Ladies and gentlemen, thank you for standing by for So-Young's First Quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. After management gives their prepared remarks, there will be a question-and-answer. As a reminder, today's conference call is being recorded. I would now like to turn the meeting over to your host for today's call, Ms. Mona Qiao. Please proceed, Mona.

Thank you, operator, and thank you, everyone for joining So-Young's first quarter 2025 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 U.S. Private Securities and the Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that 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 20F. So-Young does not undertake any obligation to update any forward-looking statements, except as required under applicable law. Finally, please note that unless otherwise stated, all figures mentioned during the conference call are in RMB. At this time, I'd like to turn the call over to Mr. Xing Jin.

Hello, everyone, and welcome to today's conference call. In the first quarter of 2025, we recorded total revenues of RMB297.3 million, with a net loss attributable to So-Young of RMB33.1 million. The non-GAAP net loss was RMB31.5 million. This decline was mainly due to increased investments aimed at expanding our aesthetic centers, which we believe will provide a solid foundation for our long-term growth. In the first quarter, we continued our vertical integrity transition and expanded our network of aesthetic centers in key cities. Our branded aesthetic centers, So-Young clinic, are exclusively located in premium commercial areas of China's first and second-tier cities. We are increasing the number of stores in these areas to enhance the uniqueness and convenience of our centers. By providing high-quality, cost-effective, and standardized services, we are gaining a loyal customer base. The So-Young clinic is gradually becoming our primary growth driver. We are also lowering customer acquisition and procurement costs through vertical integration and expect further cost efficiency improvements as we grow. As of the end of Q1, we operated 23 So-Young clinic centers across nine major cities, including Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou, Chengdu, Wuhan, Chongqing, and Changsha. Of these, 18 centers have achieved positive monthly operating cash flow. On a monthly basis, our revenue from our aesthetic center business reached RMB98.8 million, a 21.6% increase quarter-on-quarter and 551.4% year-over-year. Total verified paid visits exceeded 45,500, representing an 18.5% rise quarter-on-quarter and 874.3% year-over-year. The number of verified paid aesthetic treatments performed surpassed 92,900, reflecting a 14% growth quarter-on-quarter and 989.4% year-over-year. Customer satisfaction remains high at 4.98 out of 5, demonstrating our commitment to delivering top-notch service. Moving forward, we plan to further expand our network and enhance store density in our existing cities. In Q1, we launched a natural energy event brand campaign featuring offline pop-up events with artists in Shenzhen and Beijing. These events were complemented by online sign-up activities to engage a wider audience. Each event provided opportunities for customers to try popular light medical aesthetic services, such as IPL and ultrasound-based anti-aging treatments, with licensed doctors explaining the science behind the procedures. This interactive strategy helped clarify the technical aspects of the medical aesthetic industry and reinforced our value proposition of promoting natural beauty. We also optimized our service offerings in our branded aesthetic centers while discontinuing low-demand treatments based on user feedback. To expand our portfolio, we collaborated with premium skincare brand SkinCeuticals to launch new co-treatment solutions. Additionally, we allocated more marketing resources and implemented sales incentives to enhance revenue contributions from our proprietary products, aiming to improve gross margins. On the upstream side, we enhanced our comprehensive medical aesthetic supply chain, focusing on in-house developed products and exclusive partnerships. By Q1, we served over 1,500 institutions with supply chain solutions for injectables, shipping approximately 27,900 units, a rise of roughly 14% year-over-year. Our pop-up business remains a vital contributor to profits and traffic growth, supporting our aesthetic centers and upstream operations. In Q1, the gross merchandise volume for verified medical aesthetic services reached around RMB300 million, with per capita total sales growing by 4% year-over-year. Looking ahead, we see significant long-term potential for our aesthetic center business in China and aim to establish a nationwide medical aesthetic chain with strong brand recognition. Over the past few quarters, we have increased both the number of stores and their density. In April, I personally increased my shareholding in So-Young, amounting to nearly US$4.1 million, reaffirming my confidence in our long-term objectives. Our legacy pop-up business focuses on natural growth selling. We believe the key to our next phase lies in advancing our aesthetic center business with complete control over the supply chain. Drawing inspiration from the Sam's Club retail model, we are adopting a strategy focused on premium products, value-oriented pricing, and comprehensive supply chain management. Sam's Club's success is attributed to exclusive, high-quality products that are carefully managed for quality and cost, attracting customers and increasing their spending and loyalty. We believe the medical aesthetic sector can experience similar success with high-quality proprietary products and services at fair prices. We aspire to become the leading club in the medical aesthetics industry in the coming years. Our plans include developing end-to-end capabilities through vertical upstream integration and proprietary product acquisition and partnerships. We anticipate introducing several new products to market within the next two to three years, providing our customers with enhanced value. We will continue to strengthen our supply chain capabilities and improve service quality to ensure a safer and more effective medical aesthetic experience. Now, I'll hand over to our staff member Nick, who will provide an overview of the financial results followed by the Q&A session.

