Yatsen Announces First Quarter 2023 Financial Results

Conference Call to Be Held at 7:30 A.M. U.S. Eastern Time on May 16,2023

GUANGZHOU,China,May 16,2023 -- Yatsen Holding Limited ("Yatsen" or the "Company") (NYSE: YSG),a leading China-based beauty group,today announced its unaudited financial results for the first quarter ended March 31,2023.

First Quarter 2023 Highlights

Total net revenuesfor the first quarter of 2023 decreased by 14.1% to RMB765.4 million (US$111.5 million) from RMB891.0 million for the prior year period.

Total net revenues from Skincare Brands[1]for the first quarter of 2023 increased by 34.2% to RMB245.1 million (US$35.7 million) from RMB182.7 million for the prior year period. As a percentage of total net revenues,total net revenues from Skincare Brands for the first quarter of 2023 increased to 32.0% from 20.5% for the prior year period.

Gross marginfor the first quarter of 2023 was 74.3%,as compared with 69.0% for the prior year period.

Net income[2] for the first quarter of 2023 was RMB50.7 million (US$7.4 million),as compared with net loss of RMB291.4 million for the prior year period. Non-GAAP net loss[3] for the first quarter of 2023 decreased by 83.2% to RMB25.8 million (US$3.8 million) from RMB153.6 million for the prior year period.

Mr. Jinfeng Huang,Founder,Chairman and Chief Executive Officer of Yatsen,stated,"We started 2023 by continuing to execute our new five-year strategic transformation plan,focusing on building a healthy brand portfolio and capitalizing on rising opportunities as the consumer goods industry recovers. For our Skincare Brands,we are committed to increasing brand awareness and developing new products,while improving our current hero products' market position in their relevant sub-categories. For our Color Cosmetics Brands,we continued to introduce high-quality products and build a more sustainable business model. Additionally,we remained dedicated to strengthening our R&D capabilities as a core strategy for our future growth and product differentiation."

Mr. Donghao Yang,Director and Chief Financial Officer of Yatsen,commented,"Our first quarter financial results once again proved that we are on the right path to achieve our strategic goal. We recorded net revenues of RMB765.4 million,representing a 14.1% decline year-over-year and beating the guidance we provided previously. Revenue contribution from our Skincare Brands grew to 32.0% for the first quarter from 20.5% for the prior year period. Furthermore,gross margin improved significantly by 5.3 percentage points year-over-year to 74.3%. We recorded net income marginof 6.6%,as compared with net loss margin of 32.7% for the prior year period. With an ample cash reserve,we are well positioned to carry out our long-term development plan for 2023."

First Quarter 2023 Financial Results

Net Revenues

Total net revenues for the first quarter of 2023 decreased by 14.1% to RMB765.4 million (US$111.5 million) from RMB891.0 million for the prior year period. The decrease was primarily attributable to a 29.1% year-over-year decrease in net revenues from Color Cosmetics Brands[4],partially offset by a 34.2% year-over-year increase in net revenues from Skincare Brands.

Gross Profit and Gross Margin

Gross profit for the first quarter of 2023 decreased by 7.5% to RMB568.7 million (US$82.8 million) from RMB614.5 million for the prior year period. Gross margin for the first quarter of 2023 increased to 74.3% from 69.0% for the prior year period. The increase was driven by (i) increasing sales of higher-gross margin products from Skincare Brands,(ii) more disciplined pricing and discount policies and (iii) cost optimization across all of the Company's brand portfolios.

Operating Expenses

Total operating expenses for the first quarter of 2023 decreased by 37.6% to RMB575.9 million (US$83.9 million) from RMB922.5 million for the prior year period. As a percentage of total net revenues,total operating expenses for the first quarter of 2023 were 75.2%,as compared with 103.5% for the prior year period.

Fulfillment Expenses.Fulfillment expenses for the first quarter of 2023 were RMB51.9 million (US$7.6 million),as compared with RMB73.9 million for the prior year period. As a percentage of total net revenues,fulfillment expenses for the first quarter of 2023 decreased to 6.8% from 8.3% for the prior year period. The decrease was primarily attributable to a decrease in warehouse and logistics costs due to the outsourcing of most of the Company's warehousing and handling operations.

Selling and Marketing Expenses. Selling and marketing expenses for the first quarter of 2023 were RMB459.0 million (US$66.8 million),as compared with RMB604.7 million for the prior year period. As a percentage of total net revenues,selling and marketing expenses for the first quarter of 2023 decreased to 60.0% from 67.9% for the prior year period. The decrease was primarily attributable to the closure of underperforming offline stores and a reduction in share-based compensation related to the decrease in selling and marketing headcount.

