Yatsen (YSG) Q1 2026 Earnings Call Transcript

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Date

Tuesday, May 26, 2026 at 7:30 a.m. ET

Call participants

• Founder, Chairman, and CEO — Jinfeng Huang
• Chief Financial Officer and Director — Donghao Yang
• Vice President, Head of Strategic Investment and Capital Markets — Irene Lyu

Takeaways

• Total net revenues -- $1.02 billion, up 22.5% year over year, primarily driven by a 58.5% increase in skincare brands revenue, partially offset by a 5% decline in color cosmetics brands.
• Gross profit -- $819.2 million, an increase of 24.3% year over year, with gross margin expanding to 80.2% from 79.1%.
• Operating expenses -- $918.1 million, rising 32.5% year over year to 89.9% of net revenues (up from 83.2%), with selling and marketing expenses at $737.2 million, or 72.2% of net revenues, and fulfillment expenses at $61.1 million, or 6%, reflecting improved logistics efficiency.
• Research & development (R&D) expenses -- $39.4 million, a year-over-year increase, now 3.9% of total net revenues, driven mainly by increased R&D headcount.
• Loss from operations -- $99 million, with an operating loss margin of 9.7% as compared to 4.1% in the year-ago quarter; non-GAAP loss from operations was $84.6 million (8.3% margin).
• Net loss -- $61.9 million (6.1% net loss margin); non-GAAP net loss was $57.3 million (5.6% margin), reversing non-GAAP net income from the prior year.
• Cash, restricted cash, and short-term investments -- $934.2 million as of March 31, 2026, down from $1.05 billion at December 31, 2025.
• Net cash used in operating activities -- $90 million, turning negative from net operating cash inflow of $23.8 million in the prior year period.
• Revenue guidance -- Management expects Q2 total net revenues between $1.2 billion and $1.3 billion, implying 10%-20% year-over-year growth.
• Strategic brand focus -- The company highlighted continued investment in R&D, portfolio expansion around successful product families, and strengthening brand equity, exemplified by launches such as Galénic’s anti-aging cream and Dr. Wu’s initiatives in dermatology research.
• Financing update -- Completion of a private placement of convertible notes and warrants, with new institutional investor participation as of May 21, 2026.

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Risks

• Operating expenses grew faster than revenues, with operating expenses at 89.9% of net revenues, up from 83.2%, primarily due to higher selling and marketing, as well as research costs.
• Net loss and net cash used in operating activities expanded significantly, reversing positive results from the prior year period.
• Management highlighted "core brands, coupled with higher traffic acquisition costs," signaling margin risk as industry-wide costs rise.

Summary

Yatsen Holding (NYSE:YSG) reported double-digit revenue growth driven by continued momentum in its skincare brands and increased R&D investment, while gross margin reached a record level. The company completed a material private placement transaction, bringing new institutional capital and signaling investor confidence in the multi-brand strategy. Guidance for the second quarter anticipates 10%-20% revenue growth, supported by ongoing portfolio innovation and channel development.

• Management articulated a clear plan to leverage multi-brand differentiation through targeted investment and product expansion, using data tools and AI to sharpen consumer insights and marketing efficiency.
• In explicit response to investor queries, management stated, "Competition is very intense. But we believe we have a differentiated position," specifically referencing Galénic's anti-aging positioning and enhanced consumer education initiatives.
• The company intends to extrapolate Otitis brand's channel and profitability strategies to other portfolio brands, aiming for broader efficiency and profit improvement.
• Leadership reinforced an unwavering commitment to operational streamlining and margin improvement, with dynamic channel mix optimization stated as an ongoing tactical imperative.

Industry glossary

• Convertible notes: Debt securities that can be converted into a predetermined number of the issuing company's shares, typically at the option of the holder.
• Traffic acquisition costs: Expenses incurred to attract and acquire online traffic, often via digital advertising or e-commerce platform fees.
• Anti-aging (anti-agent): Products or treatments aimed at reducing or preventing visible signs of aging, particularly in skincare.

Full Conference Call Transcript

Operator: Ladies and gentlemen, good day, and welcome to the Yatsen First Quarter 2026 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Irene Lyu, Vice President, Head of Strategic Investment and Capital Markets. Please go ahead.

Irene Lyu: 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 Jason's business financial results is included in certain filings of the company with the Securities and Exchange Commission.

Companies that box undertakes 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 for. Please see the earnings release issued earlier today for a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results. Joining us today on the call from Yatsen's senior management are Mr. Info Hong, our Founder, Chairman and CEO; and Mr. Doho Yang, our CFO and Director. Management will begin with prepared remarks, and the call will conclude with the Q&A session. As a reminder, this conference is duly recorded.

In addition, a webcast replay of this conference call will be available on Yatsen's Investor Relations website. at ir.yatsenglobal.com. I'll now turn the call over to Mr. Jinfeng Huang. Please go ahead, sir.

