Yatsen Reports Fourth Quarter and Full Year 2020 Financial Results

GUANGZHOU, China, March 11, 2021 /PRNewswire/ -- Yatsen Holding Limited ("Yatsen" or the "Company") (NYSE: YSG), a leader in the rapidly evolving China beauty market, today announced its unaudited financial results for the fourth quarter and full year ended December 31, 2020.

Fourth Quarter 2020 Highlights

• Total net revenues for the fourth quarter of 2020 increased 71.7% to RMB1.96 billion (US$300.6 million) from RMB1.14 billion for the fourth quarter of 2019.
• Gross margin for the fourth quarter of 2020 was 66.3% compared to 62.7% for the fourth quarter of 2019.
• Gross sales^[1] for the fourth quarter of 2020 increased 73.3% to RMB2.27 billion (US$348.2 million) from RMB1.31 billion for the fourth quarter of 2019.
• The number of Direct-to-Consumer ("DTC") customers^[2] for the fourth quarter of 2020 increased 30.9% to 14.4 million from 11.0 million for the fourth quarter of 2019.

"We are thrilled to report solid fourth quarter and full year results as our efforts to scale our brands and unlock synergies between our various sales channels, resulted in powerful top-line growth," said Mr. Jinfeng Huang, founder, chairman and CEO of Yatsen. "The growing popularity of homegrown Chinese beauty brands is presenting us with unprecedented opportunities that we are well positioned to capture. With our acquisition of several distinct skincare brands and our partnership with Sensient Technologies, we are on track to offer our customers a full suite of products. While we continue to focus on innovation and quality, our efforts in expanding our offline experience stores will create even greater value for our customers and spur stronger brand engagement and loyalty. In 2021, as customers continue their journey of beauty discovery, we look forward to introducing effective skincare regimens and new color cosmetics consisting of an even fuller array of colors and textures."

Mr. Donghao Yang, CFO and director of Yatsen, commented, "We finished the fourth quarter of 2020 with solid financial results. Our healthy top line growth reflects strong performance across our brand portfolio and demonstrates the deep market appeal of our products, the success of our growth strategy, and our ability to skillfully execute our operational plan. 2020 was a pivotal year for Yatsen and the overall beauty industry, and our efforts in product innovation and development paid off. As we move further into 2021, we remain committed to our growth strategy of expanding our product offerings and customer base which we firmly believe will lay a solid foundation for profitability in the long run."

Fourth Quarter 2020 Financial Results

Net Revenues. Total net revenues for the fourth quarter of 2020 increased by 71.7% to RMB1.96 billion (US$300.6 million) from RMB1.14 billion for the fourth quarter of 2019, primarily attributable to the growth in sales volume of our beauty products driven by an increase in the number of customers during the same period.

Gross Profit and Gross Margin. Gross profit for the fourth quarter of 2020 increased by 81.6% to RMB1.30 billion (US$199.4 million) from RMB716.3 million for the fourth quarter of 2019. Gross margin for the fourth quarter of 2020 was 66.3% compared to 62.7% for the fourth quarter of 2019.

Operating Expenses. Total operating expenses for the fourth quarter of 2020 were RMB2.83 billion (US$434.5 million), compared to RMB644.8 million for the fourth quarter of 2019. As a percentage of total net revenues, total operating expenses for the fourth quarter of 2020 were 144.5%, compared to 56.5% for the fourth quarter of 2019.

