Yatsen (YSG) Q2 2025 Earnings Call Transcript

Image source: The Motley Fool.

DATE

Aug. 21, 2025 at 7:30 a.m. ET

CALL PARTICIPANTS

Chief Executive Officer — Jinfeng Huang

Chief Financial Officer — Donghao Yang

Investor Relations Director — Irene Lyu

Need a quote from a Motley Fool analyst? Email pr@fool.com

TAKEAWAYS

Total Net Revenues-- Total net revenues increased by 36.8% to RMB1.09 billion in 2025, primarily due to a 78.7% year-over-year increase in net revenues from skincare brands and an 8.8% year-over-year increase in net revenues from color cosmetics brands.

Gross Profit and Margin-- Gross profit rose 39.5% to RMB850.4 million in 2025 with gross margin increased to 78.3% from 76.7% in the prior year period driven by higher-margin product sales.

Operating Expenses-- Operating expenses increased by 21.7% to RMB905.9 million in 2025, but fell as a percentage of net revenues to 83.4% from 93.7% in the prior year period due to improved scale efficiencies.

Net Loss and Margin-- Net loss (GAAP) in 2025 was $19.5 million, compared with $85.5 million in the prior year period, with net loss margin (GAAP) was 1.8%, compared with 10.8% in the prior year period.

Non-GAAP Profitability-- A non-GAAP net income margin of 1.1% for Q2 2025 was reported, compared to a non-GAAP net loss margin of 9.4% in the prior year period.

Cash Position-- Reported $350 million in cash, restricted cash, and short-term investments as of June 30, 2025, down from $1.36 billion as of December 31, 2024.

Operating Cash Flow-- Generated $77.7 million in net cash from operating activities in 2025, a reversal from net cash usage of $148.2 million in the prior year period.

Business Outlook-- Management guided total net revenues between $778.6 million-$880.1 million in 2025, representing a year-over-year increase of approximately 15%-30%.

Brand and Product Highlights-- Notable growth in skincare brands, especially driven by Calanique, Doctor Wu, and new product launches featuring proprietary R&D technologies.

Cost Structure-- Fulfillment, selling and marketing, and G&A expenses all declined as a percentage of revenues in 2025, reflecting efficiency initiatives and operational leverage.

International Innovation-- Expanded global R&D collaborations, opened new experience stores in major Chinese cities, and participated in multiple industry conferences.

Management Strategic Statement-- CFO Donghao Yang said, "We believe that we can achieve both growth and profitability." emphasizing an R&D-driven strategy to outcompete international brands.

SUMMARY

Yatsen(NYSE:YSG) posted significant top- and bottom-line improvement in Q2 2025, with growth in both skincare and color cosmetics supporting an improved profit profile and strong margin expansion, as reflected by a non-GAAP net profit margin of 1.1%. New product introductions in core brands and expanded proprietary R&D capabilities contributed substantially to market momentum. The company demonstrated progress in channel and operational efficiency, as management cited scale effects enabling a notable reduction in operating expense ratios. Year-over-year increases in net cash generated from operating activities signaled improving business fundamentals amid robust growth guidance for the upcoming quarters.

CEO Jinfeng Huang stated, "we are beginning to see tangible results from our long-term focus on R&D." indicating measurable impact on performance from research investments.

Expanded offline presence through new stores in Guangzhou, Shanghai, Wuhan, and Shenzhen aimed to strengthen brand engagement and enhance visibility.

CFO Donghao Yang detailed that, for Doctor Wu, "the new essence toner has been very successful." underscoring the role of product innovation in segment expansion.

Joint laboratory with Regen Hospital unveiled new innovation at an international healthcare congress, highlighting advancement in scientific collaboration.

INDUSTRY GLOSSARY

Micro profusion and active anchor technology: Proprietary technologies referenced in Yatsen’s upgraded skincare mask products, designed to enhance ingredient delivery and efficacy.

Makeup skinification: Industry term describing the integration of skincare benefits into makeup formulations, as exemplified by Pavidari’s product lines.

Full Conference Call Transcript

I'll now turn the call over to Mr. Jinfeng Huang. Please go ahead, David.

