Q1 2026 SBC Medical Group Holdings Inc Earnings Call

May 14, 2026

Hikaru Fukui: Joining the SBC Medical Group Holdings Q1 earnings briefings today. Today's session will be led by Yuya Yoshida, Director, CFO, COO, and AI evangelist, together with myself, Hikaru Fukui, Head of IR Department, who will serve as the moderator. Thank you for being with us. We will begin with a presentation delivered by AI avatar. The content has been reviewed and approved by management in advance. After the presentation, we will move on to the Q&A session. To submit a question, please click the Q&A icon at the bottom of your screen. Type in your question and send it to us. Now let us begin the presentation.

Speaker #2: Joining the SBC Medical Group Holdings Q4 earnings briefing today. Today's session will be led by Yuya Yoshida, Director CFO, COO, and AI evangelist together with myself, Hikaru Fukui.

Speaker #2: Head of IR department, who will serve as the moderator. Thank you for being with us. We will begin with the presentation delivered by AI avatar.

Speaker #2: The content has been reviewed and approved by management in advance. After the presentation, we will move on to the Q&A session. To submit a question, please click the Q&A icon at the bottom of your screen.

Speaker #2: Type in your question and send it to us. Now, let us begin the presentation.

Speaker #3: I am Yoshida, CFO of SBC Medical Group Holdings. Thank you very much for joining our conference call today. Despite your busy schedules, I will now present our financial results for the first quarter of 2026.

Yuya Yoshida: I am Yoshida, CFO of SBC Medical Group Holdings. Thank you very much for joining our conference call today despite your busy schedules. I will now present our financial results for Q1 2026. First, let me cover the clinic highlights. Both the number of customers and average revenue per visit increased YOY, and total revenue rose accordingly, including same-clinic revenue. We will continue to enhance service levels through our multi-brand strategy, which enables us to address diverse customer needs with precision, as well as through the development of new services. Next, the consolidated income statement. Total revenues for Q1 2026 were $43 million.

Speaker #3: First, let me cover the clinic highlights. Both the number of customers and average revenue per visit increased year over year, and total revenue rose accordingly, including same clinic revenue.

Speaker #3: We will continue to enhance service levels through our multi-brand strategy, which enables us to address diverse customer needs with precision, as well as through the development of new services.

Speaker #3: Next, the consolidated income statement. Total revenues for the first quarter of 2026 were $43 million. While this represents a 9% year over year decline, the primary driver was the fee structure revisions that took effect in April of last year, which had a negative impact of 6.2 million dollars on franchising revenue and 2.4 million dollars on management services revenue totaling an 8.7 million dollars decrease.

Yuya Yoshida: While this represents a 9% year-over-year decline, the primary driver was the fee structure revisions that took effect in April of last year, which had a negative impact of $6.2 million on franchising revenue and $2.4 million on management services revenue, totaling an $8.7 million decrease. Procurement revenue and rental services revenue declined year-over-year. Management services revenue was offset by an increase in point revenue. Please also note that net income attributable to SBC Medical Group declined year-over-year, partly because the prior year quarter included a one-time life insurance surrender gain of $8.7 million. As I mentioned, the revenue decline was primarily attributable to the fee structure revisions.

Speaker #3: In addition, procurement revenue and rental services revenue declined year over year. On the other hand, management services revenue was offset by an increase in point revenue.

Speaker #3: Please also note that net income attributable to SBC Medical Group declined year over year partly because the prior year quarter included a one-time life insurance surrender gain of 8.7 million dollars.

Speaker #3: As I mentioned, the revenue decline was primarily attributable to the fee structure revisions. Excluding the fee structure revisions of 8.7 million dollars and further adjusting for the 1.3 million dollars difference in AHH consolidation period, underlying revenue grew 11% year over year.

