Good morning and good evening, ladies and gentlemen.
Thank you and welcome to Yunji's Q3 2021 earnings conference call.
With us today are Mr. Shanglue Xiao, Chairman and Chief Executive Officer, Mr. Chengqi Zhang, Vice President of Finance, and Ms. Kaye Liu, Investor Relations Director of the company.
Now I would like to hand the conference over to our first speaker today, Ms. Kaye Liu, IRD of Yunji. Please go ahead, ma'am.
Hello, everyone. Welcome to our Q3 2021 earnings call.
Before we start, please note that this call will contain forward-looking statement within the meaning of Private Securities Litigation Reform Act of 1995, that are based on our current expectations and current market operating conditions, and relate to events that involve known and unknown risks, uncertainties and other factors affecting Yunji and its 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 document filed with U.S. SEC.
Any forward-looking statement that we make on this call are based on assumptions as of today and are expressly qualified in entirely by cautionary statements, risk factors, and details of the company filing with SEC.
Yunji do not undertake any obligation to update this statement in effect as required under applicable law. With that, I will now turn over to Shanglue Xiao, Chairman and CEO of Yunji.
大家好，欢迎来到云集二零二一第三季度的财报电话会。
Hello, everyone. Welcome to Yunji Q3 2021 earnings call.
今年二季度，为了让我们的服务更聚焦，也为会员精选爆款购物节省选择时间，我们新上线了极致精选板块云集99。在一个季度的推广以来，单坑产值稳步提升，云集站内站外直播也逐渐走上轨道。每周举办百余场美食、美妆、服饰等专题直播，有效带动了销量和会员的停留时长。今年双十一，云集99板块催生了许多百万品牌和百万单品。更可喜的是，这些百万品牌和百万单品中，有许多来自我们的自有品牌以及合资品牌。
During the Q2 of this year, we successfully launched our highly curated product selection Yunji 99 special sales portal. The Yunji 99 portal enable us to improve the focus of our service and help our members to save time when selecting market products. Following over one quarter's efforts promoting Yunji 99, we have seen a steady improvement in sales per display. In addition, our live streaming business on the Yunji platform or on third party live streaming platforms is gradually getting on track.
We now stream more than 100 live programs focused on food, beauty and cosmetics, apparel, and other topics every week, effectively driving sales and members time spent on our platform. During this year's Double Eleven Shopping Festival, Yunji 99 curated many market brands and products. It's worth mentioning that many of these brands and products come from ourselves and the co-developed brands.
在云集99战略下，我们下个阶段的重点将放在美食这个品类上。我们希望在不久后的将来建立起我们的用户心智，上云集，吃遍全中国。今年我走访了许多各地的农产品的原产地，品尝了当地的地标美食，学习美食创新，体验最前沿的营养、提炼和保存技术。这些走访让我更坚定了云集将美食作为第一品类。我们希望能让我们的会员足不出户，吃遍天下美食，同时吃出健康，吃出美丽。
Under our Yunji 99 strategy, during the next phase of our development, we will focus on the food category. We hope that in the near future, our users will become aware that on Yunji's platform, they are able to try food from all over China.
During this year, I visited agricultural products, places of origin across the country, tasted the famous local cuisine, studied culinary innovations, and gained a greater understanding of the most cutting edge nutrition, extraction, and preservation techniques. These experiences have made me even more determined that food will be Yunji's top category.
Our dream is for our members to be able to eat delicious food from all over the world without leaving home, and sometimes eat healthily to become more beautiful.
