Yatsen Q4 2023 Earnings Report

Converge Technology Solutions EPS Results

• Actual EPS: -C$0.20
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Converge Technology Solutions Revenue Results

• Actual Revenue: $151.09 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Converge Technology Solutions Announcement Details

• Quarter: Q4 2023
• Date: 3/6/2024
• Time: N/A
• Conference Call Date: Wednesday, March 6, 2024
• Conference Call Time: 7:30AM ET

Converge Technology Solutions (TSE:CTS) Corp is a Canadian company building a platform of regionally focused Hybrid IT infrastructure providers that deliver best-of-breed solutions and services in the United States. The solutions provided include multi-cloud solutions, the blockchain, resiliency, and managed services, enabling the company to address the business and IT issues that public and private-sector organizations face.

Converge Technology Solutions Q4 2023 Earnings Call Transcript

[Operator]

Ladies and gentlemen, good day and welcome to the Yatson Fourth Quarter and Full Year 2023 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Irene Lu, Vice President, Head of Strategic Investment and Capital Markets.

[Speaker 1]

Thank you, operator. Please note the discussion today will contain forward looking statements relating to the company's future performance and are intended 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.

[Speaker 1]

Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion. A general discussion of the risk factors that could affect Yatin'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. Please see the earnings release issued earlier today for a definition of non GAAP financial measures and a reconciliation of GAAP to non GAAP financial results.

[Speaker 1]

Joining us today on the call from Yatin's Indian management are Mr. Zinfo 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 and A session. As a reminder, this conference is being recorded.

[Speaker 1]

In addition, a webcast replay of this conference call will be available on Yat sen's Investor Relations website atir.yasonglobal.com. I'll now turn the call over to Mr. Jingbo Huang. Please go ahead, sir.

[Speaker 2]

Thank you, Irene, and thank you, everyone, for participating in Yaxan's 4th quarter and full year 2023 earnings conference call today. I would like to begin with a macro overview before delving into the details of our strategy and progress across our segments and the brand. China's beauty market experienced a modest recovery in 2023. According to the adjusted data published by the National Bureau of Statistics of China, total retail sales of consumer goods grew by 8.3% year over year for the 4th quarter and 7.2% for the full year. Against dispatch off, total beauty retail sales were up 1% year over year for the 4th quarter and 5.1% for the full year.

[Speaker 2]

Online beauty sales patterns were mixed in 2023. Sales on Tmall decreased while sales on Douyin increased year over year for both the Q4 and the full year. We made solid progress this quarter amid a still soft retail environment, returning to a growth trajectory as we executed our strategy transformation plan. Private Diary's brand repositioning is also proceeding as intended. To pave the way for future growth, we remained focused on building strong brand equity through superior products and consumer satisfaction, while continued investments in brand building and R and D.

[Speaker 2]

Our total net revenue for the quarter beat our guidance, up 6.7% year over year. Net revenues from our skincare brands for the 4th quarter grew by 17.6% year over year. Our clinical and premium skincare brands, including Delanique, Doctor. Wu and Yif Long delivered another solid performance, recording a 23.4% year over year growth in combined net revenues and further elevating their contribution to total net revenues. Net revenues from color cosmetic brands declined slightly by 1.8% year over year for the Q4.

[Speaker 2]

In terms of channel optimization, we continued to strategically close underperforming offline stores. As of the end of 2023, we operated 110 offline experience stores for the Perfect Diary brand as compared with 158 stores a year ago. Our 2 other color cosmetic brands, Little Own Ding and Pin Bear continued to resonate with their customers and recorded year over year revenue growth. Our 4th quarter gross margin improved to 73.7% from 71.1% for the prior year period, benefiting from higher gross margin products and a more disciplined pricing and discount policies. Our net loss margin expanded to 46.1 percent for the 4th quarter, primarily attributable to an impairment of goodwill as well as increased investment in our brands.

