Q3 2022 So-Young International Inc Earnings Call
Speaker 1: Good morning ladies and gentlemen and thank you for standing by for So Young's third quarter 2022 earnings conference call.
Speaker 1: 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.
Speaker 1: As a reminder, today's conference is being recorded.
Speaker 1: I would now like to turn the meeting over to your host for today's call, Ms. Vivian Hsu. Please proceed.
Speaker 2: Thank you, operator, and thank you for joining Sohyang's third quarter 2022 earnings conference call. Please note that the discussion today will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities and the Latigation Reform Act of 1995. Please note that the discussion today will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities and the Latigation Reform Act of
Speaker 2: Overlooking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations.
Speaker 2: Potential risks and uncertainties include, but are not limited to those outlining our public findings with the SEC.
Speaker 2: including our annual report on Form 20F.
Speaker 2: SOEM does not undertake any obligation to update any forward-looking statement.
Speaker 2: except as required under applicable law.
Speaker 2: Joining us today on call is Mr. Xin Jin, our co-founder, chairman and CEO . At this time, I would like to turn the call over to Mr. Xin Jin. Test, please.
Speaker 3: Hello everyone, thank you for joining Sohyang's Third Quarter 2022 earnings call.
Speaker 3: joan leoben.
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Speaker 2: China's overall domestic consumer market remained under pressure in the third quarter, with repeated COVID-19 outbreaks in certain parts of the country. Despite this market uncertainty, we delivered solid financial performance during the quarter.
Speaker 2: And we have now achieved gradual sequential improvements in each of the first three quarters of 2022.
Speaker 2: Total revenues were RMB 320 million, representing a sequential increase of about 5%, and in line with our previous guidance.
Speaker 2: Our progress was well recognized among medical service providers, and we established new corporation agreements with small institutions, thanks to our device product offering.
Speaker 2: The number of pain medical service providers on So Yung's platform reached 6,199, up 28% from the Pride year.
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Speaker 3: Chinese interpretation
Speaker 3: The user side continues to refine our operations to serve different cohorts of medical aesthetic consumers.
Speaker 2: leverage our deep understanding of users and our age in big data analysis. We made some progress on our user segmentation efforts.
Speaker 2: which enable us to cater to the demands of different consumer groups based on location and user characteristics.
Speaker 2: For new customers with limited budget, we used popular talks and promotions for new treatments to encourage them to place orders.
Speaker 2: For customers at medium price segment, we promoted well-known products to enhance their thickness.
Speaker 2: In the third quarter, number of user verified order on our platform grow 6% sequentially.
Speaker 2: In addition, we launched the SoYaN Prime program, targeting customers in the first and second tier cities.
Speaker 2: who account for the majority of medical aesthetic consumption. The So Yum program is aimed at establishing clear and transparent industry standards, reducing consumers' trial and error costs, simplifying their decision-making process, and providing one-stop solutions for light medical aesthetic services.
Speaker 2: enabling our customers to pursue beauty with peace of mind.
Speaker 2: For category with all the value of over RMBs, 8,000 launched during the quarter, such as ultrasonic GONG, Immort Skin Remodeling, etc. The MOUTHLINK online GMB increased by over 60% compared with the previous mouse.
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Speaker 2: In terms of our operating strategy, So Yang Select had expanded to 19 major cities in China as of the end of October . As part of our long-term strategy for providing superior user experience, So Yang Select cutters to our users' preference for high-quality branded medical service providers.
Speaker 2: and enables providers to offer enhanced service and build their brand value.
Speaker 2: In the third quarter, with the rollout of So Yau Select, the promotional spend of service providers on our platform increased by over 25% quarter over quarter.
Speaker 2: and about 20% yield per year.
Speaker 2: We also saw gradual improvement in conversion rate for the medical service providers on our platform.
Speaker 2: Meanwhile, under So Yang Select, we have also rolled out So Yang Select Doctor, which helps users choose premier doctors.
