Yatsen Holding(YSG) - 2021 Q4 - Annual Report

Introduction This annual report on Form 20-F defines key terms such as ADSs (American Depositary Shares, each representing four Class A ordinary shares), DTC (direct-to-consumer), and VIE (variable interest entity) - This annual report on Form 20-F defines key terms used throughout the document, including ADSs (American Depositary Shares, each representing four Class A ordinary shares), DTC (direct-to-consumer), and VIE (variable interest entity)[4] - All translations from Renminbi (RMB) to U.S. dollars (US$) are made at a rate of RMB 6.3726 to US$1.00, the exchange rate in effect as of December 30, 2021[5] Forward-Looking Information This report contains forward-looking statements regarding the company's goals, future business development, financial condition, and operational results, which are subject to known and unknown risks - This report contains forward-looking statements concerning the company's goals, future business development, financial condition, and operational results. These statements are subject to known and unknown risks and uncertainties[6][7] - The forward-looking statements are based on current expectations and projections, which may later prove incorrect. Key risks are detailed in Item 3.D (Risk Factors), Item 4.B (Business Overview), and Item 5 (Operating and Financial Review and Prospects)[8] PART I ITEM 3. KEY INFORMATION This section details Yatsen's corporate structure, emphasizing its reliance on a Variable Interest Entity (VIE) in China, which contributed 8.9% of total revenues in 2021, outlining significant risks, and presenting selected consolidated financial data showing revenue growth to RMB 5.84 billion in 2021 but also a net loss of RMB 1.55 billion and negative operating cash flow Holding Company Structure and VIE Yatsen Holding Limited, a Cayman Islands holding company, operates in China through PRC subsidiaries and a Variable Interest Entity (VIE) structure to comply with foreign ownership restrictions, with the VIE contributing 8.9% of total revenues in 2021 - Yatsen Holding Limited is a Cayman Islands holding company and does not directly operate in China. It conducts its business through PRC subsidiaries and a Variable Interest Entity (VIE), Huizhi Weimei, due to PRC restrictions on foreign ownership in value-added telecommunication services[12] VIE Revenue Contribution | Year | Revenue Contribution from VIE (RMB in millions) | % of Total Revenue | | :--- | :--- | :--- | | 2019 | Not specified | 8.2% | | 2020 | Not specified | 17.1% | | 2021 | 521.8 | 8.9% | - The company faces risks from PRC government oversight, potential requirements for CSRC approval for offshore offerings, and the Holding Foreign Companies Accountable Act (HFCAA), which could lead to delisting from U.S. exchanges if the PCAOB cannot inspect its China-based auditor[17][19][21] - Cash transfers within the organization show that for the year ended December 31, 2021, the Cayman holding company made capital contributions of RMB 25.9 million to subsidiaries, the VIE received RMB 93.0 million in net debt financing from the WFOE, and the WFOE received RMB 236.4 million from the VIE for services like inventory purchase and logistics[23] Selected Consolidated Financial Data The company's total net revenues grew from RMB 3.03 billion in 2019 to RMB 5.84 billion in 2021, with a gross profit margin of 66.8% in 2021, but reported a net loss of RMB 1.55 billion in 2021 and negative operating cash flow of RMB 1.02 billion Selected Consolidated Statements of Operations Data (RMB in thousands) | Metric | 2019 | 2020 | 2021 | | :--- | :--- | :--- | :--- | | Total net revenues | 3,031,167 | 5,233,170 | 5,839,973 | | Gross profit | 1,927,658 | 3,364,025 | 3,898,796 | | Income/(loss) from operations | 143,761 | (2,682,671) | (1,624,244) | | Net income/(loss) | 75,359 | (2,688,415) | (1,547,038) | | Net income/(loss) attributable to ordinary shareholders | (45,080) | (3,984,236) | (1,540,734) | Selected Consolidated Balance Sheets Data (RMB in thousands) | Metric | As of Dec 31, 2020 | As of Dec 31, 2021 | | :--- | :--- | :--- | | Cash, cash equivalents, and restricted cash | 5,733,392 | 3,138,008 | | Total current assets | 7,088,528 | 4,555,857 | | Total assets | 8,307,738 | 7,272,009 | | Total liabilities | 1,444,144 | 1,264,516 | | Total shareholders' equity/(deficit) | 6,863,594 | 5,668,906 | Selected Consolidated Cash Flow Data (RMB in thousands) | Metric | 2019 | 2020 | 2021 | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | (6,179) | (983,368) | (1,020,441) | | Net cash used in investing activities | (148,172) | (508,832) | (1,484,257) | | Net