Yunji Q3 2023 Earnings Call Transcript

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December 14, 2023

There are 4 speakers on the call.

Operator

Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to ENGIE's 3rd quarter 2023 earnings conference call. With us today are Mr. Shang Li Xiao, Chairman and Chief Executive Officer Mr. Yi Qing Hsui, Senior Financial Director and Ms.

Operator

Kaye Liu, Investor Relations Director of the company. As a reminder, this conference call is being recorded. Now, I would like to hand the conference over to our first speaker today, Ms. Kay Liu, Investor Relations Director of Yanxi. Please go ahead, ma'am.

Speaker 1

Hello, everyone. Welcome to our Q3 2023 earnings call. Before we start, please note that the call will contain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on our current expectations and current market operating conditions and relate to events that involve known and unknown risks, uncertainties and other factors of Yunxi and its industry. These forward looking statements can be identified by terminologies such as will, expect, anticipates, continue or other similar expressions. For a detailed discussion of these risks and uncertainties, please refer to our latest document filed with the US SEC.

Speaker 1

Any forward looking statements that we make on this call are based on assumptions as of today and are expressly qualified entirely by cautionary statements, risk factors and details of the company filing with the SEC. Yunxi does not undertake any obligation to update this statement except as required in the applicable law. With that, I will now turn over to Shang Yue Siao, Chairman and CEO of Yunxi.

Speaker 2

Hello, everyone. Welcome to Yunxi's 3rd quarter 2023 earnings call. The third question is traditionally an off peak season for e commerce. We took this opportunity to further develop and strengthen our business foundation and continue to iterate on both product front. We focus on a number of initiatives, including fine tuning our market positioning, advancing development of new products, strategically addressing the structure of our product offerings and optimizing our supply chain capabilities.

Speaker 2

In addition, we ramped up our marketing and hosting events to highlight product origins and unveil new products, laying the groundwork for our promotional sales in the Q4. Notably, during September, our product label team relocated to a new office building with enhanced display and presentation areas, allowing us to more effectively showcase our private label brands to our partners. Guided by our ongoing strategic development, we conducted a comprehensive evaluation of Yunji's market positioning. Both Yunji and our private label brands have consistently maintained higher repeat purchase rates. This positive trend has promoted us to reflect on how can we further enhance the value we deliver to our users and our service managers.

Speaker 2

Operating within a competitive market landscape, we remain firmly committed to offering high quality competitively priced products that deliver outstanding value to our users. We believe that these commitments will generate higher revenues and strengthen our brand image, paving the way for our sustainable growth. During this year's double 11 shopping festival, major e commerce platforms engaged in aggressive discounting and extended their promotions over the course of a month by using a variety of creative approaches. We chose to try a different course opting for a more straightforward promotional approach over a shorter timeframe. For example, we successfully attracted and engaged users by leveraging product same date, direct discounts and multi item offers.

Speaker 2

These strategic focus enable us to coordinate our marketing efficiently and more precisely target dormant users, effectively drawing them back to our platform. During our previous earnings call, we outlined our strategic initiative to enhance our supply chains and capitalize on consumers' growing appetite for seasonal purchases. Our approach has yielded impressive results particularly in the food category. For example, by the end of August, our craft vouchers and craft gift boxes have emerged as go to gifting choices for the Mid Autumn Festival and a National Day holiday. Importantly, we have successfully generated stable levels of daily sales without significant promotional spending.

Speaker 2

In the space of just 1 month, we sold over 400,000 crabs, generating revenue in excess of RMB 13,000,000. To share some updates on Yunxi's private label brands. While beauty remain our core focus, healthcare has emerged as a strong secondary area. This dual focus on building a house opens up exciting opportunities to explore cross category collaboration, allowing us to create highly unique and differentiated products. For example, in September, our beauty brands P&S launched a CE Boxall Lip Balm that was an instant hit, selling out within an hour on its launch day.

Speaker 2

The lead bomb's popularity sparked a strong demand within our community groups for a further round of sales. C. Box stores has proved to be a popular ingredient for our health brand the Baiyue Shen. Following its launch, the Lipan has garnered a devoted following across both beauty and health categories, demonstrating the potential of a cross category collaboration. Building on the sense of the lead bond and aligning with the resurgence of a traditional Chinese medicine culture, we've established an herbal skin skincare studio and intend to introduce more cross category products, such as the TCM face mask to cater to the evolving preferences of users.

Speaker 2

Finally, I'd like to turn to a critical component of our success. Our dedicated service managers, they choose Yunji because we offer a unique opportunity to strike a balance between their professional and family lives. Our innovative flash sale strategy empowers the service manager to build mega hit products or brands in a short time frame, often within an hour. This allows them to rapidly generate sales and then return to their personal lives, freeing up time for self improvement and to spend with their families. In terms of her personal development, we continue to prioritize the continuous learning and growth of our service managers.

Speaker 2

As part of this commitment, we launched a new education and training program in the Q3. This initiative will not only refine their sales skills, but also foster broader thinking and cultivate more diverse interests, ultimately helping to create a more fulfilling family life. With that, I will turn the call over to Mr. Cui, our Senior Financial Director to go through the financial results.

