SBC Medical Group Q4 2024 Earnings Call Transcript

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March 28, 2025

Key Takeaways

  • FY2024 performance: Revenue rose 6% year-over-year despite yen depreciation, while ROE declined 4% due to one-time NASDAQ listing expenses.
  • Network expansion: Added 43 new clinics (+21% YoY) to reach 251 locations, with annual customer visits up 15% to 6.03 million, driven by satisfaction-based service improvements.
  • Competitive landscape: Post-pandemic market growth attracted new entrants and intensified competition, prompting SBC to differentiate through customer surveys, flexible pricing and a multi-brand clinic strategy.
  • Overseas growth: A profitable Ho Chi Minh clinic and new Singapore hub will spearhead expansion across Asia (Vietnam, Thailand, Indonesia, India) and into the US via a mix of direct management, franchising and M&A.
  • Capital strategy: With ample cash on hand, SBC is exploring share buybacks, dividends and new major shareholders to improve stock liquidity and diversify currency holdings for overseas deployments.
AI Generated. May Contain Errors.
Earnings Conference Call
SBC Medical Group Q4 2024
00:00 / 00:00

Transcript Sections

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Moderator

Good morning. I'm Fukui, SBC's IR office head. It It is time to start, so we would like to start. Thank you very much for attending SBC Medical Group Holdings Financial Results Briefing despite your busy schedules.

Moderator

Today, we have Mr. Aikawa, the CEO and Guy, the Vice President, and will be explaining the financial results and outlook. On the right hand side, there is a QA box. So if you do have a question, please write it in that box. Without further ado, Ai Gawa, CEO will make the presentation.

Moderator

Ai Gawa san, please go ahead. Hello, everyone. This is Ai Kala, SBC Midetto Group Holdings' CEO. Thank you for joining us today on this conference call. Today, I would like to provide an overview of our 2024 financial results, the current state of our business and our future direction.

Moderator

Today, because all of you have participated, I would like to first briefly introduce myself, Aikawa. I myself in February founded Aishona Clinic. An aesthetic clinic with myself, two more colleague counselors and two other nurses. And from the time of the foundation, we aim to become a aesthetic clinic group that is number one in Japan that many customers have visited and we're able to achieve that target in 2017. And nowadays, we're not limited to as the clinics, but we have orthopedics, dermatology, ophthalmology, gynecology and internal medicine as well where we have the clinics.

Moderator

And right now, at this point, we have the aim of becoming the largest medical group that the most customers in Japan will visit. Once we set the target, achieving that, we have the strongest intention than anyone to do so. And we have been working in that. And we would like to continue to keep this attention and work towards achieving the target. And I would like to share you my thoughts keeping that in mind.

Moderator

So the overview of 2024 and the current state of business for FY 2024 financial results, revenue increased by 6% year over year to $2.00 $5,000,000 Japan currently is impacted by the depreciation of yen. And from the overseas perspective, there may seem that there is a disadvantage, but we were able to achieve this number. Currently, ROE year on year basis have declined by 4%. That is because last September, we came listed on NASDAQ. And that time, there was a top based compensation and impairment loss, which are onetime listing related expenses that have occurred.

Moderator

And as a franchisor of clinic franchisees, we have a company that is doing that operation. And how much of franchise we have include? There was a twenty one percent forty three clinic 21% increase, 43 of clinics increased, total of two fifty one clinics. And the number of customers is 6,030,000 annually. And this is a 15% increase year on year.

Moderator

And it's we have entered the twenty fifth year since we were founded, and every year, we are seeing a steadily growth. And the reason behind we are seeing this steadily growth every year is as written here, the customers and patients that repeatedly visit us. We have a large we have a large number of those patients and customers. And that is why we're able to have this steadily increase of customers and patients. And the reason why such a thing is happening simply put at each treatment, we conduct a customer satisfaction survey and we look at which treatment has a high satisfaction level and low satisfaction and we numerically make that clear.

