Yunji Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
June 2, 2023

There are 5 speakers on the call.

Operator

Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to Yoon Yi's First Quarter 2023 Earnings Conference Call. With us today are Mr. Shung Le Zhao, Chairman and Chief Executive Officer Jupeng Peng Zhong, Vice President of Finance and Ms. Kay Liu, Investor Relations Director of the company.

Operator

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 Yunji. Please go ahead, ma'am.

Speaker 1

Hello, everyone. Welcome to our Q1 2023 earnings call. Before we start, please note that this 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 normal risks, uncertainties and other factors to Yunxian's industry. These forward looking statements can be identified by terminologies such as well, expect, anticipate, continue or other similar expressions. For a detailed discussion of these risks and uncertainties, please refer to our related 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's filings with SEC. Yunxi does not undertake any obligation to update these statements as required by applicable law. With that, I will now turn over to Shangri Zao, Chairman and CEO of Lingxi.

Speaker 2

I'm delighted to announce that we celebrated our 8th corporate anniversary on May 16, 2023. It has now been 3 years since the outbreak of COVID. And during the first half of this year, consumption has been gradually and steadily recovering. And in time, consumers have been yearning for more fulfilling and enriching lives. During our anniversary celebration with employees, partners and service managers in attendance, we have 2 opportunities to announce an exciting new initiative, leveraging our brand and vertical community service competitive advantages.

Speaker 2

We will embark on a comprehensive exploration of gourmet food, beauty and healthcare. We will delve into interconnectedness of these categories and their role enhancing quality of life. Local community services have emerged as a new growth trend in the consumption this year. In line with this trend, during March, we integrated our existing food and neighborhood groups into our e commerce service super supply chain. This service offers exclusive products to users with a particular focus on the gourmet food category.

Speaker 2

Super Supply Chain leverages the super community leaders to bring a wide selection of affordable gourmet food from all over the country and around the world to do this doorsteps. Under this model, every super community leader is closely connected to users, residing within a 500,000,000 radius, facilitating high interactions on a daily or even hourly basis. To encourage repeat purchases, the most popular product featured in super supply chain will subsequently become available for regular purchase. Furthermore, we have set up an innovation department that is to expanding the reach of our community e commerce at least beyond our current community. This department will explore community e commerce in untapped commercial networks and actively connect with new group leaders.

Speaker 2

Beyond expanding the scope of our services initiatives, we will build brand awareness, drive sales and invest to deliver more During recent offline events, I had a privilege of meeting service managers from all over the country. I was highly impressed by their professionalism and their passion for beauty and a zeal for life. To further enhance our support for them, we are committed to developing and expanding our range of private label products that address both our panel and internal beauty needs, absent our diverse portfolio of attractive label products encompasses natural supplements, body management, oral care, hair loss prevention, skin care, personal care and more. Going forward, we will actively explore further opportunities and possibilities in the realm of beauty, ensuring that we continue to meet the evolving needs of our users. In line with our strategy of developing mass market, private label products that cater to a broader range of families and their diverse needs, we recently launched a brand new consumer product, Everyday Light Oil.

Speaker 2

The product is a next generation healthy cooking oil with ancillary soy content of over 50% and a well balanced composition of fatty acids. We developed the oil with the intention of making it an indispensable ingredient in Chinese cuisine, sparkling a revolutionary change in the edible oil industry, Recognizing that healthy cooking oil is a relatively novel concept, we include a number of strategies to promote it as a new and healthy lifestyle choice to our community and among our users. These strategies include as live presentations, offline events and a combination of graphics for massive articles and engaging short videos. Thanks to these efforts, Everyday Lion Oil's launch was a resounding success with sales exceeding 5,000,000 units on its first launch. Our recent phenomenon is people's increasing consciousness of the importance of boosting their own immune systems.

