So-Young Intl (NASDAQ:SY) held its second-quarter earnings conference call on Monday. Below is the complete transcript from the call.

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Summary

So-Young Intl reported Q2 2026 revenue of RMB 510 million, a 33% year-over-year increase, with the aesthetic treatment business contributing RMB 330 million, up 130% year over year.

Net loss narrowed by 37% year over year to RMB 22.7 million, showcasing improved operational efficiency and profitability across 47 centers.

Strategic expansion continued with 65 clinics in 18 cities, leading to a 145% increase in verified visits and a broadening user base of over 250,000 active users.

AI integration and strategic partnerships, such as those with Jingbo Biopharmaceutical, are enhancing operational capabilities and product offerings, aiming to drive future growth.

Management remains optimistic, forecasting 91.7% to 97.2% growth in aesthetic treatment services revenue for the following quarter, driven by scale and operational improvements.

Full Transcript

OPERATOR

Ladies and gentlemen, thank you for standing by for So-Young Intl's second quarter 2026 earnings conference call. At this time, all participants are in a 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. Bona Chiao. Please proceed.

Bona Chiao, Investor Relations

Thank you, operator, and thank you everyone for joining So-Young Intl's second quarter 2026 earnings conference call. Joining the call today are Mr. Xinxing, our Founder, Chairman and CEO, and Ms. Shanhu Shen, our CFO. Before we begin, please refer to the safe harbor statement in our earnings release, which applies to this call, and we will be making forward-looking statements. We will also discuss non-GAAP financial measures. Reconciliations between GAAP and non-GAAP measures are included in today's earnings press release.

Please also note all figures mentioned in this call are in RMB unless otherwise stated. With that, I'd like to turn the call over to Mr. Xinxing.

Xinxing, Founder, Chairman and CEO

Hello everyone and welcome to today's earnings call. In Q2 2026, we continued to expand our aesthetic treatment business guided by our dual MOs of scale and efficiency. Backed by our ever-improving medical capabilities, a uniform delivery framework and wider AI adoption, the business enhanced its operational ability and delivered a robust performance. Its Q2 revenue reached RMB 330 million, up roughly 130% year over year, beating the upper end of guidance by about 5%.

As a result, group revenue hit a quarterly record, growing 33% year over year to about RMB 510 million with better operating efficiency. Net loss attributable to the company narrowed by 37% year over year to RMB 22.7 million. Now turning to the key business developments in Q2, the Zhong approach delivered clear results this quarter. So-Young Intl Clinic kept a healthy pace of expansion while operating quality improved. By the end of Q2, So-Young Intl Clinic expanded into 18 cities with 65 centers in total.

The larger footprint improved accessibility. More importantly, it reinforced brand awareness and captured consumer mind share, driving continued growth in treatment volume and user base. On treatment volume, verified visits exceeded 165,000 in Q2, up 145% year over year. Verified aesthetic treatments performed were above 362,000, up 134% year over year. On the user front, active users reached over 250,000 by the end of June. In particular, the number of level three and above core members exceeded 78,000.

The quarterly repurchase rate of core members remained robust, reflecting high user regard for our quality. New customer count also grew quarter to quarter, with over 50% of them being referrals. This lowered blended acquisition cost while building a loyal, high-quality user base, which in turn positions us to lift user LTV and retention. Meanwhile, both the volume and mix of public-domain new customers improved, confirming that our full-channel acquisition playbook works.

Profitability also improved as we refined operating workflows and heightened resource coordination. As a result, in Q2 the number of profitable centers rose to 47, with 51 generating positive operating cash flow. Gross margin of the aesthetic treatment business improved by about 3.8 percentage points year over year to 28.1%. These outcomes validate our management approach. Healthy growth of our aesthetic treatment business relies on a robust supply chain and enriched product lineup.

In late April, Miracle Collagen, our joint product with Jingbo Biopharmaceutical, launched to a warm reception with over 66,000 units sold to date. In June, we rolled out Wavecom. It adopts soft crosslinking technology to create a gel texture without a crosslinking agent. Wavecom helps fill the eye and mid-face areas while promoting ongoing collagen regeneration for a natural look. Our partnership with Jingbo goes beyond a traditional buyer and vendor relationship.