Speaker 3

Thank you, Songry. Hello, everyone. Before I go through our financial results, please note that all numbers that are in the following remarks are in RMB terms and all categories and percentage change on a year over year basis unless otherwise noted. During the Q3 of 2023, our operations remained relatively stable and we used the opportunity to reinforce our core operational process. Q2's efforts has been the enhancement of our inventory management practice.

Speaker 3

We now have a robust comprehensive strategy that covers our private label product development, sales scheduling and management of stock inflows and outflows. At the same time, we actively monitor different product categories on a weekly or monthly basis to ensure inventory is kept at optimal level. Their strategic focus on inventory management has been instrumental in optimizing our use of assets and effectively managing cash flow. We believe this new approach lays a solid foundation for our sustainable development within a constantly shifting dynamic market. Now let's take a close look at our financials.

Speaker 3

Total revenues were 100 RMB145 1,000,000 compared to RMB239 1,000,000 a year ago. Revenues from sales of merchandise were $114,000,000 and the revenue from our marketplace business was $29,000,000 The changes were primarily driven by ongoing refinements to our product range across all categories. This coupled with the optimization of our supplier and the merchant network resulting in a short term impact on sales. Despite these challenges, our gross margin remained relatively solid at 45.7%. This was due to a tender customer loyalty towards our private label and our effective product caution strategy.

Speaker 3

Now let's take a look at our operating expense. Fulfillment expense was US26 $1,000,000 compared to US37 $1,000,000 a year ago. This was primarily driven by a decrease in warehousing and logistics expenses stemming from lower merchandise sales and the reduced personnel costs due to staffing structure optimization. Sales and marketing expense was RMB30 1,000,000 compared to CNY47 1,000,000 a year ago. This was primarily a result of a decline in member management fee and the decrease in business promotion expense.

Speaker 3

Technology and content expense were RMB14 1,000,000 compared to RMB17 1,000,000 a year ago. The decrease was mainly due to a reduction in personnel costs resulting from staffing structure optimization. General and administrative expenses were $28,000,000 compared to $38,000,000 IAS Go. This was mainly due to a decline in share based compensation expense. Total operating expense in the Q3 decreased to $98,000,000 from 100 and 39 1,000,000 in the same period of 2022.

Speaker 3

Loss from operations were RMB30 1,000,000 compared to RMB80 1,000,000 a year ago. Net loss was US35 $1,000,000 compared to US38 $1,000,000 a year ago, while adjusted net loss was US34 $1,000,000 compared with US30 $1,000,000 Basic and diluted net loss per share attributed to ordinary shareholders were $0.02 compared with $0.02 in the same period of 2022. Turning to liquidity. As of September 13, 2023, we had a total of CNY55 1,000,000 in cash and cash equivalents, restricted cash and short term investments on our balance sheet compared to CNY69 1,000,000 as of December 31, 2022. Our liquid assets were sufficient to cover our payable obligations and we did not hold any long term bank loans or debits on our balance sheet.

Speaker 3

Looking ahead, we will continue to proactively explore investment opportunities with the aim of enhancing our supply chain capabilities. To summarize, we took crucial steps towards achieving our long term strategy growth during the Q3. Our diligent efforts to enhance our inventory management mechanism and our decision to prioritize to sustainable and effective asset management approach will integral to this process. Going forward, we will continue to drive ongoing effective improvements ensuring that our company remains resilient and adaptable. This approach positions us to effectively meet future challenges and seize opportunities as we negative the ever challenged economic landscape.

Speaker 3

This concludes our prepared remarks for today. Operator, we are now ready to take questions.

Operator

Thank you. We will now begin the question and answer session. The first question today comes from Ethan Yu with First Trust. Please go ahead.

Speaker 3

Thanks for taking my question. Could you share more color on the specific plans and the business positioning for our health business segment? Thank you.

Speaker 2

And thank you for your question. Bingi Health is Bingi's forward looking strategy for the next 10 to 20 years. And in the next 10 to 20 years, we know that in China, we are going to have a 620,000,000 Chinese people over 60 years old and above. And you can take it as our secondary curve. And 95% of our consumers are women, among which 86% of them are mothers.

Speaker 2

A key characteristic of this group is their keen focus on health, particularly as the primary guardian of the well-being the both elderly family members and children. Actually, in China's car industry, and we do not lack different models of the SUV, but we lack the SUV with 6 seats. Similarly, in China's health industry, we do not lack the online and offline supermarkets. But in the next 20 years in China, we lack the house supermarket. Weyngi Health can be likened to a Sam's Club for the health domain, including the healthy food, also those food that are focused on health and with a primary emphasis on household scenarios or like those functional food.

Speaker 2

It gathers diverse health products from various brands and categories to meet the personalized health needs of different family members. While many associate health with dietary choices, we advocate for a healthy lifestyle encompassing aspects like the sun protection, skin care, hair care and cleanliness. Linji advised to be a comprehensive health steward for all aspects of life. Thank you for your question.

Speaker 3

I have no more questions. Thank you.

Operator

As there are no further questions at this time, I'd like to hand the conference back over to management for closing remarks.

Speaker 1

Thank you for joining us today. Please do not hesitate to contact us if you have any further questions and we're looking forward to talking with you next quarter.

Operator

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

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