So-Young International Inc.

Ladies and gentlemen, thank you for standing by for SoYoung's first quarter 2026 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 Hsiao. Please proceed, Mona.

Thank you, operator, and thank you, everyone, for joining SoYang's first quarter 2026 earnings conference call. Joining me today on the call is Mr. Xin Xin, Chair, Met and CEO, and Ms. Shan Zhang, Apex Finance. Before we begin, please refer to the safe harbor statements in our earnings release. Hello, everyone.

Hello, everyone, and welcome to today's EARLINK call. Xinyang continues to expand its chain business, steadily advancing its two-wheel drive strategy of scale and efficiency, and has achieved solid performance. In the first quarter of 2026, the company achieved a total income of 4.33 billion RMB, with a growth of about 46%. Among them, the chain business earned up to 2.82 billion RMB, with a growth of about 186%.

Entering 2026, China's medical aesthetic industry continues to evolve. With demand becoming more routine and supply continue to grow, large-scale operational capabilities and a uniform delivery framework have become the key mode for top players to achieve high-quality growth. We capitalize on this by expanding our aesthetic center business and advancing our dual engine of scale and efficiency initiative. As a result, we achieved robust performance. In Q1, total revenue reached 433 million, up around 46% year-over-year. Revenue from our aesthetic center business reached 282 million, up around 186% year-over-year. Now, let's take a closer look at our recent progress across a few core areas.

首先,新阳青春诊所持续领跑中国青衣美联所市场,门店数量服务人次,用户规模均居行业首位,运营效率和盈利能力也在稳步提升。

Yes, Soyang Clinic continued to lead some of the medical aesthetics chain market, ranking number one by center count, treatment volume, and user base. Our operational efficiency and profitability also continued to improve.

在门店规模方面,截至今天发布会, 新阳青春诊所已进入17个城市, 门店总数达到59家, 较2025年末竞争10家。 在服务量方面, In the first quarter, the number of people connected to the network has exceeded 14.8 million times, which is 172% of the total growth. The number of service points in the network has exceeded 32.5 million, which is 164% of the total growth. At the same time, the active user size continues to expand. At the end of March, it exceeded 210,000 people. Among them, the number of core members of L3 and above exceeded 630,000. The recovery rate of core members has also maintained a high position. the value of the user's life cycle has been further discovered. With a good service experience and user reputation, in the first quarter, Laodaixin accounted for a 52% increase in the proportion of new customers. At the same time, through deepening platform cooperation and efficient content placement, the number of new customers in the public domain is also constantly increasing, and our overall customer cost is still well controlled. In order to effectively enhance brand influence and promote user transformation, In terms of center food point,

As of today, Soyang Clinic has expanded into 17 cities with 59 centers in total. That is a net add of 10 centers compared to year-end 2025. On treatment volume in Q1, verified treatment visits exceeded 148,000, up 172% year-over-year. Number of verified treatments performed was over 325,000, up 164% year-over-year. Our active user base expanded further, reaching over 210,000 by March end. Within that, the number of Level 3 and above core members exceeded 63,000. Core members attained a high quarterly report transfer rate as the further on LTV, driven by excellent user experience and positive results. The proportion of new customers from referrals rose to 52% in Q1, In addition, by enhancing platform partnerships and content marketing, new customers acquired through public domain continued to grow, while our overall CAC remained well under control. We also enhanced broad awareness and drove conversion by deepening partnerships with renowned IPs. For example, we launched Disney co-branded pop-ups in major commercial areas nationwide for our Miracle Collagen product line. This campaign is attracting active participation from potential customers and generated remarkable results. On top of that, we invited famous Chinese actress Fan Bingbing and popular Thai actress Mai to experience and endorse our Collagen products.

In addition, we are continuing to optimize the single-storied model and rely on standardized operating systems. We have further shortened the period of new electricity escalation, Moreover, we continue to improve our per-central economic model through standardized operations

we accelerated the run-up of new centers. As we refined our product portfolio and customer acquisition, our per-center operational efficiency improved steadily. In Q1, the number of profitable centers rose to 41, and 48 centers generated positive operating cash flow. Athletic center business growth margin reached 27%, reflecting continued operating efficiency gains.