It is a move towards product co-creation, case development and long-term value alignment. Going forward, we plan to extend this model to more domestic and international medical device and treatment partners. This collaboration model will cover consumer insights, product definition, indication development, physician training, uniform protocols, post-launch evaluation and continuous iteration, bringing advanced technology from R&D to real-world use at a faster pace.

We introduced a building version of Miracle PLLA. It uses a better-calibrated PLLA microparticle diameter to improve injection outcomes. Beyond the collagen category, we are also expanding the product portfolio to meet diverse anti-aging demand. Furthermore, we continued to enhance our uniform medical delivery capabilities. First, we expanded our physician team to meet growing market demand. As of June 30, 2026, the number of full-time physicians increased to around 280.

On top of that, we have kept physician capabilities and treatment workflows aligned. This is made possible by our medical RMD and training center, treatment guidelines, video audits and other training and quality control mechanisms we have in place. In Q2, we partnered with leading upstream manufacturers including Allergan and Jingbo to deliver nine specialized training workshops, effectively enhancing our physicians' expertise and clinical skills.

We also completed 12 regular training sessions as part of our New Physician initiative. By assessing theoretical knowledge and hands-on skills, we ensure our newly onboarded physicians are well prepared to deliver uniform and safe clinical care. Additionally, the National Command and Control Center coordinates medical workflows end to end to further elevate the user experience. Finally, we are integrating AI with medical aesthetics to innovate for expansion under the constraints of medical safety, user privacy and data compliance.

We believe AI's core value lies in empowering physicians, keeping delivery quality consistent and breaking the industry's ceiling on scale, which will ultimately bring premium medical care to more consumers. Right now our focus is on the data foundation, which powers service quality, user experience and upstream R&D enablement. Leveraging our years of industry data and capabilities across mid-platform user operations and clinical practices, we are now building a real-world database and clinical AI infrastructure tailored for the industry.

For example, our clinics launched a user-facing virtual medical dispensing platform and dual screens that display treatment SOPs in real time. Both have effectively boosted user trust. Looking ahead, the principles of transparency, uniform delivery and accessibility will continue to guide us. We remain focused on building a premium medical service framework and deepening customer trust. We believe that as we expand, ongoing refinement of our operation rating framework will drive continued gains in operating efficiency and margins.

This will unlock greater economies of scale across our clinic chain. Meanwhile, we will further diversify our supply chain, advance AI-powered digital capabilities and deliver a more competitive product portfolio. We are confident that these initiatives will drive high-quality growth for our aesthetic treatment business. Now I'll hand it over to our CFO, Shanhu Shen, for a deep dive into Q2 financials, after which we will move to the Q&A session.

Thank you, P.S., and thank you everyone for joining our call today. It's my great pleasure to walk you through So-Young Intl's second quarter 2026 performance. On behalf of the management team, I will now share with you our latest operational progress across three key growth, efficiency, and organizational effectiveness. Please note that all financial data will be presented in RMB terms unless otherwise noted. First, in the second quarter of 2026, our aesthetic treatment business exceeded 330 million in revenue, growing approximately 130% year over year and marking its tenth consecutive quarter of triple-digit year-over-year revenue growth.

Not only has this propelled our total revenues to an all-time high with a 33% year-over-year increase, but it has also enabled our aesthetic treatment business to achieve feasible economics of scale. Behind this clear upward growth trajectory and our rising brand momentum is our scaled capacity to deliver high-quality products and services for digital natives. We offer one-account product value that aligns with their consumption pattern, aesthetic preferences, and online purchasing habits, thereby driving sustainable growth characterized by high frequency and high retention.

While sustaining rapid top-line growth, we remain unwavering in our commitment to growth, quality, and long-term sustainability. With a laser focus on strengthening unit economics, we recently have raised our aesthetic center capacity utilization benchmark by 50%, reflecting elevated expectations for per-person revenue, labor productivity, and sales per square meter. Through operational excellence—streamlining customer flow to reduce redundant waiting periods, optimizing dynamic staffing, leveraging intelligent inventory management—we expect to drive meaningful margin expansion at aesthetic centers.

