Conference Transcript - SBC 2026-01-21

Operator

and welcome back everyone next we have sbc medical group holdings trades on the nasdaq under the symbol sbc headquartered in irvine california and tokyo japan owns and provides management services and products to cosmetic treatment centers happy to welcome head of global planning and strategy stephen rogers and head of investor relations hikaru fukui welcome gentlemen happy to have you on the conference today happy to be here thank you so much thank you very much

Hikaru Fukui, Head of Investor Relations

Thank you, Ana. So, good afternoon, everybody. I'm Hikaru, Head of IR of SBC Medical Group Holdings. Thank you very much for joining our conference call today, despite your busy schedule. As some of you may be meeting us for the first time today, I will begin with briefly introducing our overview of SBC based on Q3 figures. In the latter half of this presentation, Stephen, our head of global planning and strategy, will explain our current global business expansion strategy, as well as Orange Twist, the U.S.-based med spa in which we have recently invested. it. Firstly, SBC is the biggest aesthetic medical group in Japan, and we provide comprehensive management support services to franchise clinics. We generate income through franchise fee. While aesthetic medicine remains our primary area of focus, our franchise clinic have expanded their offering to include a comprehensive range of specialized medical services, including orthopedics, orthodontology, hair loss treatment, and infertility treatment. This diversification allows us to meet a broader spectrum of customer needs, enhance customer retention, and further strength our position. Let me begin with the current status of our franchise Phoenix. The number of locations has been expanded to 258 and the annual number of customers continue to increase steadily and has now expanded to approximately 6.5 million. Meanwhile, amid to intensifying competition in the domestic market, the average revenue per customer visit are temporarily declined, but the turnaround has already begun. We will provide more detail on this next page. The graph on the left shows a quarterly trend of average spend per customer. per customer. As you can see, thanks to initiatives such as pricing and promotion strategy optimization and our multi-branding strategy in the dermatology segment, which has successfully captured higher spending customer group. The overall average revenue per customer visit is clearly showing a sign of recovery. We intend to sustain this positive trend by accurately capturing customer needs and continuing to provide high-quality, high-satisfaction services. Next, our financial performance for the third quarter of 2025. Sales had been declined through the second quarter due to business restructuring and devising to franchise fees, but it is showing sign of bottom-out. Additionally, the decline in listing-related costs, including share-based compensation expense contributed to turnaround in both operating income and net income. We maintain a high level of EBITDA margin. Next, our financial foundation. We maintain a sound and robust financial base with sufficient cash and deposits. To further accelerate growth, we believe building a strong relationship with a financial institution would be effective. So recently, we utilize bank financing for working capital purposes. Our ample liquidity will continue to be actively deployed for strategic investment including both organic growth and M&A in Japan and overseas. That concludes my remarks. Steven, please take care from here. Absolutely. Thank you, Kaveh. Are you able to hear me okay?

