On Friday, So-Young Intl (NASDAQ:SY) discussed first-quarter financial results during its earnings call. The full transcript is provided below.

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Summary

So-Young Intl reported strong Q1 2026 financial performance with total revenue of RMB 433 million, marking a 46% year-over-year increase, driven by the growth of its aesthetic center business.

The company expanded its clinic footprint, adding 10 new centers, now totaling 59, and reported significant increases in treatment volumes and active user base.

Management highlighted strategic initiatives including supply chain partnerships, enhanced brand awareness campaigns, and the establishment of a medical R&D and training center to strengthen its competitive edge.

Aesthetic center business gross margin improved to 27%, and the company plans further expansion in major tier-1 cities, aiming for a 1000-center goal in the long term.

Guidance for Q2 2026 projects aesthetic treatment service revenue growth of 102.6% to 119.5% year-over-year, reflecting continued confidence in market opportunities and operational efficiency.

Full Transcript

OPERATOR

Thank you for standing by for So-Young Intl's first quarter 2026 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 session. 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 Xiao.. Please proceed, Mona

Mona Xiao (Moderator)

Thank you, operator, and thank you everyone for joining So-Young Intl's first quarter 2026 earnings conference call. Joining me today on the call is Mr. Xin Jin, Director, Chairman and CEO and Shan Zhang, VP of Finance. Before we begin, please refer to the safe harbor statements in our earnings release which applies to this call and 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 sec. Please also note all fingers mentioned in this call are in RMB and this time I'd like to turn the call over to Mr. Xinjing. Hello everyone and welcome to today's earnings call. Entering 2026, China's medical aesthetic industry continues to evolve. With demand becoming more routine and supply continue to grow. Large scale operational capabilities and a uniform delivery framework have become the key mode for top players to achieve high quality growth. We capitalize on this by expanding our Aesthetic center business and advancing our dual engine of scale and efficiency and initiative. As a result, we achieved robust performance in Q1. Total revenue reached 433 million, up around 46% year over year. Revenue from our aesthetic center business reached 282 million, up around 186% year over year. Now let's take a closer look at our recent progress across the few core areas. Thus, Clinic continued to lead China's Life medical aesthetics chain market, ranking number one by center count, treatment volume and user base. Our operational efficiency and profitability also continued to improve. In terms of center footprint. As of today, Soyang Clinic has expanded into 17 with 59 centers in total. That is a net out of 10 centers compared to year end 2025. On treatment volume in Q1 verified treatment visit exceeds 148,000, up 172% year over year. Number of verified treatments performed was over 325,000, up 164% year over year. Our active user base expanded further reaching over 210,000 by March end. Within that, the number of Level 3 and above Core members exceeded 63,000. Core members maintained a high quarterly repercussions rate as we further unlock LTV Driven by excellent user experience and positive the proportion of new customers from referrals rose to 52% in Q1. In addition, by enhancing platform partnerships and content marketing, new customers acquired through public domain domain continued to grow while our overall CAC remained well under control. We also enhanced brand awareness and drove conversion by deepening partnerships with renowned IPs. For example, we launched Disney Co branded pop ups in major commercial areas nationwide for our Miracle Collagen product line. These campaigns attracted active participation from potential customers and generated remarkable results. On top of that, we invited famous Chinese actress Fan Bingbing, and popular Thai actress Mai, to experience and endorse our Collagen products. Moreover, we continue to improve our per center economic model through standardized operations. We accelerated the ramp up of new centers as we refined our product portfolio and customer acquisition, our per center operational efficiency improved steadily. In Q1, the number of profitable centers rose to 41 and 48 centers generated positive operating cash flow. Athletic center business Gross margin reached 27% reflecting continued operating efficiency gains. This year, we will continue expanding our center footprint and broadening access. We will focus on major tier 1 cities as economics of scale take effect, new centers run faster and operational efficiency improves. Further, we expect per center revenue to keep climbing