Speaker 2: providing useful information to facilitate
Speaker 2: their decision making and driving user conversion.
Speaker 3: The following answers will take the aluminumpi viruseline from a
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Speaker 2: In terms of industry regulation, the recent national regularity policies emphasized transparent pricing, consistent online and offline pricing, and cracking down on false advertising and misinformation that harms the interest of consumers.
Speaker 2: The regulatory requires for online platform are consistent with the self-regulatory actions Sohyang has been implementing.
Speaker 2: implementing for years, indicating that our work is towards the right direction. Regarding internal platform governance, we continue to promote self-regulation within the industry to strengthen the quality of the supply side in our ecosystem.
Speaker 2: We also took the initiative to identify and eliminate false transactions and false reviews.
Speaker 2: and establish and optimize our anti-fraud system and data prevention scheme.
Speaker 2: thereby promoting the healthier...
Speaker 2: development of the industry.
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Speaker 2: Looking at the overall Chinese medical statistics industry, it is under pressure in the near term while the positive prospect is intact for the long term.
Speaker 2: Therefore, for the near term, we took stringent measures to cut costs and increase efficiency and achieve profitability on a quarterly basis.
Speaker 2: During the quarter, the non-GAAP net profit attributable to So Yung International Inc. reached RMB $9.9 million. We have maintained healthy financial conditions and sufficient cash reserves to ensure that the company remains strong and we are able to make constant improvements.
Speaker 2: Going forward, we will work to better serve medical settings consumers by investing in our business and evaluating the user experience.
Speaker 3: Thank you for watching.
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Speaker 3: China's growth is increasing and the global market is increasing. China's growth is increasing and the global market is increasing. Looking at the global medical settings market, we are pleased to see that it continues to have strong growth potential.
Speaker 2: According to Frost and Sullivan, browsing back from the year-over-year decrease in 2020 due to the outbreak of the pandemic and the global medical status market grow by 13% year-over-year in 2021 and is expected to grow by 14% year-over-year in 2022, with CAGR of approximately 13% from 2021 to 2025. For more information, visit our website at www.cagr.com.
Speaker 2: In 2020, the number of the metastatic treatments per 1,000 people in China was about 21, compared with 82 and 48, respectively, in South Korea and the United States.
Speaker 2: which are more developed medical settings markets.
Speaker 2: So the penetration rate of the metathetics in China still has plenty of room to grow.
Speaker 3: Thank you for your attention.
Speaker 2: 2022 is the ninth anniversary of SoYoung and marks a new beginning for us. We are confident that we will overcome the uncertainties of the current market environment and will leverage the vast industry experience we have accumulated to place the user as the center of our business and build the most trusted medical settings service platform.
Speaker 2: I will read the prepared remarks on behalf of Mr. Xin Jin, then open the Q&A.
Speaker 2: Now I will go through the financials for the third quarter. Please be reminded that all amounts quoted here will be in the RMB. Please also refer to our earnings release for detailed information of our corporate financial performance on a year-over-year basis.
Speaker 2: For the third quarter 2022, total revenues will be $323.3 million, compared to the $431.5 million in the corresponding period of 2021. In line with our previous guidance.
Speaker 4: Thank you.
Speaker 2: The decree is worth $5,000.
Speaker 2: primarily due to a decrease in average revenue per pain medical service provider, which was impacted by the resurgence of COVID-19 and remained under pressure from China's overall domestic consumer market.
Speaker 2: Within total revenues, information services and other revenues were $235.7 million, down 26.7% year-over-year. Reservation services revenue were 29.7% year-over-year.
Speaker 2: 7 million down 51.8% year-over-year. Sales of equipment and maintainer service revenue which were from Wuhan Miracle Laser System Inc. were RMB 57.8 million compared with RMB 48.1 million in the same period of 2021.
Speaker 2: Cost of revenues were $94 million up.
Speaker 2: almost 5% year-over-year. The increase will permeate due to the consolidation of Wuhan miracles.