Hello. This is Nick. Please note that all amounts are quoted in RMB. Please also refer to our earnings release for detailed information about our comparative financial performances on a year-over-year basis. Total revenues during the quarter were RMB297.3 million, in line with our guidance and down 60.6% year-over-year, primarily due to a decrease in the number of medical service providers subscribing to information services on our platform. Information reservation services and other revenues were RMB142.9 million, down 34.1% year-over-year, primarily due to a decrease in the number of medical service providers subscribing to information services on our platform. Aesthetic treatment services revenues reached RMB98.8 million, a remarkable 551.4% year-over-year increase, primarily due to the expansion of our aesthetic center business. Sales of medical products and maintenance services were RMB55.6 million, down 35.7% year-over-year, primarily due to a decrease in order volume for medical equipment. Cost of revenues were RMB151.4 million, up 29.1% year-over-year, primarily due to the expansion of our aesthetic center business. Within cost of revenues, cost of information reservation services and others were RMB40.7 million, down 34.1% year-over-year, primarily due to a decrease in the cost of services associated with So-Young Prime. Cost of aesthetic treatment services were RMB80.3 million, up 547.6% year-over-year, primarily due to the expansion of our aesthetic center business. Cost of medical products sold and maintenance services were RMB30.4 million, down 29.4% year-over-year, primarily due to a decrease in costs associated with the sales of medical equipment. Total operating expenses were RMB189.3 million, down 20.4% year-over-year. Sales and marketing expenses were RMB103.4 million, down 8.7% year-over-year, primarily due to a decrease in expenses associated with branding and user acquisition activities. General and administrative expenses were RMB53.7 million, down 36.7% year-over-year, primarily due to a decrease in share-based compensation expenses. Research and development expenses were RMB23.1 million, down 18.9% year-over-year, primarily attributable to improvements to staff efficiency. Income tax benefits were RMB1.6 million compared with the income tax benefits of RMB2.6 million in the same period of 2024. Net loss attributable to So-Young International Inc., was RMB33.1 million compared with the net loss of RMB21.2 million during the same period last year. Non-GAAP net loss attributable to So-Young International Inc., was RMB31.5 million compared with non-GAAP net income attributable to So-Young International Inc., of RMB4.1 million during the same period in 2024. Basic and diluted losses per ADS attributable to ordinary shareholders were RMB0.32, compared with basic and diluted loss per ADS attributable to ordinary shareholders of RMB0.21 during the same period of 2024. We have maintained a robust cash position with cash and cash equivalents, restricted cash, term deposits, and short-term investments totaling RMB1.1 billion as of March 31, 2025. Moving to our outlook for the second quarter of 2025, we expect aesthetic treatment services revenues to be between RMB120 million and RMB140 million, representing a 337.3% to 410.1% increase from the same period in 2024. This outlook reflects our strategic decision to prioritize long-term value creation over short-term financial optimization. As we continue to invest in expanding our branded Aesthetic Centre network and refining our vertically integrated business model. Inspired by Sam’s Club, our approach is anchored by control of the supply chain, proprietary product development, and standardized service delivery. This is already having an impact demonstrating its potential to improve customer retention, lower customer acquisition costs, and enhance operational consistency. We believe this model will be instrumental in redefining cost effectiveness in the medical aesthetic sector, helping us better address the expectations of increasingly rational and quality-conscious customers. Looking ahead, as we deepen execution across our self-operated and partner networks, we expect this model to support more resilient margins and greater scalability across the market. This concludes our key remarks. I'll now turn the call over to the operator and open the call for questions.

And your first question comes from Li Yibing with Guotai Junan Securities.

Let me translate myself. Good evening management. Thank you for taking my questions. I would like to ask about So-Young Clinic. How is it different from traditional medical institutions like Mylike and Yestar?

Our aesthetic center business is fundamentally different from traditional models like Mylike and Yestar. Essentially, we have a refined operational model. They provide a wider array of services, require larger clinics, depend heavily on new doctors and consultants, and generate a higher spend per customer, though less frequently. In contrast, our clinics adopt a fast-casual model. We focus on more targeted services, need less clinic space, have a greater number of locations, rely less on individual doctors, and achieve a lower spend per customer but with a higher visit frequency. Specifically, Mylike and Yestar offer a wide range of procedures, including surgeries like double eyelid surgery, rhinoplasty, breast augmentation, and liposuction, as well as services such as skincare, anti-aging, hair removal, body contouring, hair transplants, and intimate care. Their customers usually aim for significant visible changes. On the other hand, our clinics concentrate solely on non-surgical anti-aging treatments without offering surgeries or high-risk procedures. Our clients mainly seek maintenance and rejuvenation services. Regarding customer spend and visit frequency, Mylike and Yestar have a high spend per customer but with lower frequency, while average treatments at our clinics cost around RMB1,000 but are more frequent. Typical customer spending is about RMB2,000, with loyal customers visiting 6 to 8 times a year. In terms of store size and expansion strategy, Mylike and Yestar generally run a large flagship clinic per city, often over 8,000 square meters. Our clinics, in contrast, are smaller, from 200 to 500 square meters, and more broadly distributed throughout the city. Currently, we operate six aesthetic centers in Beijing and plan to expand to ten by year-end, with a potential to grow to 30 locations. This aligns with our strategy to position medical aesthetic treatments as high-frequency maintenance services, where convenience and accessibility are vital. For user experience, Mylike and Yestar operate only offline, while we utilize our restaurant internet model to provide a hybrid experience that integrates in-person treatment with a comprehensive digital platform. With the So-Young Clinic app and our extensive online female private community, users can explore treatment options, compare services, and make purchases and bookings online at transparent prices. After treatment, customers can access skin test results through before and after photos and receive timely care instructions via the app. In terms of product supply chain, Mylike and Yestar focus on service delivery. In contrast, since 2021, we have developed upstream supply chain capabilities, highlighted by our acquisition of Wuhan Miracle Laser, which enhances our injectable product pipeline and enables us to offer highly effective services. In summary, our aesthetic center business operates under a highly standardized model that is ideally suited for expansion. The key to successful chain operations is scale, and this is where we clearly excel.

