JS Global Lifestyle Company Limited (1691) Earnings Call Transcript & Summary

Before we begin, I'd like to introduce the management team of JS Global Lifestyle, who will present with us today. They are Mr. Xuning Wang, Chairman, CEO and Executive Director of JS Global Lifestyle, Founder of Joyoung, Mr. Mark Barrocas, Global President of JS Global Lifestyle, President of SharkNinja, Ms. Yang Ningning, Chair of Joyoung. Ms. Han Run, CFO and Executive Director of JS Global Lifestyle; Mr. [indiscernible], Financial Director of JS Global Lifestyle; Mr. Paul Carbone, CFO of SharkNinja. Mr. Kenny Kan, CFO of Joyoung. I'm [ Mars Chen ], IR Manager of JS Global Lifestyle. Let's welcome Mr. Wang Xuning, Chairman, CEO and Executive Director of JS Global Lifestyle, Founder of Joyoung to deliver an opening remark. Welcome, Chairman Wang.

Greetings, investors. We're delighted to have you here with us today at the 2022 annual results announcement of JS Global Lifestyle. I would like to thank you for your continued support and interest in the company. Looking back on 2022, the world faced a multitude of challenges and instability, including rising inflation, increasing cost for raw materials, tightening fiscal and monetary policies, ongoing geopolitical tensions, recurring domestic and international epidemic and excessive inventory abroad. Despite these unfavorable circumstances in a high benchmark from the previous year, JS Global Lifestyle managed to achieve almost flat in revenue for the full year of 2022 on a constant currency basis compared to last year. In 2022, the SharkNinja segment has upgraded its product in existing categories, which include vacuum cleaners, robotic vacuum cleaners, multifunctional electronic cooking pots, and air fryers. We have also broadened our product portfolio in new categories in the last 2 years, launch products like Flexstyle hair styler and dryer and 3 in 1 air purifiers. Additionally, the SharkNinja segment is continuously expanding into new product categories, including outdoor grills and wet dry 2 in 1 vacuum. Apart from expanding product line, short digit sales performance across various markets is also impressive. Despite many complications, the U.S. market has managed to maintain a revenue level that is compared to that of the previous year. In the European market, SharkNinja even bought the trend and achieved a double-digit growth on a constant currency basis. It is worth mentioning that our off-line markets in Germany and France have also been launched and we are confident in the long-term development of the European market. Other markets represented by Asia Pacific region have also demonstrated solid growth in 2022 and JS Global aims to further develop the SharkNinja brand in APAC. We plan to enhance our existing product range in the Asia Pacific market, launch products that are tailored to local preferences and expand our reach to new regions with untapped consumer potential. In 2022, we focused on enhancing the competitiveness of the Joyoung brand by expanding its product series and offering products for various scenarios. Furthermore, we introduced several competitive new products that outperformed the industry, including new flip air fryer, zero-coating rice cooker, blender and cookware with antibacterial technology and 2 in 1 water purifier. These new products help to strengthen Joyoung's market position as a leading national brand in China. Joyoung's core strength lies in its ability to understand customer needs. It's extensive R&D capabilities, its diverse supply chain system and its nation-wide online and off-line sales network in 2022. Joyoung underwent some management adjustment to introduce fresh energy and foster changes in future operations. Moving forward, Joyoung will focus on improving its operational sales and profitability capabilities with particular emphasis on enhancing its refined operational capacity. The company will continue to expand its product line which include small kitchen appliances, small cleaning appliances, water appliances and cookware and seek to maximize the synergy between Joyoung and Shark. As we look ahead to 2023, you may have heard about our plans to stay off SharkNinja's European and U.S. business for separate listing in the U.S. However, JS Group will still retain a Joyoung and SharkNinja Asia Pacific business. Our growth strategy and business model will remain unchanged, and we are confident in our ability to accelerate the growth of our small appliances business in the Asia Pacific market, including Greater China. Our 3-dimensional strategy will continue to focus on growing our existing products and markets, entering new categories and expanding into new markets. We will maintain our core business model, which involves identifying and meeting consumer needs, launching innovative products through global R&D collaboration and leveraging our marketing and omnichannel sales network to create successful products. It's important to highlight that the synergy between JS Group and SharkNinja Group will persist and become stronger in the future to improve business efficiency and meet operational requirements. The 2 groups will increase cooperation in product development, research and development, engineering and supply chain management as well as strengthening partnership in brand management and expand Asia Pacific business. Dear investors while improving the quality of life for global consumers, fulfilling our social responsibility is the foundation for the healthy and sustainable development of JS Global Lifestyle and a reflection of our long-term value as a listed company. We have always been dedicated to upholding high ESG standards and have been promoting them systematically. We have established a comprehensive ESG indicator system and management structure, along with the UNSDGs. Additionally, we encourage more individuals to join us in making a positive impact on society and the environment. Although the future present significant economic and geopolitical uncertainties worldwide, we anticipate a gradual recovery and sound development of the global economy with COVID under control. We have confidence in our company's development and will work tirelessly with all our employees to improve our operations and performance continually. We aim to promote a healthy and orderly cooperate development generate long-term value and returns for our investors. Thank you all.

