Q1 2021 Yatsen Holding Ltd Earnings Call
Okay.
Ladies and gentlemen, good day and welcome to the Yadkin first quarter 2021 earnings Conference call.
Today's conference is being recorded at this time I would like to turn the conference over to Irene, though head of strategic investments and capital market. Please go ahead.
Thank you operator these low the discussion today will contain forward looking sales.
For the couple of future for for less and are intended to qualify for the safe Harbor from liability established by the U S. Private Securities Litigation Reform Act.
The most are not guarantees of the future for for less and are subject to certain risks and uncertainties assumptions and other factors. Some of these risks are beyond the company's control at the cause actual results to differ materially from those mentioned in today's press release and that's the discussion of general discussion of the risk factors that could affect yet.
The financial result is included in certain filings of the company for the Securities Exchange Commission. The company does not undertake any obligation to update it for the full of inflammation.
As required by law during today's call Nashville will also discuss certain non-GAAP financial matters for <unk>.
Comparisons purposes, only for a definition of non-GAAP financial measure and a reconciliation of GAAP to non-GAAP financial results. Please see the earnings release issued earlier today.
Plenty of today on the call from the out the senior management all necessary for full fall, our founder Chairman and CEO and Mr. Joe How young our CFO and director of management will begin with prepared remarks on the call will conclude with the Q&A session.
Reminder, the conference is being recorded in addition, a webcast replay of this conference call will be available on Investor Relations website at IR day, Yes on global Hawk call I'll now turn the call over to Mr. Hu of football. Please go ahead Sir.
Got it.
And thank you everyone for the figures.
The first quarter pardon me for the 1 earning.
Earnings Conference call today.
The other off the year almost call it low yes on a.
The cheap of 42, 7% year over year of growth and total net revenue in the first quarter.
Supported by a healthy growth of our purpose I regret and the robust performance of the daunting choice and the other brands in that sense of reported.
So during the quarter the number of E T Z customers increased 11.
Yea over year to $9, because the media while revenue per DTC customer also increased by $24 5 per cent for.
Approximately RMB 9 2.
2 of RMB 100 of incentive fee per customer.
So we ended the quarter with gross margin of.
8 points of 6%.
The improvement.
With the 7 percentage points compared to 617 percentage for the first quarter of on here.
So we went into the year with the clear execution plan to optimize our branch performance expand our quarter for audio and he has all of core capabilities.
A key focus has been on the flagship of it I regret, particularly to upgrade its positioning and the price point from mass to hire and met the market.
In order to further extend the growth potential.
So we have set out to achieve the through more disciplined pricing and the discount policies, which successfully raised for the diaries.
Average selling price.
The order value and a gross profit margin during the quarter.
At the same time, we continued to introduce new products that excite and it'd be like all customers.
Especially if the new revenue growth.
Gross line as well of the fleet Lipsticks Gibson.
Which were designed for the Chinese new year holiday season, and the Valentine's day.
This new product.
Complemented by the launch of a number of things here.
You know offline stores at the early may represent refinement and of putting the migration of the perfect I reported on line this year.
So first of all where we have further plans to launch new products and existing and the new categories.
Equity based makeup.
California, Atlanta and amend the skincare.
Instead, the window, so would all of a year to capture of higher board of share for all customers.
Overall, we see further room for ESP in the 8 will be important.
New product rollout and the caliber of inspections to drive operating result for the diary brand throughout this year.
We are also making continued progress towards a multi brand strategy as we introduce new brands.
With the pivotal with Brent trading up we see the need to attack and the capture of new entrance of in color cosmetics market.
Especially gen Z on the Gen 8 who are more price sensitive.
We launched the pins bear Brad you can meet the March designs of the dispute Young girl brand person with an initial focus on providing high value for money partner in the high volume categories for Genocea, the gender age consumers.
With the introduction of the leap growth part of pins bear has achieved encouraging results during its first months of flow.
All of the mass color cosmetics brand lead the ongoing all the experience robust for year over year of growth in the quarter powered by several well received a part of the launches such as the crossover with hallmark at of Chinese Popstar Wang on for Colin That's what the new vinyl records I shut up.
Pallet, which were introduced in the late March.
And given the need for all of this unique to the street spectrum brand positioning you for it.
Of the outside is expected to be lower than that of the diary, which we aim to do better for further at the simple brand within the group.
As lethal only had already become at the top selling telecom from other brands in China's online market.
For its next stage of growth.
Plan to optimize the investment level in the good spread with increased focus on for pinnacle growth going forward.
1 multiple channel we saw what's the increasing diversity in the balance of our channel mix compared to the first quarter of credit country, which boosted the sales contribution from non traditional e-commerce channels.
It's very it's sub video end of to be platforms as well as for all of our experience of stores.
