So-Young International Inc.

Ladies and gentlemen, thank you for standing by for SoYoung's second quarter 2024 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 conference over to your host for today's call, Ms. Mona Chow. Please go ahead, Ms. Mona.

Thank you, operator, and thank you, everyone, for joining SOEAM's second quarter 2024 earnings conference call. Joining me today on the call is Mr. Xin Jin, our co-founder, chairman, and CEO, and Mr. Nick Zhao, CFO. Please note that the discussion today will contend for looking at statements made under the safe harbor provisions of the U.S. private securities and the Litigation Reform Act of 1995. Four looking statements are subject to risk and alternatives that may cause actual results to differ materially from our current expectations. Potential risks and alternatives include, but are not limited to those outlined in our public filings with SEC, including our annual report on Form 20F. Soyeon does not undertake any obligation to update any forelooking statements, except as required under applicable law. And this time, I'd like to turn the call over to Mr. Shinjin

Hello, everyone. Welcome to today's earnings call.

Our performance during the second quarter was solid, with a total revenue of RMB 407.4 million, exceeding the top end of our guidance. Non-GAAP net profit was RMB 22.2 million, up 43.1% year-over-year, showcasing our high-quality growth and the effectiveness of industry integration.

We were able to grasp the industry trend, carry out a preemptive layout, and achieve a bright progress. To be specific, the growth of the new business model continues to grow rapidly. One of them is the sales and maintenance service income of 1.06 billion RMB, which has increased by 22.6%. In the upstream, our product delivery continues to rise. At the same time, we accelerate the deployment of downstream chain business, and continue to contribute to the development of company business. As the only platform company in the upstream and downstream of the medical industry, Xinya is leading the industry to a new stage of high-quality and sustainable development. We help the industry gradually improve transparency and operation efficiency through the coordination and orientation of upstream platforms and institutions, provide the mid-range consumers with unprecedented extreme cost-effectiveness and diversified product choices, continue to optimize customer experience, redefine the new standards of beauty service, and thus realize the deep integration of industry value improvement and consumer demand.

We capitalized on industry trades, executed on our strategy and made impressive progress during the quarter. Specifically, our new business segments continue to grow rapidly with revenue from the sales of medical products and maintenance services reaching RMB 106 million, up 22.6% year-over-year. Product shipments in our upstream supply chain business increased as our chain of clinics expanded. both contributing significantly to growth. We are the only platform covering the upstream, midstream, and downstream segments of the entire aesthetic medical industry, and are leading the industry into a new era of high quality and sustainable development. Leveraging the synergies created by the vertical integration, we are enhancing industry transparency and operational efficiency across the value chain. This closely aligns the industry value chain with involving consumer needs, ensures a diverse range of high quality and affordable products, optimize the customer experience, and redefine standards for medical aesthetic services.

Next, I would like to share with you the development of our second quarter business. In the community e-commerce business section, we continue to promote high-quality development strategies through accurate supplementation of users and detailed operation methods. and continue to consolidate the competitive advantage in the medium and high-end markets. We pay attention to the daily growth of users' demand for high-end customized medical products, take the initiative to make strategic adjustments, and upgrade the SKU on the platform. On the basis of ensuring positive products, we will further enrich the medical products provided by the leading institutions, support high-quality merchants, and promote in-depth coordination with chain businesses. to better capture and satisfy the constantly evolving needs of high-end users. In the second quarter, our verification of EMEI GMV reached 4.28 billion yuan, with an increase of about 17%. The verification order number exceeded 230,000, with an increase of about 8%. Recently, we have also been continuously optimizing the efficiency of flow input, reducing the flow input of low ROI online. At the same time, through multi-channel linkage, We continue to drive high-quality development in our pop segment and strengthen our competitive advantage in the mid- to high-end market by refining operations and deploying target user subsidies.