[Speaker 2]

The goodwill impairment recorded in the 4th quarter represents the amount by which the carrying value of the Yiflon reporting unit exceeded its fair value based on quantitative goodwill impairment test due to weaker operating results than expected at the time of acquisition. Despite challenges in the market environment and ongoing competition, we still see potential in the brand. For the full year 2023, our net loss margin was 22% as compared with 22.2 percent in 2022. Our non GAAP net loss margin narrowed to 8.7% from 12.2% for the prior year period, a significant improvement that underscores skills in balancing cost structure optimization with the need to grasp market opportunities as we drive sustainable growth. Moving on to the brands and products.

[Speaker 2]

For our skincare brands, we maintained our focus on brand building and introduced official products to foster deeper connections with each brand's audience. Galenic recorded solid performance during the Double 11 Shopping Festival, ranking number 1 in the premium brightening cereal category in terms of retail sales value on both Tmall and Douyin with his Heal VCs turn. The brand is also making progress on his Co2 line, winning the Essence of the Year award at the BaZa Beauty Awards 2023 for its co2 secret excellent active serum. Doctor. Wood Acne Research Fund announced its 1st batch of pioneering research projects at the 2023 National Congress of Cosmetics Dermatology in Shanghai.

[Speaker 2]

Endotowu continues to push boundaries in clinical acne research and the application of magnetic acid, propelling the fields of long term development. Also, Itlong opened its first offline store in Southern China in January this year, bringing the brand's pet aisle experience to a broader customer base. With respect to color cosmetics, Poppy Diary's brand repositioning continues to gain traction among its target Bio Lip Essence Lipstick, the new hero product we launched in September 2023, has been gaining market share in the lipstick category on both Tmall and the Dohin. During the hotel, the newly launched lipstick made Pedebari the number one lipstick brand in terms of retail sales value on Douyin. Given this product line's potential, we expanded the series to include Bio Lip Essence Lip Stain in 2023 and Bio Lip Essence Matte Lipstick in February 2024, enriching offering for customers to experience its advanced formulation.

[Speaker 2]

Cremidari also recently launched its multi peptide essence tonal cream, the brand's very first product, integrating the wrinkle reducing cream with a makeup primer and natural foundation. Both Little Aunding and Pin Bear introduced new products during the quarter. Little Aunding's Little White Eyeline pants won the eye color award in the color cosmetic category at the Vogue Beauty Awards 2023. While Kim bears fairy dream eyeshadow brought home the Sea Beauty Awards Color Development Award.

[Speaker 3]

Moving now to the

[Speaker 2]

R and D. R and D expenses as a percentage of revenues were 3.4% for the 4th quarter and 3.3% for the full year 2023. Over the past year, we have significantly enhanced our R and D capabilities under the leadership of our Chief Scientific Officer, establishing a comprehensive R and D framework and a clear strategy direction. The R and D team has developed iconic products, including Perfidari's Lipstick Essence, Bio Lip Essence Lipstick and Galynex Vivint Invigorating Micromaster. We also strengthened our R and D infrastructure by setting up our Shanghai R and D Center.

[Speaker 2]

Along with these efforts, we promoted innovation through industry academia collaboration, including leading initiatives such as Doctor. Wu's Acne Research Farm and the Galenic Dermatology Research Farm. Going forward, we remain committed to R and D investments to drive innovation and growth. So before I conclude, a brief update on our 2023 ESG performance. Yaxuan's dedication to environmental and social responsibility and employee welfare is integral to our brand and future development.

[Speaker 2]

We published our 2nd ESG report in 2023, highlighting our alignment with prevailing green development initiatives. Furthermore, we were honored to be recognized at China's 2023 DEI Employer Awards for our deep commitment to inclusion and employee welfare. To summarize, we are pleased with our return to growth in the Q4 and we will remain focused on pursuing sustainable growth with innovation across our brands. With that, I will now turn the call over to our CFO, Donghao Yang to discuss our financial performance. Thank you, everyone.

[Speaker 3]

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 revenues for the Q4 of 20 23 increased by 6.7 percent to RMB1.07 billion from RMB1.01 billion for the prior year period. The increase was primarily attributable to a 17.6% year over year increase in net revenues from skincare brands, partially offset by 1.8% year over year decrease in net revenues from color cosmetics brands. Gross profit for the Q4 of 2023 increased by 10.6 percent to RMB790.1 million from RMB7 $14,600,000 from the prior year period.