We have adopted the and omni channel strategy to serve all kind of customers at every touch point.
As of the end of March 'twenty for the 1 we had the total of 245 experienced stores.
Already having achieved significant scale covering key cities in the regions. We aim to open a parcel of approximately 100 of stores throat.
The wrap up the year.
In addition to our color cosmetics the portfolio. We are excited about the expansion of our range of skin care brands.
Which for the addition of bulk of with mainland China business and the heap.
In the first quarter.
Along with the Atlantic in the IB is choice, we now have for skincare brands with different positioning and the consumer basis.
As part of our efforts to ensure a smooth transition and the integration of the Atlantic and stock of Hu <unk>.
And that's kind of business in the first quarter of Kim with focus on putting in place the right management team and the incentive structure to rejuvenate each breath of product and the positioning.
To accelerate e-commerce and to optimize the supply changes.
The team has identified the fuel product that's resonated with the new generation of consumers and the witness some early success for this the launches such as the Atlantic Newbee E survey and of the mentally ethnic suite of theories.
Since the Eve long transition was completed at the end of the first quarter. We remain in the early stage of integration process, which we spent over the second quarter. We believed that the overtime you would have significant room to apply all of a disruptive b to C model and the core platform capabilities for our yoga.
Slide the brands as we'd hope them to realize their full potential.
With full for an acquisition since mid 2019, our strategy and investment in the capital market teams has the benefits of core capabilities of the sourcing executing and integrating new brands through these experiences and it has continued to improve and upgrade.
We are concerned in terms of you started to see on a number of the high quality brands emerge and become available globally.
And we are continually seeking to identify potential attractive additions to our portfolio.
We believe our success in applying the floor is a testament to our ryzen reputation as the serious high quality consolidator of global beauty assets.
We plan to leverage the unique window of opportunity to add to our portfolio.
In a prudent and the cost effective manner.
The 5 for operational improvements and the MAA continued investments in our core infrastructure and the capabilities are also of our central focus.
We have the increased R&D spending during the quarter to almost 2% of total net revenues compared to 1 2% in the same period last year.
For the Buildout of our Guangzhou manufacturing hub and research center in the form of the joint venture with Kosmos is on track with construction.
Got it in late March.
As of the end of the first quarter, we held a total of 75 global registered patents, including 36 invention patents.
All of overlap R&D architecture, which encompass our internal R&D division as the Bell as collaboration with the net of outside OEM in the R&D powders such of sensor technology peer Bob.
The University of science of technology and et cetera.
Enhance our capabilities and abilities to develop unique active ingredient formulations and in the wage of packaging and the application solutions.
Finally, we would like to per white and update on our international business, where our progress in certain markets such as southeast Asia have exceeded our expectations.
So even though overseas sales represent a relatively small part of all of the ourselves in the first quarter of kind of because 1 it is worth noting that we have already become 1 of the top selling price in the online cosmetic categories in fast growing consumer market.
Such as Thailand, Malaysia, Singapore, and the for the pace.
We are inspired by the percentage.
Endorsed by other Chinese DTC companies, such as seeing an anchor in overseas market. We have already started to learn from these leaders at the may accelerate our overseas business in the future.
I'm thinking of what with that I will now turn for the court over to ICF Olson of Hogan to discuss our financial performance.
Thank you, David and Hello, everyone before I get started I would like to clarify that all financial numbers presented today are amounts.
And all percentage changes referred to year over year changes unless otherwise noted.
Total net revenues for the first quarter of 2021 increased by 42, 7% to $1 4 billion RMB from 1 billion R&D for the first quarter of 2020.
Primarily attributable to the increases in the number of DTC customers as well as revenue per day to see customer during the period growth.
The profit for the first quarter of 2021 increased by 58, 8% to $991 6 million RMB from $624 4 million RMB for the first quarter of 2020 gross margin improved by approximately 7 percentage points.
The 6 to 8 6% in the first quarter of 2021 compared to 61, 7% in the same period of 2020 on the.
Back of more disciplined pricing and discount policy.
On the business and we saw increased sales Jenna.
Generated from higher margin line.
And who experienced stores, we have also of creatively.
Premium on my our product offerings, enabling us to achieve higher average order value and better margin outcome.
Total operating expenses for the first quarter of 2021 for $1 3 billion RMB compared to $800 3 million RMB for the first quarter of 2020 as.
The percentage of total net revenues total operating expenses increased to 92, 4%.
79, 1% for the first quarter of 2000 points.
Fulfillment expenses for the first quarter of 2021 for $92 7 million RMB compared to $107 1 million RMB for the first quarter of 2020 as a percentage of net revenue fulfillment expenses decreased from 10, 6% in the for.
