Yatsen Q2 2025 Earnings Call Transcript

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August 21, 2025

Key Takeaways

  • Positive Sentiment: Yat Sen delivered 36.8% year-over-year revenue growth to RMB 1.09 billion, driven by a 78.7% surge in skincare and an 8.8% increase in color cosmetics.
  • Positive Sentiment: The company narrowed its net loss margin to 1.8% and achieved a 1.1% non-GAAP net profit margin, marking the third consecutive profitable quarter on a non-GAAP basis.
  • Positive Sentiment: Ongoing R&D investments support innovation, including new biotech launches like the BioPhase Essence Foundation and upgraded premium micro masks.
  • Negative Sentiment: Cash, restricted cash, and short-term investments declined to RMB 350 million from RMB 1.36 billion as of year-end, despite generating RMB 77.7 million in operating cash flow.
  • Positive Sentiment: For Q3 2025, management forecasts total net revenues to grow 15%–30% year-over-year, reflecting continued market momentum.
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Earnings Conference Call
Yatsen Q2 2025
00:00 / 00:00

There are 5 speakers on the call.

Speaker 1

Ladies and gentlemen, good day and welcome to the Yatsen second quarter 2025 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.

Operator

Thank you, Operator. Please note that the discussion today will contain forward-looking statements relating to the company's future performance and our intent 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 summary 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.

Operator

Please see the earnings release issued earlier today for a definition of non-GAAP financial measures and a reconciliation of GAAP to the 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'll now turn the call over to Mr. Jinfeng Huang. Please go ahead, David.

Speaker 3

Thank you, Irene, and thank you, everyone, for joining Yatsen's second quarter 2025 earnings conference call today. I will begin with a brief market overview and a summary of our financial results, followed by an update on how our R&D driven initiatives have supported the healthy development of our brand portfolio. China's beauty industry saw another modest quarter. According to the adjusted data published by the National Bureau of Logistics, beauty sales increased by 2.6% year over year, falling short of the 5.4% growth in total retail sales of consumer goods. Statistically, during May and June, the key promotion periods around the June 18th shopping festival, beauty sales rose by 4.4% in May but declined by 2.3% in June. Despite the uncertain environment, we stayed focused on executing our R&D driven strategy, anchored in our vision of becoming a world-class pioneer in beauty innovation.

Speaker 3

We have continued expanding our international innovation network, attracting top global R&D talent, and deepening collaborations across industries, academia, and research institutions. These efforts have laid a solid foundation for both product innovation and brand equity, which in turn supported the rebound in our financial performance. Building on the momentum that began in the fourth quarter of 2024, we delivered year-over-year revenue growth and achieved non-GAAP performance for the third consecutive quarter. In the second quarter of 2025, total net revenues grew by 36.8% year over year, significantly exceeding our previous guidance. Revenues from skincare brands increased 78.7% year over year, driven by an 88.1% growth in the combined revenue for our three major skincare brands: KALANIK, Dr. Wu, and YSLONG. Our color cosmetics brands also delivered year-over-year growth of 8.8%, with the Perfect Diary brand back on a growth trajectory.

Speaker 3

As operating leverage began to take effect, coupled with our efforts to improve efficiency in our operations and the marketing spend, we narrowed our net loss margin to 1.8% from 10.8% for the prior year period and achieved a non-GAAP net profit margin of 1.1% for the second quarter of 2025, as compared with non-GAAP net loss margin of 9.4% for the prior year period. Let me now walk you through some brand and product highlights powered by our solid R&D successes. KALANIK posted strong results, supported by a robust product pipeline and effective product marketing. Our number one VC serum continued to lead sales, while our upgraded brightening micro mask, featuring the brand's microperfusion and active anchor technology, ranked number one among premium single-use masks on both Tmall and JD during the June 18th period. The number two VA serum also received increasingly positive feedback, particularly on Douyin.

Speaker 3

In addition to online growth, we began expanding KALANIK's offline presence, opening experience stores in Guangzhou, Shanghai, Wuhan, and Shenzhen by the end of June. These stores are designed to strengthen brand visibility and deepen consumer engagement. Dr. Wu also benefited from a more diverse and balanced product portfolio. His Purifying Renewal Essence Toner, formulated with a gentle acidic complex, effectively adjusted the antioxidant and brightening index of oily and acne-prone skin. This product resonated strongly with its targeted consumers and reinforced the brand's positioning as a leader in professional skin renewal. The second quarter also marked a key milestone for Perfect Diary. Since the launch of the Bio-Lip Essence Lipstick in September 2023, Perfect Diary has embraced a new philosophy of makeup skinification. Building on this, we introduced the third-generation biotech technology and applied it to facial makeup.