Yuya Yoshida: Excluding the fee structure revisions of $8.7 million and further adjusting for the $1.3 million difference in AHH consolidation period, underlying revenue grew +11% year over year. Similarly, excluding the fee structure revisions of $8.7 million, underlying EBITDA grew +17% year over year. While the headline figures show a decline in both revenue and profit, I would like to emphasize that excluding the impact of the fee structure revisions from the prior year, both revenue and EBITDA demonstrated solid underlying growth. That concludes my presentation. Thank you for your attention.

Speaker #3: Similarly, excluding the fee structure revisions of 8.7 million dollars, underlying EBITDA grew 117% year over year. While the headline figures show a decline in both revenue and profit, I would like to emphasize that excluding the impact of the fee structure revisions from the prior year both revenue and EBITDA demonstrated solid underlying growth.

Speaker #3: That concludes my presentation. Thank you for your attention.

Speaker #2: We will now move on to the Q&A session. To submit questions, please click the Q&A icon at the bottom of your screen. Type your question and send it to us.

Hikaru Fukui: We will now move on to the Q&A session. To submit a question, please click the Q&A icon at the bottom of your screen, type your question and send it to us. First question is regarding clinic revenue growth and competitive environment. Clinic revenue grew significantly year-over-year this quarter, including same clinic sales. Do you view this as a sign that the competitive environment has started to normalize?

Speaker #2: So, first question is regarding clinic revenue growth and the competitive environment. Clinic revenue grew significantly year over year this quarter, including same-clinic sales. Do you view this as a sign that the competitive environment has started to normalize?

Speaker #3: Okay. I will answer the question. Overall, I think yes. We do feel that the competitive environment of Japanese and the global aesthetic market has eased to some extent.

Yuya Yoshida: Okay. I'll answer the question. Overall, I think, yes, we do feel that the competitive environment of Japanese and the global aesthetic market has eased from to some extent compared to where it was previously. Our domestic clinic operations are performing well. We are expanding our customer base while maintaining a consistently high repeat customer ratio. The average customer ticket, average revenue per customer, has also begun to recover. Our priority is to further strengthen customer trust and capture the underlying growth of the market. On top of that, we are also seeing a meaningful momentum in non-aesthetic categories such as AGA and dentistry. We see these as the adjacent area as promising growth domains. We intend to invest in scaling them in parallel.

Speaker #3: Compared to where it was previously, and our domestic clinic operations are performing well. We are expanding our customer base while maintaining a consistently high repeat customer ratio.

Speaker #3: And the average customer ticket, average revenue per customer, has also begun to recover. So our priority is to further strengthen customer trust and capture the underlying growth of the market.

Speaker #3: So on top of that, we are also seeing a meaningful momentum in non-aesthetic categories such as AGA, and dentistry. So we see these as adjacent areas as promising growth domains.

Speaker #3: And we intend to invest in scaling them in parallel.

Hikaru Fukui: Yes, thank you very much. Next question is regarding the fee structure. With the Q1 2026 QOQ +9% revenue growth, is the impact of early 2025 pricing market adjustment now over?

Speaker #2: Okay. Thank you very much. So next question is regarding the fee structure. With the Q1 2026 Q1Q plus 9% revenue growth, is the impact of early 2025 pricing market adjustment now over?

Yuya Yoshida: Basically, I think yes. We basically view fiscal year 2025, last year, as a transitional year that put the company on a healthier footing. We think reported revenue decline due to restructuring and fee structure changes. As you can see now, our profitability improved and the overriding space became more normalized. In that sense, yes, you are right. We think the impact of fee structure is kind of now over.

Speaker #3: Yes. Basically, I think yes. We basically view fiscal year 2025, last year, as a transitional year. They put the company on a healthier footing.

Speaker #3: So we think reported revenue decline due to the structuring and fee structure changes. But as you can see now, profitability improved and the overall earnings space became more normalized.

Speaker #3: In that sense, yes, you are right. We think the impact of fee structure is kind of now over.

Speaker #2: Thank you very much. So again, about the financial situation, excluding the impact of the fee structure division implemented the last year, your top line in first quarter is growing.

