So-Young International - Q2 2024

Transcript

Operator (participant)

Ladies and gentlemen, thank you for standing by for So-Young second quarter two thousand and twenty-four earnings conference call. At this time, all participants are in a 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 conference over to your host for today's call, Miss Mona Chao. Please go ahead, Miss Mona.

Mona Qiao (Head of Investor Relations)

Thank you, operator, and thank you everyone for joining So-Young second quarter 2024 earnings conference call. Joining me today on the call is Mr. Jin Xing, our Co-founder, Chairman, and CEO, and Mr. Nick 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 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 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. At this time, I'd like to turn the call over to Mr. Jin Xing.

Jin Xing (CEO)

大家好，欢迎参加今天的财报电话会议。今年第二季度，我们的业务表现稳健，实现总收入4.07亿元人民币，超过收入指引上限。Non-GAAP口径下的净利润为2,219万元人民币，同比增长43.1%，充分彰显了我们高质量发展和全产业链整合战略的有效性。

Mona Qiao (Head of Investor Relations)

Hello, everyone. Welcome to today's earnings call. Our performance during the second quarter was solid, with total revenue of RMB 407.4 million, exceeding the top end of our guidance. Non-GAAP net profit was RMB 22.2 million, up 43.1% year over year, showcasing our high quality growth and the effectiveness of industry integration.

Jin Xing (CEO)

我们把握行业趋势，进行前瞻性布局，并取得了亮眼的进展。具体来说，新业务板块持续快速增长，其中医美产品销售和维护服务收入1.06，1.06亿元人民币，同比增长22.6%。在上游，我们的产品出货量持续攀升，同时我们加速布局下游连锁业务，为公司业务发展持续注入动力。作为唯一覆盖医美行业上中下游的平台公司，新氧正在引领行业迈向高品质、可持续发展的新的阶段。我们通过上游平台机构的协同和纵向整合，帮助行业逐步提升透明度和运营效率，为终端消费者提供了前所未有的极致性价比和多样化的产品选择，持续优化客户体验，重新定义医美服务的新标准，从而实现行业价值提升与消费者需求深度融合。

Mona Qiao (Head of Investor Relations)

We capitalized on industry trends, execute on our strategy, and made impressive progress during the quarter. Specifically, our new businesses segments continued to grow rapidly, with revenue from the sales of medical products and maintenance services reaching RMB 106 million, up 22.6% year over year. Product shipments in our upstream supply chain business increased as our chain of clinics expanded, both contributing significantly to growth. We are the only platform covering the upstream, midstream, and downstream segments of the entire aesthetic medical industry and are leading the industry into a new era of high quality and sustainable development. Leveraging the synergies created by the vertical integration, we are enhancing industry transparency and operational efficiency across the value chain.

This closely aligns the industry value chain with evolving consumer needs, ensures a, diverse range of high quality and affordable products, optimize the customer experience, and redefines standards for medical aesthetic services.

Jin Xing (CEO)

下面具体分享一下我们二季度业务发展情况。在社区电商业务板块，我们持续推进高质量发展战略，通过用户精准补贴、私域精细化运营等手段，持续巩固在高端市场的竞争优势。我们注意到用户对高端定制化医美需求日益增长，主动进行战略调整，对平台上的SKU进行了升级。在确保正品的基础上，进一步丰富头部机构提供的医美品类，扶持优质商家，推动与连锁业务的深度协同，以更好地捕捉和满足中高端用户不断演变的差异化需求。二季度，我们的验证医美GMV达到4.28亿元，环比提升约17%，验证订单数超过23万，环比增长约8%。近期，我们也不断优化流量投放效率，减少线上低ROI的流量投放，同时通过多渠道联动，积极拓展和沉淀精准的医美私域用户，并且采用精细化运营，提升用户粘度和商业化效率。2024年第二季度，我们的私域规模达到81万人，环比增长了14%。

Mona Qiao (Head of Investor Relations)

...We continue to drive high quality development in our POP segment and strengthen our competitive advantage in the mid to high-end market by refining operations and deploying target user subsidies. With client demand for premium customized products growing, we adjust our strategy and upgraded SKUs, ensuring their authenticity and further enrich the categories offered by our leading partner institutions. We also strengthened support for high quality institutional partners by integrating our POP business with our chain of clinics to create deeper and greater synergies, enabling us to better meet the evolving and diverse medical aesthetic needs of mid to high-end users. In the second quarter, GMV from medical aesthetic products and services reached RMB 428 million, over 230,000 verified orders, up around 70% and 8% respectively.

