So-Young International Inc.

Good morning, ladies and gentlemen, and thank you for standing by for SoYoung's fourth quarter and full year 2020 earnings conference call. At this time, all participants are in a listen-only mode. After the management's prepared remarks, there will be a question and answer session. As a reminder, today's conference call is being recorded. And I'd like to turn the meeting over to your host for today's call, Ms. Vivian Xu. Please proceed.

Thank you, operator, and thank you for joining Soyang's fourth quarter and full year 2020 earnings conference call. Please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities and Litigation Reform Act of 1995. Forward-looking statements are subject to risk and uncertainties that may cause actual results to differ materially from our current expectations. Potential risk and uncertainties include, but are not limited to those outlined in our public findings with the SEC, including our actual report on Form 20F. Soyang does not undertake any obligation to update any forward-looking statement, except as required under applicable law. Joining us today on call are Mr. Xin Jing, our founder, chairman, and CEO, and Mr. Mingyu, our CFO. At this time, I would like to turn the call over to Mr. Xinjin. Please.

感谢大家参加新养2020年第四季度及全年财报电话会议。 Thank you everyone for joining us for our fourth quarter and full year 2020 earnings call. In the fourth quarter, despite the small-scale outbreak of the epidemic in many provinces in China, the overall medical industry and company business are continuing to advance, especially as our number of users has maintained a strong growth trend. In the fourth quarter, the mobile end averaged 8.9 million. Compared to the same period last year, it increased by 142%. This is mainly due to our continuous expansion of platform content advantages and promotion of The M-Digit 2020 with a solid quarter

as total revenues reached RMB 425 million, an increase of 19% year-on-year, in line with our previous guidance. Although there were small outbreaks of COVID-19 across some provinces in China during the quarter, the medical aesthetics industry as a whole and our business remained on track. In particular, our user base kept a strong growth momentum, with average mobile MAUs 8.9 million in the fourth quarter, an increase of 142% from a year ago. The growth was mainly attributable to our efforts to continuously expand our content library that caught us to users' demands, as well as the launch of innovative service based on advanced technologies, such as the VR store and live diagnosis. Our progress was well-recognized among medical service providers, leading to new cooperation with many of them. In the fourth quarter, the number of paying medical service providers on Soyang's platform reached 4,746, up 40% from the prior year. Looking back at the year 2020, due to the COVID-19 pandemic, the industry has slowed down.

The U.S. and U.S. projects have a longer cycle, More expensive surgery projects have been hit hard, but they are still recovering relatively slowly. At the same time, we found that institutions with better management capabilities and better service skills have improved their own competitiveness in the epidemic by cooperating with faith-based platforms. This has significantly improved the efficiency of customers. In the future, with the gradual maturity of regulators and each participant in the ecological circle, Due to the impact of the COVID-19 pandemic, 2020 was a challenging year for the metastatic industry, especially for surgical treatments. As costs are generally much higher,

and people tend to take more time to consider different factors before making final decisions. As of date, the surgical category is on track to recover at a relatively slow pace, but deepening their cooperation with so young medical service providers with stronger operation capabilities and offered comprehensive services were able to outperform tough market conditions, thereby greater, sorry, thereby greatly improving their customer acquisition performance. Looking ahead, along with the tightening regulatory environment and the development of various parties throughout the value chain, we believe the industry will progress in a better and more orderly manner, with more trust and transparency among all service providers, demand from end users, will eventually ensure the sustainable and healthy growth of the materials industry.

Now I would like to share with you some takeaways and do a recap of this past year. 首先,我们通过丰富的优质内容和高价值的专业信息 to continuously increase the number of users and the degree of user participation. After a rapid growth in the number of users in 2020, the services and content of the platform have been recognized in larger and broader user groups. These user groups have some common characteristics, namely that they have a better understanding of medical professional knowledge and information, and are more inclined to study and compare different treatment plans to meet their own consumer needs. By the end of 2020, there were 4.7 million articles published on the platform. In 2020, the total number of articles published on social media platforms was 13.2 billion. Compared to 2019, the number has increased by 150%. At the same time, we have successfully launched some new content promotion activities, such as the New Yang Experience and User Encouragement Project.

