Q4 2023 So-Young International Inc Earnings Call

Ladies and gentlemen, thank you for standing by for so Young's fourth quarter and full year 2023 earnings conference call. At this time all participants are in a listen only mode. After management gives their prepared remarks, there will be a question and answer session. As a reminder, today's conference call is being recorded I will now.

Operator: Ladies and gentlemen, thank you for standing by for So-Young's fourth quarter and full year 2023 earnings conference call. At this time, all participants are in a listen-only mode.

Operator: After management gives their prepared remarks, there will be a question and answer session. As a reminder, today's conference call is being recorded. I will now like to turn the meeting over to your host for today's call, Vivian XU. Please proceed, Ms. XU.

Like to turn the meeting over to your host for today's call is Vivian Xu. Please proceed Ms. Zhu.

Vivian XU: Thank you, Operator, and thank you, everyone, for joining So-Young's fourth quarter and full year 2023 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 the U.S. Private Securities Act of 1995 and the Litigation Reform Act of 1995. Forward-looking statements are subject to risk and uncertainties, which 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 28. So-Young does not undertake any obligation to update any forward-looking statement, except as required under applicable law. At this time, I would like to turn the call over to Mr. Xing Jin, Cassie.

Thank you operator, and thank you everyone for joining <unk> fourth quarter and full year 2023 earnings conference call. Joining me today on the call is Mr. Xing Jin, our co founder Chairman and CEO and Mr. Nick Chow CFO. Please note that the discussion today will contain.

All of these statements made under the Safe Harbor provisions.

U S private Securities and Litigation Reform Act of 90 95.

Forward looking statements are subject to risks and uncertainties that may cause actual results.

So if were to differ materially from our current expectations.

And also does this include but are not limited to those are light in our public filings with the SEC.

Including our annual report on form 20-F.

So young does not undertake any obligation to update any forward looking statement, except as required under applicable law.

At this time I would like to turn the call over to Mr. Xing Qi cash piece.

Xing Jin: Hello, everyone. Welcome to today's financial telephone conference. Although the market environment is full of challenges, our business remains strong, and new business shows very good growth potential. The revenue of the fourth quarter increased by 20.1% to RMB3906 billion,,, 15.8% 50.6%. I am proud of the exquisite control of cost. In 2023, the net profit of XinYang International Inc. reached 21.28 million RMB, which is a significant increase from the loss in 2022 of 65.55 million RMB. The environment in 2023 is much more challenging than during the pandemic.

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Xing Jin: In this context, our financial performance is more outstanding, showing our toughness and adaptability under the constant changes in consumer behavior and market conditions. Hello everyone, thank you for joining the call today. Despite the challenging market conditions, our business remained resilient as the new ventures we are developing continue to demonstrate significant growth potential. Total revenues increased by 20.1% year-over-year to RMB319.6 million during the quarter. Our legacy business, reflected in revenues from information services and others, increased by 15.8%, while new businesses, reflected in revenues from sales of medical products and maintenance services, increased by 50.6% during the quarter. By carefully managing costs, So-Young International Inc. will regain profitability with net income attributable to So-Young International Inc. of RMB21.3 million in 2026, a significant turnaround from a net loss attributed to So-Young International Inc. of RMB 65.6 million. In many ways, last year presented an even more challenging situation than the COVID-19 pandemic did in this context.

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Hello, everyone and thank you for joining the call today, despite the challenging market conditions, our business remainder of students at the new ventures, we antibody continue to demonstrate significant growth potential.

Total revenues increased by 21 or 20%, 1% sorry.

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21% year over year to RMB 319.6 minutes during the quarter.

Our legacy business reflected in revenue from information services and others.

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While new business in fact in revenues from sales of medical products and to maintain its services.

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By carefully managing costs, we regained profitability with net income.

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RMB 21, 3 million in 2023, a significant turnaround from a net loss attributed to <unk> International Inc of RMB $55 6 million last year in many ways last year present, even more Chinese situation that the COVID-19 pandemic in this comp.

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Xing Jin: Our financial results for the year are even more impressive and a testament to our students and adaptability in the face of evolving consumer behaviors and market preferences. Looking back at 2023, in a competitive environment, we have maintained steady growth. The reason behind this growth is the differentiated competition between Xinyang and other platforms. Whether it is a large group purchase e-commerce platform or a short video platform, we are using price competition to attract price-sensitive people. But we think that mainstream consumer groups in the United States value the quality of American products more. This group of consumers accounts for only 13%, but they have contributed 51% of total sales.

Our financial results for the year I, even more impressive and attachment to our students and adaptability in the face of evolving consumer behaviors and market practice.

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Xing Jin: In terms of high-end projects, Xinya has always had a huge traditional advantage. In 2023, we will further consolidate and maintain this advantage. Through customized projects and high-end projects, on the one hand, we meet the needs of high-end users; on the other hand, we help institutions to get better profits. In the future, we will continue to implement this strategy and cooperate closely with more high-quality medical institutions. Looking back at 2023, it's evident that our differentiated strategy was key to maintaining stable growth. While e-commerce platforms and short-form video platforms prioritized the pricing of products to attract budget-cautious low-to-mid-tier users,

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Looking back at 2000, Twenty's suite is evidence that our differentiated strategy was key to maintaining stable growth.

While e-commerce platforms, and short form video platforms prioritized as a pricing our products to attach a budget cautious low to mid tier users.