Going forward, our expansion strategy will be more disciplined and market-responsive. We will dynamically calibrate our opening cadence based on regional utilization levels, enabling us to sustain high revenue growth while striking an optimal balance between scale and profitability. We prioritize sustainable growth over pure top-line expansion. In the second quarter of 2026, we delivered a 37% year-over-year improvement in profitability. Rapid expansion places extraordinary demand on organizational capabilities.

Best-in-class organizational excellence is fundamental to sustaining high growth over the long term. To that end, we have made systematic investments in organizational infrastructure with a particular focus on compliance and user experience. We continue to advance end-to-end visibility across treatment workflows to enhance transparency and reinforce trust. Furthermore, we have closed the loop on user feedback. This cross-functional coordination enables us to maintain acute market sensitivity and continuously elevate service delivery quality and user satisfaction even as the business scales rapidly.

The company stands at a pivotal inflection point, pursuing high growth and operational efficiency in parallel while advancing scale and profitability in lockstep. Ten consecutive quarters of triple-digit revenue growth validate our market acumen and execution discipline. This continued refinement of center-level unit economics together with our market-responsive expansion strategy ensures that our growth remains high quality and sustainable. Complementing this, our systematic investments in organizational capabilities provide the bedrock for long-term value creation.

Next, let's dive into each business segment. Revenues from aesthetic treatment services reached 331.4 million, exceeding the upper end of guidance for the fifth consecutive quarter. The rollout of our loyalty program and systematic treatment protocols creates a 3 to 5 percentage point deferral between service delivery and recognized accounting revenue. Today's services generate future membership benefits. While this tempers near-term reported revenue, it builds a deferred revenue base that underpins long-term growth.

Net of this deferral impact, revenue still grew approximately 103%. Looking at aesthetic centers data, as of June 30, we operated 65 So-Young clinics across 18 major cities, reflecting a net addition of 11 centers during the quarter. Among them, 47 centers were profitable and 51 centers generated positive operating cash flow during the quarter, reflecting a net addition of 6 and 3 respectively from last quarter. We also achieved same-store sales growth of 52%, substantially improved from 14% in the prior-year period.

Turning to our other segments, revenues from information and reservation services were 87.9 million, down 35% year over year, primarily due to the decrease in the number of medical service providers subscribing to our information services. Sales of medical products and maintenance services revenues were 73.9 million, down 2.8% year over year, primarily due to the decrease in order volume for medical equipment. Other services revenues were 12 million, down 48.2% year over year due to lower insurance brokerage revenue.

Cost of revenues was 282.4 million, up 53% year over year, driven primarily by the expansion of our branded aesthetic centers. Total operating expenses were 266.5 million, up 10.4% year over year. Specifically, sales and marketing expenses were 153.5 million. From an aesthetic treatment service perspective, our comprehensive customer acquisition cost remains at a healthy level, accounting for less than 10% of revenue. Coupled with strong user retention, our overall customer acquisition model remains sustainable.

G&A expenses were 88.6 million, up 12.5% year over year, reflecting the continued expansion of our branded aesthetic centers. R&D expenses were 24.4 million, down 21.7% year over year, driven by continued improvements in staff efficiency. Moving forward, we will continue to deepen AI integration across our operations, streamlining workflows and driving efficiency gains in R&D, clinical diagnosis and treatment, and beyond. Income tax benefits were 2.5 million compared with income tax expenses of 1.9 million in the prior-year period.

Net loss attributable to So-Young Intl was 22.7 million, which narrowed by 37% compared with 36 million in the prior-year period. Non-GAAP net loss attributable to So-Young Intl was 21 million compared with 3.5 million in the prior-year period. Basic and diluted loss per ADS were both 0.22 compared with 0.35 in the prior-year period. As of June 30, 2026, our cash and cash equivalents, restricted cash and term deposits, and short-term investments totaled 848.2 million.

