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spk07: Good morning, ladies and gentlemen, and thank you for standing by for SoYoung's third quarter 2022 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 is being recorded. I will now like to turn the meeting over to your host for today's call, Ms. Vivian Hsu, please proceed.
spk02: Thank you, operator, and thank you for joining Soyang's third quarter 2022 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 risk 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 outlining our public findings with the SEC, including our annual report on Form 20F. SOEON does not undertake any obligation to update any forward-looking statement, except as required under applicable law. Joining us today on call is Mr. Xin Jing, our co-founder, chairman, and CEO. At this time, I would like to turn the call over to Mr. Xin Jing. Cast, please.
spk04: Hi, everyone. Thank you for attending Xinyang's third quarter of 2022 earnings call.
spk02: Hello, everyone. Thank you for joining Xinyang's third quarter of 2022 earnings call.
spk04: In the third quarter of 2022, the COVID-19 pandemic has spread to many parts of the country. In the face of uncertainty in the market, Xinyang has still achieved steady financial performance. In the first three seasons, business performance has been steady and good. In the third season, the total income reached 3.2 billion yuan, and the return was increased by about 5%, which is in line with the company's guidance. The operation strategy we adopted has been recognized by medical institutions. By providing different series of products and establishing new cooperation with more institutions,
spk02: China's overall domestic consumer market remained under pressure in the third quarter, with repeated COVID-19 outbreaks in certain parts of the country. Despite this market uncertainty, we delivered solid financial performance during the quarter, and we have now achieved gradual sequential improvements in each of the first three quarters of 2022. Total revenues will be $320 million, representing a sequential increase of about 5% and in line with our previous guidance. Our progress was well recognized among medical service providers, and we established new cooperation agreements with more institutions thanks to our diverse product offering. The number of paying medical service providers on Soyang's platform reached 6,199, up 28% from the prior year.
spk04: At the user's end, we continue to take a detailed operation to serve different levels of the medical consumer group. Based on the user's understanding of the platform and big data advantages, we do a good job of dividing users and products. We focus on satisfying the consumer needs of different consumer groups for different cities and product characteristics. For the first time trying medical, budget-limited small white users, Through hot topics and new project sales, we attract new users to consume. For middle-class users, we mainly promote mouthpiece products to increase user annuality. In the third quarter, the number of users who pre-ordered service orders increased by 6% compared to Q2. In the third quarter, in the first and second-tier cities where e-commerce mainly consumes, we launched XinYang YouXiao, which is dedicated to creating clean and transparent e-commerce industry standards. On the user side we continue to refine our operations to serve different
spk02: cohort of medical aesthetics consumers. Leveraging our deep understanding of users and our age in big data analysts, we made some progress on our user segmentation efforts, which enabled us to cater to the demands of different consumer groups based on location and user characteristics. For new customers with limited budget, we used popular talks and promotions for new treatments to encourage them to place orders. For customers at medium price segment, we promoted well-known products to enhance their thickness. In the third quarter, number of user verified order on our platform grew 6% sequentially. In addition, we launched the Soyoung Prime program targeting customers in the first and second tier cities who account for the majority of medical aesthetics consumption. The Soyang Prime program is aimed at establishing clear and transparent industry standards, reducing consumers' trial and error costs, simplifying their decision-making process, and providing one-stop solutions for light medical aesthetic services, enabling our customers to pursue beauty with peace of mind. For a category with an order value of over RMB $8,000, during the quarter, such as ultrasonic gong, in-mode skin remodeling, etc. The monthly online GMB increased by over 60% compared with the previous month.
