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spk07: Ladies and gentlemen, thank you for standing by for SoYoung's third quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. After management gives their prepared remarks, there will be a question and answer 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.
spk01: Thank you, operator, and thank you, everyone, for joining Soyang's third quarter 2023 earnings conference call. Joining me today on the call is Mr. Xin Jing, our co-founder, chairman, and CEO, and Mr. Nick Zhao, CFO. 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. SOEON does not undertake any obligation to update any forward-looking statement except as required on the applicable law. At this time, I would like to turn the call over to Mr. Xinjing. Cash, please.
spk06: Hello, everyone. Welcome to the third quarter of Xinyang's fiscal change meeting in 2023. In the third quarter, Xinyang has overcome the pressure of the economic environment. The financial and operating performance have been stable. The total income has reached RMB3.9 billion. The share price has increased by 19%, which is in line with the company's guidance. Hello, everyone. Thank you for joining Soyang's third quarter 2023 earnings call. Our business remained resilient and delivered solid financial and operational results during the quarter,
spk01: despite microeconomic headwinds. Total revenues were RMB 390 million, an increase of 19% year-over-year and in line with our previous guidance. Probability also continued to improve thanks to our careful management of costs. That income attributable to Soyang International Inc. was RMB 18.3 million compared with RMB 2.3 million in the same period last year.
spk06: In the same period last year. I would like to start by sharing my thoughts on where the sector is heading. We strongly believe that the medical aesthetics market going forward will head in two directions.
spk01: The first is a gradual and stark popularization of high-tier users who are less impacted by a weak macroenvironment and will continue to seek high-quality services. In this scenario, low- to mid-tier users would increasingly navigate towards products with the best quality-to-cost ratio. The second is a continuation of high-speed growth of light medical aesthetics as the market continues to expand in size. We are adapting each of our business to be able to cater to both of the two scenarios.
spk06: and service experience. High-quality community users. The output of high-quality community content and the user's sense of experience in the field of medical professionalism are strengthened. Helping high-quality doctors and institutions to get out of the price range, return to the medical essence, and obtain reasonable benefits. In the third quarter, we joined together with high-quality doctors to promote the face outline category. Online orders of GMV increased by 40%. The total number of GMV orders in the online operating system has increased by 11%. The price of the online hand-to-hand products has increased by 60%. The total number of GMV orders in the online hand-to-hand system has increased by 72%. In addition, through the operation of shared hospitals and the investment in medical medicine MSN, we have a deeper understanding of medical medicine doctors and the environment. This will help Xinya App to transform into a high-end.
spk01: Taking this into account, we are adjusting our community-powered business with a focus towards high-end service and users. During the quarter, we strengthened cooperation with a select number of well-respected doctors and institutions, further integrate internal resources, and optimize the processes, all in an effort to provide the highest quality service and experience through our one-stop solution. Offering premium content and enhancing the user medical aesthetics service experience has helped well-respected doctors and institutions avoid costly price wars while still generating reasonable premium. During the quarter, we worked with well-respected doctors to promote the face contouring category. Online GME for the face-contrary category grew by 40% year-over-year during the quarter, while GME for all surgical categories grew by 11% quarter-over-quarter. Average transaction value for non-surgical products grew by 60% year-over-year, and GME grew by 72% year-over-year. In addition, by cooperating clinics with BillCare and investing in medical aesthetics MCNs, we have obtained a deep understanding of the mechanics, which is helping us transform Soyang app into a high-end platform that offers users a large selection of premium doctors to choose from and reducing the decision-making costs.
spk06: It is also an important step for us to sell to the standardization service of QIYI. Since the launch in August last year, the business has steadily expanded. In the third quarter, the number of orders sold by users has increased by 23%. Among them, the product of super sound anti-crash represented by super sound cannon, the number of orders sold by users has increased by 44%. As I mentioned in my last quarter call meeting, At the same time, we pay more attention to guarantee users from online to offline consumer experience, improve the efficiency of the existing institutional network points, and clarify the business operation link. In this quarter, among more than 100 institutional network points cooperating with Xinyang, 13% of Xinyang orders have been contributed.
