SY - Earnings call transcript Q2 2024 | So-Young International Inc.

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Operator

Ladies and gentlemen, thank you for standing by for So-Young's Second Quarter 2024 Earnings Conference Call. [Operator Instructions] 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 Qiao. Please go ahead, Ms. Mona.

Mona Qiao

thank Conference for Call. and Quarter So-Young's operator, Earnings XXXX you, you, joining everyone, Second Thank

Mr. Joining Mr. Co-Founder, and Xing today Jin, Zhao, me on our Chairman the and call is Nick CFO. CEO;

made Please note today Litigation Private safe discussion that Reform U.S. Act provisions the and under forward-looking of will harbor Securities the contain the statements the of XXXX.

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

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

to At this time, I'd like over Xing Mr. to call turn Jin. the

Xing Jin

Language]. [Foreign

Mona Qiao

call. today's everyone. Hello, to Welcome [Interpreted] earnings

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

We trades impressive our during on progress industry executed strategy quarter. made has the on capitalized

business segments new RMB products million, with reaching grow year-over-year. maintenance to sales of our Specifically, medical revenue from and XX.X% up XXX services rapidly the continue

our upstream chain our in significantly shipments Product to clinics business chain increased supply expanded, as of growth. contributing both

and industry high-quality only are of leading the are segments into development. upstream, medical new covering entire platform era aesthetic and We of the the midstream and the downstream a industry sustainable

ensures services. of affordable chain the with experience efficiency standards Leveraging the value closely the consumer and This the aesthetic optimize enhancing needs, value aligns medical we are industry transparency synergies by across products, a and high-quality operational integration, for created customer the reach vertical industry redefine and diverse evolving chain.

categories adjust customized deploying our strengthen their With we advantage SKUs, upgraded premium refining client demand partner and our We ensuring our for offered continue the segment further high-end to by by drive authenticity in in operations products user competitive our market the subsidies. target mid- high-quality and and leading strategy POP growing, and enrich development to institutions.

strengthened us We with POP and medical high-quality meet to enabling clinics our and synergies, to partners mid- integrating aesthetic our also needs by evolving to better users. support create chain greater diverse high-end the of business for deeper of institutional

In the second verified aesthetic and XXX,XXX XX% XXX over orders, and quarter, products X%, up GMV around reached for services medical respectively. million RMB

We from domains. a base cultivate to continue and traffic private our us as away and user online monetization our allows user private low operations to channels target retain strategy Refined optimize improve by acquisition to budget reallocating multichannel ROI domain efficiency. engagement,

up In of private quarter-over-quarter. the reached XXX,XXX, second the use XX% domains quarter,

Hangzhou, in So-Young clinics cities, Let's Wuhan, Shenzhen, we move X Currently, on Prime. Chengdu, prime Beijing, have to Changsha. Shanghai, XX commercial areas core including and Chongqing in opened

are these and of in operational expectations. clinics All line performing with fully

We've also Leveraging our fulfillment to customer and of brand of the number repeat operational quarter-over-quarter, achieved rate and strong user base, X.XX verified reach standardized our out satisfaction of increased impressive capabilities, the XX% customers reputational X. XX%, an improved purchase by exceeded strength efficiencies. solid the

For around of X.X than profit a hit industry XX% XX%. and The revenue with rate example, of Beijing higher million X.X million profit generated RMB average. June clinics pretax margin of our repurchase RMB in the

have per clinics valuable new other Notably, will apply outperformed insights The accumulated with and these we doctor traditional revenue accelerate their that monthly both us clinics. area we provide unit growth. from efficiency to experience to

our to this cities. planned aesthetic medical by of the clinics We franchising are this footprint chain clinics very light future in standardized order rapidly target year the of as of begin our model half replicating optimistic in the to proven about expand second in

a we extensive operations, of insights, laying category data user have are behavior our will the ecosystem. capabilities supply consumer experienced team, upstream a demand of solid broader our chain aesthetic customization our medical and With consumer data a on decade building I provide development Leveraging for wealth accumulated business. updates products. and for we and of Lastly, manufacturing over behavior foundation our for

leveraging our competitiveness we In new ensure stream sales. extensive coverage and our addition, using marketing products institutional rapidly to customer a strengthen steady strong of able are to the capabilities, of clinics

and of Our domestic selection in sales. product X core possessing top XX of of manufacturers, industry team from average is an and each professionals experience and international strong years composed to expertise

half year. the will of by reaching In of to goal of team a the year, we the second the end with members XXX continue expand this

shipments Additionally, market we've potential a hit. increase device, newly anti-aging reflecting ultrasound nonsurgical a launched continuous strong our be to in seen of Lift, True a