Speaker 2: To weather the storm, we adopt a series of cost-saving schemes, such as reducing marketing activities, optimizing cost structure, etc., in order to maintain operating efficiencies.
Speaker 2: Total operating expense for RMB is 336.6 million, down 26.6% year-over-year.
Speaker 2: Sales and marketing expense were 124.8 million, down almost 35% year-over-year, primarily due to a decrease in expense associated with branding and user acquisition activities.
Speaker 2: Research and Development Expense for RMB 52 million down...
Speaker 2: 32% year-over-year primarily due to a decrease in payroll costs.
Speaker 2: General and administrative expenses were 59.8 minutes up 9.4% year-over-year primarily due to an increase in payroll costs and professional service fees.
Speaker 2: In context, benefits was
Speaker 2: 16.5 million compared with income tax expense of
Speaker 2: 4.3 million in the third quarter of 2021. The increase in income tax benefit was primarily due to the refund of income tax of $2.5 million.
Speaker 2: 12.6 million in the third quarter of this year based on the final 2021 tax refund final result.
Speaker 2: tax return finding result. Next income attributable to So Yang International Inc. RMB 2.3 million compared to 6.8 million in the third quarter of 2021.
Speaker 2: non-GAAP net income are treatable to So Yang International Inc., which includes the impact of share-based compensation expenses.
Speaker 2: was 9.9 minutes compared with 28.9 minutes in the same period of last year.
Speaker 2: Basic and diluted earnings per ADS attributable to ordinary shareholders were RMB 0.02 and RMB 0.02 respectively, compared with RMB 0.06 and RMB 0.06 respectively during the third quarter of 2021.
Speaker 2: with regards to some items on our key balance sheet.
Speaker 2: We held a deniquet liquidity in the quarter as of September 30, 2022. We had total cash and cash equivalents, restricted cash and term deposits, term deposits and short-term investment of RMB 1.6 billion. Compared with RMB 1.8 billion as of December 30, 2022, we had total cash and term deposits. We had total cash and term deposits. We had total cash and term deposits. We had total cash and term deposits.
Speaker 2: 2021. Net current assets were RMB 1.3 billion as of September 2022 compared with 1.3 billion as of December 2021. Net assets were RMB 2.6 billion as of September 2022 compared with RMB 2.1 billion as of October 2022.
Speaker 2: December 31.
Speaker 2: For the fourth quarter of 2022, we expect total revenue to be between RMB 300 and RMB 10 million and RMB 330 million. The above outlook is based on the current market conditions that reflect the company's preliminary estimates of the market and operating conditions and the customer demand.
Speaker 2: Today, the board of directors of the company authorized a share repurchase program under which the company is authorized to repurchase up an aggregate value of US dollar 15 minutes of these shares, including in forms of the ADA during the 12-month period beginning from November 18, 2022.
Speaker 2: This concludes our key remarks. I will now turn the call to the operator and open the call for Q&A. Operator, we are ready to take questions.
Speaker 5: Thank you.
Speaker 1: Thank you.
Speaker 1: We will now begin the question and answer session. To ask a question, you may press star and then one on your telephone keypad.
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Speaker 1: Our first question today will come from Thomas Chong of Jefferies. Please go ahead.
Speaker 6: When I first looked at the information I had Allies assume colonial storm and?] Let me quickly translate myself.
Speaker 3: So recently, SAMR has released a guideline on cracking down on first advertising and illegal pricing in the medical aesthetics industry. Can management comment on this regulation? Thank you. Thank you.
Speaker 3: the The He touched into the Co he
Speaker 2: Thank you. As I have just mentioned, the guidelines focus on preventing false advertising and misinformation and emphasize transparent pricing and consistent pricing online and offline. The regulatory requirements for online platforms are consistent with the self-regulatory actions that beyond has been implementing for years.
Speaker 2: indicating that all along we have been a leader and a training center in protecting the interests of our users.
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Speaker 2: For our eternal youth,
Speaker 2: governing platform information, we have roll out comprehensive and systematic initiatives. New information posted on the platform is effectively intercepted and information storage is reviewed and inspected both by AI and 7.24 bases and professionals.
