Yatsen Holding achieves 47.5% revenue growth in Q3 2025, driven by skincare success and improved profitability outlook.

I'll now turn the call over to Mr. Hatcher.

Hello everyone. Thank you for joining our third quarter 2025 earnings call. The beauty market in China continued to show signs of recovery in the third quarter, particularly in the skincare category which remained robust and support its 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 and 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 hero product engines 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 a 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 towards profitability in a disciplined and sustainable way. We expect further improvement to be driven by a higher skin care mix, ongoing growth, margin optimization and greater marketing efficiency. While we will continue to invest in innovation and hero products, we remain distant in balancing growth with profitability. Now let me share some brand and product highlights. During this quarter, Galani delivered strong momentum and remained one of the fastest growing premium skincare brands. The brand Hero Serum series continued to perform well with the number one VC serum and a number two a VA Serum ranking among the top selling serums across major E commerce platforms. The newly introduced number three VB Serum, launched in the 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 Guoyuan. 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 UK, 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 9th Annual Academic Conferences of the Dermatology Committee of the Chinese Non Government Medical Institution association, further demonstrating the brand's commitment to clinically grounded innovation and strengthening its leadership in renewal focused interview Our flagship brand Perfect Diary also continued to make progress following the successful launch of the Translucent Blurring Setting Powder and Bio Face Essence Foundation. The brand focus on streamlining its core product assortment, improving HERO product quality and enhancing overall product experience under the Makeup Identification concept. Several of these HERO products delivered performance above expectations, driving perfect diary based makeup category to exceed 40% of the total sales and supporting a more sustainable and disciplined recovery. In the third quarter, Perfect Diary also excelled in new channel performance and achieved the number one ranking among makeup brands on WeChat video channel, reflecting the brand's strengthened competitiveness and growing consumer recognition. R&D and innovation 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 IFSCC Congress for the fourth consecutive year, this time in Cannes, France. Eleven of our papers were shortlisted by the IFSCC covering topics from cellular mechanism and clinical translation to AI algorithms and emotion skincare, so this work highlights our full chain capabilities from fundamental science to technology translation and clinical validation and it directly supports future HERO 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 that our strategic focus on R and D, together with disciplined execution and a 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 brands and innovation capabilities while creating long term value for shareholders. Thank you. I will now turn the call to Dongha.

Thank you David and hello everyone. Before I get started I would like to clarify that all financial numbers presented today are 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 998.4 million from $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 profit for the third quarter of 2025 increased by 51.9% to 780.5 million from 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 $864.1 million from $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 61.8 million as compared with 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 6.0 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 682.3 million as compared with 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 investment for the 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 skin care mix and more disciplined spending across channels. General and administrative expenses for the third quarter of 2025 were 80.2 million as compared with 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 39.8 million as compared with 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 five 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 83.6 million as compared with 141.3 million for the prior 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 60.6 million as compared with 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 70.4 million as compared with 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 Holding ordinary shareholders for diluted ads for the third quarter of 2025 was 0.7 RMB as compared with 1.22 RMB for the prior year period. Non GAAP net loss for the third quarter of 2025 was 51.2 as compared with 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 Holding ordinary shareholders for diluted ads for the third quarter of 2025 with 0.5 RMB as compared with 0.77 RMB for the prior year period. As of September 30, 2025, the Company had cash, restricted cash and short term investments of 1.16 billion RMB as compared with 1.36 billion RMB as of December 31, 2024. Net cash used in operating activities for the third quarter of 2025 was 126.8 million as compared with 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 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 1.2 and 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 and A operator.

Thank you. We will now begin the question and answer session. To ask a question, please press Star then one. On your touchtone 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 2. 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 and at this time we'll pause momentarily to assemble our roster again. To ask a question, please press Star then one and our first question will come from Maggie Wang with cict. Please go ahead.

Well, thanks for taking my question. This is Maggie Huang from cicc. Firstly congratulations for beating our revenue guidance and I have two questions. My first question is about our performance during Double eleven Festival. Is that in line with our expectation and have we observed any change in the competition from foreign high end brands? And my second question is that how do we expect the profitability of the fourth quarter and the next year? That's my question. Thank you.

