Q3 2023 Yunji Inc Earnings Call
Participants
Kaye Liu; IR; Yunji Inc.
Shanglue Xiao; Chairman, CEO; Yunji Inc.
Yeqing Cui
Ethan Yu; Analyst; First Trust China
Presentation
Operator
Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to Yunji's third quarter 2023 earnings conference call. With us today are Mr. Shanglue Xiao, Chairman and Chief Executive Officer; Mr. Yeqing Cui, Senior Financial Director; and Ms. Kaye Liu, Investor Relations Director of the company. As a reminder, this conference call is being recorded.
Now I would like to hand the conference over to our first speaker today, Ms. Kaye Liu, Investor Relations Director of Yunji. Please go ahead, ma'am.
Kaye Liu
Hello, everyone. Welcome to our third quarter 2023 earnings call. Before we start, please note that this call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on current expectations and current market operating conditions and relate to events that involve known and unknown risks, uncertainties, and other factors of Yunji in this industry.
These forward-looking statement can be identified by terminologies such as will, expect, anticipate, continue or other similar expressions. For detailed discussion of these risks and uncertainties, please refer to our related documents that is filed with US SEC. Any forward-looking statement that we make on this call are based on assumptions as of today and that is especially qualified in the entirety by cautionary statements, risk factors, and details of the company's filing with SEC. Yunji does not undertake any obligation to update these statements except as required under applicable law.
With that, I will now turn over to Shanglue Xiao, Chairman and CEO of Yunji.
Shanglue Xiao
(interpreted) Hello, everyone. Welcome to the third quarter 2023 earnings call. The third quarter is traditionally an off-peak season for e-commerce. We took this opportunity to further develop and strengthen our business foundation and continue to accelerate and build the marketing and a product front.
We focused on a number of initiatives, including fine-tuning our market positioning and advancing development of a new product, strategically at adjusting the structure of our product offerings, and optimizing our supply chain capabilities. In addition, we have ramped up our marketing and hosted events to highlight product [arrangements] and unveil new products, laying the groundwork for our promotional sales in the fourth quarter. Notably during September, our private label team relocated to a new office building with enhanced production display and a presentation area, allowing us to more effectively showcase our private label brands to our panels.
Guided by our ongoing strategic development, we conducted a comprehensive evaluation of the Yunji's market positioning. Both Yunji and our private label brands have consistently maintained high repeat purchase rates. This positive trend has promoted us to reflect on how can we further enhance the value we deliver to our users and our service managers.
Although these are within our current private label market landscape, we remain firmly [communitive] offering high quality competitively priced products that deliver outstanding value to our users. We believe that these commitments will generate higher revenues and strengthen our brand image, paving the way for our sustainable growth.
During the year's February 11 shopping festival, major e-commerce platform to engage in aggressive discounting and a [senator] promotions over the course of a month by using a value of accrued 80 approaches. We chose to have a different course, opting for a more straightforward promotional approach over a shorter time frame.
For example, we successfully attracted and engaged users by leveraging production date, direct discounts, and multi-item offers. These strategic focus enabled us to coordinate our marketing efficiently and more presently having dormant users effectively joined them back to our platform.
During our previous earnings call, we outlined our strategic initiative to enhance our supply chains and capitalize on consumers' growing appetite for seasonal purchases. Our approach has yielded impressive results for the [way] in the food category. For example, by the end of August, our crab vouchers and crap gift boxes have emerged as go-to-gifting choices for the Mid-Autumn Festival and a National Day holiday.
Importantly, we have successfully generate stable levels of a battery cells without significant promotional spending. In the space of just the one month we sold over 400,000 crabs generating revenue in excess of RMB13 million.
Now, I want to share some updates on Yunji's private label brands. While beauty remain our core focus, healthcare has emerged as a strong secondary area. This (inaudible) building a house opens up exciting opportunities to explore across category collaboration allowing us to create a highly unique and differentiated products.
For example, in September, our beauty brands [PNH] launched a (inaudible) lip balm that was an instant hit, selling out within our on launch day. The lip balm popularity sparked a strong demand within our community groups for further round of sales.
The [product] has proved to be a popular ingredient. For our health brand, the valuation following its launch the lip balm has garnered a devout following across both beauty and health category, demonstrating the potential of an cross-category collaboration. Building on the success of the lip balm and aligned with the resurgence of the traditional Chinese medicine culture, we've established an herbal skincare (inaudible) and intend to introduce more cross category products such as [DTC] and face masks to cater to the evolving preferences of users.
Finally, I'd like to tend to a critical component of our success, our dedicated service managers. They choose Yunji because we offer a unique opportunity to strike a balance between their professional and assembly lines. Our innovative flash sales strategy empowers service manager to build [massive] products or brands in a short timeframe, often within an [hour].
This allows them to rapidly generate sales and then return here their personal life, freeing up time for self-improvement and to spend with their family. In terms of a personal development, we continue to prove our case (technical difficulty) continuous learning and a growth of our service managers. As part of this commitment we launched a new education and training program in the third quarter. This initiative will not only refine their sales skills, but also force a broader thinking and cultivate a more diverse interests, ultimately helping to create a more fulfilling family life.