This year, we will continue expanding our center footprint and broadening access.

We will focus on major Tier 1 cities. As economics of scale take effect, new centers run faster, and operational efficiency improves further. We expect per-center revenue to keep climbing, and the change financial model to improve meaningfully.

接下来是新养医疗交付的专业能力与口碑建设。 医美连锁业务的可持续发展依托于高质量的医疗交付能力, Therefore, we continue to strengthen core competitiveness from medical team, treatment quality, service experience, and so on. By the end of March, 2026, the whole medical team of Xinyang Youth Hospital has expanded to about 230 people. By the end of 2025, it will increase by 9% and continue to maintain the leading industry. At the same time, we are also continuing to strengthen the professional ability of medical talent teams and promote digital construction.

Next, let's turn to Soyang's professional medical delivery capabilities and reputation building. The long-term development of medical aesthetic chain business relies on high-quality medical service delivery. To this end, we continue to build core competitiveness across the physician team, diagnosis and treatment quality, and user experience. By March end, our full-time physicians reached about 230, up 9% from year-end 2025, maintaining industry leadership. We have also been enhancing physician capabilities and digitalizing operations to elevate the user experience and ensure consistent medical practice.

In the first quarter, we officially established Xinyang Youth Center Medical Training Center and National Command and Control Center. The research and development center focuses on medical research and training. The light and electrical laboratory we have built, the蒸汽 laboratory, the physical laboratory, and the detection laboratory can carry out systematic evaluation of all products and equipment on the market. Therefore, when we face the supply and demand trend of upstream products, we can return to the medical essence, return to the product, and not blindly promote it, but test the product itself from the clinical effect, whether it is safe, effective, and reasonable. At the same time, the Xinyang Medical Research and Development Team can develop product data on this basis to form a standardized SOP. At the same time, medical training centers are also invested in use. All doctors who join the Xinyang Youth Hospital need to carry out closed, systematic technology improvement training in the training center, and can officially enter the work position after receiving the assessment certification.

In Q1, we established the Cillian Phoenix Medical R&D and Training Center and Control Center. Focusing on medical research and training, the R&D center has labs for energy-based devices, injectables, and testing. This enables us to thoroughly evaluate products and devices in the market. As upstream product offerings continue to diversify, this capability keeps us grounded in clinical fundamentals, not marketing claims. We evaluate products based on clinical evidence to determine whether they are safe, effective, and appropriate. From these findings, our R&D team developed treatment tools and SOPs. Meanwhile, the training center is now fully operational. All physicians joining Soyang Clinic must complete intensive comprehensive training at the center and pass all assessments before practicing.

指挥控制中心是连锁运营的大脑,其中,安全合规办公室形成了安全合规的闭环,实现了新阳总部对一线门店的安全合规远程监察,离线报警,应急联动,支持总部实时介入与响应,保障医疗安全。 The user experience office is responsible for customer satisfaction, service design, and customer collection. Any suggestions and opinions about the user will be known and processed at the first time, effectively improving the overall medical service process. In addition, we also have a operating office responsible for managing the data hard disk in all stores in the country to ensure the good business of all stores.

This command and control center is the brain of our clinic chain operations. Using it, the safety and compliance office closes the loop on compliance. It allows headquarters to remotely monitor safety and compliance at our clinics, receive offline alerts, and coordinate emergency responses. It enables real-time intervention to ensure medical safety. The user experience office manages the user journey, service design, and complaints. Any user feedback is immediately escalated to headquarters for action, which helps us continuously improve our medical workflows. In addition, the operations office tracks operating data across centers nationwide to keep operations healthy.

凭借专业的医疗团队出色的诊疗质量和可信赖的高标准服务, Thanks to our professional medical team, excellent treatment quality and reliable premium services

we continued to cement our foundation of user trust and reputation. Looking ahead, we will harness Soyang's blind influence and wide market presence to attract more outstanding physicians. That will further enhance our medical delivery capabilities and service quality, reinforcing reputation and blind momentum. In turn, this creates a positive flywheel for long-term business growth.