Speaker 2: Special inspections are also conducted.
Speaker 2: periodically for information storage. We constantly upgrade our perpetuity anti-fraud system and have developed strong capabilities in real-time computation, real-time policy configuration and flexible verification and anti-cheating, which all play a key role.
Speaker 2: identifying and blocking false comments and identifying and cracking down on false transactions.
Speaker 3: How can we offer more for the largest hard- shells.
Speaker 2: As the first platform to adopt and consistently drive self-discipline actions in the industry, we let consumers to be fully informed about the products, including price, performance, specifications, etc., and disclose products and services information in a comprehensive, authentic, and accurate manner. By doing this, we guarantee consumers' right to know and to choose, continue to promote industry self-discipline.
Speaker 2: and keep strengthening the quality of the supply side in our ecosystem.
Speaker 3: Thank you for watching.
Speaker 2: In the long term, government regulation will be beneficial from the healthy development of the whole industry and promote the medical nature of the authentic business.
Speaker 3: Thank you.
Speaker 1: Our next question today will come from Leo Chang of Deutsche Bank. Please go ahead.
Speaker 7: So let me translate my question. My question is that your plan for Mark T spending in Q4 and 2023.
Speaker 7: What is your estimate for the total number of users and your MAU? Thank you.
Speaker 3: at the business level.
Speaker 2: Given the microeconomic uncertainty, we will remain cautious with our marketing spendings and focus our attention on efficiency. As we have done so far this year, subsequently we may make adjustments based on evolving market conditions. They include CON GooKoo,
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Speaker 2: For the current medical aesthetic market, I'd like to emphasize that the competition is no longer purely for traffic. Professional platforms with insights into the industry and users are needed both with respect to regulation and user experience.
Speaker 2: We need to provide users with good consumption value and experience. A medical status platform doesn't retain users by entertaining them, but rather by satisfactorily solving their needs.
Speaker 3: One way, we will continue to carry the early match of the immune system and make use of a fever, Fully Activates Samsung's new Phantose
Speaker 2: First, we will continue to optimize community content, effectively recommend products and services to users, and provide diverse content including doctors and products. We will stick to our long-term goal for enhancing user trust and establishing the most trusted professional community, leveraging our advantages in content and community operations. We will perfect user art.
Speaker 2: We will perfect user experience for online products, enhance consumer protection, optimize consumer consumption experience on our platform, and drive users to make highly efficient buying decisions.
Speaker 3: I would like to thank the members of the Ministry of Foreign Affairs, the Ministry of Foreign Affairs, the Ministry of Foreign Affairs, the Ministry of Foreign Affairs, and the Ministry of Foreign Affairs. We are very happy to have you here today. We hope to see you again soon. Thank you. Thank you for your attention. We look forward to seeing you again soon. Thank you.
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Speaker 2: Second, as our attention shifts from merely traffic incremental growth to operation and service of client stock, we keep improving usage service experience during the whole life cycle and guarantee their consumption experience throughout the whole process.
Speaker 2: As I just mentioned, to achieve that, first we must create trust with our users.
Speaker 2: Trust has always been our primary goal to attract users to our platform. Second, products and information on our platform need to provide good consumer protection as well.
Speaker 2: as SOBS uses issues with online decision making and demands.
Speaker 2: Third, for users who want to use one institution to satisfy their diverse demands or needs, we provide service catering to multiple scenarios. So users can directly visit an institution with information acquired on a platform or some users with higher service requirements, they can work with institutions through our So Yon Select program and if users demand a standardized process for a specific product.
Speaker 2: they can choose institutions that provide such solutions. Finally, our platform provides up-sell return visits, customer service consolations, and insurance for post-payment issues, which ensure the experience throughout the complete progress.
Speaker 2: Yes, it's just for the Sohyang mission is to make everyone more beautiful and healthier.
Speaker 8: Thank you.