Speaker 2

Capitalizing on the trend, we are intensifying our efforts to develop healthcare products for our private label portfolio. These products empower individuals to pivot from a reactive healthcare approach to actually nurturing their health and well-being. During the Q1, we saw a significant surge in newly demand for healthcare products with the Qingzhiyang Pro Biotis and Intel Xeon tablets proving to be especially popular. We proactively responded to this growing demand by launching a number of new offerings, including the addition of crude oil to our product lineup. On the marketing front, we energized the community engagement in the first half of the year by holding a range of an offline events, including the loans, production site visit and a new product launch ceremony.

Speaker 2

During the month of March alone, our activities garnered the participation of more than 2,000 service managers. Since February, we have organized a variety of events, including a mailing sales lunch plan, offline kickoff meeting in Changsha and with Tuxinjiang where our new Zhang private label milk is sold. For our everyday light oil, we held a 1,000 person study tour in Bin Nan, giving participants a deeper understanding of the product. These events also forced their mutual support and inspire individuals to embrace a healthy lifestyle, cultivate a stronger sense of belonging and a collective pride among our sales managers. In line with our commitment to technological innovation, our research and development department is actively engaged in exploring and developing AI nutritionists, AI customer support and AI community management.

Speaker 2

We aim to gradually roll out these initiatives during the Q2, delivering a fresh experience and a more efficient round of clock service to our users and service managers. Upon their introduction, our AI nutritionist will provide personalized nutrition advice, ensuring that users receive tailored recommendation for their individual needs. By implementing AI customer service, we will rapidly and accurately deliver more efficient and personalized customer support. Furthermore, AI community management will help us to gain deeper insight into the needs and preferences of our community, allowing us to remotely address issues as they rise. With tens of thousands of service managers and a vast collection of graphical, textual and short video content, we present an intensive set of resources that was set as a robust training set for our AI power services.

Speaker 2

By fully leveraging these resources, we can apply AI more rapidly and effectively and deliver high quality portend solutions to our users. For our service managers, we provide more than just a job. We present a pathway to achieving a harmonious work life balance. We are also committed to providing products and services that enable our users to live more healthily. Moreover, we are dedicated to offering opportunities to ordinary individuals while making it easier for people to lead better and more fulfilling lives.

Speaker 2

With that, I will turn the call over to Mr. Peng Zhang, our President of Finance to go through the financial results.

Speaker 3

Thank you, Xiaoying. Hello, everyone. Before I go through our financial results, please note that all numbers stated in the following remarks are in RMB terms and all comparisons and percentage changes are on a year over year basis unless otherwise noted. After navigating the challenges of last year, we spent the Q1 of 2023 implementing a number of strategic upgrades to adapt to the post COVID environment. Responding to shifting consumer trends, we refocused our private label product development to capture growing interest in immunity enhancement, allocating more resources for the cultivation of healthcare and the nutritional therapy products.

Speaker 3

This initiative, combined with other efforts such as online repurchase reminders, contributed to an 80.2% repurchase rate during the quarter. Meanwhile, our gross margin improved to 47.7% as our attempts to enhance user loyalty for Food. Despite pressure on our top line from our ongoing product mix refinement and optimization efforts, our net loss narrowed by 37.8% from the same period last year, and we recorded operating profit for the quarter. We are confident that our emphasis on efficiency and our ability to respond to emerging consumer trends leave us well positioned for the future. Now let's take a closer look at our financials.

Speaker 3

Total revenues were RMB179 1,000,000 compared to RMB343 1,000,000 a year ago. Revenues from sales and merchandise were $143,000,000 and revenues from our marketplace business were $33,000,000 This change was primarily due to our continued strategy to refine our product selection across all categories and optimize our selection of suppliers and merchants, which has a near term impact on sales. Meanwhile, consumer confidence and the spending power still have yet to fully recover. Despite these challenges, we improved our gross margin to 47.7% compared to 44.2% a year ago. This was a result of sustained consumer loyalty to our private labels and our effective product curation strategy.

