Yunji Q4 2023 Earnings Call Transcript

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March 21, 2024

There are 5 speakers on the call.

Operator

Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to Yundi's 4th quarter 2023 earnings conference call. With us today are Mr. Shang Lu, Chairman and Chief Executive Officer Mr. Yejin Kuei, Senior Financial Director and Ms.

Operator

Kai Yu, 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. Kai Yu, IRD of Yumghee. Please go ahead, ma'am.

Speaker 1

Hello, everyone. Welcome to our Q4 2023 earnings call. Before we start, please note that this call will contain forward looking statements within the meaning of Private Securities Litigation Reform Act of 1995 that are based on our current expectations, the current market operating conditions and related to events that involve known unknown risks, uncertainties and other factors of Pingtan Industries. These forward looking statements can be identified by terminologies such as will, expect, anticipate, continue or other similar expressions. For a detailed discussion of these risks and uncertainties, please refer to our latest documents 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 may expressly qualify entirely by cautionary statements, risk factors and details of the company's filings with the SEC. Uinti do not undertake any obligation to update these statements except as required under applicable law. With that, I will now turn over to Shangyue Seng, Chairman and CEO of Bingxi.

Speaker 2

During 2023 and particularly in the Q4's peak e commerce promotion season, the prevailing trend led to the market with intense price competition. Major ecommerce and line streaming platforms adopted low price strategies as known, fostering a bargain commenting mindset among consumers. However, YingJI is not merely an e commerce platform. We are also a brand builder and a sales service provider. We understand the long term repercussions of relying on low price strategies, which can enroll the brand identity over time.

Speaker 2

The value we deliver to users lies in our cost effective products with low return rates as well as in minimizing decision making and wait times for our users. Our commitment to a carefully curated product development ensures that Yngjing maintains a stable average order value even amidst the market focus on low prices. The stability of our average order value is intrinsically linked to our highly developed product capabilities Centered around the theme of love for food, beauty and health, we have developed a range of cost effective private label products. We have not only expanded existing categories, but also successfully upgraded our lineup of Med Hit products. Over the span of many years of product development and sales, we have identified key indicators that resonate strongly with our user base, such as collagen and probiotics, building on successful trials and induces active user feedback, we have introduced a variety of new products across multiple categories that innovatively incorporate these popular ingredients, while following different ways to harness these ingredients and enhance product functionality.

Speaker 2

Leveraging the existing popularity of these ingredients, our new offerings have been warmly embraced by our users. We aim to cultivate loyal users of individual products who appreciate our carefully selected ingredients. In doing so, we will develop a user base that is loyal to the entire YYngJ brand ecosystem, fostering a deeper trust in our brand. At Jurenxi, we are coming into transparency in terms of our inventory. And we actually paid the January user feedback.

Speaker 2

We draw upon the rich heritage often over 5000 years of Chinese history to source high quality natural ingredients such as the zendrobian and seed stone. This renowned Chinese medicine now helps are carefully processed using advanced technology to produce healthier foods that are easier to digest and absorb. Over the past year, I've personally journeyed through 1% and a 1% to authenticate the quality of our ingredients and products, ensuring that our users can consume them with confidence and peace of mind. In terms of marketing, we recognize the powerful mix between exceptional service and a strong sales performance to enhance customer service and drive sales. We are committed to the continuous improvement of our service manager's skills through a comprehensive professional training and technical support.

Speaker 2

Furthermore, we have invited a number of our service managers to explore and trace product origins. These first hand experience allows them to gather more product related materials, which they can then share with users in our community. During March, we rolled out a range of new products as part of our healthcare brand upgrade. Alongside these products, we also unveiled a novel product plus service integrated sales model. Upon purchasing of product, users can gain access to Inge's 20 day volume image management program, which includes personal ones, 1 on 1 services and convenient online tracking via mini program.

Speaker 2

Our new self care products were responding to that with sales surpassing RMB8 1,000,000 on launch When it comes to basic w customer service, we focus on fair quality merchant management, internal customer service training and service policy optimization. We have also conducted regular customer follow-up and online service to improve and ensure overall customer satisfaction. AI was a significant trend in 2023 and we have been exploring new ways to acquire in our operations. During the year, our capabilities evolved significantly and we now integrate AI into a range of functions from basic customer service chatbot and handling routine call center tasks to more advanced support for service managers. For example, users of an average 28 day body image management program can now consult with service managers regarding their daily nutritional needs and calorie intake.

Speaker 2

Our AI health consultants seamlessly support service managers by rapidly and accurately calculating personalized recommended recovery intake in real time and providing informed and insightful advice. That concludes our strategic summary and reflection for 2023. Moving forward, we remain committed to our strategy of a curated product selection, ensuring product cost system effectiveness, enhancing brand image and actively exploring diverse marketing avenues to further elevate the Yingji brand.