cash provided by financing activities | 795,231 | 6,680,869 | (1,706) | Risk Factors The company faces significant risks across its business, corporate structure, operations in China, and its publicly traded ADSs, including intense competition, VIE enforceability, regulatory oversight, potential delisting under HFCAA, and ADS price volatility - Business & Industry Risks: Operates in a highly competitive beauty industry with a limited operating history; success depends on anticipating consumer trends and the performance of new products; business has been and may continue to be affected by the COVID-19 pandemic; has a history of net losses and may not achieve future profitability[50][51][58] - Corporate Structure Risks: Relies on a VIE structure, and if PRC authorities find these arrangements non-compliant, the company could face severe penalties; contractual arrangements with the VIE may not be as effective as direct ownership and could be subject to conflicts of interest with VIE shareholders[52][237][243] - Risks of Doing Business in China: Subject to significant PRC government oversight, which could hinder the ability to offer securities to investors; the PCAOB is unable to inspect the company's auditor in China, which could lead to delisting from U.S. exchanges under the HFCAA by 2024 (or 2023 if laws change); future offshore offerings may require approval from the CSRC, creating uncertainty[53][55][267] - ADS Risks: The trading price of ADSs is volatile and the company has received a non-compliance notice from the NYSE for its stock trading below $1.00; a dual-class voting structure gives founder Jinfeng Huang significant control (77.9% of voting power), limiting the influence of other shareholders[56][328][333] ITEM 4. INFORMATION ON THE COMPANY Yatsen, founded in 2016, is a leading China-based beauty group with a multi-brand portfolio, utilizing a digitally native, direct-to-consumer (DTC) model leveraging data analytics for product development and marketing, with a strong online presence and 294 offline experience stores History and Development of the Company Yatsen commenced operations in 2016, launching Perfect Diary in 2017, and expanded its portfolio through strategic acquisitions including Little Ondine (2019), Galénic (2020), DR.WU's mainland China business (Jan 2021), Eve Lom (Mar 2021), and EANTiM (Oct 2021) - The company was founded in 2016 and launched its flagship brand, Perfect Diary, in 2017[386][400] - Yatsen has expanded its brand portfolio through several key acquisitions: Little Ondine in June 2019, Galénic, a premium skincare brand, in October 2020, DR.WU's mainland China business in January 2021, Eve Lom, a prestige skincare brand, in March 2021, and EANTiM, a professional-channel skincare brand, in October 2021[388] Business Overview Yatsen is a leading China-based beauty group with a multi-brand strategy across color cosmetics and skincare, driven by a digitally native DTC model that leverages data insights for rapid product development and targeted marketing, combining online presence with 294 offline experience stores - Yatsen is a leading China-based beauty group with a portfolio of color cosmetics and skincare brands, including Perfect Diary, Little Ondine, Abby's Choice, Galénic, DR.WU, Eve Lom, Pink Bear, and EANTiM[392] Gross Sales by Brand Category (RMB in billions) | Brand Category | 2019 | 2020 | 2021 | | :--- | :--- | :--- | :--- | | Color Cosmetics | 3.51 | 5.80 | 5.84 | | Skincare | 0.00 | 0.23 | 1.00 | - The company utilizes a digitally native, direct-to-consumer (DTC) business model focused on customer engagement and data-driven product development. It has an expansive presence across all major e-commerce, social, and content platforms in China[392] - As of December 31, 2021, Yatsen operated 294 offline experience stores globally to drive customer engagement and provide a physical space for product sampling[394] - The company collaborates with top-class ODM/OEM partners like Cosmax and Intercos for production and is building a joint manufacturing hub with Cosmax in Guangzhou, expected to begin production in 2023[448][450] Organizational Structure Yatsen Holding Limited, a Cayman Islands entity, controls its PRC operations through a wholly-owned subsidiary (WFOE) and a Variable Interest Entity (VIE), Huizhi Weimei, via contractual arrangements to comply with PRC foreign investment restrictions - The company uses a VIE structure to conduct its online sales and other businesses in China where foreign ownership is restricted. The primary VIE is Huizhi Weimei (Guangzhou) Trading Co., Ltd[604] - Control over the VIE is