Thank you, Chairman Wang, for your remarks. Next, Let's welcome Ms. Han Run, CFO and Executive Director of JS Global Lifestyle to introduce JS Global's financial performance in 2022. Ms. Han.

Dear investors, I'm pleased to share with you our 2022 financial results. In 2022, JS Global achieved a revenue of USD 5.04 billion slightly down by 2.1% year-on-year. Exchange rate fluctuations in 2022 negatively impacted our foreign currency revenue, which was up 4.7% year-on-year on a constant currency basis. The company's gross margin for 2022 remained largely consistent with 2021 with gross profit totaling USD 1.88 billion. Adjusted EBITDA was USD 673 million in 2022. Adjusted net profit was USD 426 million with a net margin of 8.4%. The drop in adjusted net profit was primarily attributable to expenses related to increased personnel and significant increase in the [ corporate ] finance cost due to escalating interest rates of the U.S. dollar loans. In the past year, the company faced the significant challenges from various aspects due to the complex and unstable global political and economic climate. Even though the data didn't match the exceptional results of the past few years, our operations quality has significantly improved, and our sustainable development has shown great resilience. Next, I'll walk you through the revenues by segment. In 2022, the SharkNinja segment achieved a growth of 2.4% to USD 3.8 billion on a constant currency basis, despite a challenging comparison against the high performance of the previous fiscal year. SharkNinja continued to expand its market share and outperform the industries through a constant implementation of its growth strategy. This included aggressively tapping into established markets, exploring new emerging markets and successfully launching new products as planned. The Joyoung segment declined slightly by 3.7% year-on-year to USD 1.38 billion on a constant currency basis, mainly due to the slowdown in China's economic growth, slow recovery in consumer demand and recurring COVID in 2022. Nevertheless, we are delighted to report that Joyoung has introduced new products with advanced technology and a strong health commitment outperforming in [ striking ] areas such as air-fryers, rice cookers and blenders. Originally, although the North American market was under pressure from historic inflation and high inventory, we continue to gain market share by implementing our successful strategy of introducing new and high desirable products for consumers. As a result, revenue from North America decreased slightly by only 1.2% year-on-year. In 2022, Europe's overall economic environment was negatively impacted by geopolitical factors as well as significant devaluation of the pound and euro against the U.S. dollar. However, despite these challenges, the group has successfully gained market share in the U.K. and expanded its business in other European countries. As a result, revenues in Europe decreased by 2.5% year-on-year on a constant currency basis. Revenue growth in Europe reached 14.6% year-on-year. Revenue in China declined slightly by 2.5% on a constant currency basis. Revenue in other markets led by Japan grew by 8.8% year-on-year on a constant currency basis. Regarding product categories, while experiencing a slight year-on-year revenue decrease in the cooking appliance, cleaning appliance and food preparation appliance categories, we maintained our ability to surpass industry standards by continuing to expand market share across most categories despite the challenges. We saw rapid growth in other categories with revenue up 18.9% year-on-year, mainly from air purifiers, hair dryers and water purifiers. The group's gross margin for 2022 was 37.3%, flat year-on-year. In the first half of 2022, we were impacted by inflating cost of raw material and shipping and in the second half of the year, it was affected by the destocking of the industry in Europe and the U.S. At the same time, we increased our investment in promotion in 2022. Our superior product mix and tariff exemptions helped to partially mitigate the impact of the headwinds. Additionally, raw material and shipping costs gradually decreased during the second half of the year, which is resulting in a favorable trend for our gross margin levels. Next, I will provide an overview of our working capital management in 2022. JS inventory turnover days, accounts receivable days and the accounts payable turnover days for 2022 were 82 days, 88 days and 90 days, respectively. In detail, inventory turnover days dropped greatly by 28 days compared to 108 days in mid-2022, showing a destock ability of our product portfolio and a high inventory environment. Accounts receivable days maintained stable year-on-year and accounts payable days declined 8 days year-on-year to 90 days. The group's existing working capital is adequate and cash flow is very healthy, so we will continue to optimize. Next, our capital expenditure and capital structure in 2022. The company's capital expenditure in 2022 were USD 165 million and our total debt was USD 857 million as the cost of borrowing in USD decreased significantly, we reduced about USD 85 million debt in 2022 thereby reduced our leverage ratio to 0.46x. This demonstrates our ability to adjust our debt structure in different market environments. In 2022, our return on investment was 13.5%, again, demonstrating our strong profitability. This concludes our presentation of JS Global full year financials in 2022. Thank you.

Thank you, Ms. Hunt for your introduction. Next, let's welcome Mr. Mark Barrocas, Global President of JS Global Lifestyle, President of SharkNinja, to update you on our business development in 2022.