We continue to drive engagement and user growth with enriched, high-quality content and invaluable information. Building on the success of our 2020 user growth, we are now recognized by a larger and wider user base for our service and trustworthy content. This group of users share similar attributes. They are more socially informed and knowledgeable, and spend time researching to further evaluate their options and needs. By the end of 2020, beauty diaries on Soyang's platform reached 4.7 million, and the average monthly views of the articles we distributed on various social platforms reached 1.32 billion for 2020, an increase of 150% from 2019. Meanwhile, with the successful launch of a series of marketing campaigns, such as SOIA Ambassador and User Incentive Programs, we continue to provide our content creators with excellent support on multiple levels, which helped grow our user base.

In 2020, we proposed the brand positioning as the most trustworthy platform in the medical industry. We established the XinYang Public Health Fund as the first public health rescue project established by China for black medical victims, and took on the social responsibility of the enterprise, and also improved the credibility of public faith in the industry. In this year's hot-spot variety, Sisters Who Make Waves, we have greatly improved the brand reputation and brand image of XinYang. The relevant Weibo topic has a reading volume of 437.6 billion. At the same time, the domestic natural flow has increased by 228%.

Overall, the attribute of continued success to our broad content library, engaging community experience and rising brand awareness. In 2020, we established our brand proposition as the most trusted platform in the metastatic industry. As part of our social responsibility and awareness initiatives, the Soyang Charity Fund was founded as the first charity relief program in China for victims of unlicensed or illegal medical procedures. This year, as ran in the blockbuster variety show Sisters Who Make Wraiths, significantly raised Soyang's brand awareness and the brand image. The views of related Weibo trading tops reached 43.76 billion, while the organic traffic on our site surged by 228% year-over-year.

The business of the institutions has been gradually restored. Institutions with limited cash flow and lack of online operating capabilities urgently need to find effective solutions to obtain target users. In the second half of 2020, we launched a new member product on the platform to help small and medium-sized institutions obtain user traffic and sales clues. In order to solve the situation of the current flow of cash flow during the epidemic, we launched VR watching products. to highlight the individuality of the unit and focus on the product to accurately identify and gain user attention. In terms of operating support, based on the professional skill advantages and strengths of the individual customers, we manage them according to the number of hands, non-hands, and new customer expansion into different teams. Thanks to our strong user growth and brand popularity, medical institutions have become more aware of the value of the belief in the community of users. more institutions joined the collaboration with XinYang.

Secondly, we enhanced our service providers by helping them with better target customer acquisition strategies. Our service provider partners were heavily hit by the COVID-19 pandemic in early 2020, but gradually recovered during the year as the business reopened and improved. Those with limited cash flow and less capability in online marketing will need to find efficient solutions to reach their target audience. In the second half of 2020, we rolled out a new membership product on our platform to help small and medium institutions acquire potential users and more sales leads. To address the restricted food traffic to offline stores during the pandemic, we launched a VR store product to highlight features of each store and their major products to attract and target a wider range of user interests. As for operational support, we created dedicated teams for surgical, non-surgical, and new business development based on the specialization and focus of each hospital. Thanks to our strong user growth and renowned brand name, service providers ever more aware of the value of our users and have partnered with us for increased visibility.

For example, in 2020, we have completed more than 550,000 video interview services and 70,000 live broadcasts. We continue to improve the algorithm, while prioritizing high-quality original content, to ensure that the recommended content matches the needs of users. All these measures effectively save time for users and doctors, shortening the consumer's decision period to choose the right treatment for their own needs.

Thirdly, we continue to invest in R&D and capitalize on advanced technology to serve our users. As COVID-19 kept our users away from the in-person doctor consultations, we swiftly launched a series of online products to provide remote services with user-friendly technology. For example, in 2020, we completed a total of over 550,000 live diagnoses, and 70,000 live broadcastings. We continue to improve our algorithm to ensure the right content is distributed to the right users while promoting high-quality original content. All these approaches effectively save time for users as well as medical professionals and shorten the consumer's decision process when choosing the appropriate treatments for their needs.

Now, I would like to give you some updates on our strategies for 2021.

On the user front, as our user base has been growing quickly over the past few years, an increasing number of new users joining our communities may be inexperienced and have limited knowledge about metastatic treatments. Therefore, we are in the process of refining our operations to address the needs of users at different levels. and build loyalty and high retention rate over time.