spk01: Xinyang Prime is being adjusted to serve the group looking for the best quality cost ratio product. 4GEM Prime is a unique innovation for the light metal aesthetics industry and a critical step to standardize offline services. Since its launch in August last year, the business has rapidly expanded and scaled with fulfilled orders increasing by 23% sequentially during the quarter. Within fulfilled orders, high intensified focused ultrasound under the ultrasonic ATH category in particular increased by 44% sequentially. As I mentioned in our last earnings call, at Soyang Prime scales, our focus is on ensuring the best possible online to offline use experience, improving operational efficiency for our institutional network, and refining operations. During the quarter, orders through Soyang Prime from the more than 100 institutions we worked with contributed over 13% of fulfilled orders in-house. To further standardize the management system for light medical aesthetics institutions, we built a flagship clinic on the second floor of our head office to test our systems in real time. The team operating the clinic fully integrate with Soyang Prime and has already seen monthly visits increased by more than six-fold over the past three months. Equally as important, The clinic has already achieved a probability.
spk06: Finally, our supply chain business can seize the opportunity of high-speed growth in the future of the light medical market. This part of the business has also gained significant growth in the third quarter. Xinya's supply chain business is a new attempt that we have gradually expanded to the top of the medical industry chain after many years of exploration and insight into the industry. In the field of upstream light and electricity equipment, we have further customized and developed the new generation of ultrasonic antifreeze equipment, ultrasonic shield, and based on this product to improve our DTC mode. In the field of upstream real estate, we have achieved high-speed growth in performance by establishing a team through Elastic. It is expected that the total amount of exports will reach seven times last year, Lastly, our supply chain business is being positioned to capture opportunities if the light medical asset market continues expanding rapidly.
spk01: encapsulated with the standout performance it had during the quarter and the remarkable growth it has generated. The supply chain business is a result of our initiative to implore opportunities and acquire deep industry insights that would allow us to expand upstream along the medical aesthetics supply chain. Looking at the upstream medical laces product category, Following the acquisition of Wuhan Miracle, we built a new generation of ultrasonic ATNG equipment called the micro-focused ultrasound device, which we are using to build out our direct-to-consumer business model. On the medical injection part, we established a team through elasticity and achieved rapid growth in performance. Full-year shipments are expected to be seven times that of last year. In July, we also signed a strategic cooperation agreement with Xihong Biopharma for the exclusive distribution rights of two filler products. Cooperation agreements such as these filled gaps and greatly enhanced our light metastatic product portfolio.
spk06: Different from other traditional upstream manufacturers, Distinct from the traditional upstream R&D production supply chain model used by manufacturers,
spk01: we are able to add further value by developing synergies with our existing business and fully leverage our institutional network and expansive consumer reach. This allows us to quickly bring new products to market and rapidly make them competitive.
spk06: At the end of the supply chain, you can see that in three seasons, including the supply chain version within Wuhan Qizhi, the income is about RMB 75 million yuan. The growth rate is 19% and the total income contribution is up to 20%. As for the real estate products, we just started entering the market last year. We first tried to operate in the competitive category of Bonaire. At present, this business income is constantly rising, and in August and September, single-month profits have been continuously achieved. This is a good proof of a new platform plus high-quality products.
spk01: In the third quarter, revenue from our supply chain business, which includes Wuhan Miracle, reached RMB 75 million, an increase of 19% year-on-year and accounting for 20% of total revenue. We entered the injectable filler market just last year with a product designed for the highly compactive hyaluronic acid serum. Revenue for this serum keeps hitting new highs, and has already become profitable on a single-month basis in August and September. This success directly reflects the enormous synergies we are able to create between the SoYang platform and high-quality upstream products.