spk04: At the end of October, we launched the Xinyang Yanxuan, which covered 19 major cities. The launch of Yanxuan is a way for us to build long-term user experience. It satisfies users' trust in brand institutions and enjoys a high-quality service experience. At the same time, it also allows institutions to better serve users and establish their own brand value. In the third quarter, the implementation of the policy selection makes the company's stake on our platform increase by more than 25% and increase by about 20%. The efficiency of institutional transformation and user service experience have been gradually improved. In terms of our operating strategy, Soyang Select had expanded to 19 major cities in China as of the end of October. As part of our long-term strategy for providing superior user experience,
spk02: Soyang Select cartels to our users' preference for high-quality branded medical service providers and enables providers to offer enhanced service and build their brand value. In the third quarter, with the rollout of Soyang Select, the promotional spend of service providers on our platform increased by over 25% quarter-over-quarter and about 20% year-over-year. We also saw gradual improvement in conversion rates for the medical service providers on our platform. Meanwhile, under Soyang Select, we have also rolled out Soyang Select Doctor, which helps users choose premium doctors, providing useful information to facilitate their decision-making and driving user conversion. 行业监管方面,近期国家市场监管部门的政策主要集中于
spk04: to fight against false propaganda, to emphasize the price of the code, and to fight against the false information that harms the rights of consumers. The supervision of the requirements of the online platform is consistent with the industry governance actions carried out by Xinyao for many years. It also reflects the correctness of the direction we are going. On the internal platform governance, we continue to advance the industry governance action, and continue to evolve a consensus-based ecosystem, and actively identify
spk02: In terms of industry regulation, the recent national regularity policies emphasized transparent pricing, consistent online and offline pricing, and cracking down on false advertising and misinformation that harms the interests of consumers. The regulatory requires for online platform are consistent with the self-regulatory actions Soyoung has been implementing for years, indicating that our work is towards the right direction. Regarding internal platform governance, we continue to promote self-regulation within the industry and strengthen the quality of the supply side in our ecosystem. We also took the initiative to identify and eliminate forced transactions and forced reviews, and established and optimized our anti-fraud system and data prevention scheme, thereby promoting the healthier development of the industry. 放眼整个国内医美市场,短期内是承压的,但长期是利好的。
spk04: In the short term, we strictly control cost and expense expenditure. Lowering the stock price effectively achieves a single quarter downturn. This quarter, non-US general accounting standards belong to listed companies with a net profit of up to 9.9 million yuan. The financial situation remains healthy. The cash reserve is full. Maintain your strength and keep improving yourself. Serve our medical consumer group better.
spk02: Looking at the overall Chinese medical aesthetics industry, it is under pressure in the near term, while the positive perspectives intact for the long term. Therefore, for the near term, we took stringent measures to cut costs and increase efficiency and achieve profitability on quarterly basis. During the quarter, the non-GAAP net profit attributable to Soyang International Inc. reached RMB 9.9 million. We have maintained healthy financial conditions and sufficient cash reserves to ensure that the company remains strong and we are able to make constant improvements. Going forward, we will work to better serve medical aesthetics consumers by investing in our business and evaluating the user experience.
spk04: We see that the global medical market is still growing. According to the Shalivin report, the global medical market size, in addition to the outbreak of the epidemic in 2020, the market size has dropped more than in 2019. In 2021, it increased by 13% compared to 2020, and in 2020, it increased by 14% compared to 2021. From 2021 to 2025, Looking at the global medical statistics market,
spk02: we are pleased to see that it continues to have strong growth potential. According to the Frost and Sullivan, browsing back from the year-over-year decrease in 2020 due to the outbreak of the pandemic and the global medical aesthetics market grow by 13% year-over-year in 2021 and is expected to grow by 14% year-over-year in 2022, with CAGR of approximately 13% from 2021 to 2025. In 2020, the number of the metastatic treatments per 1,000 people in China was about 21, compared with 82 and 48, respectively, in South Korea and the United States, which are more developed medical aesthetics markets. So the penetration rate of the metastatics in China still has plenty of room to grow.
spk04: 2022 is the 9th anniversary of SoYoung and marks a new beginning for us.