Thank you, Chairman Wang, Ms. Han, and thank you all for joining us to discuss our 2022 full year results. JS Global has achieved massive growth over the last 3 years, adding $2 billion of revenue since 2019. As we enter 2022, we faced numerous challenges that we expertly navigated throughout the year while persevering through a down market and maintaining our new higher baseline of revenue. Given this higher revenue base that we grew the business to at the end of 2021 and the emerging headwinds in the market as we began 2022, many expected last year to be a correction year for JS Global and others in our space, giving our prior year growth. This is not at all what happened for us. We outperformed most of our peer sets, continue to take market share from our competition, continue to launch into new and adjacent categories and continue to execute against our international expansion strategy. We saw numerous market challenges start to subside in Q4 as we exited 2022 and are well-positioned to continue this success in the years ahead. Today, I'd like to walk you through 5 key areas that helped us deliver this performance in 2022, and we'll continue to propel the business forward. First, we have a diversified business via the categories and markets we operate in. So despite macroeconomic headwinds and challenging year on year comps, our business is resilient and growing. Second, we continue to take market share across existing categories and are quickly establishing a dominant presence in new ones. Third, our ability to enter and succeed in these new categories was on full display in 2022. This is a strategy that is working in an extraordinary and compounding way, continuing to cement our right to enter and win in new and diverse categories. Fourth, our international expansion outside the core markets of North America and China continues to gain momentum driven by the U.K., Germany and Japan, where we continue to invest and lay the foundation for our future growth. Finally, we've proven our ability again to navigate challenges in the market and outperform our competition. Now let's talk a bit more about each of these points. We delivered impressive results in '22 in the face of a challenging macroeconomic landscape. JS Global increased net sales of approximately 1% in constant currency. Achieving this level of sales means a few different things. We held on to the extraordinary revenue expansion that we delivered in 2020 and 2021 through new and existing categories and international markets. We did so in an environment that saw many of our competitors' revenue decline year-on-year, and many of the markets that we operate in contract as well. We grew our major international markets significantly in local currency. The SharkNinja business in Europe grew 14.6% on the foundation of an expanding business in the U.K. and new expansions in Germany and France. And our other SharkNinja markets, led by Japan and Israel grew 8.8%. Our 2022 net sales represent 67% growth against 2019 and an even more impressive 82% growth rate on adjusted net profit compared to the same period. The combined Shark and Ninja brands grew approximately 2.4% year-over-year in constant currency, while Joyoung declined slightly down 3.7% in constant currency. Taking a step back from 2022 and looking at this tremendous 3-year growth, our team has grown the business organically from approximately $3 billion in 2019 to $5 billion in 2022. This kind of sustained growth at our scale is not easy and rarely seen in our categories or ones like them. We accomplished this by successfully executing on our strategy in both favorable and unfavorable economic periods. We are often asked whether our growth came from a COVID bump. I think that we firmly proved in 2022. That growth was not a bump. It is our new baseline that we've lifted the business to and will build from going forward, driven by our strong market share gains in existing categories, consistent new category entry and continued international growth. The first pillar of our 3-part strategy is to grow our existing categories by innovating faster than the competition, which enables us to take, keep and grow market share. That is why we're a market share leader in all the major categories and markets that we operate in. As the #1 brand for vacuums, total floor care and small kitchen appliances in the United States, Shark and Ninja brands yet again grew share compared to the same period last year. Market share for food preparation increased 270 basis points. Cleaning increased 260 basis points. Cooking decreased 120 basis points driven by some competitors over promotion in the category to move scale stock through the channels. For Ninja, however, we effectively managed our inventory levels and did not have to incur such massive fire sales. We consider this was a onetime rightsizing of inventory across the market and believe that we're well-positioned moving forward with our existing and new product launches in the cooking category. In the United Kingdom, we continue to expand our already dominant market position. Our Ninja heated cooking business grew over 1,000 basis points in the electric cooking pots category, eclipsing nearly 60% market share. Vacuums continue to strengthen its market position, increasing 120 basis points and food preparation gained an impressive 440 basis points of share, continuing with our first pillar of growth in existing categories. Here you see the performance of some of our recent new Shark and Ninja category entries as they become existing categories for us, many having launched in 2021 and continue to build momentum and perform well in '22. In the U.S. market, in just one year, we grew our kitchenware market share from 3% to 4.5% and roughly $3.5 billion market. We more than doubled our market share in the $800 million air purifiers market from 3% in '21 to 6.4% in '22. In hair care, including hair dryers and hot air stylers, our market share soared from less than 1% to nearly 7.5% in one year, consumers have spoken and overwhelmingly agree that Shark Beauty is a force to be reckoned with. And in at-home ice cream makers a relatively sleepy category until our introduction of Ninja Creamy in 2021, we took our market share from around 24% to a dominant 60% jumping out to such successful starts and continuing to grow in new categories paves the way and reaffirms our ability to continue innovating and delighting consumers in existing and new categories. Here on display are some of the key drivers of our market share growth in recently entered categories, driven by our continued innovation, we don't simply enter a new category with 1 product and rely on that one SKU to propel the business. We're continuously innovating and quickly follow one successful launch with another. The latest examples of that are here in front of you. Each of these products here today launched in the second half of '22 and is selling very well. These products represent line extensions, continued innovation and new ways to address consumer pain points. This is our strategy at work and one that remains unique to us, which other company launches this breadth of consumer products across these wide variety of categories with innovation and amazing value to the consumer year after year. It does not happen anywhere else. This is the key to how we generate diversified and compounding revenue