Jinfeng Huang: Thank you, Irene, and thank you, everyone, for joining Yatsen Holding Limited's second quarter 2025 earnings conference call today. I will begin with a brief macro overview and a summary of our financial results, followed by an update on how our R&D-driven initiatives have supported the healthy development of our brand portfolio. China's beauty industry saw another modest quarter. According to the adjusted data published by the National Bureau of Logistics, beauty sales increased by 2.6% year over year, falling short of the 5.4% growth in total retail sales of consumer goods. Specifically, during May and June, the key promotion period around June, beauty sales rose by 4.4% in May but declined by 2.2% in June.

Despite the uncertain environment, we stayed focused on executing our R&D-driven strategy, anchored in our vision of becoming a world-class pioneer in beauty innovation. We have continued expanding our international innovation network, attracting top global R&D talents, and deepening collaborations across industries, academia, and research institutions. These efforts have laid a solid foundation for both product innovation and brand equity, which in turn supported the rebound in our financial performance. Building on the momentum that began in 2024, we delivered year-over-year revenue growth and achieved non-GAAP profitability for the third consecutive quarter. In 2025, total net revenues grew by 36.8% year over year, significantly exceeding our previous guidance.

Revenues from brands increased 78.7% year over year, driven by an 88.1% growth in the combined revenue from our three major skincare brands, Calanique, Doctor Wu, and Yiflon. Our color cosmetics brands also delivered year-over-year growth of 8% with Perfect Diaries brand back on the growth trajectory. As operating leverage began to take effect, coupled with our efforts to improve efficiency in our operations and marketing spend, we narrowed our net loss margin to 1.8% from 10.8% for the prior year period and achieved a non-GAAP net profit margin of 1.1% for the second quarter of 2025 as compared with a non-GAAP net loss margin of 9.4% for the prior year period.

Let me now walk you through some brands and product highlights powered by our solid R&D infrastructure. Genomics posted strong results, supported by robust product highlights and effective product marketing. Our number one VC7 continues to lead sales, while our upgraded brightening micro mask featuring the brand's micro profusion and active anchor technology ranked number one among premium single-use masks on both Tmall and JD during the June 2018 period. The number two VA Serum also received increasingly positive feedback, particularly on Douyin. In addition to online growth, we began expanding dynamic offline presence, opening experience stores in Guangzhou, Shanghai, Wuhan, and Shenzhen by June. These stores are designed to strengthen brand visibility and deepen consumer engagement.

Doctor Wu also benefited from a more diverse and balanced product portfolio. Its purifying renewable essence toner formulated with a gentle acid complex effectively adjusted the antioxidant and the brightening ease of Oly and Acne Protein. This product resonates strongly with its targeted consumers and reinforces the brand positioning as a leader in professional skin renewal. The second quarter also marked a key milestone for Pavidari. Since the launch of the Bio Lip Essence Lipstick in September 2023, Pavidari has embraced a new philosophy of makeup skinification. Building on this, we introduced the third generation biotech technology and applied it to facial makeup. The new BioPhase Essence Foundation provides a flawless finish while supporting the skin barrier.

We also launched the translucent blurring setting powder, powered by the smart lock technology to control oil, combat oxidation, and reduce dullness. These innovations played a key role in putting Togedari back on its growth path. As our commitment to R&D remains essential to our long-term strategy, we continue to strengthen our capabilities and presence in the scientific community. In May, we participated in the 2025 China Cosmetic Science and Technology Conference in Yunnan as a guest speaker and joined a roundtable discussion on emotional skincare at the 2025 International Cosmetics Innovation Conference in Shanghai. In June, our joint laboratory with Regen Hospital unveiled its latest innovation at the 30th International Council of Nurse Congress in Health Care, Finland.

We are also proud of our ongoing social responsibility initiative. During 2025, our Create a Beautiful Life program launched in partnership with the China Women's Development Foundation celebrated the graduation of its first 2025 cohort in Guizhou. Now in its fifth year, the program provides free professional makeup training for low-income women, helping them pursue new opportunities in employment and entrepreneurship. Meanwhile, Doctor Wu has entered the third year of his campus charity tour, promoting scientific skincare education and raising skin health awareness among university students across China. In summary, we are beginning to see tangible results from our long-term focus on R&D. We remain committed to nurturing our brands and delivering exceptional products to our customers.

With that, I will now turn the call over to our CFO, Donghao Yang, to discuss our financial performance. Thank you, everyone.