We will continue to assist community users to cooperate closely with doctors and medical professionals to produce more diversified high-quality content to reach and attract users' attention. Through faith in the influence of our own brand and effective promotion activities, we will accurately target consumers and improve electricity consumption transformation. For example, in March this year, we launched the New Year's New Year's Day. In the early days, we worked with KOL and Dawei to popularize the concept of healthy skin and identify beauty skin products, promote topic content in the community and increase user attention. As a result, in the New Year's Day activities, the promotion effect is more obvious. Buy a higher level of skin products to meet the needs of users.

We are continuously enhancing our community-based content offering, working closely with medical professionals to find new ways to reach new users and attract user interest by generating more diversified and high-quality content. Through Soyang's brand awareness and effective marketing campaigns, we promptly convert high-demand volume among new users into real transactions. For example, this March, We go out in festival. Prior to this event, we partner with key opinion leaders and sources who shared their professional knowledge about how to sleep down using healthy methods and commented on various medical sleeping treatments. These social conversions influence a large number of users to consume content related to these hard and training topics on our platforms. Therefore, during our theme festival, we were able to meet demand by promoting sought-after treatments that were well-received.

We will continue to strengthen our advantages in traditional surgical projects. In this field, Xinyao as the leading platform is widely known among domestic consumers and medical institutions. We will continue to use years of operating experience and close relations with medical doctors to provide high-quality services.

On the business front, we believe non-surgical categories will continue their strong growth in 2021. In this area, we plan to strengthen our standardized service process to enhance service performance. We have also expanded the network coverage of our partner service providers and optimized our operations for key categories. At the same time, we will continue to strengthen our traditional advantage in the surgical sector. We are well recognized by consumers and medical service providers as the leading medical aesthetics information platform in China. And we will continue to leverage our multi-year operating experience and close relationships with top-tier doctors to provide high-quality services.

In short, we believe that the Chinese medical industry is on the path of rapid growth. As the leaders of the industry, We have the responsibility to promote the establishment of industry regulations to make the medical industry better and better, provide real value services to users, and look forward to the future. We will fully utilize our competitive advantage in terms of content, technology, and users, and use users as the center, and dive deep into the industry industry chain, and use medical as an entry point to build the most trusted medical service platform.

In summary, we believe that the Chinese medical asset industry is on a vigorous growth trajectory. As the leading player in the sector, we have the responsibility to make it more professional and ethical by promoting the development of industry norms and to provide our users with services of real value. Looking forward, we will fully leverage our competitive edge in content offering, technology, and user base. focus on user-centric process, and continue to explore deeply into the medical-scientific industry value chain, and became the most trusted platform in the broader consumer healthcare service industry. I would now like to turn the call over to Ming, who will go through the financials for the first quarter and for year.

