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spk01: Ladies and gentlemen, thank you for standing by for SoYoung's fourth quarter and full year 2022 earnings conference call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question and answer session. We do ask that you limit yourself to one question during the Q&A session. As a reminder, today's conference call is being recorded. I would now like to turn the meeting over to your host for today's call, Ms. Vivian Hsu. Please proceed, Ms. Hsu.
spk07: Thank you. Thank you, operator. And thank you for joining Soyang's fourth quarter and full year 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 risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to those outlying our public findings with the SEC, including our annual report on Form 20F. SOEAM does not undertake any obligation to update any forward-looking statement except as required under applicable law. Please also know that unless otherwise stated, all figures mentioned during this conference call are in RMB. Joining us today on call is Mr. Xin Jing, our co-founder, chairman, and CEO, and Mr. Nick Zhao, senior vice president of finance. At this time, I would like to turn the call over to Mr. Xin Jing. Please.
spk03: Hello, everyone. Thank you for participating in the fourth quarter of Xinyang 2022.
spk07: Hello everyone, thank you for joining Soyang's fourth quarter and full year 2022 earnings call.
spk03: A large number of medical institutions have been severely affected by the epidemic. At the same time, the slowdown in China's economic growth has also caused users to be more cautious in terms of consumption. Despite this, we have achieved a single-year income of RMB 3.25 billion, which meets the previous company's expectations. At the same time, we have benefited from cost structure optimization and performance efficiency improvement. The net profit under the non-US general accounting standard reached RMB 38.8 million. Since last quarter, the profit level has continued to be good after achieving a return on interest. By the end of 2022, our cash reserves remain close to the level of RMB 1.6 billion. This has provided us with a sufficient financial guarantee to explore new growth opportunities in the post-pandemic era.
spk07: 2022 was a remarkable year for all of us at Zoya. Despite multiple external halvings, we have successfully stabilized our core business and substantially improved our profitability. In the fourth quarter, amidst the most severe challenges of the past three years, as the COVID-19 pandemic seriously disrupted the operations of many medical aesthetic institutions, While the slowdown of the Chinese economy made consumers more cautious, we managed to achieve quarterly revenue of $325 million, in line with our prior guidance. In the meantime, we significantly scaled up our profit with non-GAAP net income of $38.8 million. We have continued to make strides since reaching breakeven in the third quarter, thanks to our optimized cost structure, and improved efficiency. As of the end of 2022, our cash balance remained at close to $1.6 billion, which provides us with sufficient financial assurance to explore new business growth opportunities in the year ahead. 抓住变化带来的机遇,成长为新的收入支柱。 Next, I'd like to share some market trends we observed during the past year. In the future, we will look in these directions as we continue to invest resources. These opportunities presented by change and build new pillars of revenue for our business. 首先,医美用户群体结构在不断升级,非手术类用户占比不断提高。
spk03: Seventh, there has been a change in the number of users. High-quality users have temporarily increased their demand for medical services. Finally, the Chinese-made medical consumer group is constantly expanding. Following the long-term trend of China's consumer upgrade, the Chinese-made community in China is continuing to grow. We see that especially Chinese women in the first and second-tier cities have become accustomed to medical consumption. The amount and frequency of medical consumption is increasing. At the same time,
spk07: We also see that this part of the Chinese medical aesthetics user base is structurally upgrading as the ratio of non-surgical users continues to increase. Second, user demands are evolving, with high-value users showing increased demand of premium one-stop medical aesthetics. Finally, along with the long-term trend of consumption upgrade in China, The middle class medical aesthetics customer group is expanding. The growing middle class demographic in China, and particularly urban middle class females in the first and second tier cities, have formed medical aesthetics consumption habits characterized by increased volume and frequency of consumption. Meanwhile, we have observed several important differences between the middle class consumers and traditional medical aesthetics consumers.
spk03: First, these consumers generally have higher level of education and are more cautious with their choice of metastatic services. They are more attuned to safety factors including the maturity and reliability of
spk07: service, doctors' and institutions' qualifications, and product compliance.