• Fulfillment Expenses. Fulfillment expenses for the fourth quarter of 2020 were RMB144.7 million (US$22.2 million), compared to RMB113.2 million for the fourth quarter of 2019. The increase was primarily due to (i) an increase in warehousing, shipping and handling expenses driven by the growth in sales volume of our beauty products during the same period, and (ii) share-based compensation expenses recognized upon occurrence of initial public offering ("IPO") according to accounting principles generally accepted in the United States of America ("U.S. GAAP"). As a percentage of total net revenues, fulfillment expenses for the fourth quarter of 2020 decreased to 7.4% from 9.9% for the fourth quarter of 2019.
• Selling and Marketing Expenses. Selling and marketing expenses for the fourth quarter of 2020 were RMB1.38 billion (US$211.3million), compared to RMB446.3 million for the fourth quarter of 2019. The increase was primarily due to (i) an increase in advertising, marketing and brand promotion costs, (ii) an increase in expenses incurred during the development of experience stores, and (iii) share-based compensation expenses recognized upon occurrence of IPO according to U.S. GAAP. As a percentage of total net revenues, selling and marketing expenses for the fourth quarter of 2020 increased to 70.3% from 39.1% for the fourth quarter of 2019.
• General and Administrative Expenses. General and administrative expenses for the fourth quarter of 2020 were RMB1.29 billion (US$197.1 million), compared to RMB71.9 million for the fourth quarter of 2019. The increase was primarily due to (i) an increase in personnel cost, and (ii) share-based compensation expenses recognized upon occurrence of IPO according to U.S. GAAP. As a percentage of total net revenues, general and administrative expenses for the fourth quarter of 2020 increased to 65.6% from 6.3% for the fourth quarter of 2019.
• Research and Development Expenses. Research and development expenses for the fourth quarter of 2020 were RMB25.6 million (US$3.9 million), compared to RMB13.4 million for the fourth quarter of 2019. The increase was primarily due to (i) an increase in personnel costs, and (ii) share-based compensation expenses recognized upon occurrence of IPO according to U.S. GAAP. As a percentage of total net revenues, research and development expenses for the fourth quarter of 2020 increased to 1.3% from 1.2% for the fourth quarter of 2019.

Income (Loss) from Operations and Non-GAAP Income (Loss) from Operations^[3]. Loss from operations for the fourth quarter of 2020 was RMB1.53 billion (US$235.1 million), compared to income from operations of RMB71.5 million for the fourth quarter of 2019. Non-GAAP loss from operations for the fourth quarter of 2020 was RMB290.1 million (US$44.5 million), compared to non-GAAP income from operations of RMB90.0 million for the fourth quarter of 2019.

Net Income (Loss) and Non-GAAP Net Income (Loss)^[4]. Net loss for the fourth quarter of 2020 was RMB1.53 billion (US$234.7 million), compared to net income of RMB46.2 million for the fourth quarter of 2019. Non-GAAP net loss for the fourth quarter of 2020 was RMB287.4 million (US$44.1 million), compared to non-GAAP net income of RMB64.8 million for the fourth quarter of 2019.

Net Income (Loss) attributable to Ordinary Shareholders per Diluted ADS^[5] and Non-GAAP Net Income (Loss) attributable to Ordinary Shareholders per Diluted ADS^[6]. Net loss attributable to Yatsen's ordinary shareholders per diluted ADS for the fourth quarter of 2020 was RMB4.04 (US$0.62), compared to net income attributable to Yatsen's ordinary shareholders per diluted ADS of RMB0.10 for the fourth quarter of 2019. Non-GAAP net loss attributable to Yatsen's ordinary shareholders per diluted ADS for the fourth quarter of 2020 was RMB0.73 (US$0.11), compared to non-GAAP net income attributable to Yatsen's ordinary shareholders per diluted ADS of RMB0.16 for the fourth quarter of 2019.

Balance Sheet and Cash Flow

As of December 31, 2020, the Company had cash and cash equivalents and restricted cash of RMB5.73 billion (US$878.7 million), compared to RMB676.6 million as of December 31, 2019.

For the quarter ended December 31, 2020, net cash used in operating activities was RMB362.1 million (US$55.5 million). For the full year ended December 31, 2020, net cash used in operating activities was RMB983.4 million (US$150.7 million).

Full Year 2020 Financial Results

Net Revenues. Total net revenues for the full year of 2020 increased by 72.6% to RMB5.23 billion (US$802.0 million) from RMB3.03 billion in the prior year, primarily attributable to the growth in sales volume of beauty products driven by an increase in the number of customers.

