So-Young International - Earnings Call - Q1 2025
May 16, 2025
Transcript
Operator (participant)
Ladies and gentlemen, thank you for standing by for So-Young's first quarter 2025 earnings conference call. At this time, all participants are in listen-only mode. After management gives their prepared remarks, there will be a question-and-answer session. 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 Qiao. Please proceed, Mona.
Mona Qiao (Head of Investor Relations)
Thank you, Operator, and thank you, everyone, for joining So-Young's fourth quarter 2025 earnings conference call. Joining me today on the call is Mr. Xing Jin, our Co-founder, Chairman, and CEO, and Mr. Hui Zhao, CFO. Please note that the discussion today will contain forward-looking statements made under the safe-harbor provisions of the U.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. So-Young does not undertake any obligation to update any forward-looking statements except as required under applicable law. 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. Xing Jin.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
Hello everyone and welcome to today's conference call. In the first quarter of 2025, we recorded total revenues of RMB 297.3 million. Net loss attributable to So-Young was RMB 33.1 million, and non-GAAP net loss attributable to So-Young was RMB 31.5 million, primarily driven by increased investment to expand our aesthetic centers. We believe these investments are laying a solid foundation for our long-term growth.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
In the first quarter, we continued to execute our vertical integration transition and expanded our network of aesthetic centers in key cities. Our branded aesthetic centers, SoYoung 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. SoYoung 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.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
As of the end of Q1, we operate 23 SoYoung 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 RMB 98.8 million, up 21.6% quarter to quarter and 551.4% year-over-year. Total verified paid visits exceeded 45,500, up 18.5% quarter to quarter and 874.3% year-over-year. Total number of verified paid aesthetic treatments performed surpassed 92,900, up 14% quarter to quarter and 989.4% year-over-year. Customer satisfaction remains high at 4.98 out of 5, 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.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
In Q1, we launched a natural energy blend bride campaign with offline pop-up events featuring artists in Shenzhen and Beijing. These offline events were complemented by online sign-up activities to broaden bride engagement and reach. Each event also featured an experience show, allowing 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 treatments. 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 done in our branded aesthetic centers while also removing certain treatments with low demand based on our user feedback. To further expand our portfolio, we partnered with premium skincare brand SkinCeuticals to launch new core treatment solutions.
Additionally, we allocated additional marketing resources and implemented sales incentives to boost revenue contribution from our proprietary products. This was done to improve overall gross margins for our aesthetic centers.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
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 elastin reached approximately 27,900 units in Q1, up roughly 14% year-over-year.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
Our pop business, which remains a fundamental 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 RMB 300 million, with per capita install GTV growing by 4% year-over-year.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
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. In April, I personally increased my shareholding in So-Young by approximately $4.1 million, reaffirming my confidence in our long-term growth.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
As our legacy pop business purchase is natural growth selling, we believe the 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. In the medical aesthetic sector, we believe that high-quality proprietary products and services at fair prices have similar potential.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
We aim to become the Sam's Club of the medical aesthetics industry. Over the past few years, we've built end-to-end capabilities, including vertical upstream integration and proprietary products. Through acquisitions and long-term partnerships, we now own our exclusively distributed chemical 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. We will continue to deepen our supply chain capabilities and improve service quality to deliver a safer and more effective medical aesthetic experience.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
Now I'll hand over to our staff Hui, who will walk through the financial results, followed by the Q&A session.
Hui Zhao (CFO)
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 RMB 297.3 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 and reservation services and other revenues were RMB 142.9 million, 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. Aesthetic treatment services revenues reached RMB 98.8 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 RMB 55.6 million, down 35.7% year-over-year, primarily due to a decrease in order volume for medical equipment. Cost of revenues were RMB 151.4 million, up 29.1% year-over-year, primarily due to the expansion of our aesthetic center business. Within cost of revenues, cost of information and reservation services and others were RMB 40.7 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 RMB 80.3 million, up 547.6% year-over-year, primarily due to the expansion of our aesthetic center business. Cost of medical products sold and maintenance services were RMB 30.4 million, down 29.4% year-over-year, primarily due to a decrease in cost associated with the sales of medical equipment. Total operating expenses were RMB 189.3 million, down 20.4% year-over-year.
Sales and marketing expenses were RMB 103.4 million, down 8.7% year-over-year, primarily due to a decrease in expenses associated with branding and user acquisition activities. G&A expenses were RMB 53.7 million, down 36.7% year-over-year, primarily due to a decrease in share-based compensation expenses. R&D expenses were RMB 23.1 million, down 18.9% year-over-year, primarily attributable to improvements in staff efficiency. Income tax benefits were RMB 1.6 million, compared with the income tax benefits of RMB 2.6 million in the same period of 2024. Net loss attributable to So-Young International was RMB 33.1 million, compared with a net loss of RMB 21.2 million during the same period last year. Non-GAAP net loss attributable to So-Young International was RMB 31.5 million, compared with non-GAAP net income attributable to So-Young International of RMB 4.5 million during the same period 2024.
Basic and diluted losses for ADS attributable to ordinary shareholders were RMB 0.32 and RMB 0.32 respectively, compared with basic and diluted losses for ADS attributable to ordinary shareholders of RMB 0.21 and RMB 0.21 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 RMB 1.1 billion as of March 31, 2025. Moving to our outlook for the second quarter of 2025, we expect aesthetic treatment services revenues to be between RMB 120 million and RMB 140 million, representing a 337.3%-410.1% increase from the same period in 2024. This outlook reflects our strategic decision 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 had 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 partner networks, we expect this model to support more resilient margins and greater scalability across markets. This concludes our key remarks. I will now turn over the call to the operator and open the call for Q&A. Operator, we are ready to take questions.
