So-Young International Q1 2025 Earnings Call Transcript

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May 16, 2025

There are 4 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by for So Young's First Quarter twenty twenty five Earnings Conference Call. Are As a reminder, today's conference call is being recorded. I would now like to turn the meeting over to your host for today's call, Ms. Mona Zhao. Please proceed, Mona.

Speaker 1

Thank you, operator, and thank you, everyone, for joining Soliang's fourth quarter twenty twenty five earnings conference call. Joining me today on the call is Mr. Xin Jin, our Co Founder, Chairman and CEO and Mr. Nick Zhang, CFO. Please note that the discussion today will contain forward looking statements made under the Safe Harbor provisions of U.

Speaker 1

S. Private Securities and the Litigation Reform Act of 1995. Forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to those outlined in our public filings with the SEC, including our annual report on Form 20 F. Soyoung does not undertake any obligation to update any forward looking statements, except as required under applicable law.

Speaker 1

Finally, please note that unless otherwise stated, all figures mentioned during the conference call are in RMB. At this time, I'd like to turn the call over to Mr. Xin Jin. Hello, everyone, and welcome to today's conference call. In the first quarter of twenty twenty five, we recorded total revenues of CNY 2 and 97,300,000.0.

Speaker 1

Net loss attributable to So Young was CNY 33,100,000.0 and non GAAP net loss attributable to So Young was million, primarily driven by increased investments to expand our asset expenses. We believe these investments are laying a solid foundation for our long term growth. In the fourth quarter, we continued to execute our vertical integration strategy and expanded our network of aesthetic centers in K cities. Our branded aesthetic centers, Soyang Clinic, operates exclusively in core commercial areas across China's First and second tier cities. We are increasing store density in these markets to make our centers more accessible and convenient By offering high quality, cost effective and standardized services, we are acquiring a loyal and recurring customer base.

Speaker 1

Soyang Clinic is gradually becoming our main growth driver. We are also reducing customer acquisition and procurement costs through our vertical integration and expect to improve cost efficiency further as we scale. As of the end of Q1, we opened 23 Soyang clinic centers in nine major cities, including Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou, Chengdu, Wuhan, Chongqing and Changsha. Among them, 18 centers have achieved positive monthly operating cash flow and 16 centers are profitable on a monthly basis in March. Revenue from our aesthetic center business reached million, up 21.6% quarter over quarter and 551.4% year over year.

Speaker 1

Total verified paid visits exceeded 45,500, up 18.5% quarter on quarter and eight hundred and seventy four point three percent year over year. Total number of verified paid aesthetic treatments performed surpassed 92,900, up 14% quarter over quarter and 989.4% year over year. Customer satisfaction remains high at 4.98 out of five, reflecting our commitment to maintaining the highest level in service delivery. Going forward, we plan to further expand our network and increase store density in existing cities. In Q1, we launched a natural energy event brand campaign with offline pop up events featuring artists in Shenzhen and Beijing.

Speaker 1

These offline events were complemented by online sign up activities to broaden live engagement and reach. Each event also featured an experience, customers to try popular light medical aesthetic services like IPL and ultrasound based anti aging treatments with licensed doctors on-site to explain the science behind the treatment. This interactive approach helped demystify the overall technical nature of the medical aesthetic industry and reinforced our value proposition of natural healthy beauty. We also optimized service offerings and concentration in our branded aesthetic centers, while also removing symptom treatments with low demand based on our user feedback. To further expand our portfolio, we partnered with premium skincare, black skin suitables to launch new co treatment solutions.

Speaker 1

Additionally, we allocated additional marketing resources and implemented sales incentives to boost revenue contribution from our proprietary products. This was down to improve overall gross margins for our aesthetic centers. On the upstream, we advanced our comprehensive medical aesthetic supply chain, focusing on products developed in house and through exclusive partnerships. As of Q1, the number of institutions we served with supply chain solutions for injectables grew to over 1,500. The shipment of elasticity reached approximately 27,900 units in Q1, up roughly 14% year over year.

Speaker 1

Our POP business, which remains a foundational pillar, continues to contribute profits and traffic while supporting the growth of our aesthetic centers and upstream business. In Q1, GMV for verified medical aesthetic services reached approximately RMB300 million with per capita in store GTV growing by 4% year over year. Looking ahead, we see significant long term potential for our aesthetic center business in China. We aim to build a differentiated nationwide light medical aesthetic chain with strong brand recognition. Over the past few quarters, we have scaled both store count and density.