Thanks, Cass. Please be reminded that all amounts Coated here will be an RMB term. Please also refer to our earnings release for detailed information of our comparative financial performance on a year-over-year basis. For the fourth quarter 2020, total revenues were RMB 424.6 million, up 18.6% year-over-year and in line with our guidance. The increase was primarily due to an increase in the number of pain medical patients whose operations covered as the impact of COVID-19 continued to ease in China. Within total revenues, information services revenue was RMB 335.9 million, up 27% year-over-year. Reservation services revenue was RMB 80.7 million, a decrease of 5.3% year-over-year. Cost of revenues was RMB 63.6 million, up 8.7% year-over-year. Total operating expenses were RMB 331.2 million, up 48.6% year-over-year. Sales and marketing expenses were RMB 210.4 million, up 59.2% year-over-year, primarily due to an increase in expenses associated with marketing activities and payroll costs. GNIA expenses were RMB 49.9 million, up 38.4% year-over-year, primarily due to increasing payroll costs associated with the expansion of administrative employees. Research and development expenses were RMB 70.9 million, up 29.6% year-over-year. The increase was primarily attributable to an increase in payroll costs. Income tax expenses were RMB 13.0 million, compared with income tax expenses of RMB 29 million during the same period last year, the change was mainly due to the decrease in taxable income. Net income was RMB 37.7 million compared with the net income of RMB 69.9 million in the fourth quarter of 2019. Non-GAAP net income was RMB 62.9 compared with RMB 86.4 million non-GAAP net income in the same period of 2019. Basic and diluted earnings per ADS attributable to ordinary shareholders were RMB 0.36 and RMB 0.35 respectively, compared with RMB 0.68 and RMB 0.65 respectively during the fourth quarter of 2019. For the full year 2020, total revenues were RMB 1.29 billion, up 12.4% year-over-year. Within total revenues, information services revenue was RMB 962.1 million, up 15.4% year-over-year. Reservation services revenue was RMB 332.9 million, up 4.6% year-over-year. Cost of revenues was RMB 212.2 million, up 6.8% year-over-year due primarily to an increase in service costs related to online platform development. Total operating expenses were RMB 1.14 billion, up 41.1% year-over-year. Net income was RMB 4.9 million compared with RMB 176.7 million in fiscal year 2019. Non-GAAP net income was RMB 97 million compared to RMB 280.9 million in fiscal year 2019. Basic and diluted earnings per ADS attributable to ordinary shareholders were RMB 0.05 and 0.05 respectively compared with basic and diluted earnings per ADS attributable to ordinary shareholders of RMB 1.64 and RMB 1.8. 54 in fiscal year 2019. Now for our balance sheet. As of December 31st, 2020, we had total cash and cash equivalents, restricted cash and term deposits. Term deposits and short-term investments of RMB 2.68 billion compared with RMB 2.84 billion as of December 31st, 2019. For the first quarter of 2021, Soyang expects total revenues to be between RMB $320 million and RMB $330 million, representing a 75.3% to 80.8% increase from the same period of 2020. The above outlook is based on the current market conditions and reflects the company's preliminary estimates of market and operating conditions. and the customer demand, particularly in view of the potential impact of COVID-19, the effects of which are difficult to analyze and predict, which are all subject to change. This concludes our prepared remarks. I will now turn the call to the operator and open the call for Q&A. Operator, we are ready to take questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone and white for your name to be announced. If you wish to cancel your request, please press the pound or hash key. If you ask a question in Chinese, please repeat it in English immediately. Please limit to one question at a time. If you have follow-up questions, please request to rejoin. So once again, ladies and gentlemen, it's star 1 to ask a question. This question comes from Thomas Chong from Jefferies.

Thanks management for taking my questions. My question is more about 2021 and outlook in the next couple of years. What is our strategy on surgical and non-surgical treatments? And also, what are the similarities and differences between you and your competitors in terms of advertising and operation advantage? Thank you.

谢谢你的提问。 2021年我们在非手术品类的运营方面有这样几个侧重点。 第一,在低客单价的项目上面,我们会加强SKO的数量, and some of the priority advantages in terms of price, and strengthen the priority advantages of SKO covering the domain and category. In the project of medium-high price, we will use XinYang's每次卡 to standardize the service, improve the quality of the contract, and catch the people of medium-high price. Then, the third point, we will strengthen the link between the experience officer and XinYang's self-media organization and the top oil manufacturers. First, on the non-surgical categories,

The number one is to treatments with low average transactions value. We want to strengthen the leading position in the quantity, pricing, as well as the coverage of the SCU. And then to those middle and high average transactions values, we're going to standardize our services and improve performance with Soyang Pass to target mid to high end user groups. Then we will steal through our Soyoung Ambassador Program and the new media team which can enhance our partnerships with upstream OPMs and increase the amount of content on non-surgical treatments in our community and also drive more user engagement. And lastly, we will promote more shopping festivals such as the Anti-Aging and Slim Festival and other promotional activities to strengthen consumer awareness of our professional advantage in non-surgical categories.

In terms of surgery, our focus is, first of all, to increase the number of doctors. By introducing a large number of high-quality orthopedic doctors through the Lubausi medical list, including doctors from some public orthopedic hospitals. Second, by introducing a large number of high-quality orthopedic doctors On the surgical categories,

First of all, we will expand the list of doctors by introducing a larger number of top-tier surgeons with our embryo doctor list, including doctors from public hospitals. Also, we will throw features like SoYoungDoctor, public account, live diagnosis, and QA. In this way, we could help doctors to improve efficiency while upgrading their IPs. and also to highlight their differentiations. Then in some sectors, like the eyelid surgery, rhinoplasty, breast, and also some like the fat transfer, we will set up dedicated teams for each category. We will restart the overseas surgery business in Korea and Japan, according to the epidemic situation overseas, and policy changes on traveling abroad.

In terms of market placement and operation, we see that only XinYang can continue to invest in the brand positioning of a professional medical platform. Other products, either comprehensive e-commerce platforms, cannot establish the image of a professional medical platform, or the volume is too small to continue to invest.