Jinfeng Huang: Thank you, Irene. Hello, everyone, and thank you for joining our first quarter 2026 earnings call earnings call. Going into this year, we delivered top line growth that met our period guidance range. and demonstrated ongoing resilience of our multi-brand strategy. Our financial and operational highlights this quarter further show that Yatsen is navigating the market with a clear strategic vision. Looking at the macro environment. According to the National Bureau of Statistics, beauty retail sales grew by 5.9% year-over-year in the third quarter of it reflecting a stable, highly competitive domestic beauty market. Looking closely at the online channels, the combined sales across Tmall, Loen and Digi.com also recorded a single-digit year-over-year growth.

Against this market backdrop, our strategic rebalancing has yield highly encouraging results. Our total net revenues based on a steady growth trajectory, growing by 22.5% year-over-year for the first quarter. More importantly, this growth was primarily proposed by the sustained upward momentum of our sincere brand, which experienced another substantial year-over-year growth of 58.5% on -- so driven by this favorable shift toward our inter offering, our gross margin continued its year-over-year expansion and reached a historical milestone of 18.2% reinforcing the structural health of our business model. Throughout the first quarter, we remain swiftly committed to our core strategic initiatives.

Basically, we continue to drive R&D last quarter innovation, strengthen brand equity across our multi-brand portfolio and position our business for long-term profitability optimization. In the following section, I would like to share our key progress across each of these 3 strategic pillars. Our first pillar is driving R&D-led innovation, which remains the ultimate engine behind our sustainable growth. In the first quarter, we consistently set up our R&D investments. This R&D expenses as a percentage of total net revenues increasing further to 3.9%. This ongoing commitment allowed us to broaden our scientific initiatives. For instance, Dr. Wu long support of acne Research Fund project in March.

Bridging online and off-line dermatological assets to tackle a series of specialized research products. In April, the brand marks another milestone with the release of the white paper on Chinese dermatological research and skin renewal. Leveraging 48 years of clinical ecloud and skin insight, this publication officially defines a multi-ingredient multi-target and full layer in renewable management framework, further solidifying the brand authorities in dermatology. On the product front, our advanced R&D system has successfully powered a series of highly market-ready solution. During the first quarter, Galani's new cotrevalation seller revising cream with an instant feet. Starting now soon after its developed. Votable expanded its successful PDR series with the introduction of 2 new breakthrough products.

The versal sodium ENA collagen hydroluminal mark and the adversal anti-lingo quality cream. Meanwhile, plan also expanded its product portfolio by launching the renewal in 10 treatments, designed specifically for the dedicated eye area. These launches underscore our enhanced efficiency and expanding existing series into new categories and a broader expertise. Our second pillar is strengthening brand equity through our portfolio through expert-led communication and strategic brand activities. In March, lanicmade a high-profile appearance at AMW. The aesthetic and anti-agent Medicine World Congress in Monaco. This world-class presentation further reinforced the mic scientist scientific credentials and solidified its core consumer mill share in cellular level anti-agent sites.

Furthermore, in April, Galani announced the appointment of a Fundtech as a new brand and base, a move that has amplified its brand retina and consumer awareness. Our third pillar is improving overall profitability. So during the first quarter, our selling and marketing expenses as a percentage of total net revenues, we experienced an increase. As a result of both the continued investment in building our core brands and the elevated industry-wide traffic acquisition costs on the Doing platform. However, our commitment to long-term profitability optimization remains unwavering. More forward, we will dynamically adjust our channel mix. streamline our operational expenses and unlock greater operational leverage for our fixed costs.

These initiatives will ensure that our top line expansion efficiently translate into further margin improvement paving the way of sustainable profit-centric growth. Finally, I would like to provide an important update regarding our recent financing transaction. Following our announcement on March 11, we are pleased to note that we successfully completed the first change of the private placement of convertible notes and warrants on May 21, 2026. In addition to myself and CaspaCapital, we are delighted to welcome -- House as a key participating investor in this offering. This successful closing serves as a powerful treatment a testament to our long-term investors steady fast confidence, investments, strategic direction and further value.

Management shares this exact same competence, and we are fully energized to deliver sustained value for our shareholders in the quarters to come. With that, I will now turn the call over to our CFO, Donghao Yang, to discuss our financial details.

Donghao Yang: Thank you, David, and hello, everyone. Before I get started, I would like to clarify that all financial numbers presented today are renminbi amounts and all percentage changes refer to year-over-year changes unless otherwise noted. Total net revenues for the first quarter of 2026 increased by 22.5% to $1.02 billion from $833.5 million for the prior year period. The increase was primarily due to a 58.5% year-over-year increase in net revenues from skin care brands, partially offset by a 5% year-over-year decrease in net revenues from Cove cosmetics brands. Gross profit for the first quarter of 2026 increased by 24.3% to $819.2 million from $659.1 million for the prior year period.

Gross margin for the first quarter of 2026 increased to 80.2% from 79.1% for the prior year period. Total operating expenses for the first quarter of 2026 increased by 32.5% to $918.1 million from $693.2 million for the prior year period. As a percentage of total net revenues, Total operating expenses for the first quarter of 2026 were 89.9% as compared with 83.2% for the prior year period. Fulfillment expenses for the first quarter of 2026 were $61.1 million as compared with $51.8 million for the prior year period. As a percentage of total net revenues, fulfillment expenses for the first quarter of 2026 decreased to 6% from 6.2% for the prior year period.