General and Administrative Expenses.General and administrative expenses for the first quarter of 2023 were RMB40.7 million (US$5.9 million),as compared with RMB208.1 million for the prior year period. As a percentage of total net revenues,general and administrative expenses for the first quarter of 2023 decreased to 5.3% from 23.4% for the prior year period. The decrease was primarily attributable to a reversal of recognized share-based compensation expenses of RMB109.4 million due to the forfeiture of unvested awards granted to our former chief technology officer upon his resignation,and a decrease of RMB42.2 million in recognition of share-based compensation expenses using the graded-vesting method over the vesting term of the Company's awards.

Research and Development Expenses. Research and development expenses for the first quarter of 2023 were RMB24.2 million (US$3.5 million),as compared with RMB35.8 million for the prior year period. As a percentage of total net revenues,research and development expenses for the first quarter of 2023 decreased to 3.2% from 4.0% for the prior year period. The decrease was primarily attributable to the Company's efforts to maintain research and development expenses at a reasonable level relative to total net revenues.

Loss from Operations

Loss from operations for the first quarter of 2023 decreased by 97.7% to RMB7.2 million (US$1.0 million) from RMB308.0 million for the prior year period. Operating loss margin was 0.9%,as compared with 34.6% for the prior year period.

Non-GAAP loss from operations[5] for the first quarter of 2023 decreased by 63.3% to RMB62.4 million (US$9.1 million) from RMB170.1 million for the prior year period. Non-GAAP operating loss margin was 8.1%,as compared with 19.1% for the prior year period.

Net Income/Loss

Net income for the first quarter of 2023 was RMB50.7 million (US$7.4 million),as compared with net loss of RMB291.4 million for the prior year period. Net income margin was 6.6%,as compared with net loss margin of 32.7% for the prior year period. Net income attributable to Yatsen's ordinary shareholders per diluted ADS[6] for the first quarter of 2023 was RMB0.08 (US$0.01),as compared with net loss attributable to Yatsen's ordinary shareholders per diluted ADS of RMB0.46 for the prior year period.

Non-GAAP net loss for the first quarter of 2023 decreased by 83.2% to RMB25.8 million (US$3.8 million) from RMB153.6 million for the prior year period. Non-GAAP net loss margin was 3.4%,as compared with 17.2% for the prior year period. Non-GAAP net loss attributable to Yatsen's ordinary shareholders per diluted ADS[7] for the first quarter of 2023 was RMB0.05 (US$0.01),as compared with RMB0.24 for the prior year period.

Balance Sheet and Cash Flow

As of March 31,2023,the Company had cash,restricted cash and short-term investments of RMB2.54 billion (US$369.2 million),as compared with RMB2.63 billion as of December 31,2022.

Net cash used in operating activities for the first quarter of 2023 decreased by 80.6% to RMB20.2 million (US$2.9 million) from RMB104.1 million for the prior year period.

Business Outlook

For the second quarter of 2023,the Company expects its total net revenues to be between RMB761.4 million and RMB856.6 million,representing a year-over-year decline of approximately 10% to 20%. These forecasts reflect the Company's current and preliminary views on the market and operational conditions,which are subject to change.

Exchange Rate

This announcement contains translations of certain Renminbi ("RMB") amounts into U.S. dollars ("US$") at specified rates solely for the convenience of the reader. Unless otherwise noted,all translations from RMB to US$ were made at a rate of RMB6.8676 to US$1.00,the exchange rate in effect as of March 31,as set forth in the H.10 statistical release of The Board of Governors of the Federal Reserve System. The Company makes no representation that any RMB or US$ amounts could have been,or could be,converted into US$ or RMB,as the case may be,at any particular rate,or at all.

[1]Include net revenues fromDR.WU(its mainland China business),Galénic,EveLom,Abby's Choiceand otherskincarebrands of the Company.

[2]The net income we recognized for the first quarter of 2023 was primarily attributable to a reversal of recognized share-based compensation expenses of RMB109.4 million due to the forfeiture of unvested awards granted to our former chief technology officer upon his resignation,and a decrease of RMB42.2 million in recognition of share-based compensation expenses using the graded-vesting method over the vesting term of the Company's awards.

[3]Non-GAAP net loss is a non-GAAP financial measure. Effective from the third quarter of 2022,non-GAAP net loss is defined as net loss excluding (i) share-based compensation expenses,(ii) amortization of intangible assets resulting from assets and business acquisitions,(iii) revaluation of investments on the share of equity method investments,and (iv) tax effects on non-GAAP adjustments,and non-GAAP net loss for the prior year period presented in this document is also calculated in the same manner.