established through several key contractual agreements: Proxy Agreement and Power of Attorney (grants the WFOE the right to exercise all shareholder rights of the VIE), Equity Pledge Agreement (shareholders of the VIE pledge their equity interests to the WFOE as collateral), Exclusive Business Cooperation Agreement (the WFOE provides exclusive services to the VIE in exchange for fees), and Exclusive Option Agreement (grants the WFOE the right to purchase all equity and/or assets of the VIE)[608][609][611][613] - The VIE holds critical assets for online operations, including social platform accounts (Weixin public accounts and mini-programs), the ICP License, and the Permit to Produce and Distribute Radio and Television Programs[604] Property, Plant and Equipment The company's principal executive offices are located in leased premises of approximately 48,786 square meters in Guangzhou, China, supplemented by leased office space in Shanghai and a 46,997-square-meter warehouse in Guangzhou - The company's main executive offices are in a leased space of approximately 48,786 square meters in Guangzhou[616] - Yatsen also leases a 6,273 square meter office in Shanghai and a 46,997 square meter warehouse in Guangzhou[616] ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS In fiscal year 2021, Yatsen's total net revenues increased by 11.6% to RMB 5.84 billion, driven by strong growth in skincare brands, with gross margin improving to 66.8%, but reported a net loss of RMB 1.55 billion due to high selling and marketing expenses, despite reduced share-based compensation Operating Results For 2021, total net revenues grew 11.6% to RMB 5.84 billion, driven by a 332.2% increase in skincare gross sales, with gross margin improving to 66.8%, and a net loss of RMB 1.55 billion (down from RMB 2.69 billion in 2020) due to lower share-based compensation, while selling and marketing expenses remained high at 68.6% of net revenues Results of Operations (2020 vs. 2021, RMB in billions) | Metric | 2020 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Total net revenues | 5.23 | 5.84 | +11.6% | | Gross profit | 3.36 | 3.90 | +15.9% | | Gross margin | 64.3% | 66.8% | +2.5 p.p. | | Selling and marketing expenses | 3.41 | 4.01 | +17.6% | | (as % of revenue) | 65.2% | 68.6% | +3.4 p.p. | | Net loss | (2.69) | (1.55) | -42.4% | - The increase in net revenue was primarily driven by strong growth in skincare brands, whose gross sales grew 332.2% YoY to RMB 995.5 million, representing 14.6% of total gross sales in 2021, up from 3.8% in 2020[626][663] - The decrease in net loss from 2020 to 2021 was primarily due to a significant reduction in share-based compensation expenses, which were RMB 1.84 billion in 2020 (including a large IPO-related charge) compared to RMB 418.8 million in 2021[670][672] - Research and development expenses more than doubled, increasing from RMB 66.5 million in 2020 to RMB 142.1 million in 2021, reflecting increased investment in R&D and IT capabilities[671] Liquidity and Capital Resources As of December 31, 2021, Yatsen had cash, cash equivalents, and restricted cash of RMB 3.14 billion, down from RMB 5.73 billion at the end of 2020, with net cash used in operating activities of RMB 1.02 billion and investing activities of RMB 1.48 billion Summary of Cash Flows (RMB in millions) | Metric | 2019 | 2020 | 2021 | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | (6.2) | (983.4) | (1,020.4) | | Net cash used in investing activities | (148.2) | (508.8) | (1,484.3) | | Net cash provided by financing activities | 795.2 | 6,680.9 | (1.7) | - As of December 31, 2021, the company's cash, cash equivalents, and restricted cash stood at RMB 3.14 billion (US$492.4 million)[694] - Net cash used in investing activities in 2021 was RMB 1.48 billion, primarily due to RMB 989.7 million for business acquisitions (mainly Eve Lom) and RMB 322.8 million for equity investments[701] Material Cash Requirements as of Dec 31, 2021 (RMB in thousands) | Commitment Type | Total | Due within 1 Year | Due in 1-3 Years | Due in 3-5 Years | Over 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Capital commitment | 480,000 | 240,000 | 240,000 | - | - | | Products and services purchase | 208,937 | 208,937 | - | - | - | | Operating lease obligations | 446,315 | 231,314 | 190,897 | 22,030 | 2,074 | | Total | 1,135,252 | 680,251 | 430,897 | 22,030 | 2,074 | Critical Accounting Estimates The company's financial statements rely on critical accounting estimates, including inventory valuation, goodwill impairment, fair value for business combinations, and share-based compensation, all requiring significant management