spk03: 二,消费项目以抗衰,皮肤管理,形体管理等轻衣项目为主,且消费频次较高。 Second, the main consumer anti-aging, skin management, and shape management products with high frequency. 三,注重价格的合理性,不单纯追求便宜,但也不希望被收智商税。
spk07: Third, they look for rational prices, not simply purchase cheapness, but they don't want to be charged an IQ tax. 四,注重服务履约质量。 Fourth, the value, service, quality, and delivery. 基于市场变化和满足这部分消费群体的需求,我们整合了多年积累的资源能力,于2022年三季度,在一二线城市小规模率先推出了新养优享业务, Based on these changes in the market and meeting the needs of the consumer group, leveraging the resources and capabilities we have accumulated through the years, we launched Soyang Prime Business at a small scale in first- and second-tier cities in the third quarter of 2022.
spk03: Qingyang Youxiang is a Qingyang-based, self-sufficient, green-money-free service. First of all, according to the platform data, 找出最受中产消费者欢迎的轻医美项目,邀请专家团对这些项目的治疗方案进一步升级并形成治疗和服务的SOP,并由我们统一定价及售卖。其次,我们筛选符合标准的医美机构,对其运营团队和医生进行培训和考核,通过后,方可进入新养优享的服务网络。这些医美机构要为新养优享用户 provide a dedicated treatment room and standardized services. New and promising nurses will stay in these medical institutions and welcome every prospective user who comes to the clinic to ensure a full-scale service experience. Finally, we will focus on purchasing or verifying the light medical equipment and supplies used by the users in the treatment. Supplies such as needles and other supplies will be stored in the positive medicine cabinet that we place in the institution
spk07: Suyang Prime is our self-operated SSLite service platform for non-surgical medical aesthetics. First, based on the big data gathered on our platform, which shows those most popular treatments of line medical aesthetic service for middle-class consumers, we invited experts to create an upgraded treatment plan with standardized operating procedures for treatment and service. Soyang is responsible for pricing and sales. Second, we screen institutions that meet our standards and train and assess their operating teams and doctors before allowing them into the Soyang Prime service network. These institutions are responsible for providing exclusive treatment rooms and standardized service to Soyang Prime customers. We have Stationed staff in these institutions welcome Soyang Prime customers and ensure high-quality service experience throughout the treatment. Finally, we procure and certify the light medical aesthetics equipment and consumables used in treatments. Injections and other consumables are stored in the gene medicine cabinet placed in each institution and medical Chapsons take out the check each item in front of the customer.
spk03: Enabled by innovation in the light medical aesthetic service model,
spk07: quality control of service delivery, and our scale advantage in operations, user acquisition, and supply chain, Soyang Prime provides users with premium, genuine, and low-priced line medical aesthetics service.
spk03: After the service was launched on August 1st, last year, the service was quickly recognized by users. The average customer service rate per customer purchase was significantly higher than Upon debut at small scale on August 1 last year, Soyang Prime has quickly won recognition among users.
spk07: Soyang Prime's user satisfaction, average order value, and the repeated purchase rate were all significantly higher than our existing pub business. As of the date, users' visits to the institution have continued to grow every month, even at the end of 2022 when national-wide COVID-19 infections peaked, as well as during the Chinese New Year.
spk03: Next, I would like to outline our business plan and objectives for 2023. Our POP business, after nine years of development, has accumulated rich diary content, transparent transaction information, innovative user products and tools, realized the onlineization of digital information, improved the scale efficiency of the medical industry, and accumulated tens of millions of high-year-old user groups, allowing many institutions to achieve significant development and good returns through cooperation with Xinya.
spk07: First, we will continue to strengthen and develop our existing community promise, i.e., pop business, leveraging our established advantage in community operations, user operations, and doctor resources. We always aim to enhance user trust, increase user engagement, and build a trustworthy professional platform. After nine years development, Our pop business has accumulated enriched beauty diary content, transparent trade information, innovative user products, and tools, and a tremendous volume of industry information. It has also boosted the efficiency of the metastatic industry at scale, accumulated a high sticky user base, numbering the tens of millions, and enabled numerous institutions to achieve significant growth. and sounds returns through operation with SOYA. And these will become cornerstones for our development and the transformation in scale.
spk03: We will expand our business on the basis of last year. We will expand our business on the basis of last year. We will expand our business on the basis of last year. We will expand our business on the basis of last year. We will expand our business on the basis of last year. to promote user acquisition. Smart business is an important step for us in industrial Internet. It can fully integrate industrial production elements, rebuild production relationships, improve industrial efficiency and reduce costs, and ultimately make consumers profit. Compared to simple Internet business, it is heavier and deeper, but it can also solve problems in a deeper industry and build higher barriers.