Xing Jin: We prioritize the premium service to attract high-tier users seeking quality service. This segment, representing only 13% of frequent users, drives 51% of the market. We've consistently maintained a strong competitive advantage with this segment given our premium products and services. Throughout the year, we further strengthened this advantage by offering high-tier users the personalized services they require for high-quality procedures, which also drives support for the profitability of the partner institutions we cooperate with. Moving forward, we remain committed to this strategy as we build stronger relationships with more high-caliber doctors and institutions. We have made surprising progress in Youxiang. We have raised 200,000 yuan for the upload of the online fund to Youxiang. We have raised 100,000 yuan for the revenue generated by the cooperative. We have raised 120,000 yuan for the cost of sales and marketing. In the second half of 2023, we tested to upgrade from the cooperative mode to the chain mode.

We prioritized our premier service to attract high tier users seeking quality services. This segment.

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13% of frequent users drive.

Two 1% of market volumes.

We've consistently maintained a strong competitive advantage with the segment given our premium products and services.

Throughout the year, we further strengthened this advantage by offering high tier usage that pleasant personalized services.

David quite for high quality procedures, which also drive supports the profitability of the partner institutions, we compete with.

Moving forward, we remain committed to this strategy as we build a stronger relationship with more high caliber doctors and institutions.

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Xing Jin: On the second floor of the company's headquarters, we have established a sample shop of Qingyi Medical Clinic, and the operation has been excellent. In the second half of last year, the monthly income of the sample shop increased by 13.8 times, and the monthly growth rate was 71%. We have achieved a balance of revenue in the third month since the official operation began, and the profit rate has continued to grow steadily. We are accelerating the conversion of more cooperatives into chain stores. At present, many chain stores are under construction, and the first batch of chain stores has recently entered official operation.

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Xing Jin: We expect to build chain stores in six or seven cities this year and to explore joining chains in the second half of the year. So-Young Prime made significant progress throughout the year with over 200,000 clinics and visit facilities, generating over RMB100 million in revenues for partner institutions. This translates to a significant user acquisition cost savings of roughly RMB 120 million. To further optimize our model, we piloted operations for a chain of clinics by establishing a model clinic for light medical aesthetics procedures on the second floor of our headquarters last summer.

So we are prime made significant progress throughout the year with over 200000 clinics visit facility generating over RMB 100 minute revenue, it's about panic institutions.

This translates to a significant user acquisition cost maybe of roughly RMB 120 minutes.

To further optimize the pilot operations for a chain of cleanness by establishing a model.

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On the second floor of our headquarters last summer.

Xing Jin: The results have been impressive. This clinic has shown exceptional growth, with steadily expanding margins and monthly revenue increasing 13.8 times during the second half of this year, a CAGR of 71%. Equally as important, it broke even after only three months of formal operation.

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Teen eight times during the second half of this year.

CAGR of 71 six.

Equally as important it hit breakeven after only three miles are far more operations.

Xing Jin: Building on this success, we are now actively expanding our network by turning partner institutions into a chain of clinics. Several are already under construction, with the first ones already operational. We plan to open clinics in six to seven cities throughout 2024, and we'll explore franchise opportunities in the latter half of this year. Finally, the supply chain business continues to expand to the upstream of the US supply chain through coordination with other business blocks and creates opportunities. It is different from traditional upstream manufacturers.

Building on this success, we are now actively.

Expanding our network by turning partner institution into a chain of clinics.

Several are already under construction with the first one is already operational we plan to open clinics in six to seven cities throughout 2024 and will explore franchise opportunities in the later half of this year.

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Xing Jin: The single production and sales supply chain model fully utilizes our reputation and brand advantage in the C-end user group as well as the ability of B-end institutions to cover the network to quickly build up competitiveness in the new product market. Currently, we have seven real-world product layouts, a R&D center, and two production lines. We are actively moving to expand the attitude of caution and safety when choosing products, collaborating partners, and cooperating methods. We believe that in a healthy market, the key to sustainable development and pricing ability is to cultivate and develop our products. Our supply chain business also continues to create opportunities for us by leveraging synergies with our other businesses to expand upstream along the metastatic supply chain.

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Our supply chain business also continues to create opportunities for us by leveraging synergies with our other business to expand upstream allow the matter of a static supply chain.

Xing Jin: Distinct from the traditional upstream R&D production supply chain model used by manufacturers, we are able to add further value by leveraging our institutional network and expansive consumer reach. This allows us to spot emerging trends and quickly bring new products to market and rapidly make them competitive. To date, we have seven injectable products available on the market, one R&D center, and two robust production lines. We approach each relationship with care by adopting a cautious and safe approach.

From the traditional upstream R&D production and supply chain model used by manufacturers.

Able to add further value by leveraging our institutional network and passive consumer reach.

This allow us to spot in margin trends and quickly bring new products to market and rapidly make them uncompetitive to date, we have seven injectable products available on the market, one R&D center and to a robust year production life.

Approach each relationship with care by adopting a cautious and save approach.

Xing Jin: Developing a healthy market for our products is key to long-term sustainability. Sustainability and Pricing Power. Collaborating with Korean brand Elasti is a good example. Our position on Elast-T is that it is a mid-range imported hyaluronic acid and strictly selects high-quality institutions to cooperate with.

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Xing Jin: Through this policy, the number of shipments increased by 598% in 2023, exceeding 120,000. More than 750 companies were selected, and the benefits of cooperating institutions are obvious. More than 500 core institutions and revenue increased by 20%. In a single-factory cooperation, a single-product performance can reach 2 million yuan.