Gross Profit and Gross Margin. Gross profit for the full year of 2020 increased by 74.5% to RMB3.36 billion (US$515.6 million) from RMB1.93 billion in the prior year. Gross margin for the full year of 2020 was 64.3% compared to 63.6% in the prior year.

Income (Loss) from Operations and Non-GAAP Income (Loss) from Operations. Loss from operations for the full year of 2020 was RMB2.68 billion (US$411.1 million), compared to income from operations of RMB143.8 million in the prior year. Non-GAAP loss from operations for the full year of 2020 was RMB782.1 million (US$119.9 million), compared to non-GAAP income from operations of RMB218.8 million in the prior year.

Net Income (Loss) and Non-GAAP Net Income (Loss). Net loss for the full year of 2020 was RMB2.69 billion (US$412.0 million), compared to net income of RMB75.4 million in the prior year. Non-GAAP net loss for the full year of 2020 was RMB787.8 million (US$120.7 million), compared to non-GAAP net income of RMB150.4 million in the prior year.

Net Income (Loss) attributable to Ordinary Shareholders per Diluted ADS and Non-GAAP Net Income (Loss) attributable to Ordinary Shareholders per Diluted ADS. Net loss attributable to Yatsen's ordinary shareholders per diluted ADS for the full year of 2020 was RMB19.12 (US$2.93), compared to net loss attributable to Yatsen's ordinary shareholders per diluted ADS of RMB0.40 in the prior year. Non-GAAP net loss attributable to Yatsen's ordinary shareholders per diluted ADS for the full year of 2020 was RMB3.78 (US$0.58), compared to non-GAAP net income attributable to Yatsen's ordinary shareholders per diluted ADS of RMB0.36 in the prior year.

Fourth Quarter and Recent Developments

• The Company successfully completed its IPO and listing of 67,562,500 ADSs (including the full exercise of the over-allotment option to purchase additional ADSs from the underwriters) on the New York Stock Exchange on November 19, 2020. The Company raised total proceeds of US$709.4 million from the offering.
• At the end of October 2020, the Company acquired Galénic, an iconic premium skincare brand, from Pierre Fabre, a French pharmaceutical and dermo-cosmetics group. The Company will continue to support the brand in Europe and China. In addition, the Company has completed the acquisition of the masstige Chinese skincare brand which was mentioned during the IPO.
• In March 2021, the Company entered into a definitive agreement to acquire the prestige skincare brand Eve Lom from Manzanita Capital. The brand combines high quality natural ingredients with the latest scientific innovations to create a portfolio of luxurious and effective products, many of which are award-winning.
• The Company appointed Dr. Jiming Ha as the third independent director in the Company's board of directors, effective March 11, 2021. Dr. Ha served as a managing director at Goldman Sachs (Asia) in investment banking services from 2010 to 2017. Prior to that, Dr. Ha was Chief Economist at China International Capital Corporation from 2004 to 2010. Dr. Ha received his Ph.D. from University of Kansas and an MS and BS from Fudan University in Shanghai. Following the appointment, Dr. Ha will serve as a member of the audit committee and compensation committee, and as the chairman of nominating and corporate governance committee.
• Concurrent with the appointment of Dr. Ha, our board of directors has approved to further update the composition of our committees in furtherance of good corporate governance. Our three committees will be fully independent with composition set forth below:

Business Outlook

For the first quarter of 2021, the Company expects its total net revenues to be between RMB1.37 billion and RMB1.42 billion, representing a year-over-year growth rate of approximately 35% to 40%. These forecasts reflect the Company's current and preliminary views on the market and operational conditions, which are subject to change.

Exchange Rate

This announcement contains translations of certain Renminbi ("RMB") amounts into U.S. dollars ("US$") at specified rates solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to US$ were made at a rate of RMB6.5250 to US$1.00, the exchange rate in effect as of December 31, 2020 as set forth in the H.10 statistical release of The Board of Governors of the Federal Reserve System. The Company makes no representation that any RMB or US$ amounts could have been, or could be, converted into US$ or RMB, as the case may be, at any particular rate, or at all.

