Title

Presentation

So-Young International Inc. beats earnings expectations. Reported EPS is $-0.04, expectations were $-0.34.

Operator: 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. 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 Qiao. Please proceed, Mona.

Mona Qiao: Thank you, operator, and thank you, everyone for joining So-Young’s first quarter 2025 earnings conference call. Joining me today on the call is Mr. Xing Jin, our Co-Founder, Chairman and CEO; and Mr. Nick Zhao, CFO. Please note that the discussion today will contain forward-looking statements made under the Safe Harbor provisions of U.S. Private Securities and the Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to those outlined in our public filings with the SEC, including our annual report on Form 20F. So-Young does not undertake any obligation to update any forward-looking statements, except as required under applicable law.

Finally, please note that unless otherwise stated, all figures mentioned during the conference call are in RMB. At this time, I’d like to turn the call over to Mr. Xing Jin.

Xing Jin : [Foreign Language] Hello, everyone, and welcome to today’s conference call. In the first quarter of 2025, we recorded total revenues of RMB297.3 million, net loss attributable to So-Young was RMB33.1 million. And non-GAAP net loss attributable So-Young was RMB31.5 million. Primarily driven by increased investment to expand our aesthetic centres, we believe these investments are laying a solid foundation for our long-term growth. [Foreign Language] In the first quarter, we continued to expect, have a vertical integrity transition and expanded our network of aesthetic centres in K cities. Our branded aesthetic centres. So-Young clinic operates exclusively in cold commercial areas across China’s first and second tier cities.

We are increasing store density in these markets to make our centres more special and convenient. By offering high quality, cost effective and standardized services, we are acquiring a loyal and recurring customer base. So-Young 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. [Foreign Language] And so the end of Q1 we all 23 So-Young clinic centres in nine major cities, including Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou, Chengdu, Wuhan, Chongqing and Changsha and among them 18 centres have achieved positive monthly operating cash flow and [indiscernible] referred monthly basis emerge revenue from our aesthetic centre business reached RMB98.8 million up 21.6% quarter-on-quarter and 551.4% year-over-year.

Total verified paid visits exceeded 45,500 up 18.5% quarter-on-quarter and 874.3% year-over-year. Total number of verified paid aesthetic treatments performed surpassed 92,900 up 14% quarter-on-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. [Foreign Language] In Q1, we launched a natural energy event brand campaign with offline POP up events featuring artists in Shenzhen and Beijing. These offline events were complemented by online sign-up activities to broaden live engagement and reach. Each event also featured an experience through allowing customers to try popular light medical aesthetic services like IPL and ultrasound based anti-aging treatments with licensed doctors outside to explain the science behind the treatment.

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 symptom treatments with low demand based on our user feedback. To further expand our portfolio, we partnered with premium skincare blood, SkinCeuticals to launch new co-treatment solutions. Additionally, we allocated additional marketing resources and implemented sales incentives to boost revenue contribution from our proprietary products. This was done to improve overall gross margins for our aesthetic centers. [Foreign Language] 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 shipments of elastic reached approximately 27,900 units in Q1, up roughly 14% year-over-year. [Foreign Language] Our POP business, which remains a — foundational pillar, continues to contribute profits and traffic while supporting the growth of our aesthetic centres and upstream business. In Q1 GMV for verified Medical aesthetic services reached approximately RMB300 million. With per capita install GTV growing by 4% year over year. [Foreign Language] Looking ahead with the significant long-term potential for our aesthetic centre business in China, we aim to build a defic ed-tech nationwide large medical aesthetic chain with strong blood recognition.

Over the past few quarters, we have scaled both store counts and density. In April, I personally increased my shareholding So-Young. I approached monthly US$4.1 million, reaffirming my confidence in our long-term goals. [Foreign Language] As our legacy POP business [indiscernible] is natural growth selling. We believe big key to our next phrase hinges on developing our aesthetic centre business with full control over the supply chain. Joining inspiration from the Sam’s Club retail model, we are pursuing a strategy centered-on preparatory products, value for money, pricing, and end-to-end supply chain management. Sam’s Club success was built on 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 and fair prices have similar potential. [Foreign Language] We aim to become the seventh 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. Now on our exclusively distribute 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. [Foreign Language] Now, I’ll hand over to our staff, Nick, who will walk through the financial results followed by the Q&A session.

