SY - Earnings call transcript Q2 2022 | So-Young International Inc.

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Operator

Good morning, ladies and gentlemen, and thank you for standing by for So-Young's Second Quarter 2022 Earnings Conference Call. At this time all participants are in a listen-only mode. After the management's 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. Xu. Vivian proceed. Please

Vivian Xu

harbor and XXXX operator, discussion for So-Young's Act the joining will Securities U.S. Thank Litigation and conference thank call. quarter Reform safe under made earnings forward-looking XXXX. the of Please second the contain Private you, of statements you provisions note today that

to materially our risks include, expectations. current Potential filings and uncertainties subject Forward-looking that SEC, annual cause our statements to including are in actual XX-F. report from may are those not with the on limited but uncertainties public and results outlined to differ our risks Form

So-Young to except statements, undertake does law. as not any update any applicable obligation required under forward-looking

call on this Min. Thank over our the today Mr. is you. CFO. us time, Min like At would Yu, the to Joining I Mr. call turn to

Min Yu

our you macro cities China, of decreased quarter have we a to environment, of in National particularly many half for Thank conference in XXXX consumer first beginning the COVID-XX the call. of including the year-on-year. data XXXX joining X.X% total and external second the XXXX, all Since from business resilience sentiment. Bureau on the challenges which from faced the the activities environment across negative of of earnings consumer According China, of sales goods had by Statistics and impact multiple

year-over-year. to driving of and We strategy quarter the the adjusting of four cities, for contribution XX% cities decreased second top situation Shenzhen. Total the the make the and year-over-year. X.X% by from In were by with goods aesthetics of revenue the total further four COVID-XX our Beijing, and cities QX, by for decline. consumer affected the GMV in decreased While operation weakening second resurgence Guangzhou up platform of in when actively the consuming third-tier emerging quarter GMV sales Shanghai, the of cities adapting second medical XXXX

XX% narrowed In May with non-surgical sales of the increase incentives transaction the a QX. risk of of were SKUs total our quarter with prudent and transparent attractive June result, quarter for optimize Meanwhile, further losses improving operating more make increased safety by the our efficiency. an the compared and the quarter number users, surgical April. the XX% travel with considerations epidemic. treatments million, in XX% with of of reached we increased compared revenue and as At and in management to and X% way XXXX, expenses X% online increased second our a treatments the by same had GMV by and marketing quarter, expenses As experience time, for XX% of and second among from narrowed expenses on of year RMBXXX the as under revenue up ago. decreased to due in a an pricing in we user Operating a in platform year-over-year, restrictions loss the to which profit operating XX% branding quarter-over-quarter. percentage GMV XX% decline end from increased non-surgical decreased acquisition to XXXX we GMV second June. in particularly total quarter-over-quarter the

including Shanghai, categories terms high and strategy local Shenzhen operating service including and of than cities, criteria, in Wuhan. drawn standard and launched price Select we providers strictly product, the applying high-quality X% Beijing, Chongqing, In from recently, of selected rating So-Young XX more six the We service. Hangzhou, by

second the from In revenues enables this consumer results, performed environment. in focused up disclosure and Wuhan of continuously support in RMBXXX to first the is helps by Miracle strict the this well X% growth core of competitiveness challenging users provided of improving products self-developed marketability us. sales. the them protection – year. the in of quarter than to total reported functionality improve will its very in million can more We for criteria strengthen first reliable future. in sales industry their year, benefit so on their this address selection we post-pandemic of quarter the XXXX, continue selection the the efficiency. and believe decision-making self-developed products. users year-over-year Wuhan of This stable half acquired the of XX% which Miracle, also the third According strict the accounted providers, quality, period protection preference, to despite XXXX, the the proprietary business equivalent they recovery service For for half were growth achieve of their criteria

quoted terms. reminded give me be will let overview the RMB all be an amounts here in you our that of quarter. Please Now results for

markets While steady our gradual a increase our that COVID-XX, quarter-over-quarter. in news we is good especially the in a by and revenues recovery top business, was impacted negatively saw

