YSG - Earnings call transcript Q4 2020

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Operator

Ladies and gentlemen, good day, and welcome to the Yatsen Fourth Quarter and Full Year 2020 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Irene Lyu, Head of Strategic Investment and Capital Markets. Please go ahead.

Irene Lyu

Thank you, operator. liability today performance forward-looking to Reform and the harbor discussion the relating qualify Act. the the safe future by company's our from note will Securities statements contain to for US Please Private established Litigation as intent is certain Such to guarantees are not assumptions uncertainties, are the future and statements and and performance of subject risks other factors.

required financial included obligation differ this law. today's are beyond of with any The factors could Yatsen's A results business results the Exchange to does and of company press discussion the certain to company cause update and Securities in mentioned Commission. and by control and risks is materially company's these the as in those this undertake of that discussion. filings forward-looking Some general could not release from the except actual risk affect information,

will today's comparison only. for call, certain During measures management non-GAAP financial purposes also discuss

of non-GAAP definition a today. non-GAAP reconciliation and please the release earlier earnings results, For the financial GAAP issued measures to financial of see

prepared will today call Q&A and Huang, and and from Jinfeng management Mr. and are Chairman begin Founder, call a our Donghao the us will with Management Yang, the our Mr. on Director. conclude Yatsen's CFO with senior Joining remarks, session. CEO;

reminder, a conference this As is recorded. being

a go Please I now Huang. turn will webcast call will over Relations ir.yatsenglobal.com. at Mr. be this Jinfeng addition, replay In conference Investor the of site available on Web Yatsen's ahead. to call

Jinfeng Huang

participating today. Yatsen Thank And Okay. everyone, earnings inaugural you, Irene. call conference you, in thank for

and for achieved strides an made our was business great year exciting we milestones. as XXXX So Yatsen numerous across

successful last highlight Stock New significant year. Exchange the our on of one for the the XXth most York year November on So listing was

journey start as of our company. So marking the public a new

continue solid with operating first the for employees and and to to who full are fourth as Yatsen's of present extend the public the support sincere financial would quarter of our our we a pleased myself, us. gratitude to new all Today, XXXX. for long company, and appreciation performance time the shareholders and to and you behalf I time of like on year So

the and So to position Z successes we further millennial Gen in leveraged fortify leading customers. cosmetics color past for throughout our year, our

firm product and portfolio Yatsen's the enhancing beauty commitment online offerings us with unique both development, strengthening and innovation, growing offline ties competitive China's through So in to channels, customers brand player as industry. and product and a fast position

So in extension XX.X% as increased year-over-year RMBX.X fourth in our year-over-year a year-over-year to XXXX result, of RMBX we revenues billion saw to XXXX. revenue In an total and RMBX.X throughout the to increased for net total XX.X% sales gross climbed by from RMBX.X grew billion year, and RMBX.X to robust billion we by billion, sales momentum XX.X% billion. quarter gross full XX.X% the year, net our the

our portfolio. results So growth and our including accelerated are flagship quickly evidenced introduced to our rapid as by brands, our a the after testament brand Abby's by to the Little being ability expansion soon Diary, and quarter to Perfect other Choice business Ondine grow our witnessed our of

effectiveness and press to and to and across us demonstrated forward. enabled portfolio brands, model, that customer that as the consistently incubate right which display assures services strength of deepen products the So ability we These our deliver on to are also brand numbers engagement. our continue we BXC personalized us our track the disruptive scale innovative

golden and homegrown millennials, popularity targets is the Gen great Chinese of cohort our Z the beauty creating for So growing industry. a China's of as us brands opportunity brand beauty

So seeing our is gaining product and evolving young line among steadily growth. consumers traction substantial

XX.X million, number XX.X year. the another high of million of BXC number came in reached record for the quarter, fourth the in this full at and So customers

of XX% impressive So over represents gains year XX% this year and respectively.

business our a of are and So contributor foundation to dominant revenue. color cosmetics the

So having the quality, widened quarter and with variety emphasis on our uniqueness. product during innovation we that, offerings said fourth more further and

reach So segment Fabre brand, medical acquisition highly skincare skincare in care skincare products, which in the is we brand various Chinese and deepened for French a the from with an skin our its brand the Pierre sensitivities iconic of premium Asian skin. leading targeting Galénic, known effective

also We colors for R&D partnership entered strategic partnership cosmetics. new with for Sensient enhancing materials a Technologies, is capabilities color innovative the a our that and

in So the raw amplifying the industry. technology recurring solve use materials boosting and for color control quality of to cosmetics challenges

disruptive upcoming the selection of mind, initiatives leveraging product recent activities and this towards needs like and unpack and are for review building model more and in core working our beyond. the customers. platform With would capabilities, some to XXXX of adjusted drives portfolio BXC broader vision So multibrand a we that I our