spk07: Second, we will continue to focus on expanding Soyang Prime's market penetration, building on our experience in last year. Through optimizing the products on the supply side and growing our network of cooperating institutions, we will improve our capability to deliver standardized services, attract more customers, and drive repeated purchases. Soyang Prime is our key deployment in the industrial internet. It will comprehensively integrate production factors in the industry, reconstructed relationships of the players in supply chain, increase efficiency, lower costs, and ultimately benefit consumers. It covers a broader and a deeper range than pure internet business and will solve the industry issue at a deeper level and construct higher barriers to entry.
spk03: Looking forward to 2023, the external situation is heading towards the development of the industry and our direction. The medical institutions are gradually recovering to normal operation. In the long term, medical services in China, especially the light medical consumption, still have a lot of room for growth. New business directions will help us achieve a diversified income and establish a healthier business model. In terms of operation, we will continue the efficient market investment strategy Looking into 2023, external conditions are moving in a positive direction for the industry and our business, and institutions are gradually returning to normal operation.
spk07: In the long run, there is still large room for growth in Chinese medical aesthetics consumption, particularly for light medical aesthetics. Our new business direction will help us diversify our revenue streams and build a healthier business model. Operationally, we will continue our highly efficient marketing strategy, strictly control our expense, refine our operation, and seek profitable growth. With persistent in the near term and confidence in the long term, we will continue to put users first and remain committed to becoming the most trusted medical statics platform.
spk03: Now let me invite our Senior Vice VP of Finance, Nick, to review the financial results for the fourth quarter before taking your questions.
spk00: Hello, this is Nick. I will now take some time to go through the financials for the fourth quarter and the full year 2022. Please be reminded that all amounts quoted here will be in RMB. Please also refer to our earnings release for detailed information for our comparative financial performances on a year-over-year basis. For the fourth quarter 2022, total revenue were RMB $325.1 million compared to RMB $449.5 million in the corresponding period of 2021. In line with our previous guidance, the decrease was primarily due to a decrease in average revenue for paying medical service providers. The decrease was primarily due to, one, COVID-19 control measures and the surge of COVID-19 cases, especially in major areas in China, limited people visits to offline service providers, and two, pressure on the overall Chinese consumer market. Within the total revenues, Information services and other revenues were R&D $233.9 million down 32.1% year-over-year. Reservation services revenues were R&D $26.0 million down 37.2% year-over-year. Fuels and equipment and maintenance service revenues, which were from Wuhan Miracle Laser System Inc., were RMB 65.3 million compared with RMB 63.8 million in the same period of 2021. Cost of revenues were RMB 88.2 million down 30.6% year-over-year. The decrease were primarily due to our cost optimization errors and efficiency improvement programs. Total operating expenses were around $212.6 million, down 42.8% year-over-year. Sales and marketing expenses were around $98.4 million, down 35.6% year-over-year, primarily due to decreasing expenses associated with branding and user acquisition activities. G&A expenses were around $73.2 million, down 14.8% year-over-year. The change was primarily due to a decrease in share-based compensation expenses, partially offset by an increase in payroll costs and professional service fees. R&D expense for R&D, 41.1 million, down 39.2% year-over-year, primarily due to a decrease in payroll costs. Income tax benefit for R&D, 2.4 million. compared with income tax expenses for RMB 10.1 million in the fourth quarter of 2021. Net income attributable to Soyang International Inc. for RMB 31.3 million compared with a net loss attributable to Soyang International Inc. of RMB 27.7 million in the fourth quarter of 2021. Net gap net income attributable to Soyang International Inc. which exclude the impact of share-based compensation expenses and impairment of goodwill and intangible assets attributable to Soyang International Inc. for RMB 38.8 million compared with RMB 62.9 million in the same period of 2021. Basic and diluted earnings per ADF attributable to ordinary shareholders were RMB 0.29 and 0.29, respectively, compared with basic and the loaded losses per ADS attributable to ordinary shareholders of RMB 0.26 and 0.26, respectively, during the fourth quarter of 2021. For the full year 2022, total revenues were RMB 1.26 billion, down 25.7% year-over-year. Within total revenues, Information service revenues were RMB 888.5 million, down 31.9% year-over-year. Reservation services revenues were RMB 128.7 million, down 53.4% year-over-year. Sales and equipment and maintenance service revenues were RMB 240.7 million. Cost of revenues were RMB 393.3 million, up 19.9% year-over-year due primarily to the consolidation of Wuhan Miracle. Total operating expenses were RMB 967.4 million, down 30.8% year-over-year. Net loss attributable to Soyang International Inc. were RMB 65.6 million compared with net loss of RMB 8.4 million in the fiscal year 2021. Net gap net loss attributable to Soyang International Inc. or RMB 22.2 million compared to net loss of RMB 139.5 million in fiscal year 2021. Basic and diluted losses per ADS attributable to ordinary shareholders were RMB 0.61 and 0.61 respectively compared with basic and diluted losses per ADS attributable to ordinary shareholders of RMB 0.08 and 0.08 respectively in fiscal year 2021. With regards to some items on our key balance sheet, we held adequate liquidity in this quarter. As of December 31st, 2022, we had a total cash and cash equivalents, restricted cash and term deposits. Term deposits and short-term investments in R&D 1.6 billion compared with R&D 1.8 billion as of December 31st, 2021. For the first quarter of 2023, we expect total revenues to be between RMB 290 million and RMB 310 million. The overall outlook is based on our current market conditions that reflect the company's preliminary estimates of market and operating conditions and the customer demand. This concludes our key remarks. I will now turn the call to the operator and open the call for Q&A.