Operator (participant)
We will now begin the question-and-answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Your first question concerns Ye Bing Li with Guotai Haitong Securities. Please go ahead.
Yibing Li (Analyst)
[Foreign language]. Let me translate myself. Good evening, management. Thank you for taking my questions, and I would like to ask about SoYoung Clinic. How is it different from the traditional medical institutions like Meilai and YiXin? Thank you.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
Our aesthetic center business is fundamentally different from traditional models by the likes of Meilai and YiXin. In short, these institutions, if by dialing a professional model, they offer a broader range of services, require larger clinics, rely heavily on star 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, requires less clinic space, and are available in more locations, depend less on individual doctors, and generate lower per-customer spend but with higher frequency.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
Most specifically, while service offerings, Meilai and YiXin 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 primarily seek visible, transformative changes. In contrast, our clinics exclusively focus on non-surgical anti-aging treatments. They do not offer surgeries or other high-risk procedures. Our customers mainly seek maintenance and rejuvenation services.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
Two, per-customer spend and visit frequency. Meilai and YiXin generate high per-customer spend but with lower frequency. Our treatments, on the other hand, are priced around RMB 1,000 but with higher frequency. Typical customer spend is roughly RMB 2,000, with loyal customers visiting 6-8 times per year.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
Three, store size and expansion strategy. Meilai and YiXin typically operate one large flagship clinic per city, often exceeding 8,000 sqm in size. In contrast, our clinics are smaller, ranging from 100-500 sqm, 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. This aligns with our positioning of medical aesthetic treatments and a high-frequency maintenance service. Where convenience and accessibility are critical, similar to beauty salons.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
Four, user experience. Meilai and YiXin 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 SoYoung 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.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
Five, product supply chain. Meilai and YiXin focus on the service delivery phase of the value chain. In contrast, they have built upstream supply chain capabilities in 2021. This is highlighted by the acquisition of Wuhan Miracle Laser as an extensive pipeline of injectable products. This leads us to offer highly cost-effective services.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
In summary, our aesthetic center business was defined using a highly standardized model that's ideally positioned to be expanded. As we all know, the key to successful chain operations lies in scale, and this is where we clearly have an advantage.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
Thank you.
Operator (participant)
Your next question comes from Nelson Cheung with Citibank. Please go ahead.
Nelson Cheung (Analyst)
[Foreign language]. So let me translate the question in English. Thanks, Management, for taking my question. As the clinic's network grows, will capacity become a burden for the company? Is this model sustainable? Thank you.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
We place 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 financially sustainable model.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
Currently, we expect to open around 30 new clinics 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.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
At the same time, we are actively planning to roll out a franchise model. This will help accelerate our geographic reach and network density while reducing CapEx pressure, paving the way for the asset-light expansion.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
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.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
Thank you.
Operator (participant)
Your next question comes from Yin Jinpeng with CITIC. Please go ahead.
Jinpeng Yin (Analyst)
[Foreign language]. Thank you for, thanks Management, for taking my question. I have two questions here. The first is, how does the Miracle Laser create more synergy with the company's core business?
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
With the full integration of Wuhan Miracle Laser, we have efficiently consolidated product talent and organizational processes to improve R&D capabilities. This positions Wuhan Miracle Laser as a market-oriented upstream platform that creates strong synergies to support our growth model.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
As a leading provider of aesthetic laser devices in China, Wuhan Miracle Laser's proprietary R&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 its expansion.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
Wuhan Miracle Laser also holds a unique advantage in serving China's long-tail aesthetic market. While most manufacturers focus on the leading institutions, Wuhan Miracle Laser 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.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
Thank you.
Operator (participant)
Your next question comes from Daisy Chen with Haitong. Oh, sorry, it'll be a follow-up from Yin Jinpeng.
Jinpeng Yin (Analyst)
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.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
Trade tensions primarily affect the aesthetic industry in two ways: changes 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.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
From the cost perspective, the impact on our aesthetic center business is minimal. Only one of our main offerings uses U.S.-imported equipment and consumables: Thermage, 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.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
That said, the impact on the upstream may be higher. Wuhan Miracle Laser currently distributes several imported devices, including BBL treatments. Tariff increases could affect the pricing and sales volume of these products.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
In conclusion, we see this as opportunities rather than threats. We will continue leveraging our vertical integration capability to upgrade China's domestic aesthetic supply chain and deliver high-quality, cost-effective solutions to consumers.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
Thank you.
Operator (participant)
Your next question is from Daisy Chen with Haitong. Please go ahead.
Daisy Chen (Analyst)
[Foreign language]. Thanks, Management, for taking my question. We see that the company has a very good ability on cost and control in Q1, and we also noted that the cash balance is sufficient. My question is, can Management please leverage 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? Thank you.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
We are encouraged by the early results our aesthetic center business is generating, and we 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.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
Going forward, we will maintain a measured pace of self-operated aesthetic center expansion, and we'll carefully manage new openings in a disciplined manner. Meantime, we are actively preparing the launch of a franchise model to enable lighter, scalable growth.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
In addition, we are optimizing our offering mix, deepening 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.
Xing Jin (Co-Founder, Chairman and CEO)
[Foreign language]
Mona Qiao (Head of Investor Relations)
Overall, we remain focused on sustainable, high-quality growth, supported by financial discipline and structural optimization across our core business lines. Thank you.
Operator (participant)
This concludes our question and answer session and today's conference call. Thank you for attending today's presentation. You may now disconnect.