So-Young International Inc.

Ladies and gentlemen, thank you for standing by for So Young's first quarter 2025 earnings conference call. At this time, all participants are in listen-only mode. After management give 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. Mona Chow. Please proceed, Mona.

Thank you, operator, and thank you, everyone, for joining Soyang's fourth quarter 2025 earnings conference call. Joining me today on the call is Mr. Xin Jin, our co-founder, chairman, and CEO, and Mr. Nick Zhao, staff O. Please note that the discussion today will contain four looking statements made under safe harbor provisions of U.S. private securities and the Litigation Reform Act of 1995. Four looking statements are subject to read-through 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 findings with SEC, including our annual report on Form 20F. SOEON does not undertake any obligation to update any following statements except as required under applicable law. Finally, please note that unless otherwise stated, All fingers mentioned during the conference call are in RMB. At this time, I'd like to turn the call over to Mr. Xinjing.

Hello, everyone. Welcome to today's financial phone call meeting. In the first quarter of 2025, we achieved a total income of RMB 2.97 billion, which is a net loss of RMB 3313.8 million, which is a net loss of RMB Hello everyone and welcome to today's conference call.

In the first quarter of 2025, we recorded total revenues of 297.3 million. Net loss attributable to Soyang was 33.1 million. and non-GAAP net loss attributable to young was 31.5 billion. Primarily driven by increased investment to expand our aesthetic centers, we believe these investments are laying a solid foundation for our long-term growth.

In the first quarter, we will continue to firmly promote the full-fledged chain vertical integration strategy, accelerate the deployment of chain business in key cities, our Qingyi Mei chain brand, Xinyang Youth Clinic, The stores are located in the core shopping malls of the country's first and second-tier cities. Currently, we are continuously improving the density of stores in existing cities, so that consumers can easily and conveniently find our medical clinic. With a high-quality, high-performance standardized service system, we continue to attract high-payment, high-annual user groups. Currently, the chain business has gradually become the core growth engine of the group. In the fourth quarter, we continued to execute our vertical integrity transition and expanded our network of aesthetic centers in K-cities.

Our blended aesthetic centers, Soyang Clinic, operates exclusively in core commercial areas across China's first- and second-tier cities. We are increasing store density in these markets to make our centers more accessible and convenient. By offering high-quality, cost-effective, and standardized services, we are acquiring a loyal and recurring customer base. Soyang Clinic is gradually becoming our main growth driver. We are also reducing customer acquisition and procurement costs through our vertical integration and expect to improve cost efficiency further as we scale.

Next, I would like to share with you the development situation of our first quarter business. In terms of joint business, up to the first quarter, we have been in Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou, Chengdu, Wuhan, Chongqing, Changsha, nine core cities, and opened 23 XinYang Youth branch stores. In March, 18 stores have achieved monthly cash flow verification. 16 stores have achieved monthly profit. In the first quarter, the joint business income reached 9882.7 million RMB. The net profit increased by 21.6%, and the net profit increased by 551.4%. The turnover of over 45,500 people has increased by 18.5%. with a growth of 87.3% with a growth of 87.3% with a growth of 87.3% with a growth of 87.3% with a growth of 87.3% with a growth of 87.3% with a growth of 87.3% with a growth of 87.3% with a growth of 87.3% with a growth of 87.3% with a growth of 87.3% with a growth of 87.3% with a growth of 87.3% with a growth of 87.3% with a growth of 87.3% with a growth of 87.3% with a growth of 87.3% with a growth of 87.3% with a growth of 87.3% with a growth of 87.3% with a growth of 87.3% with a growth of 87.3% with a growth of 87.3% with a growth of 87.3% with a growth of 87.3% with a growth of 87.3% with a growth of 87.3% with a growth of 87.3%

As of the end of Q1, we operate these 23 Soyang Clinic centers in nine major cities, including Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou, Chengdu, Wuhan, Chongqing, and Changsha. centers have achieved positive monthly operating cash flow, and 16 centers are profitable on a monthly basis in March. Value from our aesthetic center business reached 98.8 million, up 21.6% quarter-to-quarter, and 551.4% year-over-year. Total verified paid visits exceeded 45,500, up 18.5% quarter-to-quarter, and 874.3% year-over-year. Total number of verified paid aesthetic treatments performed surpassed 92,900, up 14% quarter-to-quarter and 989.4% year-over-year. Customer satisfaction remains high at 4.98 out of 5, reflecting our commitment to maintaining the highest level in service delivery. Going forward, we plan to further expand our network and increase store density in existing cities.