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Xing Jin: In 2024, we will launch a new model of Elasti and launch new anti-shake products. At present, we have set up seven products, including collagen, collagen needles, etc., covering the current popular upstream track. Because the upstream field requires a lot of early accumulation, through three years of preparation, our entire product pipeline and sales team, and the entire platform's coordination are becoming more and more mature. As we get more and more products, we get sales licenses, and we expect that the upstream business will generate very good continuous income and profit growth. Our cooperation with Korea Bank and Rabi is a perfect example.

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Xing Jin: We position their Hyaluronic Acid Probiotics as a lead market product, and through the careful selection of partner institutions, we distribute to growth sales significantly less. Shipments of this product increased by nearly 600%, with over 120,000 medical injections sold thus far. More than 750 select partners' institutions also gained from it, with 500 of our core institutions seeing revenue increase by 20% last year as a result. A single FDU can generate revenue of RMB 2 million for them in one campaign. We plan to add a new ERAVI product to our portfolio this year and are looking at other opportunities in the NEH category. Our current portfolio of 7 product addresses are demounted across various segments within the highly demounted collagen category, including PLA and others.

Mid market product and assure the careful selection of partners institutions, we distribute to gross has significantly last year shipments.

Shipments of these products increased nearly 700, 600% it was over 120000 magical injection so far.

More than 750 select partners institutions also gained from this with 500 of our core institution C revenue increased by 20% last year as a result of <unk>.

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We plan to add a new euro IV product to our portfolio this year and looking at other opportunities in the NPA category.

Our current portfolio of seven products addresses the mouse cross very segments within the highly demanded hygiene category, including Elas and others.

Xing Jin: Building a strong upstream presence along the medical aesthetics supply chain requires strategic investment and lead time. Through three years of focused efforts, we have built stronger synergies between our product development pipeline, sales team, and our platform. As we secure additional product certifications, we are confident in our ability to consistently generate incremental revenue and profit growth over the long term. We are in the critical phase of the transformation of new and old businesses. All new businesses have made breakthroughs and grown rapidly.

Building, a strong upstream present, along the medical aesthetics of supply chain cost strategic investment and the Tac.

So were three year all focused efforts, we have been stronger in Egypt synergies between our product development pipeline sales team and our platform as we secure additional product certifications. We are confident in our ability to consistently generate incremental revenue and profit.

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Xing Jin: But we are still in the process of market capacity accumulation. It is expected that in the next few quarters, it will gradually show a significant contribution to income. We are currently undergoing a strategic business transformation, with a strong focus on the development and growth of our new venture. However, while these new initiatives are making promising progress and generating rapid growth, they are still in their investment crisis.

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We are currently undergoing a strategic business transformation with a strong focus on the development and growth of our new ventures, well. This new initiatives are making promising progress any generating rapid growth. They are still in their investment phase. We are confident that these new business will become significant.

Xing Jin: We are confident that this new business will become significant contributors to revenue in the coming quarter. The Chinese and American medical market is still moving in the right direction and has great potential for growth. As the industry becomes more standardized, our comprehensive vertical integration ability and competitive advantage will become more obvious.

The contributors to revenue in the coming quarters.

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Xing Jin: We will continue to adjust our business to achieve greater coordination between sectors and with institutions, doctors, and products. This strategy will build a more diversified and sustainable source of income and ultimately create greater long-term value for our shareholders. The matter-of-fact sector in China still presents significant growth potential. It's all about adopting the right strategy.

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Hui Zhao: As the industry moves towards greater standardization, our compressive, vertically integrated capabilities and competitive strengths are set to become increasingly evident. We will continue to adjust the business to create greater synergies between our business and institutions, doctors, and products. This strategy focus will allow us to build more drivers, and more diverse and sustainable revenue sources and a solid profit structure, ultimately delivering long-term value to our shareholders. CFO Nick, Q&A I will now turn the call over to our CFO Nick to review the financial results for the quarter before taking your questions. Great pleasure. Hello, this is Nick.

The industry moved towards greater standardization, our compressive, our comprehensive vertically integrated capabilities and competitive strengths are set will become increasingly evident.

We will continue to adjust our business to create greater synergies between our business and institution doctors and products. This strategy focus will allow us to build more drivers.

And direct salary pute more diverse and sustainable revenue sources.

A solid profit structure, ultimately delivering long term value to our shareholders.

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Now I'll turn the call over to our CFO Nick to review the financial results for the fourth quarter before taking your questions. Nick Please.

Hello. This is for Nick please be reminded that all amounts quoted here will be RMB. Please also refer to our earnings release for detailed information of our comparative financial performance year over year basis.

Hui Zhao: Please be reminded that all amounts quoted here will be in RMB. Please also refer to our earnings release for detailed information on our comparative financial performance on a year-over-year basis. Total revenues during the quarter were RMB 390.6 million, up 20.1% year-over-year and in line with our guidance.

Total revenues during the quarter were RMB 396 million up 21% year over year and in line with our guidance. The increase was primarily due to the increase in revenues generated by <unk> and the sale of cosmetic injectables.

Hui Zhao: The increase was primarily due to the increase in revenues generated by So-Young Prime and the sales of cosmetic injectables. Information services and other revenues were RMB 268.1 million, up 15.8% year-over-year, primarily due to an increase in revenues generated by So-Young Prime. Reservation services revenues decreased 20.7% year-over-year to RMB 20.6 million, primarily due to the operating strategy which gave higher subsidies to end users.

Information services and other revenues were RMB $268 1 million up 15, 8% year over year, primarily due to an increase in revenues generated by Sylvia on Prime reservation services revenues decreased 27% year over year to RMB.

<unk> 6 million, primarily due to the operating strategy.

Which gave higher subsidies.

