YJ 云集

Operator

Good morning, and good evening, ladies and gentlemen. Thank you. And welcome to Yunji’s Second Quarter 2021 Earnings Conference Call. With us today are Mr. Shanglue Xiao, Chairman and Chief Executive Officer; Chengqi Zhang, Vice President of Finance; and Ms. Kaye Liu, Investor Relations Director of the company. Now, I would like to hand the conference over to first speaker today, Ms. Kaye Liu, IRD of Yunji. Please go ahead, ma’am.

Kaye Liu

Hello, everyone. Welcome to our second quarter 2021 earnings call. Before we start, please note that this call will contain forward-looking statements within the meaning of the Private Security Litigation Reform Act of 1995 that are based on our current expectations and current market operating conditions and relate to events that involve known or unknown risk, uncertainties and other factors of Yunji and its industry. These forward-looking statements can be identified by terminologies such as will, expect, anticipate, continue or other similar expressions. For a detailed discussion of these risks and uncertainties, please refer to our latest documents filed with the U.S. SEC. Any forward-looking statements that we make on this call are based on assumptions as of today and are expressly qualified in the entirety by cautionary statements, risk factors and details of the company filing with the SEC. Yunji does not undertake any obligation to update this statement except as required on applicable law. With that, I will now turn over to Shanglue Xiao, Chairman and CEO of Yunji.

Shanglue Xiao

Hello everyone. Welcome to Yunji’s second quarter 2021 earnings call. Based on product selection and social sharing, Yunji’s marketing model has established a complete and healthy lifecycle. The cycle starts with the product selection promotion by our service managers and a precious facilitation. And while our service managers’ benefit from promotional incentives our members have a better understanding of the product through the service managers’ introductions. We see core effective product that satisfy their need, establish trust with Yunji’s platform and our sharing based model and come back to repeat purchases. Meanwhile our service managers will earn income by delivering services. Common prosperity has also been Yunji’s only meeting vision since its establishment. To create more user value and offer products with better quality, we remain focused on three core strategies, highly curated productive selection, differentiated supply chain and special lines of retail system. In May 2021, we launched Yunji 99 Special Sales Portal on our Yunji app as one of the core products for our curated product selection strategy, aiming to become the portal for megahit product across all of the Internet. Our Yunji 99 Portal funnels of our platforms core traffic to a refined introduction of the megahit products across all categories. The addition of this section reinforces our refining supply chain strategy, as well as the collaboration of the megahit product sales by connecting Yunji members to create ideas with viral appeal by focusing on highly cost effective products. We have millions of members assess quality products from all over the world. The Yunji 99 Special Sales Portal featuring a curated selection has been up to 99 products each day. These 99 products are vigorously screened and selected through strict criteria and a basic product poor selection process. Of the 99 products, the top 10 best retailers will be highly recommended and provided with more resources to support. Providing such high quality brands at affordable prices enhances Yunji shopping experience and encourages purchases. We will continue to optimize our product selection and utilize data driven insights to enhance the Yunji shopping experience and provide our users with a true one-stop shopping solution. As for our differentiated supply chain strategy, we recently celebrated the 11th anniversary of our private label skincare brand, Solo Life, by utilizing our social sharing capability. We have helped Solo Life to better express its brand value and assumingly a large group of a loyal usage over the years. By the annual 2020 Solo Life had become a skincare brand with annual sales of more than RMB1 billion on the Yunji platform and cultivate a multiple megahit products with hundreds of millions in unit sales. Within our differentiated supply chain metrics, we have also introduced a number of unique products in various categories. For example, the first batch of our newly developed line of beauty creams, which include 85,000 products were sold out within just 57 seconds of its launch. We are currently optimizing production capability -- capacity and achieving speed and will focus to these product line performances after our production capacity has improved. We chose to differentiate our strategic focus on the health industry for a number of reasons. First, we believe that the tailwind generated by the health industry brings tremendous value to not only us, but also our members. More importantly, we want to provide our service managers and members with methods to improve their vehicle strength in beauty. It is also our sincere hope that our sales managers will develop a lifelong career and have a platform that benefits not only themselves, but also their family. Now let me share the initiatives we have taken to utilize our specialized retail system and online traffic. These have helped millions of our service managers discover and develop life changing career opportunities. Most of them are services managers are women. We train our service managers to deliver professional services to our members and hope that they can gradually earn a decent monthly salary of tens of thousands of RMB. They are not only service managers but also assets in various fields. They are entrepreneurs who help for a change in daily life. We offer them many training programs in areas such as health management and marketing so that they can become experts in the fields of the cosmetics, health and sales. This training enabled them to reach customers with a more professional attitude and improve their marketing skills. The professional marketing skills are practical in use and also boost our sustainable development. Going forward, we hope that more leaders will emerge from within our service manager group and we will focus on supporting these leaders, while making our specialized retail system more complete and efficient. During the second quarter, we maintained the entrepreneurial spirit and continued to conduct innovative initiatives. In terms of user retention, we set up a special group to better reach users, engage in active users and strengthen users’ consumption frequently. In addition to developing new traffic channels, this group who worked hard on content marketing and created their own original short form video content. Meanwhile, we have also been preparing for our online streaming session on third-party live streaming platforms, where I will host the session myself. With that, I will turn the call over to Mr. Chengqi Zhang, our Vice President of Finance to go through the financial results.

