Ladies and gentlemen, thank you for standing by for So-Young's Fourth Quarter and Full Year 2025 Earnings Conference Call. 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 Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining me today on the call is Mr. Xing Jin, our Founder, Chairman and CEO, and Ms. Hui Zhao, VP of Finance. Before we begin, please refer to the safe harbor statements in our earnings release, which applies to today's call as we will be making forward-looking statements. Please also note that we will discuss non-GAAP measures today, which are more thoroughly explained and reconciled to the most comparable measures reported under GAAP in our earnings release on our Investor Relations website and filings with the SEC. Please also note all figures mentioned in this call are in renminbi or otherwise stated. At this time, I'd like to turn the call over to Mr. Xing Jin.

China's medical aesthetic industry is undergoing significant structural changes as upstream capacity grows and consumers become more focused on value. The importance of value has emerged as a central theme. For organizations adopting scalable and repeatable models, this presents a crucial opportunity to establish a long-term competitive advantage. In the fourth quarter, we improved our investments and made strides in three key areas. First, we achieved significant growth and operational enhancements in our aesthetic center business; second, we strengthened our medical service capabilities to foster a long-term trust-based model; and third, we fortified our supply chain to enhance our brand and capitalize on market opportunities. We are encouraged to see these decisions reflected in our financial performance. Our total revenue for Q4 reached RMB 451 million, representing a year-over-year increase of approximately 25% and setting a record for quarterly revenue. Revenue from our aesthetic center business was RMB 248 million, soaring over 205% year-over-year and exceeding our guidance by about 10%. This segment has become our largest revenue contributor and growth engine, with So-Young Clinic leading as the biggest medical aesthetic chain in China by the number of centers. Let me outline our achievements in Q4 and our plans for 2026, emphasizing our aesthetic center business. Recently, we reached two significant milestones. First, regarding our center footprint, by the end of 2025, we plan to have opened 49 medical aesthetic centers, making us the top chain in the country by center count. Second, in terms of treatment volume, verified treatment visits surpassed 125,000 in Q4, up 178% year-over-year, while verified aesthetic treatments exceeded 289,400, a 168% increase year-over-year. By the end of December, our total active users exceeded 170,000. The increase in both treatment volume and user base demonstrates strong market demand and consumer recognition. As we scale, our center-level operational efficiency is improving. In Q4, 25 centers achieved profitability and 39 centers generated positive operating cash flow. In 2026, we aim to open at least 35 new centers, enhancing our presence in core cities such as Beijing, Shanghai, Guangzhou, and Shenzhen, and expanding into second-tier cities. As our operations advance, we are optimistic about further profitability while continuing our expansion efforts. We are also improving our medical service delivery capabilities to establish a long-term trust-driven model. In Q4, we enhanced our services across three areas: our physician team, compliance framework, and data security, which bolstered user trust. By the end of 2025, our full-time physician team is expected to grow to 211, a 41% increase from Q3, making us first in the industry by physician count. All our physicians have backgrounds in public hospitals and pass our regular internal certifications before they start practicing. Over half hold attending physician qualifications or higher, and our team's average clinical experience exceeds six years. Those with at least a year at So-Young have conducted over 6,200 treatments each, reflecting our robust clinical capabilities. In 2026, we will introduce a new physician initiative to expedite recruitment and develop a talent pipeline, offering industry-leading hands-on training and clear career advancement paths to help physicians achieve top performance swiftly. As our team's expertise grows and our user word-of-mouth expands, we anticipate increasing physician productivity, leading to ongoing improvements in profitability. On compliance, we have implemented a six-pillar compliance framework and regular inspection processes. Utilizing digital software, we ensure full traceability of medical services. Regarding data security, So-Young is the first in the sector to receive TIA certification, setting a standard in the industry. Our continuous investments are reflected in user behavior. Core members have an 80% quarterly retention rate, and their average annual spending is around 16,500. This growing user trust underpins our sustainable low-cost growth. We will continue to strengthen our supply chain and capitalize on market opportunities. As of Q4, we collaborated with 18 leading domestic suppliers and procured nearly 1,400 devices. In the injectables category, we have partnered with 42 top-tier upstream suppliers, accumulating over 700,000 units. The upstream supply saw significant expansion in 2025, with the NMPA issuing over 50 Class II medical device certificates, a year-over-year increase of over 60%. This development broadens our product portfolio, stabilizes procurement costs, and enhances user experiences. Supported by China's largest light medical aesthetic chain, we continue to refine our supply chain capabilities and have established long-term partnerships with key suppliers, implementing a pricing mechanism that secures the best procurement rates in the industry. In terms of product offerings in Q4, we launched a light version of Merle PLLA version 3 printing, which reduces customers' barriers to trying our products. We also secured exclusive distribution rights for a biopharma's HP solution, now approved for marketing in China, broadening our product lineup. For BPL treatments, we've enhanced branding influence and conversion through co-branding initiatives and immersive experiences. In Q4, we collaborated with a partner to introduce the Youth Radiant campaign, utilizing diverse channels and formats, including celebrity treatment experiences, pop-up events, and influencer store visits. Our corporate initiatives attracted around 2 million onsite visits, with total exposure exceeding 40 million. This blend of online and offline strategies has strengthened our brand recognition and driven sales conversions for BBL, aligning our brand-building efforts with revenue generation. Our commitment to integrating products, launching new items, and engaging in market activities reflects our dedication to a blockbuster strategy. In Q4, these blockbuster products significantly contributed over 37% of our revenue with sequential growth and remain a key driver of our aesthetic business. Our brands have been validated in offline settings, and we have successfully established a presence in high-end shopping malls nationwide, including locations in Beijing, Guangzhou, and Hangzhou. These premium venues enhance our brand visibility and help us connect with targeted customer segments. Looking ahead, we foresee a shift in the industry back to a regionally-focused quality-driven approach, prompting a reset in value distribution. We believe the industry will be led by those closest to consumers and capable of delivering the most trusted services. For So-Young, 2026 marks a pivotal transition. We are evolving from a focus on scale to an emphasis on both scale and efficiency. Our goal extends beyond merely opening centers; we aim to demonstrate that our model is profitable as we grow. Our systematic advancements over the past two years instill confidence in our ambitions, which extend beyond these foundational goals. As our network of centers, supply chain, and medical service capabilities integrate, we will reduce barriers to access, allowing more consumers to experience safe, transparent, and inclusive services while delivering sustainable shareholder returns. We are confident that companies that create real value will gain long-term recognition in the market. Now, I will pass the floor to our VP of Finance, Ms. Hui Zhao, who will discuss our financial results, followed by a Q&A session.