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Hui Zhao: Sales of medical products and maintenance service revenues were RMB 101.9 million, up 50.6% year-over-year, primarily due to an increase in sales of cosmetic injectables. Cost of revenues were RMB 137.6 million, up 56.0% year-over-year. The increase was primarily due to an increase in costs associated with So-Young Prime and the sales of cosmetic injectables, within cost of revenue. Cost of services and others will be RMB 94.1 million, up 73.6% year-over-year, primarily due to an increase in costs associated with So-Young Prime. Cost of medical products sold and maintenance services was RMB 43.6 million, up 28.1% year-over-year, primarily due to an increase in costs associated with sales of cosmetic injectables. Total operating expenses were RMB257.8 million, up 21.3% year-over-year. Sales and marketing expenses were RMB126.2 million, up 28.3% year-over-year, primarily due to an increase in payroll costs and expenses associated with branding and user acquisition activity. G&A expenses were RMB 86.7 million, up 18.4% year-over-year, primarily due to an increase in payroll costs associated with the expansion of administrative employees to support our business upgrade and new strategic business. R&D expenses were RMB45.0 million, up 9.6% year-over-year, primarily attributable to an increase in payroll costs.

Sales of magical products and the maintenance service revenues were RMB $101 9 million up 56% year over year, primarily due to an increase in sales of cosmetic injectables.

Cost of revenues were RMB, $137 6 million up 56.0% year over year. The increase was primarily due to an increase in costs associated with the prime and the sales of cosmetic injectables.

Within cost of revenues.

Cost of services and the others were RMB 19, $4 1 million.

73, 6% year over year, primarily due to an increase in costs associated with affiliate prime cost of magical products sold and maintenance services were RMB $43 6 million up 28, 1% year over year, primarily due to an increase in <unk>.

Costs associated with the sales of cosmetic injectables.

Total operating expenses were RMB 257, 8 million up 21, 3% year over year.

Sales and marketing expenses were RMB $126 2 million up 28, 3% year over year, primarily due to an increase in payroll costs and the expenses associated with the branding and the user acquisition activities.

G&A expenses were RMB $86 7 million up 18, 4% year over year, primarily due to an increase in payroll costs associated with the expansion of others.

Administrative employees to support our business upgrades and new strategic businesses.

R&D expenses were RMB 45 million.

Million up nine 6% year over year, primarily attributable to an increase in payroll costs.

Income tax benefits were RMB, 10, 8 million, which was primarily due to the impact of additional deductions for research and development expenditures compared with income tax benefits of RMB, two 4 million in the fourth quarter of 2022.

Hui Zhao: Income tax benefits were RMB10.8 million, which was primarily due to the impact of additional deductions for research and development expenditures, compared with income tax benefits of RMB2.4 million in the fourth quarter of 2022. Net income attributable to So-Young was RMB 17.5 million, compared with a net income of RMB 31.3 million during the same period last year; non-gap net income attributable to So-Young was RMB 35.3 million compared with RMB 38.8 million non-gap net income attributable to So-Young in the same period of 2022. Basic and diluted earnings per ADS attributable to ordinary shareholders were RMB 0.18 and 0.18, respectively, compared with basic and diluted earnings per ADS attributable to ordinary shareholders of RMB 0.29 and 0.29, respectively, during the same period of 2022. For the full year 2023, total revenue will be RMB 1.5 billion, up 19.1% year-over-year. Within total revenues, information services and other revenues will reach RMB 1.1 billion, up 22.2% year over year. Reservation services revenues will be RMB 101.3 million, down 21.3% year over year.

Net income attributable to <unk> was RMB $17 5 million.

Compared with a net income of RMB $31 3 million during the same period last year non-GAAP net income attributable to so young with RMB $35 3 million compared with RMB 38, 8 million non-GAAP net income attributable to so young in the same period of 2020.

Two.

Basic and diluted earnings per ads attributable to ordinary shareholders were RMB 0.18, and the 0.18, respectively compared with basic and diluted earnings per ads attributable.

Attributable to ordinary shareholders of RMB 0.29, and zero point to nine respectively. During the same period of 2022.

For the full year 2023 total revenue were RMB, one 5 billion up 19, 1% year over year.

Within total revenues information services and other revenues were RMB, one 1 billion up 22, 2% year over year Reservation services revenues were RMB, one $101 3 million down 21, 3% year over year.

Hui Zhao: Sales of medical products and maintenance services revenues were RMB333.5 million, up 28.7% year-over-year. Cost of revenues was RMB 544.3 million, up 38.4% year-over-year, primarily due to an increase in costs associated with So-Young Prime and the sales of cosmetic injectables. Total operating expenses were RMB 1.0 billion, up 4.9% year-over-year.

Sales of medical products and maintenance services revenues were RMB $333 5 million up 28, 7% year over year.

Cost of revenues were RMB $544 3 million up 38, 4% year over year, primarily due to an increase in costs associated with Sony on Prime and the sales of cosmetic injectables.

Total operating expenses were RMB 1.0 billion up four 9% year over year net income attributable to <unk> International Inc. Were RMB $21 3 million compared with a net loss of RMB $65 6 million in the fiscal year 2022.

Hui Zhao: Net income attributable to So-Young International Inc. was RMB 21.3 million, compared with a net loss of RMB 65.6 million in the fiscal year 2022; non-GAAP net income attributable to So-Young International Inc. was RMB 57.6 million compared to a net loss of RMB 22.2 million in the fiscal year 2022. Basic and diluted earnings per ADS attributable to ordinary shareholders were RMB0.21 and RMB0.21 respectively compared with basic and diluted losses per ADS attributable to ordinary shareholders of RMB0.61 and RMB0.61 respectively in fiscal year 2022. We have ample cash on hand, with total cash and cash equivalents, restricted cash, and term deposits, term deposits, and short-term investments of RMB 1.3 billion as of December 31, 20 The decrease was primarily due to share repurchases of RMB 125.6 million in 2023 and an RMB 111.3 million increase in term deposits with a maturity longer than one year.

non-GAAP net income attributable to <unk> International Inc.