So segments back incubation the our the we some on brands, considerable self acquisitions of we target market where plan existing success more in through room for introducing on growth. of and brands see

varying we wide to positioning as mass market end Our market to of of ideal with brands attract seek consist from high consumers. will portfolio a expression diversified

are We proactively and investments, both collaborations, overseas. and domestically strategic pursuing also acquisitions

month, Capital. prestigious announced Lom skincare we recently Eve acquired earlier the this brand, As from Manzanita

accelerate brand with product the capabilities global exceptional Eve range Lom's and the award our e-commerce we of confident we cost the winning that So will market. growth are innovation, demonstrated multi further in

before China's unleashed. close, enormous potential to beauty I over be hand Donghao, to market to it So has

and our strong beauty BXC business So evolving industry. uniquely country’s a in a proposition, role to value the model centric disruptive positioning play customer leading capabilities Yatsen

of even new committed engage ahead, beauty, beauty to with with looking consumers, the next grow we Chinese redefining and So landscape of remain the a of we discovery. them generation as journey provide

call With our the discuss performance. everyone. to to you, financial Yang, now Donghao turn our will CFO, thank over that, So I

Donghao Yang

set We the with solid of finished fourth quarter XXXX David, hello, of you, results. Thank a financial and everyone.

expand the achieved increased and demonstrates result the growth expenses Our healthy marketing and skillfully of strong and strategy our to our success products, growth our our deep as our to well of our top reflects administrative brands as scale expenses. line portfolio portfolios, was general brand and quarter market across a the plans. we during In profitability selling execute operational ability appeal of performance our and impacted an as effort

rose margin our our While XXXX Yatsen in and quarter for period year the last are in XX.X% compared with and pivotal as the same beauty the was a innovation and to in whole, a product year. efforts off. gross industry XX.X% paying development

solid move firmly we strategy remain committed we revenue, As into will our we profitability foundation run. and growing deeper lay further for XXXX, to product customer in which of the base offerings long believe a our

financial on moving quarterly highlights. Now our to

Before by the billion financial of refer billion period. beauty and revenues noted. customers million same XXXX. during increases operating today RMBXXX.X the our RMB billion of XXXX to by XXXX. profit amounts driven quarter fourth increased over are quarter from Total changes, increased I for would presented fourth quarter attributable in all unless year for in quarter fourth otherwise sales fourth the the of XX.X% net to that XXXX, the the clarify the RMBXXX.X fourth the year get from XXXX expenses products, the percentage fourth numbers billion compared for changes to XXXX were Gross growth of RMBX.X to of for for Total of started, I primarily RMBX XX.X% million RMBX.X RMBX.X to like of in quarter of number volume by quarter to all for

for two, XX.X% RMBXXX.X total period. growth to million XXX.X% by increase XXXX of fourth the was during according of expenses in net of shipping and in handling XXXX. the total based sales share expenses, of recognized an expenses primarily percentage IPO increase due period; driven expenses a GAAP. warehousing, fourth our and upon compared product to to The beauty for same US increased compensation prior in year Fulfillment operating from RMBXXX.X to; volumes quarter of one, occurrence the the million the revenues, As were quarter

marketing advertising, one, compensation and a incurred As net expenses primarily costs; an total year X.X% XXXX quarter of based according of fourth three, period. the was recognized increase and expenses million the brand to to expenses development stores; of of the an X.X% quarter due increase of Selling promotion expenses IPO occurrence revenues, were fulfillment GAAP. RMBXXX.X for in RMBX.X two, decreased compared share during US the increase in marketing upon in The prior to; XXXX. fourth percentage billion to for from and

of of XXXX quarter marketing the for XX.X% period. of were expenses US IPO to fourth upon billion year due to XX.X% a recognized the compared RMBX.X RMBXX.X primarily increase one, for million GAAP. personnel net the expenses occurrence percentage prior in and two, costs; quarter fourth total XXXX. expenses were to revenues, selling in was General of As compared The and the according increase an and administrative to;

of compensation year development XXXX X.X% period. and net a administrative primarily expenses to due The expenses were the the to quarter of upon fourth costs; two, RMBXX.X of fourth for share IPO of quarter the XXXX. total As was to; compared personnel XX.X% in million according GAAP. one, general RMBXX.X based and Research the prior expenses percentage and occurrence were compared US for million to increase revenues, recognized