Well I think first of all the 11 performance for the whole company generally it's in line with our expectation and for some of the brands are exceeding our expectations. So having said that I think we are very happy to observe some of not only the existing here at SKUS are doing well but some of the newly launched products are gaining a very strong momentum during the eleven 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 for in high end brands we did observe a very big challenge and also competition for the past seven shopping festival and some of the high end brands are struggling with very big and also deep price cut for their hero products. We did see that with our R and 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 eleven Shopping festival will load some of the pantries for some of the foreign high end brands which means will hurt their Long term growth. So having said that, I'm happy to see that our high end brand, we're still keeping a very strong momentum by balancing the price promotion and also refocusing on promoting some of the new SKUs. So going back to the Q4, I think we are on our right track to reach the profitability and then that's our long term goal and then we are seeing the balance of the growth and also the right check for the profitability.

Thank you. Okay, got it. It's very clear. Thank you very much. And I have no more questions.

The next question will come from Lucia Zhang with CP Securities. Please go ahead.

Thank you for taking from CT Securities. I also have two questions. The first one is we can see that the skin care business of the company has achieved rapid growth this year. So from which aspect should we make efforts to sustain the growth maybe in the last quarter and next year. And the second question is about profitability. So in which aspects will the company will make efforts to continuously improve their profitability? Thank you.

Well, so going back to the fundamental drivers for our skincare business, I think the number one thing is about the R and D beauty market has always driven by further and then better water innovation. So we are very happy to see that with our R and D growth engine and then we can launch a very strong pipeline this year and then 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 liner 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. So during this process as we continue to drive the brand's awareness and also continuously drive the customer base, we still have a potential to grow our existing skincare brand. And then last but not least, I think for us we focus on launching some new products on some of the key channels and in the future we will expand into other channels and also drive further better channel mix. So with that I think that will contribute to the sustainable driver for the our skincare plan. Going back to your questions about how can we continuously improve the profitability, I think as we said many times before, I think 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 CRM 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 like the revenue scale grow up, we will see further leverage on the true branding expenses roi. So those are the things, some of the things we think are very important to draft continuously improvement for the profitability. Thank you.

Okay, thank you. Thank you. That's really helpful and clear.

The next question will come from Jennifer Wan with High Child Securities. Please go ahead.

Hi, this is Jennifer Yuan from Huate Securities. So congratulate on company's great performances and could you please introduce, just give us some colors on the expected expenses of the company in the future and maybe could you please share how do you view the increasingly fierce competition in the online channel? Thank you for your answers.

Well, can you help me to clarify what do you mean by expenses.

Like general expenses, operating expenses, et cetera? Just general speaking.

Okay. Well if you look at our, if you look at our financial statements, I see we see a pretty stable G and A expenses in the past quarters. But having said that, I think moving forward as the scale of our total revenue grow and then we will see some operational leverage on the general and administrative expenses. We will continue to invest in some of the what we think short term wise will categorize as expenses. But we see it more like the investment including R and D and also for branding dollars to really build up the brand equity. Those are some of the areas that we focus on. And what is your second question?

Oh, that's how do you view the ongoing sales competition on the online channel? How do you think our company is going to face such kind of situation? Thank you for your answers.

I think as we said before, when we are looking at the busy market, there are so many players and then one of the reasons that we can continuously and also accelerating our growth is mainly given some of the investments we have devoted in R and D in the past few years and also our continuously commitment on brand building. So we did something right before, that's why we are getting the growth today. So if we are looking at the competition, as long as we continue to focus on what we have done right and then we will see more and more robust quota lineup and then better innovations coming and we will see the higher brand awareness so that we can get some more operational and also brand building like optimization. And also we will see some of the operational efficiency improving by our product mix and channel. Mix optimization and we will see some organization growth by we focus on the cornerstones of our product innovation, customer focus, CIM and etc. So as long as we focus on doing the right thing, we think in the future we will achieve the long term sustainable growth. Thank you.

Thank you for your kind response. We are very looking forward to see the company's rapid growth.

Appreciate it. Thank you.

And 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. Thank you once again for joining us today. If you have any further questions, please feel free to contact us at Yatsen Holding directly. Our contact information for IR in both China and the US can be found in today's press release. Thank you and have a great day. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.