So-Young International (ticker: NASDAQ:SY) has reported a strong first quarter in 2024, with total revenues reaching RMB 318.3 million, surpassing market expectations. The company achieved non-GAAP profitability for the fourth time in the past five years. A significant 23.3% year-over-year increase in medical products and maternity services sales contributed to this growth.
So-Young's expansion efforts are evident in the opening of three PR operations and a 19.7% increase in users acquired through private domains. The company's non-surgical anti-aging device, True Lift, has performed beyond expectations, and Korean product sales have seen an impressive 80% growth. Looking forward, So-Young anticipates second-quarter revenues to be between RMB 380 million and RMB 400 million.
Key Takeaways
- So-Young's total revenues hit RMB 318.3 million, with a non-GAAP net income of RMB 4.1 million.
- The company reported a 23.3% year-over-year increase in sales of medical products and maternity services.
- Three PR operations were opened, enhancing the chain of clinics, So-Young Prime.
- User acquisition through private domains grew by 19.7%.
- Sales of Korean products surged by 80%, with the True Lift device launch surpassing expectations.
- So-Young maintains a strong cash position with RMB 1.3 billion.
- Revenue projection for Q2 2024 is between RMB 380 million and RMB 400 million.
Company Outlook
- So-Young plans to open 15 clinics in 2024, targeting 100 to 150 clinics over the next three years.
- The company will continue to focus on user satisfaction and expand its proprietary supply chain.
- There are plans to use cash reserves for industry expansion and possibly for shareholder returns through repurchases or dividends.
Bearish Highlights
- The report did not highlight any specific challenges or setbacks faced in the quarter.
Bullish Highlights
- So-Young's expansion of its clinic chain and product pipeline indicates a strong growth trajectory.
- The company's focus on vertical integration aims to optimize costs and enhance efficiency.
Misses
- There were no reported misses in the earnings call; the company exceeded revenue expectations.
Q&A highlights
- In the Q&A session, So-Young discussed strategies to attract high-quality clients and cater to diverse user demands.
- The company emphasized its competitive advantages, including high-quality users and offline medical aesthetic institutions.
So-Young International's first-quarter performance in 2024 demonstrates a solid growth strategy with successful expansions in both its product offerings and clinic operations. The company's focus on vertical integration and traffic acquisition through private domains has paid off, leading to an increase in users and sales. Their strong cash position and future revenue projections suggest a confident outlook for the company's continued expansion and potential shareholder value returns.
InvestingPro Insights
So-Young International's (ticker: SY) robust first-quarter performance in 2024 is echoed by several encouraging metrics and InvestingPro Tips. Notably, the company's aggressive share buybacks and strong cash position align with the InvestingPro Tips that highlight management's confidence in the company's value and financial stability. Specifically, the company has been actively buying back shares and holds more cash than debt on its balance sheet, which is a positive sign for investors looking for companies with solid financial health.
InvestingPro Data further complements the article's optimistic tone with key financial metrics. The company's Price / Book multiple for the last twelve months as of Q4 2023 stands at a low 0.3, suggesting that the stock may be undervalued. This is reinforced by a PEG Ratio of 0.27 for the same period, indicating potential for growth relative to earnings expectations. Additionally, the company's Revenue Growth was reported at 19.09% for the last twelve months as of Q4 2023, reflecting the strong sales performance mentioned in the article.
For investors seeking more comprehensive analysis and additional insights, there are 15 InvestingPro Tips available for So-Young International, which can be accessed by visiting https://www.investing.com/pro/SY. Remember to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, enhancing your investment research with valuable information.
Full transcript - So Young International Inc (SY) Q1 2024:
Operator: Ladies and gentlemen, thank you for standing by for So-Young's First Quarter 2024 Earnings Conference Call. At this time all participants’ are in listen-only mode. After management give their prepared remarks, there will be an opportunity for question-and-answers. As a reminder today’s conference is being recorded. I would now like to turn the conference over to your host for today's call, Ms. Mona Qiao. Please proceed, ma’am.
Mona Qiao: Thank you, operator, and thank you everyone for joining So-Young’s first quarter 2024 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 the U.S. private securities and the litigation reform act of 1995. Forward-looking statements are subject to risks and alternatives that may cause actual results to differ materially from our current expectations. Potential risks and alternatives include, but are not limited to those outlined in our public filings with SEC, including our annual report on Form 20-F. So-Young does not undertake any obligation to update any forward-looking statements, except as required under applicable law. At this time, I would like to turn the call over to Mr. Xing Jin.
