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Operator: Ladies and gentlemen, good day and welcome to the Yatsen First Quarter and Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Irene Lyu, Vice President, Head of Strategic Investment and Capital Markets. Please go ahead.

Irene Lyu: Thank you, operator. Please note the discussion today will contain forward-looking statements, relating to the company’s future performance and are intended to qualify for the safe harbor from liability as established by the U.S. Private Securities 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 factors that could affect Yatsen’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 forward-looking 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 Yatsen’s senior management are Mr. Jinfeng Huang, our Founder, Chairman and CEO; and Mr. Donghao 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 being recorded. In addition, a webcast replay of this conference call will be available on Yatsen’s Investor Relations website at ir.yatsenglobal.com.

I will now turn the call over to Mr. Jinfeng Huang. Please go ahead, sir.

Jinfeng Huang: Thank you, Irene, and thank you, everyone, for participating in Yatsen’s first quarter 2025 earnings conference call today. I will begin with a market overview and our key financial results, followed by insights into our key strategy initiatives and operational highlights. China’s beauty market saw modest growth in the first quarter of 2025. According to the China National Bureau of Statistics, beauty retail sales rose 3.2% year-over-year, slightly trailing the 4.6% year-over-year growth in total retail sales of consumer goods. Online beauty sales reflected a similar trend. Combined beauty sales on Tmall and Douyin recorded low double-digit year-over-year growth, with the Women’s Day shopping festival delivering moderate performance.

In terms of channels, Douyin outperformed Tmall in both skincare and color cosmetics categories. Despite a soft market environment, we delivered results in line with our guidance. Total net revenues increased by 7.8% year-over-year. Remarkably, our net revenues from skin care brands rose by 47.7% year-over-year, driven by a 58% year-over-year increase from our clinical and premium skin care brands, including Galénic, DR. WU and Eve Lom. On the profitability front, for the first quarter of 2025, our overall growth margin increased to 79.1% from 77.7% for the prior year period, driven by the greater contribution from higher-margin products. We also reduced our net loss margin by 15.5 percentage points to 0.7% from 15.1% in the prior year, through more strategic marketing spending and streamlined general and administrative expenses.

Notably, we achieved a non-GAAP net income of RMB7.1 million, representing a significant turnaround from the non-GAAP net loss of RMB83.8 million for the prior year period. Our solid performance for the first quarter marked another milestone in our strategic transformation, which particularly progressed on two key fronts, accelerating the growth for our skin care brands and optimizing our cost structure to prepare us for profitable growth. Now, let me walk you through the key performance highlights this quarter that reflect the accomplishments we have achieved. Starting with skin care, our portfolio continues to show strong momentum, primarily driven by Galénic and DR.WU, our skin care brands delivered year-over-year revenue growth of 47.7%.

Galénic saw another quarter of steady growth. Its number one Vitamin C serum was the best-selling product in the premium vitamin serum category in our attendees’ live streaming room, while the secret de-oxidant active cream ranked among the top six anti-aging creams on Tmall in terms of retail sales value in the first quarter. The Michaelmasque series also contributed to the brand’s strong performance. In May, we hosted an offline event in Greenland, China to officially launch the upgraded, rejuvenating Michaelmasque, which recently obtained the Special Cosmetic Registration Certificate for whitening products. At the event, we also announced renewed actress Dulin Chen as the brand ambassador for the Michaelmasque series. We aim to further elaborate Galénic’s awareness and recognition through continued product innovation and targeted marketing efforts.

Dr. Wu also delivered robust revenue growth in the third quarter, supported by a broader product portfolio and a more balanced channel mix. We collaborated with a wide range of celebrities and KOLs to promote adverse products, including the Purifying Renewal Essence Toner, the Sun KUV Protect Whitening Lotion and the newly launched Targeted Acne Cleaning Serum. This approach helped us drive revenue growth on both Tmall and Douyin. In addition to strong sales performance, we remain committed to scientific research and collaboration. In March, we launched the third Bakuchiol acne research found project led by 14 renowned dermatologists from top institutions. Since its inception in 2023, the project has reached over 20,000 doctors, and we received more than 350 clinical research proposals.