First quarter of 2020 to 6 4% in the first quarter of 2021 of the decrease in percentage is primarily due to the normalization of logistics expenses compared to the first quarter of 2023 of them with logistics expenses were higher due to the impact.
Cash from COVID-19.
Selling and marketing expenses for the first quarter of 2021, 1 billion RMB compared to $556 9 million RMB for the.
First quarter of 2020 as a percentage of total net revenue selling and marketing expenses were $72 1 per cent compared to 55 per cent and the prior year period. The increase was primarily due to investment in promotions and consumer awareness building for.
The newer brands.
The testing of the effectiveness of new traffic acquisition channel.
General and administrative expenses for the first quarter of 2021 on $172 3 million RMB compared to $124 1.
1 of million RMB for the first quarter of 2020 as a percentage of total net revenues general and administrative expenses for the firm.
First quarter of 2021 decreased to 11, 9% from.
12, 3% for the first quarter of 2020.
The decrease in percentage is primarily due to increased increased economies of scale, resulting from the higher level of revenue.
Research and development expenses for the first quarter of 2021 for $27 7 million RMB compared to $12 2 million RMB for the first quarter of 2020 as a percentage of total net revenues research and development expenses for the first quarter of 2.
21 increased to 1 9% from.
On 1 2% the first quarter of 2020.
The increase was primarily due to on an increase in personnel costs and share based compensation expenses and reflection of our commitment to enhance our R&D capabilities and this is.
Favorable source of competitive advantage.
Loss from operations for the first quarter of 2021.
For 43.3 million RMB, representing.
Operating loss margin of 23, 8% compared to loss from operations of 176 million RMB for operating loss margin of 17.
Key 0.4% the first quarter of 2020.
Non-GAAP loss from operations for the first quarter of 2021.
258, 3 million, representing a non-GAAP operating loss margin of 17, 9% compared to non-GAAP loss from operations of $113 7 million.
RMB or non-GAAP operating loss margin of.
11, 2% for the first quarter of 2020.
Net loss for the first quarter of 2021 was the hunger and 19.
19 million RMB, representing net loss margin of <unk>.
On the 2 1% compared to net loss of <unk>.
$191 7 million RMB for net loss margin of 18, 9% for the first quarter of 2020.
Non-GAAP net loss for the fourth quarter of 2021 was $234 3 million RMB, representing net loss margin of 16, 2%.
Compared to the non-GAAP net loss of.
100 point of that 4 million RMB for 12, 8% of net loss margin for the first quarter of 2020.
Net loss attributable to yes on ordinary shareholders per diluted EPS for the first quarter of 2021 was 0.5 RMB compared to net losses attributable to the Hudson ordinary shareholders per diluted EPS of $4 6 RMB for the first quarter.
For 2020 non.
Non-GAAP net loss attributable to the absence of ordinary shareholders per diluted EPS for the first quarter of 2021 with 0.37, RMB compared to non-GAAP net loss attributable to <unk>.
Yes on ordinary shareholders per diluted EPS of 0.92, RMB for the first quarter of 2020.
As of March 31, 2021 of the company had cash and cash equivalents and restricted cash of 4.3 building RMB compared to 5 7 billion RMB as of December 31, 2020.
Looking at our business outlook for the fourth quarter of 2021.
We expect.
Looking at our outlook for the second quarter of 2021 for our total net revenues to be between 149 billion RMB.
And 1.54 billion RMB, representing a year over year of growth rate off of.
Approximately 50% to <unk> 55 per cent. This forecast reflects our current and preliminary view on the market and operational conditions, which are subject to change with that I would now like to open the call of the Q&A.
Yeah.
Operator, thank you.
Thank you.
We will now begin the question and answer session to ask the question in the press Star then 1 on your touch comes out for you.
Using a speakerphone please pick up of your handset before pressing the keys.
From the question queue. Please press Star then 2.
With the benefit of all participants on today's call. If you wish to ask management of your question in Chinese. Please immediately greet torture question repeat your question in English at this time, we will pause momentarily to assemble our roster.
Our first question today comes from Justin why with the Morgan Stanley. Please go ahead.
Thanks for taking my questions.
My first question regarding the guidance for the second quarter. It seems like E suggest that 327% quarter on quarter on growth versus the first quarter and I feel you seems weaker than normal seasonality for cosmetics. So is there sort of adjusted.
The adjustment going on with the like some of the strategy change or so manage the main tends to be conservative. So for question regarding the guidance.
The question is that given the competition on call of cosmetics seems to be.
The become more intense so is there any strategy change for the management.
Sort of in terms of allocating more marketing resources to the skin care rather than in color cosmetics and that kind of part of reason that our sales growth side any sort of lower than previously.
The ups.
Third question is regarding the debt.
That doesn't know losses in the SEC.