XXXX ADS expenses diluted of compared the loss of income XXXX the operations for ordinary loss diluted was year million quarter were RMBX.X Loss the compared compared to fourth to for income development As net shareholders per of XXXX. XXXX. RMBXX.X a RMBXX.X ADS the quarter for non-GAAP compared of of XXXX. XXXX from Non-GAAP ADS million million XXXX. for for loss attributable Non-GAAP and the from fourth billion from income shareholders billion fourth compared and of for to fourth income of million was Yatsen’s net per quarter the the XXXX RMBX.X of net non-GAAP RMBXX.X attributable of operations RMBX.XX were quarter the was to to income fourth operations ADS period. attributable quarter RMBX.XX for fourth revenues, of of quarter for in XXXX to the loss Net million X.X% XXXX. diluted of of was fourth ordinary to ordinary the research RMBX.X RMBXXX.X per operations to prior compared income diluted percentage non-GAAP shareholders for RMBXXX.X was XXXX net the X.X% Net of of Yatsen’s to RMBXX net for fourth quarter total million to compared from the fourth shareholders quarter for quarter XXXX. attributable per ordinary Non-GAAP fourth to of quarter the of fourth quarter quarter Yatsen’s for RMBX.XX net loss fourth net

XXXX, company of and restricted as million December to cash equivalents As XX, XXXX. compared December RMBX.X RMBXXX.X of of billion had cash and cash XX, the

the For December net operating in was activities XX, million. RMBXXX.X XXXX, ended quarter used cash

With outlook growth RMBX.XX our approximately XX% of billion, our total representing the for change. that, rate current net XX%. and first XXXX, to would billion year-over-year quarter market reflects to and RMBX.XX forecast revenues operational Q&A. be now the to conditions, like I to at of business This to call on between we view is Looking which the our and preliminary expect turn a subject

Operator

Sachs. [Operator Christine Instructions] from Cho question And first Goldman the with comes

ChristineCho

have David quick would I for Diary do care you love see all key congratulations on get earnings your two some assumptions acquisitions skincare One, Galénic, the first could the And the you. Thank your next and and And on extension in care of also kind the the call. Lom quarter? of Donghao, you skin the update evolving secondly, with I how plans. your Eve mix skin guidance long to Perfect run? of an give behind questions. brands,

DonghaoYang

didn't question. I first Christine, get quite your

to or what? QX guidance So you some color provide behind want the

ChristineCho

Yes.

DonghaoYang

didn't… is mean What I by color? XX% guidance do the guidance mean, to XX%, you the is I

ChristineCho

So this some are what The first looking looking the as be some FX let market things way, kind a that factors is key you very rates at the to at important that whole. some mentioned into quarter. you're it of you're the -- But conditions for are of what category me phrase looking what X.XX. of growth could

DonghaoYang

those terms in David, and in I focusing those Well, acquired our we QX QX, of into brands We acquired of new still Ondine, existing And this number But But have those on we terms brands. ahead. business from going execute brands those still to increasing have expect think and in into our newly integration very year, do we're question limited. operations. one, brands we brands, to go we ABC, continue still and of answer. currently to later the part two, revenue the contributions a the continue from QX, is existing contributions Little strategies grow second our of the QX, again, new brands. of, new

JinfengHuang

year. coming we for of our expansion, think So in skin rolling I now, line care the Perfect middle the care the the have main products are out offline right and Diary the product also, skin stores we the in because

our see expanding the Diary leverage we and skin in brand we the So Perfect select care, equity. especially

also, long just build product a will for Diary’s term the brands skin there. the most like and you launches And QX. and usually the So the contribute look wise growth of portion QX, care existing Perfect our for of guidance if believe the we to expectation at new in

more to out products there new even launch QX. after brands and the will be so And coming new

Operator

the And Morgan question with Dustin comes from next Stanley. Wei

DustinWei

So related of I XX% that the was year-on-year. to is meaningfully 'XX still I of think slightly XX% question COVID. guidance to think the or first first online even for the business of kind impacted by quarter the

of base there, effect we and So little have low sort this there's a yet guidance.

