Yatsen Holding Limited Q2 FY2025 earnings call

• Macro overview: China's beauty industry had modest growth, with beauty sales having fluctuations around the June 18 shopping festival. - R&D-driven strategy: Continued expanding international innovation network, attracting top R&D talent and deepening collaborations. - Financial performance: Delivered year-over-year revenue growth and non-GAAP profitability for the third consecutive quarter. - Brand and product highlights: Galénic's products performed strongly with new launches and offline expansion; DR.WU's product portfolio diversified; Perfect Diary returned to growth path with new product launches. - R&D activities: Participated in various industry conferences and had joint lab innovations. - Social responsibility: Create A Beautiful Life program graduated first cohort in 2025; DR.WU's campus charity tour continued.

In the second quarter of 2025, total net revenues grew by 36.8% year-over-year to RMB 1.09 billion. Revenues from skincare brands increased 78.7% year-over-year, with the combined revenue from the 3 major skincare brands Galénic, DR.WU and Eve Lom growing 88.1%. Color cosmetics brands delivered year-over-year growth of 8.8%. Skincare brands contributed a significant portion to the overall revenue growth, with their strong performance driving the positive financial trend.

For the third quarter of 2025, Yatsen expects total net revenues to be between RMB 778.6 million and RMB 880.1 million, representing a year-over-year increase of approximately 15% to 30%.

Q: As we enter into the second half of the year, how should we expect the trends of profitability for both skincare and color cosmetic categories? And how do we intend to strike a 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?

A: Donghao Yang responded that they've always tried to strike a balance between growth and profitability. High-end skincare brands grow faster with higher margins, so confident of achieving both growth and profitability. Regarding competition, as high-end skincare brands grow faster, expect more competition from international brands, and they adopt an R&D-driven growth strategy with a best-in-class R&D team and infrastructure.

Q: For the skincare brands. So I want to ask what are the key drivers behind the rapid growth of skincare brands, especially for the Galénic and DR.WU in the first half of the year? And what is the outlook for the skincare business in the second half year and next year? And my second question is, in which assets will the company make efforts to continuously improve the profitability?

A: Irene Lyu said key drivers for skincare brand growth are continued investment in R&D and systematic upgrade of R&D capabilities with strong new product pipeline. Outlook for skincare business in Q3 is reflected in the 15% to 30% guidance. For improving profitability, continuing to optimize channel and product mix, streamline operating expenses, and brands still have growth potential so will invest in brand awareness and equity. Donghao Yang added further profitability improvement opportunities include optimizing product mix by driving premiumization and hero products, improving marketing efficiency through data-driven CRM, enhancing supply chain and operational efficiency, and gaining operating leverage across fixed expenses as top line grows