[Speaker 3]

Gross margin for the Q4 of 2023 increased to 73.7 percent from 71.1% for the prior year period. The increase was driven by increasing sales of higher gross margin products and more disciplined pricing and discount policies across all of our brand portfolio. Total operating expenses for the Q4 of 2023 increased by 67.7 percent to RMB1.33 billion from RMB792.9 million for the prior year period. As a percentage of total net revenues, total operating expenses for the Q4 of 2023 were 124% as compared with 78.9% for the prior year period. Fulfillment expenses for the Q4 of 2023 were RMB62.7 million as compared with RMB62.5 million for the prior year period.

[Speaker 3]

As a percentage of total net revenues, fulfillment expenses for the Q4 of 2023 decreased to 5.8% from 6.2% for the prior year period. The decrease was primarily attributable to further improvement in logistics efficiency. Selling and marketing expenses for the Q4 of 2023 were RMB717.4 million as compared with RMB535.2 million for the prior year period. As a percentage of total net revenues, selling and marketing expenses for the Q4 of 2023 increased to 66.9% from 53.2% for the prior year period. The increase was primarily due to the Perfect Diary brand upgrade as well as our investments in new product launches across our brands.

[Speaker 3]

General and administrative expenses for the Q4 of 2023 were RMB158.7 million as compared with RMB169.9 million for the prior year period. As a percentage of total net revenues, general and administrative expenses for the Q4 of 2023 decreased to 14.8 percent from 16.9% for the prior year period. The decrease was primarily attributable to a reduction in share based compensation. Research and development expenses for the Q4 of 2023 were RMB36.9 million as compared with RMB25.1 million for the prior year period. As a percentage of total net revenues, research and development expenses for the Q4 of 2023 increased to 3.4% from 2.5% for the prior year period.

[Speaker 3]

The increase was primarily attributable to an increase in personnel costs, reflecting our commitment to enhancing our research and development capability. Impairment of goodwill for the Q4 of 2023 was RMB354 1,000,000 as compared with RMB0 in the prior year period. Impairments reported in this quarter represent the amount by which the carrying value of the Yiflon reporting unit exceeded its fair value based on quantitative goodwill impairment tests, primarily due to weaker operating results than expected at the time of acquisition. Loss from operations for the Q4 of 2023 was RMB539.6 million as compared with RMB78.2 million for the prior year period. Operating loss margin was 50.3 percent as compared with 7.8% for the prior year period.

[Speaker 3]

Non GAAP loss from operations for the Q4 of 2023 was RMB125.9 million as compared with non GAAP income from operations of RMB11.5 million for the prior year period. Non GAAP operating loss margin was 11.7 percent as compared with non GAAP operating income margin of 1.1% for the prior year period. Net loss for the Q4 of 2023 was RMB494.5 1,000,000 as compared with RMB 55 1,000,000 for the prior year period. Net loss margin was 46.1% as compared with 5.5% for the prior year period. Net loss attributable to Yatra's and ordinary shareholders per diluted ADS for the Q4 of 2023 was RMB0.91 as compared with RMB0.09 for the prior year period.

[Speaker 3]

Non GAAP net loss for the Q4 of 2023 was RMB93.7 million as compared with non GAAP net income of RMB34.7 million for the prior year period. Non GAAP net loss margin was 8.7% as compared with non GAAP net income margin of 3.4% for the prior year period. Non GAAP net loss attributable to Yesen's ordinary shareholders for diluted ADS for the Q4 of 2023 was RMB0.17 as compared with non GAAP net income attributable to Yatin's Women's Shareholders' Per Diluted ADS of RMB0.06 for the prior year period. Now I'd like to briefly walk you through the highlights of our full year results. Total net revenues for the full year of 2023 decreased by 7.9% to RMB3.41 billion from RMB3.71 billion for the prior year period, primarily attributable to the decline in net revenues from color cosmetics brands, partially offset by the increase in net revenues from skincare brands.

[Speaker 3]

Gross profit for the full year of 2023 decreased by 0.2 percent to RMB2.51 billion from RMB2. 5 2,000,000,000 for the prior year period. Gross margin for the full year of 2023 was 73.6 percent as compared with 68% for the prior year period. The increase was primarily attributable to 1st, increasing sales of higher gross margin products from skincare brands and second, more disciplined pricing into some policies and third, cost optimization across all of our brand portfolio. Loss from operations for the full year of 2023 was RMB913.4 million as compared with RMB928.9 million for the prior year period.