judgment and subjective assumptions - Key critical accounting estimates include: Inventory Valuation (assessing net realizable value for obsolete, damaged, and excess inventory based on historical recovery, market conditions, and future sales plans), Goodwill (annual impairment testing using a discounted cash flow analysis, which relies on assumptions about future cash flows, discount rates, and growth rates), Business Combinations (allocating purchase consideration to tangible and intangible assets based on estimated fair values), and Share-based Compensation (determining the fair value of share options using models with subjective inputs like stock price volatility and expected term)[716][719][721][723] ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES This section details the company's leadership, compensation, and board structure, including six directors, RMB 2.2 million in executive cash compensation for 2021, 68.9 million outstanding share options, and 3,497 full-time employees as of year-end 2021 Directors and Executive Officers The company's leadership team includes founder Jinfeng Huang as Chairman and CEO, co-founder Jianhua Lyu as Director and Chief Sales Officer, and Donghao Yang as Director and CFO, alongside three independent directors - The key executive team includes Jinfeng Huang (Founder, Chairman & CEO), Jianhua Lyu (Co-founder, Director & CSO), and Donghao Yang (Director & CFO)[726][727][728] Compensation of Directors and Executive Officers For fiscal year 2021, aggregate cash compensation paid to executive officers was RMB 2.2 million, with independent directors receiving US$0.2 million, and 68,921,824 Class A ordinary shares reserved for awards under the Share Option Plan were outstanding - For the year ended December 31, 2021, aggregate cash compensation paid to executive officers was RMB 2.2 million (US$0.3 million)[734] - The company has a Share Option Plan with a maximum of 249,234,508 shares available for issuance. As of December 31, 2021, options for 68,921,824 Class A ordinary shares were outstanding[735] Board Practices The Board of Directors consists of six members and has established three key committees—Audit, Compensation, and Nominating and Corporate Governance—all composed of independent directors, with no fixed term of office for directors - The board has three committees: Audit, Compensation, and Nominating and Corporate Governance, all composed of independent directors[752] - The Audit Committee is responsible for overseeing accounting processes, financial reporting, and appointing independent auditors[753] Employees As of December 31, 2021, Yatsen had 3,497 full-time employees, primarily located in China, with the largest groups being Offline Beauty Advisors (1,092) and Online Operation staff (878), reflecting its omni-channel retail focus Employees by Function as of Dec 31, 2021 | Function | Number of Employees | | :--- | :--- | | Offline Beauty Advisors | 1,092 | | Online Operation | 878 | | Marketing | 375 | | Online Sales and Customer Service | 294 | | R&D, Product Development & Production | 273 | | Other | 435 | | Total | 3,497 | Share Ownership As of February 28, 2022, founder Jinfeng Huang beneficially owned 24.9% of total ordinary shares, controlling 77.9% of voting power due to the dual-class structure, limiting other shareholders' influence Principal Shareholder Ownership (as of Feb 28, 2022) | Shareholder | % of Beneficial Ownership | % of Aggregate Voting Power | | :--- | :--- | :--- | | Jinfeng Huang | 24.9% | 77.9% | | Jianhua Lyu | 3.4% | 10.8% | | Hillhouse Entities | 12.0% | 1.9% | | ZhenFund Entities | 8.3% | 1.3% | | Banyan Partners Entities | 8.3% | 1.3% | - The dual-class share structure grants holders of Class B ordinary shares twenty votes per share, while Class A ordinary shares receive one vote per share. This concentrates significant voting control with the company's founders[772] ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS This section details the company's relationships with major shareholders and related entities, including service and product purchases from equity investees like Guangzhou Intelligent and Yatsen Biological Technology, and a shareholders' agreement granting certain investors demand and piggyback registration rights - The company engages in transactions with related parties, including purchasing logistics services from Guangzhou Intelligent (RMB 13.8 million in 2021) and inventories/services from Yatsen Biological Technology (RMB 24.5 million in 2021), both of which are equity investees[779][780] - A shareholders' agreement grants certain shareholders demand, piggyback, and