Yunji Inc. (NASDAQ: YJ) Q4 2021 earnings call dated Mar. 17, 2022
Corporate Participants:
Kaye Liu — Investor Relations Director
Shanglue Xiao — Chairman and Chief Executive Officer
Chengqi Zhang — Vice President of Finance
Analysts:
Unidentified Participant — — Analyst
Presentation:
Operator
Good morning and good evening, ladies and gentlemen, thank you and welcome to Yunji Fourth Quarter 2021 Earnings Conference Call. With us today are Mr. Shanglue Xiao, Chairman and Chief Executive Officer; Mr. 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 our first speaker today, Ms. Kaye Liu, IRD of Yunji. Please go ahead ma’am.
Kaye Liu — Investor Relations Director
Hello, everyone. Welcome to our fourth quarter 2021 earnings call. Before we start, please note that this call will contain forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995 that are based on our current expectations and current market operating conditions and related to events that involve known and unknown risk, uncertainties and other factors of Yunji and its industry. These forward-looking statements can be identified by terminology such as will, expect, anticipate, continue or other similar expressions. For a detailed discussion of these risks and uncertainties, please refer to our latest document filed with U.S. SEC. Any forward-looking statements that we make on this call are based on assumptions as of today and are expressly qualified entirely by cautionary statements, risk factors and details of the company filing with the SEC. Yunji do not undertake any obligation to update these statements, expect as required on applicable law.
With that, I will now turn over to Shanglue Xiao, Chairman and CEO of Yunji.
Shanglue Xiao — Chairman and Chief Executive Officer
[Foreign Speech]
Hello, everyone. Welcome to Yunji’s fourth quarter 2021 earnings call. Today, I will summarize our strategy execution during the past year and discuss the outlook for its continuous implementation in the coming year.
[Foreign Speech]
We’re acutely aware that consumers need to be more precisely targeted and segmented and given greater peace of mind. At the same time, we realize that our service managers need to increasingly focus on serving our users. As such, we have launched our highly curated product selection, Yunji99 special sales portal. Yunji99 portal displays no more than 99 cost effective products per day, each of which is guaranteed to be in line with current trends, meet users’ needs and consistent with our high product selection standards. In addition, our product curation model allows us to more efficiently operate our platform and community group.
[Foreign Speech]
During 2021, we cultivated our user mindset foods gather at Yunji. Going forward, we hope that that platform will be known for quality products gather at Yunji, by effectively executing our product curation strategy, we guarantee that only products that reach the high standards necessary to be certified Yunji quality products are launched on our platform. We always put quality first carefully selecting simpler products for our customers. We are saving them time and enhancing their shopping experience. By doing so, we are developing our user mindset of quality products gather at Yunji.
[Foreign Speech]
Our private label strategy that is crucial for us, achieved healthy profitability. We have made substantial progress developing our private labels especially for our food focus strategy. At the same time, we fortified and extended our cosmetics and healthcare categories. With our food category as our focus, our dream is for our members to be able to eat delicious foods from all over the world without having to leave their homes. To allow our users to eat happily and safely, we have launched multiple new private labels such as purely meat positions Li Ba Tian and natural and nutritious Baiyueshan. Our private label foods are targeted at different user cohorts but they share the same philosophy to make users [indecipherable] while eating food they can share with your whole family. The success of our selection of branded products is demonstrated by their high repurchase rates. To build on this success, this year, we will accelerate and enhance our development of new branded food products.
[Foreign Speech]
On the cosmetics front, we have successfully launched a number of new product lines for our SUYE brand. Additionally, several SUYE products are certified to be registered as a medical device by the National Medical Products Administration and can therefore be used in cosmetic surgery applications. SUYE’s new product lines will satisfy more diversified consumer needs and give them increased feeling of assurance. Under the SUYE brand, we have developed multiple new products by integrating new technologies from Switzerland and the USA. Among this, hyaluronic acid face mask was an instant hit generating RMB10 million in sales revenue within 15 minutes of its launch. Furthermore, we have a variety of new skincare and cosmetics products in the pipeline that are due to be launched in the next few months.
[Foreign Speech]
Now let’s turn to our healthcare category. Based on our previous successful experience in weight management products, we have extended the concept of health products gathered in Yunji and upgraded our healthcare brand [indecipherable], which generates billions in sales per year. We further augmented our product offering matrix to better satisfy the healthcare needs of our female customers in 3 dimensions, weight management, skincare and body revitalization. Multiple products have achieved 10s of millions in sales within only a few months of their launch.
[Foreign Speech]
We have always hoped that our private label products would also be available to purchase through external retail channels. During 2021, we prepared for and explored how our new and traditional private labels could be retailed at other platforms. This year, we will accelerate our pace and take the necessary steps to integrate our supply chain with [indecipherable] platforms, including but not limited to streaming platforms and e-commerce platforms. We hope that the external platform traffic can be directed to our private community group further enhancing our brand awareness and competitiveness and in turn generating ever greater profit for us.
[Foreign Speech]
The promotion of our private label brands is dependent on our service managers and the vertical specialization that they bring to retail. For a long time, we have been empowering women and helping them improve their life. Over the past few years, we have been delighted to see that the lives of those of our service managers who are mothers have become better and better. We see our service managers as entrepreneurs and we hope to develop even more excellent entrepreneurs by cultivating their capabilities in their specialized field. Well, we are dedicated to generating income for our service managers, we also provide professionality training for those who are mothers. In addition, we promote a healthy and beautiful lifestyle which satisfies our service managers material and the psychological needs. The developments of all verticals especially food, cosmetics and healthcare enables us to further segment our community group. Importantly, our increasingly segmented user groups and our emphasize on all the quality products gathered at Yunji, will improve the promotional efficiency of our service managers.
