Yunji Inc. (YJ) Earnings Call Transcript & Summary

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. Shanglue Xiao, Chairman and Chief Executive Officer; Mr. Yeqing Cui, Senior Financial Director; and Ms. Kaye 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. Kaye Liu, Investor Relations Director of the Yunji. Please go ahead, ma'am.

Hello, everyone. Welcome to our first quarter 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 Yunji's industry. These forward-looking statements can be identified by terminologies such as will, expects, anticipates, continue or other similar expressions. For a detailed discussion of these risks and uncertainties, please refer to our related documents filed with the U.S. SEC. Any forward-looking statements that we make on this call are based on assumptions as of today, and are expressly qualified is entirely by cautionary statements, risk factors and details of the company filing with the SEC. Yunji do not undertake any obligation to update these statements, expect as required by applicable law. With that, I will now turn over to Shanglue Xiao, Chairman and CEO of Yunji.

[Foreign Language] [Interpreted] Hello, everyone. Welcome to Yunji's first quarter 2024 earnings call. [Foreign Language] [Interpreted] The first quarter is traditionally an off-peak season for e-commerce. We see this opportunity to further refine our operations, allow us to maintain a solid gross margin As consumers' appetite for pursuing better life intensified, we are laser focused on driving high-quality growth by stabilizing average order values and gaining deeper insights into our core users' consumption preferences. [Foreign Language] [Interpreted] In May, I celebrated Yunji's ninth anniversary alongside our service managers ,[ panels ] and employees. During the festivities, we unveiled several exciting new initiatives. One such initiative is our plan to provide our users with a holistic health solution. To realize this, we will expand our presence into off-line communities and establish wellness [ stations ], 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. [Foreign Language] [Interpreted] Our private label beauty brand, SUYE and P&S continue to roll out new products that prove to be mega hits. These products are especially formulated with ingredients that are tailored for mature skin, mirroring the effectiveness of the leading western beauty brands. 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 influence the marketing on live streaming platforms. [Foreign Language] [Interpreted] In the health care 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 our reactive approach to health care to approve [indiscernible] that emphasizes daily dietary enhancements. As in time, we will continue to innovate and enhance the radio community service experience and deploy advanced AI applications. In addition, we will further evolve our transition to cultivate the professional house nutritionists, who provide value-added services beyond our products. Our mission is to ensure that every family has access to a professional health adviser. [Foreign Language] [Interpreted] While apparel has historically been a less prominent to [indiscernible], we have seen increasing demand from users and our service managers for our broader range of products in this category. With the emergence of the short video trends, we see a good opportunity for Yunji's apparel category to become an integral component of our beauty segment. This year, we've embraced the integration of short videos and live streaming, hosting weekly live streams on Yunji's official channel. 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. [Foreign Language] [Interpreted] Every industry is currently grappling these changes and challenges, and the new consumption industry in which we operate is no exception. However, we firmly believe that while challenges exist opportunities also thrive. At Yunji, 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 video channel trends. Over the past 6 months of exploring the content creation and live streaming video channels, we have gradually developed a business model that fully aligns with Yunji's entrepreneurial DNA. Our focus is on nurturing leaders in real channels who can produce and distribute high-quality content on large scale. To streamline product promotion and make communication more efficient, we equip our service managers with new skills, enabling them to keep the business with nothing more than a mobile phone. We will include aspiring ordinary people to become video channel leaders, providing them with training and creating product promotional short videos and live streaming, and helping them stay updated with new capabilities. Our video channel leader incubation program, which was powered in the first quarter, is set for a more extensive rollout in the second quarter. [Foreign Language] [Interpreted] The WeChat community event created a unique and now the advent of short videos to that committed to invite Yunji with greater vibrancy and efficiency. We aspire to be the treasury partner that empowers our users to lead a healthy and beautiful life. [Foreign Language] [Interpreted] With that, I will turn the call over to Mr. Cui, our Senior Financial Director, to go through the financial results.