We continue to optimize our traffic acquisition strategy by reallocating budget away from low ROI online channels to our private domains. Refined multi-channel private domain operations allows us to cultivate and retain a target user base and improve user engagement and monetization efficiency. In the second quarter, the use of private domains reached 810,000, up 14% quarter over quarter.

Jin Xing (CEO)

连锁业务方面，截至现在，我们已成功开设14家门店，分别位于北京、上海、深圳、杭州、成都、武汉、重庆和长沙八个核心城市的黄金商业区，并已全面投入运营，经营状况符合预期目标。凭借新氧平台积累的强大用户基础和品牌力，叠加标准化的履约能力，核销用户数环比增长85%，整体复购率超过50%，满意度持续提升，达到4.97，五分满分。在运营效率方面，以北京的保利样板店为例，今年六月单店月收入超过RMB 620万元，税前利润约RMB 130万元，税前利润率达20%，老客占比在67%，均高于行业整体水平。值得一提的是，不管是单位效，还是每位医生贡献的月营收，均领先于多数传统医美连锁机构，这些都将为我们其他新店的快速成长提供宝贵经验。同时，我们持续看好轻医美连锁的未来发展。我们将在下半年开放新氧优选连锁店的加盟，加速将这一经验验证的标准化运营模式快速复制到目标城市，继续扩大连锁的业务版图。

Mona Qiao (Head of Investor Relations)

Let's move on to So-Young Prime. Currently, we have opened 14 clinics in prime, commercial areas in 8 core cities, including Beijing, Shanghai, Shenzhen, Hangzhou, Chengdu, Wuhan, Chongqing, and Changsha. All of these clinics are fully operational and performing in line with expectations. Leveraging our strong user base, the reputational strength of our brand and standardized fulfillment capabilities, the number of verified customers increased by 85% quarter over quarter.

The repeat purchase rate exceeded 50%, and customer satisfaction improved to reach an impressive 4.97 out of five. We've also achieved solid operational efficiencies. For example, our Beijing clinics generated revenue of RMB 6.2 million in June, with pre-tax profits of RMB 1.3 million and a profit margin of around 20%. The repeat purchase rate hit 67%, higher than the industry average. Notably, both unit area efficiency and monthly revenue per doctor outperformed traditional clinics. The experience we have accumulated from these provide us with valuable insights that we will apply to other new clinics to accelerate their growth. We are very optimistic about the future of light medical aesthetic clinics, and plan to begin franchising our chain of clinics in the second half of this year, in order to rapidly expand our footprint by replicating this proven standardized model in the target cities.

Jin Xing (CEO)

上游业务方面，我们致力于成为基于品牌数据团队为核心的生态型全品类医美上游厂商。凭借新氧平台十余年的品牌沉淀，我们积累了大量医美用户消费行为数据和需求洞察，为上游产品的研发和定制提供了坚实的基础。同时，我们利用平台广泛的机构覆盖和C端强大的营销能力，可以快速建立新品的市场竞争力，而我们自营的连锁门店又可以确保产品的基本销量。我们的上游核心团队由国内外知名厂商的专业人才组成，拥有平均五到十年的行业经验，具备强大的选品和销售能力。下半年，我们计划持续扩大上游人才队伍，预计到年底团队将达到百人规模。此外，我们今年推出的全新一代非手术类超声抗衰产品——曲提超声，出货量持续增加，已展现出成为市场爆款的潜力。同时，韩国品牌艾拉斯提也保持了很好的销量增长势头。...

二季度出货量超过四万只，环比增长76%，同比增长113%，增剂收入环比增长65%，同比增长117%。截至2024年二季度，上游增剂合作机构数已达到8,780家。

Mona Qiao (Head of Investor Relations)

Lastly, I will provide updates on our supply chain business. Leveraging our brand extensive consumer behavior data and experience team, we are building for category upstream medical aesthetic manufacturing capabilities to build for our broader ecosystem. With over a decade of operations, we have accumulated a wealth of consumer behavior data and user demand insights, laying a solid foundation for the development and customization of our products. In addition, leveraging our extensive institutional coverage and strong customer marketing capabilities, we are able to rapidly strengthen the competitiveness of new products using our clinics to ensure a steady stream of sales. Our core team is composed of professionals from top domestic and international manufacturers, each possessing an average of five to 10 years of industry experience and strong expertise in product selection and sales.

