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 Fourth Quarter 2024 Earnings Conference Call. With us today are Mr. Shanglue Xiao, Chairman and Chief Executive Officer; along with Mr. Yeqing Cui, Senior Financial Director. As a reminder, this conference call is being recorded. Before we start, please note that this call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on the company's current expectations and current market operating conditions and relate to events that involve known or unknown risks and uncertainties or other factors of Yunji and its industry. These forward-looking statements can be identified by the terminologies such as will, expect, anticipate, continue and other similar expressions. For a detailed discussion of these risks and uncertainties, please refer to the company's related documents filed with the U.S. SEC. Any forward-looking statements that the company makes on this call are based on assumptions as of today and are expressly qualified in the entirety by the cautionary statements, risk factors and details of the filings with the SEC. The company does not undertake any obligation to update these statements, except as required by applicable law. With that, I would now like to turn the call over to Mr. Shanglue Xiao. Chairman and Chief Executive Officer of Yunji. Please go ahead, sir.

[Foreign Language] [Interpreted] Hello, everyone. Welcome to Yunji's Fourth Quarter 2024 Earnings Call. Looking back at our operations over the past year, while focusing on the future, we continue to firmly position organic health as the key strategic objectives for our future development. In 2024, our overall gross margin improved to 49.4%, while our user repurchase rate maintained a strong 71.9%. Behind these numbers lies the trust our consumers have placed in us, through the road for healthy living. But more important than numbers is our complete operational realignment. Over the past year, we have enhanced our organizational structure, improved operational efficiency and optimized our business layout. These changes will serve as the starting point for us to move forward with greater agility in 2025. This March, we completed the consolidation of our health business and Yunji's [indiscernible] business. This significant move enabled us to better provide a trusted healthy living solutions for our users, strengthening our trust chain through true traceability, authentic experiences and generation sharing, bringing organic health to millions of households. Under our commitment to our organic health strategy, our private label organic health products have gradually earned our user' trust. For example, our probiotics bolus achieved sales of nearly RMB 5 million in the fourth quarter of 2024 and over RMB 6 million in the first quarter of 2025. Additionally, our new live [indiscernible] launched at the end of March this year immediately gained high consumer recognition, generating sales of over RMB 5 million in just half a month after its launch. We will continue to strengthen our private label brand SUYE. Through our efforts in 2024 and the first quarter of this year, we have completed a strategic upgrade from SUYE's messaging to its visual identity. Upholding the brand mission of bringing advanced skincare technology into your daily routine. SUYE is dedicated to offering premium quality products at accessible prices, aspiring to become world-class leader in skincare and the proud representative of China's innovation in beauty. At SUYE, we are building complete product lines around our flagship innovations to deliver exceptional value and drive growth. In 2024, we launched our SUYE [indiscernible] firming series, a premium yet affordable line that generated over RMB 20 million in total sales, a testament to the strong demand for high-value skincare solutions. Building on this success, we are expanding this series in 2025 with the launch of SUYE [indiscernible] solution, a highly competitive flagship product. This new addition will further enhance the fast-growing series, solidifying its position as a go-to choice for customers, seeking advanced skin care without premium price tags. We are thrilled to introduce our new business initiative for 2025, the ginseng tea therapy program, a unique wellness experience designed to deliver exceptional value while promoting holistic health. This meticulously crafted 80-minute program combines tea tasting, traditional Chinese studies, meditation and stretching lessons, offering participants a deeply enriching wellness journey. During its trial phase, the program achieved remarkable success with 91% of its first 150 participating tea enthusiasts returning for frequent sessions. Some users even attended morning tea courses for 100 consecutive days, highlighting the program's ability to build a strong user loyalty and engagement. This April, we plan to recruit 1,000 tea enthusiasts to join the program. On March 20, the ginseng tea therapy program will officially launch. And by June, we aim to train and onboard 100 skilled tea therapies. By combining high margin products with an immersive and engaging experience, these initiatives strengthen the appeal of our organic health offerings, while fostering the deep customer loyalty and satisfaction. It serves as a pivotal step in our evolution from a traditional transaction platform to a dynamic experience ecosystem. In 2025, Yunji remains committed to its vision as the global leader in organic living, focusing on delivering high-value organic health foods and [ growing ] advanced skincare products. By leveraging significant cost reductions achieved last year, we will continue optimizing our product lineup to create a standout products that offer exceptional value for money. Our strategy centers on shifting towards high margin, high repurchase rate products to enhance profitability and then achieve break-even. Beyond product sales, Yunji is evolving into a service experience platform, embracing the promising opportunities of the silver economy. Our innovative tea therapy wellness courses will serve as the cornerstone for building health-focused communities. This program unites product sales, culture experiences and social engagement into a cohesive ecosystem, a tree of life where every branch nurtures growth and connection. In the future, we will continue to stimulate product innovation, enhance core competence and create greater social value for Chinese families. With that, I will hand it over to Mr. Cui, our Senior Financial Director to go through the financial results.