growth year after year. Flexstyle is an unbelievable and profoundly affirmative example of what is possible when truly breakthrough ideas and technology come together to bring something entirely new to the world and transform what is a daily routine for our consumer. So much so that it becomes a viral sensation, but let me take a step back. We entered the beauty category in 2021 with the Shark [ hyper air ] hairdryer and started to hear the question, Shark is a cleaning brand. Can it really succeed in beauty? Then in the second half of '22, we launched the Shark Flexstyle, a 2-in-1 styling and drying system that you see here today. This product not only surpassed our consumers' expectations for which Shark could bring to the beauty category, but its viral success and runaway demand answered that question posed before in the most powerful way, Shark without a shadow of a doubt, prove that, yes, absolutely. It not only can be a beauty brand, but it is one of the top beauty brands in the world. At the end of '22, the Shark Flexstyle was the #1 hot air styler between $100 and $500 in the United States. Shark became the #1 brand across hair styling tools, price between $100 and $300, and Shark added the most dollar growth in the hair styling tool category in the United States delivering 1.5x the growth of the #2 top growing brand. We have included here just a sample of the headlines generated around this breakthrough product, all from Q4 for the short period of time, Flexstyle was in the market in 2022. The excitement, buzz and genuine newsworthiness of this product, both through these outlets as well as social media platforms like TikTok and Instagram show that Shark has a bright future ahead of it in the beauty space. This is an incredible product with global appeal that we have ramped up production to serve a surge in worldwide demand. And this is only the second product line for Shark Beauty. We're just getting started. In 2022, Joyoung won several new products across existing product categories within China. Some of these top sellers are within the SpaceTech series, including our high-speed blender, zero-coating rice cooker, air fryer, 2-in-1 water purifier and nonstick frying pan. The SpaceTech series brings the same kitchen technologies used in the space station to our consumers helping them enjoy a healthier lifestyle. The second pillar of our 3-part strategy is entering new and adjacent categories. Quickly touching on last year's new category entries, as you heard from us last year, we entered 2 new distinct categories in the second half of '22. Outdoor grills and 2-in-1 wet dry floor cleaning. These 2 entries demonstrate how multidimensional this pillar of our strategy is. First, take the Shark Hydrovac they have just launched. The 2-in-1 wet dry category is new for us, but an adjacent category where we have internal expertise and consumer insights to leverage from our other Shark cleaning categories. The Ninja Woodfire on the other hand is our first venture outdoors, as the first electric outdoor grill of its kind that can barbecue, smoke and air fry all in one, the Ninja Woodfire smokes [ low ] to develop deeper woodier flavors as it tenderizes large cuts of meat in less time than traditional smoking. As new and pioneering of innovation that this is on its own, it is also opening the door for us to a much larger outdoor cooking arena. A similar category pioneering strategy was launched in 2018 with Foodie, the first product to combine pressure cooking with air frying. Fast forward 4 years, and I could not fit the current Ninja heated cooking portfolio of products on this table. This is our playbook in action, develop incredible products such as the Flexstyle, the Woodfire Grill, the Foodie to name a few that are not only amazing on their own, but open the door for a new portfolio of product and category dominance. The third and final pillar of our growth strategy is international expansion outside of our core established markets of North America and China. We continue to establish and grow strong foundations for future growth internationally. While our largest market, North America, has grown over 100% since 2019, Europe and our other markets have well exceeded that impressive growth rate, growing 185% and 162%, respectively, in that 3-year period. 2022 experienced unfavorable currency impact on reported revenue, but our year-on-year local growth rates were strong for the SharkNinja segment despite these markets being down overall, as you probably saw from our competitors recent earnings. SharkNinja Europe grew nearly 15% in constant currency, on the foundation of an expanding business in the U.K. and new expansions in Germany and France. In our other markets led by Japan and Israel grew about 9%. Europe continued to perform well as the Shark and Ninja brand awareness soars in the U.K., and we continue to expand our new foothold in Germany. In the U.K., you heard me talk about our nearly 60% market share in electrical cooking pots. This represents most of the small home appliance heated cooking category and shows the dominance of our brand. As Europe saw surging energy prices in 2022, consumers sought out more economical means of cooking at home, and they chose the Ninja brand in an overwhelming way. New markets such as Germany, France and Australia continue to be a major area of focus and investment for the organization as we work towards continuing this outsized growth trajectory. As we have said before, we continue to operate in a dynamic environment and are not immune to the challenges in the market. However, as we predicted, many of the headwinds from the second half of '21 through '22 started to turn to tailwinds as we exited '22 entering '23. Starting with ocean freight. The market has turned the corner, coming off peak pricing from '21 and '22 by leveraging our global scale alongside long-term relationships and new partners to drive favorable contract terms for the North America and European markets. This expense became a gross margin tailwind at the end of '22 into '23. We're seeing a similar stabilization across other commodities that are used in the products we make as well, along with a continued sufficient supply of key components such as [ microchips ], as you heard from us, we took proactive steps in the first half to rightsize our inventory at retail and our warehouses to ensure healthy levels were established across our system as we headed into our peak season. This positions us well for 2023. Looking at the state of the consumer, our demand in North America and Europe is strong. And as you saw from our market share gains, the consumer continues to choose our brands in a meaningful way when they come to market. We track and analyze point-of-sale data from our key retailers weekly and react quickly to trends generally during times of uncertainty. We benefit from the strength of our brands and the diversity of the categories we operate in. We have a proven track record of effective P&L management through uncertain times, leveraging our global expense base, continuing to invest in R&D and advertising while keeping cost optimization initiatives as a major focus both in terms of the cost of our products and expense needed to run the business. Thank you again for your time today. I will now hand it back Run Han, our Group CFO, to walk you through ESG and outlook.

