Yatsen Q4 and Full Year 2025 Earnings Call - Skincare-Led Recovery Narrows Losses, Non-GAAP Turnaround

Operator: Ladies and gentlemen, good day, welcome to the Yatsen fourth quarter and full year 2025 earnings conference call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Sophia Pang, Investor Relations Manager. Please go ahead.

Sophia Pang, Investor Relations Manager, Yatsen: Thank you, operator. Please note that 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. 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. A general discussion of the risk factors that could affect Yatsen’s business and financial results is included in certain filings of 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.

Please see the earnings release issued earlier today for a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results. Joining us today on the call from Yatsen senior management are Mr. Jingfeng Huang, our Founder, Chairman, and CEO, and Mr. Donghao Yang, our CFO and Director. Management will begin with prepared remarks and the call will conclude with a Q&A session. As a reminder, this conference is being recorded. In addition, a webcast replay of this conference call will be available on Yatsen’s Investor Relations website at ir.yatsenglobal.com. I will now turn the call over to Mr. Jingfeng Huang. David, please go ahead, sir.

Jingfeng Huang, Founder, Chairman, and Chief Executive Officer, Yatsen: Hi. Thank you. Hello, everyone. Thank you for joining Yatsen’s fourth quarter and full year 2025 earnings call. I will start with a macro overview and our key financial performance, followed by an overview of our operational highlights under our key strategy initiatives over the past year. China’s beauty industry maintained an upward trajectory throughout 2025. According to the adjusted data from the National Bureau of Statistics, beauty retail sales grew by 8.2% in the fourth quarter, the highest quarterly growth rate of the year. For the full year 2025, beauty retail sales grew by 5.1%, rebounding from the decline in 2024. While the market demonstrated robust recovery, the landscape was also marked by intensified competition, particularly during major shopping festivals.

Against this backdrop of growing, yet highly competitive market, we successfully executed our strategy initiatives to capitalize on the industry’s upward momentum. Our total net revenue grew by 20.1% year-over-year for the fourth quarter, performing in line is with our previous guidance and significantly outpacing the industry average. More importantly, this growth was driven by our skincare brands, which accounted for 61.1% of our total net revenues in the fourth quarter. Our profitability also marked an improvement, recording net income under both GAAP and non-GAAP measures for the fourth quarter. For the full year 2025, we also achieved a solid recovery in both revenue and profitability. Total net revenue returned to a growth trajectory, increasing by 26.7% year-over-year to RMB 4.3 billion.

Both our color cosmetics and skincare brands delivered year-over-year growth, with DR.WU and Galénic serving as the primary drivers of this robust performance. For the full year, skincare brands contributed 53% of our total net revenues. On the bottom line, we narrowed our full year net loss margin to 2.2% from 20.9% in the prior year, while delivering a non-GAAP net income margin of 0.2%. This non-GAAP profitability turnaround is the direct result of our enhanced growth margin, optimized operation efficiencies and a positive operating leverage from our top line growth. Our robust performance demonstrated the long-term value of our strategy transformation. Throughout the year, we remained steadfast in our commitment to three core initiatives: driving R&D-led product innovation, strengthening brand equities across our multi-brand portfolio, and improving our overall profitability.

I would now like to dive in deeper into these key focus areas. First, we leveraged our established R&D infrastructure to fuel a pipeline of innovative products. Driven by proprietary ingredients development, open collaboration and application of AI in areas such as molecular structure prediction, our system efficiently translates cutting-edge technology into market-ready solutions. Our high growth brands have all benefited from this refined R&D ecosystem, with Galénic as a prime example. In September, Galénic launched the VB Serum, further strengthening the brand’s ABC cellular-level skincare framework. The product saw a rapid surge in sales, becoming one of Galénic’s top sellers and winning the Breakthrough Repairing Serum of the Year at the 2025 Cosmo Beauty Awards. In December, Galénic introduced another flagship innovation, the Couture Révélation Cellulaire Reviving Cream.

Utilizing the brand’s active anchor penetration technology, it delivers our exclusive patent anti-aging ingredient, Lumiskin, deep into the skin to achieve significant firming and lifting effects. With these launches, Galénic has established a comprehensive presence across key skincare categories, including serums, creams and masks. We believe that our expanded product portfolio could not only optimize our channel mix by providing more offerings across different platforms, but also increase customer lifetime value by encouraging broader regime adoption. Second, we continue to focus on deepening the value and market positioning of our brands. With a portfolio that spans from mass to premium and from color cosmetics to skincare, we possess a unique comprehensive view of the beauty industry. This allowed us to precisely adjust the evolving needs of diverse consumer segments. For example, by leveraging Dr.

