Yunji Q3 2024 Earnings Call Transcript

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Provided by Quartr
November 21, 2024

There are 4 speakers on the call.

Operator

good evening, ladies and gentlemen. Thank you for standing by, and welcome to Yunxi's Third Quarter 2024 Earnings Conference Call. With us today are Ms. Sheng Lu Zhao, Chairman and Chief Executive Officer Mr. Yashin Tui, Senior Financial Director and Ms.

Operator

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

Speaker 1

Hello, everyone. Welcome to our Q3 2024 Earnings Call. Before we start, please note that the tower 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 related to events that involve known or unknown risks, uncertainties and other factors of VMC and its industry. These forward looking statements can be identified by terminology such as will, expect, anticipate, continue or other similar expressions. For a detailed discussion of these risks and uncertainties, please refer to our latest document filed with the U.

Speaker 1

S. SEC. 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. Binxin does not undertake any obligation to update these statements, except as required under applicable law. With that, I will now turn over to Shao Xue Siao, Chairman and CEO of Yunxi.

Speaker 2

Hello, everyone, and welcome to Yinti's 3rd quarter 2024 Earnings Call. So let me start with a significant milestone in our company's growth. On November 8, we broke ground on our new headquarters, the Yunji Innovation Center. This 15 new campus strategically located in the heart of the economic and technology development zone represents more than just a new office space. It is designed to be an integrated facility that brings together our marketing, training, R and D and operational teams under one roof.

Speaker 2

The center will serve as an incubator for our expanding health and beauty brands, while embodying our corporate culture and vision for the future. We secured this property at an attractive valuation in the Q2 of this year, which aligns with our strategy of strategic asset diversification to strengthen our market position and optimize returns in today's dynamic environment. In line with our with the global wellness trend, we are reinforcing our decision to health and wellness as a key pillar of our 10 year strategy. Our mission is to democratize access to healthy lithium, particularly in the organic food space. While organic products traditionally come with premium price tags, we've leveraged our procurement expertise to make these products more affordable without compromising quality.

Speaker 2

Our team has traveled nationwide to discover and connect with top notch house product back to supply chain, acting as the eye for our consumers by insurance, true traceability, authentic experiences and genuine sharing. Additionally, we've established a robust quality control process through our proprietary Yunzhi Health Certification System, which includes random sections of certified products even after they receive certification. These initiatives have garnered positive feedback from our users. For example, our autumn and the moon pairs have become an annual favorite for many parents who eagerly return each October to make their family purchases. We've also made significant progress in our offline expansion.

Speaker 2

In July, we launched our 1st wellness store featuring traditional Chinese medicine practices. This initiative has helped us tap into the growing demographic for customers aged 41 to 55 through word-of-mouth referrals in our standardized offline systems. We've successfully replicated this business model with our 2nd location opening in October. Our private label brand, has celebrated 14 successful year in the beauty arena. In November, our cumulative sales on the platform have exceeded RMB100 1,000,000 for the year.

Speaker 2

We are particularly excited about our expansion in the premier anti aging segment, where we align ourselves with top global brands and consistently launch outstanding products within our age recovery series. The upcoming release of specialized eye care products marks another significant advancement in our high end eye care lineup. On the technology front, digitalization is vital for advancing the fast moving consumer goods industry. Building the modern marketing infrastructure requires effective big data strategy. We are pushing forward with the development of an innovative digital platform powered by AI tools that support the integration and sharing of public resources on trading platforms.

Speaker 2

Our AI applications focus on improving customer service, generating content, sharing materials and delivering educational training, which helps lower costs while enhancing operational efficiency and service reliability. So looking ahead, we will continue to drive innovation, enhance our core competence and try to create greater social value for Chinese families. With that, I will hand it over to Mr. Cui, our Senior Financial Director to go through the financial results.

Speaker 3

Thank you, Shangri. Hello, everyone. Before I go through our financial results, please note that all numbers that in the following remarks are in RMB terms and all comparisons and percentages change on a year over year basis unless otherwise noted. During the Q3 of 2024, we faced the market dynamics that impact our operations. Nevertheless, our financial position enables us to support our strategic initiatives.

