Q1 2022 Yatsen Holding Ltd Earnings Call
Please go ahead.
Thank you operator, please note that the discussion today will contain forward looking statements relating to the company's future performance and are intended to qualify for the safe Harbor from liability as established by the U S. Private Securities Litigation Reform Act and such.
Statements are not guarantees of future performance and are subject to certain risks and uncertainties assumptions and other factors.
Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion.
General discussion of the risk factors that could affect your business.
<unk> financial results is included in certain filings with the company with the Securities and Exchange Commission.
The company does not undertake any obligation to update this forward looking information.
Except as required by law.
During today's call management will also discuss certain non-GAAP financial measures for comparison purposes, only for a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results.
You see the earnings release issued earlier today.
Joining us today on the call from <unk> Senior management team are Mr. Seen some fall off founder Chairman and CEO and also Mr. Don How young are director and CFO .
Management will begin with prepared remarks, and the call will conclude with a Q&A session. As a reminder, this conference call is being recorded and a webcast replay will be available on <unk> Investor Relations website at IR of thought, yes, and global Dot com.
I'll now turn the call over to MS. Searching football. Please go ahead David.
Yes.
Thank you Ari and I, thank everyone for participating in <unk> conference call.
Third quarter all syndicated to.
The first quarter of two what's the timing to one four yesterday and even tie up with even better.
Sure.
According to the China National Bureau.
BT retail spending.
One 8% in the first quarter.
One of the lowest growth rate.
And then the recovery from the second quarter of 2020.
Due to weak.
Lending and economy uncertainties in China.
So we've taken sort of COVID-19 in March led to widespread suspicion you major Chinese cities such as Shanghai.
And we still get sufficient continuing well into the second quarter.
It's clear that you are facing one of the toughest visiting wyman.
Yes.
Against this market backdrop.
A potential net revenues in the first quarter.
Climbed by 40.
But the eight 3% year over year to RMB 891.
In line with our previous guidance.
Market.
Notwithstanding.
We remain committed to our strategy.
Pollution, playing a positive again in 'twenty to 'twenty one.
Fundamentally we believe strong brands are highly visible.
Market cycles.
Brian will give you their higher margins.
You can turn can't give it you Betsy.
Wendy.
R&D.
Apache or aging.
It's a cycle.
Therefore, our evolution strategy is simple.
Both carry a portfolio of sampling.
How do you differentiate it.
Thank you Paul that could drive sustainable growth.
And location dependent and the resources needed to achieve these goals and our team executed with passion.
And we see that during the first quarter.
Thanks to the team's efforts we have already seen some signs of progress.
Once that's fine with the equipment you know gross margin.
Which reached FID.
59% in the first quarter.
And equally viewpoint and a full percentage point.
That's it.
On a year over year and quarter over quarter basis.
We achieved these gross margin gains.
Right.
Relentless focusing O b.
Brent equities, and reducing unprofitable discounting and promotions.
Encouragingly I would put it probably loose powder won't W. D. They called.
And it was included on the national basis.
They tend to take a true China generation right.
These awards not only underscore the ongoing acute book values and the public.
But also a powerful validation of our brand building approach.
Yep.
All brands and to launch the new products.
Yeah.
So I think it's skincare March both of them with these new Triple action here Syrian.
Along with the campaign.
The product because the military I can eat more.
And he had been in how you think about the dermatology.
<unk>.
In April if loan launched a new branding campaign.
Taking a break.
He shows centered around a technical issue.
Okay, Nicole carbon.
Wakening customers, saying bye.
Now an approach while interpretation of vision Radiant scheme.
T or new generation.
Not to be all done in May and I need.
Do you think rate estimates put us cities.
An anti aging serum featuring the algae ingredients.
Great.
Combining the breathtaking scenery of the French Alps.
Insistence on French position and fine to be enforced and that makes reputation.
And again, yes, we've got cheap skincare.
Yeah.
The energy and excitement of this campaign.