Thank you, Shanglue. Hello, everyone. Before I conclude our financial results, please note that all numbers stated 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 first quarter of 2024, our operations remained relatively steady as we continue to bolster the core process underpinning our operations. Refinements to our inventory management protocols enable us to sustain a consistent level of gross profit. Inventory management remains a strategic focal point with vigilant monitoring of assorted product category on a weekly or monthly tendance to optimize stock levels. By doing so, we enhanced utilization of our assets, while more effectively managing our cash flows. At the same time, we are actively making our cash flow management more efficient. Now let's take a close look at our financials. Total revenues were RMB 128 million compared to RMB 179 million a year ago. Revenues from sales of merchandise were RMB 102 million and the revenue from our marketplace business was RMB 24 million. The changes were primarily driven by ongoing refinements to our product range across all categories, and coupled with the optimization of our supplier and the merchant network results in a shorter impact on sales. Despite these 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. Now let's take a look at our operating expense. Fulfillment expense were RMB 22 million compared to RMB 27 million a year ago. This was primarily driven by a decrease in warehousing and logistics expense due to lower merchandise sales and reduced the total cost resulting from staffing structure optimization. Sales and marketing spend decreased to RMB 26 million from RMB 30 million a year ago. This was primarily a result of a decline in member management fees, partially offset by an increase in business promotion expense. Technology and content expense were RMB 13.3 million compared to RMB 13.4 million a year ago. The decrease was mainly due to reduce the total cost. General and administrative expense were RMB 14.9 million compared to RMB 15.2 million a year ago. This was mainly due to the reduction in total cost resulting from staff structure refinement, cash offset by increase in the allowance for credit loss. Total operating expense in the first quarter decreased to RMB 76 million from RMB 85 million in the same period of 2023. Loss from operations were $9 million compared to income from operations of RMB 1 million a year ago. Net income was RMB 4 million compared with a net loss of RMB 23 million a year ago, while adjusted net income was RMB 3 million compared with adjusted net loss of RMB 27 million a year ago. Basic and diluted net income per share attributable to ordinary shareholders, who are [ borrowing ] compared with basic and diluted net loss per share of RMB 0.01 in the same period of 2023. Turning to liquidity. As of March 31, 2024, we had a total of RMB 505 million in cash and cash equivalents, restricted cash and short-term investments on our balance sheet compared to RMB 552 million on December 31, 2023. Our liquidity assets is sufficient to cover our payable obligations, and we do not hold any long-term bank loans or debt 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 first quarter make important progress on the road to realizing our long-term strategic goals. Our ongoing improvements in inventory management around 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 stress our company's resilience and adaptability. Our strategy positions us to effectively address future challenges and seek emerging opportunities in the evolving economical landscape. This concludes our prepared remarks for today. Operator, we are now ready to take questions.

[Operator Instructions] Our first question is from the line of Ethan Yu from First Trust Group.

[Foreign Language] The management just mentioned our progress in short video and live streaming. Could you share more details about how we differ from other platforms in this area?

[Foreign Language] [Interpreted] Thank you for your questions. [Foreign Language] [Interpreted] Firstly, we will select every commodity often all categories and ensure they are cost effective. We do not report to selling low-priced of holding clearance items to draw traffic. [Foreign Language] [Interpreted] Secondly, we are not only content creators, but also developers of numerous commodities. Our team engages from the inception of the product to project, actively participating in the traceability of the origins, production and selection of packaging materials. This hands-on approach creates us with a deeper understanding of the commodities and a more tangible grasp of the entire commodity chain compared to other content producers. [Foreign Language] [Interpreted] As in most critical human level, Yunji's short video strategy encompassing in both content production and distribution is really in an ordinary people-centric approach, facilitating individual entrepreneurship and rendering our content more accessible. [Foreign Language] [Interpreted] And also, all these have been differentiated us from other competitors. Thank you for your question.

Okay. Got it. Okay.

Ladies and gentlemen, as there are no further questions at this time. I would like to hand the conference back to the management for closing remarks.

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 talking with you next quarter. Bye.

Thank you. This conference has now concluded. Thank you for attending. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]