Speaker 3

Now let's take a look at our operating expenses. Fulfillment expenses were RMB27 1,000,000 compared to RMB49 1,000,000 a year ago. This was primarily due to reduced warehousing and logistic expenses due to lower merchandise sales, reduced personnel costs as a result of staffing structure refinements and a decrease in share based compensation expenses. Sales and marketing expenses were RMB30 1,000,000 compared to RMB51 1,000,000 a year ago. This was mainly due to a reduction in personnel costs as a result of staffing structure refinements, a decrease in member management fees and a reduced personnel business promotion expenses.

Speaker 3

Technology and content expenses were RMB13 1,000,000 compared to RMB24 1,000,000 a year ago. The decrease was mainly due to a reduction in personnel costs as a result of staffing structure requirements and reduced cloud server costs. General and administrative expenses were RMB50 1,000,000 compared to RMB31 1,000,000 a year ago. This was mainly due to reduced personnel costs as a result of staffing structure refinements, lower professional service fees and a decrease in share based compensation expenses. Total operating expenses in the Q1 decreased to RMB85 1,000,000 from RMB155 1,000,000 in the same period of 2022.

Speaker 3

We recorded income from operations of RMB1 1,000,000 compared to RMB2 1,000,000 a year ago. Net loss was RMB23 1,000,000 compared with RMB37 1,000,000 a year ago, while adjusted net loss was RMB27 1,000,000 compared with RMB31 1,000,000 a year ago. Basic and diluted net loss per share attributable to ordinary shareholders were both RMB0.01 compared with RMB0.02 in the same period of 2022. Moving on to liquidity, as of March 31, 2023, we had a total of RMB568 1,000,000 in cash and cash equivalents, restricted cash and short term investments on our balance sheet, compared to RMB669 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 debt on our balance sheet.

Speaker 3

Looking ahead, we will take advantage of the post COVID recovery trend by cultivating our private label products while continuing to emphasize operational efficiency. We will foster synergistic collaboration between our online and offline initiatives with the goal of enhancing customer loyalty and attracting new users. These strategic approaches will lay a strong foundation for our future development and will position us to deliver long term value to our shareholders. This concludes our prepared remarks for today. Operator, we are now ready to take questions.

Operator

We will now begin the question and answer session. And our first question will come from Ethan Yu of First Trust China. Please go ahead.

Speaker 4

We have observed rapid recovery in offline economic, tourism and intercity mobility, but overall the consumer confidence remains unstable. How does this impact your business and what specific measures has the company taken? Additionally, what specific initiatives has your company implemented or planned to implement to enhance our brand awareness of Yunji and our private label products? Thank you.

Speaker 2

Thank you for your question. Yunji believes in the connection between people, both online and offline, has its own advantages. Before the pandemic, Ringi operated with a marketing model that combined online communities and offline salons. The offline salons help bridge the gap between the company service managers and customers fostering trust and providing a better experience with our products. This became even more important as we develop more private labels, as cultivating customer trust and education Our private labels adhere to the principle of providing customers with the peace of mind and high quality products.

Speaker 2

We insist on sourcing directly from the to invest to invest and trade the production and processing of our goods. As the cities resume their flow, we have invited some top service managers to join us in exploring and learning, witnessing the birth of many in Yunji manufacturing and sharing authentic experience with virtual community. Furthermore, we are establishing a new brand center in Hangzhou, setting as a hub to display our private label capabilities. We hope to attract more product brands and incubate more private label products. And for some quite mature drawing to label products, we are going to make more education to our customers by the middle level influencers from the top platforms.

Speaker 2

And we are going to take various offhandles offline media to do the advertising and the publicity of the products based on our existing customers and the intensity of our customers from city to city, we're going to do the test then due to the promotion of the joint label products. And so our publicity, we mainly will use 4 channels, the existing online channels and the self made content and the mid level influencers online and also the offline media. Thank you for your question.

Speaker 4

Thank you. This is Zhao's detailed answer. Thank you.

Operator

As there are no further questions at this time, I'd like to hand the conference back to the 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. Bye.

Operator

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

Powered by Quartr
Earnings Conference Call
Yunji Q1 2023
00:00 / 00:00