prior year period.
- Net loss margin narrowed by 1.9 percentage points to 10.8% from 12.6% in the prior year period.
- Color cosmetics brand net revenues increased by 11.4% year-over-year, driven by the transformation of the Perfect Diary brand.
- The company launched its first global R&D hub in Shanghai, enhancing its product development and technological advancement capabilities.
- Skincare brands like Galénic and DR. WU showed steady performance with new product launches and increased visibility on platforms like Douyin.
Negative Points
- Total net revenue for the second quarter decreased by 7.5% year-over-year to RMB794.5 million.
- Non-GAAP net loss margin increased to 9.4% from 5.4% in the prior year period, mainly due to higher channel trapping expenses.
- Selling and marketing expenses increased to 68.6% of total net revenues from 53.2% in the prior year period.
- Net cash used in operating activities increased significantly to RMB148.2 million from RMB14.4 million in the prior year period.
- The company revised its revenue guidance downward in July due to the subdued performance of China's beauty market.
Q & A Highlights
Q: What is Yatsen's plan for product development and channel expansion for color cosmetics and skincare brands?
A: Irene Lyu, Head of Strategic Investments & Capital Markets, explained that Yatsen has a robust new product pipeline for both color cosmetics and skincare. For the second half of the year, Galénic and DR. WU will launch new active and functional skincare products, while Perfect Diary and Little Ondine will introduce new lipstick and foundation products. In terms of channels, Yatsen plans to expand into more TV channels to enhance growth and profitability.
Q: What is Yatsen's promotion strategy for the second half of the year, and how will the company balance revenue growth and profitability?
A: Donghao Yang, CFO, stated that there will be no substantial changes in promotion strategies, with a focus on optimizing channel and product mix. The company aims to recover losses and achieve profitability while aggressively pursuing new product development and channel expansion to grow revenue. The emphasis will be on profitable revenue growth.
Q: How did Yatsen's gross margin perform in the second quarter of 2024?
A: Donghao Yang, CFO, reported that the gross margin increased to 76.7% from 74.7% in the prior year period, primarily driven by higher sales of high gross margin products.
Q: What were the key factors affecting Yatsen's net revenue in the second quarter of 2024?
A: Donghao Yang, CFO, noted that total net revenue decreased by 7.5% year-over-year to RMB794.5 million, mainly due to an 11.4% decline in net revenues from the color cosmetics segment.
Q: What are Yatsen's expectations for total net revenue in the third quarter of 2024?
A: Donghao Yang, CFO, projected total net revenue to be between RMB646.3 million and RMB718.1 million, representing a year-over-year decrease of approximately 0% to 10%.
Q: How did Yatsen's operating expenses change in the second quarter of 2024?
A: Donghao Yang, CFO, stated that total operating expenses decreased by 4.1% to RMB744.6 million, but as a percentage of total net revenue, they increased to 93.7% from 90.5% in the prior year period.
Q: What was the performance of Yatsen's skincare brands in the second quarter of 2024?
A: Jinfeng Huang, CEO, highlighted that net revenues from skincare brands were flat year-over-year, with combined revenues from Galénic, DR. WU, and Eve Lom growing by 5%.
Q: How did Yatsen's color cosmetics brands perform in the second quarter of 2024?
A: Jinfeng Huang, CEO, reported that net revenues from color cosmetics increased by 11.4% year-over-year, driven by the ongoing strategy transformation of the Perfect Diary brand.
Q: What were the key drivers behind Yatsen's increased non-GAAP net loss margin in the second quarter of 2024?
A: Jinfeng Huang, CEO, attributed the increase in non-GAAP net loss margin to higher channel trapping expenses due to Douyin's growing contribution to sales and investments in marketing events.
Q: What strategic focus will Yatsen maintain for the remainder of the year?
A: Jinfeng Huang, CEO, emphasized that Yatsen will focus on optimizing channel mix and cost structure to reduce losses, while continuing investments in brand building and R&D for sustainable growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