With client demand for premium customized products growing, we adjust our strategy and upgraded SKUs, ensuring their authenticity, and further enrich the categories offered by our leading partner institutions. We also strengthen support for high-quality institutional partners by integrating our pub business with our chain of clinics to create deeper and greater synergies. enabling us to better meet the evolving and diverse medical aesthetic needs of made to high end users. In the second quarter, GM way from medical aesthetic products and services reached RMB 428 million over 230,000 verified orders, up around 70% and 8% respectively. We continue to optimize our traffic acquisition strategy by reallocating budget away from low ROI online channels to our private domains. Refining multi-channel private domain operations allows us to cultivate and retain a target user base and improve user engagement and monetization efficiency. In the second quarter, the use of private domains reached 810,000, up 14% quarter-to-quarter. From now on, we have successfully opened 14 stores

located in Beijing, Shanghai, Shenzhen, Hangzhou, Chengdu, Wuhan, Chongqing, and Changsha, the eight core cities of the gold business district, and fully invested in operation. The operating situation meets the expected goals. With the strong user base and brand power accumulated on the XinYang platform, the standardization of service capacity has been added, and the number of users has increased by 85%. The overall resale rate is more than 50%, The satisfaction level continues to increase to 4.97, 5 full points. In terms of operating efficiency, using Beijing's Baoli Sample Electric as an example, in June this year, the monthly income of single electricity was more than 6.2 million yuan, and the profit before tax was about 1.3 million yuan. The profit before tax reached 20%, and the old class accounted for 67%, which is higher than the overall level of the industry. It is worth mentioning that Whether it is unit evaluation or monthly revenue contributed by each doctor, they are ahead of most traditional medical association institutions. These will provide valuable experience for the rapid growth of other new stores. At the same time, we continue to look forward to the future development of Qingyi Medical Association. In the second half of the year, we will open the alliance of Xinyang and Youxiang chain stores to accelerate the standardization of this standardization operation mode. Let's move on to Soyang Prime.

Currently, we have opened 14 clinics in prime commercial areas in eight core cities, including Beijing, Shanghai, Shenzhen, Hangzhou, Chengdu, Wuhan, Chongqing, and Changsha. All of these clinics are fully operational and performing in line with expectations. Leveraging our strong user base, the reputational strength of our brand, and standardized fulfillment capabilities. The number of verified customers increased by 85% quarter-to-quarter, the repeat purchase rate exceeded 50%, and customer satisfaction improved to reach an impressive 4.97 out of 5. We've also achieved solid operational efficiencies. For example, our Beijing clinic generated revenue of $6.2 million in June with pre-tax profits of $1.3 million and a profit margin of around 20%. The repeat purchase rate hit 67%, higher than the industry average. Notably, both unit area efficiency and monthly revenue per doctor outperformed traditional clinics. The experience we have accumulated from this provide us with valuable insights that we will apply to other new clinics to accelerate their growth. We are very optimistic about the future of light medical aesthetic clinics. As planned, we began franchising our chain of clinics in the second half of this year in order to rapidly expand our footprint by replicating this proven standardized model in the target cities.

In terms of upstream business, we strive to become an eco-friendly all-terrain YiMei upstream manufacturer based on the brand, data, and team. With the help of Xinyang Platform's 11-year brand foundation, we have accumulated a large number of YiMei user consumer behavior data and demand insights, and provided a solid foundation for the development and customization of upstream products. At the same time, we use the extensive institutional coverage and strong marketing capabilities of the B-end can quickly establish new market competitiveness. And our self-employed chain stores can also ensure the basic sales of products. Our top-tier core team is made up of professional talents from well-known domestic and foreign manufacturers. They have an average of 5 to 10 years of industry experience, have a strong selection and sales ability. In the second half of the year, we plan to continue to expand our top-tier talent team. It is expected that by the end of the year, the team will reach the size of 100 people. In addition, we have launched a new generation of non-surgical hyperlipidemia anti-lipidemia products this year. The demand for hyperlipidemia and the continued increase in the amount of delivery has shown the potential of becoming a market package. At the same time, the Korean brand Elastic has also maintained a good sales growth momentum. In the second quarter, the amount of delivery exceeded 40,000 units, which increased by 76% and increased by 113%. Finally, I will provide updates on our supply chain business.