spk02: We are confident that we will overcome the uncertainties of the current market environment and will leverage the vast industry experience we have accumulated to place the user as the center of our business and to build the most trusted medical setting service platform. I will read the prepared remarks on behalf of Mr. Xinjing, then open the QA. Now I will go through the financials for the third quarter. Please be reminded that all amounts quoted here will be in RMB. Please also refer to our earnings release for detailed information of our corporate financial performance on the year-over-year basis. For the third quarter 2022, total revenues were RMB $323.3 million compared to the $431.5 million in the corresponding period of 2021. In line with our previous guidance, The decrease was primarily due to a decrease in average revenue per paying medical service provider, which was impacted by the resurgence of COVID-19 and remained under pressure from China's overall domestic consumer market. Within total revenues, information services and other revenues were $235.7 million, down 26.7% year-over-year, Reservation services revenue were 29.7 million down 51.8% year-over-year. Sales of equipment and maintenance service revenue, which were from Wuhan Miracle Laser System Inc., were RMB 57.8 million, compared with RMB 48.1 million in the same period of 2021. Cost of revenues were $94 million, up almost 5% year-over-year. The increase was primarily due to the consolidation of Wuhan Miracle. To weather the storm, we adopted a series of cost-saving schemes, such as reducing marketing activities, optimizing cost structure, et cetera, in order to maintain operating efficiencies. Total operating expense were RMB $336.6 million, down 26.6% year over year. Sales and marketing expense were $124.8 million, down almost 35% year over year, primarily due to a decrease in expense associated with branding and user acquisition activities. Research and development expense were RMB $52 million, down 32% year-over-year, primarily due to a decrease in payroll costs. General and administrative expenses were $59.8 million, up 9.4% year-over-year, primarily due to an increase in payroll costs and professional service fee. Income tax benefit was $16.5 million compared with income tax expense of $4.3 million in the third quarter of 2021. The increase in income tax benefit was primarily due to the refund of income tax of $12.6 million in the third quarter of this year based on the final 2021 tax return final result. Next net income attributable to Soyang International Inc. RMB 2.3 million compared to 6.8 million in the third quarter of 2021. Non-GAAP net income attributable to Soyang International Inc., which includes the impact of share-based compensation expenses, was 9.9 million compared with 28.9 million in the same period of last year. Basic and diluted earnings per ADS attributable to ordinary shareholders were RMB 0.02 and RMB 0.02, respectively, compared with RMB 0.06 and RMB 0.06, respectively, during the third quarter of 2021. With regards to some items on our key balance sheet, we held adequate liquidity in the quarter as of September 30, 2022. We had total cash and cash equivalents, restricted cash and term deposits, term deposits and short-term investment of RMB 1.6 billion, compared with RMB 1.8 billion as of December 31, 2021. Net current assets was RMB 1.3 billion as of September 30, 2022, compared with 1.3 billion as of December 31, Net assets was RMB 2.6 billion as of September 30, 2022, compared with RMB 2.1 billion as of December 31, 2021. For the fourth quarter of 2022, we expect total revenue to be between RMB 310 million and RMB 330 million. The above outlook is based on the current market conditions that reflects the company's preliminary estimates of the market and operating conditions and the customer demand. Today, the board of directors of the company authorized a share repurchase program under which the company is authorized to repurchase of an aggregate value of U.S. dollar 15 million of its shares, including in forms of the ADAs. during the 12-month period beginning from November 18, 2022. This concludes our key remarks. I will now turn the call to the operator and open the call for QA. Operator, we are ready to take questions.
spk07: Thank you. We will now begin the question and answer session. To ask a question, you may press star and then 1 on your telephone keypad. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. Please limit yourself to one question. You may re-queue for additional questions. Our first question today will come from Thomas Chong of Jefferies. Please go ahead.
spk00: Let me quickly translate myself. So recently, SAMR has released a guideline on cracking down on forced advertising and illegal pricing in the medical aesthetics industry. Can management comment on this regulation? Thank you.
spk04: Thank you for your question. As I mentioned earlier, this time, the work guidance focuses mainly on attacking false propaganda, emphasizing the price of the code, the online and offline prices are the same, Thank you. As I have just mentioned, the guidelines focus on preventing false advertising and misinformation and emphasize transparent pricing and consistent pricing online and offline.
spk02: The regulatory requirements for online platforms are consistent with the self-regulatory actions SoYang has been implementing for years, indicating that all along we have been a leader and a trend center in protecting the interests of our users.
spk04: On our internal platform information governance, SoYang has formed a comprehensive platform information governance system. For platform information increase, we implement effective interlocking. For platform storage information, in addition to daily 7x24 hours of AI assessment and professional artificial assessment inspection, we also carry out regular stage-level special inspection. The anti-fraud system we have built continues to upgrade. Currently, the system has formed the ability to perform practical calculations, strategic practical configuration, and soft nuclear test confrontation.