In the first quarter, we started a series of brand activities around the theme of the natural energy season. Artists in Shenzhen and Beijing held offline exhibition. And through online cards and other forms to achieve secondary transmission, further expand the impact of the brand. In the natural energy experience area, consumers have the opportunity to personally experience light and soft skin, hyperlipidemia and other popular light and light beauty projects. And professional doctors provide full-scale technical explanation. Let consumers deeply understand the aesthetic concept of natural health advocated by the brand Break down the basic impression of the cold and technological sense of the medical industry In addition, we continue to optimize the medical service project According to the market feedback, the price of some long-term products has increased the concentration of products We also cooperate with international high-end skin care brands to provide joint treatment solutions At the same time, through marketing resources

In Q1, we launched a natural energy event pride campaign with offline pop-up events featuring artists in Shenzhen and Beijing. These offline events were complemented by online sign-up activities to broaden pride engagement and reach. Each event also featured an experience zone, allowing customers to try popular light medical aesthetic services like IPL and ultrasound-based anti-aging treatments with licensed doctors on site to explain the science behind the treatments. This interactive approach helped demystify the overall technical nature of the medical aesthetic industry and reinforced our value proposition of natural, healthy beauty. We also optimized service offerings and concentration them in our branded aesthetic centers while also removing treatment with low demand based on our user feedback. To further expand our portfolio, we partnered with premium skincare blood skin to launch new cold treatment solutions. Additionally, we allocated additional marketing resources and implemented sales incentives to boost the revenue contribution. from our proprietary products. This was done to improve overall growth margins for our aesthetic centers.

In terms of the upstream business, we continue to promote the construction of a full-fledged eco-friendly medical supply chain, promote the full-fledged deployment of self-made industrial chain, self-made salt, and exclusive agent products. As of the end of the first quarter, the number of customers of our service institutions has accumulated more than 1,500, and the total shipment volume is about

On the upstream, we advanced our comprehensive medical aesthetic supply chain, focusing on products developed in-house and through exclusive partnerships. As of Q1, the number of institutions we served with supply chain solutions for injectables grew to over 1,500. The shipment of Elasti reached approximately 27,900 units in Q1,

up roughly 14% year-over-year. Our pop business, which remains a fundamental

foundational pillar continues to contribute profits and traffic while supporting the growth of our aesthetic centers and upstream business. In Q1, GMV for verified medical aesthetic services reached approximately $300 million, with per capita in-store GTV growing by 4% year-over-year.

In the future, we firmly look forward to the development space of the Chinese-American chain in the Chinese market. Looking ahead, with the significant long-term potential for our aesthetic center business in China,

We aim to build a differentiated nationwide light medical and static chain with strong blood recognition. Over the past few quarters, we have scaled both store count and density. In April, I personally increased my shareholding so young by approximately USD 4.1 million, reaffirming my confidence in our long-term goals.

当前社区电商业务增长面临一定天花板, We believe that the construction of an E-commerce chain brand that has the ability to operate and control its own products is the key path to achieve sustainable growth in the next stage. Xinyang is approaching a three-mother model of successful experience in the retail industry. In the field of E-commerce, we explore the development path of self-operating products with high cost performance and strong supply chain control. The key to success in the three-mother model is to achieve quality control and cost control through some of its own products, As our legacy pop business searches its natural growth selling, we believe Big K, to our next phrase, hinges on developing our aesthetic center business with full control over the supply chain.

drawing inspiration from the Sam's Club retail model. We are pursuing a strategy centered on proprietary products, value for money pricing, and end-to-end supply chain management. Sam's Club's success was due to our exclusive high-quality products that are tightly controlled for quality and cost. These products not only attract customers, but also drive higher average spending and customer loyalty. In the medical aesthetic sector, we believe that high-quality proprietary products and services at fair prices have similar potential.