Thank you, Mark, for your delighted introduction. Next, let's welcome back Ms. Han Run, CFO and Executive Director of JS Global Lifestyle to brief us the ESG advancement in 2022, the proposed spin-off and the strategy and outlook of the company.

JS Global has achieved significant progress in its ESG efforts in 2022. We were added to the Hang Seng Corporate Sustainability Benchmark Index as a cost [indiscernible] stock and received high rankings in several international ESG ratings, surpassing the industrial average. These include the Hong Kong Quality Assurance Agency, Hang Seng Corporate Sustainability Rating, the S&P Global CSA, the FTSE for [indiscernible] Index series of the U.K. and the carbon disclosure product. In addition, JS Global was awarded the best ESG award in Asia Pacific institutional investor, a world renowned financial magazine, ranking among the top 3 companies in the industry. We would like to express our gratitude to the market and partners for your recognition of our ESG work. We believe that long-term sustainable growth requires the integration of corporate sustainability into data operations and a balance between profitability, environmental protection and the social responsibility. To this end, in 2022, we enhanced our ESG system and made public our ESG management approach, outlining structured pipelines and standardized procedures for addressing ESG issues. As an industry leader, we are committed to advance in sustainable development within our supply chain. To this end, we conduct multidimensional audits for our core suppliers to evaluate their environmental practices, product quality and social compliance, which enhances their contributions to the society. We prioritized strict quality control measures and the exceptional after-sale service for our products and services while also paying attention to the confidentiality of our customers' information. Notably, we did not have any product recalls during 2022 due to quality issues regarding environmental concerns, our attention is centered on 5 critical areas, greenhouse gas emissions, energy consumption, material consumption, water usage and [indiscernible] production. We are committed to employing green energy solutions and our photovoltaic power system produced over 3.05 million kilowatt hour of energy annually, of which 87% is utilized for our needs. SharkNinja's European headquarter has successfully achieved a dynamic target of carbon neutrality. Furthermore, we have executed food waste reduction measures and conducted greenhouse gas emissions accounting in compliance with ISO standard in 2022. In terms of social service, SharkNinja invested USD 1.39 million in charity in 2022. Additionally, 342 volunteers dedicated over 2,500 hours to volunteering. The Joyoung Charity Foundation has financed the establishment of Joyoung Charity Kitchen in 1,330 schools, benefiting over [ 730,000 ] students. As of December 2020, the foundation has spent more than [ RMB 63 million ] on its initiative. JS Global has made a significant improvement in employee care this year with better results for employee management-related issues across all ratings. The SharkNinja segment has also enhanced its diversity, equity and inclusion practices and SharkNinja China has one of the best employer award of Suzhou in 2022. Joyoung segment is focusing on providing training courses for employees with an average of [ 80 hours ] of training for employees in 2022. Additionally, JS Global is dedicated to creating job opportunities for individuals with disabilities and the group currently employs 79 people with disabilities. We won't may encourage our investors to take a key interest and endorse JS Global's ESG initiatives. We also welcome collaboration at various levels to faster notable advancements in ESG matters across our operating regions. Thank you. Next, I'll brief you the background and proposal for the [ spin-off ] and separate listing of the SharkNinja segment in the U.S. After assessing the overall market position of SharkNinja and Joyoung brands across different regions, the company recognize that success in each market requires geography specific considerations and focus. Therefore, the company believes that the best strategy to drive long-term business growth and enhance presence in localized markets is to split after the company into its 2 primary delineated market. JS Mobile, which will remain listed on the Hong Kong Stock Exchange focuses on the APAC region, including Greater China, SharkNinja Group, the spin-off [ corporate ] will seek separate listing on the U.S. stock exchange, focusing on the U.S., Europe and other selected international markets, excluding APAC region. After the spin-off shareholders of JS Global will be entitled to approve [indiscernible] retail distribution of all JS Global shareholding in SharkNinja in proportion to respective shareholdings in JS Global. The future offerings of SharkNinja Group will be a combination of new and existing shares up to 20% of SharkNinja shares on a fully diluted basis. It's worth noting that there will be a 6-month lockup period for the remaining shares of IPO. We will sincerely take shareholder suggestions and execute the proposed spin-off subject to the approval in AGM. The spin-off will create 2 separate businesses. One is the retained group of Joyoung and SharkNinja APAC, the JS Group. The other is SharkNinja group focusing on the European and American markets. Joyoung under JS will continue to focus on kitchen appliances with a focus on Greater China and other regions. SharkNinja APAC under JS will mainly operate the brands of Shark and Ninja and the target on APAC market, including Greater China. SharkNinja Group after the spin-off will target on the United States, Europe and other selected international markets with the brands of Shark and Ninja. After the split, the retained group and SharkNinja Group will maintain independent operations in terms of products and the sales channels, while synergies among the 3 companies, JS Global, SharkNinja Group and Joyoung will persist. The retained group and SharkNinja Group will continue to run its own R&D while being able to leverage each other's strength in product development capabilities. While