momentum quarter-over-quarter Meanwhile, up shipments second the injectables units, illustrates quarter strong [ [indiscernible] exceeding growth XXX% by XX% and Revenue [indiscernible] and XXX% quarter-over-quarter disposable XX% year-over-year. with grew XX,XXX year-over-year. from ]

sales of injectables. of XXXX, institutions XXX quarter As with the second the we of for partnered

over the soft challenge near that has the consumption market medical the the in believe term. this recovery macroeconomic long we in Despite potential Chinese and still aesthetic term, enormous

reshuffling a their as full market of are leaders. advantage well category growth As ecosystem like consolidation, positioned to unique their market share position and and enters potential new and brands a expand on and the period begins opportunities, capitalize leading industry solidify So-Young the with

treatment, downstream by upstream these service POP ideally sales also can in [ our benefit clinics our business, for ] and demands suited will a Supporting be from exclusive chain products treatment. with meet of see businesses stream and non-standardized to standardized to both businesses. our guaranteed steady of both offered is business which while We to believe of opportunities

believe create new ensure vertically open value will drive strongly from business our chain we and enormous these forward. the innovation, So-Young segments integrating synergies going that services triangle of for effectively industry growth and the [indiscernible] opportunities Combined, quality X up

CFO, I to financial questions. over we'll Nick, through for our second go quarter's that, results. will now up the let take After open

Hui Zhao

quoted for information earnings our of will amounts that financial be impactive a Hello, comparative be basis. year-over-year all in performances refer our also reminded Please here this detailed is release on RMB. Nick. to Please

end revenues increase during down back products Total our quarter the of in on XXX.X maintenance sales exceeding year-over-year of high guidance year-over-year, RMB XX.X% the the and medical were million, of services. X.X%

other medical services number were and decrease in providers RMB the subscribing to X.X% service of a primarily million, services XXX.X our to year-over-year, down revenues due Information platform. information in

to revenues products. Reservation primarily increase X.X% year-over-year with decreased to subsidies. of in up to due RMB XX.X% due primarily and million, associated XX.X Services revenues RMB year-over-year, million, an of commission Cost changes XXX.X rates cosmetic costs for were sales the policy

year-over-year, to a of with due were due in Prime. decrease an others cost services sold revenues, and down the costs Cost XX.X% XX.X associated RMB of primarily to maintenance in associated of costs cost RMB Within services million, X.X% sales cosmetic year-over-year, medical So-Young up were increase with products XXX.X of products. million, primarily and

million, and branding XXX.X were marketing RMB expenses down year-over-year, expenses down XXX.X and decrease activities. XX% were operating user a RMB year-over-year. primarily X.X% associated million, to expenses acquisition with due Sales Total in

RMB million, staff attributable consulting expenses to efficiency. in due expenses were XX.X XX.X fees. and year-over-year, to the primarily XX.X% were XX.X% million, year-over-year, RMB primarily improvement professional expenses down down in G&A decreases R&D compensation share-based

with with million same during year. a of Income RMB last income tax was benefit the benefit Net loss same X.X period tax XXXX. attributable X.X million million net of X.X income compared So-Young the RMB in RMB million compared of period RMB to were XX.X

Non-GAAP million RMB shareholders XXXX. basic in net RMB So-Young the and compared with to with X.XX same per RMB shareholders income and respectively, compared XX.X same was were of to X.XX, ordinary diluted and attributable period to attributable diluted XXXX. ordinary RMB earnings XX.X X.XX respectively, and X.XX, period million attributable RMB of RMB per Basic the ADS during losses ADS of

cash term maintained XX, equivalents, deposits, X.XX of and cash restricted deposits June with as position a term short-term and robust investments cash billion totaling have We and XXXX. RMB cash

Moving to outlook. our

clinics ramping with Given RMB for and takes respect the conditions, especially million. of pace XXXX, opening we outlook to XXX uncertainties This discretionary of the revenues soft spending, million be relatively XXX RMB quarter of the and up. into to expect third between total also the account macro

industry are downstream aesthetic the initiatives, stage in and our that clinic we the foundation of being solid long-term capture business initiatives said, of medical we larger and As integrating Their growth. enable expansion significant are us position establish transformation, will and ideally will a to our strategic our a chain the upstream market of profitability. us early for share value our of confident the

As our to stabilize, our clinics we conditions improve. mature and financial gradually expect market performance

I now are to remarks. questions. call and over open will turn to our Operator, concludes we for call the you. Thank QA. take key the the ready This operator

Operator

come from Chloe Wei first CICC. the will Instructions] And [Operator question with

Chloe Wei

translate [Foreign myself. Language] me So let

And high is my revenue The overall continued Firstly, really on congratulations the solid strong line. to end the and the bottom about trend. exceed results. question

of and et we guidance, second this tourisms signs the of half say, companies entering slowdown consuming in year, So seen platforms, the most online have cetera.