Xing Jin: [Foreign Language] [Interpreted] Hello, everyone. Thank you for joining the call today. Our business performed well in the first quarter with total revenues reaching RMB318.3 million, exceeding the upper end of our guidance. At the same time, this marks the fourth time in five years that we achieved non-GAAP profitability in the first quarter. Our new businesses continue to grow rapidly with revenue from sales of medical products and maternity services increased 23.3% year-over-year. Our pipeline of upstream products continues to further diversify its offerings, while So-Young plant maintains healthy development. We have made significant progress in the expansion of our chain of clinics. In the first quarter, we opened the PR operations at three clinics, all of which boost unit area efficiencies well above industry average at a notable price advantage. In the first quarter, the cumulative clients service -- by our clinics increased 77% quarter-over-quarter. We've also made steady headway of vertical integration from products to institutions, driving the destruction of pricing system and value allocation in the industry. This will provide consumers with medical, aesthetical services that are more cost efficient and help with sustainable development of medical and aesthetic practitioners. In terms of products, institutions and So-Young platform, as we made steady progress in these initiatives, we are confident in the growth opportunities for us going forward. In our POP segment, we continued to advantage our differentiated strategy to solidify our advantage within the premium segments of the market. By offering customer size and high value services, we are not only able to serve high end users, but also assist institutions in boasting their profits. During the quarter, our order value increased by 11.3% year-over-year. In terms of traffic acquisition, we reallocated our budget away from low ROI online channels and instead focused on cultivating and returning a target user base within our private domains. We leveraged various channels within and outside of the So-Young platform and improved user engagement, aiming to enhance our monetization efficiency. As a result, in the first quarter, users required through private domains increased by 19.7% quarter-over-quarter. Turning to So-Young Prime, we capitalized on the success of the model clinic we opened at our headquarters in Beijing in the later half of 2023. Building upon this momentum, we accelerated our strategy transition from partner institutions towards establishing a chain of clinics. During the quarter, we opened three clinics, with operations firmly on track. By the end of this month, we expect to open at commerce operations for our third batch of clinics. To efficiently drive this transition, we have established a comprehensive and standardized workflow system covering everything from site selection and evaluation to clinic opening and operations. This has enabled us to expand at a pace that significantly surpasses the industry average and set an industry record for the rollout of new clinics. We plan to expand our chain of clinics nationwide, starting with five to six core cities. At the same time, So-Young Prime continues to gather exceptionally high user satisfaction, with user satisfaction of over 4.9 out of 5 for each institution every month at an ever increasing repurchase rate. Lastly, I will provide a quick recap of the process we have made in our upstream supply chain business. Sales of the Korea provides a role we continue to grow strongly over the quarter, increasing 80% year-over-year. In just one year, we have established a mature distribution network that covers 715 institutions through both direct and agency self-channels. Our recent launch of True Lift, a non-surgical anti-aging ultrasound device, has further diversified our product portfolio with sales far exceeding expectations. The success of this product is a testament to the strength of our brand. Word of mouth recognition among consumers, and domestically how we are able to quickly bring new products to markets and rapidly secure their market positions through our expansive institutional network. We recognize the immense potential for growth in China's medical aesthetics market. However, the industry still contains a less than suitable public perception despite its development over the past two decades. While a HA injection that costs tens of RMB can be sold for thousands, many institutions within the sector struggle to turn a profit. Reality such as this points to structural issues. So-Young will address these issues by establishing an industry platform. By integrating the upstream, midstream, and downstream resources of the medical aesthetical industry, we aim to fundamentally reduce costs and increase efficiency, and provide consumers with better and more cost-effective medical aesthetic services. This approach is designed to drive sustainable revenue and profit growth for the platform, while ultimately delivering greater long-term value to our shareholders. I will now turn the call over to our CFO, Nick, to review the financial results for this quarter before taking your questions.