We are committed to building a diversified supply chain system, and continue to improve the supply chain layout. We will carry out multidirectional cooperation with top-level enterprises, while achieving a win-win situation. In April, we officially announced a strategic cooperation with Jingbo Biomaterials in the development of the health and prosperity of the green and medical industry. The two parties will play their respective advantages through joint development and double-sum energy, and achieve mutual support and value co-creation. Thanks to this cooperation, we have obtained exclusive rights for Vimeco Pact, a new product of Vimeco Pact, and launched the miracle gel series to provide users with a full-scale anti-fragrance solution for the head-covered remodeled gel protein. The newly released gel product is XinYang's 20th green label product. With the introduction of this series, our green label product system is also further improved. Under this system, we focus on harmonization and price transparency, as well as continuous optimization such as user feedback, and further improve the efficiency of the supply chain through direct link upstream and counter-direction, which also makes the product better meet the needs of users. In addition, we have also immediately launched a thick-leaf glue product that includes sample live light needles and 17-type glue. to solve users' skin-sensitive skin problems in the spring and release new upgraded products such as Cherry Blossom 2.0, which continuously enriches product supply. With the deep strategic coordination at the supply chain and the acceleration of free products, the large single-use strategy continues to release growth dynamic energy, which is benefited from the hot sale of hot products such as BBL and Hot Horse. In the first quarter, large single-use income

Now, moving to our supply chain, we remain committed to diversifying and reinforcing our supply chain. Through multi-dimensional upstream partnerships, we aim for win-win outcomes while driving health industry growth. In April, we announced our partnerships with Xinbo Biopharmaceutical through joint development Both parties will leverage their respective advantage to pool resources and create value. The partnership grants us exclusive rights to the new product, WeYinMei Compact. On that basis, we launched our Miracle Collagen, offering full scenario anti-aging solutions using recombinant collagen for head and face. This is our 20th Green Label product. The launch further reinforced our Green Label system, one that focused on compliance traceability, and price transparency, while allowing us to optimize products based on our user feedback. By connecting directly with upstream partners and using reverse customization, we are improving supply chain efficiently and meeting user needs better. We also launched enhanced collagen, which combines hydroro and collagen type 17 to address spleen dermal irritation. The up-branded Sakura Skin Booster version 2 further enriched our offerings. Through deep supply chain collaboration and accelerated rollout of proprietary products, our blockbuster strategy is unlocking growth momentum. Revenue from blockbuster products rose to 41% in Q1, driven by robust demand for BBL, Dermage, and other hints.

Finally, I would like to emphasize that as the e-commerce industry enters a new stage of high-quality universalization development, Companies with standardized medical delivery capabilities, large-scale operational efficiency, and strong supply chain advantages will occupy an advantageous position in the development of the industry, and the head effect will be prominent in the future. With the complete industrial chain ability built up by the years-long deepening industry, Xinyang has established a unique competitive advantage. In the future, we will firmly advance the chain strategy, while maintaining a reasonable expansion rhythm, Continue to optimize operations and financial indicators, create long-term value for users and shareholders, and contribute to the sustainable development of the industry.

In closing, I'd like to emphasize that as the manufacturing industry enters a new phase of high-quality, inclusive growth, companies with standardized medical delivery capabilities, scalable operating efficiency, and a powerful supply chain will be real positions for the future. market leadership advantage will become increasingly evident. With full industry chain capabilities built over years, we have developed a unique competitive edge. Looking ahead, we will firmly advance our 1,000 centers goal. While maintaining a measured expansion pace, we will continue optimizing our operating and financial performance. We aim to create value for users and shareholders and to drive industry's long-term development. Now, I'll hand it over to our VP of Finance, Xia Zhang, to work through the financial results followed by the Q&A session.

