So-Young International Inc.

Q3 2021 Earnings Conference Call

11/19/2021

spk05: Good morning, ladies and gentlemen, and thank you for standing by for So Young's third quarter 2021 earnings conference call. At this time, all participants understand only mode. After the management's prepared remarks, there will be a question and answer session. As a reminder, today's conference has been recorded. I would now like to turn the meeting over to your host for today's call. Ms. Vivian Chiu, please proceed.
spk02: Thank you, operator, and thank you for joining Soyang's third quarter 2021 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 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 risk and uncertainties include, but are not limited to those outlying our public findings with ACC, including our annual report on Form 20F. Soyang does not undertake any obligation to update any forward-looking statement, except as required under applicable law. Join us today on call are Mr. Xin Jing, our co-founder, chairman and CEO, and Mr. Ming Yu, our CFO. At this time, I would like to turn the call over to Mr. Xing Jing. Please, please.
spk04: 大家好,感谢大家参加新养2021年第三季度的会议。 Thank you all for joining our earnings call for the third quarter of 2021. We continue to execute our growth strategy during this quarter and are pleased to deliver solid financial performance. Despite the challenges and impact of COVID-19 in parts of China,
spk02: Revenues grew to RMB 431.5 million, in line with our prior guidance, an increase of 20% from the same period of 2020. Now, GAM-Netcom attributed to Seoul International was RMB 28.9 million, an increase of 9.6% from the third quarter of last year.
spk04: In the third quarter, the resurgence of COVID-19 in several cities across the country resulted in weaker than normal consumer sentiment and heightened containment measures.
spk02: had a negative impact on our business. Having said that, we firmly believe that the long-term outlook for the metastatic industry remains strong and intact.
spk04: In the third quarter, our main business progress in terms of operation, first of all, our team cooperated with medical institutions to strengthen brand support for the platform. The goal is to continue to increase the sales conversion rate. The number of paid medical institutions on the XinYang platform has reached 4,841. Compared with the same period last year, 4,096 increased by 18.2%. By promoting pre-and post-sales services, the information demand gap between online and offline has been reduced. XinYang has become the first comprehensive medical service platform with a comprehensive medical service platform. Information service revenue maintains file growth. Let's talk about our strategy progress on our operation during the quarter. Firstly, our team worked timely with
spk02: tirelessly with institutions to increase brand endorsement on the platform with the aim of improving conversion rates. The number of paying medical service providers on our platform was 4,841, an increase of 18.2% from 4,096 in the third quarter of 2020. SoYang has become the premier one-stop comprehensive medical aesthetics and medical service platform to facilitate pre-sales and after-sales services, thus closing their information gap between online and offline demands. Information service revenue maintains daily growth, increasing 21.1% year-over-year to RMB 321.6 million. The number of medical service providers subscribing to Soyang's information service were 2,242 up from 2,146 in the prior year. In terms of user experience, we focused on a few key areas, strengthening the digital capabilities of Soyang's platform, increasing personal data protection, and improving the customization of community content based on individual preference and purchasing behaviors.
spk04: In terms of Facebook, users still have a lot of demand for Facebook projects. We will continue to increase the number of downloads on the platform, to optimize the online trading experience, provide transparent prices and more attractive incentive measures for middle-end users, especially those who have been repurposed many times, as we continue to strengthen the control and service supervision of positive products. With the standardization of deepening FACEL, we can see that users' protection rights on the online market are gradually increasing, and users' loyalty to the brand continues to rise. In September, the number of SKU on the platform FACEL project exceeded 140,000, On the non-surgical product side, the popularity of non-surgical categories remains high in terms of user demand.
spk02: We further increase the number of SKUs on our platform to optimize the online transaction experience with more transparent pricing and attractive incentives. for the users, particularly as a way to reward our loyal, repeated users. Our online action project has gained much traction and demonstrated progress in brand loyalty as we continue to strengthen the management and control of product authenticity and supervision over treatments and services. Alongside the standardization of non-surgical procedures As of September, over 140,000 non-surgical SPUs were available on our platform, an increase of 26% compared with the same period in last year. As a result, in third quarter, revenue contribution of our non-surgical business increased to 49% of total revenue, up from 43% in the third quarter of 2020.
