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 Half 2026 Earnings Conference Call. With us today are Mr. Shanglue Xiao Chao, Chairman and Chief Executive Officer; and Ms. Nan Song, 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, uncertainties and other factors of Yunji and its industry. These forward-looking statements can be identified by terminologies such as will, expect, anticipate, continue or 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 cautionary statements, risk factors and details of its filing with the SEC. The company does not undertake any obligation to update these statements, except as required under applicable law. With that, I will now turn the call over to Mr. Shanglue Xiao Chao, Chairman and CEO of Yunji. Please go ahead, sir.

[Interpreted] Hello, everyone. Welcome to [Technical Difficulty]

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[Interpreted] Hello, everyone. Welcome to Yunji's earnings call. Thank you for your continued interest and support. The market environment remained challenging in the first half of 2026. But we stay firmly committed to our strategic positioning as a leader in organic living advancing our products and experience view and strategy as we continue to deepen our presence in the organic house living market. I will now walk you through the company's financial performance and our strategic execution. Let me begin by sharing some financial highlights, which resolved our proactive approach to optimizing our structure and improving quality and efficiency. . Total revenue for the first half was RMB 96.3 million compared with RMB 158.3 million in the first period last year. This reflects the structural adjustment from our proactive efforts to optimize the merchandise mix, including discontinuing relationships with certain third-party merchants whose offerings do not meet our enhanced product standards. While this affected our near-term revenue, we believe it has strengthened our merchandise mix in support of our long-term strategy, self-operating merchandise now accounts for approximately 70% of the total sales, of which private label products accounted for 56%. Private label products with higher margins are increasingly becoming the core [indiscernible] our revenue. Well, our [indiscernible] initiatives such as the supply chain flexibility, continuing to strengthen customer engagement and maintain stable customer retention. So what improved profit [indiscernible]. At the same time, our gross margin remained resilient and our losses narrowed significantly. Gross margin for the period [indiscernible] at approximately 41% and a net loss for the first half narrowed to RMB 72.4 million, a substantial improvement compared with the same period last year. This reflects our continued discipline in cost management and operational efficiency. As we directed resources with high retention, high margin private label products and toward enhancing the user experience. We remain confident in our path to improved profitability. Let me walk you through our business progress in the first half. Our strategy respond to Amgen's product and experience. On the product side, we continue to build out our organic health, organic food and beauty and skin care metrics. With food and managing homology products as a growing focus within organic health. Together, our product and its various dual-engine approach powers Yunji's organic health ecosystem. In our organic health segment, we continue to deepen our presence in the broader health and wellness market, with a particular focus on food managing [indiscernible] products that address the health needs of the mono family in China. Our first flagship product in this category is [indiscernible] tea, which launched in the first quarter of 2025 supported by premium original sourcing, generating quality and refined processing technique. The product received market feedback that exceeded our expectations and quickly becoming a key growth driver of our food managing hemology product line. . In the first half of 2026, [indiscernible] delivered rapid sales growth and a separately validated our complete growth model. This demonstrates that our product strategy for entering the Chinese wellness and health market as a long-term market potential. In our organic solace segment, we have integrated our organic philosophy into consumer selling new occasions, particularly breakfast, the most important meal of the day by capturing a high-frequency deli consumption occasion, we have established an [indiscernible] customer acquisition channel, together with our organic house product. This forms a complementary for our portfolio that balances high and low frequency consumption patterns and long-term consumption cycles. In our Beauty segment, we remain focused on offering customers high-quality, heavily skin care and beauty products. In the current market environment, increasing [indiscernible] consumers favor products that deliver high value with affordable price and Yunji's long-standing brand positioning aligns closely with this trend. As a result, this brand has continued to earn consumer recognition and maintain a stable [indiscernible] segment sales broadly stable compared with the same period last year. And I think in the second quarter have stood out. So seeing skin care convincing instance or you launched in the second half of 2025 has continued to receive positive feedback from consumers and achieve 29% sequential sales growth in the first half of this year. End-to-end supply chain traceability experience is a core competitive advantage that sets Yunji apart from traditional e-commerce platforms. This is also a key method in building our customer loyalty. Our traceability experience product quality from an abstract concept into something users can see and verify for themselves. In the first half of 2026, we continue to increase our investment in supply chain traceability experience. With all of our initiatives focused on strengthening user trust and improving repurchase conversion, in total, we conducted approximately 30 traceability events during the period, and these events collaterally delivered a strong sales conversion. For example, our traceability event for our Baiyueshan product held on April 13 drove the product first half sales up 128% year-over-year and 146% compared with the second half of 2025. Similarly traceability event for valuation, Wolfberry Peru held on June 17 drove the product first half sales up 13% year-over-year and 366% compared with the second half of 2025. These results confirm that our traceability experience strategy is effective in strengthening user engagement, reinforcing our confidence in pursuing this approach over the long term. Looking ahead, we will continue to refine our product metrics, expand our food managing homology offering and [indiscernible] more resources into high margin, high repurchase items to support continued margin improvement. And at the same time, we will continue to strengthen our differentiated experimental offerings to build user trust and durable brand mode. We will also maintain our discipline in cost management, carefully evaluating our asset and expense structure to ensure resources are allocating in support of our long-term strategic priorities. Ultimately, our goal is to provide a better organic health living solutions for families across China and to create greater social value. Thank you for your continued interest and support. Despite a complex market environment, we remain confident in our strategic direction, and we will continue to put user value at the center of our approach as we balance growth and profitability to drive the company's long-term sustainable development. . This concludes my prepared remarks for today. I will now hand over to Mr. Nan Song, our Senior Financial Director, to walk you through the financial details.