Thank you, Shanglue. 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 the percentage change are on a year-over-year basis, unless otherwise noted. During the fourth quarter of 2024, we maintained our focus on optimizing our cost structure, while adapting to evolving market dynamics. We took deliberate steps to refine our staffing structure and implement cost reductions in areas such as fulfillment and technology. However, these long-term strategic cost saving measures were partially offset by increase in near-term expense, including severance costs which affect our bottom line. Despite this change, these actions represented critical progress towards building a more efficient operational framework for the future. Now let's take a closer look at our financials. Total revenue were RMB 97.1 million compared to RMB 149.1 million a year ago. Revenues from sales of merchandise were RMB 75.5 million, and the revenues from our marketplace business were RMB 19.4 million. These 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 result in a short-term impact on sales. Despite these changes, our gross margin remained relatively strong at 48.3 percentage, mainly due to continued customer loyalty towards our private labels and our effective product curation strategy. Now let's take a look at our operating expense. Fulfillment expenses were RMB 16.4 million compared to RMB 24.8 million a year ago. The decrease was mainly due to reduced staff costs as a result of staffing structure refinements, reduced the warehousing and logistics expense due to lower merchandise sales and lower service fees charged by third-party payment settlement platforms. Sales and marketing expenses were RMB 30.2 million compared to RMB 28.5 million a year ago. The increase was primarily due to an increase in business promotion expense. Technology and content expenses were RMB 8.5 million compared to RMB 12 million a year ago. This was largely due to the reduction in personnel costs as a result of staffing structure refinements and reduced server cost. General and administrative expenses were RMB 71.1 million compared to RMB 44.5 million a year ago. This was mainly due to severance payments from our staff restructuring and impairment charges on long-lived assets. Total operating expense in the fourth quarter increased to RMB 126.2 million from RMB 109.8 million in the same period of 2023. Loss from operations was RMB 77.7 million compared to RMB 39.5 million a year ago. Net loss was RMB 85 million compared with RMB 65.9 million a year ago, while adjusted net loss was RMB 84.5 million compared with RMB 65 million a year ago. Basic and diluted net loss per share attributable to ordinary shareholders were both RMB 0.04 compared to RMB 0.03 in the same period of 2023. Turning to liquidity. As of December 31, 2024, we had a total of RMB 242.8 million in cash and cash equivalents, restricted cash and short-term investments on our balance sheet. We are dedicated to making the most of our working capital and smartly managing our assets to better support our operations. In summary, as we enter 2025, we will maintain financial discipline while investing strategically to drive sustainable growth and improve profitability. The restructuring undertaken in 2024 has provided us with a more streamlined operation foundation. We will continue to be prudent with our capital allocation, focusing investment on categories that demonstrate potential for sustainable growth and improved profitability. We believe this disciplined approach to cost management, coupled with our effective product curation strategy will enable us to navigate the current market conditions and position us for improved performance in the future. This concludes our prepared remarks for today. Operator, we are now ready to take questions.

[Operator Instructions] And the first question will come from [ Megan Wang ], Investor.

[Foreign Language] Can you provide more color about the upcoming ginseng tea therapy project?

Thank you for your question. Let me share more about our ginseng tea therapy product. And this project is going to be launched in May, and then it aims to -- it allows our users to enjoy a space and where people can calm their minds, connect their body and soul and embrace a healthier lifestyle. And which make this unique is our product plus the ritualized service model, which creates a complete experience, not just the tea but a journey towards wellness. Tea itself holds deep culture significance for us as the Chinese people. For ginseng tea, we carefully selected a award-winning organic black tea from Wuyi Mountain. It is certified organic by multiple countries and it comes from the traditional production area of Wuyi Mountain. The tea has a beautiful glossy black appearance and brews into a smooth, sweet infusion that embodies quality. The real magic lies in the tea serving ritual, which is an 80-minute experience divided into three parts. 20 minutes of traditional stretching, 40 minutes of tea tasting and meditation with ginseng tea and 20 minutes of sharing [ experience ] with fellow participants. This isn't just about drinking tea, it is about self-healing through classical culture and finding joy in daily moments. The program even integrates a professionally designed curriculum based on Chinese classic studies to help participants achieve self-awareness and inner harmony. Through this ritual participants can improve blood circulation and gain insights into themselves, all while boosting physical strength, refreshing their minds and nourishing their hearts. The name ginseng itself reflects this philosophy. It means achieving innate knowledge of the good. In essence, it is about removing negativity and embracing positivity to live a more fulfilling life. . Finally, this project isn't just about personal wellness, it also strengthen our community and drive sales of our organic health products. It is a holistic approach that connects people to health, culture and happiness.

As there are no further questions, this will conclude our question-and-answer session as well as our conference call for today. Thank you for attending today's presentation. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]