In the second half of the year, we will continue to expand this team with a goal of reaching 100 members by the end of the year. Additionally, we've seen a continuous increase in shipments of TruLift, our newly launched non-surgical anti-aging ultrasound device, reflecting its strong potential to be a market hit. Meanwhile, Elasty has maintained strong growth momentum, with second quarter shipments exceeding 40,000 units, up 76% quarter over quarter and 130% year over year. Revenue from the sales of injectables grew by 65% quarter over quarter and 170% year over year. As of the second quarter of 2024, we partnered with 718 institutions for the sales of injectables.

Jin Xing (CEO)

我们认为，近期行业消费复苏偏弱，宏观经济环境变化将在未来一段时间内对医美行业需求带来不利影响。但长期来看，中国医美市场仍有巨大增长潜力，尤其是随着行业洗牌加速，行业集中度不断提升，像新氧这类具有生态型全产业链优势的头部品牌，能够抓住当下行业整合带来的新机遇，捕捉更大的市场份额和更广阔的发展空间，进一步巩固行业领先地位。业务布局上，我们认为POP业务更适合满足用户对非标医美项目的需要，连锁业务更适合满足用户对标准化医美项目极致性价比的需要。上游业务同时为POP和连锁业务提供独有的供应链支持，同时POP和连锁又可以为上游业务提供To C、To B宣传和基础的销量保障。三个业务相互赋能，构成新氧独特的铁三角。我们认为，只有行业的垂直整合才能带来跨越式创新，真正解决医美行业的医疗交付质量问题，也为新氧打开业务增长的新蓝海。

Mona Qiao (Head of Investor Relations)

Despite this soft recovery in consumption as the macroeconomic challenge over the near term, we believe that the Chinese medical aesthetic market still has enormous potential in the long term. As the industry begins reshuffling and enters a period of consolidation, leading brands like So-Young, with a unique ecosystem and full category advantage, are well positioned to capitalize on the new opportunities, expand their market share and growth potential, and solidify their position as market leaders. We believe our POP business is ideally suited to meet demands for non-standardized treatments, while our chain of clinics can service standardized treatments. Supporting both of these businesses with a steady stream of exclusive products in our upstream business, which will also benefit from To C and To B opportunities and guaranteed sales offered by both downstream businesses. Combined, these three business segments create enormous synergies and form our Iron Triangle.

We strongly believe that vertically integrating the industry value chain will drive innovation, effectively ensure the quality of services, and open up new growth opportunities for So-Young going forward.

Jin Xing (CEO)

现在请Nick来介绍二季度的财务结果，之后我们将进行问答环节。

Mona Qiao (Head of Investor Relations)

I'll let our CFO, Nick, take over now to go through the second quarter's financial results. After that, we'll open up for questions.

Nick Zhao (CFO)

Hello, this is Nick. Please be reminded that our announced quarter here will be in RMB. Please also refer to our earnings release for detailed information of our comparative financial performances on a year-over-year basis. Total revenues during the quarter were RMB 407.4 million, down 1.1% year over year, exceeding the high end of our guidance on the back of a 22.6% year-over-year increase in sales of medical products and maintenance services. Information services and other revenues were RMB 279.2 million, down 6.6% year over year, primarily due to a decrease in the number of medical service providers subscribing to information services in our platform.

Reservation services revenue decreased 16.9% year over year to RMB 22.4 million, primarily due to policy changes for commission rates and subsidies. Cost of revenues for RMB 155.1 million, up 3.1% year-over-year, primarily due to an increase in costs associated with the sales of cosmetic products. Within cost of revenues, cost of services and others were RMB 101.9 million, down 4.4% year-over-year, primarily due to a decrease in costs associated with So-Young Prime. Cost of medical products sold and management services were RMB 53.2 million, up 21.3% year-over-year, primarily due to an increase in costs associated with the sales of cosmetic products.

Total operating expenses were RMB 245.6 million, down 13% year over year. Sales and marketing expenses were RMB 132.3 million, down 4.1% year over year, primarily due to a decrease in expenses associated with branding and user acquisition activities. G&A expenses were RMB 70.8 million, down 23.3% year over year, primarily due to decreases in share-based compensation expenses and the professional consulting fees. R&D expenses were RMB 42.5 million, down 18.5% year over year, primarily attributable to improvements in staff efficiency. Income tax benefits were RMB 2.6 million, compared with income tax benefit of RMB 0.8 million in the same period of 2023.