spk04: Secondly, we worked to ensure consistent standardization of non-surgical procedures and service while helping institutions
spk02: to enhance contract performance and authenticity of high-quality service. We will continue to grow our market share in the non-surgical categories and expand our go-to-market strategy by introducing more wholesaling and popular products that address different customer needs.
spk04: For the surgery-related projects, we continue to optimize our operations and provide more resources for the private sector to expand our advantages in the field of surgery. We have upgraded the program projects
spk02: To refine our operation in the surgical categories, we allocated more resources to support reputable doctors and expand our advantage in this area. We upgrade our customized treatment program to help user find personalized solutions consisting of effective diagnosis and treatments by matching them with the right doctor and the professional consultant.
spk04: Next, I will introduce the latest progress in the combination of the Wuhan flagship business. We completed the acquisition transaction in three weeks. This acquisition will expand our institutional network and strengthen the user service experience. At the same time, this will also become our exploration of more Now I would like to give you an update on our business integration with Wuhan Miracle Laser Systems.
spk02: We closed the deal in the middle of Q3. The acquisition of Wuhan Miracle has helped us expand our institutional network fulfillment service and is a great example of our strong growth strategy exploring new collaboration opportunities with equipment and device manufacturers as well as medical drug providers. We have set up a flagship store for Wuhan Miracle on Soyang's platform and added online products to Soyang Pass. As of early November, Soyang had established business relationships with more than 30 institutions derived from Wuhan Miracle Network. Going forward, we will scale this service model and seek opportunities with upstream product providers through trials that will connect them directly with many of our users.
spk04: At the regulatory level, we are still closely communicating with the regulators, pursuing industry guidance and strengthening platform governance, implementing strict internal audit mechanisms for all doctors and institutions in the data warehouse, platform content and services, On the regulatory front,
spk02: we remain close communication with regulators and follow industry guidelines by promoting self-discipline on platform governance, conducting strategic internal review mechanics on all doctors and institutions in our database, and facilitating rigorous approval process on platform content and service offerings. As a leader in the medical aesthetics and medical industry, We particularly focus on the accuracy of the online information we provide on medical-static services, assist our institutional partners with compliance audits, and promote the standardization and orderly development of the medical industry.
spk04: 中上手术,新养的目标是在提供医美医疗信息,解决行业信息不对称的同时, 搭建一个B2B平台,开展与上游厂商的合作, To summarize, Soyang's goal is to provide comprehensive medical statistics
spk02: and a matter of information that will resolve information asymmetry within the industry. Meanwhile, we are developing a B2B platform to enhance our cooperation with upstream product suppliers. In addition, we are strengthening our community operation capabilities on the supply end. and improving overall user satisfaction rate by facilitating value-added service in the treatment execution phase. We believe this will help us extend our reach to a growing number of statics users and raise the size of total addressable markets. As we continue to grow our reputation as the most trusted metal statics and metal care platform in China, we will further strive to raise the standardized standards and the quality of the industry.
spk04: Let me invite Ming to give us an overview of the results of the water. If you want to do an overview up to the QA. Thank you.