The decrease was primarily due to further improvement in logistics efficiency. Selling and marketing expenses for the first quarter of 2026 were $737.2 million as compared with $553.8 million for the prior year period. As a percentage of total net revenues, selling and marketing expenses for the first quarter of 2026 increased to 72.2% from 66.4% for the prior year period. The increase was primarily driven by investments in bottoming consumer awareness and building long-term brand equity of our core brands, coupled with higher traffic acquisition costs under the lean platform. General and administrative expenses for the first quarter of 2026, were $80.3 million as compared with $64.9 million for the prior year period.

As a percentage of total net revenues, general and administrative expenses for the first quarter of 2026 was 7.9% as compared with 7.8% for the prior year period, remaining largely flat. Research and development expenses for the first quarter of 2026 were $39.4 million as compared with $22.6 million for the prior year period. As a percentage of total net revenues, Research and development expenses for the first quarter of 2026 increased to 3.9% from 2.7% for the prior 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 first quarter of 2026 was $99 million as compared with $34.1 million for the prior year period. Operating loss margin was $9.7 million as compared with 4.1% for the prior year period. Non-GAAP loss from operations for the first quarter of 2026 was $84.6 million as compared with $14.9 million for the prior year period. Non-GAAP operating loss margin was 8.3% as compared with 1.8% for the prior year period. Net loss for the first quarter of 2026 was $61.9 million as compared with $5.6 million for the prior year period. Net loss margin was 6.1%, as compared with 0.7% for the prior year period.

Net loss attributable to Yatsen's ordinary shareholders per diluted ADS for the first quarter of 2026, was RMB 0.64 as compared with RMB 0.06 for the prior year period. Non-GAAP net loss for the first quarter of 2026 was $57.3 million as compared with non-GAAP net income of $7.1 million for the prior year period. Non-GAAP net loss margin was 5.6% as compared with non-GAAP net income margin of 0.9% for the prior year period. Non-GAAP net loss attributable to Yatsen's ordinary shareholders per diluted ADS for the first quarter of 2026 was RMB 0.6 as compared with non-GAAP net income attributable to Yatsen's ordinary shareholders per diluted ADS of RMB 0.07 for the prior year period.

As of March 31, 2026, the company had cash, restricted cash and short-term investments of $934.2 million as compared with $1.05 billion as of December 31, 2025. Net cash used in operating activities for the first quarter of 2026 was $90 million as compared with net cash generated from operating activities of $23.8 million for the prior year period. Looking at our business outlook for the second quarter of 2026, we expect our total net revenues to be between $1.2 billion and $1.3 billion representing a year-over-year increase of approximately 10% to 20%. These forecasts reflect the company's 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&A. Operator?

Operator: [Operator Instructions] And our first question today comes from Manqi Huang with CICC.

Manqi Huang: This is Manqi Huang from CICC. I have 2 questions. But my first question, we've seen a rapid growth of our skin care brands in this quarter. could management share with us how to expand our product portfolio of Skin Care brand going forward. And my second question is that how do we view the competition from foreign brands, especially in high-end skin care market? That's my 2 questions. Thank you

Jinfeng Huang: We will continue to expand around proven hero product families. In quarter 1, galenic new anti-aging cream was a great success and sold out shortly after launch. We also saw significant growth from Galenica models. So these results give us more confidence that the lane can expand from Hisar into a broader anti-agent in skin care routine. For Dr. Wen plan, we will follow the same logic built complete routines around proven science, strong efficacy and a clear consumer demand. . For the second question regarding the competition from high-end for in brand. Competition is very intense. But we believe we have a differentiated position.

So our skincare brands, combined global heritage, strong client capabilities, local consumer insights and very fast education. Galanis is a very great example. We are building the brand around cellular level anti agent supported by successful product launches and stronger brand communication. We are also using AI and data tools to improve consumer insights, content production, CIM and make -- so this help us to compete more efficiently, not just be more.

Operator: [Operator Instructions] Our next question today comes from Lin Zhang of Citic Securities.

Lin Zhang: I'm Lin Zhang from Citic Securities. My question is that we have noticed Dou is growing really fast. So could you please share with us the key drivers of the growth?

Jinfeng Huang: Well, otitis a very important case for us. So the brand has delivered strong growth while maintaining a healthier profitability profile. The 1 reason is higher B2T channel mix. including professional and off-line channels, which give us the brand a better balance between growth, shape costs and profitability. So this is a model we want to learn from and the selectively apply to other tinkers -- stronger signs, more professional capability, more balanced channel mix and better marketing efficiencies. Those are some of the key drivers we summarize for.

Operator: And that concludes the question-and-answer session. I would like to turn the conference back over to management for any additional or closing comments.

Irene Lyu: Thank you once again for joining us today. If you have any further questions, please feel free to commit us Yetsen directly. For 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. .

Operator: Thank you. And that concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.

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