Net income attributable to So-Young was RMB eighteen point nine million, compared with a net loss of RMB two point six million during the same period last year. Non-GAAP net income attributable to So-Young was RMB twenty-two point two million, compared with RMB fifteen point five million in the same period of 2023. Basic and diluted earnings per ADS attributable to ordinary shareholders were RMB zero point eight one eight and zero point one eight, respectively, compared with the basic and diluted losses per ADS attributable to ordinary shareholders of RMB zero point zero two and zero point zero two, respectively, during the same period of 2022, twenty twenty-three. We have maintained a robust cash position, with a cash and cash equivalents, restricted cash and term deposits, term deposits and short-term investments totaling RMB one point two five billion as of June thirtieth, 2024.

Moving to our outlook. Given the relatively soft micro conditions, especially with respect to discretionary spending, for the third quarter of 2024, we expect total revenues to be between RMB 350 million and RMB 370 million. This outlook also takes into account the uncertainties of the pace of clinics opening and ramping up, as we are in the early stage of our clinic expansion and our business transformation. That being said, we are confident our strategic initiatives, integrating the upstream and downstream of the aesthetic medical industry value chain, will ideally position us for long-term growth. Their initiatives will enable us to capture a significant larger share of the market and establish a solid foundation of profitability. As our clinics mature and market conditions stabilize, we expect our financial performance to gradually improve.

This concludes our key remarks. I will now turn over to the call, to the operator and open the call for QA. Operator, we are ready to take questions. Thank you.

Operator (participant)

We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, please press star then two. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from Chloe Wei with CICC. Please go ahead.

Chloe Wei (Analyst)

非常感谢管理层给我这个提问的机会。那首先也是非常恭喜啊，公司这个二季度的业绩还是有非常好的这个超预期的表现。那尤其是我们看到在这个良好的一个费控之下呢，公司的利润端也是有一个比较大幅的修复。那我这边的问题呢，是有关于是这个行业趋势。进入这个下半年的话，我们其实还是看到这个宏观消费是有压力的。那尤其是我们，呃，前面也发布了一些公司的业绩，也是看到这个三季度的指引都是普遍比较保守。那管理层的话，是否可以去分享一下目前这个七到八月份哈，观察到的这个消费者...

So let me translate myself. Firstly, congratulations on the solid results. The revenue continued to exceed the high end and really strong bottom line. And my question is about the overall trend. So, entering the second half of this year, we have seen signs of slowdown in most consuming companies' guidance.

... say, the online platforms, tourisms, and et cetera. So, I understand that's mostly due to the macro headwind, but can management share more color on the trends we have seen in July and August from the consumers and also from advertiser side? And looking into the second half, are there anything we would like to share with the market about how we plan to adapt to the new changes? Thanks.

Jin Xing (CEO)

你好，感谢你的提问。医美市场呢近况，略低于我们在年初的预期。根据国家统计局发布的数据显示，今年上半年呢，我国社会消费品零售总额同比增加3.7%，较前两季度有所下滑，可选消费整体面临不确定性，但医美市场呢，仍然持续增长，并且存在显著的结构性机会。

Mona Qiao (Head of Investor Relations)

The current state of the medical aesthetic industry isn't quite where we thought it would be at the beginning of the year. According to data from the NBS, the retail sales of consumer goods in China increased by 3.7% year over year in the first six months of 2024, a deceleration compared to the first quarter of 2024 and the last quarter of 2023. Despite weak consumer confidence and discretionary spending, the medical aesthetic market continues to grow and offer significant structural opportunities.

Jin Xing (CEO)

在当前的市场中，轻医美的市场份额持续扩大，充分体现了消费者对这一类，低创伤、高便捷性的医美服务的需求强烈。同时，产业链正在逐渐迎来爆发期，技术创新和供应链优化不断推动行业整体向前发展。

Mona Qiao (Head of Investor Relations)

The market share of light medical aesthetic services is expanding, driven by strong consumer demand for minimally invasive and convenient services. Meanwhile, the upstream supply chain is experiencing a surge in growth, fueled by innovations and supply chain optimizations that are propelling the industry's overall advancement.