Thank you, Xin, and thank you, everyone, for joining us today. I'm Xia Zhang, Vice President of Finance. I will walk you through our first quarter 2026 financial results. For additional details on our first quarter performance, please refer to the earnings release issued earlier today. Unless otherwise noted, all amounts are in RMB. We started the year strongly with robust Q1 performance. Total revenue for the quarter grew 45.6% year-over-year. to $432.8 million, driven by the sustained growth momentum in our Branded Aesthetic Center business. We are also encouraged that our stream supply chain is not only supporting our chain operations, but also fueling growth in our upstream supply chain Let's dive into each business segment. Revenue from aesthetic treatment service increased to 282.4 million, up 185.8% year-over-year, and is setting the high end of our guidance for the fourth consecutive quarter. This segment accounted for over 65% of total revenue during the quarter. Its gross margin expanded by 8.4 percentage points year-over-year and 3.3 percentage points quarter-over-quarter. We are pleased to see our core growth driver continue to gain tracking in both revenue and profitability as we execute our dual-engine strategy focused on scale and efficiency. As of March 31st, we operated 54 Soyang Clinics across 16 major cities, with making a net addition of five centers during the quarter. now breaking down revenue by center fees. Our 20 mature fees centers generated are 150 million in revenue, or roughly 7.5 million per center. Our 23 growth fees center contribute 109.5 million, or roughly 4.8 million per center. The 11 ramp-up fees center contributed 22.9 million, or roughly 2.1 million per center. It's worth mentioning that average revenue per center for this in the ramp-up fees, so significant growth, both year-over-year and quarter-over-quarter, they clearly validate how our Increasingly, standardized operations are effectively a secondary team. Their ramp-up trajectory in the meantime, average revenue per mature feed center remains solid and well above the level seen in ramp-up and growth feed centers. In terms of profitability, 41 centers were profitable and 48 centers generated positive operation cash flow during the quarter reflecting a net addition of 16 and 9 respectively from last quarter with a robust pipeline steadily transitioning into maturity. Alongside our ongoing scale expansion and operation efficiency enhancement. We are confident in our ability to continue driving revenue growth and improving our profitability profile of this segment. Turning to our other segments, information and reservation services revenues were 8.3 million, down 30% year over year. primarily due to the increase in the number of medical service providers subscribing to our information services. Sales of medical products and maintenance service revenues were 57.1 million, up 2.8% year-over-year, driven by an increase in order volume for medical products, other services, revenues were 12.9 million, down 39.3% year-over-year, due to lower insurance brokerage revenue. I will now walk you through our financial spin-off revenue in more detail. Cost of revenue were 251 million, up 65.8% year over year, driven primarily by the expansion of our branded aesthetic centers, breaking that down by segment. Cost of aesthetic treatment service was $205.8 million. up 156.4% year-over-year. Cost of information and reservation service was $6.4 million, down 72.5% year-over-year. Cost of medical products stored and maintenance service was $30.4 million, down 0.1% year-over-year. Cost of of other services was 8.4 million, down 51.6% year over year. Total operating expenses was 239.7 million, up 26.6% year over year, and more notably, growing at a slower pace than total revenues. Sales and marketing expenses was 130.8 million, up 33.7% year-over-year. The increase was mainly driven by higher branding and user acquisition spending, as well as higher payroll costs to support our branded incentive centers. G&A expenses were 84.5 million, up 42.5% year-over-year. the continued expansion of branded society centers. R&D expenses was 24.3 million, down 24.2% year-over-year, driven by improved staff efficiency. Income tax benefits were 0.8 million compared with 1.6 million in the prior year period. Net loss attributable to Soyang was 49.2 million compared with 33.1 million in the prior year period. Now, gas net loss attributable to Soyang was 46.6 compared with 31.5 million in the primary year period. Basic and diluted loss per ADS was 0.48 compared with 0.32 in the primary year period. As of March 31st, 2026, our cash and cash equivalents restricted cash and term deposits term deposits, and short-term investments, totaling $880 million, compared with $936.4 million as of year 2025. The decrease reflects strategic capital allocation to accelerate the expansion of our branded incentive center and fuel the next phase of growth. Turning to our Outlook Q2, given our continued confidence in the Branded Aesthetic Center business, we expect aesthetic treatment service revenues to be between 307 million and 317 million. year-over-year growth of 112.6% to 119.5%. Looking at 2026, we are advancing key initiatives across supply chain optimization, medical delivery excellence, and operational efficiency. Together, these efforts will improve strengthen our leadership position, drive sustainable growth, and support a clear path to profitability. This concludes my remarks. Operator, we are now ready to begin the Q&A session.