spk02: 在识别及屏蔽虚假评价,识别及打击虚假交易方面发挥了核心作用。 For our internal use governing platform information, we have rolled out comprehensive and systematic initiatives. New information posted on the platform is effectively intercepted and information storage is reviewed and validated. inspected both by AI and on a 7.24 basis and professionals. Special inspections are also conducted periodically for information storage. We constantly upgrade our perpetuity anti-fraud system and have developed strong capabilities in real-time computation, real-time policy configuration and flexible verification and anti-cheating which all play a key role in identifying and blocking false comments and identifying and cracking down on false transactions. As the first platform to adopt and consistently drive self-discipline actions in the industry, we let consumers to be fully informed about the products, including price, performance, specifications, etc., and disclose products and services information in a comprehensive, Authentic and accurate manner. By doing this, we guarantee consumers' right to know and to choose, continue to promote industry self-discipline and keep strengthening the quality of the supply side in our ecosystem. 长远来看,政府有关部门的监管措施有利于整个行业的健康发展,促进医美回归医疗本质。 In the long term, government regulation will be beneficial from the healthy development of the whole industry and promote the medical nature of the aesthetics business.
spk04: Thank you.
spk02: Thank you.
spk07: Our next question today will come from Leo Chang of Deutsche Bank. Please go ahead.
spk03: Thank you for accepting my question. 我的提問是關於我們那個市場投放預算。 想問一下Q4和明年市場投放預算大概是怎麼樣? 然後公司對於未來用戶數或者MAU的預期是怎樣的? So let me translate my question. My question is like your plan for marketing spending in Q4 and 2023. What is your estimate for the total number of users and your MAU? Thank you. Thank you.
spk04: In the face of the uncertainty of the big environment, as we have been doing this year, we will be more cautious about the market investment budget and pay more attention to efficiency. Later, we will make appropriate adjustments according to the market situation.
spk02: Given the microeconomic uncertainty, we will remain cautious with our marketing spendings and focus our attention on efficiency. As we have done so far this year, subsequently we may make adjustments based on evolving market conditions.
spk04: For the current medical aesthetics market, I'd like to emphasize that the competition is no longer purely for traffic.
spk02: Professional platforms with insights into the industry and users are needed both with respect to regulation and user experience. We need to provide users with good consumption value and experience. A medical statistics platform doesn't retain users by entertaining them, but rather by satisfactorily solving their needs. 一方面我们会继续优化社区内容,做好用户种草。
spk04: First, we will continue to optimize community content.
spk02: effectively recommended products and service to users, and provide diverse content including doctors and products. We will stick to our long-term goal for enhancing user trust and establishing the most trusted professional community, leveraging our advantages in content and community operations. We will perfect user experience for online products, enhance consumer protection, optimize consumer consumption experience on our platform, and drive users to make highly efficient buying decisions.
spk04: This shows that first of all, we need to build trust between users and users. Trust has always been the primary goal of our platform, attracting users to the platform. Second, when users come to our platform, our online platform's products and information can provide good consumer protection for users, and solve the problem of users' decision-making and needs online. Again, when users come to the store to consume, according to the different needs of users, we can provide a multi-layered medical service consumption experience. 1. Users can go directly to the institution for consumption based on online information. If users have a higher demand for consumer experience, they can also go to Xinyang to cooperate with the selected institution for consumption. For certain products, users hope that consumption is a standardized service process. They can also choose Xinyang to provide institutional consumption of medical service programs. Finally, when users consume, the platform has post-sales feedback, customer service consultation,
spk02: Second, as our intention shifts from merely traffic incremental growth to operation and service of client stock, we keep improving user service experience during the whole life cycle and guarantee their consumption experience throughout the whole process. As I just mentioned, to achieve that, first we must create trust with our users. Trust has always been our primary goal to attract users to our platform. Second, products and information on our platform need to provide good consumer protections as well as solve users' issues with online decision making and demands. Third, for users who want to use one institution to satisfy their diverse demands or needs, we provide service catering to multiple scenarios. So users can directly visit an institution with information acquired on our platform, or some users with higher service requirements, they can work with institutions through our Soyang Select program. And if user demands standardized process for a specific product, they can choose institutions that provide such solutions. Finally, our platform provides upsell return visits, customer service, consolations and insurance for post-treatment issues, which ensure the experience throughout the complete progress. Yes, it's just for the Soyang mission is to make everyone more beautiful and healthier. Thank you.
