SBC Q1 2026 Earnings Call
Hikaru Fukui (Head of IR Department): 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.
Yuya Yoshida (Director, CFO, COO, and AI Evangelist): 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.
Yuya Yoshida (Director, CFO, COO, and AI Evangelist): 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.
Yuya Yoshida (Director, CFO, COO, and AI Evangelist): 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.
Hikaru Fukui (Head of IR Department): 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?
Yuya Yoshida (Director, CFO, COO, and AI Evangelist): 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.
Hikaru Fukui (Head of IR Department): 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?
Yuya Yoshida (Director, CFO, COO, and AI Evangelist): 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.
Hikaru Fukui (Head of IR Department): 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?
Yuya Yoshida (Director, CFO, COO, and AI Evangelist): 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.
Hikaru Fukui (Head of IR Department): 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?
Yuya Yoshida (Director, CFO, COO, and AI Evangelist): 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.
Hikaru Fukui (Head of IR Department): 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 (Director, CFO, COO, and AI Evangelist): 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.
Hikaru Fukui (Head of IR Department): 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?
Yuya Yoshida (Director, CFO, COO, and AI Evangelist): Can you say that again? Sorry.
Hikaru Fukui (Head of IR Department): Sorry. Have you seen any measurable improvement in franchisee profitability-
Yuya Yoshida (Director, CFO, COO, and AI Evangelist): Oh.
Hikaru Fukui (Head of IR Department): unit economics, following the fee structure change?
Yuya Yoshida (Director, CFO, COO, and AI Evangelist): 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.
Hikaru Fukui (Head of IR Department): 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?
Hikaru Fukui (Head of IR Department): 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?
Yuya Yoshida (Director, CFO, COO, and AI Evangelist): 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.
Yuya Yoshida (Director, CFO, COO, and AI Evangelist): 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.
Yuya Yoshida (Director, CFO, COO, and AI Evangelist): 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.
Yuya Yoshida (Director, CFO, COO, and AI Evangelist): 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.
Hikaru Fukui (Head of IR Department): 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 (Director, CFO, COO, and AI Evangelist): 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.
Hikaru Fukui (Head of IR Department): 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?
Yuya Yoshida (Director, CFO, COO, and AI Evangelist): 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.
Yuya Yoshida (Director, CFO, COO, and AI Evangelist): 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.
Hikaru Fukui (Head of IR Department): 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 (Director, CFO, COO, and AI Evangelist): 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.
Yuya Yoshida (Director, CFO, COO, and AI Evangelist): 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.
Hikaru Fukui (Head of IR Department): 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 (Director, CFO, COO, and AI Evangelist): 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.
Yuya Yoshida (Director, CFO, COO, and AI Evangelist): 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.
Hikaru Fukui (Head of IR Department): 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 (Director, CFO, COO, and AI Evangelist): 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.
Yuya Yoshida (Director, CFO, COO, and AI Evangelist): 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.
Hikaru Fukui (Head of IR Department): 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 (Director, CFO, COO, and AI Evangelist): 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.
Yuya Yoshida (Director, CFO, COO, and AI Evangelist): 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.
Hikaru Fukui (Head of IR Department): 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?
Yuya Yoshida (Director, CFO, COO, and AI Evangelist): 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.
Hikaru Fukui (Head of IR Department): Thank you very much. Yeah, are there any further questions? If not, we conclude our Q&A session.
Yuya Yoshida (Director, CFO, COO, and AI Evangelist): 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.
Hikaru Fukui (Head of IR Department): Thank you very much. This concludes today's briefing. Thank you again, and have a wonderful day. Thank you very much.
Yuya Yoshida (Director, CFO, COO, and AI Evangelist): Goodbye.
Hikaru Fukui (Head of IR Department): Goodbye.
[Company Representative] (SBC Medical Group Holdings) (Company Representative): Goodbye.