Moderator

And depending on the result, the pricing of the service and the content of the treatment is changed so that we can continue to put the efforts to increase this satisfaction level. And we are seeing the outcome of those efforts. And by having these repeating customers visit us, we're able to have this stable management of business and this I think is a strength that we have in our group. Pandemic, there was increasing number of working from home and people were covering their faces with masks. So the Japanese aesthetics and medicine market from year February grew by large.

Moderator

But at the same time, the aesthetics and medicine clinic has increased as well. So the number of the clinics increased. Therefore, though the market grew, the competition intensified. And so the competitive arena is more severe than before. And in this environment, how can we differentiate ourselves?

Moderator

And how can we steadily increase the number of customers to the clinic is something that we have a thought on a daily basis and implementing the measures to realize that. Then moving on to the balance sheet. In a continued matter, we have ample cash. Therefore, how can we effectively use this cash and lead this to the next growth is what we always think of. And for this, we will utilize various measures in a flexible manner.

Moderator

And the market itself, as I have mentioned before, is in a severe state. However, The current situation of the Japanese aesthetic medicine still has a room to grow. In South Korea, more than 20% of the total population has experienced aesthetic medicine. But in Japan, it's only 10 several percentages of the population that have experienced the aesthetic medicine. So we believe that at least we will reach the level of South Korea and I believe that we can still triple this number And as a number of player in the market, we will continue to put in the efforts to enlarge the market itself.

Moderator

And recently, male customers are showing interest towards aesthetic medicine. And recently in hair removal, the business performance is better for the male customers than the female customers in terms of revenue as well. On the other hand, the aesthetic medicine itself competitive environment is intensifying. That is for sure. Therefore, moving forward, we need to become a more flexible franchiser and we need to revise the fee in line to become so.

Moderator

The fee, we had the one type of a fee for the clinics. But once the clinic is open till the operation stabilizes and have a stable number of customers visit the clinic, it takes about a year. Therefore, receiving a lot of fee from a clinic that's just opened for the franchisee, it becomes a quite of a burden. And also like 50 tubal area size clinic there and also we have a 100 tubal large scale clinic. Therefore, there are differences in slices and so not having the one same amount of fee, but we'll receive a fee depending on the size and the business.

Moderator

With that, we will be able to create a win win situation as well as increase the number of pharmacokinetics who would like to become the member of the SBC Medical group. So in this sense, we would like to revise our fees. Moving forward. Towards 2027, having the aesthetic medicine at the center, how are we trying to grow the SBC Medical Group Holdings? First of all, regarding aesthetic medicine that is at the center continuously, we like to maintain a number one position in Japan and have many more people experienced the aesthetic medicine in Japan.

Moderator

We are experiencing aging as a society, but a woman would like to stay beautiful throughout their lives. So currently, a woman over 40 years if they have targeted a customer group and those customers that visit our clinics, we would like to take a strategy that they will continue to visit until they're in their 80s. And I will mention this later, but the aesthetics, medicine, Orthopedics or Ophthalmology or Fertility Treatment Clinic and AGA treatment for hair loss. That type of treatment as as well is increasing. So we would like to steadily increase this area as well.

Moderator

And we have become listed on NASDAQ. And to begin with, in Ho Chi Minh in Vietnam, in order to enter the Asian market, we have a clinic in Ho Chi Minh City in Vietnam and this clinic has steadily increased their performance as well. Therefore, moving forward, we would like to steadily continue to grow our overseas business as well. So the signage as we people can feel safe and secure as they feel when they see the McDonald's and other type of well known signage. That's how we would like to conduct our business moving forward.

Moderator

And the current situation, we are the Anubra and Stedis Medical Group in Japan. And the number of customers and as well as the clinics is steadily growing.