围绕美食这个品类，我们做出了礼拜天、火星大厨等肉类自有品牌的试水。今年八月，云集联合A股奶粉品牌贝因美，推出全新自有品牌新乳力，并推出儿童成长营养粉，全力聚焦六岁以上儿童营养健康，精准对标宝妈群体的需求。另外，我们结合用户需求和市场调研，推出了更多健康美食品类的自有品牌。这些品牌的单品如白月山的枸杞原浆、秋梨膏，一经上架就非常火爆，场销过百万。这些健康食品经由云集的探索和开发，从农产品原材料摇身一变，加入更好的配方，配合更好的材料加工和营养保存技术，成为易于保存和食用的中高端健康食品。而我们年初推出的礼拜天纯肉烤肠，在近一年的时间里也获得了会员广泛的认可和回购。
Let me explain further on the food category. We have recently been testing some of our own meat brands, including Li Ba Tian and Mars Chef. In August of this year, Yunji teamed up with Chinese A-share listed milk powder super brand Beingmate to launch a new private label super milk powder, and launched a nutrition powder for children focusing on the nourishment and health of children over six years old and catering to the requirements of parents. Furthermore, based on consumer demand and market research, we have launched more healthy food products, private labels.
Products such as Baiyueshan, Wolfberry Puree, and Pear Paste have proved to be megahits once they reach the shelves, over RMB 1 billion in sales. We have been exploring and developing these products with better formulas, more advanced material processing techniques, and nutrition preservation techniques.
We successfully transform the agricultural raw materials into meat and healthy food products that are easier to preserve and more convenient to eat. Our 礼拜天 brand pure meat fruit sausages have been widely acclaimed and repurchased by members since their launch at the beginning of this year.
为了让我们的会员吃得更健康，我们推荐了非常多的健康美食。我们将继续坚持自有品牌的矩阵建设，主要围绕美食、健康和护肤美妆这三个品类，以及服饰、家居日用等，满足用户多样化的需求。
Promoting healthy food is not the only way to let our members eat more healthily. We continue to adhere to establishing our private label brand matrix, and continue to focus on three categories, food, supplements, and cosmetics, while also meeting the diverse household living needs of users.
云集自有品牌云集美自2018年创立以来，一直致力于从更专业的角度呵护我们会员的健康，不断升级健康配方。推出的益生菌和蛋白粉广受消费者的好评。另有健康品牌的大健康爆款产品果蔬片已经开发出第二代产品。第二代产品根据用户反馈，配合技术革新，给用户带来更好的口感，更高的颜值，更先进的配方。
Since the establishment of our private label Yunji Beauty in 2018, we have been committed to caring for the health of our members in a more professional manner, continuously upgrading product formulas.
Our newly launched probiotics and protein powders have been well received by consumers. We have already developed a second generation of our private labels, megahit fruits and vegetables plus candy.
This second generation product is based on user feedback and leverages technological innovation to deliver a better taste with better product design and a more advanced product formula.
我们的场景品牌SUYE也将迎来品牌升级，丰富品牌形象，开辟新的水光成分专业产品线，更好地服务我们的会员，让会员在更安心、安全安心的情况下享受更精致的护理。
Moreover, we are about to upgrade our evergreen brand Solo Life so as to enrich its brand image. We also plan to launch a new professional product line with hyaluronic in the formula. As such, we will provide better services and products to our members, allowing members to enjoy more refined care and caring services in a safer and more secure environment.
公司打造的美食云集的新姿，在主站营销之外，还会借短视频平台和直播的东风，以更多不同的形式和独特的内容，向站外消费者展示云集自有品牌云集美食。云集美食和外站流量通过自有品牌和差异化供应链战略的连接，在输出云集美食内容的同时，为公司提供丰厚的利润。
Turning to our efforts to cultivate our user mindset of food gathered in Yunji. We are leveraging the short video and live streaming e-commerce phenomenon by promoting our private labels in different forms and with unique content on both our Yunji platform and third party live streaming platforms. Yunji food and third party live streaming platform generated traffic are interconnected through our private labeling and a differentiated supply chain strategy enabling us to generate huge profits while simultaneously promoting Yunji food content.
