Yunji Q1 2024 Earnings Call Transcript

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June 11, 2024

There are 4 speakers on the call.

Operator

Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to Yunji's First Quarter 2024 Earnings Conference Call. With us today are Mr. Shang Liu Shao, Chairman and Chief Executive Officer Mr. Yecheng Hsui, Senior Financial Director and Ms.

Operator

Kay Liu, 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. Kay Liu, Investor Relations Director of the UNG. Please go ahead, ma'am.

Speaker 1

Hello, everyone. Welcome to our Q1 2024 earnings call. Before we start, please note that the call will contain forward looking statements within the meaning of 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 known and unknown risks, uncertainties and other factors of Yunxian's industry. These forward looking statements can be identified by terminologies such as will, expects, anticipate, continue or other similar expressions. For related 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's filings with the SEC. BinJi does not undertake any obligation to update these statements, except as required under applicable law. With that, I will now turn over to Shang Yuexiao, Chairman and CEO of Yunxi.

Speaker 2

The first quarter is traditionally an off peak season for e commerce. We see the opportunity to further refine our operations, allow us to maintain a solid gross margin. As consumers' appetite for pursuing better lives intensify, we are laser focused on driving high quality growth by stabilizing average order values and gaining deeper insights into our core users' consumption preferences. In May, I celebrated Yun Jin's 9th anniversary alongside our service managers, tenants and employees. During the festivities, we unveiled several exciting new initiatives.

Speaker 2

One such initiative is our plan to provide our users with a holistic health solution. To realize this, we will extend our presence into offline communities and establish wellness spaces, bringing our health care products directly to consumers. These initiatives are set to generate both part time and full time employment opportunities, nurturing individual entrepreneurship through our top tier retail services. Our private label beauty brand, Suye and P and L, continue to roll out new products that prove to be mad heads. These products are specially formulated with ingredients that are tailored for mature skin, mirroring the effectiveness of the leading Western beauty brands.

Speaker 2

In terms of marketing, we are actively expanding our partnerships across a variety of external channels this year. Our approach includes creating engaging content on diverse content platforms, leveraging the power of the short video platforms and harness the influencer marketing on live streaming platforms. In the healthcare sector, we will continue to streamline cutting edge manufacturing technology and natural ingredients with medicinal properties to create products that further enrich our health supermarket metrics. Our goal is to transition Chinese families from a reactive approach to healthcare to a proactive one that emphasizes daily dietary enhancements. At the same time, we will continue to innovate and enhance the vertical community service experience and deploy advanced AI applications.

Speaker 2

In addition, we will further evolve our training system to cultivate a professional health nutritionist who will provide value added services beyond our products. Our mission is to ensure that every family has access to a professional health advisor. While apparel has historically been a less prominent fearfulness, we have seen increasing demand from users and service managers for a broader range of products in this category. With the emergence of the short video trend, we see a golden opportunity for Inju's apparel category to become an integral component of our beauty segment. This year, we've embraced integration of short videos and live streaming, hosting weekly live streams on Yunji's official channel.

Speaker 2

While our primary focus is on apparel, we also feature our beauty and food categories to bolster Yunji's image as a beauty brand. This approach allows us to infuse a sense of fashion into our offerings, while ensuring they remain practical. Every industry is currently grappling with changes and challenges, and the new consumption industry in which we operate is no exception. However, we firmly believe that where challenges exist, opportunities also thrive. At Wingxi, we harness our entrepreneurial spirit, leverage our 9 year experience in the realm of the social e commerce within the WeChat ecosystem and keep our finger on the pulse of the video channel trends.

Speaker 2

Over the past 6 months often exploring content creation and live streaming on video channels, we have gradually developed a business model that fully aligns with Yunji's entrepreneurial DNA. Our focus is on nurturing leaders in video channels who can produce and distribute high quality content on a large scale To streamline product promotion and make communication more efficient, we approved our service managers with new skills, enabling them to kick start business with nothing more than a mobile phone. We recruit aspiring ordinary people to become video channel leaders, providing them with training in creating product promotional short videos and live streaming and helping them stay updated with new capabilities. Our video channel leader incubation program, which was piloted in the Q1, is set for a more extensive rollout in the second quarter. The WeChat community era created Wingi and now the advent of short video era promises to enrich Wingi with greater vibrancy and efficiency.