RMB.

$57 6 million compared to a net loss of RMB 22, two meaning in the fiscal year 2022.

Basic and diluted earnings per ads attributable.

Attributable to ordinary shareholders were RMB <unk>, two to one and a zero point to one respectively compared with basic and diluted losses per ads attributable to ordinary shareholders of RMB <unk> six one and 0.6.

One respectively in fiscal year 2022.

We have ample cash on hand, with a total cash and cash equivalents restricted cash and term deposits term deposits and short term investments of RMB. One 3 billion as of December 31, 2023, compared with RMB, One 6 billion as of December 31st 2000.

'twenty two the decrease was primarily due to share repurchase.

As of RMB, $125 6 million in 2023 and <unk>.

M B $111 3 million increase in term deposits with the maturities longer than one year.

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Hui Zhao: I'd like to reiterate that our new businesses are currently in a critical phase of development as we support them in their early stages of growth. They are critical pieces to the foundation we are building for future growth, and we are just at the start of this journey. We, however, are extremely confident that they will increasingly contribute to revenue growth in the quarters ahead. With this in mind, for the first quarter of 2024, we expect total revenues to be between RMB290 million and RMB310 million. The above outlook is based on current market conditions that reflect the company's preliminary estimates of market and operating conditions and customer demand. This concludes our key remarks. I will now turn the call over to the operator and open the call for QA. Operator, we are ready to take questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star and then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.

E terrorist that's our new bins businesses.

Currently in a critical phase of development.

Put them in the earliest stages of growth. They are critical pieces to the foundation, we are building for future growth and and recognize that we are just at the start of this journey.

We however are extremely confident that they will increasingly contribute to revenue growth in the quarters ahead.

With this in mind for the first quarter of 'twenty 'twenty four we expect total revenues to be between RMB 290.

Million and RMB 300, and the 10 million.

Our outlook is based on the current market conditions that reflects the company's preliminary estimates of market and.

Operating conditions and customer demand.

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. Thank you.

We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad. If you were using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.

Katrina Chu: To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. And our first question will come from Katrina Chu of Citigroup.,,,,,,,,,,,,,,,,,,,,,,,,,,,, Thanks management for taking my question. My question is about the overall outlook of the medical aesthetic market in 2024 and also the market landscape of the medical aesthetic market in the first quarter of 2024. Thank you. Hello, thank you for your question. The National Bureau of Statistics has released the consumption data for February.

At this time, we will pause momentarily to assemble our roster.

Okay.

And our first question will come from Katrina two of Citigroup.

Hi, this is.

Yes, sure that Sheila with LNG ship.

Yeah come shortly you'll how can that change.

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You think of what the English with Honda Ching Kwan, just yet I would translate myself. Thanks management for taking my question. My question is about the overall outlook of the medical aesthetic market in 2024 and also the market landscape of the medical.

I think Mike and into the first quarter of 2020.

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Unknown Executive: We can see that the total number of consumer goods retailed in January to February this year increased by 6.7%. At the same time, the E-commerce consumption data on the XINYANG platform is also showing a trend of continuous recovery. With the continuous recovery of the economy and our industrialized transition strategy, we are optimistic about the E-commerce consumption market in 2024 and the future. According to data from China's National Bureau of Statistics, retail sales of consumer goods are gradually recovering, increasing by 6%.

And then kind of a generic either already happened so who is xiaofeng opinion, social work won't be too long after.

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Or do they are they are suing ETE will either email shellfish is home parks Hello, Glenn.

According to data from China National Bureau of statistics retail sales of consumer goods are gradually recovering increasing of six.

Unknown Executive: 0.7% year-over-year in January and February 2024. The consumption data from our medical statics platform is also reflecting this trend, with a gradually improving microeconomic environment and our differentiated strategy taking hold. We remain optimistic about the growth perspective of the metal aesthetics industry in 2024 and over the long term. We observed that as China's e-commerce market matures day by day, the demand for e-commerce consumption and consumption habits brought by user-structural changes are also undergoing dramatic changes.

7% year over year in January and February 2024.

Assumption data from our medical aesthetics platform is also reflecting this trend with a gradually improving macroeconomic environment and our differentiated strategy taking hold.

We remain optimistic about the growth perspective, it's a matter of aesthetics industry.

Salary in 'twenty, four and over the long term.

Well then go into adult Schrader Chunghwa, he misses Honda issue social Yahoo goes even beyond what sort of dialogue you may selfish switch off the shelf issue, but is it possible to a lot of that yet.

Unknown Executive: As user maturity increases, e-commerce markets are also inclined towards high-frequency, high-value, and high-value and diversification by low-frequency and high-customers. Therefore, whether in the e-commerce platform market, which is dominated by returns, or the upstream and institutional end of mid-end consumers, e-commerce platforms are simply low-priced and low-flow, unable to reach attractive, high-quality, and high The Chinese pharmaceutical industry is maturing, and structural changes in consumer behavior are driving tremendous shifts in demand.

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By yourself or your daughter, Sanyo, which equaled one.

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<unk> the chance of doing weight tier ctrip qunar the selfish top.

The Chinese medical aesthetics industry is maturing.

Actual changes in consumer behavior.

<unk> tremendous shifts in demand.