Conference Call Information

The Company will hold a conference call on March 11, 2021 at 7:30 am Eastern Time or 8:30 pm Beijing Time to discuss its financial results and operating performance for the fourth quarter and full year of 2020.

The replay will be accessible through March 18, 2021 by dialing the following numbers:

A live and archived webcast of the conference call will also be available at the Company's investor relations website at http://ir.yatsenglobal.com/.

About Yatsen Holding Limited

Yatsen Holding Limited (NYSE: YSG) is a leader in the rapidly evolving China beauty market with the mission of creating an exciting new journey of beauty discovery for consumers in China and around the world. The Company has launched three fast-growing, successful color cosmetics and skincare brands: Perfect Diary, Little Ondine and Abby's Choice, and has recently acquired Galénic, an iconic premium skincare brand. Leveraging its digitally native direct-to-customer business model, the Company has built a platform with core capabilities that disrupt every part of the traditional beauty industry value chain and deliver greater value to its customers. The Company reaches and engages with customers directly both online and offline, with expansive presence across all major e-commerce, social and content platforms in China. For more information, please visit http://ir.yatsenglobal.com/.

Use of Non-GAAP Financial Measures

The Company uses non-GAAP income (loss) from operations, non-GAAP net income (loss), non-GAAP net income (loss) attributable to ordinary shares and non-GAAP net income (loss) attributable to ordinary shares per diluted ADS, each a non-GAAP financial measure, in reviewing and assessing its operating performance. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. The Company presents these non-GAAP financial measures because they are used by the management to evaluate operating performance and formulate business plans. Non-GAAP financial measures help identify underlying trends in its business, provide further information about its results of operations, and enhance the overall understanding of its past performance and future prospects. The Company defines non-GAAP income (loss) from operations as income (loss) from operations excluding share-based compensation expenses, non-GAAP net income (loss) as net income (loss) excluding share-based compensation expenses and non-GAAP net income (loss) attributable to ordinary shares as net income (loss) attributable to ordinary shares excluding (i) share-based compensation expenses, (ii) accretion to preferred shares, and (iii) deemed dividends to preferred shareholders due to modification of preferred shares. Non-GAAP net income (loss) attributable to ordinary shares per diluted ADS is computed using non-GAAP net income (loss) attributable to ordinary shareholders divided by weighted average number of diluted ADS outstanding for computing diluted earnings per ADS.

However, the non-GAAP financial measures have limitations as analytical tools as the non-GAAP financial measures are not presented in accordance with U.S. GAAP and may differ from the non-GAAP information used by other companies, including peer companies, and therefore their comparability may be limited. The Company compensates for these limitations by reconciling the non-GAAP financial measures to the nearest U.S. GAAP performance measure, all of which should be considered when evaluating performance. The Company encourages investors and others to review its financial information in its entirety and not rely on a single financial measure. Reconciliations of Yatsen's non-GAAP financial measure to the most comparable U.S. GAAP measure are included at the end of this press release.

Safe Harbor Statement

This announcement contains statements that may constitute "forward-looking" statements which are made pursuant to the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "aims," "future," "intends," "plans," "believes," "estimates," "likely to," and similar statements. Statements that are not historical facts, including statements about the Company's beliefs, plans, and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. Further information regarding these and other risks is included in the Company's filings with the SEC. All information provided in this press release is as of the date of this press release, and the Company does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

For investor and media inquiries, please contact:

In China:

Yatsen Holding Limited
Investor Relations
E-mail: ir@yatsenglobal.com

The Piacente Group, Inc.
Emilie Wu
Tel: +86-21-6039-8363
E-mail: yatsen@thepiacentegroup.com

In the United States:

The Piacente Group, Inc.
Brandi Piacente
Tel: +1-212-481-2050
E-mail: yatsen@thepiacentegroup.com

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