Yatsen Holding Limited American Depositary Shares, each representing twenty (20) Class A Ordinary Shares 2026 Q2 Earnings Call

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Please note the 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 and 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 are Mr. Jinfeng Huang, our founder, Chairman, 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'll now turn the call over to Mr. Jinfeng Huang. Please go ahead, sir. Thank you, Irene.

Hello everyone, and thank you for joining our second quarter 2026 earnings conference call. We delivered a quarter of continued strategy progress with total net revenue growing 5.1% year-over-year against a challenging industry backdrop. While overall growth was more moderate than our prior expectations, our skincare portfolio delivered exceptional performance, reinforcing the effectiveness of our strategy transformation. Turning to the macro environment. According to the National Bureau of Statistics, beauty retail sales grew 6.6% year-over-year in the second quarter of 2026, outperforming overall retail sales of consumer goods. While the impact of the 618 Shopping Festival has become more moderate amid increasing promotional favor and more rational consumer behavior, the category continued to demonstrate strong consumption resilience.

That said, the competitive landscape remained challenging, with many leading participants in the domestic beauty industry also reporting growth deceleration or revenue declines during the quarter, underscoring the broad-based headwinds facing the industry. Against this resilient market backdrop, our total net revenues remained on a steady growth trajectory, increasing 5.1% year-over-year in the second quarter. More importantly, this growth was primarily driven by the sustained momentum of our skincare portfolio, which delivered another strong quarter, with revenues increasing 40.4% year-over-year and now representing 71.5% of our total net revenues. The continued strength of our skincare brands further reinforced skincare as a core pillar of our business and a key driver of our overall growth, while underscoring the effectiveness of our ongoing investment in brand building, product innovation and channel development.

With skincare now representing over 70% of the total revenues, our revenue mix has fundamentally shifted toward higher quality, more sustainable growth. At the heart of our strategy is a deep understanding of consumer needs and a strong commitment to delivering superior consumer experience. We remain focused on creating meaningful long-term value through both the products we offer and the emotional connections we build with consumers. Let me now walk you through the progress we made in these areas during the quarter. Our first strategy priority is to continue strengthening our R&D capabilities and advancing innovation on a strong scientific foundation. We remain firmly committed to R&D investment, with R&D expenses maintained at 3.2% of total net revenues in the second quarter. We also continued to make meaningful progress in strengthening our scientific capabilities and external recognition.

In May, Yatsen's Global Innovation R&D Center was recognized as a national high-tech enterprise and received the specialized, sophisticated, distinctive and innovative designation in Shanghai. More recently, in July, DR.WU once again demonstrated the depths of his scientific capabilities with three research studies published in international SCI-indexed journals. Covering innovative approach to oily and acne-prone skin, new insights into the mechanism underlying post-acne marks, the clinical evidence supporting the combination of our mandelic acid serum with adapalene. These studies further validated the depth and breadth of our scientific research capabilities. On the product front, we continue to build on the strength of our existing franchise while deepening our expertise in targeted skincare solutions. Galénic further extended its Couture Révélation Cellulaire line with the launch of The Active Eye Cream, expanding the franchise into the delicate eye care category.

DR.WU also expanded its skincare portfolio with three new essence masks for oily control, hydration, and soothing care. At Eve Lom, we further expanded the second generation Vital Dew collection with the Vital Dew Fresh Hydration Cream and Skin Infusion Serum. These launches reflect our continued focus on leveraging established product franchise and scientific expertise to address evolving consumer needs and create sustainable growth opportunities. Our second strategy priority is to further strengthening brand equity across our portfolio through high impact consumer engagement and differentiated brand experiences. In late May, DR.WU partnered with cctv.com for a dedicated live streaming event, which attracted a cumulative audience of 178 million viewers and generated a significant uplift in sales, further expanding the brand's reach and consumer engagement. Galénic brought its Brightening Your Summer campaign to consumers through a pop-up experience on Wuzhizhou Island in Sanya in July.

Eve Lom participated in the British Beauty Festival, further elevating its heritage and premium positioning. While these initiatives help to broadening our brand reach and deepen consumer engagement across key markets and touchpoints. Our third strategy priority is to enhance the quality and sustainability of our profitability. In the second quarter, gross margin was impacted by higher inventory provision in the color cosmetic business associated with the company's proactive brand portfolio optimization and SKU rationalization. Excluding the impact of this one-time inventory provisions, the underlying growth margin would have remained roughly stable year-over-year. Selling and marketing expenses as a percentage of net revenues rose, primarily driven by strategic investment in high growth channels, particularly Douyin.

At the same time, we remained focused on addressing structural profitability challenges in color cosmetics, where fast changing consumer trends, high SKU complexity, and ongoing promotion intensity require disciplined management and a more focused approach to resource allocation. We are actively streamlining our color cosmetic portfolio to improve profitability, and we focus our resources on the higher growth skincare business. Looking ahead, we will continue to optimize our cost structure, refine resource allocation across channels, and unlock greater operating leverage from our fixed overhead. Furthermore, we are accelerating integration of AI across our operational workflow to drive continuous productivity gains. Together, these initiatives will further elevate our earnings quality and solidify the foundation of our sustainable long-term profitable growth.

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Finally, I am delighted to share a leadership update. Effective today, Ms. Wang Li has been appointed as Co-Chief Financial Officer. Ms. Wang comes with a proven track record of over 15 years in the consumer and beauty industry, most recently serving as CFO of Proya Cosmetics. Her experience and financial expertise will further support our ongoing efforts to optimize our cost structure, improve resource allocation, and drive sustainable, profitable growth. With that, I will now turn the call over to our CFO, Donghao Yang, to discuss our financial details.