Hikaru Fukui: Thank you very much. Again, about the financial situation. Excluding the impact of the fee structure revision, implemented last year, your top line in Q1 is growing. Looking ahead, do you see this positive trend continuing?

Speaker #2: Looking ahead, do you see this positive trend continuing?

Yuya Yoshida: As you pointed out, our QOQ revenue increase is very promising. As we explained, our clinic operation, underlying clinic operation are performing well. As the underlying activity accelerate our top line, naturally, the accelerate is a function that structure linkage. There will of course be some kind of variability or seasonal changes. On a smooth basis, we are confident that in the overall direction from here. We expect the underlying growth profile of business to become more visible as the year progresses, and the idea YOY impact of the last year, last year's fee structure revision rolls off.

Speaker #3: Yeah. As you pointed out, our Q2 revenue increase is very promising. So as we explained, our clinic operation underlying clinic operational performing well. And as the underlying activity accelerate our top line naturally, the accelerate as a function that structure linkage.

Speaker #3: There will, of course, be some kind of variability—seasonal changes. But on a smooth basis, we are confident in the overall direction from here.

Speaker #3: So we expected the underlying growth profile business to become more visible as the year progresses and the YOY impact of the last year's fee structure division rolls off.

Speaker #2: Thank you very much. So, next question is regarding the gross margin. Gross margin was lower than expected in the first quarter of 2026, though offset by lower SG&A.

Hikaru Fukui: Thank you very much. Next question is regarding the gross margin. Gross margin was lower than expected in Q1 2026, through offset by lower SG&A. What level of gross margin and operating margin do you expect throughout the rest of 2026 hereafter?

Speaker #2: What level of gross margin and operating margin do you expect throughout the rest of the 2026 the after?

Yuya Yoshida: Basically, we are considering the margin will be stable and will be improved over the time. As we explained in our last presentation, we are now promoting the AI initiative to deliver the 2 benefits. One is top line growth, by improving our customer experiences. Also, second one is enabling us to build a leaner, more efficient organization on the cost side. Over the medium to long term, our intention to improve our profitability. In that sense, over the year, we'll expect our margin will be stable and improved.

Speaker #3: Basically, we are considering that our margin will be stable and will be improved over the time. As we explained in the last presentation, we are now promoting the AI initiative to deliver two benefits.

Speaker #3: So one is our top line growth, so by improving our customer experiences. And also, the second one is enabling us to build a leaner, more efficient organization.

Speaker #3: So on the cost side. So there will be some so over the medium to long term, our intention to improve our profitability. So in that sense, over the year, we'll expect our margin will be stable and improved.

Speaker #2: Thank you very much. So next question is regarding the cash position. You have a substantial cash position on the balance sheet. How are you thinking about the deployment of the cash growth cash going forward?

Hikaru Fukui: Thank you very much. Next question is about regarding the cash position. You have a substantial cash position on the balance sheet. How are you thinking about the deployment of the cash going forward?

Yuya Yoshida: Yeah, thanks for very good question. Obviously, as we continuously iterate to this point, growth investment is top our priority. We will continue to invest with discipline to build a more competitive group of businesses because basically number of clinics that we are supporting is a kind of a KPI for our revenue and profit. Now, we are very fortunate to be seeing a steady inflow of potential very great M&A opportunities because of intense competition in the, especially in the Japanese aesthetic medical market. At this moment, we cannot disclose anything completely. I think the benefit from the inorganic M&A opportunities over this year and the next year will be very promising, I think.

Speaker #3: Yeah. Thanks for the very good question. Obviously, as we continuously iterate to this point, gross investment is a top priority. So we will continue to invest with discipline to build a more competitive group of businesses, because basically the number of clinics that we are supporting is a kind of KPI for our revenue and profit.

Speaker #3: So now we are very fortunate to be seeing our city info of potential very great M&A opportunities because of intense competition in the especially in the Japanese aesthetic medical market.

Speaker #3: So at this moment, we cannot disclose anything concretely, but I think the benefit from the inorganic M&A opportunities over the this year and the next year will be very promising.