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 were 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 the question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from Jinping He with CITIC. Please go ahead.

Hello, everyone. Thank you for the opportunity to ask questions. I am He Jingteng, the moderator of Zhou Xinzheng's Mingzhang Business Group. I would like to ask a question about the medical industry. The medical industry, as we have seen in the past two years, has also shown a trend of overall growth, slow growth, and increasing furniture. Under such a background, I would like to ask about the current development status of the Chinese medical industry, including the characteristics of consumers, and what kind of market opportunities there will be in the future. So let me briefly translate for myself. Thank you for taking my question. I'm Jingpeng He from City Securities. So I have a question about the medical aesthetics industry. So we are seeing the industry has experienced a slowdown in overall growth and also intensified the competition in the past two years. So under this background, what are the development status and consumer characteristics in China's medical aesthetics industry? And looking ahead, What opportunities do you see? Thank you.

Hello, Jinpeng. Thank you for your question. First of all, we are still very much looking forward to the development of qi and medicine in China. I think that although the growth rate of the whole market has slowed down, the chance of internal structure still exists. As of last year, the scale of the Chinese medical market has exceeded 37 billion yuan. Since we remain bullish on light medical aesthetics in China, while the broader market is cooling, structural opportunities remain.

As of 2025, China's medical aesthetics market has exceeded RMB317 billion. Less medical aesthetics captures nearly 80% of the market, overtaking surgical treatment as the mainstream choice. This segment also has leading growth potential globally.

这种内部结构性变化来源于消费者消费习惯的改变。 我们总结有以下几个方面。 第一,医美从改变样貌转向抗衰的代名词。 People are more interested in becoming younger, rather than becoming another person. Secondly, consumers are becoming more and more rational, not willing to pay their own business tax, willing to pay for technical benefits, but refuse to pay for marketing. Thirdly, medical consumption continues to rise. In China's second-tier cities, there is no significant difference in consumer awareness in the price-to-sale price. This new demand, we believe that traditional medical institutions This internal structural change is driven by involving consumer habits in the following areas.

First, medical aesthetic conception is involving from changing appearance to anti-aging. People now want to look younger, not become someone else. Second, consumers are becoming more rational. They will pay a premium for better technologies, but not for hype. Third, medical aesthetic is gaining rising popularity. Second and third tier cities now match first tier cities in both art proof and consumer awareness. We believe this new demand is difficult for traditional clinics to meet. and stay focused on the affluent with business services, prepared card requirements, and large single-city centers. What's needed is what we offer, convenient, standardized, affordable, and premium services through a clinic chain.

总体来看,中国医美行业正步入一个供给更丰富,价格更透明, 竞争更激烈,但也更趋成熟的新阶段。 The supply of oil has continued to accelerate since 2025, especially in the popular channels such as copper salt and collagen. So far, there have been more than 10 batches of copper salt and collagen in three categories. It is expected that there will still be new batches of three categories in the future. The degree of richness will be similar to that of carbon dioxide products. For Xinyang, this means a larger selection space, better purchasing costs, and better user experience.

Overall, the industry has entered a new phase. More device supply, greater price transparency, and fiercer yet more mature competition. AppStream's supply has been accelerating since 2025, particularly in hot categories like PLLA and collagen. We've already seen more than 10 Class III certificate approvals in each category, and we expect more to come, eventually reaching the same level of diversified as HA products. For so young, that means more product choices, better procurement costs, and enhanced user experience.

For so young, that means more product choices, better procurement costs, and enhanced user experience. For so young, that means more product choices, better procurement costs, and enhanced user experience. Xinyang Youth Clinic provides a standardized medical service for medical staff in the medical field with consistent, burdensome, and urgent features, as well as our long-standing upstream supply chain layout and diversified customer advantage, which can compete with traditional high-end medical and other single business institutions. As we expand the scale, we will release greater operating advantages,

In this environment, medical and aesthetic clinics, the key bridge connecting upstream manufacturers and consumers will succeed only if they can deliver effective, affordable, safe, and reliable products and services. In 2026, we expect competition to remain intense across the industry. Weaker players will continue to exit, and survivors will need differentiated positioning. In our case, Suyang Clinic is positioned like a thumbs cross of medical aesthetics, known for consistency, affordability, and accessibility. Combined with our established supply chain and diversified customer acquisition channels, this gives us a competitive edge over traditional high-end and single-store private centers. As we scale, our advantage will compound

Looking forward to the future, China's medical market is expected to break the 6 trillion scale in 2030 and become the core market with the most growth potential in the global medical field. We believe that the biggest opportunity for the Chinese medical industry lies in standardizing services and expanding the scale. China's huge market capacity can support thousands of chain organization brands. Xinyang has the confidence to become one of them.