spk06: In the long term, China's e-commerce consumer penetration rate has a significant room for improvement. The market is wide-spread, not only in the first-tier cities but also in the developed ones. to improve the core driving factors of the ongoing growth of the industry. As the industry continues to be standardized, the competitive advantage of having integrated innovative capabilities such as Xinya will become more and more obvious. We will focus on the above three major business directions to fully integrate institutions, doctors, and products. These three major industrial elements are deeply integrated and continue to explore diversified income to improve performance.
spk01: Over the long term, the medical aesthetics industry in China still has plenty of room to grow with user penetration rates that are still very low. Markets beyond first-tier cities remain largely adapted. As standardization spreads across the industry, our fully integrated capabilities and other competitive advantages will become more pronounced. Our focus will remain in our three core business segments, where we will work to further integrate institutions, doctors, and products in order to create sustainable, diversified revenue streams and create long-term value for our shareholders.
spk06: Next, let's have CFO Nick introduce the financial situation of Sanjidu. After that, we will start the Q&A session.
spk01: I will now turn the call over to our CFO, Nick, to review the financial results for the third quarter before taking questions.
spk02: Okay. Hello, this is Nick. I will now go through our financial performances this 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 comparative financial performances on a year-over-year basis. Total revenues during the quarter were RMB 385.3 million, up 19.2% year-over-year, and in line with our guidance. The increase was primarily due to an increase in revenues generated by Soyang Prime and sales of medical products. Information services and other revenues were RMB 285.9 million, up 24.1% year-over-year, primarily due to an increase in revenues generated by Soyang Prime. Reservation services revenues decreased by 18.8% over the year to RMB 24.1 million, primarily due to our operating strategy, which gives higher subsidies to end users. Revenue from sales of medical products and maintenance services were RMB 75.2 million, up 19.2% year-over-year, primarily due to an increase in sales of cosmetic injectables. Cost of revenues for RMB 142.6 million, up 51.7% year-over-year. The increase was primarily due to an increase in costs associated with Soyang Prime. Within cost of revenues, cost of services and others for RMB 103.5 million, up 74.2% year-over-year, primarily due to an increase in costs associated with Soyoung Prime. Cost of medical products sold and maintenance services will RMB 39.1 million, up 13% year-over-year, primarily due to an increase in costs associated with the sales of cosmetic injectables. Total operating expenses will RMB 244.7 million, up 3.4% year-over-year. Sales and marketing expenses were RMB 143.8 million, up 15.3% year-over-year, primarily due to an increase in expenses associated with branding and user acquisition activities. G&A expenses were RMB 50.2 million, down 16% year-over-year. The change was primarily due to the reversal of share-based compensation expenses, partially offset by an increase in payroll costs associated with the expansion of administrative employees to support our business upgrade and new strategic businesses. R&D expenses for RMB 50.6 million, down 2.7% year-over-year, primarily due to improvements in self-efficiency. Income tax benefits were RMB 2.2 million compared with income tax benefits of RMB 16.5 million in the third quarter of 2022. Net income attributable to Soyoung was RMB 18.3 million compared with a net income of RMB 2.3 million during the same period last year. Non-GAAP net income attributable to Soyoung was RMB 9.5 million compared with RMB 9.9 million non-GAAP net income attributable to Soyang in the same period of 2022. Basic and diluted earnings per ADS attributable to ordinary shareholders were RMB 0.18 and 0.18, respectively, compared with basic and diluted earnings per ADS attributable to ordinary shareholders of RMB 0.02 and 0.02 respectively during the same period of 2022. We have ample cash on hand with a total cash and cash equivalents, restricted cash, term deposits, and short-term investments of RMB 1.4 billion as of September 30, 2023, compared with RMB 1.6 billion as of December 31, 2022. The decrease was primarily due to investments in building our supply chain product pipelines of RMB 38 million and share repurchases of approximately RMB 121 million. For the fourth quarter of 2023, we expect total revenues to be between RMB 380 million and RMB 400 million. The about outlook is based on our current market conditions that reflects the company's preliminary estimates of market and operating conditions and the consumer demand. This concludes our key remarks. I will now turn the call to the operator and open the call for Q&A. Thank you.