DR.WU’s decades of expertise in clinical skin renewing treatments and capturing the latest trends in medical aesthetics, the brand launched the PDRN serum. This product is designed to meet growing consumer demand for clinic impaired results from the comfort of home. Driven by these deep consumer insights, DR.WU experienced robust growth over the past year and was recognized as the annual growth breakthrough brand from Douyin. This success has further solidified DR.WU’s brand authority and awareness in the skin renewing segment, effectively translating market momentum into long-term brand equity. Third, we remained dedicated to enhancing our profitability and operational excellence. We see clear opportunities to further improve profitability across several dimensions. To begin with, we are optimizing our product mix by prioritizing products with higher growth margins.

Channel-wise, we plan to maximize marketing efficiency through data-driven customer relationship management and a more stringent return on our investment discipline while we are locating spend toward higher return platforms. Beyond our front-end operations, we are also optimizing operational workflows to drive cost optimization. Lastly, as our top line continues to grow, we expect to gain operational leverage across our fixed expenses. Collectively, these initiatives booster our confidence in delivering steady margin expansion while sustaining our growth momentum. In summary, 2025 was a pivotal year. Our R&D breakthroughs, deep consumer insights and enhanced operational efficiency have returned us to growth and optimized our profitability. Moving forward, we will stay committed to long term, driving brand equity through innovation and delivering a quality policy-centric growth. Thank you. I will now turn the call to Donghao Yang.

Donghao Yang, Chief Financial Officer and Director, Yatsen: Thank you, David, and hello everyone. Before I get started, I would like to clarify that all financial numbers presented today are in RMB amount and all percentage changes refer to year-over-year changes, unless otherwise noted. The total net revenues for the fourth quarter of 2025 increased by 20.1% to RMB 1.38 billion from RMB 1.15 billion for the prior year period. The increase was primarily due to a 51.9% year-over-year increase in net revenues from skincare brands, partially offset by a 9.1% year-over-year decrease in net revenues from color cosmetics brands. Gross profits for the fourth quarter of 2025 increased by 20% to RMB 1.07 billion from RMB 893 million for the prior year period.

Gross margin for the fourth quarter of 2025 was 77.7%, remaining largely flat as compared with 77.8% for the prior year period. Total operating expenses for the fourth quarter of 2025 decreased by 15.6% to RMB 1.08 billion from RMB 1.28 billion for the prior year period. As a percentage of total net revenues, total operating expenses for the fourth quarter of 2025 were 78.6% as compared with 111.8% for the prior year period. Fulfillment expenses for the fourth quarter of 2025 were RMB 77 million as compared with RMB 63.5 million for the prior year period.

As a percentage of total net revenues, fulfillment expenses for the fourth quarter of 2025 were 5.6% as compared with 5.5% for the prior year period, remaining largely flat. Selling and marketing expenses for the fourth quarter of 2025 were RMB 893.8 million as compared with RMB 690.6 million for the prior year period. As a percentage of total net revenues, selling and marketing expenses for the fourth quarter of 2025 increased to 64.8% from 60.1% for the prior year period. The increase was primarily driven by higher traffic acquisition costs amid intensified competition during the Double Eleven shopping festival.

General and administrative expenses for the fourth quarter of 2025 were RMB 74.4 million as compared with RMB 100.1 million for the prior year period. As a percentage of total net revenues, general and administrative expenses for the fourth quarter of 2025 decreased to 5.4% from 8.7% for the prior year period. The decrease was primarily driven by lower payroll expenses and share-based compensation expenses, coupled with the leveraging effect of higher total net revenues in the fourth quarter of 2025. Research and development expenses for the fourth quarter of 2025 were RMB 38.8 million as compared with RMB 26.3 million for the prior year period.

As a percentage of total net revenues, R&D expenses for the fourth quarter of 2025 increased to 2.8% from 2.3% for the prior year period. The increase was primarily driven by higher payroll expenses resulting from a rise in R&D headcount. There was no impairment of goodwill for the fourth quarter of 2025 as compared with an impairment of goodwill of RMB 403.1 million for the prior year period. Based on our assessment, no impairment indicators were identified as of December 31, 2025. Loss from operations for the fourth quarter of 2025 was RMB 12.7 million as compared with RMB 390.7 million for the prior year period. Operating loss margin was 0.9% as compared with 34% for the prior year period.

Non-GAAP income from operations for the fourth quarter of 2025 was RMB 11.8 million as compared with RMB 93.2 million for the prior year period. Non-GAAP operating income margin was 0.9% as compared with 8.1% for the prior year period. Net income for the fourth quarter of 2025 was RMB 3 million as compared with net loss of RMB 378.8 million for the prior year period. Net income margin was 0.2% as compared with net loss margin of 33% for the prior year period. Net income attributable to Yatsen’s ordinary shareholders per diluted ADS for the fourth quarter of 2025 was RMB 0.08 as compared with net loss attributable to Yatsen’s ordinary shareholders per diluted ADS of RMB 3.98 for the prior year period.

Non-GAAP net income for the fourth quarter of 2025 was RMB 41.2 million as compared with RMB 107 million for the prior year period. Non-GAAP net income margin was 3% as compared with 9.3% for the prior year period. Non-GAAP net income attributable to Yatsen’s ordinary shareholders per diluted ADS for the fourth quarter of 2025 was RMB 0.46 as compared with RMB 0.99 for the prior year period. I would like to briefly walk you through the highlights of our full year results.