In the first quarter. So that's net loss on sort of the ratio is slightly higher than fourth quarter of last year. I think that's mainly because of higher salary of marketing. So your debt any for the elaboration of that and how should we look at that ratio for the full year. Thank you very much.
So for the quarter over quarter of growth I think the first thing we want to clarify is right now our brand portfolio has been changing dramatically. So we have 3 years, we have 3 brands last year, but.
Now we have 7 per ads.
And then skincare now we have for it.
So so youre right. So when we are thinking about the resource.
We sourced allocation for.
For for the coming quarters.
We may allocate more resources into the skincare gross and the skincare growth might not be as dramatic as kind of cosmetic.
However, we think the gross of the.
Skincare, especially the luxury of et cetera of the skincare category.
It's more sustainable.
And the this is my influenced the bottom line as well.
For the second thing about the competitiveness of the color cosmetic market.
So if we look at the of the Euromonitor data.
So last year just on.
At the company was ranked as the number of 5.
And then on so.
You can tell me like.
In terms of the turnkey the company was ranking as the number for but if you look at the growth rate.
The <unk> tend to overturn the 19 growth rate.
S. The.
Based on the thing database and the other 1 was growing at the over 30% why are the number 1 number 2 what's the.
Declining and that the number 3 was just growing at the single digit. So if we look at the overall color cosmetic we think we still have the high.
The growth potential and we will work to continuously to our expanding our brand in telecom from headaches, and where we will continue invest to grow our existing brands, including put the diary.
Until we become the number 1 company in terms of the value share in kind of calls on them being kind of cosmetic market.
So you sort of questions about the increasing sales of the marketing.
So in the first quarter this year because of the newly acquired a couple of the skincare for us.
At the early integration stage the investment on brand building and also cleaning of the the inventory for the distributor will be the 2 course of the things that we need to do.
So the investment for some of our annuity of a widespread for example, we just announced the friend of the breast or for Atlantic in the first quarter and then we believe the investment in the <unk>.
The strengthening the brand equity and the improving the Brent of awareness will be reflected in the growth in the coming quarters for our skin care of brands.
Yeah.
And 1 other thing I want to.
And as you know in Q1, we spent the money testing.
The effectiveness of the new traffic acquisition channel.
Catalysts, such as the OEM quite the and some of it.
The figure out the best the most.
Efficient cost effective way.
Acquired traffic and market are a part of it.
And on top of debt, we are trying to put in place a more disciplined approach to ROI.
ROI optimization, so now we're allocating.
Our resources.
To maximize our ROI.
Uh huh.
The allocate resources across different brands and now we have 7 of the phone to make sure that we have the.
The highest return.
Our investment so going forward you just mentioned you know in Q1.
Non-GAAP net losses of 16% going forward, we do expect our net loss to come down.
And we are actually more confident about our future prospects of profitability going forward.
Now we're building.
Sizable and sustainable skincare business.
Thanks, a lot a day the in Doha, So you've I can't just half of follow up on that so.
So are we still sort of ami for like breakeven or even better profitability for 'twenty 'twenty 2 given the change of the focus towards more on skincare.
Well now we are actually not in a position to give guidance right on the profitability or 2 years from now, but as I said earlier, we're now even more confident.
But our future prospect of.
Turning this business profitable.
Yes.
Okay. Thank you very much.
Again, if you have a question. Please press Star then 1.
The next question comes from the Li Li with Bank of America.
Please go ahead.
Okay.
Yes.
Hi, Thank you management for taking my question. So my first of question is also on the guidance for Q2 so.
I recognize the Dodge the Q2 basically its the easiest thing has the ease of debate. If you look at the last year. So is it fair to say that in Q2, maybe is likely the best quarter in terms of the run rate gross right away.
On a day.
This is my my my first question.
The second question is.
If you look at the DTC growth DTC channel growth so previous in the previous in the past, we actually see the number of DTC cosmic will grow faster grow faster than the I P Valley, So I thought that.
But in this quarter in Q1 of this year and we actually see the higher ASP gross than the number of.
Customer so oh, we're going to see the assembly of trained in the future or or or it's just like 1 offs.
And if this is a case so how can we achieve the higher on.
S P a in future, particularly for the perfect dairy. So are you just mentioned that we achieved this on Brent of great perfect Dairy brand. So are we seeing the discount rate lower discount rate or we when we had the higher ASP.
The ASP for the newly launched the product and then we gave the assembly of level of discount.
So this is on my on my second question and my third question is also on the on the on.
On the margin side. So so for the Q1, we we we do see the higher as the selling and distribution ratio.
But my question is whether this is more about the newly acquired.
A quiet a branch or newly new branch.
Or are we actually see the.
Quite similar layer on.
For the different for different to kind of for different brands. So if we purely look at the perfect dairy.