Please allow me to remind everyone that this contains forward-looking statements which include risks and uncertainties that are beyond our control and could cause the actual results to differ materially from our predictions. Based on our current estimates, we expect revenues from aesthetic treatment services to be between 362 million and 362 million, representing year-over-year growth of 91.7% to 97.2%. That concludes my prepared remarks. Operator, we are now ready for the Q&A section.

OPERATOR

Thank you. 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 your question, please press star then two. At this time we will pause momentarily. The first question today comes from Jinping Hee with CITICS. Please go ahead.

Jinping Hee, Analyst at CITICS

Let me briefly introduce myself. Thank you, management, for taking the questions. Firstly, congratulations on the company's continued strong performance and impressive growth in the second quarter. So I have a question regarding the collaboration with Gen4. The collaboration is generating great momentum with an innovative partnership model. What have both parties liked and what are the benefits? Thank you.

Xinxing, Founder, Chairman and CEO

We are pleased to have reached a reliable, mutually beneficial partnership with Jingbo. As medical aesthetic demand moves toward natural restoration, tissue regeneration, and long-lasting outcomes, the component, humanized collagen, will have a long lifespan. A dependable upstream relationship with Jingbo therefore benefits our long-term growth. More importantly, we are using real-world data to drive product and supply chain decisions. We analyze connections between user age, skin condition, treatment details, post-treatment reaction feedback, and repurchasing behavior.

From there we can pinpoint which products fit which population area and treatment combination. This helps us optimize doctor training program decisions and inventory planning, which greatly reduces buying guesswork and excess inventory. It also lets upstream manufacturers move out of a closed R&D environment and integrate their products based on actual clinical insights. This enhances our operational efficiency and builds leverage in joint research, project integration, and partnerships.

Going forward, we will expand this data-feedback co-creation model to more quality partners at home and abroad. In the past, many viewed downstream clinics only as distribution channels. Today, we are transforming our extensive clinic network into the industry's innovation infrastructure. By leveraging real-world consumer demand, hands-on experience, and treatment outcomes to deliver R&D, we aim to accelerate technology innovation and product integration, ultimately delivering value to more consumers.

Thank you.

OPERATOR

The next question comes from James Wang with GF Securities. Please go ahead.

James Wang, Analyst at GF Securities

Congratulations on the outstanding performance. Management mentioned a few AI initiatives. Could you elaborate more on how AI is being applied in the business? Where do you see the biggest value and future direction? Thank you.

Xinxing, Founder, Chairman and CEO

Medical aesthetics is a highly medical field with a low tolerance for errors. It relies heavily on individual expertise. The core value of AI lies in transforming experience-driven, hard-to-perceive procedures into uniform, visible, and traceable offerings. This approach also helps distribute premium medical resources to lower-tier cities, which helps address imbalances in medical delivery. In practice, our current focus is applying AI to product authentication, back-office quality control, and data foundations and governance.

QR code authentication verifies medicine and device traceability immediately, mitigating counterfeiting-related concerns and building trust end to end. Transparency raises the user's confidence in overall experience. We also use AI to break down top physicians' experience into databases. We then embed it into our SOPs, case libraries, and post-treatment feedback modules that accelerate new physicians' development, align quality across centers, and identify irregularities in real time—lifting overall quality and customer experience.

In Q4 this year we will roll out our first generation of fully intelligent centers, initiating widespread AI deployment across our network. We aim to replicate our high-quality medical delivery and operating capabilities via AI. Given our integration, industry leadership, and early-mover advantage in digital infrastructure, we are confident that, driven by AI, we can lead the industry into a new phase of high-quality growth. Thank you.

OPERATOR

The next question comes from Nelson Chang with Citibank. Please go ahead.

Nelson Chang, Analyst at Citibank

So let me translate into English. Thanks, management, for taking a question. We observed that the aesthetic center gross margin has improved this quarter. Would you walk through what are the key drivers for the improvement and what are your future plans for gross margin expansion in the future? Thank you.

Shannon

Thanks, Nelson. This is Shannon.

