Yunji Inc. (NASDAQ:YJ) Q4 2022 Earnings Call Transcript

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by Anna Munhin Mar 22, 2023 News
Yunji Inc. (NASDAQ:YJ) Q4 2022 Earnings Call Transcript

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The transcript of the earnings call for Yunji Inc.

Operator said good morning and good evening. Thanks for standing by and welcome to the conference call. Mr. Shanglue Xiao, Chairman and Chief Executive Officer, Mr. Chengqi Zhang, Vice President of Finance, and Ms. Kaye Liu are with us. The conference call is being recorded The first speaker of the conference is Ms. Kaye Liu. Proceed, ma'am.

Thank you, everyone. Our fourth quarter earnings call will be held later today. This call will contain forward-looking statements that are based on our current expectations and current market operating conditions and relate to events that involve known or unknown risks. The will, expect, anticipate, continue or other similar expressions can be used to identify these forward-looking statements. Refer to our documents filed with the US SEC for a detailed discussion of the risks and uncertainties. Cautionary statements, risk factors and details of the company's filings with the SEC are what make any forward-looking statements qualified.

The statements must be updated under applicable law. I will turn over the reigns of the company to Xiao.

Xiao, hello, everybody. There is an earnings call for the fourth quarter of 1992. We weathered the challenges caused by COVID-related restrictions during the fourth quarter. COVID exerts downward pressure on our order volume. The country battled a surge in COVID cases in December, impacting our water fulfillment capabilities. There is still some weakness in household income and private consumption despite the larger stabilization and recovery. We are confident that our cost structure will allow us to navigate through market downtime.

Our enhanced capabilities and resilience allow us to seize opportunities when the market recovers. We are cautiously and optimistic as we look to the future. This year has been an up and down year. We continued to talk about the product and marketing insights. Our health care brand has a wide array of fresh offerings covering weight management, skin care and body rejuvenation only to meet diverse consumer needs. The focus of our R&D and production processes is to create high quality, healthy and natural products. Our users were very appreciative of our efforts.

Several of the new products each generated over 10 million in sales during a single sales event. The mindset of Yunji healthcare is slowly forming. Our skin care brand is called SUYE. We strengthened the brand for public traffic by refreshing and refocusing our private label brand promotion initiatives. We boosted user interaction by generating attention grabbing helpful content by using social media and our own user community. The upgraded Yunji selected quality certification system is an important part of our gourmet Yunji strategy.

The highest quality share consumers stock is certified by us. Our platform has a wide range of well-loved products that are frequently purchased by our users. The repurchase rate reached an impressive 81.8% in the year 2022. Let's check out our marketing efforts. The vertical community service experience continues to be refined. We have added value-added services. We made the members perks better by giving them professional house information and a nutrition advice. We upgraded our consumer marketing tool to a short video format to generate exponential growth in high value content.

By integrating these tools with our innovative features, we create a heightened brand exposure and allow our service managers to promote products more efficiently and accurately. We have begun planning on both the product and the marketing side. There is a consuming trend on the product side. The number of e-commerce companies is increasing and they are competing to get consumers to purchase low-priced products. Consumers are becoming more price sensitive and spending less even if they want higher quality products and value for money. We are confident that our private label strategy will deliver a unique consumption experience that goes beyond low prices.

Consumers became more health conscious as a result of the easing of COVID restrictions in the fourth quarter. This year, we are looking at the health care and the nutritional therapy categories to further enhance the statements of our private label products. The proportion of our total sales accounted for by health care products is increasing. Both our legacy and newly launched product proved popular with users. Recovery of consumption is a process. The travel sector has rebounded quickly.

Our goal is to expand channel penetration and build more people-to- people connections. We were unable to hold off-line promotional events over the course of the year. The limited number of sales managers who could attend impacted our consumer mindset and brand exposure. Offline marketing events have resumed as the external situation has improved. We held separate meetings in February in Changsha. We launched items from our new range during the meeting. I had a lot of one-to-one discussions with some of the service managers and models in attendance.

We are currently running an offline promotion campaign. In order to attract public traffic and boost awareness of our prep label brands, we will roll out more offline stores. There are now more than 100,000 service managers. Our goal is to improve the management of our service managers and give them more convenient services. Increasing the level of support they receive internally is one of the things we are working on. The year of transition is also the year ofopportunity. We'll be with our customers every step of the way.

We will support and help our service managers to find new opportunities in specialty retail. The call will be turned over to the Vice President of Finance, Mr.Zhang, who will review the financial results.

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ChengqiZhang said thank you. Everyone, hello. Before I go through our financial results, I would like to remind you that all numbers are in RMB terms and all comparisons and percentage changes are on a year-over-year basis. During the fourth quarter, we faced a volatile environment with restrictions in October and November and relaxation in December. As we navigate through the Pandemic, we gained valuable experience as we refine our product selections, develop our private labels, and explore new business opportunities. Our repeat purchase rate increased and our gross margin increased during the quarter.

We were able to adapt to the macro environment by furtherOptimizing our cost structures and adhering to our cost control strategy. Thanks to these efforts, we were able to decrease our operating expenses by 22%. The foundation for the further development of our business is provided by our strong cash position. Let's look at our finances a bit more closely. The total revenues were more than double what they were last year. The revenues from the sale of merchandise was 241 million and the revenues from the marketplace were 43 million. The decrease was caused by our continued strategy of refining our product selections across all categories and our selection of suppliers and merchants, as well as changes in consumers' consumption confidence caused by the COVID-19 Pandemic.

We had a stable gross margin of 40.9% compared to 39.6% last year. Customer loyalty to our private labels was the main reason for this. Let's check out our operating expenses. Fulfillment expenses were more than double what they were last year. Reduced warehousing andlogistics expenses were the main reason for this. The sales and marketing expenses were higher a year ago. Staffing structure requirements, a decrease in member management fees, and a decrease in marketplace business platform promotion expenses were some of the reasons why personnel costs were reduced. The technology and content expenses were more than double what they were last year.

Staffing structure assignments and reduced cloud service costs caused the decrease. The general and administrative expenses were higher last year. The total operating expenses in the fourth quarter were down from the previous year. We had a loss from operations of 33 million, compared to an income from operations of 4 million. The adjusted net loss was 31 million compared with the adjusted net income of 71 million. The basic andDiluted net loss per share attributable to ordinary shareholders were both less than the basic andDiluted net earnings per share attributable to ordinary shareholders.

The next thing to do is move on to liquid assets. We had a total of 699 million in cash and cash equivalents, restricted cash and short-term investments on our balance sheet as of December 31, 2022. We refined our operations during the fourth quarter. We did not have long-term debts on our balance sheet and our liquid assets were enough to cover our payable obligations. We will introduce more novel offerings with strong repurchase potential and customer peer in the future. We will refine our cost structure and explore new opportunities as we navigate through the current challenges.

The innovative strategies will deliver long-term value to our shareholders. This is the end of our comments for today. We are ready to answer questions.

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