what's sales look for then management offline, example, growth this is company more for for looking by some like, should if newer then too if about or the bit we ratio online? change example, try the the a to here for the need sure brand Dairy, of that, then to the is think a like for to of growth online, the on think XX% strategic we what's for Perfect brands, slightly management loss of can talk Just for or we focus that little slower will and whole we breakdown the focus guidance. a profitability dynamics not existing is So some growth lower sort kind that growth, company the get sense conservative the if brands. or more that reasonable on are of about XX% for And

Lom, guess, the to, guidance brands strategy the second related the question first I potential growth, is question and of in is think methodology premium drive company cash. quarter or we brand like that profitable that to I yet use the the the related the be Eve growth, will to guess loss sort going when are really I our, are short of more that's some So the term change. they to but about similar Galénic brand and the sort balance sheet very the strong Third sales generating or this the guess, of will making? be

for have and think the for still needed M&A. working assume we if some potential and I So the expanding will the capital XXXX, business loss company

burn So much. what kind look you cash that the of Thank the we should cash very consumption XXXX? of or end for

DonghaoYang

Well, thank for you the question.

at Let your question. me first a take try shot to

of especially Maybe business. for of QX a So impact low was they saw earlier. a all, the saw we last XXX% first businesses, actually other of the year, COVID-XX the not us year, base, bit year-over-year our in in some growth. But QX last

strong very a in our was it mind. So quarter

impact started So were of some came again, cities, the part country, our of in COVID-XX offline were especially the the in closed, as maybe know, parts the last in of until some in part hit stores us actually even some today. the the COVID-XX of in country, stores and some you months, Because, of and from too. back to or from China northern QX few the impacted, and

close in the not beginning brands from it the of new another into Eve from brands newly not in deal, start and contribution in Diary, of But And Eve the of numbers will brands the Chinese haven't as be Lom will the present find Perfect financials show QX. will take had that's trying we're again, earlier, providing or Galénic trying not for our Ondine launched to until actually financials revenue will and we And QX Lom we're the closed. So to We some even starting integrate like guidance. the other existing will to the from we our to Currently, couple not consolidation into actually us for QX. QX. mentioned themselves products we be the themselves Little conservative the busy to our but disclose why only weeks operations, our of [FPAs] deal. acquired

to believe start we pick the come QX overall will starting that business our QX. or growth compared of So rate to from back up

year-over-year of all right, growth the rate for like, So rate it's QX is year. not growth full just the representative

second your So question…

IreneLyu

brands. it's for think your and strategy second new existing for I I And brand the relating question, think to

company determining of agent a we actually, at brand whether brand instead strategy, new are existing. is actually So look development the when cycle the brand the or will

first So opportunities a with implement the new growth category Perfect view in even in to marketing brand good and if hesitate continue and customer sales offering, new our we growth example, equity awareness. for Diary, not the for we investing, identify brand strategy further by or invest to will to

portfolio, combination brand the at pure top share. incubation but the the very brand increase a M&A, and when rather increase not for that even we look going aggregating all the at a growing also sales, launch long through only So we're term, Basically growing to basically, self it's brands to M&A. we the more level good acquire. group of revenues our in But market together overall we are line,

So very basically, growth rather very the whether line also top at new, focusing we're still brand growth but are of healthier. on we looking stage it's in the long existing, now, -- still regardless term, right and

DonghaoYang

Your third talk activity. next your flow this can burn can question on ahead is our only cash operating year. cash actually time I about because acquisition never regarding of plan you

going current on explained to focus So growth. top making year, investors. line because as our is we've be another our this to year It's loss

But to so break and bottom negative to it's So be going even operating situation. cash year, to us. be hopefully, cash line we're our year in going our a flow next for flow able

Operator

of from Securities. next question with the comes And Luzi America Instructions] Bank [Operator Li

LuziLi

guidance. since we So gave my question first is, quarter first the

look from at the going are we rates? year, So it's to use if of year, the so quarter. And we accelerate expecting growth the second -- full accelerating how year we QX from So end to the growth for the full right? should can

acquired that? or brands Diary It Perfect and like my driver key come should be our is, So more developed, the Choice, actually, first or brand growth newly Abby's color what is flagship on this newly question. the Eve the the is Ondine behind could the the brands, from brands? the Lom. contribution second newly particularly acquired question give So you growth, from like Little should key My growth key us self-developed or

big these our now? grow care. skin that what newly as of strategy brands? believe I So to most is acquired how is it are acquired brands So the for

to base because existing target premium. or to brands trying brand Lom to we are positioning, different the the from customers So base the from new the care Galénic sales a more actually the clearly we have skin are customer and we customer capture the Eve extend

So what is our strategy? Thank you.