Jin Xing (CEO)

针对未来的市场走势，我们基于行业研究提出了两项预测。首先，随着轻医美服务的标准化进程加快，行业内有望出现大型连锁品牌，这将为市场带来更高的规范性与效率，进一步推动轻医美行业的成熟与发展。其次，头部连锁，连锁机构预计将在未来四到五年内形成，并导致行业集中度的大幅提升。在此趋势下，头部连锁品牌将占据更大的市场份额，并为资本和创业者提供新的加盟机会。新氧计划在今年下半年正式启动加盟连锁项目，抓住这一战略性机遇，助力行业未来的可持续增长。

Mona Qiao (Head of Investor Relations)

Our industry research highlights two key forecasts that will shape the future of the industry. First, we expect to see the standardization of light medical aesthetic services gain momentum. This will lead to emergence of large chain brands and enhanced market norms and efficiency, resulting in a more mature sector. Second, over the next four to five years, we anticipate that leading chains will dominate the market, significantly accelerating industry concentration. As top brands capture larger share of market, new opportunities will be created for investors and entrepreneurs to capitalize on this trade. We plan to begin franchising our chain of clinics in the second half of the year. This will not only contribute to the industry's expansion, but also position us for success in rapidly evolving markets.

Jin Xing (CEO)

谢谢。

Mona Qiao (Head of Investor Relations)

Thank you.

Operator (participant)

The next question will come from Nelson Cheung with Citibank. Please go ahead.

Nelson Cheung (Analyst)

啊，晚上好。谢谢管理层接受我的提问。我的问题是关于这个POP业务的，我想，请教一下管理层是怎么看我们POP的业务在公司未来发展中的定位，有没有一些新的业务策略可以分享一下？那我自己翻译一下。Thanks, management for taking my question. My question is regarding the POP business, and, wondering what would be the company's outlook on the positioning of the POP business in your future development? And are there any new business strategy that can be shared with us? Thank you.

Jin Xing (CEO)

你好，感谢您的提问。我们认为POP业务在公司的发 展中具有重要的地位，是不可或缺的组成部分。我们曾经分享过对中国医美市场发展趋势的看法，就是会更加的两极分化。标准化的医美项目，消费者会更加注重性价比，而非标的医美项目用户会更加挑剔，更看重医生，以及愿意支付溢价。我们通过连锁来满足用户标准化医美项目的需要，而POP模式多样化，让它更适合满足用户非标医美项目的需要。

Mona Qiao (Head of Investor Relations)

The POP business remains a vital component of our growth strategy, and we will continue to focus on its development. As we've said before, we believe that China's medical aesthetic market will become increasingly polarized. Consumer spending on standardized treatment is becoming more value-driven, while spending on non-standardized treatment is becoming more selective, with consumers willing to pay a premium for the highest quality care. To adapt to this market landscape, our strategy is twofold. One, for standardized treatment, we leverage the strength and service quality of our chain of clinics to meet client demand. And two, for non-standardized treatment, we will rely on a diverse array of treatments that our POP business facilitates to satisfy various needs.

Jin Xing (CEO)

对于POP业务，我们将向精选方向发展，就像Costco和山姆会员店一样，在每个品类里精选优质机构、医生和项目，降低消费者的决策难度，增加单SKU的订单深度，强化对供给侧的管控能力和价格谈判能力。对于技术能力强而运营能力弱的合作伙伴，我们会提供托管式的运营服务，就像我们在美学注射品类里推出的万针大师团一样，我们选择了几位优秀的注射医生，每位的注射量都超过一万例。我们为这些医生提供全方位的线上运营服务，他们只需要专注在为用户治疗，为客户治疗上。目前这个业务增长迅速，并且收获了大量的用户好口碑。

Mona Qiao (Head of Investor Relations)

We are moving towards a curated model, just like Costco and Sam's Club. By selecting high quality institutions, leading doctors, and premium SKUs in each vertical, we aim to simplify customer decision making, increase SKU transaction value, and ultimately strengthen our control over the supply side to enhance our pricing power. Additionally, for partners who are strong technically, but lack operational expertise, we offer comprehensive operational services management. A prime example of this is our master injector team, which consists of injectable specialists, each boasting an impressive track record of 10,000 treatments. We provide them with online operational support, enabling them to focus exclusively on delivering service to customers. Demand for this service has grown rapidly and received widespread positive feedback.

Jin Xing (CEO)

未来，当我们的连锁业务形成一定的用户规模，它也将跟我们的pop业务产生很好的联动。我们将发掘连锁业务用户的非标准化医美需求，并向其推荐pop上的精选机构和医生，而在更好地满足用户需求的同时，实现商业价值的最大化。

Mona Qiao (Head of Investor Relations)

Going forward, our chain of clinics will create strong synergies with our POP business as it grows to scale. By identifying non-standardized treatment in demand by customers of our chain of clinics, and promoting select high quality institutions and doctors from POP. We are maximizing both customer satisfaction and commercial value.