Chengqi Zhang

Thank you, Shanglue. Hello everyone. Before I go through our financial results, please note that all numbers stated in the following remarks are in renminbi terms and all comparisons and percentage changes are on a year-over-year basis unless otherwise noted. Starting this year, we are committed to enhancing our supply chain differentiation strategy, upgrading our product selection with our new massive product curation strategy and refining our membership management system. We have also shifted our mindset to focus on sustainable long-term growth as we further improve our efficiency as employee structure. After several quarters of adjustments, our final operations have resulted in significant improvements in our profitability despite sound fluctuations in our quarterly sales. During this quarter, we recorded our operations income of RMB16 million and our net income of RMB17 million, compared with our operating loss of RMB45 million and a net loss of RMB17 million in the year ago. Now let’s take a closer look at our financials. Total revenue were RMB571 million, compared to RMB1,487 million a year ago. Revenue from sales of merchandise were RMB472 million and revenue from our marketplace business were RMB88 million. In line with our reviewed long-term growth strategies, we further optimized our financing of suppliers and the merchants, which caused the revenue decrease in both our marketplace business and the merchandise sales during this quarter. As a result, gross margins improved to RMB75 million -- 75 percentage compared to 19 -- 29 percentage a year ago. During this quarter, we improved our operating efficiency by carefully selecting quarterly [ph] suppliers and products, removed certain products that were more included to base pricing and subsidy competition and the focus on our depreciation supply chain and make good product offerings, as a result, gross margins improved accordingly. Turning to our operating expense, fulfillment expense were RMB15 million or 8.8% of total revenues, compared to RMB129 million or 8.7% of total revenue a year ago. Sales and marketing expenses were RMB51 million, compared to RMB228 million a year ago. As a percentage of total revenues sales and marketing expenses were reduced to 10.8% from 15.4% in the same period last year. This decline was due to decreased business promotion expenses and the reduced management fees resulting from the improvements of our member management efficiency. Technology and content expenses were RMB32 million or 5.7% of total revenues, compared to RMB59 million or 3.9% of total revenue a year ago. General and administrative expenses were RMB43 million or 7.5% of total revenues, compared to RMB71 million or 4.8% of total revenue a year ago. The decrease was mainly due to a decrease in share-based compensation expenses. Total operating expenses in the second quarter decreased to RMB187 million. We recorded our income from operation of RMB16 million, as compared to a loss of RMB45 million a year ago. Net income was RMB17 million, compared to a net loss of RMB70 million a year ago. Adjusted net income was RMB24 million, compared with RMB20 million a year ago. Basic and diluted net income per share attribute to -- attributable to ordinary shareholders were both RMB0.01, compared to basic and diluted net loss per share attributable to ordinary shareholders of RMB0.01 in the same period of 2020. Moving now to liquidity. As of June 30, 2021, we had a total of RMB1.1 billion in cash and cash equivalent, restricted cash and short-term investments on our balance sheet. Our liquidity asset was sufficient enough to cover our payable obligations and though we did not hold any long-term bank loans or debt on our balance sheet. As we continue to execute our supply chain depreciation and product curation strategy, we will remain focus on our long-term growth objectives and the profitability. We are confident that our innovation strategy at the refined operation capability will continue to drive our sustainable development going forward. This concludes our prepared remarks for today. Operator, we are now ready to take the questions.

Operator

Thank you. [Operator Instructions] It seems we don’t have any questions from the line yet. Presenters, please continue. [Operator Instructions] I don’t see any questions from the line yet. Presenters or management, please continue. : :

Kaye Liu

Thank you for joining us today. Please do not hesitate to contact us if you have further questions and we look forward to talking with you next quarter. Thanks.

Operator

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now all disconnect.