spk07: Thank you. If you would like to ask a question, please press star then 1 on your telephone keypad. If your question has been addressed and you would like to remove yourself from queue, please press star then 2. We do ask that you pick up your handset before pressing the keys. Once again, ladies and gentlemen, that's star then 1 if you have a question. And today's first question comes from Thomas Chong at Jefferies. Please go ahead. Hello, Thomas Chong. Your line is open.
spk03: Hi, good evening. Thanks, management, for taking my questions. Can you share about the progress Soyang Point has made and the expectations for Q4 and 2024? And my next question is about our estimate for market expenses in Q4 and next year. Thank you.
spk06: Hello, let me answer the first question first. In the third quarter, Xinya Youxiang's business operation is just one year full. We see that the number of order orders for users is 11 times that of the same period a year ago. User size quickly expands. This also fully proves that Youxiang's service has gained the trust of many consumers. In the third quarter, the number of order orders for users increased by 44% on behalf of Chaosheng抗摔, which represents Chaosheng cannon.
spk01: Thank you for your questions. I will take the first one. We launched Soyang Prime just over a year ago. Since then, fulfilled orders have grown by tenfold during the quarter when compared to the same period last year. As our user base expands rapidly, which I believe demonstrates the transaction, its services are gaining among consumers. Within fulfilled orders, high-intensified focused orders Ultrasound under the ultrasonic ATH category in particular increased by 44% sequentially, generating strong word of mouth.
spk06: As I mentioned, we established a sample shop of Qing Yi Mei clinic on the second floor of our office building. We established a clinic operation team and combined it with good business, constantly exploring the standard management system of Qing Yi Mei institutions to polish the good business model.
spk01: As I mentioned during my prepared remarks, we built a model clinic for high, we called it a flagship store for high, for light medical aesthetics procedures on the second floor of our office. The team operating the clinic are fully integrated with Soyang Prime and are driving the development of a standardized measurement system for light medical aesthetics institutions and further improving the overall business model.
spk06: We will continue to develop Soyang Prime user base, improve the service experience,
spk01: capture emerging opportunities within the light medical service industry, and create products and services with high quality to cost ratios. We will also expand the number of categories with cooperation with institutions and implement a standardized management system to strengthen our position as an all-around partner for small and mid-sized light medical studies institutions.
spk06: At the same time, the supply chain business can also be well combined with the supply chain business in the later stage. Supply chain products can land directly in the supply chain channel. Q4, we uploaded the customized and developed new generation of Chaosheng anti-bacterial equipment, Chaosheng Dun. The clinical performance is good. In the future, the supply chain will gradually increase the number of new large unit products, and thus increase the profitability of the supply chain business, and play a huge co-efficient role in the supply chain business.
spk01: We plan on integrating Soyang Prime with our supply chain business in the future. Products from the supply chain business can be directly through Soyang Prime. Microfixed ultrasound device, the new generation of ultrasonic anti-aging equipment we launched in the fourth quarter has performed well in clinic applications. Going forward, Soyang Prime will gradually introduce new products, further improve margins, and create synergies with our supply chain business.
spk02: I will respond to the question regarding the marketing expense. We have placed an emphasis on improving advertising efficiency this year. Conversion rate for user placing an order online improved in the third quarter, mainly due to our community content, strong brand image, and new user acquisition methods. such as private domain operations. Looking ahead to Q4 and 2024, we will continue to leverage our community content, strong brand, and other competitive advantages to further improve the user experience to increase user conversion rates. Lastly, we will also continue deploying a highly efficient marketing strategy, expand user acquisition channels, improve marketing ROI, and carefully manage marketing costs to maintain our margin and improve the profitability of the company.
spk07: Thank you. And our next question comes from Nelson Chen with Citi. Please go ahead.