Hui Zhao: Hello. This is Nick. Please be reminded that all amounts quoted here will be RMB. Please also refer to our earnings release for detailed information of our comparative financial performances on a year-over-year basis. Total revenues during the quarter were RMB318.3 million, up 2.6% year-over-year, exceeding the high end of our guidance. Growth was primarily driven by sales of medical products and maintenance services, which increased 23.3% year-over-year to RMB86.5 million, driven by the sales volume increase of cosmetic products and medical equipment. Information services and other revenues were RMB208.7 million, a slight decrease of 0.7% year-over-year. Reservation service revenues decreased 22.3% year-over-year to RMB23.1 million, primarily due to the policy change for commission rates and subsidies. Cost of revenues were RMB117.3 million, up 3.2% year-over-year, primarily due to increased costs associated with the sales of cosmetic products and medical equipment. Within cost of revenues, cost of services and others were RMB74.2 million, down 8.9% year-over-year, primarily due to a decrease in payroll costs. Cost of medical products sold and maintenance services were RMB43.1 million, up 33.7% year-over-year, primarily due to increased costs associated with the sales of cosmetic products and medical equipment. Total operating expenses were RMB237.8 million, up 3.5% year-over-year. Sales and marketing expenses were RMB113.3 million, up 0.7% year-over-year, primarily due to an increase in payroll costs associated with the expansion of our marketing team. G&A expenses were RMB85 million, up 38.1% year-over-year, primarily due to an increase in payroll costs associated with the expansion of administrative employees to support the enhancement of our core and new strategic businesses. R&D expenses were RMB 39.6 million, down 29% year-over-year, primarily attributable to improvements in employee efficiency. Income tax benefits were RMB 2.6 million compared with income tax benefits of RMB 4.3 million in the same period of 2023. Net loss attributable to So-Young was RMB 21.2 million compared with a net loss of RMB 11.9 million during the same period last year. Net non-GAAP net income attributable to So-Young was RMB 4.1 million compared with RMB 2.8 million net non-GAAP net loss attributable to So-Young in the same period of 2023. Basic and diluted loss per ADS attributable to ordinary shareholders were RMB 0.21 and RMB 0.21, respectively, compared with basic and diluted losses per ADS attributable to ordinary shareholders of RMB 0.12 and RMB 0.12, respectively, during the same period of 2023. We have maintained a robust cash position with cash and cash equivalents, restricted cash and term deposits, term deposits and short-term investments, totaling RMB 1.3 billion as of March 31, 2024, effectively flat when compared with December 31, 2023. For the second quarter of 2024, we expect total revenues to be between RMB 380 million and RMB 400 million. The above outlook is based on the current market conditions that reflect the company's preliminary estimates of market and operating conditions and the customer demand. This concludes our key remarks. I will now turn the call to the operator and open the call for Q&A. Operator, we are ready to take questions.
Operator: Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] The first question we have comes from Chloe Wei of CICC.
Chloe Wei: [Foreign Language] So let me translate myself, thanks management for taking my question. Congrats on the solid first quarter result. The top-line was ahead of our expectation. So my question is about the full-year outlook. From what we got from the prepared remarks, I believe our time have turned more positive. So is there some trend and maybe management want to share with us? And given the headwinds from the macro, how should we think about our full-year top-line growth? Thank you.
Xing Jin: [Foreign Language] [Interpreted] Developments on medical aesthetics industry in the first quarter, is in line with our observation and expectation at the beginning of the year. First, the Chinese medical aesthetics market is gradually recovering with the overall consumption market. As retail sales of consumer goods in China increased by 4.7% year-over-year in the first quarter. Medical aesthetics consumption data has also reflected a gradual growth trend. Second, as the medical aesthetics user group tends to mature, user demands are more diversified. It's difficult to attract high-quality clients simply with low prices, more enriched products and services are required to cater to differentiated user demand. In 2024, we will maintain our strategies based on our existing business. We will establish a platform that's vertically integrates upstream supply chains, midstream operations and downstream distribution channels to fundamentally optimize cost and enhance efficiency. This strategic approach will enable us to deliver superior and more cost-effective services to consumers.
Operator: Thank you. The next question we have comes from [indiscernible] of CITIC Securities. Please go ahead.
Unidentified Analyst: [Foreign Language] So, okay, thanks for this opportunity. Just two questions. First is, how should consider a decline of the traditional metrics such as MAU? And what business -- different advantages in this intensified traffic competition? Yes, thank you.