[4] IncludePerfect Diary,LittleOndine,Pink Bear and other color cosmetics brands of the Company.

[5] Non-GAAP loss from operations is a non-GAAP financial measure. Non-GAAP loss from operations is defined as loss from operations excluding share-based compensation expenses and amortization of intangible assets resulting from assets and business acquisitions.

[6] ADS refers to the American depositary shares,each of which represents four Class A ordinary shares.

[7]Non-GAAP net loss attributable to ordinary shareholders per diluted ADS is a non-GAAP financial measure. Non-GAAP net loss attributable to ordinary shareholders per diluted ADS is defined as non-GAAP net loss attributable to ordinary shareholders divided by the weighted average number of diluted ADS outstanding for computing diluted earnings per ADS. Effective from the third quarter of 2022,non-GAAP net loss attributable to ordinary shareholders is defined as net loss attributable to ordinary shareholders excluding (i) share-based compensation expenses,and non-GAAP net loss attributable to ordinary shareholders per diluted ADS for the prior year period presented in this document is also calculated in the same manner.

Conference Call Information

The Company's management will hold a conference call on Tuesday,at 7:30 A.M. U.S. Eastern Time or 7:30 P.M. Beijing Time to discuss its financial results and operating performance for the first quarter 2023.

United States (toll free):

+1-888-346-8982

International:

+1-412-902-4272

Mainland China (toll free):

400-120-1203

Hong Kong,SAR (toll free):

800-905-945

Hong Kong,SAR:

+852-3018-4992

Conference ID:

6310119

The replay will be accessible through May 23,by dialing the following numbers:

United States:

+1-877-344-7529

International:

+1-412-317-0088

Replay Access Code:

6310119

A live and archived webcast of the conference call will also be available on the Company's investor relations website at http://ir.yatsenglobal.com/.

About Yatsen Holding Limited

Yatsen Holding Limited (NYSE: YSG) is a leading China-based beauty group with the mission of creating an exciting new journey of beauty discovery for consumers around the world. Founded in 2016,the Company has launched and acquired numerous color cosmetics and skincare brands including Perfect Diary,Little Ondine,Abby's Choice,DR.WU (its mainland China business),Eve Lom,Pink Bear and EANTiM. The Company's flagship brand,Perfect Diary,is one of the leading color cosmetics brands in China in terms of retail sales value. The Company primarilyreaches and engages with customers directly both online and offline,with expansive presence across all major e-commerce,social and content platforms in China.

For more information,please visithttp://ir.yatsenglobal.com/.

Use of Non-GAAP Financial Measures

The Company uses non-GAAP income (loss) from operations,non-GAAP net income (loss),non-GAAP net income (loss) attributable to ordinary shareholders and non-GAAP net income (loss) attributable to ordinary shareholders per diluted ADS,each a non-GAAP financial measure,in reviewing and assessing its operating performance. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. The Company presents these non-GAAP financial measures because they are used by the management to evaluate operating performance and formulate business plans. Non-GAAP financial measures help identify underlying trends in its business,provide further information about its results of operations,and enhance the overall understanding of its past performance and future prospects. The Company defines non-GAAP income (loss) from operations as income (loss) from operations excluding share-based compensation expenses and amortization of intangible assets resulting from assets and business acquisitions. The Company defines non-GAAP net income (loss) as net income (loss) excluding (i) share-based compensation expenses,and (iv) tax effects on non-GAAP adjustments. The Company defines non-GAAP net income (loss) attributable to ordinary shareholders as net income (loss) attributable to ordinary shareholders excluding (i) share-based compensation expenses,(iii) revaluation of investments on the share of equity method investments and (iv) tax effects on non-GAAP adjustments. Non-GAAP net income (loss) attributable to ordinary shareholders per diluted ADS is computed using non-GAAP net income (loss) attributable to ordinary shareholders divided by weighted average number of diluted ADS outstanding for computing diluted earnings per ADS.

However,the non-GAAP financial measures have limitations as analytical tools as the non-GAAP financial measures are not presented in accordance with U.S. GAAP and may differ from the non-GAAP information used by other companies,including peer companies,and therefore their comparability may be limited. The Company compensates for these limitations by reconciling the non-GAAP financial measures to the nearest U.S. GAAP performance measure,all of which should be considered when evaluating performance. The Company encourages investors and others to review its financial information in its entirety and not rely on a single financial measure. Reconciliations of Yatsen's non-GAAP financial measure to the most comparable U.S. GAAP measure are included at the end of this press release.