同时，为了让我们的服务经理能够通过推广云集自有品牌商品获得更稳定的收益，走向共同富裕，我们在专业化零售领域日益精进，主要体现在专业化培训上。在美食品类，我们培养美食情报官，这些情报官经过云集的培训后上岗，对美食搭配、原产地知识和烹饪方法等进行学习。在改善自身饮食习惯的同时，能够更好地帮助会员享受美食，培养会员健康生活的心智。在健康垂直品类下，我们正在建立健康营养师成长体系，开发三星至七星的营养师的课程，循序渐进，帮助我们的服务经理更加的专业。
Finally, in order for our service managers to generate more stable income and to create common prosperity by promoting our private label products, we have been refining our operations in specialized retail systems with a particular focus on specialized training. In order to further develop our food category, we have trained food intelligence officers.
Our food intelligence officers undertake a variety of training courses, such as creating balanced meals, knowledge of the place of origin of agricultural products and cooking methodology before being officially onboarded by us. While this training can help our service managers to improve their own eating habits, they will also leverage their knowledge to help our members to better enjoy food and further cultivate our members' mindset to live healthier lives.
In addition, under the health vertical category, we are establishing a dietitian development system and create a 3-7-star dietitian courses to help our service managers become more professional.
我的分享就到这里。下面欢迎我们的财务副总裁张晨启先生给大家分享财务的情况。
With that, I will turn the call over to Mr. Chengqi Zhang, our Vice President of Finance, to go through the financial results.
Thank you, Shanglue. Hello everyone. Before I go through our financial results, please note that all numbers stated in the following remarks are in RMB terms, and all comparisons and percentage changes are on a year-over-year basis unless otherwise noted. Starting this year, we are committed to enhancing our supply chain differentiation strategy, upgrading our product selection with our new market product curation strategy, and refining our membership management system.
More specifically, we launched a series of private label products with our differentiated supply chain. Our branded products have received a great reception from the market, reflected by our high repeat repurchase rate, which reached 80.6% in the twelve months ended September 30, 2021. In addition, we continue to further improve our efficiency and employee structure, focusing on sustainable long-term growth.
After several quarters of adjustments, our refined operations have resulted in significant improvements in profitability despite some fluctuations in our quarterly sales. During this quarter, we recorded an operating income of RMB 80 million compared with the operating loss of RMB 24 million a year ago.
In addition, we are delighted to see that our strategy of cultivating ourselves and the co-developed brand has achieved a certain level of progress, as evidenced by the addition of strategic investors.
As a result, we recognized RMB 110 million other non-operating income from the investment in a fast-growing dairy brand company during this quarter. Our net income in the Q3 was RMB 61 million, compared with a net loss of RMB 44 million a year ago.
Now, let's take a closer look at our financials. Total revenue RMB 438 million compared to RMB 1,067 million a year ago.
Revenues from sale of merchandise was RMB 366 million, and revenue from our marketplace business was RMB 65 million. We further optimized our selection of suppliers and merchants in accordance with our renewed long-term growth strategy, which caused a near-term revenue decrease in both of our marketplace business and merchandise sales during this quarter.
Nevertheless, our gross margin and operating efficiency both improved substantially, demonstrating the success of this strategy shift. Importantly, we recorded a significant increase in gross margin to 43%, compared to 30% a year ago.
During this quarter, we improved our operating efficiency by carefully selecting quality suppliers and products and focusing on our differentiated supply chain and marketplace product offerings, especially our private labels and exclusive products.
A combination of these efforts produced the corresponding gross margin improvement. Turning to our operating expense. Fulfillment expense was RMB 41 million, or 9.3% of total revenue, compared to RMB 91 million or 8.5% of total revenue a year ago.
The decrease was mainly attributed to reduced warehousing and logistics expense resulting from lower merchandise sales, reduced personal costs due to staff restructure refinement, and the fewer service fee charged by third-party payment settlement platforms.
Sales and marketing expenses were RMB 60 million compared to RMB 159 million a year ago. As a percentage of total revenues, sales and marketing expense were reduced to 13.7% from 14.9% in the same period last year. The decline was due to improvements we made in our member management efficiency, which lead to decrease in business promotion expense and member management fees.