By robust financial result for all the Egypt right.
Net revenue growing by 58, 5% year over year to RMB 183 million.
First quarter.
Representing 10, two points, but you're saying, let's take hold net revenues.
After a seven 5%.
Prior year period.
While our transformation is repeat and brand building.
We are laser focused on it in the right way.
And that the current economy conditions.
Marketing.
Sure.
Well our color cosmetic brands.
Tough market environment.
Our relentless efforts to optimize marketing online, that's where a large decline in revenues in the first quarter.
However.
Our color cosmetic brands are now operating with a much improved profitability profile.
This compared with last year.
Specifically, we significant one being profitability profile.
Streamlining operations and are concentrating on with hero product category.
I like it.
Enjoy.
Brand recognition among our loyal customers.
But there wont be out of him.
With the benefit of our strategy.
Maybe it's good bang for the Buck product.
The breadth with the breakthrough we didn't you buy an IP crossovers appealing to what age target customers.
To attract new customers and cheap performance marketing.
Expense at a reasonable level.
Yeah.
Several operating level.
And the team there.
But increasing third party online and offline distribution, she tailoring and maximizing strategy was on two more in the U S. B seek incremental opportunities for revenue and profitability amidst the difficult market environment.
These marketing efforts.
Patient enhancements.
The brand portfolio helped us significantly reduce our selling and marketing expenses in the first quarter.
Our total non-GAAP selling and marketing expenses.
Declined by 44, 4% year over year to RMB 517 media.
And as a percentage of total net revenues.
non-GAAP selling and marketing expenses reached 54%.
A decrease of seven percentage points year over year.
While we continue to pursue forbidden marketing efficiency.
Much we can do operationally to build on this progress.
At the moment, we are focusing yeah.
Mitigating that.
Adverse impact of pandemic related disruptions.
Nine stores.
During the first quarter many of our offline tours will shut down due to pandemic restrictions.
Why are those stores that remain open.
Luke do choppy and it was of course spending.
We expect this situation to persist in the park to be worse in the second quarter.
Accordingly.
Activity initiatives.
For optimization in the first quarter and the Coupe and the record it that's in foreclosure related expenses as a result.
We may continue to optimize the size of our offline stores network throughout the year.
We believe the plan, we put our offline business.
More sustainable.
Given the dynamic retail environment in China this year.
COVID-19.
<unk> impact okay.
Thanks to our logistics and supply chain.
To ensure that we are able to obtain critical orders ahead of the crucial may 10 years and the June 18 promotional holidays in the second quarter.
Our team has worked tirelessly with our logistics.
Supply chain partners to find creative solutions.
Additionally, given the weakening consumer demand on the ramp up time to tend to chew.
We made the silicon optimization adjustment to.
The size of the whole logistics footprint and to reduce the scope of the whole supply chain expansions.
The first quarter.
Looking elsewhere within our cost base.
We also overhauled our organization structure to align with our new sustainable growth objectives.
During the first quarter be comprehensively updated our management structure.
Our compensation structure and optimize our talent.
As a result.
Hum.
Things that are close to 3000 at the end of March 'twenty data to come.
Compared with 4200 employees a year ago.
Our non-GAAP general and administrative expenses totaled RMB warm Jan switching media.
Approximately RMB $32 million lower than the fourth quarter of 2013.
Sure.
The accumulative effect of a whole barriers cost optimization initiatives.
We achieved.
non-GAAP net loss of RMB 156 million in the first quarter.
Oh 38, 3% deduction.
The net lease of R&D.
I'm, James $34 3 million in the prior year period.
We expect the operation operating environment could become even more challenging in the second quarter of two due to the fed.
The COVID-19 impact on the economy.
We will remain focused on both aspects of our business and the environment that we can control.
Oh, two mining costs upgrading our capabilities and investing for the future.
While continuing to adapt your dynamically evolving market.
That's the life locked up all of our products differentiating efforts.