Speaker 3

Okay. Thank you, Shawn Rie. Hello, everyone. Before I go through our financial results, please note that all numbers started in the following remarks are in RMB terms and all calculation and the percentage changes are on a year over year basis unless otherwise noted. During the Q4 of 2023, our operations remained relatively stable and we continue to reinforce our core operational process.

Speaker 3

Our refinement to inventory management practice allowed us to generate a stable gross profit. We maintained a strategic focus on inventory management, actively monitoring various product categories on a weekly or monthly basis to ensure optimal stock levels. This approach should not only optimize our asset utilization, but also effectively manage our cash flow. Meanwhile, we are actively pursuing more efficient cash flow management. Now let's take a close look at our financials.

Speaker 3

Total revenues were RMB149 1,000,000 compared to RMB289 1,000,000 a year ago. Revenues from sales of merchandise were $112,000,000 and revenues from our marketplace business were $34,000,000 These changes were primarily driven by ongoing refinement to our product range across all categories. This coupled with the optimization of our supplier and the merchant network result in a short term impact on sales. Despite these challenges, our gross margin remained relatively solid at 46.6%. This was due to sustained customer loyalty towards our private labels and our effective product creation strategy.

Speaker 3

Now let's take a look at our operating expense. Procurement expense were CNY25 1,000,000 compared to RMB32 1,000,000. This was primarily driven by a decrease in warehousing and logistics expense, stemming from lower merchandise sales, reduced the personnel cost due to staffing structure optimization and the decreased service fee charged by 3rd party payment settlement platform. Sales and marketing expense were CNY29 1,000,000 compared to CNY59 1,000,000 years ago. This was primarily a result of a decline in member management fee and a decrease against promotion expense.

Speaker 3

Technology and content expense were CNY12 1,000,000 compared to CNY17 1,000,000 as ago. The decrease were mainly due to a reduction in personnel costs resulted from staffing structure optimization and reduced server costs. General and administrative expenses were RMB44.5 million compared to RMB44.9 million. This was mainly due to the reduction in personnel costs as a result of staffing structure refinements and share based compensation expense, partly offset by an increase in allowance for credit loss. Total operating expense in the Q4 decreased to CNY110 1,000,000 from CNY 53,000,000 in the same period of 2022.

Speaker 3

Loss from operations was RMB40 1,000,000 compared to RMB33 1,000,000. Net loss was RMB66 1,000,000 compared to RMB68 1,000,000, while adjusted net loss was RMB65 1,000,000 compared with RMB30 1,000,000. Basic and diluted net loss attributable to ordinary shareholders were both RMB0.03 compared with RMB0.02 in the same period of 2022. Turning to the liquidity. As of December 30, 2023, we had a total of RMB552 1,000,000 in cash and cash equivalents, restricted cash and short term investment on our balance sheet compared to RMB 6 69,000,000 as of December 31, 2022.

Speaker 3

Our liquid assets were sufficient to cover our payable obligations and we do not hold any long term back loans or debits on our balance sheet. In addition, we are dedicated to making the most of our working capital and smarter, managing our asset to better support our operations. In summary, the 4th quarter saw us taking significant strides towards our long term strategic objectives, our ongoing efforts to refine our inventory management system coupled with our commitment to sustainable and effective assets management, were key to this progress. Looking ahead, our focus remain on continuously enhancing our efficiencies, thereby ensuring our company's resilience and adaptable ability. Our strategy equip us to effectively comfort future challenges and capitalize on opportunities in the evolving economic environment.

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 Our first question comes from Evan Liu with First

Speaker 4

Trust China. Let me translate it by myself. I just heard you mentioned customer service. We have observed that in recent months, major e commerce platforms have launched a series of policies such as 7 day no reason return, free shipping in remote areas, etcetera. What do you think of these new policies, which bias towards consumers?

Speaker 4

Will the strategy have any impact on our performance? Thank you.

Speaker 2

This issue evolves the nature of our products and user consumption habits. First of all, we believe that to be a good platform, the selling point of your products cannot be for RMB9.90 within free shipping

Speaker 3

and users' consumption

Speaker 4

behavior cannot be

Speaker 2

based on in cost consumption. Yunji, especially Yunji's merchandise sales and private label products, has always maintained a loose and a customized service policy. However, our quality refund rate is very low compared to other platforms, which is inseparable from our sufficient user education. We believe that loose terms are important, but what ultimately attracts consumers to repurchase is unique product offering and cost effectiveness. Our average order value is enough to cover our customer management expenses.

Speaker 2

And we also have many loyal users in remote areas. Thank you for your question.

Speaker 3

Thank you. I have no more questions.

Operator

As there are no further questions at this time, I would 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

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