Speaker #3: I think.

Speaker #2: Thank you very much. Let me back to clinic situation again. Have you seen any measurable improvement in franchisee profitability retention or unit economics following the fee structure change?

Hikaru Fukui: Thank you very much. Let me back to clinic situation again. Have you seen any measurable improvement in franchisee profitability, retention or unit economics following the fee structure change?

Speaker #3: So can you say that again? Sorry.

Yuya Yoshida: Can you say that again? Sorry.

Speaker #2: Absolutely. Sorry. Have you seen any measurable improvement in franchisee profitability situation or unit economics following the fee structure change?

Hikaru Fukui: Sorry. Have you seen any measurable improvement in franchisee profitability-

Yuya Yoshida: Oh.

Hikaru Fukui: unit economics, following the fee structure change?

Yuya Yoshida: Basically, regardless of our fee structure changes, our, you know, clinic performance and our clinics' profitability remains very good. The purpose of the fee structure was to enable our clinics groups to open more new types of clinics. In that sense, as you can see, number of clinics are growing steadily over this quarter again. I think the effect of the fee structure change made a good effect on our clinic level profitability. Yeah.

Speaker #3: Basically, regardless of our fee structure changes, our clinic performance and our clinic's profitability remains very good. And the purpose of the fee structure was to enable our clinic's groups to open more new types of clinics.

Speaker #3: So in that sense, our as you can see, number of clinics are growing steadily over this quarter again. So I think the effect of the fee structure change made a good effect on our clinic level profitability.

Speaker #3: Yeah.

Speaker #2: Thank you very much. So next question is a slightly long question. Talk brief is now deployed across all Shonan Beauty Clinic's locations. With the in-house interpretation center scaling towards 800 plus sessions per month.

Hikaru Fukui: Thank you very much. Next question is, this is a slightly long question. Talk Bridge is now deployed across all Shonan Beauty Clinic locations, with the in-house interpretation center scaling towards 800+ sessions per month. What inbound KPI should investor track? Visit volume conversation from the English inquiry pipeline, per visit spending differential versus domestic, and how is the higher spend inbound mix flowing through to review per visit? Q1 of the partnership are complete. Can you provide a general operational update on the progression?

Speaker #2: What inbound KPIs should investors track? Visit volume, canvas, conversation from the English inquiry pipeline, per visit spending differential versus domestic and how is the highest spent inbound mix following through to review per visit?

Speaker #2: The first full quarter of the partnership complete, can you provide a general operational update on the collaboration more importantly? What's the potential for the bilateral cross-border deployment bringing orange tourists location as into Asia through SBC's network and deploying SBC brands over the operating model in the US through orange tourist footprint?

Hikaru Fukui: More importantly, what's the potential for the bilateral cross-border deployment, bringing OrangeTwist location as into Asia through SBC's network and deploying SBC brands or the operating model in the US through OrangeTwist footprint? What's the timeline for that bilateral expansion?

Speaker #2: And what's the timeline for that biological expansion?

Yuya Yoshida: Okay. Let me put this way. For the first part of the question regarding the basically inbound customers for SBC Medical Group, actually, we don't have a concrete number here today, so I think we'll include the information and intelligence of the inbound customers data next time. From the revenue perspective, the ratio of the inbound tourist revenue is still very relatively small, but our growth rate is very big now. We see very great growth opportunities. We are implementing a variety of measures.

Speaker #3: Okay. So let me put it this way. As for the first part of the question regarding the basically inbound customers for SBC Medical Group, actually, we don't have a concrete number here today.

Speaker #3: So I think we'll include the information and the intelligence of the inbound customer data next time. But from the revenue perspective, the ratio of the inbound tourist revenue is still very little to very small.

Speaker #3: But gross rate is very big now, so we see very great growth opportunities. So we are implementing a variety of measures. For example, we had a kind of conference that invited one of our doctors to China and to have a Chinese customer in mainland China.