Jin Xing (CEO)

谢谢。

Mona Qiao (Head of Investor Relations)

Thank you。

Operator (participant)

The next question will come from Patrick He with CITIC Securities. Please go ahead.

Patrick He (Analyst)

Hello, everyone, good evening! I am from CITIC Securities' healthcare industry group, analyst Patrick He. Thank you for this opportunity to ask a question. I would like to further ask about the company's chain clinic business. On one hand, we would like to understand the speed of this chain clinic business, what are the main factors restricting the speed of opening new clinics? For So-Young, what advantages do we have that allow us to solve these restricting factors more smoothly compared to competitors? At the same time, what are the current operating metrics of these chain businesses? For example, are our clinics now able to achieve break-even and self-sustaining operations? In the future, what are the general plans for this business? OK, so let me just briefly transform, translate for myself.

Thank you for management, and thank you for taking my question. I'm Patrick from CITIC Securities. So I'm just wondering more questions about the clinical chain business. So I'm wondering what factors might constrain the speed of the clinical chain expansion, and what are the unique advantages that So-Young have in addressing these constraints, so that we can address these constraints more effectively than our competitors? And additionally, what are the current operating metrics for the chain of clinics? And for example, if our clinics have reached breakeven, and what is your the future business plans? Yeah, thank you very much.

Jin Xing (CEO)

你好，感谢您的提问。表面上看呢，影响开店速度的是选址、装修、牌照申请、人员招聘、开业营销等这个开店流程。我们通过将这些流程呢数字化，并且形成各种专业的SOP，以及有效的流程管理，已经大幅地提升了开店的效率，将平均开店的周期从今年年初的五个月左右缩短到了目前的三个月左右。

Mona Qiao (Head of Investor Relations)

In general, factors such as site selection, furnishing and renovation, license application, staff recruitment, marketing and operational costs, can impact how quickly new clinics can open up. Having said that, we've significantly improved new clinic opening efficiency by creating respective SOPs and implementing effective process management. This has helped us cut down the average time required to open up new clinics from about five months early to around three months now.

Jin Xing (CEO)

但我们认为，在大规模的开店阶段，真正影响开店速度的是以下几个因素：一、是否有足够强的获客能力，否则店开得越多，亏损越多；二、是否能招到足够多的优质医生和其他专业人员。...

三，是否有足够强的供应链能力，这是拥有价格竞争力的同时保持利润率的关键。四，是否拥有足够强的标准化管理能力和品控能力，让新店的服务水准和老店保持一致。五，是否有充足的资金？每家新店的前期投资大概在数百万人民币。六，是否有足够强的牌照获取能力。

Mona Qiao (Head of Investor Relations)

However, we believe the following factors are what truly determine how quickly we can scale on our chain of clinics. One, the ability to acquire customers. If we cannot guarantee that, we will simply incur losses. Two, the ability to recruit a sufficient number of leading doctors and specialists. Three, the strength of our supply chain, which is key to offering products at competitive price while keeping profit margins. Four, sufficient capital as the initial investment for each new clinic can cost millions of RMB. And five, the ability to obtain the necessary license.

Jin Xing (CEO)

在以上六个因素中，在获客能力方面，新氧本身是医美的流量平台，品牌用户心智的优势明显，而且我们的内容能力和线上投放能力都会让我们在获客方面更有优势。在医生招聘方面，相比于众多中小型医美机构，新氧在医生群体内的知名度以及公司规模合规性，让我们在这方面更有优势。而在供应链方面，我们通过近几年的布局已经有了非常明显的优势，随着管线中的产品逐渐拿到注册证，我们在这方面的优势将会逐渐体现在财务报表上。

Mona Qiao (Head of Investor Relations)

We are already positioned to address each of these factors. We have solid customer acquisition capabilities that leverage our strong brand recognition and the expansive user base already on our platform. This is further enhanced by our contact and online marketing capabilities. Our strong brand recognition, scale of our business and compliance with regulations, give us a significant advantage when recruiting professionals when compared to small and medium-sized institutions. On the supply chain side, our initiatives over the past few years are already beginning to yield positive results. As more of our products receive certification, we expect our competitive advantage in this vertical to positively impact our financial performance more meaningfully.