In terms of marketing, we are the only platform positioned as a vertical professional medical aesthetics. Our competitors are positioned as comprehensive e-commerce platforms, which makes it too difficult for them to be seen as a focused platform. or they are too small in size and have difficulty to invest sustainably. In terms of operation, our dedicated team allowed us to fine-tune our service spread across different categories and regions. That's all. Thanks.

Thank you. Our next question comes from Brian Gong from CT Group. Please go ahead.

I will translate myself. Thanks management for taking my question. My question is about the recovery of, you know, the plastic surgery and the medical aesthetic industry, especially after the Chinese New Year. And when does management expect to see the full recovery? And when it will translate into our revenue? Thank you.

However, the good user base and high-quality content and community construction have effectively engaged new and old users, so we can see that in the fourth quarter of last year, MAU was close to 9 million and continued to maintain a growth of more than 100%. In terms of institution investment, we also see that the investment confidence of institution customers is gradually increasing. In the fourth quarter, the number of paid institutions increased by 41%, reaching 4,746. The investment budget of individual institutions is also steadily increasing in 2020. In terms of surgery, because of the high price, it has been greatly affected by the epidemic, so the recovery is relatively slow. However, in terms of non-surgery, the trading size of single stores and the high price compared to the peak of the fourth quarter last year still have a certain gap, but from the market situation at the beginning of this year, we found that the demand for consumption has significantly increased.

The uncertainties of the pandemic have led to weaker consumer confidence overall. However, thanks to our engaged user base, high quality content, and community building capabilities, we have effectively engaged repeated users and added new users on our platform. So you can see that the MAU during the fourth quarter was close to nine million, and this maintained a growth momentum of more than 140%. And with the continuous increase of demand from medical settings, we could see that the clinics and hospitals invest more in marketing spending, especially in the user acquisition. So in the fourth quarter, we actually grow our paying medical service provider number to over 4,700 members. And this is the highest growth compared to the several quarters last year. And this average ad budget of each customer also grows steadily in last year. Surgical treatments were heavily hit by the epidemic due to the market high average transaction value. Overall, the industry is on the right path to recover, but we could see still some gaps in transaction scales as well as the transactions value for average customer compared with the peak period in the fourth quarter of 2019. So based on the situation in the earlier 2021, consumer demands grow. especially from the non-surgical sector, because this will automatically drive the overall market growth healthily.

That's all. Thanks. Thank you. Our next question comes from Leo Cheung from Deutsche Bank. Please go ahead.

金总,余总,Vivian,晚上好。 感谢接受我的提问。 我的问题是, Thank you for taking my question. My question is, in the face of fierce competition, what strategy will you adopt to compete with others in the industry? And in the long term, what are the entry barriers? Thank you.

In summary,

Our competitive strategy is to differentiate from our peers, which includes three main points. First is focus on teams, excellent services, improve user experience. And secondly, combine e-commerce, community, and AI technology to improve user decision making efficiency. And the third is strengthen brand awareness and increase mind share of users. and continue to build on our reputation as a professional medical aesthetic service platform.

In focusing on the core of medical service and improving service quality, our view is as follows. Currently, the essence of medical e-commerce is online group purchase. The mainstream operating methods of medical institutions are online low-cost group purchase flow, offline consultation, order transfer, The user will be deceived, and the service quality will not be guaranteed, and the user will not feel good. We also noticed that in the product platform, through this low-cost flow mode, we got some growth in order volume and GMV, but the user's reputation is also very obvious. And we will focus on the service, extend it to the offline, to guarantee the user's contract quality. In the non-management aspect, we provide every time card, Enhance the standardization and control of treatment and service after the user is discharged And through the mysterious person visit mechanism and user evaluation mechanism The service institutions of each card are superior and superior Continue to improve user experience In the field of medical surgery On the one hand, through the selection of green gem list Continuous gathering and selecting the best plastic surgery doctors On the other hand, we also began to build offline shared hospitals Through the mode of shared operating room On the first point, right now, currently most institutions do use the online platform as a group buying channel to direct traffic into their offline shops. Customers who were attracted by the low price

are usually persuaded to update their packages and pay for much higher services or treatment by sales consultants. Users often feel cheated and that the service quality is not guaranteed. We have observed that platform with this business model do achieve significant growth in orders, in terms of orders or GMEs, but we do believe that in the long run, it often results in negative brand sentiment. We will continue to privilege service quality and extend our service online to give greater security to the performance. For non-surgical category, we will continue to promote Soyang Pass to enhance the standardization of service and treatment. Through reviews from third-party investigation and consumers, we were able to work selectively with the best performing institutions and continuously improve user experience. For medical aesthetic surgeries, we continuously researched and select top-tier plastic surgeons for our 2021 Embroidered Doctor list. At the same time, we also provide top-tier doctors with shared facilities and operating room in order to control overall quality on each treatment.