Unknown Executive: As consumers mature, the market is trading away from low-frequency and high-conception value towards high-frequency, high-quality, and diversification. As a result, e-commerce platforms and medical institutions are shifting their focus upstream and towards acquiring diverse traffic. Competing on pricing will no longer be an option to attract premium users.

As consumers mature and market is trading away from low frequency and high transaction value towards high frequency high quality and diversification as a result e-commerce platform and medical institutions are shifting their focus upstream and towards acquiring jai diverse traffic.

Competing on pricing will no longer be an option to attract a premium users.

Yeah odd model.

Unknown Executive: The odd model will lower the value proposition of products and services and lead to a smaller share of the wider market. In 2024, in the face of the change in the target market, we will focus on the three major business sectors on the basis of the Hang Shi Professional Medical Platform. We will upgrade our community e-commerce business and adopt an operating strategy that is different from the competition. We will increase high-end customized services to meet the needs of first-time users. XinYang YouXiang provides the best value for money for waist users.

We all know what the value proposition of products and services and it leads to a smaller shelf wider market.

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Even if you don't have that issue.

To tell you something that you will be quite a challenge to most useful.

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Josh co daunting for Nigel Coe, where you'll sort of human Showa shell.

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Unknown Executive: At the same time, our upstream business will support the above two platforms and user groups to seize the opportunity of the Qingyi US market and increase profits. In 2024, these market shifts will continue. As a result, we will focus on refining our three businesses and further consolidating the positioning of our platform in the market. We'll do this by upgrading our community pop business and adding high-end customized services, helping top-tier users by adopting a depreciated operating strategy from our peers. So-Young Prime will focus on offering the best quality-to-cost ratio for mid-tier users, and our upstream business will support both of these platforms and user groups, capturing opportunities in the light medical aesthetics market and expanding margins. Thank you.

So youll see a hobby posted on their cellular yellow jumpsuits.

Sound Angela Kinsey, the highest ROI opportunity charger with Chile, Susana Chi Chi shortly on cogent.

In 2020 for these market shifts will continue as every child with a focus on refining our three business and consolidate the positioning of our platform in the market. We will do this by upgrading the power business and adding high end customized services into.

Top tier users by adopting a depreciated operating strategy from our peers.

So we I'm trying to focus on offering the best quality deposit ratio from mid tier users and our upstream business with a part of both of these platforms and unit growth capturing opportunities in the medical aesthetics market and expanding margins.

Sure sure.

Thank you.

And our next question comes from by Han.

Vi Han: And our next question comes from Vi Han of CITIC Security. I'd like to ask what your thoughts are on the recent suspension of medical authenticated live broadcasting, and where do you think the regulatory trend will go forward? Thank you.

Security.

Hi, Good morning, Sidney Ho with Japan comes from companies that just show on the Rubicon GTE made suburban and Tim judiciously.

And then just on I hope handling just as she comes in.

Unknown Executive: Hello, thank you for your question. We think that the medical e-commerce industry is still in a state of strong supervision. There may be a period of observation for the new marketing model under supervision. However, once the new model breaks the boundaries of the Medical Advertising Act, it will still be suspended.

I'd like to ask what are your thoughts.

These risks and suspension of the medical aesthetic smashbox.

Well two things the regulation trend going forward. Thank you.

Susan let Hubert.

Yeah, what's your households, who die challenge and one that has it.

I'm going to assume the income will show no kind of way or Coke wants how cheap you doesn't seem more search will file a eat all coming off on a high school group HR team well.

Unknown Executive: We think that medical e-commerce marketing will still be strictly limited to a few channels and ways of supervision recognition, such as search engines, medical e-commerce, etc. This trend is positive for us. It highlights the advantages of our original marketing channels. However, the medical aesthetics market continues to be strongly regulated. For any new marketing models that are deployed, regulators will require an observation period where they can stop any behavior that breaks the medical education law.

Yeah. The email, it's all really show up with a younger I shouldn't even sorry, Sal Short-sheet al Richey Jaguar function.

Social into you may do some of them took a chooser to Chaucer Jin J O Rita Gandzha tuition will neither here Intel treat all the usual.

The medical aesthetics market continues to be regulated scrambling for any new marketing models.

Deployed regulators will require an observation period, where they can stop any behavior that breaks the medical Admiral.

Unknown Executive: We believe medical aesthetics marketing will continue to be restricted to a few channels approved by regulators, such as search engines and e-commerce. This regulatory trend actually benefits us indirectly, as the value proposition of our existing legal marketing channels becomes more pronounced. We have always believed that only a healthy market is the foundation of a company's long-term development and continuous value generation. In the future, we will focus more on the supply side and, at the same time, integrate the core production advantages we have accumulated in institutions, doctors, users, etc., to create a standard for travel and service and provide users with a high-quality service experience. These comprehensive capabilities have established our strong competitive advantage. Compared with the simple internet model, we can solve deeper problems and form a differentiated competition with other teams.

We believe medical aesthetics marketing will continue to be restricted to a few channels approved by regulators such as <unk> <unk> and E. Commerce. This regulator a trend actually benefit us indirectly as the value proposition of our existing <unk>.

Legal marketing channels become more pronounced.

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Unknown Executive: We maintain our belief that a healthy market is the foundation for long-term growth and value creation for companies. We will focus our attention on the supply side of the market going forward by integrating the core production advantage we have accumulated in terms of institutions, doctors, and users. This will also allow us to set standards for Service Quality and Delivery, ensuring users receive a premier experience.

We maintained.

Leave that housing market is a foundation for long term growth and value creation for companies.

We will focus our attention on the supply side of the market going forward.