Xinyao wants to be the third mother of the medical aesthetic industry. For this, we have built a comprehensive industrial chain, including a deep integrated supply chain, and have our own products. Through the lock-down of acquisitions and loans in the past few years, We have the ownership and exclusive ownership of our own upstream equipment and real estate products. It is expected that in the next two to three years, there will be many products on the market to expand our product library and provide more cost-effective products to users. In the future, Xinyang will continue to deepen the industry chain with a strong supply chain system and high-quality product services to provide a safer and more efficient experience for consumers.

We aim to become the thumbs club of the medical aesthetics industry over the past few years. We will build end-to-end capabilities including vertical upstream integration and proprietary products through acquisitions and long-term partnerships. We now own our exclusively distributed K-medical devices and injectables. We expect to bring several new products to market in the next two to three years, offering our customers even greater value we will continue to deepen our supply chain capabilities and improve service quality to deliver a safer and more effective medical aesthetic experience. Now I'll hand over to our staff, Nick, who will walk through the financial results followed by the Q&A session.

Hello, this is Nick. Please note that all amounts are quoted in RMB. Please also refer to our earnings release for detailed information about our comparative financial performances on a year-over-year basis. Total revenues during the quarter were RMB 297.3 million, in line with our guidance, and down 60.6% year-over-year, primarily due to a decrease in the number of medical service providers subscribing to information services on our platform. Information reservation services and other revenues, RMB 142.9 down 34.1% year-over-year, primarily due to a decrease in the number of medical service providers subscribing to information services on our platform. Aesthetic treatment services revenues reached RMB 98.8 million a remarkable 551.4% year-over-year increase, primarily due to the expansion of our aesthetic center business. Sales of medical products and maintenance services for RMB 55.6 million, down 35.7% year-over-year, primarily due to a decrease in order volume for medical equipment. Cost of revenues will RMB 151.4 million, up 29.1% year-over-year, primarily due to the expansion of our aesthetic center business. Within cost of revenues, cost of information reservation services and others will RMB 40.7 million, down 34.1% year-over-year, primarily due to a decrease in cost of services. associated with Soyang Prime. Cost of aesthetic treatment services for RMB 80.3 million up 547.6% year-over-year, primarily due to the expansion of our aesthetic center business. Cost of medical products sold and maintenance services for RMB 30.4 million down 29.4% year-over-year, primarily due to a decrease in costs associated with the sales of medical equipment. Total operating expenses were RMB 189.3 million, down 20.4% year-over-year. Sales and marketing expenses were RMB 103.4 million, down 8.7% year-over-year, primarily due to a decrease in expenses associated with branding and user acquisition activities. T&A expenses were RMB 53.7 million, down 36.7% year-over-year, primarily due to a decrease in share-based compensation expenses. RMD expenses were RMB 23.1 million, down 18.9% year-over-year, primarily attributable to improvements in staff efficiency. Income tax benefits were RMB 1.6 million, compared with the income tax benefits of RMB 2.6 million in the same period of 2024. Net loss attributable to Soyang International Inc. was RMB 33.1 million compared with a net loss of RMB 21.2 million during the same period last year. Non-GAAP net loss attributable to Soyang International Inc. was RMB 31.5 million compared with non-GAAP net income attributable to Soyang International Inc. of RMB 4.2 million during the same period, 2024. Basic and diluted losses per ADS attributable to ordinary shareholders for RMB 0.32 and RMB 0.22 respectively, compared with basic and diluted loss per ADS attributable to ordinary shareholders of RMB 0.21 and RMB 0.21 respectively. during the same period of 2024. We have maintained a robust cash position with cash and cash equivalents, restricted cash and term deposits, term deposits and short-term investments totaling RMB 1.1 billion as of March 31st, 2025. Moving to our outlook for the second quarter of 2025, we expect aesthetic treatment services revenues to be between RMB 120 million and RMB 140 million, representing a 337.3% to 410.1% increase from the same period in 2024. This outlook reflects our strategic decision to prioritize long-term value creation over short-term financial optimization as we continue to invest in expanding our branded aesthetic center network, and refining our vertically integrated business model. Inspired by Sam's Club, our approach is anchored by control of the supply chain, proprietary product development, and standardized service delivery. This already has an impact, demonstrating its potential to improve customer retention, lower customer acquisition costs, and enhance operational consistency. We believe this model will be instrumental in redefining cost effectiveness in the medical aesthetic sector, helping us better address the expectations of increasingly rational and quality conscious customers. Looking ahead, as we deepen execution of self-operated and partner networks, We expect this model to support more resilient margins and a greater scalability across markets. This concludes our key remarks. I will now turn over the call to the operator and open the call for QA. Operator, we are ready to take questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. And your first question comes from Yibing Li with Guotai Haitong Securities.