Speaker 1

In April, I personally increased my shareholding in So Young by approximately USD 4,100,000.0, reaffirming my confidence in our long term growth. As our legacy POP business searches its natural growth selling, we believe a key to our next phase hinges on developing our aesthetic center business with full control over the supply chain, drawing inspiration from the Sam's Club retail model. We are pursuing a strategy centered on proprietary products, value for money pricing and end to end supply chain management. Sam's Club's success was built on exclusive high quality products that are tightly controlled for quality and cost. These products not only attract customers, but also drive higher average spending and customer loyalty.

Speaker 1

In the medical aesthetic sector, we believe that high quality proprietary products and services and fair prices have similar potential. We aim to become the seventh club of the medical aesthetics industry. Over the past few years, we will build end to end capabilities, including vertical upstream integration and proprietary products through acquisitions and long term partnerships. We now own our exclusively distributed K Medical devices and injectables. We expect to bring several new products to market in the next two to three years, offering our customers even greater value.

Speaker 1

We will continue to deepen our supply chain capabilities and improve service quality to deliver a safer and more effective medical aesthetic experience. Now, I'll hand over to our CFO, Nick, who will walk through the financial results followed by the Q and A session.

Speaker 2

Hello, this is Nick. Please note that all amounts are quoted in RMB. Please also refer to our earnings release for detailed information about our comparative financial performances on a year over year basis. Total revenues during the quarter were RMB297.3 million, in line with our guidance and down 60.6% year over year, primarily due to a decrease in the number of medical service providers subscribing to information services on our platform. Information reservation services and other revenues were RMB142.9, down 34.1% year over year, primarily due to a decrease in the number of medical service providers subscribing to information services on our platform.

Speaker 2

Aesthetic treatment services revenues reached RMB98.8 million, a remarkable 551.4% year over year increase, primarily due to the expansion of our aesthetic center business. Sales of medical products and maintenance services were RMB55.6 million, down 35.7% year over year, primarily due to a decrease in order volume for medical equipment. Cost of revenues were RMB151.4 million, up 29.1% year over year, primarily due to the expansion of our aesthetic center business. Within cost of revenues, cost of information reservation services and others were RMB40.7 million, down 34.1% year over year, primarily due to a decrease in cost of services associated with So Young Prime. Cost of aesthetic treatment services were RMB80.3 million, up 547.6 year over year, primarily due to the expansion of our aesthetic center business.

Speaker 2

Cost of medical products sold and maintenance services were RMB30.4 million, down 29.4% year over primarily due to a decrease in costs associated with the sales of medical equipment. Total operating expenses were RMB189.3 million, down 20.4% year over year. Sales and marketing expenses were RMB103.4 million, down 8.7% year over year, primarily due to a decrease in expenses associated with branding and user acquisition activities. G and A expenses were RMB53.7 million, down 36.7% year over year, primarily due to a decrease in share based compensation expenses. R and D expenses were RMB23.1 million, down 18.9% year over year, primarily attributable to improvements to in staff efficiency.

Speaker 2

Income tax benefits were RMB1.6 million compared with the income tax benefits of RMB2.6 million in the same period of 2024. Net loss attributable to Soyang International Inc. Was RMB33.1 million compared with a net loss of RMB21.2 million during the same period last year. Non GAAP net loss attributable to So Young International Inc. Was RMB31.5 million compared with non GAAP net income attributable to Soyang International Inc.

Speaker 2

Of RMB4.1 million during the same period of 2024. Basic and diluted losses per ADS attributable to ordinary shareholders were RMB 0.32 and RMB0.32 respectively, compared with basic and diluted loss per ADS attributable to ordinary shareholders of RMB0.21 and RMB0.21 respectively, during the same period of 2024. We have maintained a robust cash position with cash and cash equivalents, restricted cash and term deposits, term deposits and short term investments totaling RMB1.1 billion as of 03/31/2025. Moving to our outlook. For the second quarter of twenty twenty five, we expect aesthetic treatment services revenues to be between RMB120 million and RMB140 million, representing a 337.3% to 410.1% increase from the same period of in 2024.

Speaker 2

This outlook reflects our strategic vision to prioritize long term value creation over short term financial optimization as we continue to invest in expanding our branded aesthetic center network and refining our vertically integrated business model. Inspired by Sam's Club, our approach is anchored by control of the supply chain, proprietary product development and standardized service delivery. This has already have an impact, demonstrating its potential to improve customer retention, lower customer acquisition costs and enhance operational consistency. We believe this model will be instrumental in redefining cost effectiveness in the medical aesthetic sector, helping us better address the expectations of increasingly rational and quality conscious customers. Looking ahead, as we deepen execution across our self operated and the partner networks.