Technology and content expenses were RMB 29 million or 6.5% of total revenues, compared to RMB 42 million or 4% of total revenues a year ago. The decrease was mainly due to improvements we made in our staffing structure that led to a decrease in personnel costs as well as a decrease in server costs. General and administrative expenses were RMB 65 million or 14.8% of total revenues, compared to RMB 52 million or 4.9% of total revenues a year ago.
The increase was mainly due to an increase in share-based compensation expenses. Total operating expenses in the Q3 equal RMB 194 million. As a result, we recorded an income from operations of RMB 18 million, as compared to a loss of RMB 24 million a year ago.
Our adjusted income from operations was RMB 33 million, compared to adjusted loss from operations of RMB 17 million a year ago. Net income was RMB 61 million, compared with a net loss of RMB 44 million a year ago. Adjusted net income was RMB 76 million, compared with an adjusted net loss of RMB 36 million a year ago.
Basic and diluted net income per share attributable to ordinary shares were both $0.03, compared with basic and diluted net loss per share attributable to ordinary shareholders of $0.02 in the same period of 2020. Moving on to liquidity. As of September 30, 2021, we had a total of RMB 1 billion in cash and cash equivalents, restricted cash and short-term investments on our balance sheet.
Our accounts payable reduced to CNY 298 million as of September 30, 2021, compared with CNY 502 million as of December 31, 2020. Our liquid assets were sufficient enough to cover our payable obligations, and we do not hold any long-term bank loans or debt on our balance sheet. Going forward, we will continue to execute our market product curation strategy, expanding our range of private label products, further enhance our operating efficiency and the leverage of differentiated supply chain to continue driving our long-term growth and profitability.
We remain confident that our strategy, directions and operational execution will continue to deliver sustainable and healthy growth for our shareholders in the long term. This concludes our prepared remarks for today. Operator, we are now ready to take questions.
Thank you.
Ladies and gentlemen, to ask a question, you will need to press star one on your telephone. To withdraw your question, please press the pound or hash key. Please stand by while we compile the Q&A roster.
When asking the question, please state your question in Chinese first, then repeat your question in English for the convenience of everyone on the call. Once again, to ask a question, please star one on your telephone.
The first question comes from the line of Ethan Yu from First Trust. Please go ahead.
Good evening. Thanks for taking my question. 晚上好，谢谢管理层接受我的提问。我想简单请教一下，公司目前在自有品牌孵化以及在与竞争对手的差异化方面有哪些具体的措施，未来的战略脉络又是怎样的？我还注意到公司在投资方面有所建树，能否分享一下管理层在我们的投资策略上的一些思考。Let me do a quick translation.
Could you give us more details about our private label products, incubation and featured actions to differentiate them from our from other competitors? I've also noticed that the company has made some achievements in investments. Could you please share more color about the company's investment strategy and expectations? Thanks.
谢谢您的提问。第一个呢，我们希望通过接下来的努力，能够在C端的消费者心目中能够建立明晰的认知。那过去这些年呢，我们跟我们的服务商，我们这个连接得非常紧密，所以帮助服务商赚钱是我们对外的一个重要的沟通的策略，也是我们在去践行的方向。那么我们发现呢，就是如何在这样一个竞争环境非常激烈的电商领域能够取得稳定的发展，我们不能忽视和消费者端的沟通。那我们整个研究了整个的这个第一梯队的一些电商企业，我们发现呢，美食——
这个购物入口目前还没有被占领。也就是说，对消费者来说，购买美食的第一首选平台其实还没有建立。那么我们也看到我们在服务商这端的优势，就是口碑的销售力量。我们发现，对于食品的品牌来说，口碑是大于品牌的。那么我们的会员模式本身就积攒了非常多的分享型的会员。所以，我们也非常希望，一方面能够让C端的消费者能够建立购买美食云集式第一入口。另外的话，我们也可以通过我们的会员，把我们的一些合作的、研发的那些美食品牌，能够通过我们的会员，通过我们的服务商能够推荐给更多的用户。所以这是美食作为云集的第一品类，将接下来是我们整个精选战略的这个阶段的重要的策略。
Thank you for your question and we hope that we could make more efforts to promote the Yunji mindset to the C-end customers.