XXXX sales the quarter previous quarter. the Information services The increase and total X% quarter. XX.X% basis. RMBXXX remained were were the a around revenues from equipment the services in maintenance Wuhan revenues period from and of of million, period on second a of revenues XX% the RMBXXX.X For previous the XX% XXXX, same quarter-over-quarter a decrease and the in from decrease increase million, Miracle same XXXX stable other from and

from from was were associated X.X% from Wuhan further and We Research a decrease So-Young's acquisition Non-GAAP million, The a management an branding quarter. with from a expenses to due XXXX impact and were expenses. attributable million, same net previous consolidation dynamically million, Miracle and to XX.X% decrease Total controls. administrative primarily decrease primarily X.X% the narrowed from increase and of The than So-Young to were RMBXX.X same a operations in than RMBXX.X decrease increase more XX.X% as and and quarter. expenses Sales period of in decrease of operational and response Inc. International the cost decrease environment. X.X% to in share-based in decrease headcount. improve in expense and due Inc., the costs XXXX, improved second payroll previous decrease attributable in quarter-over-quarter. user decrease loss decrease in increase the the was our primarily to previous fees. professional the and XXXX, year-over-year the we operating expenses macroeconomic marketing a by General quarter, services expenses were RMBXX.X a a a X% RMBXXX.X adjusted same a optimize quarter, RMBXXX.X XX.X% the from a XX.X% period and profitability million, also The weakening development attributable expenses includes compensation the decrease So-Young in quarter-over-quarter. XX% net the which to loss narrowed XX% were million, International, by more quarter-over-quarter quarter-over-quarter. In period

balance our for sheet. Now

cash investments were RMBX.XX deposits short-term RMBX.X as equivalents, June of cash XX, compared of with and billion term As XXXX, cash XX, billion XXXX. restricted December and and

the outlook between the third to current expects For based RMBXXX and quarter demand. conditions The that above and total So-Young conditions be operating market reflects of the market company's and on million. is million preliminary customer the of XXXX, revenues estimates RMBXXX

principles structure operating improve financial and that and cash key maintain quality on net Our the include growth, and optimize position. focus and objectives cost operating efficiency

have the the we in currently have losses progress We made us quarter, cash to executing business. billion which flexibility saw objectives. these nearly gives grow narrowed position, in financial the During RMBX.X quarter-over-quarter. We

affect will and long-term remain consumer China's COVID-XX remain many about we very So-Young. long-term fluid prospect Looking of the optimistic ahead, situation and growth of ways, in expect we economy will operations service behavior but provider outlook the and medical impact of

to adjust and to Q&A. questions. value prepared turn market I swiftly positioned take are This our the concludes in for to ready create will the for a remarks. operator we and shareholders. are We highly Operator now open call environment uncertain our uniquely the call

Operator

[Operator you. question Thank from Instructions] with today's go Chong And Thomas Please first ahead. comes Jefferies.

Thomas Chong

question about question you Can first Can My coming comment budget. question. second you competitive management landscape. about my me? in the is My taking – months for and trends about sorry, some management the can color share Thanks marketing hear recent quarters? is

Min Yu

Yes. Yes, ahead. go please

Thomas Chong

some Okay. most OpEx both and last non-surgical question Can trends. been control you about efficiency. is highlight the of on cost comment I've seeing side? my companies And the surgical and – about

So OpEx think Thank we the you. how should trend? about

Min Yu

– go Yes, worries, ahead. acquisition sales me, the for sorry. question costs, All and trend first customer marketing No the will I Okay. right. costs excuse

and sales sales that, marketing and the revenue the offline accounts for includes than So, XX%, Other BDs. it like the in around and and the it payroll personnels marketing our for second quarter, total of on still keep will to going total think, in XX% the prudent I revenue. expense quarters, of very few acquisition spent forward, And control XX% we customer of a of approach. around in the cost cost the next

i.e. few services, total sales terms the sales revenue for the landscape And And the cost, acquisition marketing For industry, it of forward. competitive marketing the same surgical keep in it and will cost, the challenging quarters. second past XX% in the the keep I been for your including question think very what's will for still for XX% surgical we has we to within and level non-surgical? going and for customer range. cost,