Total net revenues for the full year of 2025 increased by 26.7% of RMB 4.3 billion from RMB 3.39 billion for the prior year period, primarily attributable to a 63.5% year-over-year increase in net revenues from skincare brands, combined with a 1.9% year-over-year increase in net revenues from color cosmetics brands. Gross profit for the full year of 2025 increased by 28.4% to RMB 3.36 billion from RMB 2.62 billion for this prior period. Gross margin for the full year of 2025 increased to 78.2% from 77.1% for the prior year period. The increase was primarily attributable to increasing sales of higher gross margin products.

Loss from operations for full year of 2025 was RMB 185.8 million, as compared with RMB 824.9 million for the prior year period. Operating loss margins decreased to 4.3% from 24.3% for the prior year period, primarily because there was no impairment of goodwill for the full year of 2025. Non-GAAP loss from operations for the full year of 2025 was RMB 84 million, as compared with RMB 224.3 million for the prior year period. Non-GAAP operating loss margin decreased to 2% from 6.6% for the prior year period. Net loss for the full year of 2025 was RMB 92.4 million, as compared with RMB 710.2 million for the prior year period.

Net loss margin decreased to 2.2% from 20.9% for the prior year period. Net loss attributable to Yatsen’s ordinary shareholders for diluted ADS for the full year of 2025 was RMB 0.87, as compared with RMB 6.99 for the prior year period. Non-GAAP net income for the full year of 2025 was RMB 8.4 million, as compared with non-GAAP net loss of RMB 128.2 million for the prior year period. Non-GAAP net income margin was 0.2%, as compared with non-GAAP net loss margin of 3.8% for the prior year period.

Non-GAAP net income attributable to Yatsen’s ordinary shareholders for diluted ADS for the full year of 2025 was RMB 0.19, as compared with non-GAAP net loss attributable to Yatsen’s ordinary shareholders for diluted ADS of RMB 1.26 for the prior year period. As of December 31st, 2025, we had cash, restricted cash and short-term investments of RMB 1.05 billion, as compared with RMB 1.36 billion as of December 31st, 2024. Net cash used in operating activities for the fourth quarter of 2025 was RMB 69.4 million, as compared with net cash generated from operating activities of RMB 202.2 million for the prior year period.

Net cash used in operating activities for the full year of 2025 was RMB 94.7 million, as compared with RMB 243.7 million for the prior year period. Looking at our business outlook for the first quarter of 2026, we expect our total net revenues to be between RMB 958.6 million and RMB 1.08 billion, representing a year-over-year increase of approximately 15%-30%. These forecasts reflect our current and preliminary views on the market and operational conditions, which are subject to change. With that, I would now like to open the call to Q&A.

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. You may also press star then 2 if your question has been addressed and you’d like to remove yourself from queue. We’ll pause for just a moment. Oops, and I do apologize. 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. We’ll pause for just a moment to assemble our roster. Today’s first question comes from Maggie Huang with CICC. Please go ahead.

Maggie Huang, Analyst, CICC: Thanks for taking my question. This is Maggie Huang from CICC. Firstly, congratulations for achieving a non-GAAP net income turnaround for the whole year. I have two questions. My first question is that how do we plan to improve our net profit margin in this year? My second question is about our plan to expand our profit portfolio for skincare brands in this year. That’s my two questions. Thank you.

Donghao Yang, Chief Financial Officer and Director, Yatsen: Thank you very much for your question. Regarding your first question, I think this year, we’re gonna continue to grow our skincare business much faster than our color cosmetics business. With skincare business, you know, the gross margin, net margin are typically much higher than color cosmetics brands. By doing that, we’re gonna be able to improve our margin profile. Secondly, our top line will continue to grow this year. As a leveraging effect, we do believe that our net margin will improve accordingly. Your second question, regarding the growth of our skincare business, I think the most important thing that we’re gonna do to grow our skincare business is R&D.

You know, in the last 5, 6 years, you know, we’ve been investing aggressively in our R&D capabilities. If you look at the past, especially past, you know, 1 or 2 years, you know, the phenomenal top line growth of our skincare business has largely been due to the contribution of our R&D team in terms of, you know, better products, which meet our consumers demand.

Maggie Huang, Analyst, CICC: Okay, got it.

Operator: Thank you. Thank you. Ladies and gentlemen, that does conclude the question and answer session. I’d like to turn the conference back over to management for any additional or closing comments.

Sophia Pang, Investor Relations Manager, Yatsen: Thank you all once again for joining us today. If you have any further questions, please feel free to contact us at Yatsen directly. Our contact information for IR in both China and the U.S. can be found in today’s press release. Have a great day, everyone.

Operator: Thank you. That does conclude our conference for today. We thank you all for attending today’s presentation. You may now disconnect your lines and have a wonderful day.