Stephen Rogers

yeah i can hear you perfect perfect okay well a lot of exciting things happening in japan um obviously some strong growth happening there um and then also some very exciting news globally i'm really excited to announce that we have recently signed a minority investment deal with orange twist here in the u.s to start our global expansion and to you know start working with them as our u.s partner taking a step back you know what we built in japan it's taken 25 years we've got just everything from surgical to non-invasive medical a very powerful and flexible platform that is continuing to grow and and um you know it's just really amazing what the japan team has done and as we think about more globally you know how can we take all of that success and that scale and how can we, you know, more broadly export that globally. One of the things that we wanted to do was just figure out, hey, we don't want to copy and paste the SBC model, but how can we find really strong partners in different markets that we can work with that we feel like have really aligned with our values and providing great medical care, making it more available and providing great customer experience along with a really strong leadership team in a strong platform and how can we supercharge that and add in um a lot of the strong points of sbc and really start to figure out where those touch points are and how we can kind of build that out a little bit more so that was the whole logic between um doing this partnership with with orange twist and one of the things that we really love is that the the experience when you go into So an orange juice is it's just so the bar is so high and you get such a high level when you get in. And the customer experience is probably some of the best that you're going to find within any med spa. And it started by Clint Carnell, who's been in the business for a long time and has deep industry knowledge. And we're also working with children in Ethereum, who have done a lot over the last few years to really start to operationalize the business. I think that's one of the challenges of MedSpa is you can, you know, have a great service and a great offering, but if you're not really able to operationalize it and make it efficient, it's not going to work. So we feel like we've got a really strong team there, and we're already seeing growth. The company has grown into Nevada and Colorado recently. They're already in California, Texas, and Washington, New Jersey, and a lot more room for them to continue to grow. So we feel like this is the right size and the right time to start working with them and get into the U.S. so we go to the next slide um one of the things that would get us excited too is just the overall business development in the us there's obviously a demand for the aesthetic market is continuing to grow um you know some estimates have been getting up to 71 billion in 2033 so we feel really excited about the overall market trend um you know and kind of getting in getting in at the right time to really capitalize on some of that um you know obviously a lot of that's moving into non-invasive of treatments. And there's a lot of cool technologies and treatments coming out. We've been doing a lot. I would say SPC Japan is probably on the front cutting edge of a lot of those treatments and technologies. We have so many. We have our doctors traveling all over the world that kind of bring in and kind of curate what that looks like. And we're excited to work with Orange Twist to figure out, you know, where we can help and lean in to create a really unique differentiated experience. So people are not only getting that amazing customer experience at Orange but they're also getting just really deep, you know, high class, latest and greatest in terms of the technology and medical treatment so that they can feel and look their best. So, we also have a future collaboration agreement. So, we've started to identify really key touch points where we feel like we can continue to support each other, where Orange Twist can also help our business in Japan. So, we're going to look at potentially expanding SBC clinics in the U.S. through partnerships with Orange Twist and SBC has so many different brands and service offerings. We curate a lot of our clinics based on, you know, different demographics. For example, we have women's clinics. We've got, you know, our flagship SBC. We've also got clinics for men with our Guerrilla Clinic. So there's a lot of flexibility there. So we feel like, hey, there's opportunity to figure out what we have in Japan and what we could potentially make in the U.S. that could complement an orange twist and create a really unique and fun experience um the other thing too is that we don't really have these high class mitzvahs in japan so we're also looking at areas about maybe this is a unique opportunity for us to to kind of add this into our our brand of offerings within the the japan clinics um as our most of our clinics right now are more clinical um you know you're not getting kind of that luxury relaxing experience that you might get in orange twist and then we're also looking at other things like product development and some other really cool things but a lot of a lot of cool areas that we're working on um in terms of collaboration with the with the orange twist team you can go to the next slide in terms of how this fits into our overall global strategy um we want to be the top medical group in japan by 2035 and then in the world by 2050 um and so as part of that we are working with partnering with the regional top operators like Orange Twist in the U.S. We're looking at other regions too, like in Asia and in other parts of the world. We're working on creating really unique differentiated experience in terms of not just aesthetics, but where else we can lean in in terms of wellness and overall health. And then also looking at what is the newest technology's treatment that is going on and where can we leverage that first mover advantage with our clinics and really start to implement some of that so things that are getting us excited you know obviously regenerative aesthetic is is our our backbone so we're really excited about longevity medicine 4.0 and also you know really utilizing ai and some of the new technologies coming out to help you know make our treatments and experience that much better and go to slide 11. and as as i mentioned before we're looking to partner with different regional operators so last year and this year, we're continuing to look for different partners. We're not trying to recreate the wheel, but we're trying to look for teams that we feel like, hey, they've got a great platform. They've got great leadership. Maybe they're lacking in resources, and maybe they're lacking in some areas just in terms of getting access to some of the great different technologies that SBC has. And so how can we kind of supercharge those teams and work together to build something truly great and global. So this year, we're still continuing to look for different partners, develop our own knowledge. I think we're not looking to jump in and just start building really quickly by ourselves. We really want to make sure that we're working with the best in each of the different regions. So we'll continue to do some minority investments, some different partnerships, maybe some small M&A where we feel like it makes sense. And then as we start to develop more knowledge in the different markets and regions, really start to double down on things that we feel like are working for us and are successful and start to move into bigger M&A and moving into more of an operational type role. And then, you know, in the next three to five years, really start to scale that out a bit more. And so that's how we're thinking about it for the next three to five plus years from our standpoint. So I'll stop there and hand it back to you, Hikaru.