With that, I will turn it over to Mr. Cui, our Senior Financial Director, to go through the financial results.
Yeqing Cui
Thank you, Shanglue. Hello, everyone. Before I go through our financial results, please note that all numbers start in a [falling] remark (technical difficulty) and also [of papers] and percentage terms, year over year basis (technical difficulty) unless otherwise noted. During the third quarter of 2023, our operations remained relatively stable and we used the opportunity to reinforce our core operational process.
Key to this effort has been the enhancement of our inventory management practice. We now have a robust, comprehensive, strategy that covers our private label product development. [We're] also scheduling under the management of stock [in] growth and [off] growth. At the same time, we actively monitor different product categories on a weekly or monthly basis to ensure inventory to keep at an optimal level.
This strategy focuses on inventory management has been (technical difficulty) in optimizing our use of assets and effectively managing cash flow. We believe this new approach lays a solid foundation for our [temporary] development with new continually shifting dynamic market. Now, let's take a closer look at our financials.
Total revenues were RMB145 million compared to RMB249 million a year ago. Revenues from sales of merchandise were RMB140 minutes and the revenue from our (technical difficulty) was RMB29 million. The changes were primarily driven by ongoing refinements to our product range across all categories.
This, coupled with the optimization of our supplier and a merger network, resulting in a short-term impact on sales. Despite these challenges, our gross margin remained relatively solid at 45.7%. This was due to a [tender] and customer loyalty towards our private labels and our effective product [causing] (technical difficulty).
Now let's take a look at our operating expense. [Perfume] expense was RMB26 million compared to RMB37 million a year ago. This was primarily driven by a decrease in warehousing and logistics expense stemming from lower (technical difficulty) sales and reduced personnel costs due to staffing structure optimization.
Sales and marketing expense was [RMB30 million] compared to RMB47 million a year ago. This will permit a result of decline in [member] management fee and a decrease of [business] promotion expense. The knowledge and content expenses were [RMB14 million] compared to RMB17 million a year ago.
The decrease was mainly due to a reduction in personnel costs resulting from stocking structure optimization. General and administrative expense was RMB28 million compared to RMB38 million a year ago. This was mainly due to a decline in share-based compensation expense. Total operating expense in the third quarter decreased to RMB98 million from RMB139 million in the same period of 2022.
Loss from operations were RMB13 million compared to RMB18 million a year ago. Net loss was RMB35 million compared to RMB38 million a year ago, while adjusted net loss was RMB34 million compared with RMB30 million a year ago. Basic and diluted net loss per share attribute to ordinary shareholders were [bold] [$0.02] compared with [$0.02] in the same period of 2022.
Turning to liquidity. As of the 10th -- [30], 2023, we had a total of RMB555 million in cash and cash equivalents, restricted cash, and short-term investment on our balance sheet compared to RMB60 million, RMB69 million. As of December 31, 2022, our liquid assets was sufficient to cover our payable obligations, and we did not [call] any long-term bank loans or debit on our balance sheet.
Looking ahead, we will continue to proactively explore investment opportunities with it aim of in-house our supply chain capabilities. To summarize, we took crucial step toward achieving our long-term strategy goals during the third quarter, our diligent efforts to enhance our inventory management mechanism, and our decision to -- for all [it is] to sustainable and effective asset management approach. We are integral to this process.
Going forward, we will continue to drive ongoing effective improvement ensuring that our company remains desired and adaptable. This approach positions us to effectively in the future challenges and seize opportunities as we navigate the ever-changing economic landscape.
This concludes our prepared remarks for today. Operator, we are now ready to take questions.
Question and Answer Session
Operator
(Operator Instructions) Ethan Yu, First Trust.
Ethan Yu
Thank you for taking my question. (interpreted) Could you give us more color on the specific plants and positioning for our health business segment? Thank you.
Shanglue Xiao
(interpreted) Thank you for your question. Yunji Health is Yunji's forward looking strategy for the later 10 through 20 years, and in the later 10 through 20 years, and we know that in China, we're going to have 620 million people over 50 years old and about.
And you can take it as our secondary. And 95% of our consumers are women among which 86% of them are mothers. A key characteristic of this group is their key focus on health, particularly as the primary guardian of the well-being of both elderly family members and the children.
Actually, in China's car industry, and we do not lack different models of the SUV, but we lack the SUV with six seats. Similarly, in China's health industry, we do not lack the online and off-line supermarkets, but in the next 20 years in China, we lack the health supermarket.
Yunji Health can be likened to a [Sam's Club] for the health domain, including the healthy food, also those food that are focused on health and with a primary emphasis on household scenarios, or like those functional food, and it gathers diverse health products from various brands and categories to meet the personalized health needs of different family members.
While many associate health with dietary choices, we advocate for a healthy lifestyle encompassing [access] like the sun protection, skincare, hair care, and cleanliness. Yunji aspires to be a comprehensive health (inaudible) for all aspects of life. Thank you for your question.
Ethan Yu
(interpreted) I have no more questions. Thank you.
Operator
As there are no further questions at this time, I'd like to hand the conference back over to management for closing remarks.
Kaye Liu
Thank you for joining us today. Please do not hesitate to contact us if you have any further questions and we are looking forward to talking with you next quarter. Bye.
Operator
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