And your next question comes from Nelson Cheung with Citibank.

Thank you for taking my question. As the clinic network expands, will capital expenditures become a burden for the company? Is this model sustainable?

We placed great emphasis on the health of our business. While we continue to carefully expand our network, we are prudent in managing our capital expenditures to ensure a financially sustainable model. Currently, we expect to open around 13 new clinics each year. Each new aesthetic center is carefully selected based on its location and potential for profitability, which helps us keep overall costs manageable. At the same time, we are actively planning to roll out a franchise model. This will accelerate our geographic reach and reduce capital expenditure pressure, allowing for asset-light expansion. Operational efficiency is also improving; as of Q1, the majority of our aesthetic centers have achieved positive operating cash flow, benefiting from increasing economies of scale and further dilution of fixed costs. We are confident in the long-term profitability of our aesthetic centers.

And your next question comes from Hi Jim Peng with CITIC.

Thank you management for taking my question. I have two questions. First, how does the Miracle Laser create more synergy with the company's core business?

With the integration of Wuhan Miracle Laser, we have effectively combined our product talent and organizational processes to enhance our R&D capabilities. This positions Wuhan Miracle Laser as a market-driven upstream platform that generates significant synergies to support our growth model. As a leading provider of aesthetic laser devices in China, Wuhan Miracle Laser's advanced R&D capabilities enable us to supply our aesthetic centers with high-quality, cost-effective equipment, including our flagship IPL projects and other new products in development. This not only decreases our dependence on expensive imported devices but also ensures consistency across our centers, which helps accelerate our expansion. Wuhan Miracle Laser also has a unique advantage in catering to China's long-tail aesthetic market. While most manufacturers target larger institutions, Wuhan Miracle Laser has serviced over 5,000 clients, gaining extensive experience and a broad distribution network among small and medium-sized clinics. As our network of aesthetic centers continues to grow, we plan to jointly explore a B2B2C model that interprets the delivery of devices and services, enhancing user experience, improving business efficiency, and ultimately building a more competitive ecosystem.

Your next question comes from Daisy Chen with Haitong. We have a follow-up from Hi Jim Peng.

I still have the second question. It's about a trade war. So how would the ongoing trade tensions between China and America impact the company?

Trade tensions primarily affect the aesthetic industry in two ways: changes in cost structures and shifts in the competitive landscape. For So-Young, the direct impact is limited, but we also see this as an opportunity to strengthen our domestic supply chain and support import replacement. From the cost perspective, the impact on our aesthetic centre business is minimal. Only one of our main offerings uses U.S. imported equipment and consumables, which accounts for less than 10% of total revenue in our aesthetic centres. If tariffs drive prices higher, we are well-positioned to pivot to alternative products that offer similar results without compromising user experience. That said, the impact on the upstream may be higher. Wuhan Medical Laser currently distributes several imported devices, including PBL treatment. Tariff increases could affect the pricing and sales volume of these products. In conclusion, we see this as an opportunity rather than a threat. We will continue leveraging our vertical integrity capability to upgrade China's aesthetic supply chain and deliver high-quality, cost-effective solutions to consumers.

And your next question is from Daisy Chen with Haitong.

Thank you management for addressing that question. We see that the company has demonstrated a strong ability in cost control in Q1, and we also note that the cash balance is adequate. My question is whether management can further utilize the company's future investment and cost reduction plans to enhance overall financial performance.

We are encouraged by the early results of our aesthetic centre business and are confident in its mid to long-term profitability. In March, 18 centres had achieved positive monthly operating cash flow, with 16 of them being profitable on a monthly basis, showing the viability and efficiency of our business model. Going forward, we will expand our self-operated aesthetic centres at a measured pace and will manage new openings carefully and in a disciplined manner. At the same time, we are preparing for the launch of a franchise model to enable lighter, scalable growth. Additionally, we are optimizing our offering mix, deepening upstream collaboration, and enhancing efficiency at the clinic level to improve cost control and gross margin. We have also increased investment in growing our proprietary product lines, which will further support margin expansion. Overall, we remain focused on sustainable, high-quality growth, underpinned by financial discipline and structural optimization across our core business lines.

This concludes our question-and-answer session and today's conference call. Thank you for attending today's presentation. You may now disconnect.