• Total Net Revenues: Decreased by 5.7% to RMB677 million from RMB718.1 million in the prior year period.
• Net Revenues from Skincare Brands: Increased by 3.6% year-over-year.
• Net Revenues from Color Cosmetic Brands: Decreased by 10% year-over-year.
• Gross Margin: Improved to 75.9% from 71.4% in the prior year period.
• Total Operating Expenses: Decreased by 12% to RMB655.2 million from RMB744.3 million in the prior year period.
• Fulfillment Expenses: RMB50.4 million, decreased to 7.4% of total net revenues from 7.8% in the prior year period.
• Selling and Marketing Expenses: RMB494.4 million, increased to 73% of total net revenues from 71.3% in the prior year period.
• General and Administrative Expenses: RMB85 million, decreased to 12.6% of total net revenues from 21.1% in the prior year period.
• Research and Development Expenses: RMB25.3 million, increased to 3.7% of total net revenues from 3.4% in the prior year period.
• Net Loss: RMB121.1 million, with a net loss margin of 17.9%, improved from 27.6% in the prior year period.
• Cash, Restricted Cash, and Short-term Investments: RMB1.31 billion as of September 30, 2024.
• Net Cash Used in Operating Activities: RMB175.9 million, compared to RMB163.4 million in the prior year period.

• Warning! GuruFocus has detected 3 Warning Signs with YSG.

Release Date: November 20, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Yatsen Holding Ltd (NYSE:YSG) reported a 3.6% year-over-year increase in net revenues from skincare brands, driven by a 10.5% increase in clinical and premium skincare brands.
• The company's overall gross margin improved to 75.9% in the third quarter, up from 71.4% in the prior year period, due to a higher contribution from high-margin products.
• Yatsen Holding Ltd (NYSE:YSG) reduced its net loss margin by 9.7 percentage points to 7.9% from 27.6% in the prior year through strategic marketing spending and optimized general and administrative expenses.
• The company made substantial investments in R&D, with expenses totaling RMB25.3 million, representing 3.7% of net revenues, enhancing its capability to develop new high-quality products.
• Yatsen Holding Ltd (NYSE:YSG) maintained its MSCI ESG rating of A, reflecting strong performance in areas such as product packaging, waste management, and chemical safety.

Negative Points

• Total net revenues decreased by 5.7% year-over-year, primarily due to a 10% decrease in net revenues from color cosmetics brands.
• The beauty industry in China faced significant challenges, with beauty retail sales declining by 5.5% year-over-year in the third quarter.
• Net revenues from the Perfect Diary brand fell by 10% year-over-year, as the brand undergoes a strategic transformation.
• Cash, restricted cash, and short-term investments decreased to RMB1.31 billion as of September 30, 2024, from RMB2.08 billion as of December 31, 2023.
• Net cash used in operating activities increased to RMB175.9 million for the third quarter of 2024, compared to RMB163.4 million for the prior year period.

Q & A Highlights

Q: How did Yatsen perform during the Double 11 festival, and was it in line with expectations? A: Donghao Yang, CFO, stated that Yatsen performed well during the Double 11 festival, meeting expectations. The Galenic brand sold well through key opinion leaders, and Perfect Diary also performed satisfactorily. CEO Jinfeng Huang added that the festival was strategically used to boost sales for strategic brands and new product launches, achieving significant progress.

Q: What are Yatsen's plans for product development and channel expansion for the next year? A: Donghao Yang, CFO, mentioned that Yatsen has a solid plan for new product development across all brands as part of their annual budgeting process. They will focus on driving growth through top channels like Tmall and Douyin and explore new channels, including opening offline stores for Galenic.

Q: Can you provide more details on the strategic transformation and its impact on profitability? A: CEO Jinfeng Huang explained that Yatsen is optimizing its revenue mix by prioritizing higher-margin products and expanding skincare brands. They are also refining their cost structure to boost profitability, which has led to a reduction in net loss margin by 9.7 percentage points to 7.9%.

Q: How is Yatsen leveraging R&D investments for product innovation? A: CEO Jinfeng Huang highlighted that Yatsen's R&D investments have significantly improved their capability to develop high-quality products. For instance, the Perfect Diary launched the second-generation Biolip Essence Lipstick, which became a top seller on Douyin shortly after its launch.

Q: What are the financial highlights for the third quarter of 2024? A: CFO Donghao Yang reported that total net revenues decreased by 5.7% year-over-year, while gross margin improved to 75.9% from 71.4%. Operating expenses decreased by 12%, and the net loss margin improved to 17.9% from 27.6% in the prior year period.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.