and the clinic's financial model to improve meaningfully. Next, let's turn to Soyoung's professional medical delivery capabilities and reputation Building the long term development of medical aesthetic chain business relies on high quality medical service delivery. To this end, we continue to build core competitiveness across the physician team, diagnosis and treatment quality and user experience. By March end, our full time physicians reached about 230, up 9% from year end 2025. Mai,ntaining industry leadership, we have also been enhancing physician capabilities and digitalizing operations to elevate the user experience and ensure consistent medical practice. [Foreign language segment] In Q1 we established the Soyang Clinic Medical RD and Training center and National Command and Control center focusing on medical research and training. The R and D center in house labs for energy based devices, injectables, x vivo and this enables us to thoroughly evaluate products and devices in the market as upstream product offerings continue to diversify. This capability keeps us grounded in clinical fundamentals, not marketing claims. We evaluate products based on clinical evidence to determine whether they are safe, effective and appropriate. From these findings, our R and D team develops treatment SOPs. Meanwhile, the training center is now fully operational. All physicians joining Soyang Clinic must complete intensive comprehensive training at the center and pass all assessments before practicing. The Command and Control center is the brain of our clinic chain operations. Within it, the Safety and Compliance Office closes the loop on compliance. It allows headquarters to remotely monitor safety and compliance at our clinics, receive offline alerts and coordinates emergency responses. It enables real time intervention to ensure medical safety user experience of this manage the user journey service design and complaints. Any user feedback is immediately escalated to Headquarters for action which helps us continuously improve our medical workflows. In addition, the Operations Office tracks operating data across centers nationwide to keep operations healthy. Thanks to our professional medical team, excellent treatment quality and reliable premium services, we continued to cement our foundation of users trust and reputation. Looking ahead, we will harness Suiang's blind influence and wide market presence to attract more outstanding physicians. That will further enhance our medical delivery capabilities and service quality, reinforcing reputation and brand momentum. In turn, this creates a positive flywheel for long term business growth. Chen. Now moving to our supply chain, we remain committed to diversifying and reinforcing our supply chain through multidimensional in depth upstream partnerships. We aim for win win outcomes while driving health industry growth. In April we announced our partnerships with Jinbuo Biopharmaceutical Steel Joint Development. Both parties will leverage their respective advantage to pour resources and create value. The partnership grants us exclusive rights to new products. We make compact on that basis. We launched our Miracle Collagen offering full scenario anti aging solutions using recombinant collagen for head and face. This is our 20th green label product. The launch further reinforced our green label system one that focus on compliance, traceability and price transparency while allowing us to optimize products based on our user feedback. By connecting directly with upstream partners and using reverse customization, we are improving supply chain efficiently and meeting user needs better. We also launched Enhanced Collagen which combines hadroro and collagen type 17 to address spring dermal irritation. The upbranded sakura skin booster version 2 further enriched our offerings through deep supply chain collaboration and accelerated rollout of proprietary products. Our blockbuster strategy is unlocking growth momentum. Revenue from blockbuster products rose to 41% in Q1 driven by robust demand for BBL dermage and other hints. . In closing, I'd like to emphasize that as medical aesthetic industry enters a new phase of high quality inclusive groups, companies with standardized medical delivery capabilities, scalable operating efficiency and a powerful supply chain will be well positioned for the future market leadership advantage will become increasingly evident. With full industry chain capabilities built over years, we have developed a unique competitive edge. Looking ahead, we will firmly advance our 1000 centers goal while maintaining a measured expansion pace. We will continue optimizing our operating and financial performance. We aim to create value for users and shareholders and to drive industry's long term development. Now I'll hand it over to our VP of Finance Channel Shan Zhang to walk through the financial results followed by the Q and A session.