Safe Harbor Statement

This announcement contains statements that may constitute "forward-looking" statements which are made pursuant to the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "aims," "future," "intends," "plans," "believes," "estimates," "likely to," and similar statements. The Company may also make written or oral forward-looking statements in its periodic reports to the Securities and Exchange Commission ("SEC"),in its annual report to shareholders,in press releases and other written materials and in oral statements made by its officers,directors or employees to third parties. Statements that are not historical facts,including statements about the Company's beliefs,plans,outlook and expectations,are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement,which include but not limited to the following: the Company's growth strategies; its future business development,results of operations and financial condition; its ability to continue to roll out popular products and maintain popularity of existing products; its ability to anticipate and respond to changes in industry trends and consumer preferences and behavior in a timely manner; its ability to attract and retain new customers and to increase revenues generated from repeat customers; its expectations regarding demand for and market acceptance of its products and services; its ability to integrate newly-acquired businesses and brands; trends and competition in and relevant government policies and regulations relating to China's beauty market; changes in its revenues and certain cost or expense items; and general economic conditions globally and in China. Further information regarding these and other risks is included in the Company's filings with the SEC. All information provided in this press release is as of the date of this press release,and the Company does not undertake any obligation to update any forward-looking statement,except as required under applicable law.

For investor and media inquiries,please contact:

In China:

Yatsen Holding Limited

Investor Relations

E-mail: ir@yatsenglobal.com

The Piacente Group,Inc.

Hui Fan

Tel: +86-10-6508-0677

E-mail: yatsen@thepiacentegroup.com

In the United States:

The Piacente Group,Inc.

Brandi Piacente

Tel: +1-212-481-2050

E-mail: yatsen@thepiacentegroup.com

YATSENHOLDING LIMITED

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(All amounts in thousands,except for share,per share data or otherwise noted)

December 31,

March 31,

2022

2023

2023

RMB'000

RMB'000

USD'000

Assets

Current assets

Cash and cash equivalents

1,512,945

1,349,734

196,536

Restricted cash

-

20,603

3,000

Short-term investment

1,072,867

1,144,712

166,683

Accounts receivable,net

200,843

186,144

27,105

Inventories,net

423,287

382,780

55,737

Prepayments and other current assets

292,825

299,933

43,674

Amounts due from related parties

5,654

12,576

1,831

Total current assets

3,508,421

3,396,482

494,566

Non-current assets

Restricted cash

41,383

20,000

Investments

502,579

569,138

82,873

Property and equipment,net

75,619

63,288

9,215

Goodwill

857,145

866,945

126,237

Intangible assets,net

689,669

683,636

99,545

Deferred tax assets

1,951

1,295

189

Right-of-use assets,net

133,004

110,855

16,142

Other non-current assets

52,885

52,512

7,646

Total non-current assets

2,354,235

2,368,272

344,847

Total assets

5,862,656

5,764,754

839,413

Liabilities,redeemable non-controlling interests and shareholders' equity

Current liabilities

Accounts payable

119,847

94,505

13,761

Advances from customers

16,652

15,174

2,210

Accrued expenses and other liabilities

323,259

293,873

42,791

Amounts due to related parties

27,242

27,192

3,959

Income tax payables

21,826

20,883

3,041

Lease liabilities due within one year

79,586

74,785

10,890

Total current liabilities

588,412

526,412

76,652

Non-current liabilities

Deferred tax liabilities

113,441

112,779

16,422

Deferred income-non current

45,280

41,221

6,002

Lease liabilities

52,997

37,240

5,423

Total non-current liabilities

211,718

191,240

27,847

Total liabilities

800,130

717,652

104,499

Redeemable non-controlling interests

339,924

339,924

49,497

Shareholders' equity

Ordinary Shares (US$0.00001 par value; 10,000,000 ordinary

shares authorized,comprising of 6,000 Class A ordinary

shares,960,852,606 Class B ordinary shares and 3,039,147,394 shares

each of such classes to be designated as of December 31,2022 and

March 31,2023; 2,030,600,883 Class A shares and 666,572,880 Class

B ordinary shares issued; 1,569,677,384 Class A ordinary shares and

666,880 Class B ordinary shares outstanding as of December

31,2022 and March 31,2023)

173

173

25

Treasury shares

(669,150)

(669,150)

(97,436)

Additional paid-in capital

12,038,802

11,971,404

1,743,171

Statutory reserve

24,177

24,177

3,520

Accumulated deficit

(6,365)

(6,550,307)

(953,799)

Accumulated other comprehensive loss

(74,195)

(72,897)

(10,614)