Donghao Yang: Thank you, David, and hello, everyone. Before I get started, I would like to clarify that all financial numbers presented today are in renminbi amounts and all percentage changes refer to year-over-year changes unless otherwise noted. Total net revenues for 2025 increased by 36.8% to RMB1.09 billion from million for the prior year period. This increase was primarily due to a 78.7% year-over-year increase in net revenues from skincare brands combined with an 8.8% year-over-year increase in net revenues from color cosmetics brands. Gross profit for 2025 increased by 39.5% to RMB850.4 million from million for the prior year period. Gross margin for 2025 increased to 78.3% from 76.7% for the prior year period.

The increase was primarily driven by an increase in sales of higher gross margin products. Total operating expenses for 2025 increased by 21.7% to RMB905.9 million from RMB744.6 million for the prior year period. As a percentage of total net revenues, total operating expenses for 2025 were 83.4% as compared with 93.7% for the prior year period. Fulfillment expenses for 2025 were $63.3 million as compared with $51.2 million for the prior year period. As a percentage of total net revenues, fulfillment expenses for 2025 decreased to 5.8% from 6.4% for the prior year period. The decrease was primarily due to further improvements in logistics efficiency.

Selling and marketing expenses for 2025 were $722.4 million as compared with $544.7 million for the prior year period. As a percentage of total net revenues, selling and marketing expenses for 2025 decreased to 66.5% from 68.6% for the prior year period. The decrease was primarily driven by the leveraging effect of higher total net revenues in 2025. General and administrative expenses for 2025 were $84.1 million as compared with $119.1 million for the prior year period. As a percentage of total net revenues, general and administrative expenses for 2025 decreased to 7.7% from 15% for the prior year period.

The decrease was primarily driven by lower payroll expenses resulting from a reduction in general and administrative headcount coupled with the leveraging effect of higher total net revenues in 2025. Research and development expenses for 2025 were million as compared with $29.7 million for the prior year period. As a percentage of total net revenues, research and development expenses for 2025 decreased to 3.3% from 3.7% for the prior year period. The decrease was primarily driven by the leveraging effect of higher total net revenues in 2025. Loss from operations for 2025 was RMB55.5 million as compared with million for the prior year period. Operating loss margin was 5.1% as compared with 17% for the prior year period.

Non-GAAP loss from operations for 2025 was $20.4 million as compared with RMB111.9 million for the prior year period. Non-GAAP operating loss margin was 1.9% as compared with 14.1% for the prior year period. Net loss for 2025 was $19.5 million as compared with $85.5 million for the prior year period. Net loss margin was 1.8% as compared with 10.8% for the prior year period. Net loss attributable to reference ordinary shareholders per diluted ADS for 2025 was RMB0.19 as compared with RMB0.77 for the prior year period. Non-GAAP net income for 2025 was million as compared with non-GAAP net loss of RMB74.9 million for the prior year period.

Non-GAAP net income margin was 1.1% as compared with non-GAAP net loss margin of 9.4% for the prior year period. Non-GAAP net income attributable to ordinary shareholders per diluted ADS for 2025 was RMB0.13 as compared with non-GAAP net loss attributable to Yatsen Holding Limited's ordinary shareholders per diluted ADS of RMB0.67 for the prior year period. As of 06/30/2025, we had cash, restricted cash, and short-term investments of $350 million as compared with $1.36 billion as of 12/31/2024. Net cash generated from operating activities for 2025 was $77.7 million as compared with net cash used in operating activities of $148.2 million for the prior year period.

Looking at our business outlook for 2025, we expect our total net revenues to be between $778.6 million and $880.1 million, representing a year-over-year increase of approximately 15% to 30%. These forecasts reflect our current and preliminary view on the market and operational conditions, which are subject to change. With that, I'd now like to open the call to Q&A. Operator?

Operator: Thank you. Our first question today will come from Maggie Huang of CICC. Please go ahead.

Maggie Huang: Thanks for taking my question. This is Maggie Huang from CICC. Firstly, congratulations for beating our guidance. And I have two questions. My first question is that as we enter into the second half of the year, how should we expect the change of profitability for both skincare and color cosmetic categories? And how do we intend to strike the balance between promoting new product lines and improving our profitability? And my second question is about competition. So what's our view on the industry competition in Q3 and Q4, particularly the competition from foreign premium brands? That's my two questions. Thank you.