R&D continues to be a key area of investment.
We recorded RMB 36 media in R&D expenses in the first quarter.
Representing corporate tank of total net revenues.
We're working on a number of exciting initiatives.
Strengthening our R&D capability in 2022.
And if we look forward to sharing updates.
Our new partnership and a milestone.
They become available.
We are also working to upgrade our between like streaming operations.
Building on the previous quarter's momentum total net revenue from all of the lean channel you by over 150% year over here in the first quarter of kind of tended to make.
Making it our largest channel by revenues.
Kimball and all offline stores.
After more than a year.
That testing and optimization.
We have the benefit in our horned barriers.
To maximize all I would tell you across all the various right.
In particular.
We ranked <unk>.
In color cosmetic sales building during the fourth quarter.
Demonstrating the progress we have made since last year.
As pleased as we are with this result, we won't be spending too.
And given the fast moving nature of the balloon platform, we will continue to adapt and innovate to stay ahead of the curve.
Last but not least.
Integral to our sustainable but that is all continued effort to add to socially responsible corporate citizens.
Yeah, I think he's passionate about promoting women's public welfare and they empower.
Oh International Women's day, nothing in a new weekly.
And to be launched a woman without limits campaign.
We invite each women from different industries, and the diverse identities to share their life experiences encouraging more women to explore their own possibility and opportunity Oh Gee.
In addition, our efforts to ensure the safe and efficient delivery of good have continued with the recent could be offering.
We've put the Bari cooperating with logistic companies to develop a leading group cone.
This code improve the transparency.
Transported goods and it helped to ensure on time delivery to customers.
The detailed information on how we are shifting.
Mental and social impact bond business and put it in place corporate governance best practices.
Please refer to always not growth.
You report.
Which was released on May 15.
First annual report why is the comprehensive review of our ESG activities.
In a world of uncertainty we believe.
A vital social mission.
To discover protect and.
The debate to beauty.
Which creates happiness any inquires all mine.
And anytime they too will be an important year for ADESA as we settle along with new five year plan.
Although the current in the foreseeable market conditions remain challenging we plan to eat more.
They're all operating booths and they continue to delight customers in China and around the world with our primary high quality of movie club.
With that I will now turn the call over to our CFO , Joe Hogan to discuss our financial performance. Thank you everyone.
Thank you, David and Hello, everyone.
Before I get started I would like to clarify that all financial numbers presented today are in it won't be amounts and all percentage changes referred to year over year changes unless otherwise noted.
Total net revenues for the first quarter of 2022 decreased by 48, 3% to.
891 million from one 4 billion in the prior year period.
The decrease was primarily attributable to the 40.
Five 6% decrease in net revenue from our color cosmetics brands, partially offset by the 68, 5% increase in net revenues from our skin care brand.
Gross profit for the first quarter of 2022.
Creased by 38% to 614.5 million RMB from $991 6 million in the prior year period gross margin for the fourth quarter of 2022 increased to 69% from 68 point.
6% in the prior year period, the increase was primarily attributable to our continuous.
The efforts to improve our gross margin, including through increasing sales from our higher gross margin product as well as through optimization of pricing discounts and promotions.
Total operating expenses for the fourth quarter of 2022 decreased by 39% to 122.5.
Million RMB from one point 33 billion in the prior year period.
A percentage of total net revenues total operating expenses for the first quarter of 2022 or 103.5% as compared with 92.4% in the prior year period.
Fulfillment expenses for the first quarter of 2022 or 73.9.
9 million RMB as compared with 92 7 million in the prior year period.
As a percentage of total net revenues fulfillment expenses for the fourth quarter of 2022.
Eight 3% from six 4%.
The prior year period, the increase was primarily attributable.
A decrease in the economies of scale of our fixed fulfillment expenses, partially offset by certain cost saving initiatives related to fulfill them enacted.
During the fourth quarter of 2022.
