• Total Revenue: RMB371.8 million, down 3.5% year over year.
• Net Income: RMB20.3 million, up 11.2% year over year.
• Non-GAAP Net Income: RMB22.2 million, up 133.1% year over year.
• Revenue from Medical Products and Maintenance Services: RMB89.3 million, up 18.7% year over year.
• Information Services and Other Revenues: RMB263.0 million, down 8% year over year.
• Reservation Services Revenues: RMB19.6 million, down 18.9% year over year.
• Cost of Revenues: RMB142.2 million, down 0.3% year over year.
• Total Operating Expenses: RMB225 million, down 8.1% year over year.
• Sales and Marketing Expenses: RMB114.9 million, down 20.1% year over year.
• G&A Expenses: RMB69.9 million, up 39.1% year over year.
• R&D Expenses: RMB40.2 million, down 20.6% year over year.
• Cash and Cash Equivalents: RMB1.25 billion as of September 30, 2024.
• Number of Clinics: Expanded to 17 from 8 last quarter.
• Clinic Revenue Growth: 67% quarter to quarter.
• Customer Retention Rate: 60%.
• Customer Satisfaction: 4.98 out of 5.
• Outlook for Q4 2024 Revenue: Expected between RMB350 million and RMB370 million.

• Warning! GuruFocus has detected 3 Warning Signs with SY.

Release Date: November 20, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Total revenue for the third quarter reached RMB332 million, surpassing the upper end of guidance.
• Net income attributable to So-Young increased by 11.2% year over year, with non-GAAP net income up 133.1%.
• The chain of clinics expanded from 8 to 17 locations, with all new clinics generating positive operating cash flow.
• Customer satisfaction at clinics reached 4.98 out of 5, with a customer retention rate of 60%.
• The upstream business saw a 22% year-over-year increase in injectable shipments, indicating strong demand.

Negative Points

• Total revenues decreased by 3.5% year over year, with information services and other revenues down 8%.
• Reservation services revenues fell by 18.9% year over year due to decreased consumer spending.
• Sales and marketing expenses decreased by 20.1% year over year, indicating potential challenges in branding and user acquisition.
• G&A expenses increased by 39.1% year over year, primarily due to higher share-based compensation expenses.
• The company faces risks of insufficient traffic compared to larger internet platforms, impacting user and institutional retention.

Q & A Highlights

Q: What new changes or trends are emerging in the medical aesthetics industry? A: Xing Jin, CEO, noted that light medical aesthetic procedures are gaining popularity due to their ease, lower risk, and shorter recovery periods. The market is dominated by small institutions, indicating room for standardization and consolidation. The demand is polarized, with some consumers seeking cost-effective services and others preferring high-end, personalized solutions. So-Young aims to expand its chain clinics to meet these diverse needs.

Q: Has there been a strategic shift for the POP business following the decline in performance? A: Xing Jin, CEO, explained that POP remains crucial, akin to platforms like JD.com. The company is developing light medical aesthetic chain clinics to attract and retain users, thereby enhancing platform growth. The focus is on improving institutional and consumer experiences, with a shift from an advertising-based model to a service fee-based model to emphasize conversion effectiveness.

Q: What are the considerations behind implementing a franchise model alongside the expansion of the clinic network? A: Xing Jin, CEO, stated that the franchise model aims to accelerate clinic network expansion and control costs. The model leverages central platform support for cost efficiency and aims to enhance brand influence. The franchise approach ensures high service standards and deep supply chain integration, offering financial advantages and sustainable growth potential.

Q: How has the management team achieved a lower expense ratio and improved profitability? A: Hui Zhao, CFO, highlighted that profitability stems from business growth and cost optimization. The clinic chain business shows growth potential, and upstream product expansion enhances profitability. The reduction in sales and marketing expenses results from a refined marketing strategy focusing on efficiency and precision, leading to a well-managed expense ratio.

Q: What competitive advantages does So-Young have over traditional upstream companies? A: Xing Jin, CEO, emphasized So-Young's ecosystem-based operational advantage, allowing it to maintain a favorable position in the competitive industry. The company provides targeted marketing support to enhance product visibility and expand coverage. The integration of self-operated clinics and franchise models drives product sales and competitiveness.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.