each of the retained group and the SharkNinja Group will have sourcing function to support its own sourcing needs. The retained group will continue to provide value-added supply chain consulting services to SharkNinja Group to help it select quality OEM manufacturers to achieve cost reduction and efficiency improvement. Therefore, the synergy within the group in R&D and the supply chain, it will not only be maintained but continue to be amplified as the business grows. This chart clearly shows the company's shareholder structure before and after the spin-off. Prior to the spin-off, SharkNinja Group was 100% on subsidiary of JS Global after the spin-off, assuming a maximum 20% offering of new shares, JS Global shareholders will hold 80% of the fully diluted equity of SharkNinja Group. Next, let me explain the value of this proposed spin-off and separate listing. First, the spin-off will provide a more attractive value proposition for shareholders and investors. The 2 groups will have greater disclosure of their respective financial information and business position. Shareholders and investors will be able to evaluate the value of JS Group and the SharkNinja Group separately after the spin-off allowing them to make better investment decisions and giving them more flexibility to adjust their portfolio. Secondly, we believe that the split will improve the efficiency of business operations in the markets where each group operates, further develop localized business strategies for each market and contribute to long-term sustainable growth. It will also help both groups to respond quickly to local consumer and market needs to capture business opportunities more effectively and to improve operational and financial performance. We believe that the split will also enhance the independence of governance of the respective groups and their respective boards and management will achieve more focus to growth and strategic planning and gain sustainable competitive advantages through tailored social and environmental practices. It will also help both groups to strengthen their ability to recruit, motivate and maintain management under [ co-employees ]. That is all I have to say about the proposed spin-off. Please be patient for a while longer for a more detailed proposal, which we will clarify in a circular that will be sent out soon. At that point, we will have more in-depth discussions with our investors. Next, I will present the group's strategy and outlook. Consumers have always been at the center of our strategy, and we will persist in developing and marketing innovative products that meet consumer needs. We will combine these products with cutting-edge technology and excellent design to drive sustainable growth through our sales network and the category expansion. The long-term growth is and will continue to be driven by our 3 pillars of growth. Growth in existing categories in the market, growth in new categories and the growth from the new market expansion. We believe that regardless of how the larger market conditions shifts, both the present JS Group; and the 2 groups formed after the spin-off will remain committed to the business model, championed by our Chairman, Mr. Wang Xuning, which the team has consistently executed. This approach involves persistency, identifying and exploring consumer needs, constantly introducing new and inventive products in regional markets through cooperation with global research and development platforms and leveraging marketing and media communication capabilities as well as an omnichannel sales network to develop popular products. Next, my emphasis will be on our plans for expanding our business in APAC region. Besides our Joyoung segment in China will be aim to enhance our selection of small kitchen appliances, small cleaning appliances, water appliances and cookware, launch fresh product lines that improve our financial performance. We will also concentrate on quickening our expansion into other parts of the APAC region. In existing categories, we will continue to introduce enhanced products within our current categories on an ongoing basis to fulfill the demands of local consumers. Our APAC team will leverage SharkNinja brand strength and experience of successful product operation and combine consumer insights from specific regions and countries with Joyoung practice of product development in China to launch upgraded products that will effectively engage consumers in the APAC region. As a result, we expect to gain a larger market for our existing product categories. The new categories SharkNinja APAC is currently prioritizing the Shark cleaning category, but our APAC team is exploring ways to introduce other categories of Shark and the kitchen appliance to Ninja. This is a crucial task in achieving breakthroughs in the APAC market, for example, we plan to introduce and localize successful products from Europe and the U.S. to drive sales and expand our product portfolios in new categories we have entered in recent years. In new markets, APAC region offers the last market with a large population but due to cultural diversity and variations in consumer habits, we must implement different strategies to achieve maximum efficiency, for instance, we intend to adopt a direct sales model in Australia, New Zealand, India and Vietnam, by employing a distributor model in most [ Asian ] countries and select reliable local distributors to promote our products in the local market under the unified guidance of our APAC center. We're confident that the small home appliance market in the APAC region has immense potential for future growth due to its size and growth rate. We believe that JS Global continue to attract talent and build a robust executive team. Additionally, our strong R&D capabilities, diverse product portfolio, powerful brand influence and flexible supply chain will enable us to continue succeeding in the market. As a result, JS Group will stay committed to enhancing the cohort of consumer stating life to revolutionary innovation and design-driven smart home products with a promising market, a strong brand metrics and the deep synergy of resources, we sincerely hope that you will join us in the new phase of development. Thank you.