Speaker 2

We expect this model to support more resilient margins and a greater scalability across market. This concludes our key remarks. I will now turn over to the the call to the operator and open the call for Q and A. Operator, we are ready to take questions.

Operator

We will now begin the question and answer And your first question comes from Yiping Li with Guotai Haitong Securities. Please go ahead.

Speaker 3

Let me translate myself. Good evening, management. Thank you for taking my questions. And I would like to ask about So Young Clinic. How is it different from the traditional medical institutions like Meilai and Istar?

Speaker 3

Thank you.

Speaker 1

Our aesthetic center business is fundamentally different from traditional model by the likes of MyLyke and ESTurn. In short, these institutions is fine dining operational model. They offer a broader range of services, require larger clinics, rely heavily on staff doctors and consultants and generate higher per customer spend, but with less frequency. In contrast, our clinics use a fast casual model. Our model offers more focused services, require less clinic space and are available in more locations, depend less on individual doctors and generate lower per customer spend, but with higher frequency.

Speaker 1

More specifically, while service offerings, MyLoc and ESTAR provide a broader range of procedures, including surgical treatments such as double eyelid surgery, rhinoplasty, breast augmentation and liposuction. They also offer services like skincare, anti aging, hair removal, body contouring, hair transplants and intimate care. Their customers' primary seek visible transformative change. In contrast, our clinics exclusively focus on non surgical anti aging treatments. They do not offer surgeries or other high risk procedures.

Speaker 1

Our customers mainly seek maintenance and rejuvenation services. Two, per customer spend and visit frequency. Money like Anti Yipster generate high per customer spend, but with lower frequency. Our treatments on the other hand are priced around RMB1000, but with higher frequency. Typical customer spend is roughly RMB2000 with loyal customers visiting six to eight times per year.

Speaker 1

Three, store size and expansion strategy. Myelike and Yester typically operates one large flagship clinic per city, often exceeding 8,000 square meters in size. In contract, our clinics are smaller, ranging from 400 to 500 square meters and are more widely distributed across the city. For example, we currently operate six aesthetic centers in Beijing and plan to expect 10 by the year end. Looking ahead, we see potential to grow to 30 locations in Beijing.

Speaker 1

This collides with our positioning of medical aesthetic treatments and a high frequency maintenance service, where convenience and accessibility are critical similar to beauty salons. For user experience, MyLike and YESL operate exclusively through offline channels. In contrast, leveraging our strong Internet DNA, we offer a hybrid experience that combines in person treatment with a comprehensive digital platform through the Soyang Clinic app and our extensive online female private domain community, users can explore treatment options, compare services and make purchases and bookings online at transparent and cost effective prices. After treatment, customers can review skin test results, view before and after photos and receive timely care instructions, all conveniently accessible through the app. Five, product supply chain.

Speaker 1

MiLi and YESTER focus on the service delivery phase of the value chain. In contrast, we have built upstream supply chain capabilities in 2021. This is highlighted by the acquisition of High America Laser as an extensive pipeline of injectable products. This allows us to offer highly cost effective services. In summary, our aesthetics business was defined using a highly standardized model that's ideally positioned to be expanded.

Speaker 1

As we all know, the key to successful chain operations lies in scale, and this is where we clearly have an advantage. Thank you.

Operator

And your next question comes from Nelson Cheung with Citibank. Please go ahead.

Speaker 3

So let me translate the question in English. Thanks management for taking my question. As the clinic network grows, will CapEx become a burden for the company? Is this model sustainable? Thank you.

Speaker 1

We placed great emphasis on the health of our business. While we continue to carefully expand our network, we remain prudent in managing CapEx to ensure a financial sustainable model. Currently, we expect to open around 30 new clinic per year. Each new aesthetic center is carefully selected for its location and ability to achieve profitability, which helps us keep overall cost within a manageable range. At the same time, we are actively planning to roll out a franchise model.

Speaker 1

This will help accelerate our geographic reach and network density while reducing CapEx pressure, paving the way for the asset light expansion. Operational efficiency is also improving. As of Q1, the majority of our aesthetic centers have achieved positive operating cash flow with increasing economics of scale and further dilution of fixed costs, we are confident in the long term profitability of our aesthetic centers. Thank you.

Operator

And your next question comes from He Jinpeng with Citi. Please go ahead.

Speaker 3

So let me briefly translate for myself. Thank you for thank you, management, for taking my question. So I have two questions here. The first is, how does the Miracle Laser creates more synergy with the company's core business?