Speaker 3

We continuously evaluate the profitability of our of both new and exciting business lines, making informed adjustments in response to evolving market conditions. This strategy enabled us to uphold a solid financial foundation amidst a changing business environment. During the quarter, we observed a notable improvement in our comparables, underscoring our dedication to effective cash management. Additionally, we successfully narrowed our operating and net losses, reflecting our commitment to fasten sustainable growth. At the same time, we refine our product offering and optimize our supply network to better meet customer demand.

Speaker 3

Looking ahead, we will continue to carefully seek growth opportunities while prioritizing our financial stability. Now let's take a close look at our financials. Total revenue were $86,600,000 compared to $145,100,000 AFFO. Revenue from sales of merchandise were $70,000,000 and revenues from our marketplace business were $14,800,000 Changes were mainly due to softer consumer confidence and ongoing refinements to our product range across all categories. Furthermore, the optimization of our supplier and the merchant network also has a short term effect on sales.

Speaker 3

Despite the changes, our gross margin remained relatively strong at 64.1%, mainly due to continued customer loyalty towards our product labels and our effective product creation strategy. Now let's take a look at our operating expense. Fulfillment expense was 17 $200,000 compared to $25,600,000 a year ago. The decrease was mainly due to lower warehousing and logistics costs resulting from decreased merchandise sales as well as reduced personnel costs from fastening optimization. Sales and marketing expense decreased to RMB19.3 million from RMB29.6 million.

Speaker 3

This was primarily a result of a decline in member management fees. Technology and contact expense were $11,600,000 compared to $13,900,000 This was largely due to lower personnel costs from staffing optimization. General and administrative expense were $25,800,000 compared to $28,100,000. This was mainly due to a reduction in professional services. Total operation expense in the 3rd quarter decreased to $73,900,000 from ninety $7,200,000 in the same period of 2023.

Speaker 3

Loss from operations was $26,200,000 compared to $30,300,000 net loss was $30,000,000 compared to $34,800,000 while adjusted net loss was ARS29.5 million compared to ARS34 1,000,000. Basic and diluted net loss per share attributable to ordinary shareholders was ARS0.02 compared to $0.02 in the same period of 2023. Turning to liquidity, as of September 30, 2024, we had a total of 200 and $68,400,000 in cash and cash equivalents, restricted cash and short term investments on our balance sheet. Our liquid assets are sufficient to cover our payable obligations and we did not hold any long term bank loans or debits on our balance sheet. In addition, we are dedicated to making the most of our working capital and smartly managing our assets to best support our operations.

Speaker 3

Looking forward, we are dedicated to improving our operational efficiencies and adjusting our strategies to effectively navigate the changing market landscape. We are confident that our condition enhancement of inventory management and cost optimizations leave us well positioned for further growth by continuously innovating and refining our product offering. We believe that we can boost our momentum and create long term shareholder value. This concludes our prepared remarks for today. Operator, we are now ready to take questions.

Operator

And our first question today will come from Ethan Yu of First Trust. Please go ahead.

Speaker 3

Let me transfer it by myself. Thank you for taking my question. My question is about expanding our offline activities at this point of time. What is the main difference of SmartSoft and online e commerce business? And how would these 2 business be combined in the future?

Speaker 3

Could you share more color on this? Thank you.

Speaker 2

Thank you for your question. Firstly, regarding market demand and target customers, offline wellness stores are an extension of Yunji's existing customer base. Over the past 9 years and next year is the 10 years since YingJi's establishment, some of our earliest customers such as young mothers have now transitioned into the key demographic for offline wellness services, which is the 40 to 55 age group. By continuously addressing user needs, we aim to align with the development of the aging economy, broaden Yunji's customer base and truly provide services for the entire family. The offline wellness business differs significantly from online marketing.

Speaker 2

We focus on offline communities within the 500 meter radius, combining ground promotion with online campaign. This approach allows us to receive user feedback more directly and promptly during the service process. In the future, after establishing loyalty and trust among offline wellness users, we plan to integrate online sales and services. This is especially true for the promotion of our own brands and organic food products. The synergy between our people network and land network will deliver exciting opportunities for our curated and health focused business lines.

Speaker 2

So thank you for your question.

Operator

There are no further questions at this time. This will conclude the question and answer session. And I'd like to turn the conference back over to management for any closing remarks.

Speaker 1

Thank you for joining us today. Please do not hesitate to contact us 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

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