spk07: Our next question today will come from Nelson Chung of Citi. Please go ahead.
spk05: So I'll translate myself. So first management for taking my questions. We would like to... Wonder whether management can share the industry outlook going into the fourth quarter this year and into 2023 next year. And could management elaborate more about the performance during the double 11 this year? Thank you.
spk04: Thank you very much. In the third quarter, we saw repeated COVID-19 outbreaks in certain parts of China.
spk02: Despite this market uncertainty, we delivered a solid financial performance during the quarter, and the situation is gradually recovering in the first three quarters. As we are entering into the fourth quarter, the scope of the pandemic may further widen because of the weather and the corresponding prevention measures may strengthen as well. While there is uncertainty ahead, however, recently China's National Health Commission released a new set of refined epidemic prevention and control policies which are more scientific and more precise. As the overall economic environment will be getting normalized gradually, We believe our industry will be back to the growth track over time.
spk04: In terms of medical care, as I mentioned in the phone conference, we have seen that the global medical market has remained growing in recent years, while China's medical penetration rate still has a large room for growth. According to the third-party research institution, Sullivan's report, it is expected that the global medical market will grow by about 13% in 2021-2025. In 2020, China's medical treatment rate per thousand people was about 21 times, while Korea and the United States, which are more developed than the medical market, were 82 times and 48 times. Therefore, China's medical market has the greatest potential for growth in the world. We believe that with the recovery of the overall environment, users' consumer behavior will return to normal normal levels.
spk02: You're the front, as we discussed in prepared remarks. The global medical aesthetics market maintained steady growth in the past years, and there is significant upside of the penetration rate of the Chinese market. According to the Frost and Sullivan, the global medical aesthetics market expected to grow at a CAGR of around 13% from 2021 to 2025. In 2020, the number of medical aesthetics treatments per 1,000 people in China was just about 21%, compared with 82% and 48% respectively in South Korea and the United States, which are more developed medical aesthetics markets. There is clear growth potential for Chinese markets. With general economic situation back to normal, the customer spending will be back to growth track as well in our view.
spk04: In terms of infrastructure, with the weakening of the uncertain environment, If the test institutions are able to continue operating normally, we believe that the agency will gradually increase the investment budget on the Xinyang platform.
spk02: On the institution front, as the impact of uncertain factors gradually eases and when they can operate normally, we believe their marketing budget allocated to Xinyang platform will go up gradually.
spk04: At this stage, for Xinyang, we insist on conducting long-term
spk02: At present, we must commit to our long-term vision while making dynamic adjustment in short-term and execute our established strategy, improving the operation and providing high-quality user experience and forming closer relationships with industry partners.
spk04: For Double 11, users are more concerned about daily consumption. We see that the large online platform that occupies the main market share is relatively light compared to last year. The overall consumer market is still gradually recovering. Facing the pressure of the overall consumer market, Double 11's online daily number of users is stable compared to last year.
spk02: For W11, users pay more attention to daily necessities, like the gross roll goods. Overall performance of major online platforms were relatively soft compared to last year, while overall retail market is in a slow recovery stage. This is in line with the other consumer projects and services. Despite of pressure on the overall consumption market, our daily online users during W11 stayed flat compared with last year. Thank you.
spk07: Our next question today will come from Chloe Wei of CICC. Please go ahead.
spk01: Thank you. Okay, I will translate myself. Thank you, management, for taking my question. And this is Chloe from CICC. I think you've done a great job performing above the breakeven target. And we continue to see strong subsidies in this quarter. And I wonder, are there enough levers in the business in kind of rationalizing the competition? That would be the first. And secondly, we've heard some new vocabularies during the prepared remarks. Could the management team share some colors on the ongoing new businesses? And how could that mean for the user engagement and for the P&L? Thank you.