spk00: Thanks, Kez. Please be reminded that all amounts quoted here will be in RMB. Please also refer to our earnings release for detailed information of our comparable financial performance on a year-over-year basis. For the third quarter 2021, total revenues were RMB $431.5 million, up 20% year-over-year from RMB $360 million. In line with our previous guidance, The increase was primarily due to an increase in the number of paying medical service providers and the consolidated revenues of RMB 48.1 million in 21Q3 from Wuhan Miracle. The number of paying medical service providers on the platform were 4,841, an increase of 18.2% from 4,096 in the third quarter of 2020. The total number of medical service providers subscribing to information services on Soyang's platform was 2,242 during the quarter, compared with 2,146 in the third quarter of 2020. Within total revenues, information services and other revenues were on the 369.7 million, up 39% year-over-year from on the 265.7 million, Reservation services revenues were RMB 61.7 million, a decrease of 34.3% from RMB 93.9 million in the third quarter of 2020. Cost of revenues were RMB 89.6 million, up 63.7% year-over-year from RMB 54.7 million in the third quarter of 2020. The increase was primarily due to the consolidation of the cost of Wuhan Miracle. Cost of revenues included share-based compensation expenses of RMB 4.8 million compared with RMB 5.1 million in third quarter of 2020. Total operating expenses were RMB 322.5 million, a decrease of 3.7% from RMB 335.1 million in third quarter of 2020. Sales and marketing expenses were RMB 190.7 million, down 13.9% from RMB 221.6 million a year ago, primarily due to a decrease in expenses associated with branding and marketing activities. Sales and marketing expenses included share-based compensation expenses of RMB 2.2 million, compared with RMB 2.2 million in the corresponding period of 2020. GNIA expenses were RMB 54.7 million, up 8.7% from RMB 50.3 million a year ago, primarily due to the consolidation of general and administrative expenses of Wuhan Miracle. GNIA expenses include the share-based compensation expenses of RMB 10 million, compared with 12.2 million in the corresponding period of 2020. Research and development expenses were RMB 77.1 million, up 22.1% from RMB 63.2 million a year ago. The increase was primarily due to the consolidation of the research and development expenses of Wuhan Miracle. R&D expenses for the third quarter of 2021 included share-based compensation expenses of RMB 5.1 million compared with RMB 6 million in the corresponding period of 2020. Income tax expenses was RMB 4.3 million compared with RMB 16.3 million income tax benefits in the third quarter of 2020. Net income attributable to Soyang International Inc. was RMB 6.8 million compared with net income attributable to Soyang International Inc. of RMB 0.9 million in the third quarter of 2020. Non-GAAP net income attributable to Soyang International was RMB 28.9 million compared with RMB 26.4 million in non-GAAP net income in the same period of 2020. Basic and diluted income, ADS, attributable to ordinary shareholders were RMB 0.06 and RMB 0.06, respectively, compared with RMB 0.01 and 0.01, respectively, during the same quarter of 2020. Now for our balance sheet. As of September 30, 2021, we had total cash and cash equivalents, restricted cash and term deposits, term deposits and short-term investments of RMB $1.8 billion compared with RMB $2.7 billion as of December 31, 2020. For the fourth quarter of 2021, Soyang expects Total revenues to be between RMB $430 million and RMB $450 million, representing a 1.3% to 6% increase from the same period of 2020. The above outlook is based on the current market conditions and reflects a company's preliminary estimates of market and operating conditions and customer demand. 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.
spk05: Certainly. Participants who wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you ask your question in Chinese, please repeat it in English immediately. One person is allowed to ask one question at a time. If you want to ask more than one question, please rejoin the queue again. Start followed by one to ask your question. Thank you. Your first question comes from the line of Thomas Chung from Jefferies. Please go ahead.
spk03: Thanks management for taking my questions. I have a question about the regulation side. Any comments about the guidelines on medical and statistical advertising law enforcement as well as the relevant regulatory situation? Thank you.
spk04: As medical aesthetics has both medical nature and consumption nature, the guidelines on medical and aesthetics advising law enforcement issued by the SAMR
spk02: The state administration for market regulation will help maintain the order of the metastatic market and truly protect the rights and interests of consumers.
spk04: As an online medical service platform, Xinyang will strictly abide by the guidelines of the Medical Advertising Advertising Regulation in the process of providing online information services. As an online service platform for medical aesthetics, we will strictly follow the requirements
spk02: of law on protection of consumer rights and interests, e-commerce law and other laws and regulations as mentioned in the guidelines as we provided the online information services. We will let consumer acquire the specific information of products including price, performance, specifications, and disclose of information of the products or service in a comprehensive, genuine, accurate, and real-time manner. In order to guarantee the right to know and the right to choose of consumers.
