SBC Medical Group Holdings Incorporated

At the bottom of your screen, you will find a question box. If you have any questions, please answer them briefly and concisely. We will address them after the presentation. Now, I will hand over to Mr. Aikawa, CEO of Mr. Aikawa. The floor is yours.

I'm Aikawa, CEO of SBC Medical Group Holdings. I thank you very much for joining our conference call today despite your busy schedule. I will now explain our results for the second quarter, progress of our business, and our capital policy. First, let me provide an update on our franchise clinics. In this July, June Clinic joined our network, expanding our total number of clinics nationwide to 259, an increase of 36 clinics. since last year. And in Japan's aesthetic medicine industry, the competition is severe. However, the customers are steadily increasing continuously with 6.31 million visits annually. This scale is unmatched in Japan. Since our foundation, our top priority is to ensure that every customer feels that they are receiving value more than what they pay for and make them become our repeaters. And as a result, even now, we are remaining a high repeat rate of 72%, and we believe this is our utmost strength. However, having said that, While average customer spending continues to trend at a lower level than last year, we are seeing early signs of recovery in certain areas such as a guerrilla clinic. Therefore, moving forward with a high share by far and with the high repeat rate, we would like to provide the treatment that matches the customer needs and provide the differentiation of our clinic. Next is our FY2025 second quarter earnings. In 2024, we strategically restructured our business, existing staffing services and deconsolidating some affiliates. Furthermore, in April this year, we also revised our franchise fees. As a result, total revenue declined 18% year on year. However, this is a strategic restructuring to ensure future growth and the groundwork has been laid. Therefore, from the third quarter onward, we intend to accelerate growth. And elsewhere, Increased point redemption by customers at our clinics reduced revenue, which in turn impacted management service revenues. On the other hand, procurement and rental revenues rose due to higher purchase of medical materials and replacement of hair removal devices. The elevated effective tax rate this quarter is mainly due to non-deductibility of some executive compensation and temporary timing differences in aircraft sales recognition between Japan and the United States. So more than what we have expected, the tax we had to pay in advance was a higher than That is why the net profit became this way. This is a one-time advance payment of tax is how we understand this. Next, Jin Clinic has joined our network and also I would like to explain our business strategy progress. This July, we acquired MB Career Lounge bringing Jun Clinic into our clinic network. Jun Clinic operates six clinics across Japan and is known for customized laser treatments based on skin diagnosis provided by the adopters. So from the variety of lasers, The doctors will combine the lasers and provide a personalized recipe to the customer saying, this is your matching treatment. And that is the strength. The reason why we focused or had interest in Jun Clinic is that the way they diagnose the customers has characteristics, meaning that it is matching the current patients needs and also they provide a fixed pricing, meaning they receive, if it's 40,000 yen, 40,000 yen upfront and will leave the treatment decision up to the doctor. And therefore, it had a unique characteristics. And that is why we have contacted them and asked them to join our network. And as I said right now, This combination of fixed pricing and personalization delivers high customer satisfaction and retention. And also, the marketing cost is extremely low and is achieving high profitability. Moving forward, the June Clinic number is going to expand. Therefore, June Clinic will become a key growth driver for us, is how I think. Next is turning to dermatological aesthetic medicine in Japan. The dermatological aesthetics, looking at the data, it is having a higher growth rate. Therefore, this is a promising field with significant growth potential, and there's still room for us to further grow in this area as well. to respond precisely to diverse customer needs, we are implementing a multi-brand strategy tailored to different market segments. And this April, we launched Neal Skin Clinic, targeting expert-level customers with a focus on early adoption of global advanced treatments And once we have opened this clinic, it has already gained such popularity that secure appointments is becoming difficult. Up to now, we have been opening up different concept clinics. However, this Neal's Skin Clinic has been the fastest ramping up clinic. and we have high expectations towards it. And moving forward, we would like to roll out this concept globally, not just keeping it in Japan. Average expense per customer exceeds that of our existing clinics. And as I mentioned before, the Jun clinic is also achieving and every spend per customer exceeding our existing clinics. So these NeoScan Clinic and Jin Clinic are going to become the two strong weapons for our future growth strategy. And moving forward, for the entry-level customers, we are preparing a new clinic format within the advanced countries, Japan, when it comes the percentage of people receiving aesthetic medicine treatment is low. So moving forward, we believe that the market is going to expand by twofold and threefold. And in order to achieve that, as the number one group in our industry, we would like to implement initiatives that will enable us to do so. So for the people who are interested in aesthetic medicine, we would like to open up our doors. So the self-funded medical care and insurance-covered treatments, because insurance-covered treatments is something that the customers are easier to use. visit the clinic. So we are going to have a hybrid model aimed at those interested in beauty care with this combination. So by satisfying reliability as a medical provider and interest in aesthetic care, we aim to develop a new customer base and expand our aesthetic medicine.

Each brand is in a clearly positioned way to distinct the strength, enabling us to build a strong presence in the non-surgical aesthetic segment. We are also strengthening support for franchise clinics in response to market changes. Specifically, we advise on shifting to higher margin models and support their implementation. Two clinics completed such transition in the first half showing clear financial improvements. Three more clinics are currently undergoing similar transformations, contributing to stable, medium to long-term operations.