Moderator

Especially existing customers are steadily coming back to the clinic and on top of that, we acquire new customers that has been the track record in the past twenty four years. As has been said, in Japan, our share stays around only 12% who receive aesthetic medicine services. Moving forward, we want to hit minimum of 20% penetration. I'm quite confident that we can hit that and now we do acquire more and more Mayo customers, so that this is the market where having a huge growth potential moving forward. As for SBC, we are operating in a unique style.

Moderator

Normally, clinic has a single brand offering services. But to meet the diversified needs of customers, I saw that it would be better to offer a multi branded approach like Louis Vuitton Group having multiple brand offerings to better meet the needs of the customers. Not just the SBC brand, Itel Beauty Clinic, Korean Beauty Clinic or Mayo only, Govella clinic for offering aesthetic medicine and a new skin clinic not to be opened on the April 2, which I have a very high for. It's an aesthetic laser only clinic. So those are differentiating factors and we do offer some the price advantage because this is the one we introduced to the the prices and it's easier for us to ensure the margin.

Moderator

Having said that, it also requires a high initial investment. And this is the type of the market and having a high entry barrier because of the initial expenses, it's difficult for a single clinic to enter into the market. So with the clear brand image, we would like to deploy our business in Japan as well as overseas moving forward an inbound business. Because of the weaker year, we've got higher patients or customers coming from China during COVID time, we had adjusted decrease. But after that, in post COVID time, in 2024, the level of Chinese customers returned to the pre COVID time.

Moderator

Previously, Chinese customers tended to visit Korea, but supported by weaker yen as well as high quality of Japanese medical care. Now increasing number of Chinese customers coming to Japan. Moving forward, we will focus on increasing or attracting a higher number of Chinese customers. Apart from aesthetic medicine, orthopedics, ophthalmology, fertility, AGM are increasing as well, especially also OpEx. Japan will enter into an aging society with the fewer number the youth, but in exchange, we've gotten a higher number of senior people.

Moderator

When people get older, there will be a stronger need for orthopedics. Therefore, I believe that the orthopedics will be in a quite new prospectus area for the future Japanese market. So we tend to put more focus on also in arts for the Japanese aesthetic in the medicine market. The top market size is defined as JPY 600,000,000,000. Year by year, the Japanese in the entire medical market has been expanding and they're currently staying at JPY 47,000,000,000,000.

Moderator

We have an aspiration to become number one medical group so that we can ensure our growth and DDIMO's perspective area is Orthopaedics. Going forward, we will increase in the franchise of clinic and insurance based clinic. We will offer support introducing self funded services. So in such conversion is another area that we plan to expand moving forward. At for overseas business, we had a clinic in Ho Chi Minh City in Vietnam and last year in order to expand our footprint.

Moderator

If we become number one in Asia, we're having a population growth and we can achieve number one position on in the world as well. So we decided to put our Asian base in Singapore. So from Singapore, Vietnam, Thailand, Indonesia and India, the populous countries, we are planning to expand our network. So we have a plan to an open and aesthetic medicine and the beauty clinic in the 15 and aesthetic in the plan in the salon. So now this is the group and the operator that we plan to I mean, we already signed a partnership and ARBA in The U.

Moderator

S. There is one clinic. Starting from that, since we are already listed in The U. S. Market, so we want to increase our presence and enhance our brand value.

Moderator

We are planning to open new clinics in The U. S. Right now, directly managing the clinic numbers are high. But moving forward, when thinking about the pilot deployment in U. S.

Moderator

Or accelerating the expansion, I think it will be good to pursue the combination of the most models of expanding the number of directly managed clinic as well as franchising the clinics. Finally, let me talk about share liquidity. Currently, the liquidity is quite low. So this makes it quite difficult to to trade for institutional investors. So during the IRN activities, we had such invoices and we identified that as an issue.

Moderator

So two points. If it's to improve supply and demand dynamics, explore and discover new major shareholders or to conduct a share buyback and make dividend payment. So through those activities, then we want to attract more the shareholders coming into Assafu and ask for and allow liquidity, I do have a majority share. So I would like to consider setting my share or issue new shares or exchange warrants to improve liquidity. By doing so, we can create a better environment for investor to buy our shares.

