Earnings call transcript: Yatsen Q2 2025 sees revenue surge, stock gains

Yatsen Holding reported a significant increase in its Q2 2025 financial performance, highlighted by a 36.8% rise in total net revenues, reaching 1.09 billion RMB. The company also improved its gross margin to 78.3% from 76.7% year-over-year, maintaining its impressive profitability levels. According to InvestingPro data, the company’s overall financial health is rated as FAIR, with particularly strong scores in cash flow and price momentum. Following the earnings announcement, Yatsen’s stock showed a positive premarket movement, with a 2.73% increase, trading at 9.8 USD. The company’s focus on research and development (R&D) and product innovation appears to be driving this growth.

Key Takeaways

• Yatsen’s total net revenues increased by 36.8% to 1.09 billion RMB.
• Gross margin improved to 78.3% from 76.7% year-over-year.
• The stock price rose 2.73% in premarket trading following the earnings release.
• The company opened new experience stores in major Chinese cities.
• Yatsen is emphasizing R&D and international collaboration as part of its growth strategy.

Company Performance

Yatsen reported a robust performance for Q2 2025, driven by significant growth in its skincare and color cosmetics brands. Skincare brands saw an impressive 88.1% increase, while color cosmetics grew by 8%. InvestingPro analysis reveals the stock has delivered an exceptional 166.48% return over the past year, with particularly strong momentum shown in a 145.88% gain over the last six months. InvestingPro subscribers have access to 12 additional key insights about Yatsen’s performance and potential. The company’s strategic focus on innovation and expanding its retail footprint with new experience stores in key cities like Guangzhou and Shanghai contributed to this growth. Despite a challenging retail environment in China, Yatsen managed to outperform the broader beauty industry’s modest growth of 2.6%.

Financial Highlights

• Revenue: 1.09 billion RMB, up 36.8% year-over-year.
• Gross margin: 78.3%, compared to 76.7% in the previous year.
• Net loss margin narrowed to 1.8% from 10.8%.
• Non-GAAP net profit margin achieved at 1.1%.

Outlook & Guidance

Yatsen provided optimistic forward guidance, expecting total net revenues to range between 778.6 million RMB and 880.1 million RMB, projecting a year-over-year growth of 15% to 30%. The company plans to continue its investment in R&D and brand development, aiming to sustain its competitive edge in the market.

Executive Commentary

CEO David Sungheng Huang emphasized the company’s long-term focus on R&D, stating, "We are beginning to see tangible results from our long-term focus on R&D." CFO Dong Hao Yang added, "We’ve built a very best-in-class R&D team and R&D infrastructure," highlighting the strategic importance of innovation in Yatsen’s growth plans.

Risks and Challenges

• Market Saturation: The beauty market in China is competitive, with numerous domestic and international players vying for market share. InvestingPro data shows the stock has a beta of -2.11, indicating it often moves counter to market trends, which could provide portfolio diversification benefits. For comprehensive risk analysis and detailed metrics, access the full Pro Research Report on InvestingPro.
• Economic Conditions: Fluctuations in consumer spending due to economic uncertainties could impact sales.
• Supply Chain Disruptions: Potential disruptions could affect product availability and cost structures.
• Foreign Competition: Increased competition from foreign premium brands poses a challenge to maintaining market position.
• Regulatory Changes: Changes in regulations could impact product formulations and marketing strategies.

Yatsen’s strategic emphasis on R&D and innovation, combined with its expanding retail presence, positions the company for continued growth. However, it must navigate competitive pressures and economic uncertainties to sustain its upward trajectory.

Full transcript - Yatsen Holding (YSG) Q2 2025:

Conference Operator: Ladies and gentlemen, good day, and welcome to the Yat sen Second Quarter twenty twenty five Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Irene Lu, Vice President, Head of Strategic Investment and Capital Markets. Please go ahead.

Irene Lu, Vice President, Head of Strategic Investment and Capital Markets, Yaseng: Thank you, operator. Please note the discussion today will contain forward looking statements relating to the company’s future performance and are intended 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 Yahoo’s business and financial results is included in certain filings with the company with the Securities and Exchange Commission. The company does not undertake any obligation to update this forward looking information, except as required by law. During today’s call, management will also discuss certain non GAAP financial measures for comparison purposes only. Please see the earnings release issued earlier today for a definition of non GAAP financial measures and a reconciliation of GAAP to the non GAAP financial results.