How is the trend versus I'm asking the same time. Thank you.
Okay.
The first question, let's discuss other Q2 of guidance about the growth.
So if we look at the the brand portfolios. We are ahead of it right now and then also we just launched a new Oh Dear friend.
But the spreads go best of like.
So it doesn't price point is lower than for the battery, but the spring you'd have the very young for our brand equity for <unk>.
The new category entrants.
The the brains of cognizant of the young and the journey a journey on the journey consumers, who are newly of adapting to kind of cosmetics all of us. So the reason we do that is the we are right now upgrading the Oh the diary part of football.
Got it.
With 2 the 1 thing its for existing caught us all day.
Most of the training.
Just kind of on the promotion and then for our newly launched products for trying.
The catch up the upgrade and the personalization channel for consumers. So that's why we can see our increase in gross margin of the <unk> in the first quarter.
So.
Having said that.
The 1 thing in the quarter 2 last year.
<unk> had a very traumatic for gross.
So this year, we are also I'm thinking about adjusted at the investment level for the on basketball.
So for the second quarter.
The growth reflects our change in the resource allocation.
With more focus on skincare brands.
With multiple because of all adjusted for the investment model.
Model for the Doe on 10 of the EBIT choice with more focus on price up and also the pronunciation of put the battery.
So that's the that's why we think the girls.
You have some impact on the bottom line for the second quarter and we believe this the the shift of the growth model would be more sustainable and the more who we will become more robust in the coming quarters. So that's the that's my.
My answer for the first question about the on Q2 guidance.
For the second 1 of the BTC a couple of the growth versus the obstacles. The right. If you look at the absolute percentage, we can see in the cold 1 Q1 that the average revenue per customer the growth is higher than the DTC customer growth.
So if you look at the the brand portfolio right now and then on the gallant and if the law. They are they the the price point of both Bret I can get the premium skin care centers.
And of course, even for both of.
The range is the mess teach the skincare price tier.
And for for the salary the Brangus of moving on to the high end of the mass market.
Having said that which means the the.
The.
The the Apple the average revenue per customer growth will be continue to true up because of the the resource allocated in the investing the message on the premium skin care brands and also of the message color cosmetics, the daunting and also for the diarrhea, so but the way. We think is also very good.
Quarter 2 of capture a significant share of the new entrance and kind of thoughts might be so we believe the launch of pin Bayer is the very important strategy of moving to capture the new engines with the higher value for money Province, and then on so it's the right now based on the the monthly run rate of pin beer.
We are quite happy to see the or the stage result reached the pin beer is playing a very important strategy grow 2 to take the empty space where to put the diaries moving on.
So I'm still looking for where you think the both of the DTC customer and also the op who will continue the growth.
But the each of the brands will play different roles in the in the in driving the growth of the Tis true speakers.
So of others.
The question about the margin the gross so right on the gross margin of the first quarter on quarter of over last year was is over is the like 7%.
So because right now the growth mainly on the gross margin.
Many coming from 2 things 1 thing as I mentioned before is the improvement in the increase of the skincare for us.
So the screen of the skincare brands revenue ex the <unk>.
On page I'll forget since revenue has been the freezing.
Has been increasing and then because of adult of those skincare brands. The gross margin is higher so that's why we see the of the gross margin.
The incremental here and then for the diary hour of fresh.
The red in the first quarter, we launched some new products with higher gross margin for example, the.
The the oven.
The linguistics, just capturing the higher market share in the first quarter and therefore, the product is becoming the top selling product in the lipstick category, but the gross margin of that part of it gets higher than the otter products of put the battery.
So we think we think the the the long she's not.
The direct pipe out of existing partners.
Coming from more disciplined promotion and also on new products to capture Newport on new innovation, providing more value to consumers.
And of course.
Nothing that I wont add up here I'm, so proud of what we call the criminalization of strategy for brands.
We need to have some reason.
For consumers. So that's why we are consistently improving our R&D expenses as long as we have better products better innovation and the consumers. They are they have for very high willingness to pay for those of backup for us and the new products. So that's we think of how we can adjust the risk.
Of the implementation of the brands.
Yeah.
Thank you I think it just a 1 for a lot. So in terms of I know you just mentioned that in the and then in the rest of the year, maybe we will see a better.
Margin profile, given I'll watch the strategy shift so so in this case so.
So are we looking for on on a non-GAAP net profit on narrow versus the last year or we still seeing the familiar at level. Thank you.
I'm sorry, as I said earlier, we're not in the position to give guidance on <unk>.
For the ability for the for the rest of the year, but I said earlier.
As we are trading at 1 of our existing brands and introducing more.
Luxury skin care brands with higher margin.
We are you know.
More of confidence.
On the profitability of our business going forward.
Yeah.
Maybe I can kick it at 1.
