Yatsen Q3 2025 Earnings Call - Skincare Surge Drives Accelerated Revenue Growth with Improving Profitability

Conference Operator: Ladies and gentlemen, good day, and welcome to the Yatsen Third Quarter 2025 earnings conference call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Ms. Irene Liu, Vice President, Head of Strategic Investment and Capital Markets. Please go ahead.

Irene Liu, Vice President, Head of Strategic Investment and Capital Markets, Yatsen: Thank you, Operator. Please note that this session today will contain forward-looking statements relating to the company’s future performance and our intentions 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 U.S. Securities and Exchange Commission. The company does not undertake any obligation to update disposable information except required by law. During today’s call, management will also discuss certain non-GAAP financial measures for comparison purposes only.

Please see that 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’s senior management are Mr. Jinfeng 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’ll now turn the call over to Mr. Jinfeng Huang. Please go ahead, sir.

Jinfeng Huang, Founder, Chairman and CEO, Yatsen: Hello, everyone. Thank you for joining our Third Quarter 2025 earnings call. The beauty market in China continues to show signs of recovery in the third quarter, particularly in the skincare category, which remained robust and supported overall industry growth. Amid this improving backdrop, we remained focused on executing our long-term strategy to build a competitive and resilient brand portfolio anchored in R&D and innovation. Through this planned execution, we delivered our fourth consecutive quarter of revenue growth, with total net revenues increasing by 47.5% year-over-year and exceeding the high end of our guidance. Our momentum continues to be driven by strong growth from skincare and sustained performance of our zero-product engine rather than short-term promotions. Our skincare brands grew by 83.2% year-over-year and reached 49.2% of total revenue, making another step forward in our category upgrade strategy and reinforcing our transformation toward a more sustainable margin-accretive portfolio.

Meanwhile, our net loss narrowed meaningfully as a result of improved gross margin, optimized operating efficiency, and more disciplined resources allocation. Net loss margin improved significantly from 17.9% in the prior year period to 7% this quarter, demonstrating the continued progress in our profitability trajectory. These results reflect the strength of our brand as well as our commitment to disciplined execution. Looking ahead, our priority is to continue progressing toward profitability in a disciplined and sustainable way. We expect further improvement to be driven by a higher skincare mix, ongoing gross margin optimization, and greater marketing efficiency. While we will continue to invest in innovation and zero product, we remain disciplined in balancing growth with profitability. Now, let me share some brand and product highlights during this quarter. Gilanit delivered strong momentum and remained one of the fastest-growing premium skincare brands.

The brand’s HEAL Serum Series continued to perform well, with the No. 1 VC Serum and the No. 2 AVA Serum ranking among the top-selling serums across major e-commerce platforms. The newly introduced No. 3 VB Serum, launched in mid-September to further build up the brand’s ABC cellular-level skincare framework, quickly became one of the brand’s best-selling items on Douyin. We are also seeing encouraging signs of regimen adoption, with more consumers purchasing multiple products within the series, supporting stronger customer lifetime value. Dr. Wu recorded healthy growth during the quarter, supported by strong performance from its core categories. In September, Dr. Wu unveiled its first anti-aging product in the U.K., leveraging decades of clinical expertise in skin renewal.

The newly launched PDIN Serum gained strong traction across e-commerce platforms, driven by its innovative formula featuring a high concentration of active ingredients and patent penetration technology, underscoring the brand’s ability to build trust through clinically validated innovation. In China, Dr. Wu continued to lead the mandelic acid category across online platforms. In addition, Dr. Wu presented its research at the Knight Annual Academic Conferences of the Dermatology Committee of the Chinese Non-Governmental Medical Institution Association, further demonstrating the brand’s commitment to clinically grounded innovation and strengthening its leadership in renewal-focused skincare. Our flagship brand, Perfect Diary, also continued to make progress. Following the successful launch of the translucent blurring setting powder and the Biofaze Essence Foundation, the brand focused on streamlining its core product assortment, improving HEAL product quality, and enhancing overall product experience under the makeup skinification concept.