Selling and marketing expenses for the fourth quarter of 2022, or 604.7 million RMB as compared with 1.04 billion in the prior year period as a percentage of total net revenues selling and marketing expenses for the fourth quarter of 2022.
<unk> decreased to 67.9% from 72.1% in the.
Prior year period, the decrease was primarily attributable to our continuous efforts to optimize the efficiency of our marketing spending partially offset by the expenses related to the closure of certain offline experience stores.
General and administrative expenses for the fourth quarter of 2022, or 208 1 million RMB as compared with $472 3 million in the prior year period.
As a percentage of total net revenues general and administrative expenses for the first quarter of 2022 increased to 23, 4% from 11, 9% in the prior year period. The increase was primarily attributable to the increases in salaries and share base.
Compensation expenses.
Our research and development expenses for the first quarter of 2022, or 35.8 million RMB as compared with $27.7 million in the prior year period.
A percentage of total net revenues research and development expenses for the fourth quarter of 2022.
Two 4%.
One 9% in the prior year period, the increase was primarily attributable to the increases in personnel costs raw material.
And the share based compensation expenses.
Our commitment to enhancing our research and development capabilities.
Loss from operations for the fourth quarter of 2022 decreased by 10, 3%.
308 million RMB.
$343 3 million in the prior year period.
Operating loss margin was 34.6% as compared with 23.8% in the prior year period.
non-GAAP loss from operations for the fourth quarter of 2022 decreased by 34, 1% to $170 1 million from $258 3 million in the prior year period.
non-GAAP operating loss margin was 19.1% as compared with 17.9% in the prior year period.
Net loss for the fourth quarter of 2022 decreased by eight 7% to 291 point for me only RMB from $319 million in the prior year period.
Net loss margin was 32.7% as compared with 22.1%.
The prior year period net loss attributable to.
Ordinary shareholders per diluted ads for the full.
First quarter of 2022 was zero point 46, RMB as compared with 0.5 in the prior year period.
non-GAAP net loss for the fourth quarter of 2022.
Creased by 33, 6%.
$165 6 million from $244 3 million in the prior year period non-GAAP net loss margin was 17, 5% as compared with 16, 2% in the prior year period.
non-GAAP net loss attributable to ordinary shareholders per diluted ads for the fourth quarter of 2022 was <unk> five five RMB.
Compared with zero point.
<unk> 37 in the prior year period.
As of March 31, 2022, the company had cash cash equivalents and short term investments.
Two point 97 billion RMB as compared with 3.4, Kimberly and I and we as of December 31st 2021 for the first quarter ended March 31 2022.
Cash used in operating activities was $404 1 million RMB as compared with 400 and.
$66 1 million in the prior year period.
In the second quarter of 2022, the company expects its total net revenues to be between $808 3 million.
And 968 million.
Presenting a year over year decline of approximately 47% to 47% primarily due to continued industry wide softening of color cosmetics demand and continued negative impacts from COVID-19 on offline experience stores.
Online order fulfillment capabilities.
Fight change this forecast reflect the company's current and preliminary views on the market and operational conditions, which.
They are subject to change.
I would now like to open the call to Q&A.
Operator, we will now.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and you'd like to withdraw your question.
Please press Star then two for.
For the benefit of all participants on today's call. If you wish to ask your question to management in Chinese. Please immediately repeat your question in English.
At this time, we will pause momentarily to assemble our roster.
The first question comes from Dustin Wei with Morgan Stanley . Please go ahead.
Thanks, a lot for taking my questions I first question as to why I wish management quantify it a little bit before the COVID-19 impact.
Both myself market consumer perspective offline store and also I think from the product delivery or any supply chain disruption and do you actually see some of that easing situation like coming from like March Appro to me second.
Second question is you know based on the improvement in the loss reduction and a much better ROI.
But also we have these bigger headwind from Covid light just wanted to check if manager must still stick to the target to you know maybe for 2023 to get to turn around the world, making a small profit.