Leveraging our extensive consumer behavior data and experience team, we are building for category upstream medical aesthetic manufacturing capabilities for our broader ecosystem. With over a decade of operations, we have accumulated a wealth of consumer behavior data and user demand insights, laying a solid foundation for the development and customization of our products. In addition, leveraging our extensive institutional coverage and strong customer marketing capabilities, we are able to rapidly strengthen the competitiveness of new products using our clinics to ensure a steady stream of sales. Our core team is composed of professionals from top domestic and international manufacturers, each possessing an average of five to ten years of industry experience and strong expertise in product selection and sales. In the second half of the year, we will continue to expand this team with a goal of reaching 100 members by the end of the year. Additionally, we've seen a continuous increase in shipments of true leaf our newly launched non-surgical anti-aging ultrasound device, reflecting its strong potential to be a market hit. Meanwhile, the Careerbrite Elasti has maintained strong growth momentum, with second quarter shipment exceeding 40,000 units, up 76% quarter-to-quarter, and 130% year-over-year. Revenue from the sales of injectables grew by 65% quarter-over-quarter and 170% year-over-year. As of the second quarter of 2024, we partnered with 718 institutions for the sales of injectables.

We believe that the consumption of the industry is declining. The changes in the macroeconomic environment will have a negative impact on the needs of the medical industry in the future. But in the long run, the Chinese and American markets still have a huge potential for growth, especially as the industry is accelerating, and the concentration of the industry is constantly increasing. Like XinYang, a leading brand with an eco-friendly full-fledged industry chain, it can grasp the new opportunities brought by the current industry integration, capture a larger market share and a wider space for development, and further consolidate the leading position of the industry. On the business layout, we believe that POP business is more suitable to meet the needs of users for non-standard e-commerce projects. The chain business is more suitable to meet the needs of users for standardized e-commerce projects. The upstream business at the same time provides unique supply chain support for POP and chain business. At the same time, POP and chain can provide upstream business with 2C, 2B promotion and basic sales insurance. The three businesses complement each other, forming a unique iron triangle of belief. We believe that only the vertical integration of the industry can bring about cross-disciplinary innovation, truly solve the medical supply and demand problems of the medical industry, and also open up a new sea of new business growth for Xinyang.

Despite this soft recovery in conception as the macroeconomic challenge over the near term, we believe that the Chinese medical aesthetic market still has enormous potential in the long term, as the industry begins reshuffling and enters a period of consolidation Leading brands like Soyoung, with a unique ecosystem and full category advantage, are well positioned to capitalize on the new opportunities, expand their market share and growth potential, and solidify their position as market leaders. We believe our pub business is ideally suited to meet demands for non-standardized treatments, while our chain of clinics can service standardized treatments. Supporting both of these businesses with a steady stream of exclusive products is our upstream business, which will also benefit from 2C and 2B opportunities and guaranteed sales offered by both downstream businesses. Combined, these three business segments create enormous synergies and form our Aaron Triangle. We strongly believe that vertically integrating the industry value chain will drive innovation, effectively ensure the quality of services, and open up new growth opportunities for CWM going forward. I'll let our staff or Nick take over now to go through the second quarter's financial results. After that, we'll open up for questions.