Nick Zhao: 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 RMB297.3 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 were RMB142.9 million, 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 RMB98.8 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 were RMB55.6 million, down 35.7% year-over-year, primarily due to a decrease in order volume for medical equipment. Cost of revenues were RMB151.4 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 were RMB40.7 million, down 34.1% year-over-year, primarily due to a decrease in cost of services associated with So-Young Prime. Cost of aesthetic treatment services were RMB80.3 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 were RMB30.4 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 RMB189.3 million, down 20.4% year-over-year. Sales and marketing expenses were RMB103.4 million, down 8.7% year-over-year primarily due to a decrease in expenses associated with branding and user acquisition activities. G&A expenses RMB53.7 million, meaning down 36.7% year-over-year, primarily due to a decrease in share-based compensation expenses. R&D expenses were RMB23.1 million, down 18.9% year-over-year, primarily attributable to improvements to seeing staff efficiency, income tax benefits, or RMB1.6 million compared with the income tax benefits of RMB2.6 million in the same period of 2024. Net loss attributable to So-Young International Inc., was RMB33.1 million compared with the net loss of RMB21.2 million during the same last year.

Non-GAAP net loss attributable to So-Young International Inc., was RMB31.5 million compared with non-GAAP net income attributable to So-Young International Inc., of RMB4.1 million during the same ’24. Basic and diluted losses per ADS attributable to ordinary shareholders for RMB0.32 and RMB0.32 respectively, compared with basic and diluted loss per ADS attributable to ordinary shareholders of RMB0.21 million and RMB0.21 respectively during the same period of 2024. We have maintained a robust cash position with a cash and cash equivalence, restricted cash and term deposits, term deposits, and short-term investments totaling RMB1.1 billion as of March 31, 2025. Moving to our outlook for the second quarter of 2025, we expect aesthetic treatment services revenues to be between RMB120 million and RMB140 million, representing 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 Centre 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 is already have 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 across our self-operated and the partner networks, we expect this model to support more resilient margins and the greater scalability across market. This concludes our key remarks. I’ll now turn over to — the call to the operator and open the call for QA. Operator, we’re ready to take questions.

Operator: [Operator Instructions] And your first question comes from [Yibing] Li with Guotai Junan Securities.

Unidentified Analyst: [Foreign Language] Let me translate myself. Good evening management. Thank you for taking my questions. And I would like to ask about So-Young Clinic. How is it different from the traditional medical institutions like Mylike and Yestar?

Xing Jin: [Foreign language] Our aesthetic center business is fundamentally different from traditional model by the likes of Mylike and Yestar. In short, this institution is by dialing 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. [Foreign language] Most specifically, one service offerings, Mylike and Yestar provide a broader range of procedures, including surgical treatments such as double eyelid surgery, rhinoplasty, breast augmentation and liposuction.

They also offer services like skincare, anti-aging, hair removal, body contouring, hair transplant and intimate care. Their customers’ primary 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. [Foreign language] Two, per customer spend and visit frequency, Mylike and Yestar generate high per customer spend, but with lower frequency. Average treatments, on the other hand, applies around RMB1,000 but with higher frequency. Typical customer spend is roughly RMB2,000 with loyal customers visiting 6x to 8x per year. [Foreign Language] Three, store size and expansion strategy, Mylike and Yestar typically operates one large flagship clinic per city, often exceeding 8,000 square metres inside in contract.

Our clinics are smaller region from 200 to 500 square metres and are more widely distributed across the city. For example, we currently operate six aesthetic centres in Beijing and plan to expect 10 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, we are convenience and accessibility are critical. Similar to beauty –. [Foreign Language] For user experience, Mylike and Yestar operate exclusively through offline channels. In contrast, leveraging our restaurant internet A, we offer a hybrid experience that combines in-person treatment with a comprehensive digital platform. Through the So-Young Clinic app and however extensive online female private domain community users can explore treatment options, compare services, and make purchases and bookings online at transparent, at cost effective prices.

After treatment, customers can review skin test results via before and after photos, and receive timely care instructions, all conveniently accessible through the app. [Foreign Language] Five product supply chain, Mylike and Yestar focused on the service delivery phase of the value chain. In contrast, we have built upstream supply chain capabilities in 2021. This is highlighted by the acquisition of Wuhan Miracle Laser as an expensive pipeline injectable product. This has to offer highly effective services. [Foreign language] In summary, our aesthetic center business was defined using highly standardized model that’s ideally positioned to be expanded. As we all know, the key to successful chain operations, life in scale as this is where we clearly have an advantage.

