Ladies and gentlemen, good day and welcome to the Yatsen Fourth Quarter and Full-Year 2024 Earnings Conference Call. Today's conference call 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.

Thank you, operator. Please note that 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 Yatsen's business financial results is included in certain filings of 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 non-GAAP financial results. Joining us today on the call from Yatsen's senior management team are Mr. Jinfeng Huang, our Founder, Chairman and CEO and Mr. Donghao Yang, our CFO and Director. Management will begin with prepared remarks, and the call will conclude with a Q&A session. As a reminder, this conference is being recorded. In addition, a webcast replay of this conference call will be available on Yatsen's Investor Relations website at ir.yatsenglobal.com. I will now turn the call over to Mr. Jinfeng Huang. Please go ahead, sir.

Thank you, Irene, and thank you, everyone, for participating in Yatsen's fourth quarter and full-year 2024 earnings conference call today. I will start with a macro overview and our key financial performance, followed by insights into our key strategic initiatives and updates on our brands and products. China's beauty industry remained subdued over 2024, with beauty sales underperforming the overall retail market. According to the adjusted data published by the National Bureau of Statistics of China, total retail sales of consumer goods grew by 3.8% and 3.5% year-over-year in the fourth quarter and the full-year, respectively. In contrast, total beauty retail sales declined 1.5% year-over-year for the quarter and 1.1% for the full-year. Despite these challenges, our total net revenues in the fourth quarter grew by 7.1% year-over-year, in line with our guidance. The combined revenues from our three clinical and premium skincare brands, including Galénic, DR.WU and Eve Lom achieved year-over-year growth of 3%. Color cosmetics revenues were up 16.4% for the quarter, primarily driven by the recovery of Perfect Diary. Looking at our profitability in the fourth quarter, our gross margin increased to 77.8% from 73.7% in the prior year period, driven by a higher contribution from higher gross margin products. Our net loss margin improved to 33%, representing a significant decrease from 46% -- 40.6.1% for the prior year period. On a non-GAAP basis, we achieved a net income margin of 9.3% compared to a non-GAAP net loss margin of 8.7% in the prior year period. For the full-year 2024, total net revenues declined by only 0.6% year-over-year, indicating stability. Color cosmetics revenues saw a modest decline of 0.3% year-over-year. Meanwhile, skincare revenues grew by 0.7%, largely driven by a 5.4% year-over-year increase from our three clinical and premium skincare brands. Revenues from our skincare brands accounted…

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 fourth quarter of 2024 increased by 7.1% to RMB 1.15 billion from RMB 1.07 billion for the prior year period. The increase was primarily due to a 16.4% year-over-year increase in net revenues from color cosmetics brands. Gross profit for the fourth quarter of 2024 increased by 13% to RMB 893 million from RMB 790.1 million for the prior year period. Gross margin for the fourth quarter of 2024 increased to 77.8% from 73.7% 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 fourth quarter of 2024 decreased by 3.5% to RMB 1.28 billion from RMB 1.33 billion for the prior year period. As a percentage of total net revenues, total operating expenses for the fourth quarter of 2024 were 111.8% as compared with 124% for the prior year period. Fulfillment expenses for the fourth quarter of 2024 were RMB 63.5 million as compared with RMB 62.7 million for the prior year period. As a percentage of total net revenues, fulfillment expenses for the fourth quarter of 2024 decreased to 5.5% from 5.8% for the prior year period. The decrease was primarily due to an increase in the overall average selling price of our products, as well as further improvements in logistics efficiency. Selling and marketing expenses for the fourth quarter of 2024 were RMB 690.6 million, as compared with RMB 117.4 million for the prior year period. As a percentage of total net revenues, selling and marketing expenses for the fourth quarter…

We will now begin the question-and-answer session. [Operator Instructions] 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. [Operator Instructions] The first question comes from Maggie Huang with CICC. Please go ahead.

Thanks for taking my question. This is Maggie Huang from CICC. Firstly, I would like to congratulate the management for the non-GAAP turnaround in Q4 with a quite good non-GAAP net profit margin. So my first question is that with such a performance in Q4, how should we expect our profitability in 2025? And my second question is about our strategy for different categories because we've seen that in Q4, our color cosmetic brands began to grow faster than skincare. So in the future, how will we allocate our resources between Color Cosmetic and Skincare, and which category will be the more important growth driver in the future? That's my two questions. Thank you.

Okay. Thanks for the question about our, I think the first question is about our profitability guideline. And also, I think one there are a couple of things I can share with you is how we view about the market landscape and also what is our competitive edge. So, I think the beauty market looking forward the headwinds will persist, which means the price competition will be intensified and the consumer will be more rational in purchase decisions. So looking forward in order to balance the growth and also the profitability, I think it would be very important for us to maintain and even improve the gross margin growth through the brand equity strengthening and also the R&D investment. And then on the other hand, we think the skincare will be our key stable growth engine. You already contributed over 40% last year and also we have a very robust growth for our key brands including Galénic, Dr. Wu, and EveLom. So, for color cosmetic, right now I think we already demonstrated the transformation for Perfect Diary has gained tremendous outcomes. And then looking forward to the high growth, high repurchase and also the very competitive products will contribute to a more sustainable growth for our makeup category. So looking forward, so we are going to deliver and also balance the growth and the profitability by enhancing the skincare and makeup growth on the, at the same time we are also to improve our operation efficiency. So the second question talking about the focus on the category and also the brands, we think at this stage it's super important to focus on the competitive products in the market. So in the past few years, mainly driven our very strong and also consistent R&D investments, we have some very high performing products in the market. We will continue to drive those products growth. On the other hand, we are launching some new products, which has gained pretty good momentum in the market. For example, we are expanding the Galénic portfolio from vitamin C to vitamin A and also the facial mask launched by Galénic has very good growing trend. For Perfect Diary, Biolipstick has gained pretty leading positions in multi-platforms and now we are expanding the category from lip to base makeup and also we are looking at Dr.Wu, it's a clinical brand and then we're expanding the benefit space from acne, we're moving and then to early age anti-aging and also brightening benefit space. So by balancing the skincare and also makeup, so we are going to devote our resources into the fast-growing category and also with long-term sustainability. So that's our strategy behind on the investment.

Thank you very much and I have no more questions

Thank you.

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.

Thank you once again for joining us today. If you have any further questions, please feel free to contact us at Yatsen directly. Our contact 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.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.