GMV² in the fourth quarter of 2020 was RMB11.7 billion (US$1.8 billion), compared with RMB11.0 billion in the same period of 2019. GMV related to marketplace revenues in the fourth quarter of 2020 was RMB9.5 billion (US$1.5 billion), compared with RMB5.0 billion in the same period of 2019.

Total revenues in the fourth quarter of 2020 were RMB1,327.4 million (US$203.4 million), compared with RMB2,449.4 million in the same period of 2019, primarily due to an increase in the proportion of the Company’s business contributed from its marketplace business, which recognizes revenues on a net basis.

Transacting members³ in the twelve months ended December 31, 2020, continued to increase to 13.3 million. The increase was mainly attributable to the Company’s ongoing refinement of its membership enrollment system since January 2020 as well as its introduction of more quality product offerings, which helped to further augment the platform’s user stickiness in the quarter.

Revenues from sales of merchandise, net, decreased by 45.2% to RMB1,165.2 million (US$178.6 million) from RMB2,124.6 million in the same period of 2019. The decrease was primarily due to a portion of merchandise sales shifted to marketplace business platform as the Company continued to reallocate its internal resources to accommodate the increase of marketplace business and to further improve the operational efficiencies on the platform.

Revenues from the membership program were RMB0.04 million (US$0.007 million), compared with RMB145.9 million in the same period of 2019. The decrease was due to the Company’s ongoing refinement of its membership enrollment system. Beginning in January 2020, the Company has allowed any user to become a member and enjoy membership benefits free of charge for one year by simply registering for an account on the Yunji app. Revenues from the membership program in the fourth quarter of 2020 were from the deferred revenue of prior paying members.

Revenues from the marketplace business decreased by 10.3% to RMB151.7 million (US$23.3 million) from RMB169.2 million in the same period of 2019 due to the increase in promotional activities during the period and the decrease in commission rates charged to merchants during these promotional activities.

Other revenues increased by 8.2% to RMB10.5 million (US$1.6 million) from RMB9.7 million in the same period of 2019.

Fulfillment expenses decreased by 52.5% to RMB92.5 million (US$14.2 million), or 7.0% of total revenues, from RMB194.5 million, or 7.9% of total revenues, in the same period of 2019. The decrease was primarily attributable to: (i) reduced warehousing and logistics expenses due to lower merchandise sales and improved logistics efficiency, (ii) decreased service fees charged by third-party payment settlement platforms as the Company secured lower transaction fee rates, (iii) reduced personnel costs due to headcount optimization and (iv) decreased share-based compensation expenses, which included a reversal of RMB6.0 million in share-based compensation expenses that had been recognized in prior periods.

Sales and marketing expenses decreased by 45.4% to RMB167.2 million (US$25.6 million), or 12.6% of total revenues, from RMB306.5 million, or 12.5% of total revenues, in the same period of 2019. The decrease was mainly due to the reduction in member management fees as a result of the Company’s improvements to its member management efficiency. This decrease was partially offset by an increase in business promotion expenses, which resulted from the Company’s efforts to attract more popular brands and merchants to its marketplace business through the execution of more business development activities.

Technology and content expenses decreased by 41.3% to RMB44.0 million (US$6.7 million), or 3.3% of total revenues, from RMB74.9 million, or 3.1% of total revenues, in the same period of 2019. The decrease was mainly due to: (i) reduced server costs resulting from the better contract terms that the Company secured with its server providers, and (ii) reduced personnel costs as a result of headcount optimization.

General and administrative expenses decreased by 25.8% to RMB64.2 million (US$9.8 million), or 4.8% of total revenues, from RMB86.5 million, or 3.5% of total revenues, in the same period of 2019. The decrease was mainly due to reduced personnel costs as a result of headcount optimization, and decreased share-based compensation expenses, which included a reversal of RMB3.1 million in share-based compensation expenses that had been recognized in prior periods. The decrease was partially offset by higher professional service fees.

Revenues from sales of merchandise, net decreased by 54.2% to RMB4,829.4 million (US$740.1 million) from RMB10,548.3 million in the full year of 2019. The decrease was due to the same factors that led to the quarterly decrease.