Operator: And your next question comes from Nelson Cheung with Citibank.

Nelson Cheung : [Foreign language] Hey, so let me translate the question in English has mentioned for taking my question. As the clinic network grows, will CapEx become a burden for the company? Is this model sustainable?

Xing Jin: [Foreign language] We placed 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. [Foreign language] Currently, we expect to open around 13 new clinics per year. Each new aesthetic centre is carefully selected for its location and ability to achieve profitability, which helps us keep overall cost within a manageable range. [Foreign language] At the same time, we are actively planning to roll out a franchise model. This will help accelerate our geographic reach as network density while reducing CapEx pressure, having the wave for the asset light expansion. [Foreign language] Operational efficiency is also improving as of Q1, the majority of our aesthetic centres 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 aesthetic centres.

Operator: And your next question comes from Hi Jim Peng with CITIC.

Unidentified Analyst: [Foreign Language]

Unidentified Company Representative: [Foreign Language] So let me briefly translate for myself. Thank you for — 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?

Xing Jin: [Foreign Language] With before integration of Wuhan Miracle Laser, we have efficiently consolidated product talent and organizational processes to improve R&D capabilities. These positions Wuhan Miracle Laser and a market oriented upstream platform that creates strong synergies to support our growth model. [Foreign Language] And the leading provider of aesthetic laser devices in China. Wuhan Miracle Laser, preparatory R&D capabilities allow us to supply our aesthetic centres with high quality cost effective equipment, such as our flagship use 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 centres further accelerating expansion.

[Foreign Language] Wuhan Miracle Laser also holds a unique advantage in survey China’s long tail aesthetic market. While most manufacturers focus on the leading institutions, Wuhan Medical Laser has served over 5,000 clients with deep experience and broad distribution among small and medium side clinics. As our aesthetic centre network growth, 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.

Operator: Your next question comes from Daisy Chen with Haitong. We have a follow-up from Hi Jim Peng.

Unidentified Analyst: [Foreign Language] I still have the second question. It’s about a trade war. So how would the ongoing trade tensions between China and America maybe impact the company’s tensions?

Xing Jin: [Foreign Language] Trade tensions primarily affect the aesthetic industry in two ways, change in cost structures, and shifts in the competitive landscape. For So-Young, the direct impact is limited, but we also see this as opportunity to strengthen our domestic supply chain and support import replacement. [Foreign Language] From the cost perspective, the impact on our aesthetic centre business is minimal. Only one of our main offerings uses U.S. imported equipment and consumables — which accounts for less than 10% of total revenue and our aesthetic centres. If tariffs drive prices higher, we are well-positioned to pivot to alternative products that offer similar results without compromising user experience. [Foreign Language] That said, the impact on the upstream may be higher.

Wuhan Medical Laser currently distributes several imported devices, including [indiscernible] PBL treatment. Tariff increases could affect the pricing and sales volume of these products. [Foreign language] In conclusion, we see this as opportunities rather than threats. We will continue leveraging our vertical integrity capability to upgrade China’s aesthetic supply chain and deliver high-quality cost effective solutions to consumers.

Operator: And your next question is from Daisy Chen with Haitong.

Daisy Chen: [Foreign Language] Thank you management for taking that question. We see that the company has a very good ability on cause to and control in Q1 and we also, not 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 through effective further improvement in the overall financial performance?

Xing Jin: [Foreign Language] We are encouraged by the early results of our aesthetic centre business is generating and remain confident in its mid to long-term profitability. In March, 18 centres have already achieved positive monthly operating cash flow. Among them 16 centres are profitable on a monthly basis demonstrating the viability and efficiency of our business model. [Foreign Language] Going forward, we will maintain a measured pace of self-operated aesthetic centre expansion and will carefully manage new openings in a disciplined manner. Meantime, we are actively preparing the launch of a franchise model to enable lighter scalable growth. [Foreign Language] In addition, we are optimizing our offering mixed deepen upstream collaboration and enhancing efficiency at the clinic level to further improve cost control and gross margin.

We have also increased investment in growing our proprietary product lines, which will further support margin expansion. [Foreign Language] Overall, we remain focused on sustainable, high-quality growth, supported by financial discipline, and a structural optimization across our core business lines.

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