Speaker 3

The new Bio-Phase Essence Foundation provides a flawless finish while supporting the skin barrier. We also launched the translucent blurring setting powder, powered by the Smart Lock technology, to control oil, combat oxidation, and reduce dullness. These innovations played a key role in putting Perfect Diary back on its growth path. As our commitment to R&D remains essential to our long-term strategy, we continue to strengthen our capabilities and presence in the scientific community. In May, we participated in the 2025 China Cosmetic Science and Technology Conference in Yunnan as a guest speaker and joined a roundtable discussion on emotional skincare at the 2025 International Cosmetic Innovation Conference in Shanghai. In June, our joint laboratory with Regen Hospital unveiled its latest innovation at the 30th International Council of Nurses Congress in Helsinki, Finland. We are also proud of our ongoing social responsibility initiative.

Speaker 3

During the second quarter of 2025, our Create a Beautiful Life program, launched in partnership with the China Women’s Development Foundation, celebrated the graduation of its first 2025 cohort in Guizhou. Now in its fifth year, the program provides free professional makeup training for low-income women, helping them pursue new opportunities in employment and entrepreneurship. Meanwhile, Dr. Wu has entered the third year of his TEMPUS charity tour, promoting scientific skincare education and raising skin health awareness among university students across China. In summary, we are beginning to see tangible results from our long-term focus on R&D. We remain committed to nurturing our brands and delivering exceptional products to our customers. With that, I will now turn the call over to our CFO, Donghao Yang, to discuss our financial performance. Thank you, everyone.

Operator

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 revenue for the second quarter of 2025 increased by 36.8% to RMB 1.09 billion from RMB 794.5 million for the prior year period. This increase was primarily due to a 78.7% year-over-year increase in net revenue from skincare brands, combined with an 8.8% year-over-year increase in net revenue from color cosmetics brands. Gross profit for the second quarter of 2025 increased by 39.5% to RMB 850.4 million from RMB 609.4 million for the prior year period. Gross margin for the second quarter of 2025 increased to 78.3% from 76.7% for the prior year period. The increase was primarily driven by an increase in sales of higher gross margin products.

Operator

Total operating expenses for the second quarter of 2025 increased by 21.7% to RMB 905.9 million from RMB 744.6 million for the prior year period. As a percentage of total net revenues, total operating expenses for the second quarter of 2025 were 83.4% as compared with 93.7% for the prior year period. Fulfillment expenses for the second quarter of 2025 were RMB 63.3 million as compared with RMB 51.2 million for the prior year period. As a percentage of total net revenue, fulfillment expenses for the second quarter of 2025 decreased to 5.8% from 6.4% for the prior year period. The decrease was primarily due to further improvements in logistics efficiency. Selling and marketing expenses for the second quarter of 2025 were RMB 722.4 million as compared with RMB 544.7 million for the prior year period.

Operator

As a percentage of total net revenue, selling and marketing expenses for the second quarter of 2025 decreased to 66.5% from 68.6% for the prior year period. The decrease was primarily driven by the leveraging effect of higher total net revenue in the second quarter of 2025. General and administrative expenses for the second quarter of 2025 were RMB 84.1 million as compared with RMB 119.1 million for the prior year period. As a percentage of total net revenues, general and administrative expenses for the second quarter of 2025 decreased to 7.7% from 15% for the prior year period. The decrease was primarily driven by lower payroll expenses resulting from a reduction in general and administrative headcount, coupled with the leveraging effects of higher total net revenues in the second quarter of 2025.

Operator

Research and development expenses for the second quarter of 2025 were RMB 36.1 million as compared with RMB 29.7 million for the prior year period. As a percentage of total net revenues, research and development expenses for the second quarter of 2025 decreased to 3.3% from 3.7% for the prior year period. The decrease was primarily driven by the leveraging effects of higher total net revenues in the second quarter of 2025. Loss from operations for the second quarter of 2025 was RMB 55.5 million as compared with RMB 135.2 million for the prior year period. Operating loss margin was 5.1% as compared with 17% for the prior year period. Non-GAAP loss from operations for the second quarter of 2025 was RMB 20.4 million as compared with RMB 111.9 million for the prior year period. Non-GAAP operating loss margin was 1.9% as compared with 14.1% for the prior year period.

Operator

Net loss for the second quarter of 2025 was RMB 19.5 million as compared with RMB 85.5 million for the prior year period. Net loss margin was 1.8% as compared with 10.8% for the prior year period. Net loss attributable to Yatsen's ordinary shareholders for diluted EPS for the second quarter of 2025 was RMB 0.19 as compared with RMB 0.77 for the prior year period. Non-GAAP net income for the second quarter of 2025 was RMB 11.5 million as compared with non-GAAP net loss of RMB 74.9 million for the prior year period. Non-GAAP net income margin was 1.1% as compared with a non-GAAP net loss margin of 9.4% for the prior year period.

