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Yatsen announces financial results

The Chinese beauty company Yatsen Holding Limited, owner of colour cosmetics and skincare brands including Perfect Diary, Little Ondine, Abby’s Choice, Galénic, DR.WU  (in mainland China), Eve Lom and Pink Bear, reported its net revenues for the third quarter ended 30th September, 2021 increased by 6 percent to RMB 1.34 billion (US$208.4 million) from RMB1.27 billion (US$198.8 million) in the prior year period.

SEE ALSO : Yatsen acquires skincare brand Eve Lom

“Despite a challenging macroeconomic backdrop and soft industry environment for colour cosmetics, our topline continued to grow in the third quarter, supported by a significant growth of our skincare brands,” stated Jinfeng Huang, Founder, Chairman and Chief Executive Officer of Yatsen.

“Looking ahead, as we embark upon the next phase of our development, we expect to continue shifting our revenue mix towards higher-quality and more profitable growth, underpinned by sustained investments in our brand’s brand equities and R&D. We are confident that despite some short-term pain, our strategic initiatives will allow us to emerge stronger with a clear path to long-term sustainable growth,” continued Huang.

“We managed to grow the business in the face of strong industry headwinds,” commented Donghao Yang, Director and Chief Financial Officer of Yatsen.

“Total net revenues reached RMB 1.34 billion (US$309.8 million) in the third quarter, representing an increase of 6 percent year over year. Our gross margin continued its upward trend and reached 67.9 percent in the quarter compared to 65.7 percent in the same period last year. With ample cash reserves and our sights set on charting a sustainable path to long-term growth, we will continue to build a world-class multi-brand beauty group in China,” continued Yang.

The 6 percent increase in net revenues was primarily attributable to sales from its newly launched and acquired brands.

Gross profit for the third quarter of 2021 increased by 9.6 percent to RMB 911.8 million (US$141.5 million) from RMB 831.6 million (US$130.2 million) in the prior year period. Gross margin for the third quarter of 2021 increased to 67.9 percent from 65.7 percent in the prior year period. The increase was primarily attributable to premiumisation of the Perfect Diary brand, and increased sales from skincare brands with higher margins in the sales mix.

Total operating expenses for the third quarter of 2021 decreased by 13.2 percent to RMB 1.28 billion (US$198.8 million) from RMB 1.48 billion (US$231.7 million) in the prior year period. As a percentage of total net revenues, total operating expenses for the third quarter of 2021 were 95.4 percent, as compared with 116.6 percent in the prior year period.

Fulfilment expenses for the third quarter of 2021 were RMB 100.2 million (US$15.5 million), as compared with RMB 91.5 million (US$14.3 million) in the prior year period. As a percentage of total net revenues, fulfilment expenses for the third quarter of 2021 increased to 7.5 percent from 7.2 percent in the prior year period. The increase was primarily attributable to an increase in customer service expenses and share-based compensation expenses compared to the third quarter of 2020, partially offset by a slight decrease in fulfilment logistics expenses.

Selling and marketing expenses for the third quarter of 2021 were RMB 911.3 million (US$141.4 million), as compared with RMB 854.3 million (US$133.7 million) in the prior year period. As a percentage of total net revenues, selling and marketing expenses for the third quarter of 2021 increased to 67.9 percent from 67.5 percent in the prior year period. The increase was primarily attributable to an increase in salaries, store-related expenses and share-based compensation expenses compared to the third quarter of 2020, partially offset by a decrease in advertising expenses and platform commissions.

General and administrative expenses for the third quarter of 2021 were RMB 233.9 million (US$36.3 million), as compared with RMB 515.9 million (US$80.7 million) in the prior year period. As a percentage of total net revenues, general and administrative expenses for the third quarter of 2021 decreased to 17.4 percent from 40.7 percent in the prior year period. The decrease was primarily attributable to a decrease in share-based compensation expenses compared to the third quarter of 2020, partially offset by an increase in salaries.

Research and development expenses for the third quarter of 2021 were RMB 35.8 million (US$5.6 million), as compared with RMB 14.4 million (US$2.2 million) in the prior year period. As a percentage of total net revenues, research and development expenses for the third quarter of 2021 increased to 2.7 percent from 1.1 percent in the prior year period. The increase was primarily attributable to an increase in personnel costs and share-based compensation expenses reflecting the company’s commitment to enhancing its research and development capabilities.

Loss from operations for the third quarter of 2021 decreased by 42.7 percent to RMB 369.3 million (US$57.3 million) from RMB 644.6 million (US$100.9 million) in the prior year period. Operating loss margin was 27.5 percent, as compared with 50.9 percent in the prior year period.

Non-GAAP loss from operations for the third quarter of 2021 increased by 11.9 percent to RMB 221.7 million (US$34.4 million) from RMB 198.1 million (US$31 million) in the prior year period. Non-GAAP operating loss margin was 16.5 percent, as compared with 15.6 percent in the prior year period.

Net loss for the third quarter of 2021 decreased by 43.8 percent to RMB 361.8 million (US$56.1 million) from RMB 643.8 million (US$100.8 million) in the prior year period. Net loss margin was 26.9 percent, as compared with 50.8 percent in the prior year period.

Non-GAAP net loss for the third quarter of 2021 increased by 9.6 percent to RMB 216.3 million (US$33.6 million) from RMB 197.4 million (US$30.9 million) in the prior year period. Non-GAAP net loss margin was 16.1 percent, as compared with 15.6 percent in the prior year period.

Net loss attributable to Yatsen’s ordinary shareholders per diluted ADS for the third quarter of 2021 was RMB 0.57 (US$0.09), as compared with RMB 6.00 (US$0.94) in the prior year period.

Non-GAAP net loss attributable to Yatsen’s ordinary shareholders per diluted ADS for the third quarter of 2021 was RMB 0.34 (US$0.05), as compared with RMB 1.20 (US$0.19) in the prior year period.

As of 30th September, 2021, the Company had cash and cash equivalents and restricted cash of RMB 3.63 billion (US$563.8 million), as compared with RMB 5.73 billion (US$897.2 million) as of 31st December, 2020.

For the quarter ended 30th September, 2021, net cash used in operating activities was RMB 225.3 million (US$35.0 million).

For the fourth quarter of 2021, the Company expects its total net revenues to be between RMB 1.57 billion (US$245.8 million) and RMB 1.67 billion (US$261.5 million), representing a year-over-year decline of approximately 15 percent to 20 percent, primarily due to the prior year period’s high comparison basis and softer-than-expected industry-wide colour cosmetics sales. These forecasts reflect the Company’s current and preliminary views on the market and operational conditions, which are subject to change.

SEE ALSO : Perfect Diary partners with JD Daojia

The company’s board of directors has approved a share repurchase program whereby the company is authorised to repurchase up to US$100 million worth of its ordinary shares (including in the form of American depositary shares) over the next 24 months.

The company’s proposed repurchases may be made from time to time through open market transactions at prevailing market prices, in privately negotiated transactions, in block trades and/or through other legally permissible means, depending on the market conditions and in accordance with applicable rules and regulations. The company’s board of directors will review the share repurchase program periodically, and may authorise adjustment of its terms and size. The company expects to fund the repurchases with its existing cash balance.