Hikaru Fukui, Head of Investor Relations

Thank you very much. Anna, this concludes our presentation. So I want to move to the Q&A session.

Operator

Perfect. Thank you. Great job. Let's talk a little bit about how you attract, train, and retain high-quality doctors. Talk a little bit about that.

Hikaru Fukui, Head of Investor Relations

Yeah. I think that in Japan, first of all, we have a strong brand in Japan. And also, we have a high quality of education and the training system. So many doctors want to join our group. And of course, definitely, we provide very comprehensive services executing treatment. so doctors can focus on their own treatment. So they have a strong incentive to belong to our company.

Operator

And talk a little bit about the company's three to five year expectation for growth internationally and what percentage of revenue would you expect to be generated from international operations?

Hikaru Fukui, Head of Investor Relations

Steven, please.

Stephen Rogers

yeah i i would expect that um you know we're going to continue to grow uh substantially in the next three to five years um specifically in the us and the parts of southeast asia um you know our revenue in japan is pretty impressive but my goal is that most of the revenue growth in the next three to five years will be coming globally um you know from from different mna and different deals that we're doing but i'm not sure exactly what percentage of of total revenue that's going to be yet right now we're at one percent um but i expect that to substantially increase to you know maybe you know 20 plus um in the next three to five years

Operator

and we're seeing more men seek out aesthetic treatment so what trends are you noticing in your business and do you think this is a meaningful growth driver what business story um men men not just males and men not just women seeking aesthetic treatments

Hikaru Fukui, Head of Investor Relations

uh yes definitely the yeah recently the our customers mix has been changing especially for young men the number of the customer has been increasing dramatically it's a in the past the medical is for women. But for now, it's more common for men, especially for the young men as well. And in addition to that, I think that middle-aged customers have already been increasing in Japan. Yes. So I think that our customer mix has been expanded now.

Operator

perfect thank you and is your company compliant with us gap accounting

Hikaru Fukui, Head of Investor Relations

us gap accounting sorry what sorry what is your question uh steven do you want to answer that

Stephen Rogers

yeah i believe we are a us gap uh yeah because we're left on that on the nasdaq yes yeah okay

Operator

great and uh our viewers wanting is he's assuming the clinics are they franchised if you can talk about that what's the upfront startup cost and how is the fee structure set up can you explain

Stephen Rogers

the franchise model a little bit and kind of the relationship with the holding company and the

Hikaru Fukui, Head of Investor Relations

clinic yeah i think the situation is a slightly different uh in japan and the united states yeah for example uh in japan uh the basically the medical corporation is considered uh is not for profit. Of course they are making money but they are not for profit under the Japanese medical law. So we have to make the franchise relationship with them. And basically our franchise fee consists of the fixed type of the franchise fee and the variable type of franchise fee based on the service we provide it to them. So, yeah, so I think that the most biggest parameter for which contributes our revenue is a number of franchise clinic. And at the same time, if they can increase the number of treatment, it causes the increase of our revenue.

Operator

Perfect, thank you. And can you talk about what your acquisitions look like? Do you use cash, stock, debt?

Hikaru Fukui, Head of Investor Relations

You got to talk about it. Basically, as I commented earlier, we have a huge cash at this moment. So basically, we directly utilize this ample cash for the M&A. Yeah, but sometimes we finance from the financial company, banks, commercial bank. and if we make the big deal, we may raise capital from market.