In terms of improving user decision-making, we are the only strong platform for e-commerce and community. And our AI tools, including facial style detection, skin detection, etc. have been used more than 15 times. The combination of these three allows us to continuously improve user decision-making efficiency.

In terms of improving users' decision-making process, we are the only platform to have both e-commerce and community-building capabilities. In addition, our AR tools have been used over 1.5 billion times, including those for facial and skin mapping techniques. The combination of these three factors have allowed us to continuously improve the efficiency of user decision making.

另外持续的品牌建设和社交媒体的投放也让我们对用户心智的占领日益加强。 Lastly, our continuous brand building and campaigns on social media have also strengthened our brand awareness among users. 这三者的结合我觉得就是新养的竞争壁垒。

So this should be the most important and forbearance for so-and-so. That's all. Thank you.

Thank you. Our next question comes from Vincent Yu from Needham & Company. Please ask a question.

Thank you for accepting my question. Congratulations. My first question is about the users. The trend of the growth of users in 2020 is quite obvious. I would like to ask Manager Chen, what is the expectation of the growth of users in 2021? In addition, in the case of the rapid growth of current users, what do we think of the trend of the transformation of users in 2021? I would like to ask another question. As you mentioned several times, regarding the每次卡 , My first question is about the user growth and the motivation. In 2020, we have a very strong growth momentum in user growth. And what do we think about the trend in 2021? And what's the motivation or expectation in 2021? And my second question is about the story on Pulse. So how do we think, can management share some insights about our plan or strategy around the sodium parts, which seem to be a very important step for the user experience standardization. Thank you.

Thank you. In 2021, our user growth will continue to follow a strategy of 2020, but we will focus more on the acquisition of high-quality users.

We will maintain our 2020 user growth strategy in this year, execute more forcefully, and focus on the acquisition of mid to high-end and premium users.

We can see that in most of the public consumption areas, the distribution of users is in the shape of a golden tower, which means that the most price-sensitive users stand at the bottom. In the field of e-commerce, users present an olive branch. There are few users who are sensitive to price. And users who are sensitive to quality, effect, or service are the real mainstream. We also think that these high-quality users are the mainstream market for e-commerce. The price of their single e-commerce consumption is generally above 1,000 yuan. The advantage of Xinyang in this group is very obvious. And we will continue to expand and consolidate this user group.

Users typically fall into a triangular distribution model in most mass consumer categories with price-sensitive users accounting for the majority. However, for medical aesthetic services, users usually fall into a life-shaped distribution structure with high-end and premium users, forming the majority of the mainstream market. These price-insensitive users are willing to pay for quality service and better results for the treatments and the transaction value of treatments are usually above 1,000 RMB. We have significant advantage among these users and will continue to reinforce and expand our reach to them.

In the third-party market research report, we found that According to the third-party market research, in terms of the user's perception of Soyang as a professional medical aesthetics platform is by far ahead of our peers.

In this year, we will continue to invest in our branding and consolidate our advantage in users' mindshare.

In addition, we are continuously improving the effectiveness of our user acquisitions.

target users through short video platforms and social media channels, which has helped us acquire more premium users.

For monetization, we will insist on the principle of best user experience first, by continuing to expect our partner institutions' patience and a regularity

reviewing the alternatives of drugs and medical services used by those offline shops, strictly prevent fake transactions and reviews to avoid misleading consumers. At present, we believe we are the most compliant medical aesthetics platform in the market, and we will continue to comply and promote industry standards to strengthen our brand image. We think that this may have some short-term impact on our revenue, but in the long term, we will still stick to the strategy because we believe this is the right one for long-term growth and it will bring more value added service to our loyalty customers.

Regarding the card you mentioned, I can introduce some more. Meizuka is different from XinYang's e-commerce platform mode. The e-commerce mode means that as long as the organization's support is regular, it can be registered. But we all know that a regular organization may not be the best service and technology organization. And through user evaluation, it cannot fully reflect the good and bad of the organization. Meizuka actually uses another mode.