Thank you, everyone, for joining us today. I am Hui Zhao, Vice President of Finance. On behalf of our CFO, I will walk you through our fourth quarter 2025 operating and financial results. For additional details on our fourth quarter and full year performance, please refer to the earnings release we issued earlier today. Unless otherwise noted, all amounts are in RMB. 2025 marked a transformational year for So-Young. The rapid scaling of our branded network fundamentally reshaped our business profile, and we are pleased with where we are today. Total fourth quarter revenues reached RMB 46.7 million, up 24.8% year-over-year, driven by continued expansion of our branded aesthetic center business. As of year-end, our cash position stood at RMB 936.4 million, providing a solid runway to fund our expansion plans while preserving financial flexibility. Now, let me walk you through performance by business segment. Our branded aesthetic center business sits at the core of our growth, with our platform and upstream supply chain businesses serving as complementary pillars. Together, they form an integrated value chain across the medical aesthetics industry. Revenues from aesthetic treatment services reached RMB 248.1 million, up 205.3% year-over-year. This has been our largest revenue segment since Q2, and this quarter, it crossed the 50% revenue contribution threshold for the first time. This marks our third consecutive quarter of exceeding the high end of our segment guidance. This strong performance was driven by both continued network expansion and improving cost center economics. As of December 31, we operated 49 So-Young clinics across 15 major cities, reflecting a net addition of 10 centers during the quarter. Breaking down revenue by center development phase, our 17 mature phase centers generated RMB 102.5 million in revenue, or roughly RMB 8.4 million per center. Our 19 growth-based centers contributed RMB 89 million, or roughly RMB 4.7 million per center. The 13 ramp-up phase centers contributed RMB 16.6 million. Notably, average revenue per center nearly doubles as centers progress from growth phase to maturity. With 19 centers currently in the growth phase, we see a clear built-in revenue growth driver as these centers continue to mature. In terms of profitability, 25 centers achieved profitability during the quarter, including 15 mature phase centers that generated positive operating cash flow. As centers move through their development cycle, profitability has consistently followed. This gives us confidence in the financial trajectory of our newer centers. Turning to other statements, information and reservation services revenues were RMB 125.7 million, down 26.8% year-over-year, primarily due to a decrease in the number of medical service providers subscribing to information services on our platform. Sales of medical products and maintenance services revenues were RMB 69.3 million, down 19.9% year-over-year, primarily due to a decrease in the order volume for medical equipment. Other services revenues were RMB 17.7 million, down 40.7% year-over-year, primarily due to a decrease in revenues from So-Young Prime. I will now walk you through our financials in more detail. Cost of revenues was RMB 255.9 million, up 67.2% year-over-year, primarily driven by the expansion of our branded aesthetic centers. To break this down further, cost of aesthetic treatment services was RMB 189 million, up 189.9% year-over-year. Cost of information and reservation services was RMB 10.1 million, down 5.6% year-over-year. Cost of medical products sold and maintenance services was RMB 41.6 million, down 4% year-over-year. Cost of other services was RMB 15.3 million, down 7% year-over-year. Total operating expenses were RMB 327.7 million compared with RMB 815.2 million in the same period of 2024. Excluding the impact of goodwill impairment charges in both periods, total operating expenses increased moderately year-over-year, reflecting continued investment in scaling our aesthetic center business. Sales and marketing expenses were RMB 168.7 million, up 25.8% year-over-year, primarily driven by branding and user acquisition investments according to branded aesthetic center growth. General and administrative expenses were RMB 101.9 million, up 3.5% year-over-year due to the business expansion of the branded aesthetic centers. Research and development expenses were RMB 37.4 million, down 12.4% year-over-year due to improved staff efficiency. We also recorded an impairment of goodwill and long-term assets charge of RMB 19.7 million based on our annual impairment assessment. Income tax benefit amounted to RMB 0.6 million compared with income tax expenses of RMB 2.1 million in the same period of 2024. The net loss attributable to So-Young was RMB 108.8 million compared with RMB 607.6 million in the same period of 2024. Non-GAAP net loss attributable to So-Young was RMB 93.4 million, compared with RMB 53.2 million in the same period of 2024. Basic and diluted loss per ADS improved to RMB 1.08 compared with RMB 5.92 in the same period of 2024. As of December 31, 2025, our cash and cash equivalents, restricted cash, and term deposits totaled RMB 936.4 million compared with RMB 1,253.2 million as of December 31, 2024. The decrease primarily reflects our accelerated investment in brand aesthetic center expansion. Looking ahead, for the fourth quarter of 2026, we expect aesthetic treatment services revenue to be between RMB 258 million and RMB 278 million, representing year-over-year growth of 171.2% to 181.3%. This guidance reflects our confidence in the sustained momentum of our branded aesthetic center business. Currently, our standard network has crossed the 50 center milestone. In 2026, we will shift our focus from pure network expansion towards balancing growth with profitability improvement. We plan to add no fewer than 35 new centers in 2026 while leveraging our expanding scale to improve gross margins and drive efficiency gains across the network. This concludes my remarks. We are now ready for the Q&A session.