Stephen Rogers

Yeah, and to the extent that, you know, from my perspective, I think to the extent that we are able to use SBC stock in any type of transaction, I think it's really beneficial, especially for us. I know that, you know, we've talked a little bit about some of the liquidity issues, but I think that's maybe one thing that we're thinking about as well.

Operator

Okay, perfect. Thank you. And elaborate on SBC's medical tourism strategy.

Hikaru Fukui, Head of Investor Relations

and how cross-border patient referrals enhance revenue yeah definitely the recently the number of medical tourism customer has been expanding dramatically especially from east asian people such as Chinese and Taiwan, and I think that from their point of view, our service quality is very high, and our services is very safe. So many, many customer is joining, is coming to Japanese work clinics. And recently, we are trying to expand our recognition through the Chinese SNS, name called RET. And I think the Fitch support such expanding.

Operator

Great. Great. And what are the primary operational or regulatory challenges as you expand outside of Japan into markets like the U.S. and Southeast Asia?

Stephen Rogers

Regulatory challenges? I think that's also why we partner with local players on the ground already. Obviously, you have to be HIPAA compliant, and there's different structurings when you're dealing with medical operations, like in the U.S., going through professional companies um and so just how you structure everything um obviously we want to make sure we're being fully compliant that's the great thing about orange twist too is that they're they're well above and beyond um the compliance from a from a governance perspective um which is also why we like them too um and then as we look for partners in southeast asia that's that's kind of why we and also why we're hesitant to kind of start de novo um when you start from scratch you have to you know there's a lot more upfront costs and learnings and so we just want to make sure that we're already working with teams and partners that are that are well above the curve

Operator

on that. And can you tell us what the average revenue per clinic is and how does that vary by geography or brand? Is it in Japan or overseas? I think the question is general like what is the average revenue per clinic in Japan and in other places? Again so this is a total revenue of the

Hikaru Fukui, Head of Investor Relations

medical corporation and this is number of the franchise location so it means roughly 2.5 million should be the average of our clinic level in total okay and what is the current clinic count how many

Operator

clinics do you have and if you can talk about the target growth rate for the next 12 to 24 months

Hikaru Fukui, Head of Investor Relations

yeah as for the number of locations i think that well actually we don't have the concrete plan uh concrete yeah plan but uh uh i think that 10 to 50 percent growth uh should be the reasonable expectation uh equal including the m and a great and can you talk about what is your

Operator

outlook on returning to historical revenue growth rates example 10 to 15 percent yeah i think uh

Hikaru Fukui, Head of Investor Relations

yeah of course there are many uh ad hoc uh factor but uh yeah generally speaking i think that yeah again 10 to 50 percent should be the fair i think wonderful well uh steven or hikaru would you like

Operator

to give our viewers some closing remarks as we end our conference today yeah thank you very much

Hikaru Fukui, Head of Investor Relations

for everybody yeah i i think that uh the 2025 is a i think that kind of the preparation year for us and uh from for the 2026 we want to make uh this year for the uh growth uh year for us and And we consider the communication with individual, each investor is very important. I'd like to hear your voice and advice. Thank you very much for today.

Operator

Perfect. Thank you.

Stephen Rogers

Yeah, great. Yeah, I was going to say thank you so much. We're really excited. Obviously, last year, there's a lot of restructuring, a lot of things happening. And it feels like now we're finally in a place where we can really think about, you know, continuing to grow build partnership um and you know just continue to maintain that you know physical discipline that we we have in japan and continue to maintain that globally as well too as we as we think about growing and expanding and try to be as smart and um you know logical as possible

Operator

but thank you so much for your time yes thank you guys for joining us and we look forward to continuing on this conversation more in 2026. thank you thank you all right everyone that concludes our conference today in just a second you'll be redirected to the registration page for our next conference next month on behalf of all of us at emerging growth I'd like to thank our presenters and attendees for making this such a great success remember a complete replay of the conference separated by company is on our YouTube channel and follow us on X at emerging growth C I'll see you all next month thank you so