[Foreign Speech]
With that, I will turn the call over to Mr. Chengqi Zhang, our Vice President of Finance, to go through the financial results.
[Foreign Speech]
Thank you.
Chengqi Zhang — Vice President of Finance
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 the percentage change are on a year-over-year basis, unless otherwise noted. During the fourth quarter, we sustained our strategy of [indecipherable] our product range and carefully curating our products as we continue the executing our markets product pool program which focus on expanding our offering of exclusive products and the private labels. It’s worth mentioning that as we accelerate to the development of our new products and the improvement productivity, our private label have made a substantial progress allowing us to realize substantial profitability. In addition, our private labels receive excellent reception from the market and proved to be a great success. This success was reflected by our high repeat repurchase rate, which reached 80% in the 12 months ended December 31, 2021. As a result, we recorded operating income of RMB4 million and the net income of RMB58 million during the fourth quarter compared with operating loss of RMB20 million and the net loss of RMB77 million a year ago. This is our fourth consecutive quarter of non-GAAP measure appropriate and the first year turning loss to profit.
Now let’s take a closer look at our financials. Total revenue was RMB471 million compared to RMB1,327 million a year ago. Revenue from sale merchandise was RMB389 million and the revenues from our marketplace in this was RMB74 million. Adhering to our long-term growth strategy with a focus on profitability, we refined our selection of merchants and suppliers resulting in near-term decrease in both our marketplace business and the merchandise sales. Importantly, our gross margin improved significantly to 40% compared to 26% a year ago. This increase was due to our continued successful execution of our long-term growth strategy and introduction of more private label products with higher gross margin on the platform and the enhanced operating efficiencies.
Turning to our operating expenses. Fulfillment expenses were RMB47 million compared to RMB93 million in the same period of the last year. This decrease was mainly attributable to reduced warehousing and logistic expenses resulting from lower merchandise sales, reduced personnel cost due to staff restructure refinement and the decreased service fee charged by third-party payment settlement platform. Sales and the marketing expense decreased to RMB78 million from RMB167 million in the same period of last year. The decrease was due to reduced business promotion expense and the member management fees. Technology and content expenses were RMB26 million compared to RMB44 million in the same period of last year. The decrease was mainly due to a reduction in server cost and the personnel costs as we refined our staffing structure. General and administrative expenses were RMB44 million compared to RMB64 million a year ago. This decrease was primarily due to reduced personnel cost as a result of headcount optimization.
Total operating expenses in the fourth quarter decreased by 47% to RMB196 million from RMB368 million in the same period of last year. We recorded our income from operating of RMB4 million as compared to a loss of RMB20 million a year ago. Net income was RMB58 million compared with a net loss of RMB77 million a year ago. Adjusted net income was RMB71 million compared with adjusted net loss of RMB63 million a year ago. Basic and diluted net income per share attributed to ordinary shares were both RMB0.03 compared with basic and diluted net loss per share attributable to ordinary shares of RMB0.04 in the same period of 2020.
Moving on the liquidity. As of December 31, 2021, we had a total RMB1 billion in cash and cash equivalents, restricted cash and short-term investments on our balance sheets. All accounts payable reduced to RMB255 million as of December 31, 2021 compared with RMB402 million as of December 31, 2020. Our liquid assets were sufficient to cover our payable obligations and we did not hold any long-term bank loans or debt on our balance sheet. As you have probably noticed, capital market has underperformed recently. However, we remain confident in the company’s further growth prospects, have received a proposal from [indecipherable] we today announced our share repurchase program under which the company may repurchase up to $20 million of its shares over the next 6 months.
Looking ahead, we will continue to execute our strategy upgrade of carefully curation of products through our products pool initiate introduction of more products with strong repurchase potential and qualitative of private label and the crew save products. We remain confident that our strategy to focus on profitability will achieve, drive and sustain our business growth over the long term.
This concludes our prepared remarks for today. Operator, we are now ready to take a questions.
Questions and Answers:
Operator
[Operator Instructions] Your first question comes from the line of Johnny Zhang [Phonetic], who is an Individual Investor. Please ask your question.
Unidentified Participant — — Analyst
[Foreign Speech]
Let me quickly translate myself. Thank you for taking my questions. We have observed a downturn in the consumer market and a fierce competition in the second half of the year and we would like to ask whether Yunji is also affected by the economic downturn. Could you share some news and the future strategies?
Shanglue Xiao — Chairman and Chief Executive Officer
[Foreign Speech]
Thank you for your question. In 2021, we have started to work with many advanced manufacturing companies in China to make more and more new quality products. Our products are mainly in such areas as food, healthcare and cosmetics and we have explored more quality products that have a large market in China and that are also [indecipherable]. With all these products, we have further tackled the influence of the downturn of the economy.
[Foreign Speech]
We believe that in the next 10 years, the Chinese consumers will have a greater demand to further upgrade their consumption. For Yunji, on our supply chain, we will continue to explore more quality products that are also cost effective and we believe that this will meet the demands of nearly 1/3 of Chinese families. At the same time, we will also make 10 years as the cycle to further explore more quality and cost effective products and to make greater contribution to meet the consumers’ needs.
[Foreign Speech]
Thank you.
Operator
As there are no further questions at this time, I’d like to hand the conference back to the management for closing remarks.
Kaye Liu — Investor Relations Director
Thank you for joining us today, please do not hesitate to contact us if you have any further questions. And we’re looking forward to talking with you next quarter. Bye.
Operator
[Operator Closing Remarks]