spk04: At the same time, we will also actively follow the guidance of the Medical Advertising Advertising Guidelines of the Market Monitoring Bureau, to further strengthen and optimize internal auditing mechanisms, to actively implement illegal medical advertising information, and to maintain a consistent development environment in the medical industry. We believe that as the earliest and most continuous platform in the industry It is also believed that institutions should not use exaggerated or false ways to deceive consumers when they put in goods, to promote information against illegal medical cosmetics, to protect consumers' rights as the core. For institutions, institutions' choices in the distribution channel will be more cautious, and they will lean towards professional legal platforms.
spk02: Meanwhile, we will proactively follow the guidelines to further establish and optimize our network. Take the initiative to block illegal promotion information and maintain the standardization and order development opportunities. As a platform that started in the first place and continuously conduct self-discipline, we believe institutions should not cheat consumers by aggregation or false information in marketing and consumer acquisition. We strictly forbid illegal promotion information and take protection of consumer rights and interests of course. For institutions, they will turn to a more prudent, professional, and compliant platform when choosing marketing channels.
spk04: In the long run, regulations are positive to the healthy development of an industry. As a leader in the industry, we will stick to self-discipline
spk02: will improve our internal review mechanics and drive medical aesthetics to return to its medical nature. That's all. Thank you.
spk03: Thank you.
spk05: Thank you. Your next question comes from the line of Nelson Chung from Citi. Please go ahead. Nelson, your line is open. You can ask your question now. Nelson, if your mute is your line, please unmute your line and ask your question. Your line is open. Nelson, your line is open. You can ask your question now, please. Nelson from Citigroup, your line is open. You can ask your question. Please unmute yourself and ask your question.
spk06: So let me translate myself. So thanks, management, for taking my question. So with the revenue decline of preservation revenue this year, can management share the reasons behind Thank you. First, due to the resurgence of COVID-19 in some megacities, consumers' confidence is weaker than normal and their weakness to
spk02: spend is not that strong. It impacted the metastatic market. Secondly, the price for metastatic treatments is generally expensive, and some consumers need to take cross-city travel to get the treatment. The containment measures in some cities prohibit their movement.
spk04: At the same time, in the third quarter, we have launched a new business cooperation model with the institutions, which will encourage institutions to participate in our large-scale activities, encourage users' online consumption,
spk02: In the meantime, in this Q3, we tested new promotions with selected institutions. We encourage institutions to expand inventories and give more rebate to users, making them have more incentive to place orders online.
spk04: As a result, under the new promotion, GMB of online transactions in September was 96% and 78% higher than that in March and June, respectively, while ARPU was
spk02: 76% and 39% higher respectively as well. Over the long run, with better user online experience and standardization of our product offerings, we will enhance the fulfillment of online transactions and extend our service to offline, ensuring users get the authentic products. For institutions, using online payment service will be an important factor if they want to keep higher traffic and conversions. They will be encouraged to let users place orders online. That's all, thank you.
spk05: Thank you. Your next question comes from the line of Vincent Chi from Needham & Company.
spk07: Please go ahead. Thank you for the question, Mr. Guan. You should be able to hear me. I have two questions. The first question is about the impact of the pandemic. As Mr. Guan said, the pandemic has repeatedly affected our business operations. 我想知道这个管理层能不能这个分析一下,比如说至今为止我们看到的四季度,当然这个我们有个guidance,但是就是说这个比如说在这个用户增长端,我们现在看到的季程是怎么样子呢? 然后对于明年我们现在大概对于在这个用户增长和收入增长是怎么样一个看法? Then the second question is about the business progress of this medical card. I want to know how the growth of these non-surgical types of medical cards can be shared? I will translate it myself. Hi, management. Thanks for taking my question. My first question is about the impact from COVID-19. As you just said, COVID-19 resurgence continue to impact our business operation. Can management share your view on this impact on fourth quarter, especially on user-based sites? And also for the next year, what do you see for user growth and revenue growth? My second question is about the progress in Soyoung Pass compared to surgical categories, which is How is the growth trend for non-surgical category? And highlight share. Thanks.