Thank you, Shanglue. Hello, everyone. Before I go to our financial results, please note not our numbers digital in the following remarks are in RMB terms and on comparisons and percentage changes are on a [indiscernible] otherwise noted, in the first half opportunity, the market environmental remained challenged as strongly outlined, [indiscernible] committed to our strategic position as a global leader in organic leaving, advancing our products and experience [indiscernible] supported by our relevant financial position. We remain disciplined in cost management and made timely adjustment to adapt to these conditions. Now let's take a closer look at our financials. Total revenues were RMB 96.3 million compared to RMB 158.3 million in the same period a year ago. Revenues from sales of merchandise were RMB 2.4 million, and the revenues from our marketplace business were RMB 13.7 million. The change in our total revenues for the period was primarily driven by softer consumer spending and need a broader macro environment in China, together with our choice to be aligned with the organic house [indiscernible] our business as part of the effort will also proactively extend with our and shortening our merchandise mix in support of our private label and organic health [indiscernible] we had anticipated this impact on our revenues back for the period. And we continue to believe it's presented like the right long-term path for the business. On the cost side, total cost of revenues decreased by 31.9% to RMB 56.8 million, primarily due to the low merchandise sales which are recognized on a gross basis, excluding the impact of the great [indiscernible] incentive available to [indiscernible] members which carries the cost of revenue, our gross margin remained relevant at 31% during the period. This is supported by our continued focus on selecting premium high retention categories together with our provider level products. Now let's take a look at our operating expenses. Fulfillment expense go to RMB 10.3 million from RMB 28.6 million in the same period a year ago, the decrease was primarily driven by lower [indiscernible] and the logistic content resulting from reduced merchandise sales. Together with the long personnel cost from staffing structure, refinement, sales and market expenses were RMB 39.5 million compared to RMB 50.1 million in the same period a year ago. The change is primarily due to loan member management fees and [indiscernible] business promotion expenses. Technology and content expenses will do RMB 12.4 million compared to RMB 15.3 million in the same period a year ago. This was mainly due to the reduction in personnel cost, a result of continued [indiscernible] requirement. General and administrative expense decreased to RMB 47.5 million from RMB 93.4 million in the same period a year ago. The decrease was mainly driven by reduction in allowance for good data loss on the third party no receivable and partially offset by ingot impediment for [indiscernible] equipment. Our expected display extended across nearly [indiscernible] period, with the year-over-year reduction lacking both us more merchandise base and our ongoing staffing and cost [indiscernible] measures. As a result, totally operating expenses in the first half of 2026 regressed to RMB 109.7 million from RMB 139.4 million in the same period of 2025, 38.8% reduction [indiscernible] delay loss, loss from operation[indiscernible] RMB 39.4 million from RMB 100.4 million in the same period a year ago. This is best [indiscernible] supports our continued progress towards profitability as a revenue pressure from the softer environment [indiscernible] earlier. Net loss was RMB 72.4 million compared with RMB 100.7 million a year ago, while adjusted net loss was RMB 72.3 million compared with RMB 100.5 million , the year-over-year [indiscernible] both net loss and adjusted net loss reflects our expected strength together with our continued focus on stressing customer engagement and maintaining stable customer retention. Basically the diluted net loss or show attributable to ordinary shareholders of both net [indiscernible] 2025. Turning to liquidity as of June 30, 2026, we have total RMB 242.1 million in cash and cash equivalent, restructure cash and the short-term investment on our balance sheet compared to RMB 216.1 million as of December 31, 2025. We maintained sufficient liquidity to meet our payable obligation. We will continue to optimize working capital and manage our asset efficiently in support of our operations. Looking at the first half as a whole, the [indiscernible] market environment, we made the future progress on cost display and narrowed our loss on a year-over-year basis. This reflects our continued execution of the [indiscernible] so we outline our discipline in cost management and our focus on green health and provide label products. Our solid financial position continues to support this royalties and will remain displaying how we manage dual quarter and [indiscernible] in support of our position as a leader in organic house living. Looking forward, there will remain focused on improving our operation margin as we balance growth and growth feasibility in support of the company's long-term sustain development. This concludes our prepared remarks for today. Thank you.

That brings us to an end of today's call. Thank you for attending. You may now disconnect.