Yuya Yoshida: For example, we had a kind of a conference that invite our, one of the, our doctor to China and to have a Chinese customer in the mainland China to explain our expertise in the treatment. That sort of initiative are working well. With that, the number of inbound customers are increasing. As for the second part of the question regarding our partnership, especially for the US strategy, as you pointed out, our US strategy is basically centered on building barriers through our collaboration with OrangeTwist rather than pursuing a large scale standalone expansion from day one. As you mentioned, our initiative include variety of collaboration, that consists three parts basically. First is marketing support.

Speaker #3: To explain our expertise in the treatment. That's sort of initiative working well. And so with that, the number of inbound customers are increasing. And as for the second part, of the question regarding our partnership, yeah, especially for the US strategy, yeah, as I pointed out, our US strategy is basically centered on building value through our collaboration with orange taste.

Speaker #3: Rather than passing large-scale standalone expansion from them. So yeah, as you mentioned, our initiative includes a variety of collaboration, and that consists of three parts basically.

Speaker #3: First is marketing support. We see meaningful room to improve customer acquisition, retention, and overall brand execution at Orange Taste. So part of our focus is helping the brand awareness and acquiring new customers.

Yuya Yoshida: We see meaningful room to improve customer acquisition, retention, and overall brand execution at OrangeTwist. Part of our focus is helping the brand awareness and acquiring new customers. The second one is AI implementation support. We see they have a very, how can I say, potential to improve their cost by utilizing the AI. The third one is our longevity clinics proof of concept. Now we are planning and considering implementing longevity treatment in a selected location of OrangeTwist medical spa. Yeah, as you mentioned, our collaboration idea includes the OrangeTwist, how can I say, exporting OrangeTwist medical spa business clinic group to Asia globally. At this moment, we don't have a concrete timeline.

Speaker #3: And the second one is AI implementation support. We see they had a very how can I say, potential to improve their cost by utilizing the AI.

Speaker #3: And the third one is longevity clinics proof of concept. So now we are planning and considering implementing longevity treatment in a selected location of orange taste.

Speaker #3: And yeah, as I mentioned, our collaboration idea includes the orange taste how can I say, exporting the orange taste middle spot business clinic group to Asia, globally.

Speaker #3: But at this moment, we don't have a concrete timeline. So because as I explained, now we are focusing on three collaboration items now. So in the long term, yeah, we think we are considering the importing the orange taste brand to Asian countries or even Japan.

Yuya Yoshida: Because, as I explained, now we are focusing on three cooperation items now. In the long term, yeah, we think we are considering the importing the OrangeTwist brand to Asian countries or even Japan, maybe.

Speaker #3: Maybe.

Speaker #2: Thank you very much. Next slide—also the global businesses. Can you talk about US M&A valuations and whether you see near-term opportunities for strategic transactions?

Hikaru Fukui: Thank you very much. Next slide, also the global expansion. Can you talk about US M&A valuations and whether you see near-term opportunity for strategic transactions?

Yuya Yoshida: I think as you know, compared with the valuation in the Japanese M&A market, the valuation in the US is relatively expensive. From the EBITDA multiple perspective, basically over 5 times and sometimes over 10 times. Basically, we think it's reasonable to acquire the medical spa group, potentially, I mean, with the EBITDA multiple over from the 5 to 8 times.

Speaker #3: Yeah. I think as you know, compared with the variation in the Japanese M&A market, the variation in the US is relatively expensive. So from the EBITDA multiple basically over five times and sometimes over 10 times.

Speaker #3: But basically we think it's reasonable to acquire the middle spot group potentially. I mean, with the EBITDA multiple over from the 5 to 8 times.

Hikaru Fukui: Thank you very much. Next slide also international businesses. Overseas remains 1% of clinic revenue with a phase II roadmap targeting the US and Southeast Asia for 2027 to 2028. Beyond OrangeTwist, which Southeast Asian markets are highly priority? What's the preferred mode of entry? Direct to operation, joint venture, franchise, medical tourism partnership? When should investor expect overseas to become more meaningful contributor to consolidated revenue?