Donghao Yang: Okay. Thank you very much for your question. Well, we've always been trying to track balance between our growth and profitability. And we don't believe that we have to sacrifice one for the other. And especially now our high-end skincare brands are growing even faster than our color cosmetics brands, which tend to have higher gross margin and bottom line. So we're confident that as we grow our business, both in skincare and color cosmetics going forward and especially skincare is showing a much stronger growth momentum. We believe that we can achieve both growth and profitability.

And competition and I think you're right, competition is going to be becoming more and more intense going forward, especially as our high-end skincare brand is growing faster, we do expect to have more competition from the international brands. But in order to drive our growth and strengthen our competing position, we are adopting an R&D-driven growth strategy. So for the last four, five years, we've been one of the most aggressive players in the cosmetics industry to invest heavily in R&D. So now we've built a very, I would say, best-in-class R&D team and R&D infrastructure. If you look at our lab, our R&D center in Shanghai is one of the world-class facilities.

So that's how we view where to drive our future growth and especially to win the competition against the players in the industry.

Maggie Huang: Well, it's very clear. I have no more questions. Thank you very much.

Jinfeng Huang: Thank you.

Operator: Our next question today will come from Lin Zhang of CITIC Securities. Please go ahead.

Lin Zhang: Thank you for taking my questions. I'm Lin Zhang from CITIC Securities and congratulations on the performance in the second quarter. My first question is for the skincare brands. So I want to ask what are the key drivers behind the rapid growth of skincare brands, for the Calanique and Doctor Wu in the first half of the year? And what is the outlook for the skincare business in the second half year and the next year? And my second question is, in which assets will the company make efforts to continuously improve the profitability? Thank you.

Donghao Yang: Thank you for the question. So for the growth of skincare brand, so we think there are a number of reasons. Primarily it's because of our continued investment in R&D and our gradual systematic upgrade of our R&D capabilities. As a result, we have a very strong pipeline of new product innovations. So just to give you some examples, for example, for Calanique, for the past couple of quarters, we have introduced a series of new products, including on top of very successful VC, we produced the VA serum and also the MicroMask series has been very successful. And we also widened the offering of the MicroMask in terms of different efficacy and we also operated the micro mask recently.

And for Doctor Wu, the new essence toner has been very successful. So we think mainly from the R&D upgrade and also the new product pipeline. And then in terms of outlook, we have provided the guidance for Q3 of 15% to 30%, which will I would think reflect our future outlook in terms of continued trend of our skincare brands in terms of the development. And then on your second question is our efforts to how to improve the profitability. We are continuing to optimize our channel and product mix and at the same time streamline our operating expenses.

But we think most of our brands, some of them given the high growth, we think there's still significant growth potential. And those brands are right now remain well below their respective ceilings. That's why we continue to plan to invest in the brand awareness and brand equity. So especially when there are few product launch. So as a result, we think the profitability improvement will be gradual.

Jinfeng Huang: Okay. As well, just to add on to Irene's point, we do see clear opportunities to further improve profitability across several dimensions. First, we will continue to optimize our product mix by driving premiumization and hero products with stronger margins. Second, we're improving marketing efficiency through data-driven CRM and better ROI discipline, shifting spending towards higher return channels. Thirdly, we are enhancing supply chain and operational efficiency to reduce costs and improve scale leverage. And lastly, as top-line growth continues, we expect to gain operating leverage across fixed expenses. So altogether these initiatives give us confidence in steadily expanding profitability while maintaining growth.

Lin Zhang: Thank you. That's very clear. Thank you very much.

Operator: This will conclude our question and answer session. I would like to turn the conference back over to management for any closing remarks.

Irene Lyu: Thank you again for joining us today. If you have any further questions, please feel free to contact us at Yatsen Holding Limited directly. Our contact information for IR in both China and the U.S. can be found in today's press release. Thank you and have a great day.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor’s total average return is 1,052%* — a market-crushing outperformance compared to 183% for the S&P 500.

They just revealed what they believe are the 10 best stocks for investors to buy right now, available when you join Stock Advisor.

See the stocks »

*Stock Advisor returns as of August 18, 2025

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.