On March 6th, Yixian E-commerce (NYSE: YSG) released its Q4 2023 performance report. The announcement shows that the company achieved a revenue of 1.07 billion yuan in the fourth quarter, an increase of 6.7% compared to the same period last year, exceeding the performance guidance limit and returning to the growth track.
Among them, the skincare business saw steady growth, with Q4 revenue increasing by 17.6% year-on-year to 550 million yuan, accounting for 51.7% of the total revenue. In 2023, the year-on-year growth rate was 11.4%, reaching 1.38 billion yuan, accounting for 40.5% of the total revenue.
During the period, the company's operational efficiency significantly improved. The financial report shows that the gross profit margin increased to 73.7% in Q4, and the gross profit margin for the entire year of 2023 increased to 73.6%.
Yang Donghao, CFO of Yixian E-commerce, said, "With the company's firm promotion of strategic transformation, the results of high-quality development are gradually emerging. The revenue of this quarter has returned to the growth track, the business structure has been continuously optimized, the operating efficiency has been continuously improved, and the operating cash flow is sufficient. As of December 31, 2023, the company has a total of 2.08 billion yuan in cash, restricted cash, and short-term investments. We are full of confidence in continuing to promote the strategic plan in the future!"
Deep optimization of revenue structure and contribution rate of skincare business exceeding 50%
Since 2023, due to multiple factors such as shrinking demand and weakened expectations, the recovery of the cosmetics industry has slowed down, with cosmetics falling below the overall social zero for the whole year. The limited boost effect of the Double Eleven Festival has resulted in the beauty industry performing less than expected in Q4. In this context, Yixian E-commerce is firmly promoting its strategic transformation plan, focusing on high-quality development with "quality and efficiency first", and further enhancing the company's development resilience.
Specifically, the company's skincare business has maintained steady growth, with strong potential for star products. Gal é nic France Corelli grew rapidly in Q4. During the Double 11, the flagship product "Anti oxygen No.1" VC essence ranked top 1 in Tmall's high-end essence and top 1 in Tiktok essence; Platinum "snow algae" face cream was listed in the top 1 of Tmall's new product list of firming face cream; The brand new energy injection "Little Gold Pearl" facial mask ranks among the top 1 high-end new facial mask in Tiktok in November. EVE LOM Q4 celebrity single product cleansing cream continues to rank among the top high-end makeup removers, with sales of cleansing gel increasing by over 310% year-on-year; With the support of high-yield product strength, the fan base and sales conversion have increased simultaneously. In Q4, Tmall brand members exceeded 900000, a year-on-year increase of 45%, and member sales increased by 50%. DR.WU Daer Skin Q4 sales achieved a steady growth, of which the Tiktok channel showed the best performance with a growth rate of more than 50%, and the brand's monthly sales exceeded 100 million; The sales volume of star single product almond acid essence exceeded 600000 pieces, and in October November, it won the top 1 sales on multiple platforms.
Benefiting from the strong support of the three major skincare brands mentioned above, the skincare business achieved a revenue of 550 million yuan in Q4, a year-on-year increase of 17.6%, accounting for 51.7% of the total revenue. The revenue contribution rate reached a historic high, and the skincare business, as the second growth curve, made a significant contribution, evenly distributed with the cosmetics business. In 2023, the company's skincare business revenue increased by 11.4% year-on-year to 1.38 billion yuan, further increasing its proportion to 40.5% of total revenue. At this point, the company's revenue structure has been deeply optimized, providing greater sustainable development momentum for savings.
Remarkable achievements in improving the quality and efficiency of the newly revitalized cosmetics business
The cosmetics business sector showed a good development momentum in Q4. As the main brand of the cosmetics business, Perfect Diary brand concept has been renewed, and the blockbuster new product pioneered the "bionic film" essence lipstick, opening a new era of "makeup and maintenance integration" of technological innovation. During the Q4 period, the sales volume of "bionic film" essence lipstick exceeded 1 million pieces and the sales volume exceeded 100 million; With its excellent reputation, it has dominated the list of TOP 1 in channels such as Tmall and Tiktok for many times. In addition, the brand strength of Perfect Diary has been further strengthened, and its "Beauty of China" high-end makeup and wellness gift box has appeared at the 2023 "Understanding China" International Conference, serving as a diplomatic etiquette card for guests from various countries to showcase the unique "Chinese beauty" of domestic beauty to the world.