We look forward to the insights this fund will bring to the field of anti-acne treatment. While continuing to invest in product development and brand building to boost revenue growth, we also made meaningful progress in improving profitability. Selling and marketing expenses as a percentage of total net revenues narrowed to 56.4% from 59.7% for the prior year period. The improvement was primarily due to more strategic marketing spending, particularly offset by higher traffic expenses as a result of growing revenue contribution from the Douyin channel. More notably, general and administrative expenses as a percentage of total net revenues were 7.8%, down by 10.3 percentage points from 18.1% a year ago. This improvement reflected our distinct cost management and provide a solid foundation for our long-term growth.

Lastly, I would like to highlight a few milestones at the corporate level. Our global R&D center in Shanghai, which we inaugurated last year, was officially accredited by the China National Accreditation Service for conformity assessment, placing it among the top tier of global taxing institutions. This accreditation, alongside the CMAS recognition received by our R&D center in Guangzhou back in 2022, demonstrates our continued commitment to excellence in beauty research. Also, in April, we were invited by the China show of Bloomberg and engaged in an in-depth interview on the topic of the future of beauty, driven by technology. This opportunity reinforced our strategic focus on R&D as a core competitive advantage. Before passing the call to Donghao, I would like to provide an update that our Board of Directors has approved a new share repurchase program under which we may repurchase up to $30 million worth of our ordinary shares over the next 24 months, commencing on May 15, 2025.

This further demonstrates our confidence in Yatsen’s future potential. To conclude, while market conditions remain complex, we are encouraged by the progress we have made in executing our strategic transformation, we remain focused on delivering innovative and efficacious products, building strong brand equity and driving operational excellence, all of which we believe will position us well for long-term sustainable growth. With that, I will now turn the call over to our CFO, Donghao Yang, to discuss our financial performance. Thank you, everyone.

Donghao Yang : Thank you, David, and hello, everyone. Before I get started, I would like to clarify that all financial numbers presented today are in renminbi amounts and all percentage changes refer to year-over-year changes, unless otherwise noted. Total net revenues for the first quarter of 2025 increased by 7.8% to RMB833.5 million, RMB773.4 million for the prior year period. The increase was primarily due to a 47.7% year-over-year increase in net revenues from skincare brands, partially offset by a 9.9% year-over-year decrease in net revenues from color cosmetics brands. Growth profits for the first quarter of 2025 increased by 9.7% to RMB659.1 million from RMB600.9 million for the prior year period. Growth margins for the first quarter of 2025 increased to 79.1% from 77.7% for the prior year period.

The increase was primarily driven by an increase in sales of higher-gross-margin products. Total operating expenses for the first quarter of 2025 decreased by 8.6% to RMB693.2 million from RMB758.7 million for the prior year period. As a percentage of total net revenues, total operating expenses for the first quarter of 2025 were 83.2% as compared with 98.1% for the prior year period. Fulfillment expenses for the first quarter of 2025 were RMB51.8 million as compared with RMB51.4 million for the prior year period. As a percentage of total net revenues, fulfillment expenses for the first quarter of 2025 decreased to 6.2% from 6.7% for the prior year period. The decrease was primarily due to further improvements in logistics efficiency. Selling and marketing expenses for the first quarter of 2025 were RMB553.8 million as compared with RMB539.2 million for the prior year period.

As a percentage of total net revenues, selling and marketing expenses for the first quarter of 2025 decreased to 66.4% from 69.7% for the prior year period. The decrease was primarily due to the company’s more strategic marketing spending combined with the selective closure of offline stores. General and administrative expenses for the first quarter of 2025 were RMB64.9 million as compared with RMB140.1 million for the prior year period. As a percentage of total net revenues, general and administrative expenses for the first quarter of 2025 decreased to 7.8% from 18.1% to the prior year period. The decrease was primarily attributable to lower share-based compensation expenses as a result of using the graded vesting period, a method over the vesting term of the company’s awards and lower payroll expenses, resulting from a reduction in general and administrative headcount.

