Q1 2024 Yunji Inc Earnings Call

Participants

Shanglue Xiao; Executive Chairman of the Board, Chief Executive Officer; Yunji Inc

Yeqing Cui; Senior Financial Director; Yunji In

Ethan Yu; Analyst; First Trust Group

Presentation

Operator

Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to Yunji's first-quarter 2024 earnings conference call. With us today are Mr. Shanglue Xiao, Chairman and Chief Executive Officer; Mr. Yeqing Cui, Senior Financial Director; and Ms. Kaye Liu, Investor Relations Director of the company.
As a reminder, this conference call is being recorded. Now, I would like to hand the conference over to our first speaker today, Ms. Kaye Liu, Investor Relations Director of Yunji. Please go ahead, ma'am.

Hello, everyone. Welcome to our first-quarter 2024 earnings call. Before we start, please note that the call will contain forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995 that are based on our current expectations and current market operating conditions, and relate to events that involve known and unknown risks, uncertainties, and other factors of Yunji and this industry.
These forward-looking statements can be identified by terminologies such as will, expects, anticipates, continue, or other similar expressions. For a detailed discussion of these risks and uncertainties, please refer to our related documents filed with the US SEC.
Any forward-looking statements that we make on this call are based on assumptions as of today, and are expressly qualified entirely by cautionary statements, risk factors, and details of the company filing with the SEC. Yunji do not undertake any obligation to update these statements, except as required under applicable law. With that, I will now turn over to Shanglue Xiao, Chairman and CEO of Yunji.

Shanglue Xiao

(interpreted) Hello, everyone. Welcome to Yunji's first-quarter 2024 earnings call.
(interpreted) The first quarter is traditionally an off-peak season for e-commerce. We see this opportunity to further refine our operations, allow us to maintain a solid gross margin. As consumers' appetite for pursuing better life intensified, we are laser-focused on driving high-quality growth by stabilizing average order values and gaining deeper insights into our core users' consumption preferences.
(interpreted) In May, I celebrated Yunji's ninth anniversary alongside our service managers, partners, and employees. During the festivities, we unveiled several exciting new initiatives. One such initiative is our plan to provide our users with a holistic health solution.
To realize this, we will expand our presence into offline communities and establish wellness spaces, bringing our healthcare product directly to consumers. These initiatives are set to generate both part-time and full-time employment opportunities, nurturing individual entrepreneurship through our top-tier retail services.
(interpreted) Our private label beauty brand, Suye and P&S, continue to roll out new products that prove to be mega hits. These products are especially formulated with ingredients that are tailored for mature skin, mirroring the effectiveness of the leading western beauty brands.
In terms of marketing, we are actively expanding our partnerships across a variety of external channels this year. Our approach includes creating engaging content on diverse content platforms, leveraging the power of the short video platforms and harness the influence the marketing on live streaming platforms.
(interpreted) In the healthcare sector, we will continue to streamline cutting-edge manufacturing technology and a natural ingredient with medicinal properties to create products that further enrich our health supermarket metrics. Our goal is to transition Chinese families from our reactive approach to healthcare to a proactive one that emphasizes daily dietary enhancements.
As in time, we will continue to innovate, and enhance the value community service experience, and deploy advanced AI applications. In addition, we will further evolve our transition to cultivate the professional house nutritionists who provide value-added services beyond our products. Our mission is to ensure that every family has access to a professional health adviser.
(interpreted) While apparel has historically been a less prominent to (inaudible), we have seen increasing demand from users and our service managers for our broader range of products in this category. With the emergency of the short video trend, we see a golden opportunity for Yunji's apparel category to become an integral component of our beauty segment.
This year, we've embraced the integration of a short videos and the live streaming, hosting weekly live streams on Yunji's official channel. While our primary focus is on apparel, we also feature our beauty and food categories to bolster Yunji's image as a beauty brand. This approach allows us to infuse a sense of fashion into our offerings, while ensuring they remain practical.
(interpreted) Every industry is currently grappling changes and challenges, and the new consumption industry in which we operate is no exception. However, we firmly believe that where challenges exist, opportunities also thrive. At Yunji, we harness our entrepreneurial spirit, leverage our nine-year experience in the realm of the social e-commerce within the WeChat ecosystem and keep our finger on the pulse of the video channel trends.
Over the past six months of exploring the content creation and live streaming video channels, we have gradually developed a business model that fully aligns with Yunji's entrepreneurial DNA. Our focus is on nurturing leaders in real channels who can produce and distribute high-quality content on large scale. To streamline product promotion and make communication more efficient, we equip our service managers with new skills, enabling them to keep the business with nothing more than a mobile phone.
We will include aspiring ordinary people to become video channel leaders, providing them with training in creating product promotional short videos and live streaming and helping them stay updated with new capabilities. Our video channel leader incubation program, which was powered in the first quarter, is set for a more extensive rollout in the second quarter.
(interpreted) The WeChat community (technical difficulty) Yunji and now the advent of short videos committed to engage Yunji with greater vibrancy and efficiency. We aspire to be the trusted partner that empowers our users to lead a healthy and beautiful life.
(interpreted) With that, I will turn the call over to Mr. Cui, our Senior Financial Director, to go through the financial results.