One is, much I current macro-economic for expensive than the of very conditions consumption the challenging been reasons services. more relatively because is market. think, non-surgical And surgical have the

for ban cities, a us for the it's down systematic been a I take is pace, that I quarters. That's think, keep market think, of services. providers going landscape, or better mainly years. travel that has Shanghai, And non-surgical competitors to second scale [indiscernible] to COVID less service question. position to the all developed a competitors services because large usually still terms for because quality to who Beijing, at those the good competitors. So-Young you other it for managing or by to your to the developing participant. think doctors of high Chengdu relatively impact and are competitive other still the healthier still very for previous the still surgicals, the than cities, travel but negative smaller in been apply but have for the relatively applied those Other has But is COVID-XX of past reason and major the impacted ban, a for few other surgical government surgical. been I to the extension, It impact travel in competitive the And the I think the compared continuously as been in cities part consumers those contain non-surgicals, surgical for the are like compared

third expenses check I Are or… going apply cost is question operating think the control how to going we the forward?

Operator

[Indiscernible]

Min Yu

still keep yourself you I put Yes, mute? forward, third very for control strict we policies going can on will Okay. the part of cost question, the internally. think, operator Sorry,

terms – downward see developing operating high we quarters of trend next In quality we – been the keep the to costs couple we and in have still will in of or business efficiently. can the expenses much

of So third question. think the part the that's I

Thomas Chong

It's it. very useful. Got Thank you.

Operator

today Citi. our And Cheung with Nelson Please comes next go ahead. question from

Nelson Cheung

trend or I whether We in like kinds metric then any And for trend that company? reflect question guidance. is would great. your questions. consumption management thanks share be the expectations August that or about know you and few service. taking recovery the the have what second is questions. to regarding guidance for Hi, regarding my business, could July And question reservation first My your of my

So, now, given the further retain economy or steps right acquisition you or additional you. us? weaker translate improve re-acquire is there the still user cost it the into Thank when would macro consumption could any and demand that for

Min Yu

of as question, first for expected. million our positive RMBXXX to conditions that here used part frank, we the for Yes, be estimation to Okay. million is that yes, quarter. China Mainland best not RMBXXX in your is To currently be the as guidance macroeconomic the

time question. consumption, can but quarter your weak. year. And to of third seen status, a we've economic like pre-pandemic recover i.e. need quite part been quarters it you to couple for second July see, last still And in a recover to needs slow numbers your a the although still fourth has recovery of As quarter, to

Vivian Xu

reservation. the On

Min Yu

because terms marketing economic sales been and for sure Yes, spend cost revenues, condition to as being in hesitated our relatively challenging the course, and the money containing been make we of well reservation of more the efficiencies the quite consumers investments. to has marketing have of

acquisition. clear course, we think, I of we spend forward, a once try personal of disposable terms will and see we more will increase, in of consumption income very trend Going customer to – income recovery or

being that in market. customers confident acquire still market to the are or recovered, new able be we once consumption We will the

of So fourth close and of months. still need that's a can conditions have year. – in the a performance everything in why a to economic more we development can satisfactory see the have have the better in which next couple quarter XXX Hopefully, much we the

question. your think the can that's I best answers And I estimate give. So it hopefully,

Nelson Cheung

you. Thank Thank That's very you. helpful.

Operator

And from our question Chiang you. Leo next Bank. with Deutsche Thank go today Please comes ahead.

Leo Chiang

taking you Thank questions. Hi. for management my

So I questions. have two

the quarter. Select? service first question we you. The share reason So-Young see robustly expecting the second And are number question growth we My share Thank half? still model second is this monetization behind contribution Can management grow the the Select. for in revenue of So-Young under to about the is Can the quarter? see paying the management providers top

Min Yu

Okay.

platform. have to impacted improved and trying platform service try think very to by the we recover it like them important our the For or the and these acquire strategies the in from like to XX% quarter we around to providers Beijing, XXXX paying cities service providers COVID-XX. top large cities pandemic. And that policies We it's help have to the those to service providers be customers our and operating of I revenues been in second in lower-tier or XX% the because And the – the we all in help used back total like of cities. different also, takes four around our Shanghai get from – account