Speaker 2

We aspire to be the trusted partner that empowers our users to lead a healthy and beautiful life. With that, I will turn the call over to Mr. Cui, our Senior Financial Director, 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 that in the following remarks are in RMB terms and all comparisons and percentage changes are on a year over year basis unless otherwise noted. During the Q1 of 2024, our operations remained relatively steady as we continued to bolster the core process underpinning our operations. Refinements to our inventory management protocols enable us to sustain a consistent level of gross profit.

Speaker 3

Inventory management remains a strategic focal point. We will be diligent monitoring our assorted product categories on a weekly or monthly cadence to optimize stock level. By doing so, we enhanced utilization of our assets while more effectively managing our cash flow. At the same time, we are actively making our cash flow management more efficient. Now let's take a close look at our financials.

Speaker 3

Total revenues were $128,000,000 compared to $179,000,000 a year ago. Revenues from sales of merchandise were 102,000,000 and the revenue from our marketplace business were 24,000,000. The changes were primarily driven by ongoing refinements to our product range across all categories This coupled with the optimization of our supplier and the merchant network results in a short term impact on sales. Despite the changes, our gross margin remained relatively solid at 49.4%. 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. Perfumement expense was RMB22 1,000,000 compared to RMB27 1,000,000 a year ago. This was primarily driven by a decrease in warehousing and logistics expense due to lower merchandise sales and reduced the personal cost, resulting from staffing structure optimization. Sales and marketing expense decreased to 20 6,000,000 from 30,000,000. This was primarily a result of a decline in member management fees, partially offset by an increase in business promotion expense.

Speaker 3

Technology and the contact expense were RMB13.3 million compared to RMB13.4 million. The decrease was mainly due to reduced service costs. General and administrative expenses were RMB14.9 million compared to RMB15.2 million. This was mainly due to the reduction in principal costs resulting from staff, structural refinement partially offset by increase in the allowance for credit loss. Total operation expense in the Q1 decreased to RMB76 1,000,000 from RMB85 1,000,000 in the same period of 2023.

Speaker 3

Loss from operations were RMB9 1,000,000 dollars compared to income from operations of $1,000,000. Net income was $4,000,000 compared with a net loss of CNY23 1,000,000 while adjusted net income was CNY3 1,000,000 compared with adjusted net loss of CNY27 1,000,000. Basic and diluted net income per share attributable to ordinary shareholders were born compared with basic and diluted net loss per share of RMB0.01 in the same period of 2023. Turning to liquidity. As of March 31, 2024, we had a total of RMB505 1,000,000 in cash and cash equivalents, restricted cash and short term investments on our balance sheet compared to $552,000,000 on December 31, 2023.

Speaker 3

Our liquidity assets is sufficient to cover our payable obligations and we do 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 better support our operations. To sum up, the Q1 make important progress on the road to realizing our long term strategy goals, our ongoing improvements in inventory management, along with our dedication to sustainable and effective access management, we are pivotal to this advancement. Moving forward, we will focus on further enhancing our efficiency and to strengthen our company's resilience and adaptability. Our strategy positions us to effectively address future challenges and seize emerging opportunities in the evolving capital landscape.

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 question and answer session. At this time, we will pause momentarily to assemble our roster. Our first question is from the line of Ethan Yu from First Trust Group. Please go

Speaker 3

ahead. Hi, good evening. Thanks for taking my question. The management just mentioned our progress in short video and the live streaming. Could you share more details about how we differ from other platforms in this area?

Speaker 3

Thank you.

Speaker 2

Thank you for your question. Firstly, we well select every commodity often all categories and ensure they are cost effective. We do not resort to selling low priced clothing clearance items to draw traffic. Secondly, we are not only content creators, but also developers of numerous commodities. Our team engages from the inception of the product project, actively participating in the traceability of the origin's production and selection of packaging materials.

Speaker 2

This hands on approach equates us with a deeper understanding of the commodities and a more tangible grasp of the entire commodity chain compared to other content producers. Strategy in comprising both content production and distribution is rooted in an ordinary people centric approach, facilitating individual entrepreneurship and rendering our content more accessible. And also all these have differentiated us from other competitors. Thank you for your question.

Operator

Ladies and gentlemen, 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 talk with you next quarter. Bye.

Operator

Thank you. This conference is now concluded.

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