Ladies and gentlemen, good day and welcome to the Yatsen Third Quarter 2023 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Irene Lyu, Vice President, Head of Strategic Investments and Capital Markets. Please go ahead.

Thank you, operator. 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 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 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 the Q&A session. As a reminder, this conference is being recorded. In addition, a webcast replay of this conference call will also 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 third quarter 2023 earnings conference call today. In the third quarter of 2023, China’s beauty industry remained in the mild recovery phase that began as the country emerged from the pandemic earlier this year. According to the National Bureau of Statistics of China, total retail sales of consumer goods grew by 4.2% year-over-year and the total beauty retail sales increased by 2.6% year-over-year, both representing a deceleration in year-over-year growth rate from the second quarter. Online beauty sales showed a similar pattern in the third quarter. For both Color Cosmetics and Skincare, combined total sales on Tmall and Douyin, recorded a slower growth rate than in the second quarter of 2023. Amid uncertainties in consumer demand, Yatsen remained committed to its strategic transformation plan. We continuously strive to build strong brand equity based on superior product performance and consumer satisfaction. For the third quarter of 2023, we recorded total net revenue of RMB718.1 million, in line with our previous guidance. Net revenue from our Skincare Brands declined by 4.1% year-over-year, mainly attributable to our strategy decisions to phase out Abby’s Choice brand. Our clinical and premium skincare brands, including Galénic, DR.WU and Eve Lom delivered another solid performance, recording 7.4% year-over-year growth in combined net revenues and further increasing their contribution to total net revenues as compared with the prior year period. Net revenues from Color Cosmetics brands decreased by 21.5% year-over-year, primarily due to the decline in Perfect Diary sales as a result of the timing of new product launches near the end of the third quarter and the closure of underperforming offline stores. The number of Perfect Diary’s offline stores totaled 123 as of the end of the third quarter compared with 198 a year ago. Net…

Thank you, David, and hello, everyone. Before I get started, I would like to clarify that all 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 third quarter of 2023 decreased by 16.3% to RMB718.1 million from RMB857.9 million for the prior year period. The decrease was primarily attributable to a 21.5% year-over-year decrease in net revenues from Color Cosmetics brands combined with a 4.1% year-over-year decrease in net revenues from Skincare brands. Gross profit for the third quarter of 2023 decreased by 13.3% to RMB512.8 million from RMB591.3 million for the prior year period. Gross margin in the third quarter of 2023 increased to 71.4% from 68.9% for the prior year period. The increase was first, increasing sales of higher gross margin products from Skincare brands. And secondly, more disciplined pricing and discount policies and thirdly, cost optimization across all of our brand portfolios. Total operating expenses for the third quarter of 2023 decreased by 13.1% to RMB744.3 million from RMB857 million for the prior year period. As a percentage of total net revenue, total operating expenses for the third quarter of 2023 were 103.6% as compared with 99.9% for the prior year period. Fulfillment expenses for the third quarter of 2023 were RMB56 million as compared with RMB63.8 million for the prior year period. As a percentage of total net revenue, fulfillment expenses for the third quarter of 2023 increased to 7.8% from 7.4% for the prior year period. The increase was primarily attributable to the deleveraging effect of lower net revenues in the third quarter of 2023. Selling and marketing expenses for the third quarter of 2023 were RMB511.7 million as compared with RMB564.8 million for the prior year period. As a percentage…

[Operator Instructions] And the first question comes from Maggie Wan with CICC.

Thanks for taking my questions. This is Maggie Wan from CICC. I have two questions. The first one is regarding the new products of Perfect Diary. We have seen the launch of bio [ph] essence lipstick and also foundations in Q3. So, is there any feedback from the customers? And how should we expect on your performance in next year? This is for the first question. And my second question is about our guidance. We have guided a positive revenue growth for Q4, which is an encouraging signal. So, behind this guidance, could management give us more color on your expectation for both skincare and color cosmetics sectors in Q4? And like what are the key drivers for us to achieve that goal? That’s my questions. Thank you.

So, yes, thank you for the question. Let me take the first one. Well, Perfect Diary’s new lipstick launch, which is the bio essence lipstick, after its launch in the end of September, we have received very positive feedback from our users as they enjoy very strong efficacy from the lipstick. Basically, our philosophy is to have a very perfect makeup look combined with in-level efficacy benefit from the lipstick, so that’s number one. And then secondly, the user profile also started to shift after our brand upgrade and also the new launch. Historically, our consumers are most like – mostly unique [ph] and also young consumers from the lower-tier cities. But then after we launched this new product and the brand operates given that our price points start to increase and with new bolt-on benefits, we started to see more high-value consumers coming to buy our lipstick including, for example, the sophisticated young man and also the upper middle class. And also since the launch, we have seen a very positive ranking performance on both consumer and volumes. So, the launch of this lipstick was only at the end of September, so it haven’t really contributed much of the Q3 performance. But in Q4 and 11.11, we continue to see this product to gain market share.

Yes. And your second question, I think Irene has already covered part of the answer for your question. We launched our new product Perfect Diary towards the end of – mid to end of September, Q3. And the sales contribution from those new products, we started to show on our P&L starting in Q4. So, that’s one reason. One other reason is Q4 has traditionally been a strong season for our skin care products. And if you look at our skin care products and the main – three main skin care brands have been growing really fast in the past many quarters, and we are expecting strong growth from those skin care brands. So all-in-all, with the slowdown of the decline, sales decline of Perfect Diary brand and strong growth from those other skin care brands, that’s why we are expecting a strong quarter in Q4. And therefore, we gave the guidance of 0% to 5% year-over-year growth. As you know, in the past almost 2 years, the sales of the company have been declining. And hopefully, that decline has bottomed out, and we do expect our sales to start to gain traction in the foreseeable future.

That’s very helpful. Thank you very much and I have no more questions.

[Operator Instructions] Alright. This concludes the question-and-answer session. I would like to turn the call over to Irene Lyu for any closing comments.

Thank you once again for joining us today. If you have any other further questions, please feel free to contact us at Yatsen directly or at Piacente Financial Communications. Our company information for IR in both China and the U.S. can be found in today’s press release. Have a great day. Thank you.

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