Hello, this is Nick. Please be reminded that our amount quoted here will be in RMB. Please also refer to our earnings release for detailed information of our competitive financial performances on a year-over-year basis. Total revenues during the quarter were RMB 407.4 million, down 1.1% year-over-year, exceeding the high end of our guidance on the back of a 22.6% year-over-year increase in sales of medical products and maintenance services. Information services and other revenues were RMB 279.2 million, down 6.6% year over year, primarily due to a decrease in the number of medical service providers subscribing to information services in our platform. Reservation services revenues decreased 16.9% year over year to RMB 22.4 million, primarily due to policy changes for commission rates and subsidies. Cost of revenues for RMB 155.1 million up 3.1% year-over-year, primarily due to an increase in costs associated with the sales of cosmetic products. Within cost of revenues, cost of services and others will RMB 101.9 million, down 4.4% year-over-year, primarily due to a decrease in costs associated with Soyoung Prime. Cost of medical products sold and the maintenance services will RMB 53.2 million, up 21.3% year-over-year, primarily due to an increase in cost associated with the sales of cosmetic products. Total operating expenses were RMB 245.6 million, down 13% year-over-year. Sales and marketing expenses were RMB 132.3 million, down 4.1% year-over-year, primarily due to a decrease in expenses associated with branding and user acquisition activities. G&E expenses were RMB 70.8 million, down 23.3% year-over-year, primarily due to decreases in share-based compensation expenses and professional consulting fees. R&D expenses were RMB 42.5 million, down 18.5% year-over-year, primarily attributable to improvements in staff efficiency. Income tax benefits were RMB 2.6 million compared with the income tax benefit of RMB 0.8 million in the same period of 2023. Net income attributable to Soyoung was RMB 18.9 million compared with a net loss of RMB 2.6 million during the same period last year. Net gap net income attributable to Soyoung with RMB 22.2 million compared with RMB 15.5 million in the same period of 2023. Basic and diluted earnings for ADS attributable to ordinary shareholders were RMB 0.18 and 0.18 respectively compared with basic and diluted losses for ADS attributable to ordinary shareholders of RMB 0.02 and 0.02 respectively during the same period of 2023. We have maintained a robust cash position with cash and cash equivalents, restricted cash and term deposits, term deposits and short-term investment totaling RMB 1.25 billion as of June 30th, 2024. Moving to our outlook, given the relatively soft micro conditions, especially with respect to discretionary spending, For the third quarter of 2024, we expect total revenues to be between RMB 350 million and RMB 370 million. This outlook also takes into account the uncertainties of the pace of a clinic opening and ramping up. As we are in the early stage of our clinic expansion and our business transformation, That being said, we are confident our strategic initiatives integrating the upstream and downstream of the aesthetic medical industry value chain will ideally position us for long-term growth. Their initiatives will enable us to capture a significantly larger share of the market and establish a solid foundation of profitability. As our clinics mature and market conditions stabilize, we expect our financial performance to gradually improve. This concludes our key remarks. I will now turn over to the call to the operator and open the call for QA. Operator, we are ready to take questions. Thank you.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, please press star then 2. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from Chloe Wei with CICC. Please go ahead.

Thank you very much for giving me the opportunity to ask this question. First of all, congratulations. The company's second quarter performance is still very good. In particular, we see that under this good control, the company's profit is also significantly improved. My question is related to the industry trend. In the second half of this year, we actually see that the red-collar consumption is under pressure. So let me translate myself. Firstly, congratulations on the solid results. The revenue continued to exceed the high end and really strong bottom line. And my question is about the overall trend. So entering the second half of this year, we have seen signs of slowdown in most consuming companies' guidance, say the online platforms, tourism, and et cetera. So I understand that's mostly due to the macro headwind. But can management share more color on the trends we have seen in July and August from the consumers and also from advertiser side? And looking into the second half, are there anything we would like to share with the market about how we plan to adapt to the new changes? Thanks.

Hello, thank you for your question. The market is slightly lower than expected in the beginning of the year. The current state of the medical aesthetic industry isn't quite where we thought it would be at the beginning of the year. According to data from the MBS,

The retail sales of consumer goods in China increased by 3.7% year-over-year in the first six months of 2024, a deceleration compared to the first quarter of 2024 and the last quarter of 2023. Despite weak consumer confidence and discretionary spending, the medical aesthetic market continues to grow and offers significant structural opportunities.