Yeqing Cui

Thank you, Shanglue. Hello, everyone. Before I go through our financial results, please note that all numbers stated in the following remarks are in RMB terms, and all comparisons and percentage changes are on a year-over-year basis, unless otherwise noted.
During the first quarter of 2024, our operations remained relatively steady as we continue to bolster the core process underpinning our operations. Refinements to our inventory management protocols enable us to sustain a consistent level of gross profit.
Inventory management remains a strategic focal point with vigilant monitoring of assorted product category on a weekly or monthly cadence to optimize stock levels. By doing so, we enhanced utilization of our assets while more effectively managing our cash flow. At the same time, we are actively making our cash flow management more efficient.
Now let's take a close look at our financials. Total revenues were RMB128 million compared to RMB179 million a year ago. Revenues from sales of merchandise were RMB102 million and the revenue from our marketplace business was RMB24 million.
The changes were primarily driven by ongoing refinements to our product range across all categories. This, coupled with the optimization of our supplier and the merchant network, results in a short-term impact on sales. Despite these changes, our gross margin remained relatively solid at 49.4%. This was due to sustained customer loyalty towards our private labels and our effective product creation strategy.
Now, let's take a look at our operating expense. Fulfillment expense were RMB22 million compared to RMB27 million a year ago. This was primarily driven by a decrease in warehousing and the logistics expense due to lower merchandise sales and reduced the total cost resulting from staffing structure optimization.
Sales and marketing spend decreased to RMB26 million from RMB30 million a year ago. This was primarily a result of a decline in member management fees, partially offset by an increase in business promotion expense.
Technology and content expense were RMB13.3 million compared to RMB13.4 million a year ago. The decrease was mainly due to reduced total cost.
General and administrative expense were RMB14.9 million compared to RMB15.2 million a year ago. This was mainly due to the reduction in total cost resulting from staff structure refinement, partial offset by increase in the allowance for credit loss.
Total operating expense in the first quarter decreased to RMB76 million from RMB85 million in the same period of 2023. Loss from operations were RMB9 million compared to income from operations of RMB1 million a year ago.
Net income was RMB4 million compared with a net loss of RMB23 million a year ago, while adjusted net income was RMB3 million compared with adjusted net loss of RMB27 million a year ago. Basic and the diluted net income per share attributable to ordinary shareholders for full year compared with basic and the diluted net loss per share of RMB0.01 in the same period of 2023.
Turning to liquidity, as of March 31, 2024, we had a total of RMB505 million in cash and cash equivalents, restricted cash, and short-term investments on our balance sheet compared to RMB552 million on December 31, 2023. Our liquidity asset is sufficient to cover our payable obligations and we do not hold any long-term bank loans or debt on our balance sheet. In addition, we are dedicated to making the most of our working capital and smartly managing our assets to better support our operations.
To sum up, the first quarter make important progress on the road to realizing our long-term strategic goals, our ongoing improvements in inventory management, around with our dedication to sustainable and effective access management, which are pivotal to this advancement. Moving forward, we will focus on further enhancing our efficiency and to stress our company's resilience and adaptability.
Our strategy positions us to effectively address future challenges and seek emerging opportunities in the evolving economical landscape. This concludes our prepared remarks for today. Operator, we are now ready to take questions.

Question and Answer Session

Operator

(Operator Instructions) Ethan Yu, First Trust Group.

Ethan Yu

(spoken in foreign language) Hi, good evening, Thanks for taking my question. The management just mentioned our progress in short video and the live streaming. Could you share more details about how we differ from other platforms in this area? Thank you.

Shanglue Xiao

(interpreted) Thank you for your question.
(interpreted) Firstly, we will select every commodity, often all categories, and ensure they are cost-effective. We do not resort to selling low price to book all these clearance items to draw traffic.
(interpreted) Secondly, we are not only content creators but also developers of our numerous commodities. Our team engages from the inception of the product to project, actively participating in the traceability of the origins, production, and selection of packaging materials. This hands-on approach creates us with an deeper understanding of the commodities and a more tangible grasp of the entire commodity chain compared to other content producers.
(interpreted) At a most critical human level, Yunji's short video strategy encompassing both content production and distribution is rooted in an ordinary people-centric approach, facilitating individual entrepreneurship and rendering our content more accessible.
(interpreted) And also, all these have been differentiated us from other competitors.
(interpreted) Thank you for your question.

Ethan Yu

Okay, got it, got it. Thank you.

Operator

Thank you. Ladies and gentlemen, as there are no further questions at this time, I would like to hand the conference back to the management for closing remarks.

Thank you for joining us today. Please do not hesitate to contact us if you have any further questions and we're looking forward to talking with you next quarter. Bye.

Operator

Thank you. This conference has now concluded. Thank you for attending. You may now disconnect.

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the company sponsoring this event.