Our first question comes from an analyst with Citi Securities.

Let me briefly translate. I'm from Citi Securities. Firstly, congratulations on the accelerating growth in Q4. We're pleased to see improvements in gross margins in the aesthetic center and service businesses. I have a question regarding the prospects for gross margins. Could you provide more details about the gross margin plan and the sources for further margin expansion?

Thank you for your question. We believe that three core factors shape margin performance: the pace of center openings, consumable costs, and seasonal promotions. Based on these factors, we have planned to enhance gross margin. First, we will continue optimizing the pace of center openings and the ramp-up efficiency of new centers. Upfront investments in new centers can create short-term margin pressure, and license approval timing in our industry is often unpredictable. Going forward, we aim to adopt a more even cadence throughout the year, combined with our integrated operating system. This accelerates each center's path to efficient operations and a shorter ramp-up cycle. For 2026, new openings will represent a smaller share of total centers compared to last year, which will reduce margin dilution from concentrated new center investments. Meanwhile, the proportion and profit contribution from mature centers will rise, driving overall gross margin levels. Second, we will optimize consumable costs. Currently, we have built deep collaborations with upstream partners, including an undisclosed biopharma, China Medical System, an undisclosed farm, and an undisclosed medical company. This ensures reliable supply and ongoing cost optimization. Looking ahead, we will strengthen partnerships with our suppliers and convert more high-quality upstream manufacturers into long-term partners. At the same time, we will continue advancing our broader strategy. In the fourth quarter, our four major products accounted for over 37% of revenue as our core offering, and through procurement cost advantages, this will become more pronounced. Third, we will refine our seasonal promotions. Digital accounting remains a critical channel for user base expansion, customer conversion, and building long-term user assets. Moving forward, we will optimize our product mix and integrate campaigns more deeply with the membership system, targeting repeat visits among core members. Our goal is to transform short-term traffic into customers' long-term value, which will drive gross margin.