Revenues from the membership program decreased by 94.5% to RMB42.4 million (US$6.5 million) from RMB776.8 million in the full year of 2019, which was due to the same factors that led to the quarterly decrease.

Revenues from the marketplace business increased by 92.3% to RMB599.9 million (US$91.9 million) from RMB311.9 million in the full year of 2019 as a result of the increased number of popular brands and merchants on the Company’s platform and the increased sales through a diverse range of sales channels on other platforms.

Other revenues increased by 67.5% to RMB58.5 million (US$9.0 million) from RMB34.9 million in the full year of 2019.

Fulfillment expenses decreased by 53.4% to RMB450.1 million (US$69.0 million), or 8.1% of total revenues, from RMB965.9 million, or 8.3% of total revenues, in the full year of 2019, which was mainly due to the same factors that led to the quarterly decrease.

Sales and marketing expenses decreased by 32.1% to RMB806.1 million (US$123.5 million), or 14.6% of total revenues, from RMB1,187.5 million, or 10.2% of total revenues, in the full year of 2019, which was mainly due to the same factors that led to the quarterly decrease.

Technology and content expenses decreased by 35.6% to RMB202.8 million (US$31.1 million), or 3.7% of total revenues, from RMB315.2 million, or 2.7% of total revenues, in the full year of 2019, which was mainly due to the same factors that led to the quarterly decrease.

General and administrative expenses decreased by 5.6% to RMB261.9 million (US$40.1 million), or 4.7% of total revenues, from RMB277.5 million, or 2.4% of total revenues, in the full year of 2019, which was mainly due to the same factors that led to the quarterly decrease.

Conference ID

ASSETS

Current Assets

Cash and cash equivalents

Restricted cash

Short-term investments

Accounts receivable, net (Allowance for credit losses of nil and RMB8,603, respectively)

Advance to suppliers

Inventories, net

Amounts due from related parties

Prepaid expenses and other current assets (Allowance for credit losses of nil and RMB2,972, respectively)

Total current assets

Non-current assets

Property and equipment, net

Long-term investments⁸

Deferred tax assets

Operating lease right-of-use assets, net

Other non-current assets (Allowance for credit losses of nil and RMB1,514, respectively)

Total non-current assets

Total assets

LIABILITIES AND SHAREHOLDERS’ (DEFICITS)/EQUITY

Current Liabilities

Accounts payable

Deferred revenue

Incentive payables to members

Refund payable to members⁶

Member management fees payable

Other payable and accrued liabilities

Amounts due to related parties

Operating lease liabilities - current

Total current liabilities

Non-current liabilities

Operating lease liabilities

Deferred tax liabilities

Total non-current liabilities

Total Liabilities

Shareholders’ equity

Ordinary shares

Less: Treasury stock

Additional paid-in capital

Statutory reserve

Accumulated other comprehensive income

Accumulated deficit

Total Yunji Inc. shareholders’ equity

Non-controlling interests

Total shareholders’ equity

Total liabilities and shareholders’ equity

Revenues:

Sales of merchandise, net

Membership program revenue

Marketplace revenue

Other revenues

Total revenues

Operating cost and expenses:

Cost of revenues

Fulfilment

Sales and marketing

Technology and content

General and administrative

Total operating cost and expenses

Other operating income⁵

Loss from operations

Financial income/(loss), net

Foreign exchange loss, net

Other non-operating income/(loss), net

Loss before income tax benefit/(expense), and equity in (loss)/income of affiliates, net of tax

Income tax benefit/(expense)⁷

Equity in (loss)/income of affiliates, net of tax

Net loss

Less: net (loss)/income attributable to non-controlling interests shareholders

Net loss attributable to YUNJI INC.

Accretion on convertible redeemable preferred shares to redemption value

Net loss attributable to ordinary shareholders

Net loss

Other comprehensive (loss)/income

Foreign currency translation adjustment

Total comprehensive loss

Less: total comprehensive (loss)/income attributable to non-controlling interests shareholders

Total comprehensive loss attributable to YUNJI INC.