Speaker 1

With the full integration of Wuhan Medical Laser, we have efficiently consolidated product, talent and organizational processes to improve R and D capabilities. This positions Wuhan Medical Laser as a market oriented upstream platform that creates strong synergies to support our growth model. As a leading provider of aesthetic laser devices in China, Wuhan Melco Lasers proprietary R and D capabilities allow us to supply our aesthetic centers with high quality, cost effective equipment, such as our flagship Youth IPL project. With other new products in the pipeline, this not only reduces reliance on high cost imported devices, but also supports consistency across our centers, further accelerating expansion. Wuhan Laser also holds a unique advantage in serving China's long tail aesthetic market, while most manufacturers focus on the leading institutions.

Speaker 1

Wuhan Air Coviser has served over 5,000 clients with deep experience and broad distribution among small and medium sized clinics. As our aesthetic center network grows, we aim to jointly explore a 2b2c model, integrating devices and services delivery to improve user experience, business efficiency and ultimately build a more competitive ecosystem.

Speaker 3

Thank you.

Operator

And your next question comes from Daisy Chen with Haitong. Sorry, it will be a follow-up from He Jinpen.

Speaker 3

I still have the second question. It's about the trade war. So how would the ongoing trade tensions between China and America maybe impact the company's business? Thank you.

Speaker 1

Trade tensions primarily affect the aesthetic industry in two ways, change in cost structures and shifts in the competitive landscape. For So Young, the direct impact is limited, but we also see this as an opportunity to strengthen our domestic supply chain and support import replacement. From the cost perspective, the impact on our aesthetics center business is minimal. Only one of our main offerings uses U. S.

Speaker 1

Imported equipment and consumables. Dermage, which accounts for less than 10% of total revenue at our aesthetic centers. If tariffs drive prices higher, we are well positioned to pivot to alternative products that offer similar results without compromising user experience. That said, the impact on the upstream may be higher. Wuhan Medical Laser currently distributes several imported devices, including Citan's VBL treatment.

Speaker 1

Tariff increases could affect the pricing and sales volume of these products. In conclusion, we see this as opportunities rather than threats. We will continue leveraging our vertical integrated capability to upgrade China's competitive aesthetic supply chain and deliver high quality, cost effective solutions to consumers. Thank you.

Operator

And your next question is from Daisy Chen with Haidong. Please go ahead.

Speaker 1

Thanks management for taking my question. We see that the company has a very good ability on cost and expense control in Q1. And we also noted that the cash balance is sufficient. So my question is, can management please elaborate more on the company's future investment plan and also the cost reduction plan? And do you expect further improvements in the overall financial performance?

Speaker 1

Thank you. We are encouraged by the early results our aesthetics center business is generating and remain confident in its mid- to long term profitability. In March, '18 centers have already achieved positive monthly operating cash flow. Among them, 16 centers are profitable on a monthly basis, demonstrating the viability and efficiency of our business model. Going forward, we will maintain a measured pace of self operated aesthetic center expansion and will carefully manage new openings in a disciplined manner.

Speaker 1

Meantime, we are actively preparing the launch of a franchise model to enable lighter, scalable growth. In addition, we are optimizing our offering mix, deepen upstream collaboration and enhancing efficiency at the clinic level to further improve cost control and gross margin. We have also increased investment in growing our proprietary product lines, which will further support margin expansion. Overall, we remain focused on sustainable high quality growth supported by financial discipline and a structural optimization across our core business lines. Thank you.

Operator

This concludes our question and answer session and today's conference call. Thank you for attending today's presentation. You may now disconnect.

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Key Takeaways

  • In Q1 So Young reported total revenue of RMB 297.3 million and a net loss of RMB 33.1 million due to increased investments, while maintaining a strong cash position of RMB 1.1 billion to support long-term growth.
  • The Soyang Clinic network expanded to 23 centers in nine major cities, with 18 locations achieving positive operating cash flow and aesthetic center revenue up 21.6% quarter-over-quarter and 551.4% year-over-year.
  • Vertical integration efforts now serve over 1,500 institutions with supply chain solutions, shipping 27,900 injectable units in Q1 and developing proprietary devices to drive cost efficiency and margin improvement.
  • Management is executing a Sam’s Club-inspired strategy centered on proprietary products, value pricing and end-to-end supply chain control, and plans to launch a franchise model for asset-light network expansion.
  • Customer satisfaction remains exceptionally high at 4.98 out of 5, supported by optimized service offerings, interactive offline-online events and a focus on standardized non-surgical anti-aging treatments to boost loyalty and visit frequency.
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Earnings Conference Call
So-Young International Q1 2025
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