spk05: So, I will translate myself in English. So, thanks management for taking my question. How would management expect the medical expected markets to develop in fourth quarter, especially during the double 11 period and also into the next year, 2024? Thank you. Hello, thank you for your question.
spk06: As I mentioned in the previous talk, I think the future medical market will develop in two directions. One, the Chinese medical market will gradually show a clear two-level division trend. The consumer capacity of high-end users is limited due to the influence of the macro environment. We will still pursue high-quality e-commerce services. The impact of the macro market on the mid- and low-end e-commerce consumer groups will be more important than the cost of the product. The second is that the green e-commerce market still has room for rapid growth. The market size will be further improved. So based on the above two judgments, we have made corresponding changes in the direction of business.
spk01: Thank you for asking me. And first, as I mentioned in prepared remarks, I believe the macro statistics market going forward will head in two directions. The first is gradual and stark popularization of high-tier users who are less impacted by the weak macro environment and will continue to seek high-quality services. In this scenario, low-to-mid users will increasingly gravitate towards products with the best quality-to-cost ratio. The second is the continuation of high-speed growth of light medical aesthetics, and the market continues to expand in size. We are adapting each of our business to be able to counter to both of these scenarios.
spk06: We will focus on the development of three major directions on the basis of Hangshi's professional medical platform. One, the change in the direction of the POP business. The goal is to meet the needs of the high-end user community and realize the transformation to a high-quality e-commerce Internet platform. Two, the good business is mainly to meet the needs of the high-cost people and continue to explore the standardization of the e-commerce organization management system to provide users with high-cost service experience. Three, the supply chain business can make us grasp the future high-growth of the e-commerce market share.
spk01: Based on the upper production, we will focus on our three business segments to create a consolidated professional medical aesthetics platform for all consumers. First, we are adjusting our community e-commerce business with a focus towards high-end services and users seeking high-quality online medical aesthetics services. Second, Soyang Prime is being adjusted to serve user growth look for the best quality cost ratio products as we continue to explore standardized management systems for light medical aesthetics. Third, our supply chain business is being positioned to incrementally capture a larger share of the light medical aesthetics market as it continues to expand rapidly and to create synergies with other business segments.
spk06: Two days ago, the National Bureau of Statistics announced the consumption data in October. In January to October, the total consumption of consumer goods increased by 6.9%. In October, the total consumption of consumer goods increased by 7.6%. Social consumption is in a state of continuous recovery. With the continued recovery of the economy and the steady promotion of our industrialization transformation strategy, we remain optimistic about the future of the U.S. consumer market in 2024. At this stage, we may face business fluctuations in individual periods, but our investment in users and institutions and our intention to create value for the industry have not changed. We are full of confidence in the future results.
spk01: In addition, according to consumption data published by the National Bureau of Statistics, total retail sales of consumer goods in the first 10 months increased by 69% year-over-year and 76% year-over-year in October, indicating that the economy is gradually gaining recovery momentum. In summary, we remain confident with the growth perspective in medical-scientific market has for 2024 and further into the future. Even though our business is occasionally impacted by volatile markets, it remains resilient. We will continue investing in acquiring high-quality users and institutions to create value for the industry and are confident in our long-term growth prospects. Thank you.
spk07: Thank you. And our next question today comes from Chloe Wei at CICC. Please go ahead. Hello, Chloe. Your line is open. Chloe Wei. I'm sorry. We're not able to hear your audio at this time. So we'll move to the next question, which is from Gigi Ren with CITIC. Please go ahead. Uh,
spk04: 我这边有一个问题,就是关于公司连续两个季度盈利改善,然后公司预计Q4和未来的利润情况。 Let me translate my questions. As profitability has improved for two consecutive quarters, how do you expand margins to trend next quarter and going forward? Thank you.