Dear investors, and our prepared remarks have concluded here. In a minute, we will be entering our Q&A session. Please be patient. Thank you.

[Operator Instructions] And the first investor is from Citic Securities. Mr. Wang [indiscernible], there are 3 questions. The first, after the pandemic, we have seen the consumption demand of the small household appliances have dropped and the profit and the revenue of the company in fiscal year 2022 have been dropped and how do you evaluate the long-term growth of SharkNinja and what are the challenges affecting SharkNinja performance in the future? And the second question is that we know that in the second half of last year, we had provided a relatively large discount. However, the cooking appliance market share has still been dropped. What are the reasons? And what are the measures to cope with such drop? And the third question is that apart from the U.S., China and EU the other markets on a constant currency basis, the annual growth rate did not hit the double digit, and this is quite deviated from the data you had disclosed in Q3, what are the reasons? And Mark, please answer the 3 questions.

Sure. Thank you for the question. So let me take you through them one by one here. So I think it's important to recognize that from 2019 pre-pandemic to 2022, JS Global grew 67% and SharkNinja grew 114%. There are not many companies any companies in the home appliance space that have grown at that significant 114% rate. While SharkNinja in 2022 overall business was flat, it was up 2% on a constant currency basis. So in spite of the market being down significantly in 2022, SharkNinja continued to gain share in existing categories, expand into new categories and grow internationally. And so I think that 2022 really was testament to the resiliency of the business and the diversification of the business. There are obviously lots of questions that would come in to say, well, the consumption increases that happened during the pandemic, where those going to turn around and go the opposite way. And I think what 2022 has demonstrated is that this is a new baseline for SharkNinja to continue to grow on to 2023 and beyond. You might have referenced Wall Street Journal articles on a competitor and other competitors in the small home appliance space where they were single category competitors or maybe a very nondiversified product assortment, those companies experienced significant decline in 2022. We've talked about since we went public in 2019, the historical impact at SharkNinja of category diversification, customer diversification, geographic diversification. And I think that 2022 highly demonstrated that. You have to keep in mind that SharkNinja was not even in the heated cooking business 5 years ago. And today, we're the #1 market share in heated cooking in North America. If you go back in our history, at one point in the business, steam cleaners were our #1 product category. Another point in the company's history, corded upright vacuums were the #1 category in the company. At another point there our history of motorized kitchen appliances were the #1 category in the company. SharkNinja operates in 21 different subcategories across the small household appliance space. When you think about that number, it's that category diversification that is so powerful for our business and is what makes us so meaningful to consumers and customers. Consumers don't just own one SharkNinja product. They own multiple SharkNinja products. And while the heated cooking business in 2022 took a step back, we experienced enormous growth in categories like our new Shark Beauty category. We entered into categories like our 2-in-1 vacuum and mopping category and took significant share. We entered into outdoor cooking that we believe we're going to see significant growth in years to come. So I don't know that the question is so much what is going to happen with the heated cooking space. I think that people have bought a lot of heated cooking products from us over the last few years. I think we have a great pipeline of heated cooking products over the coming years. I think that those categories, if they wind up being flat categories, I think that we will continue to grow share in them. We faced the year last year where we had a number of competitors that had enormous amounts of inventory and discounted products considerably. There were competitors in 2022 that we're discounting their products as much as 50% and 60% versus what those products were sold for in 2021 and 2020. So all being, we've maintained strong average sell prices in the category. We're still the brand of choice in that category and we're going to continue to keep innovating in it as well as the 20 other product categories that we're in. In answer to the question about promotion, we actually, as I mentioned in our last earnings call and the earnings call before, we exited 2021 in a relatively good inventory position. We did not have significant excess inventory in our warehouses. We did not have large amounts of glut of inventory at our retailer shelves and we were not stuck with lots of component supply at our factories. So in many cases, we chose not to discount to extreme levels, we did not grow share due to discounting. We continue to bring new products to market in '22 faster and at a higher pace than any of the competitors in the market overall. And #2 is we invested significantly in advertising during the year that we think are going to pay big dividends in 2023 and beyond. So yes, I mean we did see constant currency growth of 2%. We did see net profit down as a result of enormous gross margin headwinds in the year where we experienced basically every combination of cost increase that came to us from freight to components, the factory cost increases to FX impact, but as we exited 2022, we saw a lot of those headwinds start to turn to tailwinds, and we believe that, that's going to lead to gross margin expansion in 2023. So I'll pause there, and hopefully, that answered your questions.

