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SBC Medical Group Holdings Inc (SBC)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue fell 14% year over year to $47.33M, driven by discontinuation of the staffing business and divestitures, while EBITDA margin expanded to 52% and income from operations held steady; net income rose 14.6% YoY to $21.50M aided by a gain on redemption of life insurance policies .
  • Management announced a $5M share repurchase program (May 20, 2025–May 20, 2026), deferred further Bitcoin purchases, and is reviewing acquisition of Risenet to strengthen group synergies—key near-term stock catalysts for liquidity and capital allocation .
  • The franchise fee structure shifted to a tiered, performance-based model effective April 1, 2025; if applied retro to FY24, revenue would have been c.10% lower, but management expects 2025 operating income impact to be offset by absence of 2024 one-time losses .
  • Sequentially, Q1 revenue improved vs Q4 ($47.33M vs $44M), with stronger margins (EBITDA margin 52% vs 47%) and net income ($21.50M vs $7M) as the business model pivot gains traction .
  • Wall Street consensus estimates via S&P Global were unavailable for Q1 2025 at retrieval; comparisons to estimates cannot be determined*.

What Went Well and What Went Wrong

What Went Well

  • Margin and profitability resilience: Operating income held near flat YoY ($24.20M vs $24.46M) despite revenue decline; EBITDA margin expanded to 52% from 46% YoY, reflecting cost actions and mix shift . CEO: “operating margin improved from 45% in the first quarter 2024, to 51% in the first quarter 2025… net income increased 15% year-over year” .
  • Strategic capital actions: Board approved $5M share repurchase program and deferred the JPY 1B Bitcoin plan, prioritizing shareholder returns and liquidity .
  • Network and demand expansion: Partner clinics reached 251 (+36 YoY), LTM customers 6.1M (+14% YoY), and rental services revenue grew 56% YoY, underscoring underlying demand and platform leverage .

What Went Wrong

  • Top-line contraction: Total revenue declined 13.65% YoY to $47.33M, primarily from discontinuing staffing operations and disposal of subsidiaries; management services revenue dropped 44.25% YoY .
  • FX headwinds and revenue mix shifts: Unfavorable FX reduced net revenue by ~$1.31M YoY; mix shifted away from higher-margin “other” revenues with disposals (Kijimadaira Resort, Skynet Academy) .
  • Controls still under remediation: Disclosure controls were “not effective” as of March 31, 2025; material weaknesses identified in 2024 remain un-remediated, a governance overhang .

Financial Results

Sequential and YoY Comparison

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$53.08 $44.00 $47.33
Net Income ($USD Millions)$2.83 $7.00 $21.50
Diluted EPS ($USD)$0.03 —$0.21
Gross Profit ($USD Millions)$43.24 $34.00 $37.73
Gross Margin %81.45% 77.27% (computed from 34/44) 79.73%
EBIT ($USD Millions)$13.83 $5.00 $24.20
EBIT Margin %26.06% 11.36% (computed from 5/44) 51.14%
EBITDA ($USD Millions)—$21.00 $24.83
EBITDA Margin %—47% 52%
MetricQ1 2024Q1 2025
Revenue ($USD Millions)$54.81 $47.33
Net Income ($USD Millions)$18.75 $21.49
Diluted EPS ($USD)$0.20 $0.21
Gross Profit ($USD Millions)$39.52 $37.73
Gross Margin %72.11% 79.73%
EBIT ($USD Millions)$24.46 $24.20
EBIT Margin %44.63% 51.14%
EBITDA ($USD Millions)$25.48 $24.83
EBITDA Margin %46% 52%

Revenue Stream Breakdown

Revenue Stream ($USD Millions)Q1 2024Q1 2025
Franchising Revenue$15.11 $15.72
Procurement Revenue$13.20 $14.33
Management Services$15.65 $8.73
Rental Services$3.62 $5.64
Others$7.23 $2.91
Total Revenue$54.81 $47.33

KPIs and Balance Sheet Highlights

KPI/MetricQ1 2025
Partner Clinics (#)251 (↑36 YoY)
LTM Customers (Millions)6.1 (↑14% YoY)
Repeat Rate (%)71%
ROE (%)41% (↓10pp YoY)
Cash & Equivalents ($USD Millions)$132.06
Working Capital ($USD Millions)$166.63
Finance Lease Receivables ($USD Millions)$17.93