Several of these HEAL products delivered performance above expectations, driving Prakash Mahesh’s base makeup category to exceed 40% of the total sales and supporting a more sustainable and disciplined recovery. In the third quarter, Prakash Mahesh also excelled in new channel performance and achieved the No. 1 ranking among makeup brands on WeChat Video Channel, reflecting the brand’s strengthened competitiveness and growing consumer revenue. R&D and innovation have consistently served as the cornerstone of our product development and brand building. We are committed to advancing scientific research to strengthen our long-term competitiveness. During the quarter, we participated in the IFSC Congress for the fourth consecutive year, this time in Cannes, France. Eleven of our papers were shortlisted by the IFSC, covering topics from molecular mechanism and clinical translation to AI algorithms and emotion skincare.

These works highlight our full-chain capabilities, from fundamental science to technology translation and clinical validation, and directly support future HEAL pilots across our brands. As we finish the third quarter, we are pleased to see continued progress in both growth and operational improvement. We remain confident that our strategic focus on R&D, together with disciplined execution and sharper resource allocation, will enable us to deliver sustainable long-term growth. At the same time, we will remain highly disciplined in capital allocation, prioritizing investments that strengthen our core brand and innovation capabilities while creating long-term value for shareholders. Thank you. I will now turn the call to Donghao.

Donghao Yang, CFO and Director, Yatsen: Thank you, David. Hello, everyone. Before I get started, I would like to clarify that all financial numbers presented today are in RMB amounts, and all percentage changes refer to year-over-year changes, unless otherwise noted. Total net revenues for the third quarter of 2025 increased by 47.5% to RMB 998.4 million, from RMB 677 million for the prior year period. The increase was primarily due to an 83.2% year-over-year increase in net revenues from skincare brands, combined with a 25.2% year-over-year increase in the revenues from color cosmetics brands. Gross profits for the third quarter of 2025 increased by 51.9% to RMB 780.5 million, from RMB 513.8 million for the prior year period. Gross margin for the third quarter of 2025 increased to 78.2%, from 75.9% for the prior year period. The increase was primarily driven by an increase in sales of higher gross margin products.

Total operating expenses for the third quarter of 2025 increased by 31.9% to RMB 864.1 million, from RMB 655.2 million for the prior year period. As a percentage of total net revenues, total operating expenses for the third quarter of 2025 were 86.5%, as compared with 96.8% for the prior year period. Fulfillment expenses for the third quarter of 2025 were RMB 61.8 million, as compared with RMB 50.4 million for the prior year period. As a percentage of total net revenues, fulfillment expenses for the third quarter of 2025 decreased to 6.2%, from 7.4% for the prior year period. The decrease was primarily driven by fulfillment cost optimization coupled with the leveraging effect of higher total net revenues in the third quarter of 2025. Selling and marketing expenses for the third quarter of 2025 were RMB 682.3 million, as compared with RMB 494.4 million for the prior year period.

As a percentage of total net revenues, selling and marketing expenses for the third quarter of 2025 decreased to 68.3%, from 73% for the prior year period. The third quarter included a portion of our planned upfront investments for the Double 11 shopping season. These investments typically elevate selling and marketing ratios in the short term but support revenue acceleration and stronger brand equity in the fourth quarter and beyond. Excluding these seasonal effects, we continue to see improving marketing efficiency driven by a higher skincare mix and more disciplined spending across channels. General and administrative expenses for the third quarter of 2025 were RMB 80.2 million, as compared with RMB 85 million for the prior year period. As a percentage of total net revenues, general and administrative expenses for the third quarter of 2025 decreased to 8%, from 12.6% for the prior year period.

The decrease was primarily driven by lower share-based compensation expenses coupled with the leveraging effect of higher total net revenues in the third quarter of 2025. Research and development expenses for the third quarter of 2025 were RMB 39.8 million, as compared with RMB 25.3 million for the prior year period. As a percentage of total net revenues, research and development expenses for the third quarter of 2025 increased to 4%, from 3.7% for the prior year period. The increase was primarily driven by higher payroll expenses resulting from a rise in research and development headcount. Loss from operations for the third quarter of 2025 was RMB 83.6 million, as compared with RMB 141.3 million for the prior year period. Operating loss margin was 8.4%, as compared with 20.9% for the prior year period.