spk01: Thank you. Yes, ma'am. Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, we ask that you please pick up your handset before pressing the keys. If at any time your question is addressed and you would like to withdraw your question, please press star then two. We do ask that you please limit yourself to one question. Today's first question comes from Thomas Chong at Jefferies. Please go ahead.
spk05: Thank you for accepting my question. 我的問題是關於我們2023年公司市場投放的策略, 還有就是預期達到的用戶規模。 那我現在翻譯一下。 Thanks, Benjamin, for taking my question. Can you share with us about your marketing strategies and expected user base in 2023? Thank you.
spk03: Thank you. As the market gradually recovers, we will ramp up our marketing strategy compared to 2022, yet we will still emphasize efficiency and accuracy and make adjustments based on market conditions. In addition to our existing marketing strategy,
spk07: We will also focus on private domain operations in an effort to increase user engagement and repurchase rates. In 2022, we attempted private domain operations for Soyang Prime and developed an effective conversion path with private domain clients contributing over 90% of Soyang Prime orders.
spk03: We will continue to optimize the content of the community. using platform innovation tools to cultivate more natural user traffic. But as we mentioned before, for the current medical market, we think it is no longer just a competition of traffic. We need professional platforms to have a deeper understanding of the industry and users, provide users with better sales experience, and solve the real needs of users.
spk07: We will continue to optimize community content and our innovative user tools to generate more organic user traffic. But as we mentioned before, competition in the medical aesthetic industry is no longer merely for traffic. Professional platforms need a profound understanding of users and industry to provide a good service experience and meet customer demands. Thank you.
spk01: Thank you. And our next question today comes from Nelson Chung at Citi. Please go ahead.
spk02: Let me translate myself. Thanks management for taking my question. My question is regarding management view regarding the recovery trajectory of the medical aesthetic industry in 2023 and the growth driver for Soyang this year. Thank you.
spk03: We still hold a cautious view of
spk07: optimistic outlook for 2023, mainly depending on the recovery pace of the overall consumption environment and the market. At the same time, we do see the marketing spend from institutions lagging behind the recovery on the user side.
spk03: In the user side, we see that the recovery of the medical market does exist. Due to the impact of the epidemic in the past few years, Especially after the end of last year's COVID-19, a large number of user orders were suppressed. So in the first and second-tier cities, users showed a rapid recovery trend at the beginning of this year. At the same time, the number of user orders has returned to the level of 2021. But in the third and fourth-tier cities, the number of user orders has returned to the level of 2022, but has not returned to the level of 2021.
spk07: First, on the user side, we see regional differences in the recovery of the metastatic market. Due to the impact of the epidemic in the past few years, and especially consideration of the surge in COVID-19 infections at the end of last year, a large number of treatment orders were backlogged. Therefore, in the Tier 1, Tier 2 cities, user orders have rebounded rapidly since the beginning of this year. and have already recovered to the level of the same period of last year, of 2021. In third and fourth tier cities, so user orders have recovered to the 2022 level, but not yet to the 2021 level.
spk03: In the agency side, we see that the agency has put in a state of cautious recovery, mainly because after last year's user COVID-19 relief, On the institution side, we see that they are still cautious when budgeting their market spend, mainly because of two factors.
spk07: First, because user orders in first and second tier CTS rebound rapidly post-infection, institutions do not need to spend a lot on marketing at this stage. Second, the overall turbulence of the past few years has made institutions more cautious about spending. But overall, we do see institutions spending gradually recovering.
