Yatsen Holding Ltd. Q1 2025 Earnings Call Highlights

Yatsen Holding Ltd. ((YSG)) has held its Q1 earnings call. Read on for the main highlights of the call.

Yatsen Holding Ltd.’s latest earnings call for the first quarter of 2025 showcased a robust performance, primarily driven by significant growth in its skincare brands, improved profitability, and strategic cost management. Despite facing challenges such as a decline in color cosmetics revenue and a generally soft market environment, the company achieved a notable turnaround in non-GAAP net income and launched several innovative products. The announcement of corporate milestones and a new share repurchase program further underscores the company’s confidence in its future growth trajectory.

Significant Revenue Growth in Skincare Brands

Net revenues from Yatsen’s skincare brands surged by an impressive 47.7% year-over-year. This growth was largely fueled by a 58% increase in sales from its clinical and premium skincare brands, including Galénic, DR. WU, and Eve Lom. This strong performance highlights the company’s successful focus on expanding its skincare segment.

Improved Profitability

Yatsen reported an increase in its overall gross margin, which rose to 79.1% from 77.7% in the previous year. Additionally, the net loss margin was significantly reduced by 15.5 percentage points, dropping to just 0.7% from 15.1% a year earlier. These improvements reflect the company’s effective strategies in enhancing its profitability.

Non-GAAP Net Income Turnaround

The company achieved a non-GAAP net income of RMB7.1 million, marking a significant turnaround from a non-GAAP net loss of RMB83.8 million in the same period last year. This positive shift underscores Yatsen’s successful financial management and operational strategies.

Strategic Cost Management

Yatsen’s strategic cost management efforts were evident as general and administrative expenses decreased to 7.8% of total net revenues, down by 10.3 percentage points from the previous year. This reduction demonstrates the company’s commitment to optimizing its operational efficiency.

Launch of New Skincare Products

The introduction of new products, such as the upgraded Michaelmasque series and the Targeted Acne Cleaning Serum, contributed to the strong performance of Yatsen’s skincare brands. These launches reflect the company’s ongoing innovation and responsiveness to consumer needs.

Corporate Milestones

A significant corporate milestone was achieved with the accreditation of Yatsen’s global R&D center in Shanghai by the China National Accreditation Service. This accreditation reinforces the company’s strategic focus on research and development.

Share Repurchase Program

Yatsen’s Board of Directors approved a new share repurchase program, authorizing the buyback of up to $30 million worth of ordinary shares over the next 24 months. This move signals the company’s confidence in its future growth and commitment to enhancing shareholder value.

Decline in Color Cosmetics Revenue

Despite the overall positive performance, Yatsen experienced a 9.9% year-over-year decline in net revenues from its color cosmetics brands. This decline reflects the challenges faced in this segment amidst a competitive market environment.

Soft Market Environment

China’s beauty market experienced modest growth, with beauty retail sales increasing by only 3.2% year-over-year, lagging behind the 4.6% growth in total retail sales of consumer goods. This soft market environment posed challenges for Yatsen’s overall performance.

Forward-Looking Guidance

For the first quarter of 2025, Yatsen’s financial performance aligned with its guidance, showing a 7.8% year-over-year increase in total net revenues. Looking ahead to the second quarter of 2025, the company projects total net revenues between RMB810.4 million and RMB889.9 million, representing an anticipated year-over-year increase of 2% to 12%. This forecast underscores Yatsen’s optimistic outlook and strategic positioning for continued growth.

In conclusion, Yatsen Holding Ltd.’s earnings call for the first quarter of 2025 highlighted a strong performance driven by significant growth in skincare brands and improved profitability. Despite challenges in the color cosmetics segment and a soft market environment, the company achieved a remarkable turnaround in non-GAAP net income and launched innovative products. The approval of a new share repurchase program and corporate milestones further demonstrate Yatsen’s confidence in its future growth prospects.