Looking ahead, China's network setting market is forecast to exceed RMB 600 by 2030, making it the world's most promising market in this industry. We believe this industry's biggest opportunity lies in network expansion through uniform services. China's market capacity can accommodate thousands of clinic chain brands, so Yang is confident in becoming one of them. Thank you.

Our next question comes from James Zhang with GF Securities. Please go ahead.

Our next question comes from James Zhang with GF Securities. Please go ahead.

Our next question comes from James Zhang with GF Securities. Please go ahead. This is James from Guanfa Securities. My question is, we can see that the trace rate among core members is very high. indicating strong user-sickness. Can you help us understand whether there is still upside potential for high-value users' annual spending, or will you grow up through FTO extension? Which blockbuster products can we expect? Thank you.

Hello, Zhang Wang. Thank you for your question. We observed that our core members did show a very high desire and year-round spending. This will help us further dig up user value and build a good foundation.

Yes, indeed. We are laying strong repurchase intent and consumption stickiness among core members. This gives us a solid foundation to grow user value over time.

In the future, we will continue to improve app value from two aspects. One is to implement specialized management for L3 and above core members by differentiating rights and individualizing services to strengthen brand value. Going forward, we will increase our pool in two ways.

First, we will provide dedicated services for core members at Level 3 and above. Through differentiated benefits and personalized services, we will enhance brand value. Combined with curated SKUs, this allows us to meet our users' diverse and evolving light metal aesthetic needs while increasing lifetime value. Second, we will continue expanding our made-to-high-end offerings. while promoting coordinated diagnosis and bundled complementary treatment solutions. This will meaningfully boost ARPU.

In terms of mass-produced products, the current reports, such as Le Ma Ji, BBL, etc., are outstanding in terms of improving ARPU. In addition, our new products, which are cooperating with high-quality tea producers, also show strong sales dynamic energy, such as the dynamic energy tree series cooperating with Xihong, For Blockbuster products, popular treatments like Thermage and BBL have been strong drivers of ARPU.

New products launched with upstream partners are also gaining traction. Our skin booster series on biopharma and collagen products with Zinbo Biopharmaceutical have shown strong market reception and sales momentum. These new products enrich our mid- to high-end product portfolio while also driving reference behavior and output. They are definitely something to look forward to. Thank you.

Our next question comes from Daisy Chen with Haitong Securities. Please go ahead.

I'll translate myself. a commitment to elaborate more on talent reserves and organizational compatibility buildings, like how is the reserve of high-quality doctors, and what unique mechanism does the company adopt for the non-target retention of the professional talent? Thank you.

Thank you for your question. We have always said that premium services are defined by high-quality medical delivery.

This is critical for early user trust and driving consumption, which is why talent development is so central for us.

In the construction of the medical team, we insist on selection and continuation. As the largest light medical association in the country, Xinyang continues to attract and encourage doctors to join. The medical team is constantly expanding. Currently, the total number of full-time doctors in Hong Kong is about 230. All doctors have been strictly selected. In addition, all doctors must complete systematic theory and practical training and assessment before going to Hong Kong. It also starts with rigorous hiring and training standards.

As China's largest light medical aesthetic chain, Soyang continues to attract high-quality doctors, with physician team keeping exciting. we now have about 230 full-time physicians. All hires undergo regular selecting, and we require every physician to complete theoretical and hands-on training and assessments before practicing. As mentioned in our remarks, our physician training center and RMD center at Beijing headquarters are now up and running. These facilities further strengthen our already high standards for skills and treatment consistency across our network.