DonghaoYang

the situations acquired our parts three, we of For your by do I I question, going newly for top growth especially full year, business some to we said at do see on have existing in our may and last earlier, pointed products not that; line, a provide we categories. new contributing brands, the guidance you line business, QX, rate, strong COVID-XX from brands year first if haven't as was some still starting offline growth. starting country; we're But product first earlier, QX pickup QX hit got from and very and one, look see quarter; year our started some top two, to our launch of as our to because our QX or our this plans

For QX example, we're this going example, product for be Perfect Diary, year. in launching, to QX,

three the our for quarters be will remaining for the year. line drivers top growth those the of So

think in is But mostly customer prestige difficult probably brands, our Your and positioned Eve two chain, marketing it capabilities Galénic, built skincare because very you're these they're and and be Eve absolutely newly as brands I like driven sell core us brands Galénic, market Perfect through second brands will question, R&D supply also another least, Lom in our have yes, Lom brand. to and Diary, acquired And of are for we social existing to data again, Chinese actually of are The at right. base capability of different terms segments. capabilities just them product media.

successful those will leveraging core be or brands. capabilities, launching by in So newly acquired we those that believe operational relaunching we

Operator

And Zhang] [Kevin with from the Research. next question [Aegis] comes [Indiscernible]

UnidentifiedAnalyst

results. earning strong two have very I quick questions. on Congratulations

have one is already provisioning. a first built The different with and categories strategy brand portfolio since that our price

online we best how user membership. base base So have our of and make do because the very very we use large cross to follower large sell,

brand, So what question and Galénic operations The is newly second our Eve about the acquired is multibrand Lom. strategy?

strategy Thank existing with So their what the distributor team post How on network? and deal is our integration? overseas acquisition you. to

JinfengHuang

like first to leverage into customer market capabilities. so expand also and back financial the going like can So the I brands we're existing we one, guess, and when our base our

launch going so or two to or capacity acquired, parts. I to like like positioning coming One the new believe, we from can the design is brands products. So have the growth base for test and the so product part back new existing we the customer either leverage about cost, the or brand to to

a benefit of also, get. actually BXC acquired we So are we to that at model. that And brand good the is growth we thing that's accelerate our another can the on based

So going your… back to

IreneLyu

you second question? Do repeating your mind

UnidentifiedAnalyst

since and acquired have Galénic two we Eve So overseas brands. these Lom,

example, So resources our the with existing their well R&D the distributors? as team, integration? acquisition to deal what For on is post as strategy overseas how

JinfengHuang

Well, a I very important when about important we integration the part question very plays a that's expand brand acquisition, the portfolios. the because think

are a we right there now, So few taking. steps

the at It's with joint venture us XXX%. important can of actually transfer like are which not thing help to we the a One smoothly more is most the shareholders, operation. existing

keeping partners, network and distribution key they're even our to the remain keep equity innovation. then helping employees and and for the and the the et us helping And So cetera. brand product us and existing R&D on

joint venture all make acquisition sure effort the parties. is a this So strong to like important of is that very

important thing. a that's So very

organization the Another so team. growing we now and thing is, right internally are M&A our capabilities

acquisition. consulting services of part they the from the good executing at and US firm that very coming banking have and are in team, professional also we So new talent integration

with the and we we like better the and are acquisitions. internal external the getting also teams believe So health better in commitment those executing

much. thank so So you

Operator

closing for back comments. over question-and-answer the would to turn session. management conclude does any the this to conference I As like

Irene Lyu

Thank you, operator.

joining today. you for us thank again So once

Investor further free to you us or at please Relations. have feel TPG contact directly any Yatsen If questions,

for information in Have press contact Our release. be Thank a today's China day. on found US both and IR you. the can great

Operator

has conference for you. Thank attending presentation. concluded. Thank today's now The you

You now may disconnect.

Irene Lyu	Head of Strategic Investment and Capital Markets
Jinfeng Huang	Founder, Chairman and CEO
Donghao Yang	CFO and Director
Christine Cho	Goldman Sachs
Dustin Wei	Morgan Stanley
Luzi Li	Bank of America Securities

Yatsen Holding Limited (YSG) 11 Mar 212020 Q4 Earnings call transcript