Form F-3 registration rights for their shares. These rights allow them to require the company to register their shares for public sale[781][782] ITEM 8. FINANCIAL INFORMATION This section covers legal proceedings and the company's dividend policy, stating Yatsen is not currently a party to any material legal proceedings and has no present plan to pay cash dividends, intending to retain earnings for business operations and expansion - The company is not currently a party to any material legal or administrative proceedings[789] - Yatsen has no current plans to pay cash dividends and intends to retain future earnings to operate and expand the business[791] ITEM 9. THE OFFER AND LISTING The company's American Depositary Shares (ADSs) have been listed on the New York Stock Exchange (NYSE) under the ticker symbol "YSG" since November 19, 2020, with each ADS representing four Class A ordinary shares - The company's ADSs are listed on the New York Stock Exchange under the symbol "YSG" since November 19, 2020[795] ITEM 10. ADDITIONAL INFORMATION This section outlines the company's corporate governance, including its dual-class share structure granting significant control to founders, tax considerations for investors in the Cayman Islands, PRC, and U.S. (including PFIC risks), and an exclusive forum provision for U.S. federal securities law claims - The company has a dual-class share structure. Class A ordinary shares have one vote per share, while Class B ordinary shares have twenty votes per share. Class B shares are convertible into Class A shares but not vice-versa[797][801] - The company is an exempted company incorporated in the Cayman Islands, which levies no corporate income tax[818][825] - Under PRC tax law, dividends paid by the company's PRC subsidiaries to its Hong Kong holding company may be subject to a 5-10% withholding tax. The company could also be deemed a PRC resident enterprise, which would subject it to a 25% tax on its global income[659][827] - For U.S. investors, there is a risk that the company could be classified as a Passive Foreign Investment Company (PFIC), which could lead to adverse U.S. federal income tax consequences. The recent decline in the market price of its ADSs has increased this risk[379][841] ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The company's primary market risks are foreign exchange risk, as substantially all revenues and expenses are in Renminbi (RMB) affecting the U.S. dollar-traded ADSs, and interest rate risk from cash deposits - The company's main market risk is foreign exchange risk, as its business is denominated in RMB while its ADSs are traded in U.S. dollars. Fluctuations in the RMB/USD exchange rate will affect the value of the investment[860] - Interest rate risk is primarily related to interest income generated from cash held in interest-bearing bank deposits[863] ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES This section details fees and charges applicable to ADS holders, including up to US$0.05 per ADS for issuance, cancellation, and cash distributions, and notes that Yatsen received an upfront payment of US$15.8 million from the depositary in 2021 - ADS holders are required to pay service fees to the depositary bank, including up to US$0.05 per ADS for issuance, cancellation, and cash distributions[866][867] - For the year ended December 31, 2021, the company received a payment of US$15.8 million from the depositary for expenses related to the ADS program[873] PART II ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS The company raised net proceeds of approximately US$664.7 million from its November 2020 IPO, with US$247.2 million used by December 31, 2021, for strategic investments, acquisitions, business operations, and general corporate purposes - The company received net proceeds of approximately US$664.7 million from its initial public offering in November 2020[877] - As of December 31, 2021, US$247.2 million of the net proceeds have been used for strategic investments, acquisitions, and general corporate purposes[878] ITEM 15. CONTROLS AND PROCEDURES Management concluded that disclosure controls and procedures were not effective as of December 31, 2021, due to a material weakness in internal control over financial reporting, specifically a lack of sufficient financial reporting and accounting personnel with appropriate U.S. GAAP and SEC reporting experience - Management concluded that disclosure controls and procedures were not effective as of December 31, 2021, due to a material weakness in internal control over financial reporting[880] - The identified material weakness is a lack of sufficient