Joining us today on the call from Yaseng’s senior management are Mr. Zheng Zhong, our Founder, Chairman and CEO and Mr. Zhenghao Yang, our CFO and Director. Management will begin with prepared remarks and the call will conclude with a Q and A session. As a reminder, this conference is being recorded.

In addition, a webcast replay of this conference call will be available on Yaseng’s Investor Relations website at ir.yasenglobal.com. I’ll now turn the call over to Mr. Sungheng Huang. Please go ahead, David.

David Sungheng Huang, Founder, Chairman and CEO, Yaseng: Thank you, Irene, and thank you, everyone, for joining Yasen’s second quarter twenty twenty five earnings conference call today. I will begin with a brief macro overview and a summary of our financial results, followed by an update on how our R and D driven initiatives have supported the healthy development of our brand portfolio. China’s beauty industry saw another modest quarter. According to the adjusted data published by the National Bureau of Logistics, beauty sales increased by 2.6% year over year, falling short of the 5.4% growth in total retail sales of consumer goods. Specifically, during May and June, the key promotion period around the June, beauty sales rose by 4.4% in May, but declined by 2.2% in June.

Despite the uncertain environment, we stayed focused on executing our R and D driven strategy, anchored in our vision of becoming a world class pioneer in beauty innovation. We have continued expanding our international innovation network, attracting top global R and D talents and deepening collaborations across industries, academia and research institutions. These efforts have laid a solid foundation for both product innovation and brand equity, which in turn supported the rebound in our financial performance. Building on the momentum that began in the 2024, we delivered year over year revenue growth and achieved non GAAP profitability for the third consecutive quarter. In the 2025, total net revenues grew by 36.8% year over year, significantly exceeding our previous guidance.

Revenues from brands increased 78.7% year over year, driven by an 88.1 growth in the combined revenue from our three major skincare brands, Calanique, Doctor Wu and Yiflon. Our color cosmetics brands also delivered year over year growth of 8% with Perfect Diaries brand back on the growth trajectory. As operating leverage began to take effect, coupled with our efforts to improve efficiency in our operations and marketing spend, we narrowed our net loss margin to 1.8% from 10.8% for the prior year period and achieved a non GAAP net profit margin of 1.1% for the second quarter of twenty twenty five as compared with non GAAP net loss margin of 9.4% for the prior year period. Let me now walk you through some brands and product highlights powered by our solid R and D infrastructure. Genomics posted strong results, supported by a robust product highlights and effective product marketing.

Our number one VC7 continues to lead sales, while our upgraded brightening micro mask featuring the brand’s micro profusion and active anchor technology ranked number one among premium single use masks on both Tmall and JD during the June 2018 period. The number two VA Serum also received increasingly positive feedback, particularly on Douyin. In addition to online growth, we began expanding dynamic offline presence, opening experience stores in Guangzhou, Shanghai, Wuhan and Shenzhen by the June. These stores are designed to strengthen brand visibility and deepen consumer engagement. Doctor.

Wu also benefited from a more diverse and balanced product portfolio. Its purifying renewable essence toner formulated with a gentle acid complex effectively adjusted the antioxidant and the brightening ease of Oly and Acne Protein. This product resonates strongly with its targeted consumers and reinforce the brand positioning as a leader in professional skin renewal. The second quarter also marked a key milestone for Pavidari. Since the launch of the Bio Lip Essence Lipstick in September 2023, Pavidari has embraced a new philosophy of makeup skinification.

Building on this, we introduced the third generation biotech technology and applied it to facial makeup. The new BioPhase Essence Foundation provides a flawless finish while supporting the skin barrier. We also launched the translucent blurring setting powder, powered by the smart lock technology to control oil, combat oxidation and reduce dullness. These innovations played a key role in putting Togedari back on its growth path. As our commitment to R and D remains essential to our long term strategy, we continue to strengthen our capabilities and presence in the scientific community.

In May, we participated in the twenty twenty five China Cosmetic Science and Technology Conference in Yunnan as a guest speaker and joined a roundtable discussion on emotional skincare at the twenty twenty five International Cosmetics Innovation Conference in Shanghai. In June, our joint laboratory with Regen Hospital unveiled its latest innovation at the thirtieth International Council of Nurse Congress in Health Care, Finland. We are also proud of our ongoing social responsibility initiative. During the 2025, our Create a Beautiful Life program launched in partnership with the China Women’s Development Foundation celebrated the graduation of its first 2025 cohort in Guizhou. Now in its fifth year, the program provides free professional makeup training for low income women, helping them pursue new opportunities in employment and entrepreneurship.