The market share of light medical aesthetic services is expanding, driven by strong consumer demand for

minimally invasive and convenient services. Meanwhile, the upstream supply chain is experiencing a surge in growth, fueled by innovations and supply chain optimizations that are propelling the industry's overall advancement.

For the market trend in the future, we proposed two predictions based on industry research. First, as the standardization process of light medical services is accelerated, large chain brands will appear in the industry, This will bring higher regulations and efficiency to the market, and further promote the maturity and development of the green and white industry. In addition, the leading chain organizations are expected to form in the next four to five years and lead to a significant increase in the concentration of the industry. Under this trend, the leading chain brands will occupy a larger market share and provide new alliance opportunities for capital and entrepreneurs. Our industry research highlights two key forecasts that will shape the future of the industry.

First, we expect to see the standardization of light medical aesthetic services gain momentum. This will lead to emergence of large chain brands and enhance market norms and efficiency. resulting in a more mature sector. Second, over the next four to five years, we anticipate that leading chains will dominate the market, significantly accelerating the trade concentration. As top rise capture larger share of markets, new opportunities will be created for investors and entrepreneurs to capitalize on this trade. We plan to begin franchising our chain of clinics in the second half of the year, This will not only contribute to the industry's expansion, but also position us for success in rapidly evolving markets. Thank you.

The next question will come from Nelson Chung with Citibank. Please go ahead.

My question is regarding the pop business and wondering what would be the company's outlook on the positioning of the pop business in your future development? And are there any new business strategies that can be shared with us? Thank you.

Hello, thank you for your question. We believe that pop-up business has an important role in the company's development and is an indispensable component. We have once shared our views on the development trend of the Chinese e-commerce market, which is that it will be more two-tiered. For standardized e-commerce projects, consumers will pay more attention to the cost. For non-standard e-commerce projects, users will be more picky. The pop business remains a vital component of our growth strategy and we will continue to focus on its development. As we've said before, we believe that Chinese medical aesthetic market will become increasingly polarized

consumer spending on standardized treatment is becoming more value-driven, while spending on non-standardized treatment is becoming more selective, with consumers willing to pay a premium for the highest quality care. To adapt to this market landscape, our strategy is twofold. One, for standardized treatment, we leverage the strength and service quality of our chain of clinics to meet client demand, and two, For non-standardized treatments, we will rely on a diverse array of treatments that our POP business facilitates to satisfy various needs.

For POP business, we will develop in the direction of selection, just like Cashk and Shamu membership stores. In each category, we will select high-quality institutions, doctors, and projects to reduce the decision-making difficulty of consumers. Increase the order depth of the single SKU to strengthen the control and price negotiation ability of the supply and demand side. For partners with strong technical ability and weak operating ability, we will provide remote-controlled operating services. Just like the Wanzhi Master Group that we launched in the aesthetic injection category, we chose a few excellent injection doctors. Each injection amount is more than 10,000 liters. We provide all-round online operating services for these doctors.

We are moving towards a curated model just like Costco and Sam's Club. By selecting high-quality institutions, leading doctors, and premium SQUs in each vertical, we aim to simplify customer decision-making. increase FKU transaction value, and ultimately strengthen our control over the supply side to enhance our pricing power. Additionally, for partners who are strong technically but lack operational expertise, we offer comprehensive operational services management. A prime example of this is our master injector team, which consists of injectable specialists, each boasting an impressive track record of 10,000 treatments. We provide them with online operational support, enabling them to focus exclusively on delivering service to customers. Demand for this service has grown rapidly and received positive feedback.

In the future, when our chain business forms a certain user size, it will also have a good link with our POP business. We will discover the non-standard needs of chain business users.

Going forward, our chain of clinics will create strong synergies with our pub business as it grows to scale. By identifying non-standardized treatment in demand by customers of our chain of clinics and promoting select high-quality institutions and doctors from pubs, we are maximizing both customer satisfaction and commercial value.

Thank you.

Thank you.