Your next question comes from John Wang with GF Securities.

This is John Wang from Guangfa Securities. Congratulations on this outstanding performance. My question is about the development of So-Young Clinic in second-tier cities. I would like to know whether the current operating performance of these centers has met management's expectations. Could management also share some operational updates on the several representative centers?

Ladies and gentlemen, the line for the management has been disconnected. Please stay connected while we reconnect the line for the management. Thank you for patiently holding, ladies and gentlemen. The line for the management has been reconnected. Yes, please go ahead.

From an industry perspective, while the medical aesthetic market in second-tier cities in China has reached a level of maturity, these cities still lack the medical service delivery capabilities and operational standards found in first-tier cities. We ensure that our centers in these second-tier cities provide the same high level of medical service quality as those in first-tier cities. Our operational track record shows that centers in second-tier cities are growing well in terms of traffic and per-customer treatment, bringing revenue per center close to first-tier city levels. As of December, established centers in these secondary cities, like the Wuhan Tiandi Center and Changshu Center, generated an average sales per square meter of RMB 7,000 per month. Among those newly opened in second-tier cities, one center has notably excelled. These centers have shown strong revenue growth with an industry-leading compound annual growth rate. For instance, a center in Suzhou achieved over 1 million in monthly revenue just three months after opening, demonstrating the effectiveness of our model in second-tier cities. Regarding profitability, mature centers in these areas experience slightly higher margins due to lower staff payroll and rental costs compared to first-tier cities. We believe that the key benefit of a chain model lies in the reduction of transaction costs and the enhancement of brand trust, scale, and accessibility. Currently, many players in secondary cities are single-center operators without significant density. As we continue to evolve in both tiers of cities and as So-Young’s brand trust increases, customers are likely to seek multiple treatments per visit. Looking forward, we are confident that improvements in processes, resource synergy, and traffic management will lead to continued growth in our second-tier centers, and economies of scale will be realized across our network. We believe this will result in greater profitability and enhanced market competitiveness in these cities.

This is Maggie Huang from CICC. Congratulations on the excellent performance. We would like to know if the competitive advantages in customer acquisition costs have been maintained as you continue to expand, and could management share the customer acquisition strategy for 2026?

Our advantage in customer acquisition costs has been maintained and even enhanced. In the last quarter, we opened a significant number of new centers and took advantage of major shopping events like Double 11 and Double 12, resulting in a record number of new customers. For the full year, our average customer acquisition cost has stayed below 10% of revenue, which is a strong benchmark in this industry. We have maintained this edge mainly through our customer referral model. By utilizing our membership system and offering unique benefits, we encourage existing high-value users to refer new customers. This strategy will not only lower acquisition costs but also enhance the quality and retention rates of new users. Additionally, we will continue to improve the balance of our public and private domain customer acquisition channels, increasing their lifetime value through refined operations. We will also expand co-branding initiatives with top global intellectual properties. Recently, we launched co-branding programs with Little Print and Disney. Through storytelling, we have connected with a wider audience and resonated emotionally with users, strengthening our brand equity. As we expand and grow our user base, we expect further reductions in acquisition costs.

Your next question comes from the line of David Chang with Haipeng International.

Thank you, management, for addressing my question. I would like to ask about user growth and membership operations, particularly regarding core members. Can you share the specific steps you plan to take to enhance the lifetime value of core members moving forward?

For our core members, those at Level 3 and above continue to show strong growth momentum. Our user service indicates that core members still have substantial potential for expansion in their annual medical aesthetic budgets, setting the stage for us to enhance user lifetime value. This quarter, the revenue contribution from core members and their quarterly return rate both exceeded 80%, with new core members surpassing 14,000. Consumer preferences are shifting towards efficiency and clinical capabilities. In this context, our focus will be on expanding our product portfolio by introducing more comprehensive offerings, including standardized side treatments and mid- to high-end services, which we anticipate will increase user value. Additionally, we will optimize our membership system by providing differentiated benefits and services to achieve tiered user segmentation, thereby strengthening core members' perception of our brand value and fostering loyalty. These strategies are expected to enhance member profitability and support our long-term growth.

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