Shan Zhang (Vice President of Finance)

Thank you Xin and thank you everyone for joining us today. I'm Shan Zhang, Vice President of Finance. I will walk you through our first quarter 2026 financial results. For additional details on our first quarter performance, please refer to the earnings release issued earlier today. Unless otherwise noted, all amounts are in RMB. We started the year off strongly with robust Q1 performance. Total revenue for the quarter grew 45.6% year over year to 432.8 million driven by the driven by the sustained growth momentum in our branded aesthetic center business. We are also encouraged that our strength supply chain is not only supporting our chain operations but also fueling growth in our upstream supply chain business. Let's dive into each business segment. Revenue from Aesthetic Treatment Service increased to 282.4 million up 185.8% year over year and is setting the high end of our guidance for the fourth consecutive quarter. This segment accounted for over 65% of total revenue during the quarter. Its gross margin expanded by 8.4 percentage points year over year and 3.3 percentage points quarter over quarter. We are pleased to see our core growth driver continue to gain traction in both revenue and profitability as we execute our dual engine focused on scale and efficiency. As of March 31, we operated 54 Soyang clinics across 16 major cities, reflecting a net addition of five centers during the quarter. Now breaking down revenue by center fees alternative mature fees centers generated are 150 million in revenue or roughly 7.5 million per center. Our 23 gross fee center contribute 109.5 million or roughly 4.8 million per center. The 11 ramp up face center contribute 22.9 million or roughly 2.1 million per center. It's worth mentioning that. Average revenue per center for this in the ramp up phase saw significant growth both year over year and quarter over quarter. They clearly validate how our increasingly standardized operations are effectively a secondary team their ramp up trajectory. In the meantime, average revenue per metro center remains solid and well above the level seen in ramp up and growth fixed centers. In terms of profitability, 41 centers were profitable and 48 centers generated positive operating cash flow during the quarter, reflecting a net addition of 16 and 9 respectively from last quarter. With a robust pipeline steadily transitioning into maturity alongside our ongoing scale expansion and operation efficiency enhancement, we are confident in our ability to continue driving revenue growth and improving our profitability profile of this segment. Turning to our other segments Information and reservation services revenues were 8.3 million, down 30% year over year, primarily due to the increase in the number of medical service providers subscribing to our information services. Sales of medical products and maintenance Service revenues were 57.1 million, up 2.8% year over year, driven by an increase in order volume for medical products. Other Service revenues were 12.9 million, down 39.3% year over year due to lower insurance brokerage revenue. I will now walk you through our financial spinoff revenue in more details. Costs of revenue were 251 million, up 65.8% year over year, driven primarily by the expansion of our branded esthetic centers. Breaking that down by segment, cost of esthetics treatment service was 205.8 million, up 156.4% year over year. Cost and information and racing service was 6.4 million, down 72.5% year over year. Cost of medical products sold and maintenance service was 30.4 million, down 0.1% year over year. Cost of other services was 8.4 million, down 51.6% year over year. Total operating expenses was 239.7 million, up 26.6% year over year and more notably growing at a smaller pace than total revenues. Sales and Marketing expenses was 130.8 million, up 33.7% year over year. The increase was mainly driven by higher branding and user acquisition spending as well as higher payroll costs to support our branded aesthetic centers. G and A expenses were active 4.5 million, up 42.5% year over year, reflecting the continued expansion of branded aesthetic centers. R and D expenses was 24.3 million, down 24.2% year over year, driven by improved staff efficiency. Income tax benefits were 0.8 million compared with 1.6 million in the prior year period. Net loss attributable to Soyang was 49.2 billion compared with 33.1 million in the prior year period. Non GAAP net loss attributable to Soyang was 46.6 compared with 31.5 million in the primary year period. Basic and diluted loss per ADS was 0.48 compared with 0.32 in the primary year period. As of March 31, 2026. Our cash and cash equivalents, restricted cash and term deposits and short term investments totally 880 million, compared with 936.4 million as of year end 2025. The decrease reflects strategic capital allocation to accelerate the expansion of our branded satellite center and fuel the next phase of growth. Turning to our outlook Q2 given our continued confidence in the branded aesthetic center business, we expect aesthetic treatment service revenues to be between 307 million and 317 million, repreaching year over year growth of 102.6% to 119.5%. Looking at 2026, we are advancing key initiatives across supply chain optimization, medical delivery is silence and operational efficiency. Together, these efforts will strengthen our leadership position, drive sustainable growth and support a clear path to profitability. This concludes my remarks. Operator we are now ready to begin the QA session.

OPERATOR

We will now begin the question and answer session. To ask a question, you may press Star then one on your touchtone phone, if you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw the question, please press Star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Jinping He with Citic. Please go ahead.

Mona Xiao (Moderator)

So let me briefly translate myself. Thank you for taking my question. I'm Jinghe from CT securities. So I have a question about the medical status industry. So we think the industry has experienced a slowdown in overall growth and also intensified the competition in the past two years. So under this background, what are the development status and consumer characteristics in China's medical aesthetics industry? And looking ahead, what opportunities do you see? Thank you. broader market is cooling, structural opportunities remain. As of 2025, China's medical aesthetics market had exceeded RMB317 billion less. Medical aesthetics captured nearly 80% of the market, overtaking surgical treatment and the mainstream choice. This segment also has leading growth potential globally. This internal structural change is driven by evolving consumer habits in the following areas. First, medical aesthetic conception is evolving from changing appearance to anti aging. People now want to look younger, not become someone else. Second, consumers are becoming more rational. They will pay a premium for better technologies, but not parting hype. Third, medical aesthetic is gaining rising popularity. Second and third tier cities now match first tier cities in both average revenue per user (ARPU) and consumer awareness. We believe this new demand is difficult for traditional clinics to meet and stay focused on the affluent lead business services, prepared card requirements and Large single city centers. What's needed is what we offer convenient, standardized, affordable and premium services through a clinic chain. . Overall, the industry has entered a new phase. More device supply, greater price transparency and fiercer yet more mature competition. Upstream supply has been accelerating since 2025, particularly in hot categories like PLLA and collagen. We've already seen more than 10 Class 3 certificate approvals in each category and we expect more to come eventually reaching the same level of diversify as hyaluronic acid (HA) products. For so Young, that means more product choices, better procurement costs and enhanced user experience. . In this environment, medical Aesthetic clinics, the key branch connecting upstream manufacturers and consumers, will succeed only if they can deliver effective, affordable, safe and reliable products and services. In 2026, we expect competition to remain intense across the industry. Weaker players will continue to exit and survivors will need differentiated positioning. In our case, so Young clinic is positioned like a STEM club of medical aesthetics known for consistency, affordability and accessibility. Combined with our established supply chain and diversified customer acquisition channels, this gives us a competitive edge over traditional, high end and single store private centers. As we scale, our advantage will compound. . Looking ahead, China's medical aesthetics market is forecast to exceed its RMB 600 billion by 2030, making it the world's most promising market. In this industry, we believe the tree's biggest opportunity lies in network expansion through uniform services. China's market capacity can accommodate thousands clinic chain brands, so Yang is confident in becoming one of them. Thank you.