Thank you, Mark, for the detailed answering. And now let's take another question. And Alberto, please repeat the way to ask the question again. And if there is any investors asking questions, please connect. [Operator Instructions] And next, let's welcome [ Sacola ] from CICC to ask the question.

Dear management, I am analyst Sacola from CICC. And I have 2 questions. The first is given the 2022 annual results of the company, what is the positioning of the company in the industry in terms of the operational quality and operational results. And after the spin-off of the SharkNinja European and American business, will the long-term strategic goals of the company be changed? And this is the first question. And the second question is that in the Q1, what is the general results of the company. And in terms of the whole year, what do you think will be the driving forces for the results of 2023? And what are the guidance is for the top and bottom line for 2023? Okay. Thank you, Sacola, for the question. And first, I'd like to invite the Chairman Wang to answer the first question, and Mark will answer your second question. Chairman Wang, please.

Thank you, Sacola, for your question. Just now, our CFO had shared with you our annual results in 2022. Indeed, there was a slight drop for both the revenue and the profit of the company. However, compared with our peers in industry, we are still among the top in industry. And the fluctuation is very limited year-on-year. And generally speaking, especially according to the recent report issued by Frost & Sullivan based on retail sales, the company ranked fifth in the small household appliances industry in 2022 and still ranked third among companies focusing on small appliances. Just behind the Dyson and the Groupe SEB. Dear investors and analysts, you all know that JS has a very clear strategic goal, that is to become the #1 brand in the global small home appliances. So after the restructure of the group, I will still be the Chairman of JS Global and SharkNinja Group. So with this kind of a restructured organization, the BoD will continue to lead the development of the company and the primary goal maintains the same that is to become the #1 small home appliance brand in the world. And JS Global and SharkNinja will continue to operate in their respective markets and the respective categories and execute their own strategic plans. That is to say we still have a very clear strategic plans and goals and we will continue to innovate and to constantly improve our market shares and strengthen marketing and expand our influencers in the major markets around the world, and we will continuously provide value for our shareholders. Thank you, CICC, Sacola, for your question.

Thank you, Mr. Wang, for your answer. So now let's [indiscernible] Mark to answer the second question.

Yes. Yes. Thanks, Chairman Wang and Sacola just to add on, Look, we'll continue to pursue our 3-pronged growth strategy after the spin-off, which is growing share in our existing categories. We have a demonstrated track record of being able to do that historically. Expanding into new categories, again, we believe that we've demonstrated a strong ability to be able to enter new categories and be able to take significant share in those categories. I'd invite you, Sacola, to go online and look at the Shark FlexStyle hair product in the U.S., in the U.K., in Germany, the product launch for us is going fantastic. Our Ninja Woodfire Grill just launched in the U.K. and continues to now have strong results with our first grilling season in the United States. So expanding into new categories is something that we have a very, very strong competency and expanding globally. I mean we think that our business, in Europe, we've recently hired a Managing Director for Latin America to focus on our expansion into Latin America is going to help us in those markets as well. As I mentioned in the prepared remarks, what enabled us to deliver strong results in 2022 are the same things that are going to prepare us for years ahead, and quite frankly, have been the same things that we've worked on at SharkNinja for the last 15 years. We believe that a diversified business is what allows us to navigate the macroeconomic challenges that exist. We don't think that there is a company in the small household appliance business that is as diversified as SharkNinja. We also don't believe that there is a company in small household appliance business that is able to have such organic growth potential as SharkNinja. So we're very excited about those 2 pieces. As it relates to Q1, we remain comfortable with the year-to-date trends that we're seeing in our business. Again, as I mentioned, a lot of the headwinds that we saw in 2022 from a gross margin perspective and a cost perspective have turned to tailwinds. We've seen enormous decreases in the cost of freight, decreases in the cost of key components that go into our products. There's no longer any shortages of components, so we think that we will be able to capture a lot of that cost and not have to pass that cost along to the market, which will result in higher gross margin. But that said, we're not providing specific guidance for Q1 or for 2023 at this time. Thank you.