financial reporting and accounting personnel with appropriate knowledge of U.S. GAAP and SEC reporting requirements to handle complex accounting issues and prepare financial statements[887] - Remediation efforts include hiring staff with Big Four accounting firm experience and plans to implement formal training programs and comprehensive financial closing policies[887] - The independent auditor, PricewaterhouseCoopers Zhong Tian LLP, also issued an adverse opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2021, due to this material weakness[890][914] ITEM 16. CORPORATE GOVERNANCE AND OTHER MATTERS This section covers various governance and compliance topics, including a code of ethics, RMB 12.97 million in principal accountant fees for 2021, a US$100 million share repurchase program authorized in November 2021, and the company's adherence to home country (Cayman Islands) governance practices as a foreign private issuer Principal Accountant Fees (RMB in thousands) | Fee Type | 2020 | 2021 | | :--- | :--- | :--- | | Audit fees | 16,260 | 9,500 | | Tax fees | 623 | 102 | | All other fees | 581 | 3,374 | - On November 17, 2021, the board authorized a share repurchase program of up to US$100 million over 24 months[898] Share Repurchases in 2021 | Period | Total ADSs Purchased | Average Price Paid (US$) | Approx. Value Remaining (US$M) | | :--- | :--- | :--- | :--- | | December 2021 | 1,846,823 | $1.8972 | 96.5 | - As a foreign private issuer, the company follows certain home country (Cayman Islands) corporate governance practices, which may differ from NYSE listing standards, such as requirements for a majority-independent board and annual shareholder meetings[901] PART III ITEM 18. FINANCIAL STATEMENTS This section includes the company's audited consolidated financial statements for 2019-2021, prepared in U.S. GAAP, with the auditor issuing an unqualified opinion on financial statements but an adverse opinion on internal control over financial reporting due to a material weakness, and identifying critical audit matters related to goodwill, intangible asset valuation, and inventory impairment Report of Independent Registered Public Accounting Firm PricewaterhouseCoopers Zhong Tian LLP issued an unqualified audit opinion on the consolidated financial statements but an adverse opinion on internal control over financial reporting as of December 31, 2021, due to a material weakness related to insufficient accounting personnel, identifying critical audit matters in goodwill impairment, intangible asset valuation, and inventory impairment - The auditor issued an adverse opinion on the company's internal control over financial reporting as of December 31, 2021, due to a material weakness[914] - The material weakness relates to a lack of sufficient financial reporting and accounting personnel with appropriate knowledge to handle complex accounting issues and prepare financial statements in accordance with U.S. GAAP and SEC requirements[914] - Critical Audit Matters identified were: Goodwill Impairment Assessments (determining the fair values for the DR.WU and Eve Lom reporting units involved significant management judgment), Valuation of Acquired Intangible Assets (valuing intangible assets and redeemable non-controlling interests from the DR.WU and Eve Lom business combinations), and Impairment of Inventories (estimating the demand forecast for inventories to assess impairment for excess and obsolete stock)[923][927][931] Consolidated Financial Statements The consolidated financial statements show total assets of RMB 7.27 billion as of December 31, 2021, with goodwill increasing to RMB 869 million due to acquisitions, total liabilities of RMB 1.26 billion, and a net loss of RMB 1.55 billion on revenues of RMB 5.84 billion for 2021 Consolidated Balance Sheet Highlights (As of Dec 31, 2021, RMB in thousands) | Account | Amount | | :--- | :--- | | Total current assets | 4,555,857 | | Goodwill | 869,421 | | Intangible assets, net | 745,851 | | Total assets | 7,272,009 | | Total liabilities | 1,264,516 | | Total shareholders' equity | 5,668,906 | - The company completed the acquisition of 90% of DR.WU's mainland China business in January 2021 for RMB 166.4 million, recognizing RMB 134.4 million in goodwill[1189][1193] - In March 2021, the company completed the acquisition of 90% of the Eve Lom business for RMB 965.0 million, recognizing RMB 742.6 million in goodwill and RMB 569.3 million in intangible assets[1198][1201] - Share-based compensation expense was RMB 530.4 million in 2021, a significant decrease from RMB 1.9 billion in 2020, which included large IPO-related charges[1164]