spk03: Thank you.
spk01: Thank you. And our next question today comes from Chloe Wei at CICC. Please go ahead.
spk06: so um my First question is about, could you please revisit some of the things that you are thinking about as far as the business volume in the short to medium term view, say in the next three to five years? And also, can you give us just an update around maybe how you are thinking about the competitive landscape? Thank you.
spk03: Hello. As our new income growth curve,
spk07: As a new growth driver, Soya Prime trajectory will mainly depend on the development of the non-surgical market, which will continue to expand in line with the growth of the middle-class female population.
spk03: We will expand the network on the supply side, cooperate with more institutions, enrich the product portfolio, boost the number of service outlets, ensure high-quality service delivery, and improve the user penetration rate and repurchase rate. Chinese and American users' habits are closer to daily life. Many small and medium-sized American institutions have certain advantages. However, small and medium-sized American institutions have more obvious shortcomings in product equipment, product design, service contract, brand recognition, and so on. Xinyao Youxiang has integrated high-standard contract service networks for these institutions. Not only can it support more small and medium-sized institutions, but it can also serve more American users.
spk07: Now surgical medical aesthetics users are used to consuming daily cosmetics and skin care products, which is an area of expertise for the numerous small and medium institutions. But small and medium institutions are usually weak in equipment, SKU design, service delivery, and brand awareness. Suiyang Prime forms a network ensuring service delivery of high standard by empowering these institutions. In addition to benefiting small and medium institutions, this initiative could serve large medical aesthetic user group and increase convenience for consumption for them. That makes us distinctive from our competitors.
spk03: So, Suiyang Prime has opened the supply chain. Therefore, only by connecting the supply chain and link the upstream, midstream, and downstream can we expand the medical aesthetics industry addressable market.
spk07: and provide users with a better service experience, building a safe and secure environment for customers and driving the overall growth of the industry. For the second question, with environmental uncertainties in easy and consumption demands recovery, there is plenty of space in the medical aesthetics market, and industry outlook is clear.
spk03: We believe that the medical industry is driven by supply and demand. So in the future, we will focus more on supply and demand. At the same time, we will focus more on supply and demand. We believe the medical settings industry is driven by the supply side, and that is where we will put more emphasis in the future.
spk07: We will also integrate the core production advantages we have accumulated in terms of institutions, doctors, and users, set standards for service quality and service delivery, and provide users with a premium experience. These comprehensive capabilities will enable us to build a strong competitive barrier compared with the pure Internet model. We will be able to solve issues at a deeper level and create more differentiation from our competitors. In the past few years, we have provided users with a transparent and trusted information platform through our community commerce business, boosting the efficiency of the metastatic industry at scale. In the future, we will continue to optimize our community content, innovative new user tools, and leverage the scale advantage of the Internet. and provide a second complement of resources for offline service delivery. Of course, we may also cooperate with other traffic platforms.
spk03: We believe our integration capabilities across the industrial chain
spk07: and our investment in the service delivery experience will benefit users and drive the sustainable development of the whole industry. Thank you.
spk01: Thank you. And our next question today comes from Hugo with Hightong Securities. Please go ahead.
spk04: Thank you for the opportunity. My question is, Do you see any changes in mathematical mathematics consumption demands on the user end after the COVID-19? Thank you.
spk03: Hello. First of all, as I mentioned at the beginning of the phone call, there are changes in user demand. We see that the Chinese and American consumer groups are different from traditional American consumers. They pay more attention to quality, safety, products, and reasonable prices. Some high-end products demand are rising.
spk07: Thank you for asking. In the question, first, as we mentioned in our pre-marked, prepared marks, user demands are evolving. Middle-class medical aesthetics consumers have different demands from the traditional consumption group. As we focus more on quality, safety, Genie products and rational prices. Demand for certain high-order values SQ have increased. For example, SQs in those photoelectric and injection categories with average order value over 5,000 RMB are highly popular among users. Secondly, as the market recovers, we believe the surgical market, which was persecuted in the past few years, will experience a wave of consumption as the economy recovers and travels pick up. 同时,随着出境的开放,用户也会涌向比较发达的海外市场消费。 Also, with the rebound in outbound travel, users will rush to develop overseas market for medical aesthetics consumptions. Thank you. That's all.
spk01: Ladies and gentlemen, this concludes our question and answer session. I'd like to turn the conference back over to management for any closing remarks.
spk07: 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. Bye.
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