[Speaker 3]

Non GAAP loss from operations for the full year of 2023 was RMB427.5 million as compared with RMB539.3 million for the prior year period. Net loss for the full year of 2023 was RMB 750.2 million as compared with RMB821.3 million for the prior year period. Net loss attributable to Yexta's ordinary shareholders per diluted ADS for the full year of 2023 was RMB1.36 as compared with RMB1.37 for the prior year period. Non GAAP net loss for the full year of 2023 was RMB296.1 million as compared with RMB 4 100 and 62,900,000 for the prior year period. Non GAAP net loss attributable to Yat sen's ordinary shareholders per diluted ADS for the full year of 2023 was RMB0.53 as compared with RMB0.76 for the prior year period.

[Speaker 3]

As of December 31, 2023, the company had cash restricted cash and short term investments of RMB2.08 billion as compared with RMB2.63 6 3,000,000,000 as of December 31, 2022. Net cash generated from operating activities for the Q4 of 2023 was $90,500,000 as compared with net cash generated from operating activities of RMB106.6 million for the prior year period. Net cash used in operating activities for the full year of 2023 was RMB107.4 million as compared with net cash generated from operating activities of RMB136,200,000 for the prior year period. Looking at our business outlook for the Q1 of 2024, we expect our total net revenues to be between RMB765.4 million and RMB3.7 million, representing a year over year increase of approximately 0% to 5%. These forecasts reflect our current and preliminary views on the market and operational conditions, which are subject to change.

[Speaker 3]

With that, I would like to open the call to Q and A.

[Operator]

We will now begin the question and answer session. The first question today comes from Maggie Huang with CICC. Please go ahead.

[Speaker 4]

Well, thanks for taking my question. This is Maggie Huang from CICC. Firstly, congratulation on our revenue returning to growth and meeting our guidance. And I have two questions. The first one is regarding Perfect Diary.

[Speaker 4]

We are glad to see the great performance of our new products like Essence Lipstick in Q4. So for this year, do you have a target revenue contribution from the new products? And how should we expect on the revenue growth and net margin of the brand Perfect Diary? That's my first question. And my second question is regarding Women's Day Shopping Festival.

[Speaker 4]

So how is the performance of our brand so far? And is that in line with our expectation? And that's my question. Thank you.

[Speaker 1]

Thank you, Maggie. For your first question on the performance of Perfect Diary, since our launch of the Bio Lip Essence Lipstick, its performance has been trending up. So for example, last year December, the new lipstick is ranking number 2 on both Tmall and Douyin. So it's performing well. And in terms of new products contribution to the brand, last quarter, so Q4 of 2023 is a little below 40%.

[Speaker 1]

And we believe this year, it will turn up to above 50%. So that's for the new product. And you also asked about margin. So basically for this new product launch and also the Perfect Diaries brand upgrade, we're seeing some good feedbacks and results so far. First of all, the gross margin is much higher for this new product compared to the old product.

[Speaker 1]

And also the brand's average selling price also increased a lot to around 140 to 150 on both Tmall and Douyin. And also in terms of consumer profile, we're also attract more customers from a higher with higher affordability and beauty spending in general. So that's for your question number 1. And then for question number 2, regarding to the Women's Day's performance, so far, the Women's Day shopping festival already started. And looking at overall market, the performance is relatively modest.

[Speaker 1]

So as a result, for our brands, we're also seeing a relatively steady growth. So we're more putting more resources efforts for the bigger shopping platforms, for example, 618 and W11.

[Speaker 4]

Got it. That's very helpful. Thank you very much. And I have no more questions.

[Speaker 1]

Thank you.

[Operator]

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

[Speaker 1]

Thank you once again for joining us today. If you have any further questions, please feel free to contact us at xiacindirectly or at PSN Financial Communications. Our contact information for both IR in China and the U. S. Can be found in today's press release.

[Speaker 1]

Thank you, and have a great day.

[Operator]

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