Jinping He (Analyst)

Thank you very much. That's very clear. Thank you.

OPERATOR

Our next question comes from James Zhang with GF Securities. Please go ahead.

Mona Xiao (Moderator)

My question is we can say that the purchase rate among core members is very high indicating strong user stickiness. Can you help us understand whether there is still upside potential for high value usage, annual spending or will you grow output through stock-keeping unit (SKU) expansion? Which blockbuster products can we expect? Yes, indeed. We are seeing strong repeat purchase intent and consumption stickiness among core members. This gives us a solid foundation to grow user value over time. Going forward, we will increase ARPU in two ways. First, we will provide dedicated services for core members and level three and above. Through differentiated benefits and personalized services, we will enhance brand value. Combined with curated SKUs, this allows us to meet our users diverse and evolving large metal aesthetic needs while increasing lifetime value. Second, we will continue expanding our mid to high end offerings while promoting coordinated diagnosis and bundled complementary treatment solutions. This will meaningfully boost ARPU. For blockbuster products. Popular treatments like Dermage and BBL have been strong drivers of ARPU. New Products launched with upstream partners are also gaining traction. Our Skin Booster series with Xihong Biopharma and Collagen products with Biopharmaceutical have shown strong market reception and sales momentum. These new products enrich our mid to high end product portfolio while also driving with Chance Behavior and ARPU. They are definitely something to look forward to. Thank you.

OPERATOR

Our next question comes from Daisy Chen with High Tong Securities. Please go ahead.

Daisy Chen (Analyst)

I'll translate myself. Good Management Elaborate more on talent reserves and organizational compatibility buildings like how is the result of high quality doctors? And what unique mechanism does the company adopt for the long term retention of the professional talent? Thank you.

Mona Xiao (Moderator)

We have always believed that premium services are defined by high quality medical delivery. This is critical for earning user trust and driving consumption, which is why talent development is so central for us. It all starts with rigorous hiring and training standards. As China's largest light medical aesthetic chain, Soyang continues to attract high quality doctors. With physician teamkeeping expanding, we now have about 230 full time physicians. All hires undergo rigorous selecting and we require every physician to complete theoretical and hands on training and assessments before practicing. As mentioned in our remarks, our Physician Training center and R&D center at Beijing Headquarters are now up and running. These facilities further strengthen our already high standards for skills and treatment consistency across our network. In terms of talent retention, we have built a multi layer term retention mechanism. Our physician turnover rate is currently in line with the industry average. First, on performance incentives, we offer competitive commission linked to treatment volume to reward high performers. Second, we design clear progression path for physicians at different levels. For instance, doctors at PT2 level or above can receive customized training through our deep collaborations with leading partnerships like Elegant. We also help them do professional influence through live streaming, visibility and other patient building opportunities. Additionally, we have a well defined promotion lender from in clinic physician to regional physician and ultimately to Master Group physician . Meanwhile, as an Internet company, Soyang has established a comprehensive talent incentive system. We offer equity plans to core and outstanding employees. By aligning individual growth with company development, employees share the benefits of offer success, fostering both motivation and a deeper sense of belonging. We are confident that Soyoung's broad awareness, robust training system and diversified talent retention mechanism will continue to underpin a solid pipeline of quality physicians and other outstanding talents, further reinforcing our medical delivery capabilities. Our next question comes from Jesse Hsu with cicc. Please go ahead. So, could you walk us through what innovations the company has introduced in restructuring the traditional clinical service model and what are the specific changes in the roles and positioning of physicians and consultants, We are driving innovation through two main paths, upgrading our diagnosis and treatment systems and advancing our physician led initial consultation policy.

OPERATOR

On the system front, we are working with experts to categorize users skin types by their underlying causes. This work enables us to build templates and create treatment guidance that ensure standard services. We also plan to upgrade skin detectors, integrating big data and AI to enable automatic treatment recommendations. We believe this is initiatives will help us automate our diagnosis and treatment process, boosting operational efficiency across our clinic. In parallel, we are rolling out a physician like policy where doctors are involved from the very first customer visit to provide professional in person consultations. Under this model, the role of consultant shifts from leading consultation to supporting the doctor in diagnosis and treatment. This adjustment highlights the medical nature of our services which really helps customer trust and improve conversion. We have highlighted this policy in selected clinics. In future, we plan to have 100% of new customers consulted by a physician, with physician led consultation gradually expanding to returning customers. Thank you.

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