Is that the the change.
What's left of our resource allocation reallocation among the current.
All of portfolios. So I'm still so sales are associated with investing in the us can get category.
And also continues to invest in the Oh, the new brands of the kind of cosmetics. So so that's why we think.
This will impact our bottom line, but the sorry about that because we've got nothing to give you any guidance on this 1.
Did it come to the next question.
Okay.
The next question comes from Christine Cho with Goldman Sachs. Please go ahead.
Oh. Thank you I think we didn't don't go well so.
The 2 questions. So 1 could you is it possible to give us the rough sense of the sales contributions from your own organic.
Any grand for the.
The newly acquired brands.
Both in terms of this quarter I saw that the implied.
And your second quarter guidance, and then secondly, David you mentioned that in your remarks that on non traditional channel contributions have increased this quarter include.
Including the short videos and QB and experience stores.
Should we expect this trend to continue going forward and also would it be possible for you to elaborate on your strategy in these new channels.
And then lastly, a quick 1 is is there any update on the repurchase rate that you can share with us. Thank you.
Okay. So first 1 about the organic bread solely for the I cannot clarify here.
So even with the brand we acquired.
In terms of the.
The the growth we still would you still.
The inverse of locking the new acquired the brand.
So so you'd be talking about the revenue lift.
Between existing brands.
The matter is the incubated or the Brent Smith on for that.
Here or the new type of ice Brent on that.
The the percentage wise of the newly of widespread.
The relatively small in the total percentage of the revenue.
But the will be do is.
We invested in the new brand and the recapture of the gross so I'm still until now I would say debt. The main growth driver of the has come in if you're comfortable on the organic growth no matter, if the existing brand incubated Brent or even the acquired for it.
So that's about the first of all good.
The first question and we are quite happy about even our flagship brand metric of the diary schools in the first quarter.
Most of the India the.
The growth of Pillsbury mini coming for all of the new loans.
No matter the lipsey partner for the category expansion into like the telecom bands and also the skincare products as well.
So your first question on the second question is about the non traditional channels for example, they're to be or the short video or that's great.
Youre right, we see the channel will continue.
Because right now I'm in the first quarter as mentioned by from home before.
Spent some resources in Perth testing of the or the new.
Tough forms of for.
For example of as we all know for some of the short video and also the lateral cutting the.
The the the apps at the are devoting a lot of of resources in the building up their e-commerce.
Part of the of the business, which means in terms of <unk>, we see a significant growth potential for those apps and the newly emerging platforms.
So this isn't something that we spend on lots of times of the first quarter 2 study true.
You are to see of bulk will be the impacts of Oh.
Brent in the future.
So in the traditional business model, we have a brand building cash.
Forms of social media for them.
And the we have the chance of some transactional based e-commerce platforms like the many out of all by the sector, but now we see some of the newly emerging player in this market. They catch of both part of the of the of it. So they can help you just a few brands and the they can help us at the company are complete the.
The transaction.
It means a lot for corporate debt. So that's why when you have we had of some passenger in the.
The.
The quarter by working together was there the.
On the top level management of those platforms and we are very happy to see some early stage results coming from the past.
So so looking forward, we think our resource growth.
Outside of the traditional e-commerce platform.
We continue to see the to play at the gross driver for yes, that's revenue.
So for your.
So question about the repurchase rate.
Do you want to shop.
Yeah, so for repurchase rate, we have seen the same similar level of in the past.
So previously you I think in a while we were of IPO Ing also till the end.
And then with for we mentioned.
Much of fleet over a 12 month period of hassle. They are seeing of roughly per cent and then recently in the quarter, we didn't disclose the actual number but the level of high school and a similar level.
Yes.
Uh huh.
Thank you.
Okay.
The next question comes from the journey to CIBC. Please go ahead.
Okay.
[noise] Janney your line is open.
Okay.
[noise] Hello.
Can you hear me Jenny.
Yeah. This is yeah. This is Jay from TICC. Thanks, Thanks for taking my questions I've got 2 questions. The first 1 the what's our specific specific plan on the skincare business, Michigan and how will we allocate the we still have the say the marketing and the labor the team the talents of the.
The second question is as we test the and the new traffic acquisition channels that you're doing you mentioned could you frame the elaborate what we beat and how was the performance so far.
Okay.
Well for the skincare growth. So we think of the expert.
<unk> of the long, it's a pretty important.
Most of the company.
So you know we all win.
When.
So when we are entering into the skin care category.
It takes some time for us to to in proof of our understanding of the category and also the 2 to test whether the company's core capability can be up of tied to interest can be kind of thing.
So based on the Oh the stage in the.
The result, the Pottsville months, we are very glad that the confidence that the go.
Our business model is working in both kind of cosmetic and skincare.
