Yatsen Holding Ltd. Q1 FY2025 earnings call

• China's beauty market saw modest growth in Q1 2025, with beauty retail sales up 3.2% y-o-y. Online beauty sales had similar trends.
• Total net revenues increased by 7.8% y-o-y, with skincare brands' net revenues up 47.7% y-o-y, driven by clinical and premium skincare brands like Galénic, DR. WU, and Eve Lom.
• Overall growth margin increased to 79.1% from 77.7% in the prior year, and net loss margin reduced by 15.5 percentage points to 0.7%.
• Skin care portfolio showed strong momentum, with Galénic and DR.WU driving revenue growth. Galénic's Vitamin C serum and Michaelmasque series performed well; DR.WU's product portfolio and channel mix contributed to growth.
• Made progress in improving profitability: selling and marketing expenses and general and administrative expenses as a percentage of total net revenues decreased.
• Corporate milestones: Global R&D center in Shanghai accredited by China National Accreditation Service; Board of Directors approved a new share repurchase program to repurchase up to $30 million worth of ordinary shares over 24 months.

Total net revenues for the first quarter of 2025 increased by 7.8% to RMB833.5 million, compared to RMB773.4 million in the prior year period. Net revenues from skincare brands rose by 47.7% year-over-year, while net revenues from color cosmetics brands decreased by 9.9% year-over-year. Growth profits for the first quarter of 2025 increased by 9.7% to RMB659.1 million from RMB600.9 million in the prior year period. Growth margins increased to 79.1% from 77.7% in the prior year period. Total operating expenses decreased by 8.6% to RMB693.2 million from RMB758.7 million in the prior year period. Fulfillment expenses decreased to 6.2% of total net revenues from 6.7% in the prior year period. Selling and marketing expenses decreased to 66.4% of total net revenues from 69.7% in the prior year period. General and administrative expenses decreased to 7.8% of total net revenues from 18.1% in the prior year period. Research and development expenses decreased to 2.7% of total net revenues from 3.6% in the prior year period. Non-GAAP net income was RMB7.1 million in the first quarter of 2025, a significant turnaround from the prior year's non-GAAP net loss of RMB83.8 million.

For the second quarter of 2025, Yatsen expects total net revenues to be between RMB810.4 million and RMB889.9 million, representing a year-over-year increase of approximately 2% to 12%.

Forward-looking statements are subject to certain risks and uncertainties, assumptions, and other factors. Some risks are beyond the company's control and could cause actual results to differ materially from those mentioned. A general discussion of risk factors affecting Yatsen's business and financial results is in certain SEC filings.

Q: Firstly, congratulations on achieving non-GAAP net income in this quarter. How do we plan to promote the new products of Perfect Diary and Galénic, especially the foundation products of Perfect Diary and the anti-aging products of Galénic? And my second question is about our performance of this June 18th shopping festival up to now. Is that in line with our expectation?

A: For the first question regarding the Perfect Diary and Galénic new products, Irene Lyu said product innovation and efficacy are key to driving repeat purchase and favorites. Product pipelines are backed by strong R&D, consumer insights, and communication. For the second question, Donghao Yang said it's still early to predict the overall performance of the June 18th shopping festival but so far, it's pretty much in line with expectations.