So second to anything seen can I and plan we are understand how the August from also advertiser on market adapt share we the July that's changes? mostly macro the to And about half, headwind share have side. into due more in from we color the with consumers trends new the management to and looking but to the would there like

Xing Jin

Language]. [Foreign

Mona Qiao

XXXX, from of state current by deceleration retail thought the X.X% where XXXX. the in to the a quarter the year. medical increased at quite XXXX the would China in isn't goods aesthetic of the beginning of of compared last consumer at X months the The year-over-year data [Interpreted] to it first first sales quarter be of the industry we According NBS, of

to confidence consumer and Despite significant grow structural weak spending, offer the continues aesthetic medical and market discretionary opportunities.

surge for and Meanwhile, propelling aesthetic of share that in industry's overall chain its driven consumer chain invasive experiencing convenient by market strong is The advancement. growth, and supply upstream supply demand optimizations are is fueled the services. services the light medical innovations expanding, by minimally

Our industry. will key the research shape of future X that forecasts industry highlights the

large more in services momentum. First, of to resulting norms standardization live of and mature chain and lead brands This sector. see the we will expect efficiency, emergence medical market a aesthetic gain enhanced to

market, next we concentration. dominate that X X to the years, accelerating over industry chains anticipate will Second, leading the significantly

also clinics to layers but market, us will of trade. top will capture expansion share the for on chain position year. half contribute for this opportunities second We in This of As investors industry's to new be to success the evolving rapidly in of only entrepreneurs capitalize created franchising the not begin market. and our plan larger

Operator

come Nelson Citibank. question The next Cheung with will from

Fuk Lung Cheung

positioning business wondering company's what Language] shared there the the any question business that development? business outlook on the are new would in strategy My us? regarding be [Foreign with and And is of future the POP POP can be your

Xing Jin

Language]. [Foreign

Mona Qiao

strategy, development. POP its focus of vital The remains on component and business our [Interpreted] we growth a continue to will

while twofold. value-driven believe we Chinese more before, With for a is diverse Consumer of spending medical client service market spending selective. facilitates our standardized POP clinics and market for landscape, nonstandardized we highest this to strategy polarized. that premium needs. leveraged rely aesthetic said to the two, treatment increasingly on more And willing is adapt strength to we've the care, standardized on treatment is treatment, to chain we our will meet consumers treatments, become quality of our pay quality satisfy nonstandardized As that becoming business a One, will for on of array to treatments becoming demand. various

our aim Sam's strengthen We side and customer high-quality moving vertical, SKU over just model, increased value decision-making, power. ultimately curated enhance premium we each a supply simplify institutions, SKUs our like the and leading in to control Club. are doctors By and Costco transaction pricing selecting towards to

Additionally, them service but some which enabling track exclusively prime an positive feedback. with specialists online is who provide example service expertise, operational each of services customers. technically, boasting has impressive comprehensive support, of grown strong and master record A for of our operational on management. partners this received to for treatments. this to team, offer consists lack injectable injector rapidly operational delivering we XX,XXX Demand We are mostly focus

from business our demand forward, of our like throughout strong chain doctors high-quality chain our as by in by create and promoting identifying grows with treatment Going and institutions clinics clinics it scale POP. synergies of will customers nonstandardized POP to

satisfaction commercial and are both maximizing value. We customer

Operator

Securities. The Patrick next come Yee question [indiscernible] will from

Unknown Analyst

me so myself. for [Foreign briefly let just Securities. Language] Patrick Okay, I'm from translate [indiscernible]

So just more about the wondering questions clinical business. I'm chain

example, clinical we so these And the effectively if competitors? address advantages So what I'm are the of operating that more metrics in So-Young have unique clinics. have future expansion? current additionally, reached wondering streak addressing And is are your for what And of our factors might these the -- business chain can constraints the clinics the than constrain trends? constraints that what And -- for chain what our breakeven?

Xing Jin

[Foreign Language].