spk02: Thank you. For the first question, in Q3 and Q4, the rebound of the pandemic in some cities brought short-term uncertainties to our business. We are monitoring the development of the market and will make adjustments for our marketing strategy timely.
spk04: In the next four seasons and next year, the popularity of non-hospitalized projects will continue to rise. Based on the advantages of non-hospitalized projects,
spk02: For the Q4 and next year, we believe the popularity of non-surgical category will maintain its momentum. We will solidify our existing strong position on surgical side while executing our established strategy on non-surgical side to penetrate into more market and gain more market share.
spk04: The development of the medical industry in the past few years has been driven by the growth of the overall income. Because of the non-standardization of surgical medical services, the doctor's operating level is a key factor in the medical results, causing the overall medical industry to still show the situation of dispersion, non-standardization, and lower service levels. The impact of the epidemic has to a certain extent changed the consumer habits of users. At the same time, the improvement of light medical technology and the continuous penetration of medical users
spk02: In the past several years, the main driver for the growth of medical set industry came from the plastic surgeries. Because these surgeries are non-standardized treatments, the quality of which is largely dependent on certain doctors. Therefore, the status of the industry remains fragmented with no with no universal standard and poor service quality. The COVID-19 by some degree has changed user behavior. In the meantime, the advancement of the technology of light aesthetics and expanding user group are accelerating the development of the digitalization and the standardization of the industry. 我们相信这一趋势会在未来五年延续。
spk04: I believe such trend to continue in the next five years. Institution required to improve their medical skill and service quality.
spk02: while the upstream equipment and the drug providers want to increase their exposure and brand influence to end users. Both of them will need more service from our platform.
spk04: For the second question, the card was officially operated since October last year. From the first 11 cities to the end of this year, Operation for Soyang Pass was started last October, and the number of cities covered has expanded to over 50 by the end of this quarter, from 11 at the beginning.
spk02: Corporate institutions often increased from more than 250 from 90 at first. While expanding the coverage, we are continuously optimizing service experience and a popular category of 3M Pass.
spk04: At the flyer end, this quarter, our flyer orders accounted for 76% of the total orders. At the same time, we can see that combined with our community content and new media support advantages, we have created a wide range of products, such as Photonast D, For non-surgical, the orders accounted for 76% of total orders during the quarter. Meanwhile, the hot-selling products were established with our advantage in the community content, and new media such as Photona4D,
spk02: auto-rejuvenation, hearty, and other categories, recorded more than 85% year-over-year growth in average GMVs from users' online orders. Among them, the online GMV for the Protona 4D even grew over 400% year-over-year. In addition, we add 3M Pass to the shop opening and promotional campaigns of newly joined institutions, helping small and medium-sized institutions with lack of online resources and operation experience to rapidly increase the exposure and improve accurate client acquisition. 中上所述,正如我们之前所提到的,每次卡只是我们在非手段深入用户履约的第一步,
spk04: is also a catcher in our non-profit business. In terms of the overall non-profit business, we have benefited from the constant rise in the popularity of non-profit surgery projects. We have long-term focused on standardizing non-profit projects and deepening user engagement to ensure that users enjoy high-quality and positive experience at the non-profit end. At the same time, we are also seeking four-point cooperation with other top-end manufacturers to further help users solve the consumer pain points in non-profit.
spk02: In summary, we mentioned before, SoyangPath is just a first step as we take to enhance contracts and also effective means on the non-surgical side. For the whole non-surgical business benefited from the rising popularity of non-surgical services, we are committed to standardization of non-surgical service in the long term. continuous enhanced content performance, and ensure users to enjoy a premium experience of authentic products on the non-surgical side. Meanwhile, we are seeking for cooperation trials with upstream manufacturers, further helping users to solve their pain points in non-surgical categories, improving the over-user satisfaction, and penetrating to more medical-sensitive users. That's all. Thank you.