Speaker #2: Thank you very much. Next slide also international businesses. Overseas remains 1% of clinic revenue with a phase two roadmap targeting the US and Southeast Asia for 2027 to 2028.

Speaker #2: Beyond orange taste, which Southeast Asian markets are highly prioritized? What's the preferred mode of entry? Direct to operation, joint venture, franchise, medical tourism partnership, and when should investors expect overseas to become more meaningful contributor to consolidated revenue?

Yuya Yoshida: Yeah. Thank you for a very good question. Actually, we think kind of partnership with OrangeTwist could be the model how to expand our business into the global, including Southeast Asia. Partnership model could be the one of the prioritized approach to dig into the Southeast Asia because, you know, especially aesthetic medical market is a very domestic and how can I say? Affected by the each culture and customer's preference. That's why we need professionals and expert who knows much about the local markets. In that sense, partnership model would be the would be better rather than, you know, with deploying the large scale standalone expansion. Yeah. That's what we are currently considering.

Speaker #3: Yeah. Thank you for a very good question. Actually, we think kind of partnership with orange taste could be the model how to expand our business into the global, including Southeast Asia.

Speaker #3: So partnership model could be one of the prioritized approach to dig into the Southeast Asia because especially aesthetic medical market is a very domestic and how can I say, affected by each culture in the customer's preference.

Speaker #3: So that's why we need professionals and experts who knows much about the local markets. In that sense, partnership model will be the better rather than we deploying the large-scale standalone expansion.

Speaker #3: Yeah. That's what we are currently considering. But as you know, depending on the inorganic M&A opportunities, we are very open to yeah, direct M&A and having the direct medical clinics group in Southeast Asia.

Yuya Yoshida: As you know, depending on the inorganic M&A opportunities, we are very open to direct M&A and having the direct medical clinics group in Southeast Asia. It depends on the situation.

Speaker #3: So, it depends. Yeah. On this situation.

Speaker #2: Thank you very much. So could you discuss trends in ability to spend per customer and whether pricing optimization continues to support ARPU and growth?

Hikaru Fukui: Thank you very much. Could you discuss trends in average spend per customer and whether pricing optimization continues to support ARPU and growth?

Yuya Yoshida: Yes. As we explained in the last couple of earning release, you know, we saw the very intense competition in the Japanese aesthetic medical market. That's why we are very strategically changed our price and our treatment by treatment basis. As we explained, we think it hit the bottom, and we are now kinda enjoying the, how can I say, benefit of survivors. As a largest aesthetic medical clinic group, we have kind of power to control the overall price of the treatment now. Of course, we need to care about our customer satisfaction. That's our first priority.

Speaker #3: Yeah. As we explained in the last couple of adding release, we saw the very intense competition in the Japanese aesthetic medical market. So that's why we are very strategically changed our price as our treatment by treatment basis.

Speaker #3: But as we explained, we think it hits the bottom and we are now kind of enjoying the how can I say, benefit of survivors and as a largest aesthetic medical clinic group, we are kind of power to control the overall price of the treatment now.

Speaker #3: So of course, we need to care about the customer's satisfaction. That's our first priority. But we increase the price of some treatment gradually. And then even with that, as you can see, the number of customers increasing.

Yuya Yoshida: We increase the price of some treatment gradually, and then, even with that, as you can see, the number of customer increasing. That's why we successfully improving our average revenue per visit and profitability.

Speaker #3: So that's why we're successfully improving our ability to increase revenue per visit and profitability.

Speaker #2: Thank you very much. So, can you elaborate on how the multi-branding strategy is evolving, and whether a newer brand is attracting different demographic or price point segments?

Hikaru Fukui: Thanks very much. Can you elaborate on how the multi-brand strategy is evolving, and whether a newer brand attracting different demographic or price point segment?