Speaker 1: Our next question today will come from Nelson Chung of Citi. Please go ahead.
Speaker 3: So I will translate myself. So first, management for taking my questions. I would like to
Speaker 9: Wonder whether management can share the industry outlook going into the fourth quarter this year and into 2023 next year. And could management elaborate more about the performance during the top of the 11th this year? Thank you.
Speaker 3: So, to the episode that Dr. Calling will talk about two things in Botany. One is the idea that you can makeRIE proceduresannah and users- Gundam video services recording. Stay tuned for more trainingplease
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Speaker 2: In the third quarter, we saw repeated COVID-19 outbreaks in certain parts of China. Despite this marked uncertainty, we delivered solid financial performance during the quarter, and the situation is gradually recovering in the first three quarters.
Speaker 2: As we are entering into the fourth quarter, the scope of the pandemic may further widen because of the weather and the corresponding provisions measures may strengthen as well. While there is uncertainty ahead, however, recently China's National Health Commission released a new set of refined pandemic provisions and control policies which are more scientific and more precise.
Speaker 2: As the overall economic environment will be getting normalized gradually, we believe our industry will be back to the growth track over time.
Speaker 3: The Chinese government has been very involved in the Chinese government. The Chinese government has been very involved in the R&R and R&R development. The R&R development
Speaker 3: However, during this before a.
Speaker 2: On user front, as we discussed in prepared remarks, the global medical settings market maintained steady growth in the past years and there is significant upside of the penetration rate of the Chinese market. According to Frost and Sullivan, the global medical settings market expected to grow at a K-graph of around 13% from 2021 to 2025. In 2020, the number of medical settings treatments increased by about 1.5%.
Speaker 2: per 1,000 people in China, which is about 21, compared with 82 and 48 respectively in South Korea and the United States.
Speaker 2: which are more developed in medical aesthetics market.
Speaker 2: There is clear growth potential for Chinese market.
Speaker 2: With general economic situation back to normal, the customer spending will be back to growth track as well in our view.
Speaker 3: Thank you for watching.
Speaker 3: Please ask questions into the chat
Speaker 2: and one then can operate normally, we believe their marketing budget allocated to the SoYAM platform will go up gradually.
Speaker 3: Thank you for your attention.
Speaker 3: Supreme Master Ching Hai appears in front of the camera and McKinney, California.
Speaker 3: Thank you for watching.
Speaker 2: At present, we must commit to our long-term vision while making dynamic adjustment in short-term and execute our established strategy, improving the operation and providing high-quality user experience and forming closer relationships with industry partners.
Speaker 3: Thank you so much.
Speaker 2: For W11, users must pay more attention to daily necessities, like the growth of raw goods. Overhaul performance of major online platforms was relatively soft compared to last year, while overall retail market is in a slow recovery stage. This is in line with other consumer products and services. Despite pressure on the overall consumption market, our daily online users during W11 stay flat compared with last year.
Speaker 8: Thank you.
Speaker 1: Our next question today will come from Chloe Wei of CICC. Go ahead.
Speaker 6: Thank you.
Speaker 6: Okay, I will translate myself.
Speaker 6: Thank you, management, for taking my question. This is Chloe from CICC. I think you've done a great job performing above the breakeven target, and we continue to see strong subsidies in this quarter, and I wonder, are there enough levers in the business in kind of rationalizing the competition? That would be the first. And secondly, we've heard some new vocabularies during the prepared remarks. Could the management team share some colors on the ongoing new businesses?
Speaker 6: And how could that mean for the user engagement and for the P&L? Thank you.
Speaker 3: of something in the general Lisa launching'll at seven am to Every member of this
Speaker 3: how to useolic and otherwise these processes from a computer this kind of Any other keythe dev
Speaker 3: First, on industrial outlook, I believe medical settings have broad perspectives. To see the opportunity and achieve growth, the key point is to serve users well and combine with industry more profoundly. In the case of industrial outlook, I believe medical settings have broad perspectives.