Operator

Non-GAAP net income attributable to Yatsen's ordinary shareholders for diluted EPS for the second quarter of 2025 was RMB 0.13 as compared with non-GAAP net loss attributable to Yatsen's ordinary shareholders for diluted EPS of RMB 0.67 for the prior year period. As of June 30, 2025, we had cash, restricted cash, and short-term investments of RMB 1.35 billion as compared with RMB 1.36 billion as of December 31, 2024. Net cash generated from operating activities for the second quarter of 2025 was RMB 77.7 million as compared with net cash used in operating activities of RMB 148.2 million for the prior year period. Looking at our business outlook for the third quarter of 2025, we expect our total net revenues to be between RMB 778.6 million and RMB 880.1 million, representing a year-over-year increase of approximately 15% to 30%.

Operator

These forecasts reflect our current and preliminary view on the market and operational conditions, which are subject to change. With that, I would now like to open the call for Q&A. Operator?

Speaker 1

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. Our first question today will come from Maggie Huang of China International Capital Corporation Limited. Please go ahead.

Speaker 2

Thank you for taking my question. This is Maggie Huang from China International Capital Corporation Limited. Firstly, congratulations for meeting our guidance. I have two questions. My first question is that as we enter into the second half of the year, how should we expect the trends of profitability for both skincare and color cosmetics categories? How do we intend to strike a balance between promoting new product lines and improving our profitability? My second question is about competition. What's our view on the industry competition in Q3 and Q4, particularly the competition from foreign premium brands? Those are my two questions. Thank you.

Operator

Thank you very much for your question. We've always been trying to strike a balance between our growth and profitability. We don't believe that we have to sacrifice one for the other, especially now. Our high-end skincare brands are growing even faster than our color cosmetics brands, which tend to have higher gross margin and bottom line. We're confident that as we grow our business, both in skincare and color cosmetics going forward, especially skincare is showing a much stronger growth momentum. We believe that we can achieve both growth and profitability. Competition, and I think you're right, competition is going to be becoming more and more intense going forward, especially as our high-end skincare brand is growing faster. We do expect to have more competition from the international brands. In order to drive our growth and strengthen our competing position, we are adopting an R&D-driven growth strategy.

Operator

For the last four or five years, we've been one of the most aggressive players in the cosmetic industry to invest heavily in R&D. Now we've built a very, I would say, best-in-class R&D team and R&D infrastructure. If you look at our lab, our R&D center in Shanghai is one of the world-class facilities. That's how we view where to drive our future growth, especially to win the competition against other players in the industry.

Speaker 2

It is very clear. I have no more questions. Thank you very much.

Speaker 1

Again, to ask a question, please press star and then one. Our next question today will come from Ling Zhang of Citic Securities Co. Please go ahead.

Speaker 2

Thank you for taking my questions. I'm Ling Zhang from Citic Securities, and congratulations on the performance in the second quarter. My first question is for the skincare brands. I want to ask, what are the key drivers behind the rapid growth of skincare brands, especially for the KALANIK and Dr. Wu in the first half of the year? What is the outlook for the skincare business in the second half of the year and the next year? My second question is, in which aspects will the company make efforts to continuously improve the profitability? Thank you.

Speaker 4

Thank you for the question. For the growth of our skincare brands, we think there are a number of reasons. Primarily, it's because of our continued investment into R&D and our gradual systematic upgrade of our R&D capabilities. As a result, we have a very strong pipeline of new product innovation. Just to give you some examples, for KALANIK, for the past couple of quarters, we have introduced a series of new products, including, on top of very successful VC, we introduced the VA serum and also the micro mask series has been very successful. We also widened the offerings of the micro mask in terms of different efficacy, and we also upgraded the micro mask recently. For Dr. Wu, the Purifying Renewal Essence Toner has been very successful. We think mainly from the R&D upgrade and also the new product pipeline.

Speaker 4

In terms of outlook, we have provided the guidance for Q3 of 15% to 30%, which really, we think, reflects our future outlook in terms of continuing the trend of our skincare brands in terms of the development. On your second question, our efforts to improve the profitability, we are continuing to optimize our channel and product mix, and at the same time, we streamline our operating expenses. We think most of our brands, some of them given the high growth, we think there's still significant growth potential. Those brands are right now, remain well below their respective ceiling. That's why we continue planning to invest in the brand awareness and brand equity, especially when there's new product launch. As a result, we think the profitability improvement will be graded.

Operator

Okay. Just to add on to Irene's point, you know, we do see clear opportunities to further improve profitability across several dimensions. First, we will continue to optimize our product mix by driving premiumization and hero products with stronger margins. Second, you know, we're improving marketing efficiency through data-driven CRM and better ROI discipline, shifting spending toward higher return channels. Thirdly, you know, we are enhancing supply chain and operational efficiency to reduce costs and improve scale leverage. Lastly, as pipeline growth continues, we expect to gain operating leverage across fixed expenses. Altogether, these initiatives give us confidence in steadily expanding profitability while maintaining growth.

Speaker 2

Thank you. That's very clear. Thank you very much.

Speaker 1

This will conclude our question and answer session. I would like to turn the conference back over to management for any closing remarks.

Operator

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

Speaker 1

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

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