The next question will come from Patrick He with CITIC Securities. Please go ahead.

Good evening, everyone. I'm He Jingteng, a translator from the Chinese Stock Exchange Group. Thank you for this opportunity. I would like to ask about the company's chain of opening business. On the one hand, we want to understand the speed of the chain opening business, and what are the factors that control its opening speed. In my opinion, what advantages do we have here to make it easier for us to compare with new competitors to solve these controlling factors? At the same time, what is the operating data of these chain businesses at present? For example, whether our stores can now achieve this finger balance and self-sufficiency. In the future, what kind of plans will there be in this business? Okay, so let me just briefly translate for myself. Thank you for the management and thank you for taking my question. I'm Chad Patrick from City Securities. So I'm just wondering more questions about the clinical chain business. So I'm wondering what factors might constrain speed of the clinical chain expansion? and what are the unique advantages that soya have in addressing these constraints so that we can addressing these constraints more effectively than our competitors and additionally what are the current operating metrics for the chain of clinics and for example if our clinics have reached break even and what is your uh the future business plans yeah thank you very much

On the surface, the speed of opening is affected by selection, decoration, photo application, recruitment of personnel, opening and marketing, and other opening processes. Through the digitization of these processes and the formation of various professional SOPs and effective process management, we have greatly improved the efficiency of opening and shortened the average opening period from about five months at the beginning of this year to about three months at present.

In general, factors such as site selection, furniture and renovation, license application, staff recruitment, marketing, and operational costs can impact how quickly new clinics can open up. Having said that, we've significantly improved new clinic opening efficiency by creating respective SOPs and implementing effective process management. This has helped us cut down the average time required to open up new clinics from about five months early to around three months now.

But we think that in the large-scale opening stage, the real impact of opening speed is the following factors. One, is there enough capacity for customers? Otherwise, the more electricity is turned on, the more losses are incurred. Two, is there enough quality doctors and other professionals? Three, is there enough supply chain capacity? This is the key to maintaining profitability while having price competitiveness. Does it have a strong enough standard management capability and quality control capability to keep the service standards of new stores and old stores consistent? Is there enough funds? Every new store's early investment is about millions of yuan. Is there enough strong photo acquisition capability?

However, we believe the following factors are what truly determine how quickly we can scale our chain of clinics. One, the ability to acquire customers. If we cannot guarantee that, we'll simply incur losses. Two, the ability to recruit a sufficient number of leading doctors and specialists. Three, the strength of our supply chain, which is key to offering products at competitive price while keeping profit margins. Four, sufficient capital as the initial investment for each new clinic can cost millions of RMB. And five, the ability to obtain the necessary license.

Among the above six factors, in terms of customer capacity, XinYang itself is a beautiful traffic platform. The advantages of brand users are obvious. And our content capacity and online delivery capacity will make us have more advantages in terms of customer capacity. In terms of doctor recruitment, We are already positioned to address each of these factors.

We have solid customer acquisition capabilities that leverage our strong brand recognition at the expensive user base already on our platform. This is further enhanced by our contact and online marketing capabilities. Our strong brand recognition, scale of our business, and compliance with regulations give us a significant advantage when recruiting professionals. when compared to small and medium-sized institutions. On the supply chain side, our initiatives over the past few years are already beginning to yield positive results. As more of our products receive certification, we expect our competitive advantage in this vertical to positively impact our financial performance more meaningfully.

We have established a neutral capacity through faith and thought, which has been constantly improving in the past year. We believe that the key to solving standardized management is the width and depth of digitalization. In this respect, we as an Internet 5 company have natural advantages. In terms of capital reserves, we also have plenty of capital reserves. In the second half of the year, we will open a joint partnership mode, which will also allow us to open the store without the need to use our own funds. By continuously enhancing our media platform capabilities through the Soyang Prime program over the past year, we are able to ensure standardized management across multiple clinics in different regions.

