Business Context and Reporting Period
Company: Yatsen Holding Ltd (Yatsen)
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended December 31, 2025
Business Overview: Yatsen is a leading China-based beauty group operating a portfolio of color cosmetics and skincare brands, including Perfect Diary, Galénic, DR.WU, and Eve Lom. The company utilizes a Variable Interest Entity (VIE) structure to conduct operations in China, with the VIE contributing 3.1% of total third-party revenues in 2025. The company is strategically shifting focus toward higher-margin skincare brands.
Key Financial Metrics (2025 vs. 2024)
| Metric | 2025 (RMB) | 2025 (US$) | 2024 (RMB) | Change |
|---|---|---|---|---|
| Total Net Revenues | 4,298,124 | 614,624 | 3,393,414 | +26.7% |
| Gross Profit | 3,361,344 | 480,666 | 2,617,178 | +28.4% |
| Gross Margin | 78.2% | 78.2% | 77.1% | +110 bps |
| Net Loss | (92,414) | (13,216) | (710,221) | 87.0% Improvement |
| Net Loss Margin | -2.2% | -2.2% | -20.9% | N/A |
| Cash & Equivalents | 765,379 | 109,448 | 817,395 | -6.4% |
| Short-term Investments | 246,008 | 35,179 | 539,130 | -54.4% |
| Total Liabilities | 846,342 | 121,024 | 867,852 | -2.5% |
Note: US$ amounts are translated at the rate of RMB 6.9931 to US$1.00 as of December 31, 2025.
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 26.7% year-over-year, driven primarily by a 63.5% surge in Skincare Brands revenue (RMB 2.28 billion), which now accounts for 53.0% of total revenue. Color Cosmetics Brands revenue grew modestly by 1.9%.
- Profitability Improvement: The net loss narrowed significantly from RMB 710.2 million in 2024 to RMB 92.4 million in 2025. This improvement was largely due to higher gross margins and the absence of goodwill impairment charges in 2025 (compared to RMB 403.1 million in 2024).
- Expense Management: General and administrative expenses decreased by 31.7% to RMB 303.6 million, driven by lower payroll and share-based compensation. Selling and marketing expenses increased 25.7% to RMB 2.85 billion due to higher advertising costs and platform commissions, though as a percentage of revenue, they decreased slightly from 66.9% to 66.3%.
- Goodwill: No goodwill impairment was recorded in 2025, contrasting with significant impairments in 2023 and 2024 related to the Eve Lom reporting unit.
Guidance, Outlook, and Risks
Outlook and Strategy: Management continues to execute a five-year strategic plan focused on building a sustainable brand portfolio. Key initiatives include prioritizing investments in core Skincare Brands (Galénic, DR.WU, Eve Lom) to capitalize on market momentum, optimizing marketing ROI, and expanding R&D capabilities. The company intends to retain earnings to fund operations and expansion, with no current plan to pay cash dividends.
Material Risks and Contingencies:
- VIE Structure: The company relies on contractual arrangements with a VIE to operate in China. If the PRC government deems these arrangements non-compliant or unenforceable, the company could lose control of operations, potentially rendering ADSs worthless.
- Regulatory Environment: Significant risks exist regarding PRC regulations on data security, cybersecurity reviews, and overseas listings. New regulations effective in 2025 impose stricter requirements on data processors and cross-border data transfers.
- Financing Uncertainty: On March 11, 2026, the company entered into a Note Purchase Agreement for approximately US$120 million in convertible senior notes. However, the closing of the first tranche has not occurred due to objections from a significant shareholder. The transaction remains in negotiation, creating uncertainty regarding future liquidity.
- Market Competition: The beauty industry is highly competitive. The company faces risks related to consumer preference shifts, reliance on third-party e-commerce platforms, and supply chain disruptions.
Key Facts for Investor Verification
- Revenue Mix Shift: Verify the sustainability of the 63.5% growth in Skincare Brands and whether this trend can offset the stagnation in Color Cosmetics Brands.
- Goodwill Impairment History: Review the valuation assumptions for the Eve Lom reporting unit, given the RMB 758.5 million in accumulated impairment losses as of 2025.
- Financing Status: Monitor the status of the US$120 million convertible note transaction and the resolution of the shareholder objection, as this impacts future liquidity.
- VIE Compliance: Assess the company's compliance with evolving PRC data security and cybersecurity regulations, which could impact operations or require costly remediation.
- Cash Position: Note that while cash and equivalents decreased slightly, the company holds significant short-term investments (RMB 246 million) and has a history of negative operating cash flows (RMB 94.7 million used in 2025).