Please go ahead. Let me translate myself. Good evening, management. Thank you for taking my questions. And I would like to ask about SoYang Clinic. How is it different from the traditional medical institutions like Meilai and E-Star? Thank you.

Hello, thank you for your question. The model of youth clinic is different from that of Meilai and E-Star. In general, Meilai and E-Star is more like a hotel model. It has many products and has a large single-storey area. It is highly dependent on celebrities and consultants. Our aesthetic center business is fundamentally different from traditional models by the likes of MyLike and YesTech.

In short, this institution is a fine dining operational model. They offer a broader range of services, require larger clinics, rely heavily on upstart doctors and consultants, and generate higher per customer spend, but with less frequency. In contrast, our clinics use a fast casual model. Our model offers more focused services, require less clinic space, and are available in more locations, depend less on individual doctors and generate lower per-customer spend, but with higher frequency.

To be more specific, due to the difference in quality, medical institutions such as Meilai Yixing are more comprehensive in their projects, including surgeries such as double eyelid, long nose, long chest, and retina, as well as skin, anti-aging, hair removal, body shape, straight hair, and secretion. In these institutions, the core demand of the users is to change their appearance.

Most specifically, while service offerings, MyLac and APS-TAR provide a broader range of procedures, including surgical treatments such as double eyelid surgery, rhinoplasty, breast augmentation, and liposuction. They also offer services like skin care, anti-aging, hair removal, body contouring, hair transplants, and intimate care. Their customers primarily seek visible transformative changes. In contrast, our clinics exclusively focus on non-surgical anti-aging treatments. They do not offer surgeries or other high-risk procedures. Our customers mainly seek maintenance and rejuvenation services.

Two, per customer spend and visit frequency, MyLike and Easter generate high

per customer spend, but with lower frequency. Our treatments on the other hand are priced around RMB 1,000, but with higher frequency. Typical customer spend is roughly RMB 2,000, with loyal customers visiting six to eight times per year.

Three, the difference in single-storey area and quantity. Meilai Yixing is usually a large store in a city. The area of the store is usually more than 8,000 square meters. XinYang Youth Clinic has an average area of 400 to 500 square meters. It has many stores in one city. For example, we currently have six stores in Beijing. At the end of this year, there will be ten stores. In the future, it is expected that there will be 30 stores in Beijing. Our opening strategy is because we define medical resistance to failure as high-level maintenance. So convenience is very important. What we are pursuing is the feasibility of the beauty hospital.

Three, store size and expansion strategy. Mine, like Andy's, typically operates one large flagship clinic per city, often exceeding 8,000 square meters inside. In contract, our clinics are smaller, ranging from 100 to 500 square meters, and are more widely distributed across the city. For example, We currently operate six aesthetic centers in Beijing and plan to expand ten by the year end. Looking ahead, we see potential to grow to 30 locations in Beijing. This applies with our positioning of medical aesthetic treatments as a high-frequency maintenance service, where convenience and accessibility are critical, similar to beauty salons.