Xing Jin: [Foreign Language] [Interpreted] In terms of online traffic, all industries are experiencing intensified competition for traffic. For So-Young app, we continue to boost engagement and attracts more organic user traffic through operation of community content and self-media resources. In addition, there were extensive private domain operations. We strive to connect So-Young app with private domains, expanding its traffic pool as we increase private domain retention rate and user engagements. This part of data is not reflected in our MAU. But judging from recent transition data such as GMV and online orders, it reflects -- it has remained basically stable. It testaments to the effectiveness of this strategy. It can also help lower traffic costs and enhance profits. Thirdly, in terms of cooperation with third-party traffic sources, we emphasized our traffic of accuracy and placement ROI, reduced budget for channels with low ROI to further reduce placement costs and increased margins of our platform. Compared to our peers, we have two core competitive advantages. First, we have high-quality users and a high average, order volumes. Second, we benefit from our own offline medical aesthetic institutions, including So-Young chain clinics and shared hospitals, which provide us with greater room for innovation. For surgical customers, we organized offline consultations and invite multiple renowned doctors to participate. Centralized consultations help users save time and transportation costs and face-to-face communication also increased users' decision-making efficiency. For high-end injection customers, we screen high-quality doctors on the platform and complete service deliveries within our own or cooperative institutions. With this approach, we have stronger control over the contract fulfillment and delivery process, while simultaneously commanding price power and conducting refined user operations in a closed-loop manner, thus avoiding the risk of user attrition.
Operator: The next question we have comes from Yibing of Haitong. Please go ahead.
Yibing Wang: [Foreign Language] Okay, thanks for management. I will translate myself. My question is about the So-Young Prime. I want to ask is the current progress of the opening new clinics on the So-Young Prime in line with your expectation? And what's your midterm to long-term plans for proprietary chain clinics?
Xing Jin: [Foreign Language] [Interpreted] We planned to open 15 clinics in 2024 at the beginning of the year. By the end of the first quarter, we opened three clinics. Since then, we added two more before today's earnings. Now, we are opening six clinics in all generally in line with our expectation. During the process, we have established a comprehensive and standardized workforce system, covering everything from site selection and evaluation to client opening and operations. This has enabled us to expand at a pace that significantly surpasses industry average and set an industry record for the rollout of new clinics. Emphasizing on authentic products, cost performance and transparency, our aim is to position standardized light medical aesthetical services as the first choice of everyday cosmetic consumption. We expect to reach the scale of 100 to 150 clinics in the next three years. While expanding our chain of clinics, we continue to build our operation team, combining our advantages in product supply, development and innovation. We are driving the build out of a standardized management system for light medical aesthetics institutions as well as an end-to-end online process management capabilities to improve operating and management efficiency for institutions. In the future, we will continue to improve efficiency per staff and efficiency per unit area for our chain of clinics, increase penetration of our proprietary supply chain products, improve margin of our chain clinics while providing users with more cost-effective services. User satisfaction is fundamental to chain operation. With that in mind, we emphasized more on user satisfaction. From January to April, user satisfaction in our chain of clinics reached 98% and in line with our expectations. Thank you.
Operator: The next question we have comes from Joey Chan of Jefferies. Please go ahead.
Joey Chan: [Foreign Language] I will translate myself. Thanks for the management for taking my question. And I have two questions. The first question is, can management share on new progress for upstream supply chain business? And the second question is with the cash reserves of our progress in average RMB1.3 billion. What will be the planned usage? Thank you.
Xing Jin: [Foreign Language] [Interpreted] On product side, first Huawei maintained strong momentum, with sales increasing 80% year-over-year and revenue increased 56.5% year-over-year in the first quarter. In addition, we spent just one year to establish a mature distribution network covering 715 institutions through both direct and agencies of channels. In the future, we will continue to integrate our upstream supply chain help companies to increase profit and return to users with products of sound cost performance, reaching win-win situation. Second, we continue to expand our product pipeline. The launch of Face Lift product True Lift further diversifies our photo-electric category with sales far exceeding expectations. This is a testament to the strength of our brand, word-of-mouth recognition among consumers and demonstrates how we are able to quickly bring new products to market and rapidly secure their market position to our expansive institutional network. We expect to add more products and continuously generate incremental revenue and profit growth from the supply chain business.
Hui Zhao: This is Nick. [Foreign Language] I will translate. We will use the cash for two purposes. First of all, we will continue expanding along upstream and downstream of the industry, including upstream product pipeline and downstream chain clinics to lay solid ground for our integrated industry platform. And secondly, we will share repurchase plan or potential dividend to return values to our shareholders. Thank you.
Operator: Thank you, sir. Ladies and gentlemen, we have reached the end of our question-and-answer session and our conference. Thank you for joining us today. You may now disconnect your lines.
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