Yatsen Holding Limited Q1 FY2026 earnings call

• Overall Financial and Strategic Performance

  • Total net revenues grew 22.5% YoY to $1.02 billion, meeting prior guidance ranges and demonstrating resilience of the company's multi-brand strategy in a stable but highly competitive domestic beauty market
  • Gross margin expanded 110 bps YoY to 80.2%, a new historical high, driven by the favorable shift toward higher-margin skincare offerings
  • The company successfully completed the first tranche of a private placement of convertible notes and warrants on May 21, 2026, with participation from existing and new key investors, reflecting strong investor confidence in the company's strategy

• R&D-Led Product Innovation

  • R&D investment increased to 3.9% of total net revenues (up from 2.7% YoY), driven by expanded R&D headcount and higher payroll expenses
  • Key R&D milestones included the launch of the fourth Dr. Wu Acne Research Fund project and the publication of a white paper on Chinese dermatological research and skin renewal, which established a new industry framework for full-layer skin renewal management
  • Multiple successful new product launches across the portfolio: Delany's Couture Revelation Cellulary Reviving Cream sold out immediately after launch; Inducible added two new products to its popular PDRN series; Yves Laurent launched a new dedicated eye area treatment

• Brand Equity Building

  • Glanick presented at the AMWC Aesthetic and Anti-Aging Medicine World Congress in Monaco to reinforce its scientific credentials in cellular-level anti-aging skincare
  • Glanick appointed Fan Chenchen as brand ambassador, increasing consumer reach and brand awareness

• Profitability Optimization

  • Selling and marketing expenses as a percentage of revenue increased to 72.2% (up from 66.4% YoY) due to ongoing core brand investment and elevated industry-wide traffic acquisition costs on the Douyin platform
  • Fulfillment expenses as a percentage of revenue decreased to 6% (down from 6.2% YoY) due to improved logistics efficiency
  • General and administrative expenses as a percentage of revenue remained largely flat at 7.9% YoY
  • Management remains committed to long-term profitability improvement, with plans to adjust channel mix, streamline operating expenses, and unlock greater operational leverage for fixed costs

Yatsen reports two core product segments for Q1 2026: 1) Skincare brands: Net revenues grew 58.5% year-over-year, driving the company's overall top-line growth. This segment was the primary contributor to total net revenue growth, and its increasing share of overall revenue supported gross margin expansion. 2) Color cosmetics brands: Net revenues decreased 5% year-over-year, partially offsetting the skincare segment's strong growth.

• For the second quarter of 2026, Yatsen management expects total net revenues to fall between $1.2 billion and $1.3 billion, representing a year-over-year increase of 10% to 20% from the prior year period
• The forecast reflects management's current preliminary view of market and operational conditions, and is subject to change based on evolving factors

• Forward-looking statements about future performance are not guarantees, and are subject to risks and uncertainties that could cause actual results to differ materially from projections; key risks are detailed in the company's SEC filings
• The domestic beauty market is highly competitive, particularly in the high-end skincare segment where foreign brands are active competitors
• Industry-wide traffic acquisition costs on major platforms like Douyin are elevated, putting near-term pressure on operating margins

Q: How does Yatsen plan to expand its skincare product portfolio going forward, given the segment's strong Q1 growth? How does the company view competition from foreign high-end skincare brands? / A: Management will expand existing skincare lines around proven, successful hero products. Early success expanding lines like Galanique from core serums to full anti-aging routines confirms this strategy, and the same approach of building full routines around science-backed, high-efficacy products with proven consumer demand will be applied to Dr. Wu and other brands. The company sees intense competition but holds a differentiated position, combining global brand heritage, scientific credibility, local consumer insights, and fast execution. It also leverages AI and data tools to improve marketing efficiency, rather than just increasing spending.

Q: What are the key drivers behind Dr. Wu's particularly strong recent growth? / A: Dr. Wu has delivered strong growth while maintaining a healthy profitability profile, primarily due to its higher mix of B2B, professional, and offline channels. This channel mix creates a better balance between growth, traffic costs, and profitability. Management also cites the brand's strong science foundation and professional credibility as core drivers, and plans to selectively apply this successful model to other skincare brands in the portfolio.