The fourth is the difference in user experience. Meilai Yixing is an offline service provided by an offline institution, while XinYang is an Internet gene. We believe that good user experience includes both offline and in-person experience. So we developed a special XinYang Youth App and operated a million private female communities. Users can fully understand various projects, treatment methods, products, For user experience, MyLike and ESR operate exclusively through offline channels.

In contrast, leveraging our strong internet DNA, we offer a hybrid experience that combines in-person treatment, with a comprehensive digital platform through the Soyoung Clinic app. In our extensive online female private domain community, users can explore treatment options, compare services, and make purchases and bookings online at transparent and cost-effective prices. After treatment, customers can review skin test results, view before and after photos, and receive timely care instructions. All conveniently accessible through the app.

产品差异,美来一星等机构在产业链当中只覆盖医疗交付环节,而新养从2021年开始布局上游供应链,拥有旗帜激光和丰富的注射产品管线。 而正因为在上游供应链的布局,让新养青春诊所可以为用户提供高性价比的医疗服务。

Five, product supply chain. Mai-Rai and Esther focused on the service delivery phase of the venue chain. In contrast, we have built upstream supply chain capabilities in 2021. This is highlighted by the acquisition of Pan America Laser as an extensive pipeline of injectable products. This leads us to offer highly effective services.

In summary, our aesthetics business was designed using a highly standardized model that's ideally positioned to be expanded.

As we all know, the key to successful chain operations lies in scale. as this is where we clearly have an advantage.

Thank you.

Thank you.

And your next question comes from Nelson Cheung with Citibank. Please go ahead.

Good evening, Manager Chen. Thank you for accepting my question. My question is about our opening scale. Since our opening scale is getting bigger and bigger, our future capital needs to be increased. I don't know if our current model is healthy enough to maintain. So let me translate the question in English. Thanks, management, for taking my question. As the clinic network grows, will CAPS become a burden for the company if this model is sustainable? Thank you.

Hello, thank you for your question. We really value the health of our company's business. We are promoting energy expansion under a controllable rhythm. and always stick to the principle of safe and secure, ensuring that the cash flow is sustainable.

We place great emphasis on the health of our business. While we continue to carefully expand our network, we remain prudent in managing CapEx to ensure a financial sustainable model.

Currently, we control the annual opening number of our branch stores at about 30 stores, ensuring that each newly opened branch store has a choice advantage Currently, we expect to open around 30 new clinics per year.

Each new aesthetic center is carefully selected for its location and ability to achieve profitability, which helps us keep overall cost within a manageable range.

At the same time, At the same time, we are actively planning to roll out a franchise model.

This will help accelerate our geographic reach and network density while reducing capex pressure.

having the way for the iSatellite expansion.

Operational efficiency is also improving. As of Q1, the majority of our athletic centers have achieved positive operating cash flow. With increasing economics of scale and further dilution of fixed costs, we are confident in the long-term profitability of our athletic centers. Thank you.

And your next question comes from Hee Jin Pang with CIDIC. Please go ahead.

So let me briefly translate for myself. Thank you management for taking my question. So I have two questions here. The first is, how does the Miracle Laser create more synergy with the company's core business?

Hello, thank you for your question. After completing the comprehensive management of the flagship laser, Xinyang Management has carried out efficient resource integration in product strategy, organizational coordination, and talent coordination, improving the speed of development and the ability of the product to land,

We have efficiently consolidated product talent and organizational processes to improve R&D capabilities. This positions Wuhan Miracle Laser as a market-oriented upstream platform that creates strong synergies to support our growth model.

As the leading light electricity medical equipment provider in China, QiZiJigwang's independent research and development advantages not only provide high-quality and cost-effective self-development equipment support for Xinyang Co., Ltd., such as popular project equipment such as raw material superglue and other popular project equipment, but can also replace some high-end imported devices to effectively reduce the investment and operation costs of single-duty equipment.

And the leading provider of aesthetic laser devices in China, Wuhan Medical Laser's proprietary R&D capabilities allow us to supply our aesthetic centers with high-quality, cost-effective equipment, such as our flagship Youth IPL project. With other new products in the pipeline, This not only reduces reliance on high-cost imported devices, but also supports consistency across our centers, further accelerating its expansion.