Xinxing, Founder, Chairman and CEO

Our gross margin increased by 3.8 percentage points year over year and 1 percentage point quarter over quarter, an excellent result that demonstrates a clear trend of sustained improvement. Particularly consider our pace of opening 11 new centers in Q2. The gross margin improvement mainly reflects our economies of scale and efficient approach to center operation and management. We continued to enhance per-center revenue per square meter, revenue per bed and labor productivity.

We raised our initial bed capacity utilization benchmark by 50%. In other words, if the original plan assumed each bed could accommodate 10 treatments per day, we have now increased that target to 15. We are restructuring our service workflows around this new benchmark to reduce customer wait times. This not only improves the user experience, but also fully unlocks the operating leverage of our centers, thereby boosting both gross margin and operating profits.

With a maturing operating framework, mature centers take a growing share of our footprint. Ramp-up periods of our new centers are getting shorter and making positive contributions to gross margins. In Q2, 47 centers achieved center-level profitability and 51 generated positive operating cash flow. On the supply chain, our expansive network gives us more bargaining power as our network-scale procurement cost advantages from larger volumes are being unlocked at a faster pace.

With that leverage, we deepened collaborations with upstream partners to gain price-competitive deals. Exclusive OEM agreements and tiered procurement contracts also give us priority partner rights in the high-demand categories. Meanwhile, the momentum of our blockbuster products proves our capability in building blockbusters while further increasing our appeal to upstream manufacturers. We will keep pushing existing blockbusters and over the next two years we have a robust pipeline of new products to help us improve gross margin.

Meanwhile, backed by a central operations platform and AI, we can allocate resources and manage equipment, warehousing and customer operations more precisely, driving better per-center economics. In short, with continued optimization of upstream costs and per-center operating efficiency, we are confident about ongoing gross margin improvement. We will keep leveraging our mix of scale, deepen upstream collaboration and broaden AI adoption to drive high-quality growth.

OPERATOR

The next question comes from Daisy Chen with Haitong. Please go ahead.

Daisy Chen, Analyst at Haitong Securities

Good evening. Thank you for taking my question. Congratulations on the decent results with the high-quality goals this quarter. My question is about our profitability. What are the core levers for the loss reduction this year and how do you plan to move toward the group-level profitability? Thank you.

Xinxing, Founder, Chairman and CEO

Thank you, Daisy. To sum up our core lever for loss reduction this year in one word, it is focus. We are focused on the main track of our clinic business and profitable operations. First, from an operating portfolio perspective, our product and injectable sales business continue to generate profits and operating cash flow. Our clinic business is in a high growth phase and remains in a strategic investment stage. This represents a well-balanced business mix.

On the one hand, we maintain solid profit levels for our existing profitable business. On the other hand, we keep improving the operational efficiency of our clinic business to drive its overall profitability. Meanwhile, we scale back investment in other loss-making business through store closures, disposals and reduced capital allocations so that group resources can be increasingly focused on these two priorities. The breakeven point for our clinic business is relatively clear.

Under our current cost base, fixed costs can be anchored based on the number and pace of new store opens. Contribution margins depend on scale growth, the rate of gross margin improvement and customer acquisition efficiency. Our clinic business has maintained a high growth rate of over 130% for the past 10 quarters. Gross margins have been rising and customer acquisition efficiency keeps improving. We expect to see substantial continued improvement in clinic gross margins in Q3 and Q4 of this year.

With operating leverage kicking in, fixed costs being diluted by scale effects plus the upcoming peak business season in autumn and winter, overall profitability for the clinic segment is a very near and achievable target. Second, on cost optimization, back office resources will also follow the same focus principle mentioned above. We will concentrate on key business and critical tasks. Through standardized operations, digital management and AI enablement, we will boost capabilities and efficiency to continuously drive cost reduction and operational improvements.

As the footprint expands, brand awareness and consumer mindshare have taken root. Referrals now account for over 50% of new customers. On top of that organic traffic, we will prioritize ROI and core metrics to refine brand marketing investment. Together with continued revenue growth, operating efficiency gains and a linear expense profile, we are confident in group-level profitability going forward. Thank you.

OPERATOR

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

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.