Non-GAAP loss from operations for the third quarter of 2025 was RMB 60.6 million, as compared with RMB 98.5 million for the prior year period. Non-GAAP operating loss margin was 6.1%, as compared with 14.5% for the prior year period. Net loss for the third quarter of 2025 was RMB 70.4 million, as compared with RMB 121.1 million for the prior year period. Net loss margin was 7%, as compared with 17.9% for the prior year period. Net loss attributable to Yatsen’s ordinary shareholders for diluted ADS for the third quarter of 2025 was RMB 0.7, as compared with RMB 1.22 for the prior year period. Non-GAAP net loss for the third quarter of 2025 was RMB 51.5 million, as compared with RMB 76.6 million for the prior year period. Non-GAAP net loss margin was 5.2%, as compared with 11.3% for the prior year period.

Non-GAAP net loss attributable to Yatsen’s ordinary shareholders for diluted ABS for the third quarter of 2025 was RMB 0.5, as compared with RMB 0.77 for the prior year period. As of September 30, 2025, the company had cash, restricted cash, and short-term investments of RMB 1.16 billion, as compared with RMB 1.36 billion as of December 31, 2024. Net cash used in operating activities for the third quarter of 2025 was RMB 126.8 million, as compared with RMB 175.9 million for the prior year period. The operating cash flow was primarily due to working capital movement, including inventory, positioning, and receivables timing ahead of Double 11. These are seasonal and planned effects. We expect operating cash flow to improve as these improved investments convert into revenue in the fourth quarter and as we continue to optimize inventory efficiency and marketing ROI.

Looking at our business outlook for the fourth quarter of 2025, we expect our total net revenues to be between RMB 1.32 billion and RMB 1.49 billion, representing a year-over-year increase of approximately 15% to 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.

Conference Operator: Thank you. We will now begin the question-and-answer session. To ask a question, please press star then one on your touch-tone phone. If you’re using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. 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’ll pause momentarily to assemble our roster. Again, to ask a question, please press star then one. Our first question will come from Maggie Huang with CICC. Please go ahead.

Maggie Huang, Analyst, CICC: Thank you for taking my question. This is Maggie Huang from CICC. Firstly, congratulations for meeting our revenue guidance. I have two questions. My first question is about our performance during Double 11 Festival. Is that in line with our expectation? Have we observed any change in the competition from foreign high-end brands? My second question is, how do we expect the profitability of the fourth quarter and the next year? That is my questions. Thank you.

Jinfeng Huang, Founder, Chairman and CEO, Yatsen: I think first of all, the Double 11 performance for the whole company in general, it’s in line with our expectation. For some of the brands, are exceeding our expectations. Having said that, I think we are very happy to observe some of not only the existing TRS KOs are doing well, but some of the newly launched products are gaining a very strong momentum during the Double 11 shopping festival, which will contribute for further growth potentials in coming quarters. Those products we already mentioned in the earnings call. Going back to your question about the challenges and also competitions coming from the foreign high-end brands, we did observe a very big challenge and also competition for the past Double 11 shopping festival. Some of the high-end brands are struggling with very big and also deep price cuts for their KO products.

We see that with our R&D supporting some of our new product launch, those products are still gaining a very strong momentum. Looking forward, I think the competition during the Double 11 shopping festival will load some of the pantries for some of the foreign high-end brands, which means we’ll hurt their long-term growth. Having said that, I’m happy to see that our high-end brands will still keep in a very strong momentum by balancing the price promotion and also focusing on promoting some of the new SKUs. Going back to the Q4, I think we are on our right track to reach the profitability. That is our long-term goal. We are seeing the balance of the growth and also the right track for the profitability. Thank you.

Maggie Huang, Analyst, CICC: Okay, got it. It’s very clear. Thank you very much. I have no more questions.

Jinfeng Huang, Founder, Chairman and CEO, Yatsen: Thank you.

Conference Operator: Your next question will come from Lucia Zhang with CP Securities. Please go ahead.

Lucia Zhang, Analyst, CP Securities: Thank you, Maggie WAN Kit-yu, from CP Securities. I also have two questions. The first one is, we can see that the skincare business of the company has achieved rapid growth this year. From which aspects should we make efforts to sustain the growth maybe in the last quarter and next year? The second question is about the profitability. In which aspects will the company make efforts to continuously improve their profitability? Thank you.