spk04: Thank you. First, on industrial outlook, I believe medical aesthetics have broad perspectives.
spk02: To seize the opportunity and achieve growth, the key point is to serve users well and combine with industry more profoundly.
spk04: and have a good consumer experience.
spk02: Any peer platform must have a clear positioning for user service to clarify what kind of user demands it can serve. Through the years, we have built trust with our users. When users have need for metastatics, we can truly solve it and enable a better consumption experience.
spk04: We are not an entertainment platform. Users will not have a lot of time on our platform I think we should look at how we serve our users from a user perspective. 在用户消费的不同阶段,我们采取何种的方式和手段去服务好用户? 我们通过建立专业的社区内容,深入于行业产业结合,建立多场景的消费场去满足用户的需求。 As we are not an entertainment platform, users don't spend plenty of time watching video or reading posts, but
spk02: search for a product that satisfies their needs. We always emphasize that medical aesthetics are both medicine and consumption. So users' consumption must be based on safety and the demands for beauty. A price advantage of an e-commerce platform won't be the primary factor for consumers' decision making. I believe we should think about serving users from their perspective and their methods at different stages of consumption. Through professional community content and deep combination with industry, we have established diversified consumption scenarios to counter to user demands.
spk04: For our institution clients, we trust we build with users, make them willing to serve users better. For the new initiatives, we have exploring new consumption scenarios for users and serve them with a range of diverse solutions. For institutions and us, the ultimate goal is to better serve users.
spk02: Well, we actually suggest if you're in some, you know, Tier 1 or Tier 2, some major cities, you can have a try on what Soyang Prime products. It will be very different and will kind of excite you best.
spk04: Thank you.
spk07: Our next question today will come from Ingrid Zhang of UBS. Please go ahead.
spk06: 感谢管理层给我今天提问的机会。 那我今天这个问题呢,更多的是从行业的层面上。 想请教一下管理层,从我们看到的数据看呢,因为这个demographics进去有什么变化, 那从年龄啊,分线程式,以及收入等多个层面来看, The question is more on the industry level. Based on the data, how does it shift in consumer demographics for medical aesthetics in terms of age, city tiers, income level, et cetera? Thanks a lot.
spk04: According to transactions on our platform, megacities such as Beijing, Shanghai, Guangzhou, and Shenzhen have always led the consumption, with a number of users placing orders and transactions activities
spk02: at a higher level than other cities in China. But in 2022, other new first-tier cities, including Chengdu, Hangzhou, Wuhan, Nanjing, and Chongqing, will also become major cities for medical aesthetics consumption.
spk04: From the category of platform orders, the number of platform flyer orders is over 80%. Among them, anti-crash products are the main products for users. In terms of order categories on our platform, non-surgery accounts for over 80% of total orders.
spk02: Anti-aging is one of the most favored category and the most frequently purchased product, such as Wincolase and Hyaluronic Acid Skin Whitening and Skin Rejuvenation account for over 50% of total orders. The proportion is slightly higher than 2021, indicating users' demands from non-surgery categories.
spk04: Targeting user demands, we continue to optimize number of SKUs for non-surgery categories to provide high-quality supplies.
spk02: We also launched some products based on characteristics of certain category, such as Soyang Skin Card, which includes several anti-aging products in our bottom of facilitated user choice. 另外,新阳每年年末都会发布年度医美行业白皮书,将对医美行业的监管政策,医美市场发展趋势等内容做详细的解读,也欢迎各位关注。 Well, in addition, please be noted that at the end of each year, usually we will release a white paper in which we will discuss with the new regulatory policies, industry trend, and other important topics.
spk04: Okay.
spk07: And ladies and gentlemen, this will conclude our question and answer session. At this time, I would like to turn the conference back over to Ms. Vivian Chiu for any closing remarks.
spk02: Well, we are now approaching the end of the conference call. Thank you for your participation in today's conference. You may now disconnect it. Have a good day. Thank you. Thank you. Bye.
spk04: Bye-bye.
spk07: And the conference has now concluded. We thank you for attending today's presentation. You may now disconnect your lines.
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