So going back to some of the Bryan we are.
Like investing in and then we see a very clear group task for the spread for example, 1 of them.
So we repositioned the brand and are focused on a very specific the benefit category.
The benefits of basically for the brand and then of we strengthened the breath of equity and then of focus on a couple of of the U S for us.
So if we look at the growth of.
That's a win.
Is actually a very consistent and the remarkable growth so the.
This brand has been studying.
There's a microcap in March and April and we see the resolve of wears are quite impressive.
The impressive and then on this month, we are continuing to invest in the brands and building with the top kols.
Tonight and so in June the spring is going to have the promotion that won't be missed the popular else than the old people can all of the June 18 of our promotional event, we will see continuous progress on for the proposals in the mass teach the gift category.
So so we think of marketing wise, we are we our team has been the devoting a lot of resources in our understanding of the market landscape understanding the the heritage of the brand equity and also reposition the brand to be better communicating to our core customer base.
And then the pencil for the team integration. We are also very happy to see debt when we acquired those brands no matter.
The floor Atlantic and the receipt of new talents of those teams has been played importantly, clean the increasing low in guidance.
So so they they have been of a multiple and also very experienced in the skin care center. So we're very happy to walk we stand on RMB on Formula of development and also on some new channel globally.
So while we see the integration is going on quite well and we.
We think the deposition of the asbestos.
Net but also the pen.
We get from the essence.
So going back to your second question about the new traffic acquisition.
We are testing in a few of the non traditional.
In the first quarter, if you look at the live broadcasting of the leap.
We see we think the.
Yeah, very interesting of models of that exam.
Low for a lot Brock I think the 2 2 of.
Let's say to type 1 type of leverage of the Kols and other type of it.
You would have to be a lot Brock I think on your own flush of stores and then we think the growth of the of the old broadcasting ease.
The very good Hum methodology to communicate with your core consumers.
Brent story your R&D story the Formula.
Alrighty and also the of the the knowledge in skincare and the EDA.
But it also on the call.
This is the newbie.
The channel and then we think the the growth of the Oh several coffee in the we will say increasing gold in the sales.
And we also think of a quite so these are it's a.
Very interesting platform.
So it's the ideal quite so we see the GNP growth was quite remarkable and they're a field pop 2 wells are emerging from quite a basketball and the wheel Joachim basically the all of them to be for the gross of the like for passing quite sure of.
And then on so that also other interesting well change happens in the first quarter. So we think of behind a social. So we are very excited about the change and we're very happy that we tested.
In the first quarter, so even with some of them.
Based on the spacing the testing, but somehow well we'd made those mistakes of already so now with the with the the model like the finalized we are ready to to the wall and then with the with the new emerging.
The emerging channels and then we think that they will play a bigger part of it we're taking a bigger share of the total.
E Commerce landscape.
Thank you.
Yes.
The next question comes from Ingrid Zhang with UBS. Please go ahead.
Yeah.
Hi, Thanks management for taking my question I have 2 questions on the first is.
That's what has been very strong in terms of foster product launch of leveraging all of the strong consumer insights on the wish the new cosmetics on the regulation coming into effect the in May.
Could you share with all of the potential impact on our business on the second question is we start start out of all of that restaurant company in the mass Masstige segment in the in particularly in color of category now we acquired the new on to Premier.
Young to prestige skincare brands.
Could you share a bit of which are outside of our plan to grow these new skincare.
Skincare brands.
From many thanks.
Okay. So first 1 about the oh of at least.
The accretion of change of the in the in the beauty of them in.
Industry. So this is nothing new of course, we have been discussing the slices of the past 1 year.
And then a so so everything maybe a.
Mayo June of last year, and then so we were you might cause by the government to discuss the potential impact of the of the of the board I'm. So so we knew that it's going to happen and we have we had a very small at the time together with our external partners and then of we consistently communicated with the <unk>.
The officials in the EBITDA related to government departments closed the right now we didn't anticipate hum challenges from the the implement of the new so so so going back to your first question about the speech the market.
Well each of the market is what we what we believe as do the core capability of the company, but it doesn't mean, we are jumping ahead of and the like necessary or Laurie Laurie we can force.
The respect of the put the launch so we have a very strict quality control and also we have a very street benefit task for all of the part of the small so we believe all existing on.
The the F O T in our existing company you'd like the center is the is helping us to benefit from the.
Launch of the new loans.
We believe the the the.
Main purpose of the of the of the Bureau of is actually to have for a Bachelor of regulated market for many pocketing on some of them from what we've called the the the low end or Hum in the knee.
But 1 of that.
Having the strict compliance with the volume a reinforcement.
So that's about the first question well.
So.
Yeah.
Oh.
The premium skincare brands are very interesting low when we launched the beat the Sara.