Total Yatsen Holding Limited shareholders' equity

4,719,442

4,703,400

684,867

Non-controlling interests

3,160

3,778

550

Total shareholders' equity

4,722,602

4,707,178

685,417

Total liabilities,redeemable non-controlling interests and shareholders' equity

5,413

YATSENHOLDING LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(All amounts in thousands,per share data or otherwise noted)

For the Three Months Ended March 31,

2022

2023

2023

RMB'000

RMB'000

USD'000

Total net revenues

890,954

765,396

111,450

Total cost of revenues

(276,408)

(196,667)

(28,637)

Gross profit

614,546

568,729

82,813

Operating expenses:

Fulfilment expenses

(73,863)

(51,916)

(7,560)

Selling and marketing expenses

(604,726)

(459,048)

(66,843)

General and administrative expenses

(208,129)

(40,741)

(5,932)

Research and development expenses

(35,810)

(24,178)

(3,521)

Total operating expenses

(922,528)

(575,883)

(83,856)

Loss from operations

(307,982)

(7,154)

(1,043)

Financial income

8,103

26,988

3,930

Foreign currency exchange losses

(2,632)

(5,549)

(808)

(Loss) income from equity method investments,net

(2,330)

19,060

2,775

Impairment loss of investments

(4,416)

-

-

Other income,net

17,654

17,517

2,551

Loss before income tax expenses

(291,603)

50,862

7,405

Income tax benefits (expenses)

223

(186)

(27)

Net (loss) income

(291,380)

50,676

7,378

Net income (loss) attributable to non-controlling interests and redeemable

non-controlling interests

465

(618)

(90)

Net (loss) income attributable to Yatsen's shareholders

(290,915)

50,058

7,288

Shares used in calculating loss per share (1):

Weighted average number of Class A and Class B ordinary shares:

Basic

2,526,753,316

2,236,250,264

2,264

Diluted

2,373,166,850

2,850

Net (loss) income per Class A and Class B ordinary share

Basic

(0.12)

0.02

0.00

Diluted

(0.12)

0.02

0.00

Net (loss) income per ADS (4 ordinary shares equal to 1 ADS)

Basic

(0.46)

0.09

0.01

Diluted

(0.46)

0.08

0.01

For the Three Months Ended March 31,

2022

2023

2023

Share-based compensation expenses are included in the operating

expenses as follows:

RMB'000

RMB'000

USD'000

Fulfilment expenses

1,523

651

95

Selling and marketing expenses

22,355

6,292

916

General and administrative expenses (income)

94,983

(76,320)

(11,113)

Research and development expenses

6,957

1,979

288

Total

125,818

(67,398)

(9,814)

(1) Authorized share capital is re-classified and re-designated into Class A ordinary shares and Class B ordinary shares,with

each Class A ordinary share being entitled to one vote and each Class B ordinary share being entitled to twenty votes on all

matters that are subject to shareholder vote.

YATSENHOLDING LIMITED

UNAUDITEDRECONCILIATIONSOF GAAP AND NON-GAAP RESULTS

(All amounts in thousands,

2022

2023

2023

RMB'000

RMB'000

USD'000

Loss from operations

(307,982)

(7,154)

(1,043)

Share-based compensation expenses (income)

125,818

(67,398)

(9,814)

Amortization of intangible assets resulting from assets and business acquisitions

12,083

12,176

1,773

Non-GAAP loss from operations

(170,081)

(62,376)

(9,084)

Net (loss) income

(291,380)

50,676

7,378

Share-based compensation expenses (income)

125,773

Revaluation of investments on the share of equity method investments

1,986

(19,146)

(2,788)

Tax effects on non-GAAP adjustments

(2,084)

(2,080)

(303)

Non-GAAP net loss

(153,577)

(25,772)

(3,754)

Net loss (income) attributable to ordinary shareholders of Yatsen

(290,915)

50,058

7,288

Share-based compensation expenses (income)

125,814)

Amortization of intangible assets resulting from assets and business acquisitions

11,831

11,912

1,735

Revaluation of investments on the share of equity method investments

1,080)

(303)

Non-GAAP net loss attributable to ordinary shareholders of Yatsen

(153,364)

(26,654)

(3,882)

Shares used in calculating loss per share:

Weighted average number of Class A and Class B ordinary shares:

Basic

2,264

Non-GAAP net loss attributable to ordinary shareholders per Class

A and Class B ordinary share

Basic

(0.06)

(0.01)

(0.00)

Diluted

(0.06)

(0.01)

(0.00)

Non-GAAP net loss attributable to ordinary shareholders per ADS

(4 ordinary shares equal to 1 ADS)

Basic

(0.24)

(0.05)

(0.01)

Diluted

(0.24)

(0.05)

(0.01)