Mona Qiao

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

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positioned are of factors. already each these We address to

We and that brand have solid leverage customer our extensive base the on acquisition our user already strong capabilities recognition platform.

further is by and online capabilities. our This marketing enhanced contact

recognition, of recruiting when advantage professionals business and when medium-sized strong a regulations give scale small- us to Our compliance and significant institutions. our with compared brand

yield initiatives side, the to already are the positive our years few chain over past On results. supply beginning

in As financial this program enhancing lies year, impact in performance management we the key that more to receive our company. area advantage vertical our Prime through continuously advantage our the We the breadth natural different where we positively depth across to in believe the are products expect and management capabilities meaningfully. By So-Young able ensure as standardized digitalization of clinics over platform to more our a have of an standardized multiple Internet past we competitive certification regions.

year capital in to own in deploy to new need launching ample the the well. us allow expand have the will half We of invest second The also that clinics as are capital. model without to our franchise

of in Shanghai, this In in clinics relatively for terms license set obtaining applications, experience XX have regions prime Having nationwide, China earnings other opened have simple of license and in call, we commercial aside Beijing already from fast. clinics and up accumulated area. And we areas. is today's

these expectations. line and performing our of fully operational are in with clinics All

and for following are clinic growth with months. little X has Beijing profitable, other Our been operational will than has the been more reach X time X breakeven. its months months but the become for to remaining a clinics, for already Among investment. have XX trajectory, XX less initial similar recouping require They operational a

To curve. context, provide typically some clinics months go more followed our XX about of period, reached accelerated of trial generally a They follow growth X growth. are X-month a through after operations. months by usually well-defined Maturities

began our year. example, officially opened in operations in Beijing and For treat clinic August last May to

insights effectiveness XX%. operational we pretax to that other grown to clinics RMB the has growth. profit June value valuable new then, validates profit site million of and our of their accelerate X.X apply providing year RMB opening million with of X.X a margin around Since and in strategies, to clinic outstanding this selection, performance This will

middle procurement costs ensuring have delivery, In increase, allowing outperform By services overall while and we profit products will use leveraging the institutions. platform, volume our chain future, of increase. will other our cost reduced to across clinics margin standardized and fall us gradually as self-branded our

as XXXX, of density are By increasing ahead, clinics plan a Looking with we end also expanding plans business our the centered In self-operated clinics and across the cities, target flagship focus to model training city. each of our open on clinics. our on future within of our year, half over the to we leverage XX external with partners centers clinics. the second launch franchise will clinics

enable and will scale rapidly. to standardize us This

will of new but significant which clinics, increase our position, strengthen create only for not also market a the in number opportunities growth. year-over-year revenue expect We

Operator

from The next question come will Joei [indiscernible] With Jefferies.

Unknown Analyst

competitors? [Foreign sector So-Young's this elaborate the is upstream other the upstream positioning could management's on how differentiates My year? question does the perspective sector Language] from plan business you regarding for itself And the strategic and

Xing Jin

Language]. [Foreign

Mona Qiao

manufacturers to to advantage strength partners. us sales allow and existing to with customers traditional capitalize unique our reputation ecosystem coverage and integrated the we Unlike full network through approach production amplify rely linear that The our among R&D brand, lines. institutional to of business category create synergies model, on our

market our As ] using a media of in stream and achieve [ and products our matrix for sales, ensure competitiveness result, customer we steady app that can targeting apart clinics rapidly new a a capability us build through while the industry. to set

saw not when example, ago. sales ultrasound volumes it's and become preorder True anti-aging generated tremendous potential For our expectations market the volumes Lift, and launched team. our long capabilities performance This to a showcased hit its of nonsurgical beyond device

grow. the of continue brand Korea to sales Elravie Similarly,

pipeline In our addition, have we potential. been growth expanding high actively with

is year targeting in XXXX, new X products and map devices. all energy-based segments X popular of with next road launch and robust ready Our for injectables more

products significant are these to revenue will make We growth. contributions confident

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

Operator

will question with Securities. come from The next [indiscernible] Haitong

Unknown Analyst

Language] gross some you the can translate just provide margin around margins myself. for XX%, insights With gross please [Foreign the I'll going expected into current forward? trend

Hui Zhao

you for the Thank question.

inflationary as Over such near global on pressures growth to the continue sentiment. risks consumer and weigh slowing term, macroeconomic

third This to constrained, is spend uncertainty. may As in a increasing reflected be result, our guidance. quarter capability consumer willingness market and revenue

business, undergoing the structure margin revenue alongside, is levels. gross impacting is business our pulp transform our we a which shift As beyond

margins, product is gross affecting margin clinics, increasing chain high continue margin impacted still stable facilities but promotional the is which overall traditional medical our in reservations our activities. stages, Furthermore, our which gross have its of of early enjoy margins profile. has seen sales, While by temporarily information and lower services to share

by continue of In term, our we product chain of margins clinics medical to impacted will sales. expansion the short be the expect gross and

as upstream anticipate operations improvement will a chain strengthen margin. our we our However, supply mature, across corresponding capability in gross clinics and

franchise economies of introduction structure optimizing margin is the scale, of support our even our profit model to Additionally, further. greater gross expected through

Operator

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

may disconnect. now You

So-Young International (SY) 23 Aug 242024 Q2 Earnings call transcript