In addition, Qizhi Jigwang has a unique advantage in the service market. Compared to traditional social media manufacturers that focus on service for top medical institutions, Qizhi Jigwang has accumulated more than 5,000 services. covering a large number of small and medium-sized e-commerce institutions. When facing long-term market institutions in the market, they have extensive channel foundation and operating experience. With the continuous expansion of Xinya's chain of stores, the two sides will explore the 2B2C model together to achieve collaborative innovation in the equipment and service sectors, further enhance user experience and commercial efficiency, and build a more competitive e-commerce industry.

Wuhan Miracle Laser also holds a unique advantage in serving China's long-tail aesthetic market. While most manufacturers focus on the leading institutions, Wuhan Miracle Laser has served over 5,000 clients with deep experience and broad distribution among small and medium-sized clinics. As our aesthetic center network grows, we aim to jointly explore a 2B2C model interpreting devices and services delivery to improve user experience, business efficiency, and ultimately build a more competitive ecosystem. Thank you.

And your next question comes from Daisy Chen with Haitong. Oh, sorry, it'll be a follow-up from Heejin Penn.

I still have the second question. It's about the trade war. So how would the ongoing trade tensions between China and America maybe impact the company's business? Thank you.

Hello. Trade tensions primarily affect the aesthetic industry in two ways, change in cost structures and shifts in the competitive landscape.

For Soyoung, the direct impact is limited, but we also see this as an opportunity to strengthen our domestic supply chain and support import replacement.

We believe that the trade war has little effect on the actual cost of our chain business. Among the main projects provided by Soyoung, we use imported equipment and goods from the United States From the cost perspective, the impact on our aesthetic center business is minimal.

Only one of our main offerings uses US imported equipment and consumables. Dermage, which accounts for less than 10% of total revenue at our aesthetic centers. If tariffs drive prices higher, we are well positioned to pivot to alternative products that offer similar results without compromising user experience.

That said, the impact on the upstream may be higher.

Wuhan Miracle Laser currently distributes several imported devices, including Citon's BBL treatment. Tariff increases could affect the pricing and sales volume of these products.

In conclusion, we see this as opportunities rather than threats.

We will continue leveraging our vertical integrity capability to upgrade China's athletic supply chain and deliver high-quality, cost-effective solutions to consumers. Thank you.

And your next question is from Daisy Chen with Haitong. Please go ahead.

We see that the company has a very good ability on cost and control in Q1. and we also noted that the cash balance is sufficient. So my question is can management please leverage more on the company's future investment plan and also the cost reduction plan, and do you expect further improvements in the overall financial performance?

Thank you. We are very happy to see that in March, we have 18 stores that have been certified by the cash flow and 16 stores that have been certified by the monthly profit. This fully confirms the possibility and efficiency of our chain's business model.

We are encouraged by the early results our aesthetic center business is generating and remain confident in its mid- to long-term profitability. In March, 18 centers have already achieved positive monthly operating cash flow. Among them, 16 centers are profitable on a monthly basis, demonstrating the viability and efficiency of our business model.

Going forward, we will maintain a measured pace of self-operated aesthetic center expansion and will carefully manage new openings in a disciplined manner.

In the meantime, we are actively preparing the launch of a franchise model to enable lighter, scalable growth.

At the same time, we are also promoting the cost-efficiency and labor-intensive improvement of chain businesses through the optimization of products, strengthening cooperation with supermarkets, and increasing the cost-efficiency and labor-intensive improvement of individual products. In recent times, we have also invested more resources to support the growth of free product sales, which will further enhance our profitability.

In addition, we are optimizing our offering mix, deepen upstream collaboration, and enhancing efficiency at the clinic level to further improve cost control and growth margin. We have also increased investment in growing our proprietary product lines, which will further support margin expansion.

As a whole, we will always insist on high-quality development.

Overall, we remain focused on sustainable, high-quality growth, supported by financial discipline and structural optimization across our core business lines. Thank you.

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