So policies few more and next customers. cost to investment them have service to we for to a customers platform. return get can and quarters. cities in recruit the high helped the hopefully, let to acquire their they different get lower new relatively providers efficiencies lower-tier have It And

keep the very how in very even the consist. can if a and to be condition (X:XX:XX) will the is trends in rolled in best out service question, data, has we mentioned conversion these more been about user the the the So-Young Probably, to help been current product From still say, will And on in more conservative our future, try to challenging, disclose not Select. and have currently, contributions will results, But we we currently although rate, it's is new I we still it think or third will see get data. the how the survive to did Select, to remarks. next – the So-Young We July. I I it in And – service then still, macroeconomic back few because improve financial help the so customers revenue we quarters. And we providers for testing in of I the and/or the revenue see – – like will the second just data, providers' color. six quarter cities tracking can't of the because

Leo Chiang

That's very Thank you. helpful.

Operator

Please [Operator you. next Today's ahead. Thank Chloe CICC. Instructions] go question from comes at

Chloe Huang

questions. my management. Thanks Hi, taking for

So results quarter. of the congratulations second on the solid

the So ARPU. my first question is about

on the second quarter. seen have we the service the providers for So a in XX% year-over-year ARPU decrease

in So we is should expect we third to trend quarter continue? my And the second question that acquired the Wuhan XXXX. Miracle

us synergies? future some thanks. So That's Miracle? Many it. give you what the the could more color is Wuhan And of please about prospect

Min Yu

Okay.

providers, It's and providers because well. For invested to invested the the, question, as platforms is because frank ARPU less as your first like service same service of impact. on I COVID that other think, be I the think, sales in of for less we marketing

control. So better cost cost think better for been prudent it's to – very approach it's I – a

decreasing that of June and can July. past including months, future, couple trend the the For consist in

not we in decreasing recovering, currently or the trend. service on seeing in slowly of provider gradually I further platform, August, terms spending but the that's are think current

the and the And new in positive it's by think end the when a Miracle's normal loosened, current product pandemic is Wuhan there accepted will ARPU think more operations Wuhan new also – helping pandemic have on the of being trend. – tested impact do the in help and the signs. apply level. to also back all all also your approach we and for I be or second it's being line service to Miracle policies economy terms invest think for the with a providers the users control on the the the in better pipeline, the better recovery policy platform we I Miracle users by market. platform platform I new the together the see also being will will products question product and we approach start And Wuhan synergies, the and Hopefully, by

result XXXX I numbers, – currently I reflected or in expect although in we'll from seen in it think think a cannot we XXXX. have the better So that than been rather do financial

Chloe Huang

very Okay, helpful.

have up I question. a So will next

I'm ARPU, exploring – institutions, are paying decrease, less like is wondering the is to the higher-tier they the about are it we the the lower-tier cities So related cities? and it than

Min Yu

quarter. of the I in – of revenue revenues These And Beijing, the no think second Beijing. the revenue top major half two the we XX% reason revenue is And have COVID. and a total cities the quarter Shanghai of of like full account because for XXXX. quarter, the for because revenues in Shanghai, regular third we account the – in because in XX% major cities or four have of basically,

than or status. think have for impacts those invested spending cities in I they other stable been those very a lower-tier

they – they major spending the impacted also cities not also So their the but decreasing more, are platform, seeing we're didn't materially. the on spending have been but

if normal, from the we I back So cities. those then will the and spend think more, recovery being major Shanghai institutions ARPU see will to

Chloe Huang

questions. Okay, many no thanks. I have further

Min Yu

Thank you.

Operator

and gentlemen, over like I'd the ladies Xu closing for question-and-answer our And Vivian conference to session. this turn remarks. to concludes

Vivian Xu

Well, today's thank your you for participation conference. in

You a good may Bye. it. day. disconnect now Have

Min Yu

Bye. all. you Thank

So-Young International (SY) 16 Aug 222022 Q2 Earnings call transcript