Speaker 2: Any peer platform must have a clear positioning for user service to clarify what kind of user demands it can serve.
Speaker 3: Through the years, we have built trust with our users. When users have need for medical settings, we can truly solve it and enable a better consumption experience.
Speaker 3: of the
Speaker 2: As we are not an entertainment platform, users don't spend plenty of time watching video or reading posts, but search for a product that satisfies their needs. We always emphasize that medical settings are both medicine and consumption. So users' consumption must be based on safety and the demands for beauty.
Speaker 2: A price advantage of an e-commerce platform won't be the primary factor for consumers' decision-making. I believe we should think about serving users from their perspective and their methods at different stages of consumption.
Speaker 2: Through professional community content and deep combination with industry, we have established diversified consumption scenarios to counter to user demands.
Speaker 3: For our institution clients, we trust we build with users, make them willing to serve users better.
Speaker 3: For the new initiatives, we have exploring new consumption scenarios for users and serve them with a range of diverse solutions. For institutions and us, the ultimate goal is to better serve users.
Speaker 2: We actually suggest if you are in tier 1 or tier 2 major cities, you can have a try on what's so prime products. It will be very different and will kind of excite you best.
Speaker 2: We actually suggest if you are in tier 1 or tier 2, some major cities, you can have a try on what's so prime products. It will be very different and will kind of do excited you best. Thank you.
Speaker 1: Our next question today will come from Ingrid Zeng of UBS. Please go ahead. And're you manager for UBS IT compliance with the Do viewed Security shark,
Speaker 10: The question is more on the industry level based on the data. The question is more on the industry level based on the data. The question is more on the industry level based on the data.
Speaker 10: and shift in consumer demographics for medical aesthetics in terms of age, city tiers, income level, etc. Thanks a lot.
Speaker 3: Thank you. We hope that you will be able to see the results of the Q&A. We hope that you will be able to see the results of the Q&A.
Speaker 3: As I drive in, I am respectfully Words, say Turns 1 by 2 on each of the grabbing points. Add your Northern purchasing and purchase Practice into Angel Business part And it's over Think about IT You can bring automated and business let's bring it every time
Speaker 2: According to transactions on a platform, mega cities such as Beijing, Shanghai, Guangzhou and Shenzhen have always led the consumption, with number of users placing orders and transactions activities at high level than other cities in China. But in 2022, other new first-tier cities including Chengdu, Hangzhou, Wuhan, Nanjing and Chongqing are also become major cities for medical aesthetics consumption. Thegent Halfayaunna Team was...
Speaker 3: Please like, share and subscribe to my channel.
In terms of order categories on our platform, non-surgery accounts for over 80% of total orders. NTNG is one of the most favored category and the most frequently purchased product, such as wickolase and hyaluronic acid skin whitening and skin rejuvenation account for over 50% of total orders.
The proportion is slightly higher than 2021, indicating users' demands from non-surgery categories.
We thank you all, and please continue to have your views Thank you for your attention.
Targeting user demands, we continue to optimize number of FQUs for non-surgery categories to provide high quality supply. We also launched some products based on characteristics of certain category, such as Soyoung Skin Cart, which include several anti-aging products in a bottle of facilitated user choice.
In addition, please be noted that at the end of each year, usually we will release a white paper in which we will discuss with the new regulatory
policies, industry trends, and other important topics.
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and ladies and gentlemen.
This will conclude our question and answer session. At this time, I would like to turn the conference back over to Ms. Vivian Chu for any closing remarks. Well, we are now approaching the end of the conference call. Thank you for your participation in today's conference. You may now disconnect it. Have a good day. Thank you. Thank you. Bye.
This will conclude our question and answer session. At this time, I would like to turn the conference back over to Ms. Vivian Chu for any closing remarks. Well, we are now approaching the end of the conference call. Thank you for your participation in today's conference. You may now disconnect it. Have a good day. Thank you. Thank you. Bye. God bless you.
And the conference has now concluded. We thank you for attending today's presentation. You may now disconnect your lines.