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Franchise Fee StructureEffective Apr 1, 2025Fixed per MC and clinicTiered by clinic size, tenure, category, and performanceChanged; FY24 impact would be c.-10% revenue if applied retro
Hair Removal PricingEffective Apr 2025Prior price scheduleExample: Full-body+VIO course 1 session ¥20,000→¥25,000 (+25%); 3 sessions ¥45,000→¥49,500 (+10%); plan shifted to 5 sessions Raised
Share RepurchaseMay 20, 2025–May 20, 2026NoneUp to $5M buyback; funded by surplus cash and future FCF New program
Bitcoin PlanAnnounced Feb 12, 2025Target JPY 1B purchasesDeferred further purchases to allocate funds to buyback Deferred
Digital Assets UpdateApr 2025—Purchased 5 Bitcoins (~$0.4M) New disclosure
DividendsOngoingConsideredContinues to consider dividends for TSR improvement Maintained stance

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 & Q4)Current Period (Q1 2025)Trend
Pricing StrategyLowered prices in late FY24 to sustain customer base; plan to raise hair removal prices in 2025 Margin improved; revenue decline tied to discontinued staffing/divestitures; pricing strategy revision underway Shift to margin-accretive pricing
Franchise Fee RevisionNeed to revise fees by clinic size and maturity to enable growth Tiered, performance-based service fees effective Apr 2025; retro FY24 impact c.-10% revenue Implemented
Capital Allocation & LiquidityLow liquidity; explore buybacks/dividends; founder block trades possible $5M buyback approved; defer Bitcoin plan; evaluate Risenet acquisition Executing
Overseas ExpansionTarget US/SE Asia; Singapore hub; medspa & platform M&A APAC PTE established; AHH subsidiaries integrated; Asia HQ formed Building foundation
Inbound Demand (China)Post-COVID inbound recovered, strong momentum; multilingual support Not specifically quantified in Q1 release; network expanded Stable to improving
Regulatory/ControlsMisappropriation discovered; controls weaknesses disclosed Controls “not effective” as of Q1; remediation continues Remediation ongoing

Management Commentary

  • CEO message: “SBC is actively preparing for strategic expansion… operating margin improved from 45% in the first quarter 2024, to 51% in the first quarter 2025. Additionally, net income… increased 15% year-over year” .
  • Strategic positioning: Focus on scalable franchise model, domestic and international expansion, and long-term shareholder value; revenue decline linked to discontinuation of staffing and divestitures, partially offset by procurement and rental demand from MC expansion .
  • Capital return: Buyback reflects view that shares undervalue business performance and growth potential; balanced approach between growth investment and shareholder returns .

Q&A Highlights

  • Growth drivers: Expand aesthetic medical market by easing first-step access; repeat customers underpin stability .
  • US and Asia expansion: Pursuing medspa openings in the US and platform business; Singapore hub to scale SE Asia clinics .
  • Pricing and competition: Price reductions last year to sustain volume; raising hair removal prices as market supply shifts; expect measures to bear fruit this year .
  • Liquidity and capital policy: Management reiterated intent to consider buybacks/dividends; recognized investor difficulty with low liquidity .
  • International (Vietnam): Clinic performance improved post-COVID; plan to establish strong model this year and expand next year .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 2025 EPS and revenue was unavailable at retrieval time; as such, beat/miss vs estimates cannot be assessed*. The absence likely reflects emerging coverage for a newly listed small-cap. Going forward, estimate models may need to reflect: (1) fee-structure headwinds to revenue, (2) margin resilience from rental/procurement growth, and (3) removal of 2024 one-time items in operating income baselines .

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Margin over volume: Despite revenue contraction, margins expanded materially; focus on price optimization and higher-margin streams (rental/procurement) supports profitability .
  • Capital return catalyst: $5M buyback and dividend consideration—combined with deferred Bitcoin purchases—should improve liquidity and supply/demand for the shares .
  • Structural reset: The tiered fee structure is a drag on revenue optics (c.-10% retro FY24) but framed as enabling clinic expansion and long-term operating leverage; monitor 2H25 revenue trajectory .
  • Governance watchlist: Controls remain “not effective”; progress on remediation is a near-term risk factor and key determinant of investor confidence .
  • Network scale and demand: Clinics (+36 YoY), LTM customers (+14%), and rental services (+56% YoY) indicate sustained end-demand; supports medium-term thesis in Japan aesthetics with inbound tailwinds .
  • Estimate reset ahead: With coverage ramping, expect consensus to recalibrate for fee changes, FX, and removal of special items; margin guidance and segment mix will be pivotal in revisions .
  • Near-term trading: Positive bias on buyback authorization and margin prints; caution on headline revenue declines and governance disclosures until remediation milestones are met .