Jin Xing (CEO)

在跨区域多店标准化管理方面，我们通过新氧优选建立了中台能力，在过去一年中还在不断提升。我们认为解决标准化管理的关键在于数字化的广度和深度，这方面我们作为互联网公司有天然的优势。在资金储备方面，我们也有充足的资金储备。且在下半年我们将开启的加盟连锁模式，也让我们无需使用自有资金来开店。在牌照获取方面，目前国内除了北京、上海以外，其他地方的牌照获取都相对简单快速。在这方面，我们通过前期诊所的开设也积累了足够多的经验。

Mona Qiao (Head of Investor Relations)

By continuously enhancing our major platform capabilities through the N Prime program over the past year, we are able to ensure standardized management across multiple clinics in different regions. We believe that the key to standardized management lies in the breadth and depth of digitalization, an area where we have a natural advantage as an Internet company. We have ample capital to deploy in new clinics as well. The franchise model that are launching in the second half of the year will also allow us to expand without the need to invest our own capital. In terms of license applications, aside from Beijing and Shanghai, obtaining license in other regions of China is relatively simple and fast. Having already set up clinics nationwide, we have accumulated experience in this area.

Jin Xing (CEO)

截至今天的业绩发布会，我们在八个核心城市的黄金商业区成功开设了十四家门店，已全面投入运营，经营状况符合预期目标。目前北京保利店的店龄有十五个月，已实现盈利，并已收回投资。其他门店有三家门店的店龄在五个月，十家门店的店龄不足三个月。线下门店的成长有其客观规律，通常一家新店开业的前三个月为磨合期，然后有九个月左右的成长期，大约在十二个月后达到成熟期。以北京保利样板店为例，去年五月份试运营，八月份正式运营，收入持续增长，到今年六月，单月收入超过六百二十万元，门店层面的税前利润约一百三十万元，税前利润率达到百分之二十。这一声绩验证了我们选址、开店及运营策略的有效性，并为其他新店的快速成长提供借鉴。依托我们强大的中台能力，在压低门店综合成本的同时，也保证了大幅领先其他机构标准化履约能力。后续新氧模式进一步跑通后，随着耗材采购规模的扩大，以及自有产品管线在门店连锁门店的使用比例提升。...

进一步降低连锁业务的成本，提升利润空间。

Mona Qiao (Head of Investor Relations)

As of today's earnings call, we have opened 14 clinics in prime commercial areas. All of these clinics are fully operational and performing in line with our expectations. Our Beijing clinic has been operational for 15 months, and has already become profitable, recouping its initial investment.

Among the other clinics, three have been operational for five months, with the remaining ten for less than three months. They are following a similar growth trajectory, but will require a little more time to reach break even. To provide some more context, our clinics typically follow a well-defined growth curve. They generally go through a three-month trial period, followed by nine months of accelerated growth. Maturity is usually reached after about twelve months of operations. For example, our Beijing clinic began trial operations in May and officially opened in August last year. Since then, revenue has grown to RMB 6.2 million in June this year, with pre-tax profits of RMB 1.3 million and a profit margin of around 20%. This outstanding performance validates the effectiveness of our site selection, clinic opening and operational strategies, providing valuable insights that we will apply to other new clinics to accelerate their growth. By leveraging our platform, we have reduced overall costs while ensuring standardized services delivery, allowing us to outperform other institutions. In the future, as procurement volume and use of our self-branded products increase, costs across our chain of clinics will gradually fall and profit margin will increase.

In terms of business planning, in the second half of the year we will continue to open stores in target cities, increase single-city store density, expand the business landscape. It is expected that before the end of 2024, we will open a total of more than 20 So-Young Prime chain stores. In the second half of the year, we will open to the outside recruitment for the joint operation model, while directly operated stores will mainly serve as training centers and model stores, further elevating the standardization and replicability of the business. We expect the number of stores in the future to grow year by year, further consolidating our market position, and bringing sustained revenue growth and market expansion opportunities to the company.

Looking ahead, our future business plans are centered on expanding our clinics across target cities, with a focus on increasing the density of clinics within each city. By the end of twenty twenty-four, we plan to open over twenty clinics. In the second half of the year, we will also launch our franchise model with external partners to leverage our self-operated clinics as training centers and flagship clinics. This will enable us to standardize and scale rapidly. We expect a significant year-over-year increase in the number of clinics, which will not only strengthen our market position, but also create new opportunities for revenue growth.

Jin Xing (CEO)

谢谢。

Mona Qiao (Head of Investor Relations)

Thank you。

Operator (participant)

The next question will come from Joey Hon with Jefferies. Please go ahead.