Unlike the traditional service to our end customers, usually those qualified institutions could register on our platform as they have the license or some follow all the restrictions. But for the Soyang Pass, it's actually rounded on behalf of ourselves. So this is actually using our branding. to promote on our platform.

In all of our regulatory institutions, we strictly select a part of the institutions that are very special in this area to provide services to consumers, and the whole project is priced by faith. Then we enter these institutions in our service system through mysterious people and user evaluation mechanisms to ensure the standardization of the quality of the entire service.

First of all, for those products shown on our Soyang parts, they are standardized and more safe and also could be in a certain price. In this way, we kind of to solve our SOP process to working with those offline institutions and hospitals, and also working with those selectively, selectively working with those Offline institutions, we kind of to set up the price, and this price is certain. In this way, we could to improve our user experience, especially from the online part.

So in Mesica, we are actually very different from the platform business. We are going to do the design of the image. We are going to do the customization of the SOP. We are going to select institutions, and then we are going to do training for the institutions, and then we are going to use certain mechanisms to control the quality of the service of the institutions. These are some of the points that are more important than the original platform business. In fact, since the second half of last year, we have been in some cities to polish the service process of each card. So far, we have seen a lot of positive and positive We think that we actually go deeper into the cooperation with those offline institutions, ranging from the products designer and also the SOPs designer, and also to control the whole quality of such services.

And we think that we will first test it in several cities. And if it's successful and to be well received by our end users, we're going to expand it to the whole regions of China.

Thank you.

Okay, that's all. Thanks.

Thank you. Our final question today comes from Shi Qi Ge from CICC. Please ask a question.

Thanks management for taking my question. So my question is regarding the reservation service. We can see a decline in reservation service revenue in both absolute and relative ways. So how do you boost the sales of reservations on your platform in the future to form a complete closed-loop business model? Thank you.

In the short term, on the consumer side, we will continue to strengthen the guarantee of the reservation performance in terms of like the advanced payment, insurance, and the distributed mediation. On the merchant side, we will use online payments as a tool to strengthen our traffic distribution and conversion, promoting merchants to guide users to play orders online.

In the long run, I think that in the nature of each e-commerce platform, including XinYang, it is still a group purchase mode. The group purchase mode is relatively a backward e-commerce mode. A better e-commerce mode must be online, offline, connected, and closed. I think it will include the following characteristics. The first is the standardization of products or services. The second is the onlineization of product storage and medical discharge. The third is that the data of the e-commerce platform and the SaaS or HITS of medical institutions are in real-time communication. This must-have e-commerce model can provide consumers with better service experience and can also help institutions improve operating efficiency. Xinyao will gradually implement e-commerce model upgrades on Metzika, which allows users to place orders on the platform to form a more complete sales loophole. At the same time, each card has the characteristics of buying multiple times, which also makes consumers more familiar with the platform. Meizuka currently covers 10 popular products in 11 cities. The top-ranking products, such as super-small bubbles, light and dark skin, and other popular cities are mainly concentrated in the north, Guangzhou and Shenzhen and other first-tier cities.

Currently, I think that all the medical aesthetics e-commerce platforms, including Soyal itself, actually adopt a good buying model, which is a relatively outdated e-commerce model. A better medical aesthetics must compromise of online and offline marketing channels to form a closed-loop ecosystem, which should include the following characteristics. The first is standardize products or services. And the second should be the online management of inventory and reservations. And thirdly, but not the least important, is conduct real-time communication between e-commerce platform and medical service providers through technologies, tools like the SARS or HIS. So we believe this closed-loop e-commerce model should provide consumers with a much better customer experience and help service providers and institutions improve operational efficiency. And we think that we will gradually upgrade SoilPath to form a closed-loop sales model, which will make it easier for users to place orders as thanks to a better user experience. Meanwhile, Soyang Pass features a one-time purchase, multiple service model, and have increased the user's interest to our platform. And we believe that right now Soyang Pass actually covers more than 10 cities and more than 11 cities and covered 10 hot categories. The most popular categories include like the skin cleansing and some laser projects. And the hottest cities mainly include top tier cities like Beijing, Shanghai, Guangzhou, and Shenzhen. That's all, thanks.

Thank you. So ladies and gentlemen, we have reached the end of the question and answer session. So with that, we conclude our conference for today. Thank you for participating or disconnect.