We believe that the key to standardized management lies in the breadth and depth of digitalization, an area where we have a natural advantage as an internet company. We have ample capital to deploy in new clinics as well. The franchise model that are launching in the second half of the year will also allow us to expand without the need to invest our own capital. In terms of licensed applications, Aside from Beijing and Shanghai, obtaining license in other regions of China is relatively simple and fast. Having already set up clinics nationwide, we have accumulated experience in this area.

At the end of today's press conference, we successfully opened 14 stores in the Golden Business Zone of eight core cities, and have fully invested in operations to meet the expected goals. At present, the power supply of Beijing Bao Li Store has 15 months to achieve profit and to recover investment. Other stores have three stores of power supply in five months. The power supply of ten stores is less than three months. The growth of local stores has its objective rules. Usually a new store opens for the first three months of the molding period. Then there is a growth period of about nine months. Approximately 12 months to the maturity period. Take Beijing Bao Li sample store as an example. Last year, in May, it was operational. In August, it was operational. The revenue continued to grow. By June of this year, the monthly income was more than 6.2 million yuan. The tax revenue at the door level was about 1.3 million yuan. The tax revenue rate reached 20%. This performance has proven to us the effectiveness of the selection, opening up, and operation strategy, and provides an opportunity for the rapid growth of other new stores. With our strong central power, At the same time as lowering the comprehensive cost of the store, it also guarantees the standardization of the language ability of other institutions. Later, after the new model is further run through, with the expansion of the size of the purchase and the free product management line, the use ratio of the store will be increased, and the cost of closing the store will be reduced further to increase the profit space.

As of today's earnings call, we have opened 14 clinics in prime commercial areas. All of these clinics are fully operational and performing in line with our expectations. Our Beijing clinic has been operational for 15 months and has already become profitable, recouping its initial investment. Among the other clinics, three have been operational for five months, with the remaining 10 for less than three months. They are following a similar growth trajectory, but will require a little more time to reach break-even. To provide some more context, our clinics typically follow a well-defined growth curve. They generally go through a three-month trial period, followed by nine months of accelerated growth. Maturity is usually reached after about 12 months of operations. For example, our Beijing clinic began three operations in May and officially opened in August last year. Since then, revenue has grown to $6.2 million in June this year with pre-tax profits of $1.3 million and a profit margin of around 20%. This outstanding performance validates the effectiveness of our site selection, clinic opening, and operational strategies. providing valuable insights that we will apply to other new clinics to accelerate their growth. By leveraging our remedial platform, we have reduced overall costs while ensuring standardized services delivery, allowing us to outperform other institutions. In the future, as procurement volume and use of self-branded products increase, Cost across our chain of clinics will gradually fall and profit margin will increase.

In terms of business planning, in the second half of the year, we will continue to open stores in target cities, increase the density of single-storey stores, and expand the business map. It is expected that by the end of 2024, we will open more than 20轻易美联手门店. 在下半年,我们将对外开放联营模式的招商,而智盈门店将主要作为培训中心和样板店,进一步提升业务的标准化和可复制性。 我们预计未来的门店数量将逐年增长,进一步巩固我们的市场地位,并为公司带来持续的收入增长和市场扩展机会。 Looking ahead, our future business plans are centered on expanding our clinics across target cities.

with a focus on increasing the density of clinics within each city. By the end of 2024, we plan to open over 20 clinics. In the second half of the year, we will also launch our franchise model with external partners to leverage our self-operated clinics as training centers and flagship clinics. This will enable us to standardize and scale rapidly. we expect a significant year-over-year increase in the number of clinics, which will not only strengthen our market position, but also create new opportunities for revenue growth. Thank you.

The next question will come from Joey Han with Jefferies. Please go ahead.

So let me just let myself thank management for taking my question. My question is, how does Soyang's upstream sector differentiate itself from other competitors? And could you elaborate on the management's perspective regarding the strategic positioning and the business plan for the upstream sector this year? Thank you.