Meanwhile, Doctor. Wu has entered the third year of his campus charity tour, promoting scientific skincare education and raising skin health awareness among university students across China. In summary, we are beginning to see tangible results from our long term focus on R and D. We remain committed to nursing our brands and delivering exceptional products to our customers. With that, I will now turn the call over to our CFO, Dong Hao Yang, to discuss our financial performance.

Thank you, everyone.

Dong Hao Yang, CFO and Director, Yaseng: Thank you, David, and hello, everyone. Before I get started, I would like to clarify that all financial numbers presented today are in renminbi amounts and all percentage changes refer to year over year changes unless otherwise noted. Total net revenues for the 2025 increased by 36.8 percent to RMB1.09 billion from million for the prior year period. This increase was primarily due to a 78.7% year over year increase in net revenues from skincare brands combined with an 8.8% year over year increase in net revenues from color cosmetics brands. Gross profit for the 2025 increased by 39.5% to RMB850.4 million from million for the prior year period.

Gross margin for the 2025 increased to 78.3% from 76.7 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 2025 increased by 21.7% to RMB905.9 million from RMB744.6 million for the prior year period. As a percentage of total net revenues, total operating expenses for the 2025 were 83.4% as compared with 93.7% for the prior year period. Fulfillment expenses for the 2025 were $63,300,000 as compared with $51,200,000 for the prior year period.

As a percentage of total net revenues, fulfillment expenses for the 2025 decreased to 5.8% from 6.4% for the prior year period. The decrease was primarily due to further improvements in logistics efficiency. Selling and marketing expenses for the 2025 were 7 and $22,400,000 as compared with $544,700,000 for the prior year period. As a percentage of total net revenues, selling and marketing expenses for the 2025 decreased to 66.5% from 68.6% for the prior year period. The decrease was primarily driven by the leveraging effect of higher total net revenues in the 2025.

General and administrative expenses for the 2025 were $84,100,000 as compared with $119,100,000 for the prior year period. As a percentage of total net revenues, general and administrative expenses for the 2025 decreased to 7.7% from 15% for the prior year period. The decrease was primarily driven by lower payroll expenses resulting from a reduction in general and administrative headcount coupled with the leveraging effect of higher total net revenues in the 2025. Research and development expenses for the 2025 were million as compared with $29,700,000 for the prior year period. As a percentage of total net revenues, research and development expenses for the 2025 decreased to 3.3% from 3.7% for the prior year period.

The decrease was primarily driven by the leveraging effect of higher total net revenues in the 2025. Loss from operations for the 2025 was RMB55.5 million as compared with million for the prior year period. Operating loss margin was 5.1% as compared with 17% for the prior year period. Non GAAP loss from operations for the 2025 was $20,400,000 as compared with RMB111.9 million for the prior year period. Non GAAP operating loss margin was 1.9% as compared with 14.1% for the prior year period.

Net loss for the 2025 was $19,500,000 as compared with $85,500,000 for the prior year period. Net loss margin was 1.8% as compared with 10.8% for the prior year period. Net loss attributable to reference ordinary shareholders per diluted ADS for the 2025 was RMB0.19 as compared with RMB0.77 for the prior year period. Non GAAP net income for the 2025 was million as compared with non GAAP net loss of RMB74.9 million for the prior year period. Non GAAP net income margin was 1.1% as compared with non GAAP net loss margin of 9.4% for the prior year period.

Non GAAP net income attributable to ordinary shareholders per diluted ADS for the 2025 was RMB0.13 as compared with non GAAP net loss attributable to Janssen’s ordinary shareholders per diluted ADS of RMB0.67 for the prior year period. As of 06/30/2025, we had cash, restricted cash and short term investments of $350,000,000 as compared with $1,360,000,000 as of 12/31/2024. Net cash generated from operating activities for the 2025 was $77,700,000 as compared with net cash used in operating activities of $148,200,000 for the prior year period. Looking at our business outlook for the 2025, we expect our total net revenues to be between $778,600,000 and $880,100,000 representing a year over year increase of approximately 15% to 30%. These forecasts reflect our current and preliminary view on the market and operational conditions, which are subject to change.

With that, I’d now like to open the call to Q and A. Operator?

Conference Operator: Thank you. Our first question today will come from Maggie Huang of CICC. Please go ahead.