spk02: Thank you for your question. With a soft consumer sentiment, we will focus on driving revenue growth with the gradual diversification of revenue streams. Our supply chain business and Soyang Prime is showing a solid performance each quarter and reflects this focus. The improvement in our profitability for the past two consecutive quarters reflects the improvements we have made in operating efficiency. we will continue to execute this strategy and remain confident that we will be able to maintain profitability next quarter. 2023 is a critical year for our business transformation. We have made steady progress in laying a solid foundation for future growth and creating long-term sustainable value for our shareholders. Looking forward to 2024, we will continue to grow revenue improve operating efficiency, and carefully manage costs. We will be well positioned to increase our competitiveness and maintain healthy cash flows as we leverage opportunities to generate returns for our shareholders. Thank you.
spk07: Thank you. Thank you. And our next question comes from Chloe Wei with CICC. Please go ahead.
spk00: So I will translate myself. Mr. Xinjing, what do you think of the future competitive landscape? And given the thoughts, how do we position ourselves in the long run?
spk06: Thank you. Thank you for your question. In the medical market, we have been exploring and discovering new business models, leaping off traditional Internet thinking, opening up new thinking pathways, exploring the development and excavation of medical industry values.
spk01: To give a question, we have been following new business models across different verticals within industry that are outside the traditional internet business models. We are trying to find new ways to think about industry development and exploring value creation.
spk06: First of all, in the middle of the industry, that is, the Internet, we see mainstream short video platforms trying to enter the American market from Q3. We believe that short video platforms and comprehensive e-commerce platforms mainly adopt a low-cost group purchase competitive model that adapts to its platform characteristics. Based on the judgment of the two-level diversification market trend in the future, we adopt a operational strategy that differentiates from and against POP platform business, mainly to meet the needs of high-end e-commerce users, provide better consumer experience, and also help to increase the profit space of business.
spk01: First, looking midway upstream, we are seeing that major short video platforms tap into medical aesthetics in the third quarter. We believe these platforms, as well as the major e-commerce platforms, are mainly applying a low-price growth purchase model, which fits their operation models. Based on our expectation of industry popularization in the future, we are adopting a different operating model strategy with our pop business to focus on the demand of high-end users by providing them a better consumption experience, which will also improve our margins.
spk06: For the downstream infrastructure market, with the development of Qingyi Mei and the pursuit of cost-effectiveness by a large number of users, we believe that the Qingyi Mei chain will have a huge market growth space in the future. But there are no competitive chain organizations in China. Currently, there are only two brands with more than 20 chain stores in China and the United States. The whole standardization level and business profit level have not yet reached a relatively good performance. We see that there are very successful models abroad that provide high-quality medical consumption experience for middle and low-end users. Therefore, we will use the operation of Youxiang business Downstream at the institutional end of the spectrum, users are increasingly seeking products with a high quality-to-cost ratio, which our operations will be able to counter to add space growth.
spk01: We believe the chain stores of light medical aesthetics will have a huge market growth space in the future. Domestic competitors in the vertical are few and far between, with only two brands going over 20 chain stores with limited standardized products and low margins. There are successful models already deployed outside China, which provides a premium consumption experience for low- to mid-tier users We are working on deploying a standardized measurement system for light metapathetic institutions through Soyan Prime with high quality-to-cost product ratios for our users. This position is an all-around partner for a large number of small and mid-sized light metapathetic institutions.
spk06: For the upstream supply market, we see that the market competition in real-time products is intense. Upstream competition is getting
spk01: in the injections category, but enormous market potential remains intact for medical lasers, particularly in the ultrasonic 18-engine category. Based on our observation, we customized and launched an ultrasonic 18-engine product called the MicroFox ultrasound device during the fourth quarter. For injections, we see enormous growth potential in the regenerative market driven by new materials and have expanded our offering in the category. In summary, in addition to developing the Internet business model, we are also employing growth potential along the industry supply chain with a focus on the long term. We are confident that our superior positioning in the market and our competitive advantages will lead to growing without going forward. driven by our integration and innovation along the industry value chain. Thank you. Thank you for asking.
spk07: Thank you. And, ladies and gentlemen, we are approaching the end of today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
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