Hello, thank you for your question. Unlike other traditional upstream manufacturers' single production and sales model, XinYang uses its own unique ecosystem with full-fledged advantages and existing business blocks to fully play out the reputation and brand advantages of our C-end users as well as the ability to cover the network of B-end institutions and quickly establish the market competitiveness of new products and use the accuracy of the C-end marketing with the help of apps and self-media. At the same time, we rely on chain stores to ensure basic sales and achieve all-round linkage. This ability is extremely scarce in the industry.

Unlike traditional manufacturers that rely on linear R&D to production to sales model, we capitalize our unique ecosystem and full category advantage to create synergies with our existing business lines. The integrated approach allow us to amplify the strength of our breadth, reputation among customers, and network coverage through institutional partners. As a result, we can rapidly build market competitiveness for new products and achieve customer targeting through our app and media metrics while using our clinics to ensure a steady stream of sales, a capability that sets us apart in the industry. 例如我们今年推出的全新一代非手术类超声抗衰产品取题超声,预定量持续增长。

The sales exceeded expectations to show the potential of becoming a market share, fully showcasing our team's outstanding ability in the field of new products. At the same time, the export volume of the Korean brand Elasti has also maintained a stable growth trend. In addition, the company has pre-planned a range of products with potential growth potential, and has a wide range of recommended product lines. It is expected that two products will be listed next year, and three new products will be listed in 2026.

For example, TrueLift, our non-surgical anti-aging ultrasound device, generated tremendous pre-order volumes and sold volumes beyond expectations when it launched not long ago. This performance showcased its potential to become a market hit and the capabilities of our team. Similarly, sales of the career-bridged Elastate continue to grow. In addition, we have been actively expanding our pipelines with high growth potential. Our roadmap is robust with two new products ready for launch next year and three more in 2026, all targeting popular segments of injectables and energy-based devices. We are confident these products will make significant contributions to revenue growth.

In terms of strategic positioning, we strive to become a top-of-the-line top-of-the-line team based on brands, data, and teams. In the second half of the year, we plan to continue to expand our top-of-the-line talent team. Currently, our top-of-the-line team is made up of qualified professionals from well-known domestic and foreign companies. We expect to expand the team to 100 people by the end of the year.

Leveraging our broad, extensive consumer behavior data and experiments team, we are building full category upstream capabilities for our broader ecosystem. In the second half of the year, we will continue to expand our team, which is currently composed of seasoned experts from leading domestic and international manufacturers. We aim to grow this team to a total of 100 members by the end of the year. Thank you.

The next question will come from Ivy Lee with Haitong Securities. Please go ahead.

Thank you for giving me this opportunity. I would like to ask about the interest rate. The company's interest rate is around 60%, so can you give us some predictions about the interest rate in the future? I would like to ask about the interest rate in the future. with current growth margins around 60%, and could you please provide some insight into the expected trend for the growth margin going forward? Thank you.

Thanks for your question. Over the near term, macroeconomic risks such as slowing global growth and inflationary pressures continue to weigh on consumer sentiment. As a result, consumer willingness and capability to spend may be constrained, increasing market uncertainty. This is reflected in our third quarter revenue guidance. As we transform our business beyond the pop business, our revenue structure is undergoing a shift alongside, which is impacting growth margin levels. While our traditional information and resolution services continue to enjoy high growth margins, The increasing share of medical product sales, which have stable but lower margins, is affecting our overall margin profile. Furthermore, our chain of clinics, which is still in its early stages, has seen growth margin temporarily impacted by promotional activities. In the short term, we expect growth margins will continue to be impacted by the expansion of our chain of clinics and medical product sales. However, as our upstream supply chain capabilities strengthen and operations across our clinics mature, we will anticipate a corresponding improvement in gross margin. Additionally, the introduction of our franchise model is expected to support gross margin through greater economies of scale, optimizing our profit structure even further. Thank you.

This concludes our question and answer session as well as our conference call for today. Thank you for attending today's presentation. You may now disconnect.