During the past several years, we have kept contact and close cooperation with our service suppliers, so we help them to make profits in their cooperation with us, and these are going to be our external communication strategies, and we will be committed to this strategy in the future. We have noticed that in such a fierce competing e-commerce industry, if you're going to keep stable development, you have to have a good communication with the customers. We have done the survey for the T1 e-commerce platforms.
We find that currently there is no first choice food delicacy platform for our customers, so we hope that we could make more efforts on this area.
When customers would like to buy the food delicacy, they will choose Yunji as their first choice platform. We have found out about the food delicacy, word of mouth is more important than the brands themselves. Here in Yunji, we have a large number of the members who are going to promote our platform and the foods to other customers.
For Yunji, we would like to try hard to be the first choice for the customers if we're going to buy the delicious food. We are going to cooperate more with our sharing members and the service providers so as to make more and promote more delicious food brands through our cooperation and R&D to our users. That is our first priority. We're going to make Yunji the first choice for our customers for the selection of these delicious food. The food is going to be our first category.
除了美食品类，我们拥有口碑大于品牌的这样的一个会员电商的优势以外，在会员电商这个领域，因为我们有多年的服务商的成长体系和培训体系的建设，那服务商在消费品领域能够做很好的中度的服务。相对比而言，像美妆品类，它是非常需要有人的专业化服务的。像营养品、保健品领域，其实也是非常需要人的专业化服务的。那我们整个在自有品牌这一块的策略是一加二的策略，就是把美食作为我们自有品牌开发的一个最重要的方向。其次，我们会注重商品加服务的这个领域，也就是美妆和营养品领域，我们也会加大我们的自有品牌的建设。那我们的供应链一直是保持非常开放的，所以对于我们来说，自有品牌我们能够做的相对还是会非常有限的。但是整个市场上，在整个新媒体、视频媒体等等的带动下，有非常多的创新品牌成长起来，那么我们也希望能够有机会跟这些创新品牌深度地合作。这里不包括我们渠道端的合作，我们也希望有机会能够投资这些创新品牌，能跟这些创新品牌有更长期的战略携手合作。
In addition to the food development and also in the food category, we know that the word of mouth is more important than the brands itself. In addition to that, we are going to know that we have a quite mature cultivation and training system for the cosmetics and supplements, and especially in those two areas we need the service and professional service for the users. In Yunji, it's the private label development, we are going to have a one plus two strategy. For this one, it is in the food.
These are going to be the priority for our private label development. For the two, that is in the cosmetics, in addition to the supplements, we are going to promote the product plus the service strategy for those two narratives.
We know currently in Yunji, our supply chain is quite open, so probably we have a limited development of the private labels. Also we have noticed that there emerge many emerging brands supported by the new media developments. We not only want to cooperate with the emerging brands, but also we would like to invest in those brands so as to have the long-term development.
Uh,
In conclusion, in another five or more years, we are gonna to make more contributions for the development of the membership-based social e-commerce platform. We are gonna to make more contributions for the development of the private labels, the food, the cosmetics and the supplements. Thank you for your question.
Thank you. Thank you. Once again, ladies and gentlemen, to ask a question, you will need to press star one on your telephone.
Thank you. As there are no further questions at this time, I would now like to transfer the call back to management for any closing remarks. Please go ahead. Thank you.
Thank you for joining us today. Please do not hesitate to contact us if you have any further questions, and we're looking forward to talking with you next quarter. Bye.
Thank you. That concludes the conference for today.