By integrating the call protection advantage, we have accumulated in terms out of institutions doctors' end users.

This will also allow us to send it.

Through our service quality and delivery ensuring users receive a premier experience.

Unknown Executive: These comprehensive capabilities will enable us to build a strong competitive barrier. Unlike the pure Internet business model, we are in a position to solve issues at a deeper level, creating a differentiated model from our competitors. Xie Xie

This comprehensive.

Capabilities will enable us to build a strong competitive barrier.

Unlike pure Internet business model, we are in a position to solve issues at deeper level, creating differentiated model from our competitors.

Thank you.

Okay.

And next we have a question from Chloe way of CIBC.

Chloe Wei: And next, we have a question from Chloe Wei of CICC. Hello, management team. Thank you for accepting my question. My question is actually about market financing. I would like to ask the management team if they can do some color sharing based on the financial impact of the P&L. Also, how do we expect the business to contribute to finance in the next 24 years? On the other hand, investors are also very concerned about the expansion strategy in different cities. So, we would like to see if we have more chain clinics in the next 24 years. How do we feel about the pace of expansion and early investment? Let me translate myself. So, my question is concerning So-Young Prime.

Okay.

Gladstone.

Would you say Oh.

Monday shortage, one what are you going to tease you a bunch of course not.

Not with him when he Santiago anytime a couple of Clay Jones, Heather J cool.

We took a P&L does do cause how over time that you like Michelle, especially here in Colorado sure a whole Oh.

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Do you do with how old are.

They all knew I found Mangala, Joe share and then towards the antigen assay on the Gwen I'm sure.

Sounds like you got that potential I'm sure that you quote on the Trinidad Central another show when they sound Pandora for Nucor.

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Chain clinics.

Women.

Once you can diagnose Shlomo corridor that you're going to you know he did you listen to oppose it.

Let me translate myself. So my question is concerning so I'm fine cut management, maybe share some more about the P&L contribution revenue and margins.

Unknown Executive: Could management maybe share some more about the P&L contribution, revenue, and margins, and what we have in 2023 and what we should expect in 2024? Also, could management share some color on the playbook in different cities in China? Since we are looking at more chain clinics in operation by the end of 2024, how should we expect the pace and investment? Thank you. Hello, thank you for your question. In 2023, XINYANG U-SHARP expanded to gradually reform. We went from initial model exploration to scale growth. Using the high-efficiency operating model of light assets, we completed the iteration of U-SHARP from 1.0 to 2.0 and took the lead in the huge wave of light and beauty. Last year, So-Young Prime completed its strategic transformation into a SS-Lite highly efficient platform and operational model, which helped us to take the lead in the surgery in light medical aesthetics sector. Since August of last year, we have upgraded the network power model to the cooperative power model. We have set up a clinic operation team, combining the advantages of the free supply chain in product supply, development, and innovation to promote the standardized management system of Qingyi US institutions. Within three months of official operation, we have achieved a single-power balance.

We had the 2023 and what we should expect in 2024.

And also could management share some color on that playbook in different cities in China.

We are looking at more chain clinics are in operation by the end of 'twenty 'twenty four how should we expect the pace and investments. Thank you.

Hey, Susan Hardy ours friendlier Xi'an.

So cardboard all towards Felicia. So Jay will then turn to assure the most of the time sure Tal Greenway turns up he chooses Hank I'll tell you you know Moshe one challenge when he started into ordering and loyalty that they both had a July along celgene chunk out of synergy.

Last year, so we I'm prime completed.

He is a strategic transformation into a slight highly efficient platform and operational model, which helped us to take the lead in the secondary and like medical aesthetics sector.

Junior Empire, kosher, Youll, Shang dish or Dell or more so.

So that's where they are most of these facilities.

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Sorry, so so even though some relate to shallow Daniela can give you at home.

Unknown Executive: As a result, it reflects the high reputation of Xinyang in the US and gives us firm confidence in the promotion of chain power. The model clinic we opened last August is the logical next step of our previous cooperation with institutions and products. We gathered an experienced clinic operating team to promote the development of a standardized measurement system for a live medical aesthetics institution that takes advantage of our supply chain innovative capabilities. Our model cleaning kit breaks even after only three months of formal operation, which reflects our strong reputation among medical aesthetics users and strengthens our confidence to begin exploring franchising opportunities. In 2024, we plan on opening more than 10 clinics in 6 cities nationwide. Each location has been selected based on data from our cooperation with institutions, strict operational requirements, profitability, and deep market research.

Jaguar Chief financial Xi'an, sorry, EMEA Johan Goldcorp eight you show them the daily show at the end of two one.

<unk> relationship.

Yeah. The model clinic, we opened last August.

Logical next step of our previous cooperation with institution institutions and get products, we gathered and experienced operating team to promote would you give up all by standardized measurement system for like medical aesthetics institution that takes advantage of our supply chain capabilities.

Our model predicts breakeven after only three months for a formal operation.

Which reflect our strong reputation among medical aesthetics users and have strengthened our confidence to begin exploring franchising opportunities.

Our slogan inside the tent cheetos, some well known Quasar chunk War Lulu she has to do with Josh.

So did cardiology indoor and outdoor Norway, EG, Taiwan dearly and wish him the young girls, So Sean changes aren't Julien pieces home however, they choose.

In 2024, we plan at <unk>.

Unknown Executive: Oh, that's all. Thank you. And next, the next question comes from Joey Tan of Jeff.

Opening more than Tam clinics in six cities national wide.

Each location has been selected based on data from our corporation with institution streak operational requirements probability and deep market research.