And I guess the third question is that if they they could provide a little more of a highlight for the key brands.
I think you'd talk about it in the prepared remarks, but just anything that you to highlight especially in the current competitive environment and a car around you know a macro weakness, what's your thoughts and initiatives for the key brands as well as some of the key channel you mentioned <unk>, but I just wonder if you can elaborate more or like you know what you know some of the.
Detail. So the initiatives that you are focused on thanks.
Thanks, a lot.
[noise], David do you want to take the first question on the impact of the COVID-19 on our operations.
Sure.
I think if you look at the.
Members of the.
At the Beach House and also the the beat me to choose.
Gross.
And then we can see it in the C T M.
The total retail declines by one.
I understand that.
Also to our another 20, 213% declines in the beauty industry.
I think that has to be a very.
Important is tying up all the impacts of the Covid.
The whole business, including online and offline.
And therefore, all offline specifically I think in April we see that a lot of like a 50% of the AR of the alcohol.
All stores.
Pets by the court.
Online.
Because of logistics and also the supply chain Hum.
Cause disturbances in the Shanghai area, and then so that the.
Impact Medicine Pet school hour you put the loans.
Also for all of them customer coverage.
If we look at had about will be are going to hum too to hatch the week Coca Cola and also.
We have a very focused going forward.
Nucor's model and then also you are shifting more and more resources in exclusive brands and I'm. So sorry, I can't answer the third question first which is what kind of initiatives.
To what extent in the Hollywood brand properties.
I think for US right now cause I mean in the bucket a Goldman Uh huh.
Or cause you I think the brand has a very unique.
A brand equity that you spoke of some of the colleges blend and.
The brand launch of an important part of it's just the Chipotle took root cause there.
Helps us to expand into to probably more a bigger group of customers.
And we see the momentum the Knickerbocker, who Uh huh.
Strong clinical colonic just launched here.
No Sir.
Good good.
Do you attribute your pyramid into a peak or kind of a good space and I'm. So based on the initial launch in Belgium.
Two new products.
Oh, Yeah, that's what T mall.
Do you foresee that.
Okay.
Strong putting Peter for both brands.
Sure.
And therefore, if loans this year are one of the most important initiatives.
Teacup ran a launch for equal so right now the brand has seen.
The graco team has been Hum expanding Corona Queens, Brooklyn to more like a luxury skin care brand.
Uh huh.
Campaign, just launched or we should see a lots of good got it has been very well received by the country.
So I think looking forward about the about the about the can take pension devote more resources into Atlanta.
Long and I believe those are those firms that have high gross margin and then and also talked to the.
Hum.
We'll come back.
Yeah, and the thing you have question number two.
Well.
Well, we're still aiming to a breakeven or to turn profitable.
For the full year next year, but that depends on how the COVID-19 situation.
And first well there.
If it's over by the end of this year I think.
And it tends to start we will be able to achieve our.
Our goal, but that that that will actually depend on the the situations of the virus.
Thanks, a lot Dabian Delhomme I had just one follow up on you know man brand perfect Diary brand. This year, obviously is very important for perfect diet brand itself to go through so many so many changes in terms of the way you do marketing and I guess, the new product launch. So could you also share some colors on it.
You know what the current focus on correct perfect Arey Brent.
Yeah.
Sure I think for the diary. So we are looking at a number of growth drivers to really Easter sales decline.
But at the same time, the most important things to improve the branch profitability.
There are a few things we're doing right now.
One thing we will continue momentum and believe and then so right now we are more and stronger working relationship is to procure Els and there also we are also continuing to improve our own brand love streaming capabilities and.
And then also the fitness initiatives in particular, you're going.
Couldn't you launch new products. So right now we've just launched a weekend sponsorship choice.
Part of the.
And the promotion to it I think based on our observation on social media to put up pretty well with our core customers.
But they think theyre going to do this to expand wholesale distribution at the major offline with you the total chain.