Part of it's really like a very high price with the health of the shape and then the the lethal price was 750 R&D.
And we at the birth of the very beginning we were quite concerned about the price point.
So when we sell this product and now it's basically spoke of for maybe the either coming true 2 months of something.
And then we attack the new set of consumers, who are not the price sensitive, but more focus on the benefit and the eastern.
The effect of the skincare products.
So just give us some confidence when we are tapping into the premium skin care sector.
And this product.
So so a lot of my friends for use it and get.
The benefits of amazing and they basically you've got a very sudden b, 1 nice likelihood of adult usage.
So the so this was of course, our leap that we need to consistent to the end of heavily invest in R&D.
We have a better technology and its the pure report on price points and that's something the consumers for.
For some type of the consumers. The key concern is for your benefit of instead of the price.
So so if the going back to the fundamental for us to win in premium.
Premium in the.
Skincare.
We are strongly believed on these the pool of.
Of the winning formula.
Well on top of it.
Of that.
And then because of all of our large consumer base.
It's easy for us to get a subset of the consumer base, who have the high willingness to pay for premium skin care for the.
The contextual that give us some leverage when we are expanding when we are launching new products from new price at the early stage, but that's just for the early stage looking for work. We believe is the product.
For the product a quality play.
Player debt.
A definition of the roll in.
Other you can we can do the market.
So that's how we think about the the premium skin care brand growth.
Thank you.
The next question comes from Kevin Zhang with 86 Research. Please go ahead.
Hi, Thank you for taking my questions I have 2 quick questions. The first.
1 is about the offline business. So could you. Please give us more color on the progress and recovery of our offline experience stores in the second in the first quarter in the second quarter and then my second question is also about the offline, but it's about the distributor of module.
With no debt, that's why you see some brands such as a perfect diarrheal at the Odeon and Detroit has collaborated with the popular offline on cosmetic of chain store hit a tiny shoot on so how are how should we think about the ROE of this offline distributor of module.
In the long run thank you.
Yeah.
Okay.
Alright, okay.
Thanks for the question I'll take the sort of your first 1 well currently we have about 4 of the 245 offline stores.
And we do of a plan to open another 1 is for sure the rest of the year and the store is doing quite well and from a standalone business perspective.
Is already profitable.
That's the that's.
That's about our off line business.
Okay.
To to build on the first question. So the reason we are driving the.
Like the higher revenue per square.
Meters for the for our offline stores. So so.
So we adjusted of many.
Leveraging our category expansion into skincare and also some like the foundation.
So we launched some interesting part of the purely for offline for example, the the the essence and almost all of the make up of low shouldn't and also the AR the.
And also the the Moore's law as well and then so.
We also have some like.
From.
I'm, sorry, protectors for our like the foundations for offline stores, there as well so we see the very specific set of the product.
It is more fit with the mitigates the need for dollar offline consumers is playing like you've taken a higher and higher percentage of the revenue in the offline stores and for the subset of the products they have higher repeat purchase rate.
High gross margin and the better the profit.
That's why we've ever happy to see that the offline stores on making making money from them.
So for the Central question. The reason why we are substituting from.
The consumer company why why do we need to what we sort of heat.
So if you look at for the battery so put the diary has still a very.
Very strong infrastructure.
As we can see of for the offline like the worst network, but the but if you look at our newly acquired brands.
The economy economically is not making sense for each of the Brent true spend offline stores similar to book the diary.
So for example for like the 1 day, we have plans to open.
<unk> opened the 1 off line store in the channel quite high the Shanghai So low.
It's a place for the fashion people at the so a very cool people.
But the way we are thinking debt, whether it be the on the sheet expand like another 1 for 300 of sourcing in China.
We think the economy model of work. So that's why we need to work with the 115 to partner.
Which can kept for some of our brands and the listed them in the in the off line stores the environment we.
We chose <unk> because the the channel can help brands too.
To enhance the brand equity and the menu for for so long on driving.
Driving the consumers like the service.
Tears and if they can deliver of the brand message to the consumer quite well and then and also for our of breath of portfolio. The expansion in the based on the.
The the retailers model is helping us to.
To reach more.
To be reaching more consumers with lower cost. So that's the reason.
What can be 1 pond of right now, but having said that is the early stage of Spears. Our experimental so we will see what the results come back and then 2 will have a like the more knowledge or to decide whether you should be a good move on.
Thank you.
And that concludes the question and answer session I would like to turn the conference back over to management for any additional or closing comments.
Yes.
Thank you once again for joining us today, if you have any further questions. Please feel free to contact us at yes them directly or TPG Investor relations our content information for IR in both China and the U S can be found on today's press release have a great day. Thank you.
This conference has now concluded. Thank you for attending today's presentation you may now the.
Okay.