Ladies and gentlemen, good day, and welcome to the Yatsen Second Quarter 2024 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 Investment 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 that could affect Yatsen's business 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. 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 and 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.

Thank you, Irene. And thank you, everyone, for participating in Yatsen's second quarter 2024 earnings conference call today. I will start with an overview of the macro environment and our key financial metrics before moving on to the strategy, brand and quarter update. China's beauty industry has a subdued second quarter, with the 618 Shopping Festival falling short of expectations. According to the adjusted data published by China's National Bureau of Statistics, EANTiM retail sales rebounded in May, likely due to the early start of the 618 Festival and the cancellation of [indiscernible], followed by a significant year-over-year decline in June. For the full second quarter, total retail sales decreased by 1.2% year-over-year, lagging the overall market. Our total retail sales of consumer goods grew by 2.7% year-over-year. In addition, online beauty sales remained muted. While Tmall and Douyin combined beauty sales recorded year-over-year growth in the second quarter, the growth rate was significantly lower than in the prior year period. The profit performance of China's beauty market impacted our revenue, Yatsen to revise our revenue guidance in July. Total net revenues for the second quarter were RMB794.5 million, reflecting a 7.5% year-over-year decline, in line with our revised expectations. Net revenues from our Skincare brands were basically flat year-over-year, while combined revenues from Galénic, DR. WU and Eve Lom grew by 5% year-over-year. Color Cosmetics brand net revenues increased by 11.4% year-over-year, primarily due to the ongoing strategy transformation of the Perfect Diary brand. The flagship product line, the Biolip Essence is performing well as the brand continues to build its new product lineup. On the profitability side, our overall gross margin increased to 76.7% from 74.7% for the prior year period, thanks to an increased contribution from high gross margin products. Our net loss margin also narrowed by…

Thank you, David, and hello, everyone. Before I get started, I would like to clarify that all financial numbers presented today are in renminbi amounts and all percentage changes refer to year-over-year changes, unless otherwise noted. Total net revenue for the second quarter of 2024 decreased by 7.5% to RMB794.5 million from RMB868.6 million for the prior year period. The decrease was primarily due to 11.4% year-over-year decrease to net revenues from Color Cosmetics segment. Gross profit for the second quarter of 2024 decreased by 5% to RMB609.4 million from RMB641.6 million for the prior year period. Gross margin for the second quarter of 2024 increased to 76.7% from 74.7% for the prior year period. This increase was primarily driven by an increase in sales of higher gross margin comp. Total operating expenses for the second quarter of 2024 decreased by 4.1% to RMB744.6 million from RMB776.7 million for the prior year period. As a percentage of total net revenue, total operating expenses for the second quarter of 2024 were 93.7% as compared with 90.5% for the prior year period. Fulfillment expenses for the second quarter of 2024 were RMB51.2 million as compared with RMB68.3 million for the prior year period. As a percentage of total net revenues, fulfillment expenses for the second quarter of 2024 decreased to 6.4% from 6.8% for the prior year period. The decrease was primarily due to an increase in overall average selling price of our products as well as further improvement in logistics efficiency. Selling and marketing expenses for the second quarter of 2024 were RMB544.7 million as compared with RMB542.8 million for the prior year period. As a percentage of total net revenues, selling and marketing expenses for the second quarter of 2024 increased to 68.6% from 53.2% for the prior year period.…

[Operator Instructions]. Our first question comes from Maggie Huang with CICC. Please go ahead.

I have two questions. The first question is that, what is our plan for product development and channel expansion for Color Cosmetics and Skincare brands, respectively? And my second question is that, what is our promotion strategy in the second half of the year and how to balance our revenue growth and profitability? That's my question. Thank you.

Thank you, Maggie, for the question. So, for the first question on plan for development and channel strategy. So, our -- our product mix and also channel mix. On the product side, we have a very robust new product pipeline for the second half of the year, for both our Color and Skincare side. So, we continue to have a number of new products, for example, for Galénic and DR. WU will have new very active and functional skincare products launched in later half of this year. And also, on the Color side, we have a list of new pipelines, including new listed and foundation products for [indiscernible]. And then in terms of channels, we have been talking about expanding into more TV channels on top of currently very high [indiscernible]. So, by increasing the concentration or the weighting of the TV channel, we'll have more room for growth and also a better profitability mix in the future.

Okay. For your second question, the promotion strategy for the second half of the year, I don't think there will be substantial changes in terms of promotion strategies. [indiscernible] have 7, 11 and a few other events until the end of the -- from now until the end of the year, so we will primarily focus on optimizing our channel mix and product mix as Irene just mentioned. And in terms of revenue profitability value, I think at the second half of the year, we're going to be focusing more on recovering loss and achieving profitability is positive. In terms of revenue, we're going to be more aggressive in terms of new product development and channel mix, so that we can grow our revenue as fast as possible. But in the meantime, we're going to be focusing at a profitable revenue growth and be profitable in [indiscernible].

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

Thank you. This concludes our question-and-answer session. I'd like to turn the conference back over to management for closing remarks.

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

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.