So I'll be honest and another thing I want to highlight is the Oh really won't you poop off a month or so we should be teaching people.
Optimizing put the body's offline stores.
So while they're at home.
Thanks, a lot that's all very helpful. Thank you.
Thank you.
The next question comes from Christine Cho with Goldman Sachs. Please go ahead.
Okay. Thank you.
Management.
I have two quick questions. So I think you mentioned that I think the operating environment.
And quite challenging in the second half that down how should we think about the recovery path in the second half and also next year are you know what are some of the key drivers that we need to watch for to see industry acceleration as well as our own market share gains Oh.
That's the first question secondly, how can you elaborate a little bit more on your plans for selling and marketing spend if you look at first half of this year and first to the second half.
Okay.
I think for the whole industry one of the key indicators are you still there.
The yield vehicles right.
Right now we see them.
Hum a very big.
Declines in heat cool and hold that number it's going to be in the third quarter to the fourth quarter would become a wanted that she gets you some thoughts or some other with nothing to the house.
But the whole industry.
So having said that I think mhm you need to be.
The cautious about the impact of the supply chain or for the whole industry.
Right now if we look at the.
A lot of the manufacturers of OEM ODM partners dislocations in Shanghai.
Some areas I mean.
All of those suppliers.
<unk> got.
<unk> got a very strong impact of the COVID-19, a policy so that'd be a.
If all the players in this in good shape, but it's a challenge.
New product innovations or existing put out sometime in the second topic, which is good.
So so that's all that we can think about the.
The Kobe right now.
Okay, and then the follow up.
Yeah, and the second question that question that I asked about the sales and marketing.
Changes going forward. So currently if we look at this quarter, we have a seven percentage point reduction of the sales and marketing spend as compared to a year earlier.
So that's the actual number and the reduction is actually higher but it was partially offset by some one time expenses related to closure of some off offline source due to the resurgence of the covey light flu and then going forward. We think there are a couple of driver how it will help us continue to shoot.
<unk> reduced our sales and marketing.
Expenses as a percentage of revenue for number one is our ongoing optimization of the offline store and then secondly is the ongoing optimization of ROI, which will help reduce their traffic expenses for all our Fred in the portfolio.
So those would be the two main drivers going forward first off the market.
[noise]. Thank you.
I think your next question comes from John E. Lynn with TICC. Please go ahead.
Hi, Thanks for the management, so Shelly and taking my question. My first question is that what are the company's strategies on June 18th shopping basketballs.
She has priced strategies and marketing strategy and how much will we leverage top pay around.
And also how did the management see the competition D. C. Yeah. My second question is that we what scenes, yes. Some established open lobby in 2021 and has increased the mathematic R&D showing the Companys Korean companies empathy for our sustainable growth.
So could the management give some updates on our R&D with solids and how will the results be applied in the product development in the future.
Thanks.
I think for the first one about our preparation for the year.
Hum Junaid since the promotion one of the key initiatives can take as you to launch new partner.
And also for some for an upgrade.
The before the big promotion Bank.
So in the end.
In May we launched a few are very important U.
S K use for.
The body with a home being pain, they're basically all of our brands.
We are looking forward to both new initiatives are performing well during promotion do you bet.
On the other hand, we also strengthen our brand equities because right now you can look at the the promotion.
If you back up the Oh, Virginia team.
Did you see that this Congress and also price competition has become really strong so the only way to be clear and Hum too Jeff that concern cor politically that'd be just strengthening the brand equity.
So that we can maintain a healthy gross margin.
Or are they kind of corporate credit book roles. So I'm. So that's moving up even further.
For the didn't make me the promotion, but I haven't got that but right. Now we think that they are very uncertain about what is going to happen before the mid year promotion. So.
So that's why we have taken a relative to your a wider range of the guidance this year.
Second question about the R&D you'd be looking at the numbers, yeah, yeah, including Ganji expenses, but.
The outer hanging people connect some of the cyclical part of the future.