Moderator

So we are committed to execute them thoroughly. So that was a brief explanation about the outline of SBC Group and its prospect. Thank you very much.

Moderator

Mr. Acacio, thank you very much. And now I would like to move on to the Q and A session. Among the questions that we are receiving from you, we would like to answer to them in order. The first was is the what is the growth driver moving forward?

Moderator

First of all, for the aesthetic medicine area is to increase the overall market of the customers. The characteristics of aesthetic medicine is that the first step observed one, meaning that maybe I'll have an injection once the person experiences it, the patient will feel more value than what they have paid. And from there, they continue to visit. That's the characteristics. So if we make the entry for the first step easier, we'll be able to increase more patients or customers, meaning the easiness to visit, the easiness to receive the treatment, easiness to experience the aesthetic medicine Through those measures and increasing the aesthetic medicine patients and customers will become a large positive factor for us in the future.

Moderator

Moving on to the second question. Japanese purity industries management environment, what is your assessment? And what sort of strategy would you plan to take moving forward? As I mentioned earlier, the environment itself market has expanded, so as many competitors entered into the market, so the situation gets tougher, but market itself has been expanding. So we were trying to increase the market and within the expanded market, how we can increase our market share, so those are the two prime focuses.

Moderator

So the medical and aesthetic and the medicine offers comfort with reasonable price and attract many more people trying to experience to receive the service and within the market, how we can win more shares using laser, drug procedures by using them how we can differentiate ourselves from the others. That's our focus. And we do have an overseas clinic that is very powerful strength. State of the art, the practice can be introduced to Japan or has been boomed in Singapore, brought to Japan. So we are achieving those than anybody else.

Moderator

So the state of the art aesthetic medicine to be introduced as the first party to Japan and we will enhance that even further moving forward. Next is the financial related question. The financial results up to the third quarter was quite steady. However, for the first quarter, it seems that you have a slowdown in the growth. What were the reasons and factors behind this?

Moderator

It is going to overlap with the competitive environment situation with the competitors increasing. For us strategically, we want to enhance the aesthetic medicine market. And that is why strategically, we implemented measures to increase the number of customers. Strategically, we lower the price so that the first step by the customers will be easier to be taken. And as a result, there was a decline of the revenue per customer.

Moderator

And where there was most prominent was the latter half of last fiscal year and Q4. So compared to the first half, the speed of these performance growth has slowed down. And this is Aikawa speaking. And if I may add, last year in Japan, I believe it was around last September. This is not us, but it was one of our peers of the industry.

Moderator

They had a problem or issue that they face in terms of managing the business. And they were reported through magazine articles or mass media and was criticized. And they were a major player in the industry and they were well known. Therefore, it imposed a negative news for the overall industry and that was one of the major events that have happened. And if I may further add, because there was this unfavorable wind against us in the industry and we have lowered the price and maintained the number of customer base and also further increased it.

Moderator

Last year is what we did. And this year, there was a change in the competitive environment. The service supplier side, the hair removal specializing clinics, the number of them went down. So strategically, we increased the price what we what we have done. So the measures that we have implemented last fiscal year are starting to bear fruit this year.

Moderator

Next question. In order to realize impactful growth, enhancement adenoprazine in The U. S. Is going to be important. I think you've got some biggest M and A opportunity in The U.

Moderator

S. So what is your plan to enhance your platform in The U. S? Well, there is one clinic in The U. S.

Moderator

So how to horizontally deploy the clinic is one of our scope. And in order to achieve impactful growth, M and A strategy is powerful. So we would like to seek M and A an opportunity to realize win win situation.

Moderator

Last year, you have acquired Ah in Singapore and are they generating profit? Both profit and number of our customers, they're experiencing a steady growth. And now we're going to have the Ah Group as a hub and increase the number of clinics in Asia. We are in the midst of planning.