Maggie Huang, Analyst, CICC: Thanks for taking my question. This is Maggie Huang from CICC. Firstly, congratulation for beating our guidance. And I have two questions. My first question is that as we enter into the second half of the year, how should we expect the change of profitability for both skincare and color cosmetic categories?

And how do we intend to like strike the 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? That’s my two questions. Thank you.

Dong Hao Yang, CFO and Director, Yaseng: Okay. Thank you very much for your question. Well, we’ve always been trying to track balance between our growth and profitability. And we don’t believe that we have to sacrifice one for the other. And especially now our high end skincare brands are growing even faster than our color cosmetics brands, which tend to have higher gross margin and bottom line.

So we’re confident that as we grow our business, both in skincare and color cosmetics going forward and especially skincare is showing a much stronger growth momentum. We believe that we can achieve both growth and profitability. And competition and I think you’re right, competition is going to be becoming more and more intense going forward, especially as our high end skincare brand is growing faster, we do expect to have more competition from the international brands. But in order to drive our growth and strengthen our competing position, we are adopting a R and D driven growth strategy. So for the last four, five years, we’ve been one of the most aggressive players in the cosmetics industry to invest heavily in R and D.

So now we’ve built a very I would say best in class R and D team and R and D infrastructure. If you look at our lab, our R and D center in Shanghai is one of the world class facilities. So that’s how we view where to drive our future growth and especially to win the competition against the players in the industry.

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

David Sungheng Huang, Founder, Chairman and CEO, Yaseng: Thank you.

Conference Operator: Our next question today will come from Lin Zhang of CITIC Securities. Please go ahead.

Maggie Huang, Analyst, CICC: Thank you for taking my questions. I’m Lin Zhang from CITIC Securities and congratulations on the performance in the second quarter. My first question is for the skincare brands. So I want to ask what are the key drivers behind the rapid growth of skincare brands, for the Lannik and Daughter Wu in the first half of the year? And what is the outlook for the skincare business in the second half year and the next year?

And my second question is, in which assets will the company make efforts to continuously improve the profitability? Thank you.

Dong Hao Yang, CFO and Director, Yaseng: Thank you for the question. So for the

Irene Lu, Vice President, Head of Strategic Investment and Capital Markets, Yaseng: growth of skincare brand, so we think there are a number of reasons. Primarily it’s because of our continued investment in R and D and our gradual systematic upgrade of our R and D capabilities. As a result, we have a very strong pipeline of new product innovations. So just to give you some examples, for example, for Glymit, for the past couple of quarters, we have introduced a series of new products, including on top of very successful VC, we produced the VA serum and also the MicroMask series has been very successful. And we also widened the offering of the MicroMask in terms of different efficacy and we also operated the micro mask recently.

And for Doctor. Wu, the new asset owner has been very successful. So we think mainly from the R and D upgrade and also the new product pipeline. And then in terms of outlook, we have provided the guidance for Q3 of 15% to 30%, which will I would think reflect our future outlook in terms of continued trend of our skincare brands in terms of the development. And then on your second question is our efforts to how to improve the profitability.

We are continuing to optimizing our channel and product mix and at the same time streamline our operating expenses. But we think most of our brands, some of them given the high growth, we think there’s still significant growth potential. And those brands are right now remain well below their respective feelings. That’s why we continue to plan to invest in the brand awareness and brand equity. So especially when there are few product launch.

So as a result, we think the profitability improvement will be gradual.

Dong Hao Yang, CFO and Director, Yaseng: Okay. As well, just to add on to Irene’s point, we do see clear opportunities to further improve profitability across several dimensions. First, we will continue to optimize our product mix by driving premiumization and hero products with stronger margins. Second, we’re improving marketing efficiency through data driven CRM and better ROI discipline, shifting spending towards higher return channels. Thirdly, we are enhancing supply chain and operational efficiency to reduce costs and improve scale leverage.

And lastly, as top line growth continues, we expect to gain operating leverage across fixed expenses. So altogether these initiatives give us confidence in steadily expanding profitability while maintaining growth.

Maggie Huang, Analyst, CICC: Thank you. That’s very clear. Thank you very much.

Conference Operator: This will conclude our question and answer session. I would like to turn the conference back over to management for any closing remarks.

Irene Lu, Vice President, Head of Strategic Investment and Capital Markets, Yaseng: Thank you again for joining us today. If you have any further questions, please feel free to contact us at Yixin directly. Our content 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 your lines.

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