The online omni channel sales of Xiaoaoting brand increased year on year, of which Tiktok and Xiaohongshu increased significantly; The popular single product Wo Silkworm Pen ranks top 1 in the category of Wo Silkworm Pen on Tmall, Tiktok and JD. Pico Bear's omni channel sales grew rapidly year on year, of which the Tiktok channel grew by 93% year on year; The celebrity IP likes cute and the LOOPY co branded single product has sold 1.25 million pieces, occupying the top spot in the multi-channel category.
With the dual drive of skincare and makeup business, Yixian E-commerce has achieved significant results in improving quality and efficiency. The gross profit margin of the company increased to 73.7% in the fourth quarter, and the gross profit margin for the entire year of 2023 increased to 73.6%. Thanks to the stable development of the company, the operating cash flow for this quarter was positive, approximately 90.5 million. As of December 31, 2023, the company has a total of 2.08 billion yuan in cash, restricted cash, and short-term investments, and the management is confident in its future development.
Strengthening Global R&D Layout and Enhancing Beauty Intelligence
Throughout 2023, in the context of the overall weak recovery trend in the consumer market, rational consumption has gradually become mainstream, and "high-quality domestic products" with higher quality to price ratios are more favored by consumers. To this end, Yixian E-commerce has a vision of being a "healthy and beautiful explorer in the new technology era", continuously increasing research and development investment, and consolidating research and development innovation.
In the fourth quarter of 2023, Yixian E-commerce invested 36.85 million yuan in research and development, and the proportion of research and development expenses in total net revenue increased to 3.4%. The R&D expenses for the whole year of 2023 were 110 million yuan, with a R&D expense ratio of 3.3%. The R&D expense ratio continues to rank among the top tier in the world.
Over the years of continuous investment, Yixian E-commerce has established an industry-leading research and development system and team. During the Shanghai International Import Expo in November 2023, Yixian E-commerce launched the "Yixian Technology Road" strategic layout, with one global advanced beauty factory, three global independent research and development centers, four major research and development fields, six co built laboratories, and more than 20 joint projects, demonstrating its increasingly perfect global research and development layout.
Under the strategic layout of "Yixian Technology Road", the transformation of research and development achievements of Yixian E-commerce has been fruitful. The "makeup and maintenance integration" perfect diary "bionic film" essence lipstick developed by Yixian E-commerce has realized the research, development and production of the first self-developed Heikeji Biolip cosmetics product relying on its own advanced equipment in the world's advanced beauty factory. The success of this product has attracted numerous multimedia factory visits and foreign delegation visits to Guangzhou, becoming one of the representatives of China's advanced technology and intelligent manufacturing strength in beauty.
In addition, France's Corelli continues to delve into advanced technology and is equipped with ActiveAnchor&, a 45 year specialized anchor penetration technology; Quota;, Refine the essence of grape flower newborn cells with cutting-edge technology to create a new energy injection "little golden bead" facial mask, which has become a big product loved by consumers once it is launched.
At the same time, Yixian E-commerce has received high attention and recognition from the industry for its extensive research and development in technology and product innovation over the past year, and has won the "Science and Technology Innovation Contribution Award" at the 2023 Annual Summit on High Quality Development.
It is reported that the Shanghai Global Innovation and Research Center will be officially completed and put into use in May 2024. The R&D center will focus on the four major R&D fields of "biotechnology", "scientific skincare", "emotional skincare", and "Chinese skin experts". By building a globally leading R&D team, we will establish a leading R&D ecosystem from cutting-edge basic research and development to advanced manufacturing, achieve cooperation and innovation with external R&D resources, lead industry innovation, and assist the group in high-quality development.
Looking ahead to 2024, institutional analysis indicates that the current global market changes present both opportunities and challenges for domestic brands. The Matthew effect will become more apparent, and beauty consumption will concentrate on the leaders of various price bands. Innovation of functional products with competitive barriers is the core competitiveness of the brand. Huang Jinfeng, founder, chairman, and CEO of Yixian E-commerce, said, "After years of investment accumulation, the company has established a global R&D layout and accumulated a first mover advantage in product and channel innovation. In the future, the management will fully seize industry opportunities and welcome a new round of development."