Joey Tan: Good evening, Manager Chen. Thank you for accepting my question. I am Joy from Jefferies, representing Thomas Chong.

The decision that's all thank you.

And next the next question comes from Joey Pan of Jefferies.

Joey Tan: My question is whether Manager Chen can share with us his expectations for the upstream supply chain. Thank you. Let me translate myself. This is Joy from Jefferies on behalf of Thomas Chong.

Cornerstone, Russia Central addition wasn't Piedmont, well shall I say Jeffrey Detroit.

21.

The one issue when each of them for sure.

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Unknown Executive: My question is, can management share with us the outlook for the upstream supply chain business? Thank you. Hello, thank you for your question. In 2024, Elasti will launch a new product model. We will also add new anti-leakage products to the upstream market. Starting from 2025, we will launch several new products in the upstream market, including collagen and copper sulfate. We have already laid out a layout for this track

Hey, gentlemen, Michelle this is joy from Jefferies on behalf of John My question is can management share with us.

Sure.

So Mike Chinn.

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Unknown Executive: In the upstream market of E-Mei, through the accumulation of the previous three years, the entire product pipeline and sales team, and the entire platform have been coordinated. We expect that the product category will grow. Our upstream revenue and profits are expected to continue to grow very well. Thank you for your question. We plan to launch a new Sorabi product in 2024 and also add a new anti-aging product source through our supply chambers. In addition, from 2025, in the Light Mounted Collagen category, we will launch various products, including PWLA, which will establish a strong presence for us in this world.

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Thank you for question.

We plan to launch our new.

Okay.

2024, and also added new anti ageing product sourced through our supply chain business.

In addition from 2025 in the light the mandate of collecting category, we will launch various products, including <unk>.

Which we have established a strong presence for us in this electrical with three year operational experience the synergies between our product development pipeline South team and platform are now rapidly expanding.

Unknown Executive: With three years of operational experience, the synergies between our product development pipeline, self-team, and platform are now rapidly strengthening. We expect to add more products and continuously generate incremental revenue and profit growth from the supply chain business. Xie Xie.

To add more products and to continuously generate incremental revenue and profit growth from this client chain business.

Oh sure sure.

Eve Lee: Next, we have a question from Eve Lee from Haitong Security. Good evening, Managing Director. Thank you for the opportunity to ask this question. I have a small question here.

Thank you.

Next we have a question from <unk> Li from <unk> Securities.

Oh great.

That's the kind of guy here for the Q&A.

I Wonder if Dan are you there.

So when she graduated markedly to acquire Sanchez yard.

Eve Lee: It's mainly about the interest rate. I would like to ask what is the reason for the drop in our interest rate? And is it convenient to look forward to the future trend of interest rates? Let me translate myself.

Women them ideally account besides on the niche of March.

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Let me translate myself.

Thank you and good evening management Oh.

Eve Lee: Thank you and good evening, management. I'm here. I have a question about the profit margin. And I would like to know what the reason for the year-over-year decrease in growth margin is and where will margins trend going forward. Thank you. Okay. Thank you for your question. Let me answer this question.

I'm here I have a question about the profit margin and I'd like to know what's the reason for the year over year decrease in gross margin and well well their margins trend going forward. Thank you.

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Unknown Executive: The reason why the interest rate has dropped is mainly due to the change in our income structure. Our traditional information services and reservation services still maintain a relatively high level of interest rates. Our upstream medical products' sales are relatively stable, but lower than the interest rate of information services and reservation services. In addition, Youxiang and this year's fourth quarter chain, although the business progress is relatively fast, the business is still in the early investment stage, so the interest rate is relatively low. We believe that with the gradual implementation of our industrial chain layout in the United States, we are expected to continue to contribute profits to the platform in various business sectors. At the same time, with the gradual display of the effect of the upper and lower right sectors, the overall profit level will continue to improve in the medium and long term. Okay, I will translate myself.

Hi, Sebastian let Jacques other shipping.

<unk> Shanghai.

It's just an email.

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And he said he provided an initial Sudan, you would seem to US we'll do it.

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<unk> been higher corn Geneva Auto show that suggest I'll tell you about plus you don't show you. Another solution sure don't you do actually keen insight at Georgetown <unk> Sushi gotcha, Okay about translate myself. The decrease in gross margin was mainly due to the changes in revenue mix in Q4 2023 of our sales.

Unknown Executive: The decrease in gross margin was mainly due to the changes in revenue mix. In Q4 2023, our sales of information and reservation services maintained high margins compared to those for sales of medical products and maintenance, which were lower. While revenue from new businesses such as Soyoung Prime has already demonstrated its potential, it is still in the early stages of development with a lower gross margin. As we strategically expand our presence along the medical aesthetic value chain, each of those new businesses is expected to increasingly contribute to our bottom line. As the synergies created by our presence both upstream and downstream strengthen, the profitability of our business overall is expected to improve in the mid to long term.

So the information and the reservation services maintained high margins compared to those for sales of medical products and maintenance, which were lower while revenue for from new business such as Sylvia on prime have already demonstrated their potential it is still in the early stages of.

Element was at lower gross margin.

As we strategically expand our presence along the magical aesthetic value chain each of those new businesses are expected to increasingly contribute to our bottom line as the synergies created by our presence both upstream and downstream strengthen the profitability of our.

Business overall is expected to improve in the mid to long term. Thank you.

We are now approaching the end of the conference call. Thank you for your participation in today's conference you May now disconnect have a good day.

Operator: We are now approaching the end of the conference call. Thank you for your participation in today's conference. You may now disconnect. Have a good day.

Yeah.

Okay.