Research and development expenses for the first quarter of 2025 were $22.6 million, as compared with $27.9 million for the prior year period. As a percentage of total net revenues, research and development expenses for the first quarter of 2025 decreased to 2.7% from 3.6% for the prior year period. The decrease was primarily due to lower lease expenses, resulting from more favorable terms under a lease agreement renegotiated during the first quarter of 2025 and lower share-based compensation expenses. Loss from operations for the first quarter of 2025 was $34.1 million, as compared with $157.7 million for the prior year period. Operating loss margin was 4.1%, as compared with 20.4% for the prior year period. Non-GAAP loss from operations for the first quarter of 2025 was $14.9 million, as compared with $107 million for the prior year period.

Non-GAAP operating loss margin was 1.8%, as compared with 13.8% for the prior year period. Net loss for the first quarter of 2025 was $5.6 million, as compared with $124.9 million for the prior year period. Net loss margin was 0.7%, as compared with 16.1% for the prior year period. Net loss attributable to Yatsen’s ordinary shareholders per diluted ADS for the first quarter of 2025 was RMB0.06, as compared with RMB1.16 for the prior year period. Non-GAAP net income for the first quarter of 2025 was $7.1 million, as compared with non-GAAP net loss of $83.8 million for the prior year period. Non-GAAP net income margin was 0.9%, as compared with non-GAAP net loss margin of 10.8% for the prior year period. Non-GAAP net income attributable to Yatsen’s ordinary shareholders per diluted ADS for the first quarter of 2025 was RMB0.07, as compared with non-GAAP net loss attributable to Yatsen’s ordinary shareholders per diluted ADS of RMB0.78 for the prior year period.

As of March 31, 2025, we had cash and short-term investments of RMB1.28 billion, as compared with RMB1.36 billion, as of December 31, 2024. Net cash generated from operating activities for the first quarter of 2025 was $23.8 million, as compared with net cash used in operating activities of RMB121.6 million for the prior period. Looking at our business outlook for the second quarter of 2025, we expect our total net revenues to be between RMB810.4 million and RMB889.9 million, representing a year-over-year increase of approximately 2% to 12%. These forecasts reflect our current and preliminary views on the market and operational conditions, which are subject to change. With that, I would now like to open the call to Q&A. Operator?

Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions]. The first question today comes from Maggie Huang with CICC. Please go ahead.

Maggie Huang: Thanks for taking my question. This is Maggie Huang from CICC. Firstly, congratulations on achieving non-GAAP net income in this quarter. And I have two questions. My first question is that, 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? That’s my two questions. Thank you.

Irene Lyu : Thank you, Maggie, for the question. For your first question regarding the Perfect Diary and Galénic new products, we think product innovation and efficacy are the most important in driving consumers’ repeat purchase and favorites. Basically, right now, all our product pipelines are really with strong product innovation and are backed by very strong R&D capability, deep consumer insights, and very strong consumer communication. So, right now, for Perfect Diary and Galénic, so far, we have seen very good initial achievement results from the consumer feedback in terms of the facial makeup products and the anti-aging products, which is the foundation and also our VA serum. Once we receive more positive feedback from the consumers and fine-tune our consumer communication, then we can begin to enlarge our channel distribution and also further build these products into the serum products.

Donghao Yang: All right. Let me take your second question. Well, it’s still a bit too early for us to predict our overall performance for the June 18th festival, but so far, so good. I think the sales so far is pretty much in line with our expectations. Thank you.

Operator: [Operator Instructions]. Thank you again for joining us today. If you have any further questions, please feel free to contact us at Yatsen directly. Our company information for IR in both China and the U.S. can be found in today’s press release. Thank you, and have a great day.

Operator: The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.