Yuya Yoshida: Yes. As I pointed out, we are implementing a multi-brand branding strategy. For example, we opened a new skin clinic that focus on the more customers with high literacy of aesthetic medical and especially those who want to go to Korea to take the up-to-date treatment. With that, we introduced up-to-date medical device, including the laser devices. With that, with those efforts, we are successfully attracting customers with high literacy of the aesthetic medical. That's sort of the initiative are currently working. Not only the new skin clinic, we acquired a medical clinic group called JUN CLINIC that focuses on more.

Speaker #3: Yes. As I pointed out, we are implementing a multi-brand branding strategy. And, for example, we opened the Neo Skin Clinic that focuses on customers with higher literacy in aesthetic medical.

Speaker #3: And especially those who want to go to Korea, to take the up-to-date treatment, so with that, we introduced the up-to-date medical device, including the laser devices.

Speaker #3: So yeah, with that, with those efforts, we are successfully attracting customers with high literacy of the aesthetic medical. Yeah. That's sort of the initiative currently working.

Speaker #3: Not only the Neo Skin Clinic, we acquired medical clinic groups called June Clinic that focuses on more how can I say, not non how can I say, with low medical aesthetic literacy actually.

Yuya Yoshida: With low medical aesthetic literacy, actually, yeah, on the other hand, on the contrary to the new skin clinic. That's how the multi-branding strategy works very well to capture the diverse customer needs as I explained.

Speaker #3: Yeah. On the other hand, on the contrary to the Neo Skin Clinic. So that's the multi-branding strategy works very well to capture the diverse customer needs as I explained.

Speaker #2: Thank you very much. So this is a profitability question. As you continue to as you continue to roll out AI across the organization, is it fair to assume that the EBITDA margin is on the upward trajectory from here?

Hikaru Fukui: Thank you very much. This is a profitability question. As you continue to roll out AI across the organization, is it fair to assume that EBITDA margin is on the upward trajectory from here?

Yuya Yoshida: Yeah. Short answer is yes. gose, Yeah, due to the nature of aesthetic medical clinics group, our business is basically kind of labor intensive business model until so far. We believe AI has meaningful potential to improve our productivity and reduce operating cost over time. Yeah, more concretely, our priority is to start with areas where implementation is relatively simple and the return can be verified quickly. It's a kind of quick win project. For example, we see internal manual research as a short-term quick win because actually we have a wide variety of treatment to capture customer needs. In that sense, we have lots of internal manuals, from the co-counselor or nurse perspective, it's difficult to find the appropriate manual by their hand.

Speaker #3: Yeah. Short answer is yes. Because yeah, due to the nature of aesthetic medical clinics group, our business is basically kind of labor-intensive business model until so far.

Speaker #3: But we believe AI has meaningful potential to improve our productivity and reduce operating costs over time. So, yeah, more concretely, our priority is to start with areas where implementation is relatively simple.

Speaker #3: And the return can be verified quickly. It's a kind of quick win project. For example, we see internal manual research as a short-term quick win because actually we have a wide variety of treatment to capture customer needs.

Speaker #3: So in that sense, we have lots of internal manuals that from the counselor or or nurse perspective, it's difficult to find the appropriate manual by their hand.

Yuya Yoshida: In that sense, we can utilize AI. More broadly, we have already taken a disciplined approach to hiring at headquarters, including a principle-based pause on some mid-career hiring. With that, you know, from the cost reduction perspective, we also believe there's substantial room to streamline operations through automation and workflow redesign over time. Yeah, in a short answer, yes, we can reduce our cost and improve margin.

Speaker #3: So in that sense, we can utilize AI. And more broadly, we have already taken disciplined approach to hiring at headquarters. Including the principal-based force on some mid-to-carrier hiring.

Speaker #3: So with that, from the cost reduction perspective, we also believe there's substantial room to streamline operation through automation and workflow redesign over time. So yeah, in a short answer, yes, we can reduce our cost and improve margin.

Speaker #2: Thank you very much. So next question is regarding the charge. You established share departures program at the end of last year. Could you share your thinking on how you plan to utilize this program going forward?