Jinfeng Huang, Founder, Chairman and CEO, Yatsen: Going back to the fundamental drivers for our skincare business, I think the number one thing is about the R&D. Beauty market has always driven by further and then better product innovation. We are very happy to see that with our R&D growth engine, and then we can launch a very strong pipeline this year and also for coming years as well. The second thing we can think is with our expansion for our skincare portfolio, including the benefit expansion and also product line extension, we see further link sales for our product portfolios, which can help us to drive further marketing ROI. The third thing is for our skincare brands, I think the overall for the three major skincare brands, we still have a pretty far potential to reach their optimized revenue level.

During this process, as we continue to drive the brand awareness and also continuously drive the customer base, we still have a potential to grow our existing skincare brands. The last but not least, I think for us, we focus on launching some new products on some of the key channels. In the future, we will expand into other channels and also drive further better channel mix. With that, I think that will contribute to the sustainable driver for our skincare brands. Going back to your questions about how can we continuously improve the profitability, I think as we said many times before, the product mix optimization and the channel mix optimization can help us drive the gross margin and also the further ROI on the marketing expenses.

The second one is as we focus more on the customer CIM and also the product link sales, this will help us to further drive better ROI on the marketing expenses. The third thing is very important. For some of our brands, those brands are reaching to what we call the optimized threshold. In the future, as the brands’ revenue scale grow up, we will see further leverage on the true branding expenses ROI. Those are some of the things we think are very important to drive the continuous improvement for the profitability. Thank you.

Lucia Zhang, Analyst, CP Securities: Okay, thank you. Thank you. That’s really helpful and clear.

Conference Operator: Your next question will come from Jennifer Wu, with Haitong Securities. Please go ahead.

Jennifer Wu, Analyst, Haitong Securities: Hi, this is Jennifer Wu from Haitong Securities. Congratulations on the company’s great performances. Could you please introduce, just give us some colors on the expected expenses of the company in the future? Maybe could you please share how do you view the increasingly fierce competition in the online channel? Thank you for your answers.

Jinfeng Huang, Founder, Chairman and CEO, Yatsen: Can you help me to clarify what do you mean by expenses?

Jennifer Wu, Analyst, Haitong Securities: Like general expenses, operating expenses, etc., just general speaking.

Jinfeng Huang, Founder, Chairman and CEO, Yatsen: Okay. Well.

Jennifer Wu, Analyst, Haitong Securities: Thank you so much.

Jinfeng Huang, Founder, Chairman and CEO, Yatsen: If you look at our financial statements, I see we see pretty stable G&A expenses in the past quarters. Having said that, I think moving forward, as the scale of our total revenue grows, I think we will see some operational leverage on the general and administrative expenses. We will continuously invest in some of what we think short-term-wise we will categorize as expenses, but we see it more like an investment, including R&D and also for branding dollars to really build up the brand equity. Those are some of the areas that we focus on. Sorry, what was your second question?

Jennifer Wu, Analyst, Haitong Securities: Oh, that’s how do you view the ongoing fierce competition on the online channel? How do you think our company is going to face such kind of situation? Thank you for your answers.

Jinfeng Huang, Founder, Chairman and CEO, Yatsen: I think as we said before, when we are looking at the beauty market, there are so many players. One of the reasons that we can continuously and also accelerate our growth is mainly driven by some of the investments we have devoted in R&D in the past few years, and also our continuous commitment on brand building. We did something right before. That is why we are getting the growth today. If we are looking at the competition, as long as we continue to focus on what we have done right, we will see more and more robust product lineups and better innovations coming. We will see the higher brand awareness so that we can get some more operational and also brand building optimization.

We will see some of the operational efficiency improving by our product mix and channel mix optimization. We will see some organization growth by we focus on the cornerstones of our product innovation, customer focus, CIM, and etc. As long as we focus on doing the right thing, we think in the future we will achieve the long-term and sustainable growth we’ve got. Thank you.

Jennifer Wu, Analyst, Haitong Securities: Thank you for your kind response. We’re very looking forward to see the company’s rapid growth.

Jinfeng Huang, Founder, Chairman and CEO, Yatsen: Appreciate it. Thank you.

Conference Operator: This concludes our question-and-answer session. I would like to turn the conference back over to management for any additional or closing comments. Please go ahead.

Irene Liu, Vice President, Head of Strategic Investment and Capital Markets, Yatsen: Thank you 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. Thank you and have a great day.

Conference Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.