spk05: Thank you. Thank you. Your next question comes from the line of Liu Cheng from China.
spk08: Please go ahead. Thank you, Guan Yicheng, for accepting my question. My question is about our MAU and market cost. We see that MAU has a downward trend in the third quarter and market cost. I would like to ask about 4Q and next year's I'll translate my question. So my question is regarding to MAU and sales and marketing. I just wonder why the reason behind the MAU decrease and the reason behind the decrease in marketing expense and what is the marketing and promotion strategy for next quarter and next year? Thank you.
spk04: Thank you. Firstly, due to the negative impact of resurgence of COVID-19 in some large cities, consumer confidence was hurt and consumption willingness declined.
spk02: resulting in the Q1Q decrease in MEU.
spk04: Secondly, as we already mentioned at the beginning of this year,
spk02: Our marketing strategy in this year is to acquire more co-makers, putting the priority of user quality ahead of quantity, which is different from the strategy in last year when we focused on targeting new users.
spk04: In the third quarter, we optimized the market launch channel, reduced the offline brand launch, and used our own advantage in terms of content to improve online content launch.
spk02: referring to the total marketing fee during the quarter, we optimized our marketing strategy, reducing branding spending in offline channels and increasing online promotional content, leveraging our content advantages and also releasing the premium content on third-party platforms. to enhance effectiveness, establishing our image as a professional medical aesthetics and medical platform.
spk04: Looking forward to the whole year of 2021, we estimate the total sales and marketing expense will account for no more than 50% of our revenues.
spk02: the same level as we projected in the beginning of this year. Thank you, that's all.
spk05: Thank you. Your next question comes from the line of Shishiki from CICC.
spk01: Thanks, Benjamin, for taking my question. Just wondering if you could give us more business update on Wuhan Miracle, and since you added the business of upstream equipment supply, Could you please also share with us more color about your long-term development strategy? Thank you.
spk02: In the third quarter, we closed the deal of acquiring Wuhan Miracle. We have set up a flagship store for Wuhan Miracle on our platform and promote its products to our users and integrate its products with Soyang Pass. As of early November, SoYang had established business relations with more than 30 institutions derived from Wuhan Miracle Network.
spk04: Regarding the long-term development direction of the company, in the past few years, we have solved the user decision-making difficulties caused by asymmetric information. Through the regulation and optimization of community content, users have a professional understanding of e-commerce consumption at the information level.
spk02: Referring to your second question, in the past few years, we have made efforts to solve the difficulty of user decision-making by providing more transparent information. By normalizing and optimizing our community content, we enable our users to gain better understanding of metastatic treatments with professional help at the information level. 学者对医美运营的加深,我们规范了线上商品的标准化和透明化,
spk04: With the refinement of our operation, our online service will be more standardized and transparent in price. We are able to
spk02: correctly displayed to users the place of production, usage, specification, and other information. We are also pioneered in offering online ride protection at no cost, providing advanced compensation and insurance for relevant medical-sensitive treatments to our users.
spk04: Now, as we continue to deepen our understanding of the medical industry, we are more deeply aware The high price of high-end products and limited selection of products have to a certain extent limited more users to enjoy medical consumption. However, in terms of user demand, medical consumption is gradually breaking out. Users' demand for medical products is constantly rising. Therefore, we believe that at this stage, we need to use platform advantages to strengthen cooperation with suppliers to enter the medical industry.
spk02: At present, as we better understand the metastatic industry, we are aware that the higher transaction value of upstream products and the limited choice of categories have set limits for more users to enjoy metastatic consumption. On the demand side, We are seeing that medical aesthetics consumption expanding out of the original user base as the demand for the medical aesthetics continues to rise. For the reason, we believe at the current stage we will leverage ages of our platform, enhance cooperation with the supply end, explore into industry, enable more users to have access to good medical aesthetics experience, and expand the overall market size. Thank you. That's all. Thank you.
Disclaimer

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Q3SY 2021

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