Hikaru Fukui: Thank you very much. Next question is regarding the cash. Sorry, share buyback. You established a share repurchase program at the end of last year. Could you share your thinking on how you plan to utilize this program going forward?

Yuya Yoshida: I think we cannot completely tell what we're gonna do in the next period. From our point of view, we believe the situation has drastically improved compared to where we were previously, I mean, when we established the share repurchase program, as I explained. As you can see, our revenue increased, I mean, the underlying revenue increased, and our profitability remains improving. From our point of view, the, our priority is to improve our liquidity. In that sense, our share repurchase program, by its nature, reduces the float. That's what some investors pointed out to us, and we duly understand that point.

Speaker #3: Okay. So I can concretely tell where we're going to do in the next build. But from our point of view, we believe the situation has drastically improved compared to where we were previously I mean, when we established the share repurchase program as I explained and as you can see, our revenue increase I mean, the underlying revenue increased and our remains improving.

Speaker #3: So from our point of view, our priority is to improve our liquidity. So in that sense, share repurchase program by its nature reduces the fraud.

Speaker #3: That's what some investors pointed out to us, and we duly understand that point. So we do not view it—I mean, the share repurchase program—as a high-priority tool at this stage.

Yuya Yoshida: We do not view it, I mean, the share repurchase program, as a high priority tool at this stage. Instead, we plan to continue working on liquidity through expanding analyst coverage, broadening our institutional investor base, and pursuing proactive IR engagement, and so on. We do everything to improve our liquidity and increasing our float. That's all, that's what we are considering now.

Speaker #3: Instead, we plan to continue working on liquidity through expanding analyst coverage, building our institutional investor base, pursuing proactive IR engagement, and so on.

Speaker #3: Yeah. So we do everything to improve our liquidity and increasing our fraud. That's what we are considering now.

Speaker #2: Thank you very much. So next question is also the capital strategy. Do you envision additional founder share sales in 2026? If so, what size and timing?

Hikaru Fukui: Thank you very much. Next question is also the capital strategy. Do you envision additional founder share sales in 2026? If so, what size and timing?

Speaker #3: Yeah. Actually, selling the founder's portion is a decision should be made by our founder basically. That's a basic concept. But even with that, yeah, as I just explained, increasing our liquidity and number of floating shares is our top priority in the sense we are very open to any idea to contribute to increase floating shares and our liquidity.

Yuya Yoshida: Yeah. Actually, you know, selling the founder's portion is a decision should be done, should be made by our founder, basically. That's a, I think, a basic concept. Even with that, as I just explained, increasing our liquidity and number of floating shares is our top priority. In that sense, we are very open to any idea to contribute to increase our floating shares and our liquidity. I think that's what we can say now.

Speaker #3: Yeah, I think that's what we can say now.

Speaker #2: Thank you very much. So yeah, are there any further questions? If not, we conclude our Q&A session.

Hikaru Fukui: Thank you very much. Yeah, are there any further questions? If not, we conclude our Q&A session.

Yuya Yoshida: Yeah. Thanks, so, thanks for joining us, and thanks for giving the very great questions. Again, we are very committed to improve our liquidity and the floating shares and improving our profitability. As you can see, the very big improvement of QOQ basis now, so really look forward to discussing with you again in the near future. Thanks so much.

Speaker #3: Yeah. Thanks. Thanks for joining us and thanks for giving the very great questions. Again, we are very committed to improve our liquidity and floating shares and improving our profitability.

Speaker #3: So as you can see, the very big improvement of Q1, Q2 basis now. So we look forward to discussing with you again in the near future.

Speaker #3: Thanks so much.

Speaker #2: Thank you very much. So this concludes today's briefing. Thank you again and have a wonderful day. Thank you very much. Goodbye.

Hikaru Fukui: Thank you very much. This concludes today's briefing. Thank you again, and have a wonderful day. Thank you very much.

Yuya Yoshida: Goodbye.

Hikaru Fukui: Goodbye.

[Company Representative] (SBC Medical Group Holdings): Goodbye.