In terms of personnel flow, we have established a multi-layered long-term binding mechanism. The doctor's flow rate is at the normal level of the industry. First of all, in terms of performance, we provide competitive performance improvement through the number of operations, and encourage excellent doctors. In addition, we have designed a clear growth path for doctors of different levels. For example, for doctors above the PTR level, we work with top-level head manufacturers such as Ergen, In terms of talent retention, we have built a multi-layer retention mechanism.

Our physician turnover rate is currently in line with the industry average. First, on performance incentives, we offer competitive commission linked to treatment volume to reward high performers. Second, we design clear progression paths for our physicians at different levels. For instance, doctors at PT2 level or above can receive customized training through our deep collaborations with leading partnerships like Allergan. We also help them to do professional influence through live streaming visibility and other location building opportunities. Additionally, we have a real defined promotion lender from in-clinic physician to regional physician and ultimately to master group physician.

At the same time, Xinyang, as an Internet business, has established a perfect talent incentive system to face core and excellent employees and open employee rights incentive policies. Through binding personal growth and company development, let employees share the prosperity of corporate growth. This effectively stimulates everyone's subjective mobility and further strengthens the sense of team belonging. Believing in the brand influence of faith, solid training system and diversified talent storage mechanism will continue to support the reserves of top doctors and other excellent talents to further strengthen our medical delivery ability.

Meanwhile, as an Internet company, Soyang has established a comprehensive talent incentive system. We offer equity plans to core and outstanding employees by allying individual growth with company development. Employees share the benefits of our success, fostering both motivation and a deeper sense of belonging. We are confident that CILIA's broad awareness, robust training system, and diversified talent retention mechanism will continue to underpin a solid pipeline of quality physicians and other outstanding talents, further reinforcing our medical delivery capabilities.

Thank you. Our next question comes from Jesse Hsu with CICC. Please go ahead.

Good evening, Mr. Guan. I am Xu Zhonan, an analyst at Zhongjing. First of all, I would like to congratulate the company on its very good performance this quarter. I would like to ask what innovations do we have in the traditional treatment system? What changes have been made in the role positioning of doctors and consultants? Could you walk us through what innovations the company has introduced in restructuring the traditional clinical service model? And what are the specific changes in the roles and positioning of physicians and consultants?

Hello, Joe. Thank you for your question. We are driving innovation through two main paths, upgrading our diagnosis and treatment systems and advancing our physician-led initial consultation policy. standardize the skin type of the user, classify them, and form a standardized model, create standardized treatment guides, and promote the unification and regulation of the treatment process. On the other hand, we plan to carry out secondary development of the skin detector by combining big data and AI algorithms to achieve the automatic recommendation of the treatment program. We believe that these will help us to improve the standardization and automation of the diagnosis process, thereby increasing the efficiency of door-to-door operation.

On the system front, we are working with experts to categorize users' skin types by their underlying causes. This work enables us to build templates and create treatment guidance that ensures standard services. We also plan to upgrade skin detectors, integrating big data and AI to enable automatic treatment recommendations. We believe these initiatives will help us automate our diagnoses and treatment process, boosting operational efficiency across our clinics.

At the same time, we are promoting doctor-in-charge treatment, allowing doctors to provide professional face-to-face services to clients when they first come to the clinic. In this mode, the role of the consultant is to lead the consultation, turn to assistance and service, and focus on supporting doctors to complete the treatment process. This adjustment highlights the specialty of medical professionals, which can strengthen the trust of users and increase the conversion rate. Currently, the doctor's first diagnosis has started at four points in some stores. The plan is to achieve 100% of new customers in the future by the doctor's diagnosis and gradually promote the doctor's diagnosis coverage among old customers.

In parallel, we are rolling out a physician-led consultation policy where doctors are involved from the very first customer visit to provide professional in-person consultations. Under this model, the role of consultant shifts from leading consultation to supporting the doctor in diagnosis and treatment. This adjustment highlights the medical nature of our services, which will enhance customer trust and improve conversion. We have highlighted this policy in selected clinics. In future, we plan to have 100% of new customers consulted by a physician, with physician-led consultation gradually expanding to returning customers. Thank you.

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