Net loss attributable to ordinary shareholders

Weighted average number of ordinary shares used in computing net loss per share, basic and diluted

Net loss per share attributable to ordinary shareholders

Basic

Diluted

Share-based compensation expenses included in⁹:

Technology and content

General and administrative

Fulfillment

Sales and marketing

Total

Reconciliation of Net Loss to Adjusted Net (Loss)/Income:

Net loss

Add: Share-based compensation⁹

Adjusted net income/(loss)

This announcement contains translations of certain Renminbi (RMB) amounts into U.S. dollars (US$) at a specified rate solely for the convenience of the reader. Unless otherwise noted, the translation of RMB into US$ has been made at RMB6.5250 to US$1.00, the exchange rate in effect as of the end of December 2020 as set forth in the H.10 statistical release of The Board of Governors of the Federal Reserve System.

“GMV” refers to the total value of all orders for merchandise placed in the Company’s merchandise business and marketplace business, including the value of the merchandise sold as part of the membership packages, as well as the VAT and tax surcharges paid, regardless of whether the merchandises are returned and without taking into consideration any discounts and incentives. GMV includes the value from orders placed on the Company’s mobile apps as well as orders placed on third-party mobile apps and websites that are fulfilled by Yunji, by Yunji’s third-party merchants, or by Yunji’s third-party business partners. Yunji’s revenues recognized on a gross basis are net of the VAT and related tax surcharges paid, discounts and incentives, the value of the merchandises returned, and any adjustments due to the timing difference between shipping and receipt, which are included in the above GMV measure. Yunji’s revenues recognized on a net basis are net of the corresponding amount to be paid to the vendor, the principal in the transaction, in addition to the items mentioned above, which are included in the above GMV measure.

“Transacting member” in a given period refers to a member who successfully promotes Yunji’s products to generate at least one order or places at least one order on Yunji’s platform, regardless of whether any product in such order is ultimately sold or delivered or whether any product in such order is returned.

Adjusted net income/(loss) is a non-GAAP financial measure, which is defined as net income/(loss) excluding share-based compensation expense. See “Reconciliation of Non-GAAP Measures to The Most Directly Comparable Financial Measures” set forth at the end of this press release.

Starting from 2020, the Company presents government grants, which are received from local government to support and reward the Company’s ongoing business and operations, as Other operating income. The relevant item in the prior year periods of RMB7,518 and RMB43,599 for the three months and year ended December 31, 2019 are also reclassified from Other non-operating income, net, to be in conformity with the current period presentation in the unaudited condensed consolidated statements of comprehensive loss.

The estimation of refunds payable to members is based upon the historical data of referral incentives earned by referring members within their active life cycle. On a quarterly basis, the Company revisits the estimation with a consistently applied approach and the most up-to-date data. The balance of refund payable to members reflected the best estimation of the Company as of December 31, 2020, and the decrease as compared to the balance as of December 31, 2019 was consistent with the Company’s understanding of its members’ referral behavior in light of its ongoing refinement of its membership enrollment system and decrease of refunds payable to members of RMB0.4 million and 23.5 million resulting from a change in the estimated amount of that liability, which represented the positive revenue and income/(loss) from operations impact fourth quarter and full year of 2020, respectively.

Income tax expense for the fourth quarter of 2020 was RMB43.9 million (US$6.7 million), compared to Income tax benefit RMB4.8 million in the same period of 2019. The Company’s effective tax rate was changed primarily due to changes in the profitability of its subsidiaries that have different tax rates, including non-deductible share-based compensation expenses, and increased valuation allowance as the Company will not be able to utilize tax loss carry forwards generated by certain unprofitable subsidiaries.

As of December 31, 2020, the balance of long-term investment mainly represented an equity security with readily determinable fair value, which was remeasured based upon market price at each period end and recorded the unrealized changes in Financial income/(loss), net, in the Consolidation Statements of Comprehensive Loss.

The decrease of share-based compensation expenses was mainly due to the reversal of previously recognized share-based compensation expenses in a total amount of RMB10.9 million and 42.2 million as a result of headcount optimization, in which RMB6.0 million and 8.9 million, RMB3.1 million and 25.9 million, RMB1.5 million and RMB3.0 million, RMB0.3 million and RMB4.5 million were recorded previously in fulfilment expenses, general and administrative expenses, sales and marketing expenses, and technology and content expenses, for the fourth quarter and full year of 2020, respectively.