Moderator

As a new initiative, what is your plan? And what sort of synergy would you plan to derive the existing business? So business diversification is a topic that and I would like to better understand. Well, now apart from the medical and aesthetic medicine, we see steady growth. So in those areas, we would like to become number one in the business group in Japan.

Moderator

That's a continued initiative. Apart from that, B2B, for example, the Korean, American laser to be imported or the medical the laser devices or the products. So we want to be a supplier of those moving forward. So for example, in the Botox and here, Loric and acid and rejuvenation, yarn and lasers. So we want to be in the supplier of those.

Moderator

So we are aspiring to to buy the supply company, if I may add. Intensification of the competitive landscape, of course, it provides a harsh environment to us. Us. But from the perspective of the M and A bridge buyer, there are some good and attractive M and A items tabled on with attractive price. So growth opportunities and growth potentials are increasing.

Moderator

So by properly capturing those opportunities, not just focusing on our core, the aesthetic and medicine, but in other medical field. Now we see better visibility of acquiring the companies in medical field moving forward. The next question, you have ample cash on hand, but the interest income is quite limited. So the rate, the interest in specific terms, how much is that? The payment interest rate, we are not disclosing that. However, till now, there was as a yen asset heavy. So thinking of the overseas business deployment, we need to we are going to consider diversifying the currency used itself.

Moderator

And yes, we are in a cash rich situation. So how we are going to utilize that and diverse the usage of that is also what we are considering right now.

Moderator

2025 forecast, how many franchisees you're going to be the total number? To meet the needs of our customers, changing in some business operational format or conducting M and A. We have those activities on the agenda. So last year, 43 new clinics opened. There are some conversion of the operational format, but the net increase we expect 20 clinics.

Moderator

That organic net increase of the total number of clinics. And in addition to that, through M and A, there may be in the sum on the clinic number increase in the Thruin M and A.

Moderator

Regarding the capital location, can you share your thoughts? You're talking about the capital policy? Well, regarding the liquidity of the stock, I believe that it was mentioned during the explanation of the liquidity being low and difficult for the investors to purchase it. We would like like to implement appropriate measures at the appropriate timing. And within that, what we are considering is already disclosed is a share buyback and pay out dividends included.

Moderator

How we will be using the capital is something that we would like to further continue to consider. And once it's decided, we'd like to share that with you. Thank you.

Moderator

Next. The Vietnamese market is So what is your plan for business expansion in Vietnam? Vietnamese clinic during COVID, we struggled, but in post COVID time gradually the performance improves. Right now, we see now the situation is ready to achieve a rapid growth. Once the strong business model is established, then we can horizontally deploy that model.

Moderator

So within this year, we want to establish the strong business model and from next year, we plan to we will be ready to expand the number of clinics in Vietnam.

Moderator

Thank you very much. 2024 financial results was not that good. It's how I feel. Share buyback should be considered is what I think. Of course,

Moderator

I'll conduct the share buybacks and return to the shareholders. We have a strong feeling that we like to do that. And the share price currently, Whether that's truly reflecting our performance or not, we believe that it could go higher. Therefore, we would like to consider all this in a positive manner. Thank you.

Moderator

So we've covered all questions. So lastly, we would like to have a closing remark by Mr. Aykala. Thank you very much for joining the call despite Jabiru's schedule. The foundation in the clinic was in the year February, so we've been operating for twenty five years.

Moderator

But NASDAQ, the market we just listed in September, so we are relatively new company. But first, we want to be the biggest medical group in Japan, and we are determined to accomplish this. So I thank you for your continued support. Thank you very much for your kind attendance. Thank you very much.

Moderator

With this, we would like to conclude the earnings call. Once again, thank you very much indeed for your kind participation despite your busy schedule. Thank you very much indeed.

Analysts
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