And as you can see that they are patterns. There are technologies that are developing for based on the open up strategy. For example, blah blah blah blah blah triple exercise repair serving as a partner we talked about it goes with the quadrant scientific on arguably bug fixes and the patterns and the time something back.
Hum.
And a group of Crappy, Craig from the entry barrier for the competition.
Luca.
Oh Gee survey.
Our Puerto Rico give out of books and hip hop in the past years and also the the.
The ingredients go no go kind of larger zynga.
I'll get started.
Actually even sure very high performance of the pullback in person.
Hmm.
All weekend, you got looking forward, there will be more and more patterns dermatology, we'd be happy to be putting to our newly launched products.
During the coming half a year, there will be a more and more new.
I'm actually poker phone.
Yeah.
You can see that the the R&D efforts.
Helping or caught up to our and improve the competitiveness of the market and also reflecting the gross margin and a healthier people purchase.
Thank you.
It's super insightful, Yeah, that's all the questions I have thanks.
The next question comes from Olivia Tong.
With Raymond James Please go ahead.
Hi, This is Devin Weinstein on for Olivia I appreciate you taking our questions first.
First I wanted to ask a little bit more about the guidance. So presumably the impact of COVID-19 will be a bit more substantial in Q2 than Q1, but your guidance for next quarter implies only at the midpoint just a slight increase in the slowdown right.
And on a two year stack a sequential improvement so I was hoping to get a little bit more color on the environment the category and your positioning us to get some more context and then if you could also comment on the second half I. Appreciate some of the earlier comments that you gave but more specifically around some of the pent up to.
Man, you're expecting to see with lockdowns, ending and the easier comps going into the second half.
And then my second question is around the cost environment.
It sounds like you've done quite a bit of work in terms of reducing head count.
Right sizing you know the your personnel I'm curious, where you think you stand in terms of your long term goal, where the head count needs to be what kind of other actions you plan to take them as well in terms of optimizing your cogs or other operating expenses just any other areas, where you think you can.
Leaned out the expenses and bring greater productivity. Thank you.
Yeah.
I think the first question for the fifth year.
But the kind of the bogie in April you can be separately hum like color cosmetics and skin care.
Color cosmetics has a bigger.
<unk> has a higher decline rate versus okay.
So the reason.
Yeah give me just got in.
A question about escalation Oklahoma.
Brian .
So that you can.
Hum.
The right now the skincare skincare.
Skincare Ah that's her off the video industry.
Congrats it'd be easy for me.
And also I'm, just looking to get them.
Okay come to terms with the clinical work. So that's why we are devoting more resources quoting between Jetblue and we choose to do.
Fundamentally and helping the business to become a profitable business.
Having said that for because so right now we are for.
For sure or the very end of the Columbia has been declining.
Two months, it's one of the key reasons that Oh, Yeah, you are raising the sales and marketing the all white barn football stuff.
Hum.
This will be reflected in a rapidly declining sales and marketing expense co. So so right now I'm on the other hand, you said looking forward about our optimization Hum strategy, we think that you compliments that'd be good focus on the number one.
The most important thing to prove themselves into marketing.
Because if we look at that.
The Q1 and all.
So put a sales and marketing we see the opportunity will come once the offline resuming to a normal situation and also.
Our continued effort to optimize them to market at ally.
And also to go.
So high we could purchase they are coming from different.
So all those factors will be contributing to the.
A decrease in sales and marketing.
On the iron ore.
And one thing that we will continue to optimize it.
Hum you see.
Is there a room to optimize the talent performance and also won the.
The optimization project.
Moving forward, we will see a good percentage of total revenue.
Our continuous efforts.
Okay.
Thank you for the comments.
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.
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.
You can find our contact information for IR in both China and the U S. In todays press release, Thank you and have a great day.
Yeah.
The conference has concluded you may now disconnect. Thank you.
Yeah.
[music].
Yeah.
[music].