Joey Hon (Analyst)

Thanks, management, for taking my question. My question is, how does So-Young's upstream sector differentiate itself from other competitors, and could you elaborate on the management's perspectives regarding the strategic position and the business plan for the upstream sector this year? Thank you.

Jin Xing (CEO)

你好，感谢您的提问。区别于其他传统上游厂商单一的研发、生产、销售模式，新氧凭借自身独特的生态型全品类优势，协同现有业务板块，充分发挥我们在C端用户中的口碑和品牌优势，以及B端机构网络覆盖能力，能迅速建立起新品、新产品的市场竞争力，并利用APP和自媒体矩阵进行精准的C端营销，同时依托连锁门店确保基础销量，实现全方位的联动。这种能力在行业中极为稀缺。

Mona Qiao (Head of Investor Relations)

Unlike traditional manufacturers that rely on linear R&D to production to sales model, we capitalize our unique ecosystem and full category advantage to create synergies with our existing business lines. The integrated approach allows us to amplify the strength of our brand, reputation among customers and network coverage through institutional partners. As a result, we can rapidly build market competitiveness for new products and achieve customer targeting through our app and media metrics, while using our clinics to ensure a steady stream of sales, a capability that sets us apart in the industry.

Jin Xing (CEO)

例如，我们今年推出的全新一代非手术类超声抗衰产品，曲提超声，预订量持续增长，销量超出预期，已展现出成为市场爆款的潜力，充分体现了我们团队在新品运营方面的卓越能力。...

同时，韩国品牌艾拉提的出货量也保持了稳定的增长势头。此外，公司已提前布局上游具有增长潜力的品类，拥有多类在研产品管线，预计明年有两款产品上市，2026年将会有三款新品上市。这些产品都是对标真迹和光电类市场热门明星产品，我们期待这些产品持续为新氧带来收入增长。

Mona Qiao (Head of Investor Relations)

For example, TruLift, our non-surgical anti-aging ultrasound device, generated tremendous pre-order volumes and so, sales volumes beyond expectations when it launched not long ago. This performance showcase its potential to become a market hit as the capabilities of our team. Similarly, sales of the Elasty continue to grow. In addition, we have been actively expanding our pipelines with high growth potential. Our roadmap is robust with two new products ready for launch next year and three more, and three more in 2026, all targeting popular segments of injectables and energy-based devices. We are confident these products will make significant contributions to revenue growth.

Jin Xing (CEO)

战略定位方面，我们致力于成为基于品牌数据团队为核心的生态型全品类医美上游厂商。下半年我们计划持续扩大上游人才队伍。目前，我们的核心上游团队由国内外知名厂商的资深专业人士组成，预计到年底将扩展团队规模至百人。

Mona Qiao (Head of Investor Relations)

Leveraging our broad, extensive consumer behavior data and experienced team, we are building for category upstream capabilities for our broader ecosystem. In the second half of the year, we will continue to expand our team, which is currently composed of seasoned experts from a leading domestic and international manufacturers. We aim to grow this team to a total of 100 members by the end of the year.

Jin Xing (CEO)

谢谢。

Mona Qiao (Head of Investor Relations)

Thank you.

Operator (participant)

The next question will come from Ivy Lee with Haitong Securities. Please go ahead.

Ivy Lee (Analyst)

Thank you for taking my question on the call, with current gross margins around 60%, and could you please provide some insight into the expected trend for the gross margin going forward? Thank you.

Nick Zhao (CFO)

Thanks for your question. Over the near term, macroeconomic risks, such as slowing global growth and inflationary pressures, continue to weigh on consumer sentiment. As a result, consumer willingness and capability to spend may be constrained, increasing market uncertainty. This is reflected in our third quarter revenue guidance. As we transform our business beyond the POP business, our revenue structure is undergoing a shift alongside, which is impacting growth margin levels. While our traditional information and reservation services continue to enjoy high growth margins, the increasing share of medical product sales, which have stable but lower margins, is affecting our overall margin profile. Furthermore, our chain of clinics, which is still in its early stages, has seen growth margin temporarily impacted by promotional activities.

In the short term, we expect growth margins will continue to be impacted by the expansion of our chain of clinics and medical product sales. However, as our upstream supply chain capability strengthen and operation across our clinics mature, we will anticipate a corresponding improvement in growth margins. Additionally, the introduction of our franchise model is expected to support gross margin through greater economies of scale, optimizing our profit structure even further. Thank you.

Operator (participant)

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