So-Younger Worldwide Inc. (NASDAQ:SY) Q2 2023 Earnings Convention Name August 21, 2023 7:30 AM ET
Firm Contributors
Vivian XU – IR
Xing Jin – Co-Founder, Chairman and CEO
Hui Zhao – CFO
Convention Name Contributors
Thomas Chong – Jefferies
Chloe Wei – CICC
Operator
Women and gents, thanks for standing by for So-Younger’s Second Quarter 2023 Earnings Convention Name. [Operator Instructions] As a reminder, in the present day’s convention name is being recorded.
I’d now like to show the assembly over to your host for in the present day’s name, Ms. Vivian XU. Please proceed, Ms. XU.
Vivian XU
Thanks, operator, and thanks for everybody for becoming a member of So-Younger’s second quarter 2023 earnings convention name. Becoming a member of me in the present day on this name is Mr. Xing Jin, our Co-Founder, Chairman and CEO; and Mr. Nick Zhao, CFO.
Please notice that the dialogue in the present day will comprise forward-looking statements made beneath the protected harbor provisions of the U.S. Non-public Securities and Litigation Reform Act of 1995. Ahead-looking statements are topic to dangers and uncertainties which will trigger precise outcomes to vary materially from our present expectations.
Potential dangers and uncertainties embody however are usually not restricted to these outlined in our public filings with the SEC, together with our annual report on Kind 20-F. So-Younger doesn’t undertake any obligation to replace any forward-looking statements, besides as required beneath appliable regulation.
At the moment, I want to flip the decision over to Mr. Xing Jin. Sure, please.
Xing Jin
[Foreign Language] Howdy, everybody. Thanks for becoming a member of So-Younger’s second quarter 2023 earnings name.
We proceed to regain stable development momentum through the quarter, with each our monetary and operational metrics climbing steadily. Whole income exceeded the higher vary of our steering, rising 33.3% year-over-year to RMB 412 million, a brand new quarterly excessive for the reason that starting of 2022. This interprets into bettering profitability, with non-GAAP web revenue attributable to So-Younger of RMB 15.5 million through the quarter in contrast with a lack of RMB 22.7 million throughout the identical interval final 12 months.
Let me now stroll you thru the progress we made through the quarter, beginning with our group e-commerce POP enterprise. This enterprise confronted important challenges through the pandemic controls in China however has seen the tempo of it in all probability accelerated through the quarter. The resurgence of confidence amongst medical aesthetic establishments was pushed by the restoration of normal operations at a promising gradual improve in spending on medical aesthetic procedures.
The variety of subscribing medical service suppliers and knowledge service income elevated sequentially by roughly 21% and 40%, respectively. As sentiment amongst our customers makes a gradual restoration, their preferences have shifted again in direction of in search of real-time interplay and customised providers past merely buying product data and pricing particulars. Demand have diversified, requiring further buyer assist and the providers to facilitate the decision-making course of.
Turning to our merchandise. We additionally optimized the So-Younger app to enhance the person expertise, notably by enhancing algorithms and person suggestions and fine-turning operations for various demographics based mostly on their in-app conduct. These tweaks enable medical aesthetic establishments to determine and goal particular customers with better velocity and accuracy, considerably bettering general buyer acquisition effectivity and conversion charges.
On the similar time, the mix of our high-quality person content material and the highly effective community impact our group creates has allowed us to considerably broaden the attain and enhance providers for person acquired by personal channels comparable to our WeChat public accounts and different communities. Wanting forward, as we proceed to execute our diversified model technique, we’ll proceed to amass extra customers with our premium content material, sensible instruments and high-quality providers.
By way of providers, our focus stays squarely on nonsurgical medical aesthetic procedures. We’ll proceed to construct a community of premium docs on this section and strengthen the promotion of our scorching SKUs, such because the physique controller and Fotona4D answer. We additionally launched a seasonal lovely eye marketing campaign in June.
To assist these initiatives, we’re trying carefully with medical establishments to boost their model fairness and enrich their product choices. On-line bookings and GMV for nonsurgical procedures elevated by 26% and 52% year-over-year, respectively.
For surgical providers, we lately launched a program in partnership with public hospital the place docs create premium well being content material and act as ambassadors for eye procedures, leveraging the sturdy relationship we now have with premium docs on the esteemed and broad record. We’re working collectively to extend curiosity, content material and consciousness of eye surgical procedures, a surgical class that’s in excessive demand. Our method contains in-depth analysts of person choice and real-life case research, coupled with the rollout AI-powered eye testing instruments, which really useful the newest traits in eye shapes.
Now I’ll transfer on to the progress of So-Younger Prime. As proprietary one-stop nonsurgical medical aesthetic answer, So-Younger Prime has steadily expanded in dimension and scale since its launch in final August. As of finish of the second quarter, So-Younger Prime is now partnered with over 140 medical establishments and over 450 docs in 28 cities, which displays the progress we now have made in guaranteeing a seamless person expertise and enhancing the operation, operational effectivity of collaborating establishments. Merely put, So-Younger Prime’s distinctive worth proposition is its high quality and person expertise.
From the strategic screening of docs, {qualifications} and the power to precisely prognosis to their remedy plans and the uncertainty of their merchandise, we wish to be certain that the person expertise is flawless. Fulfilled orders by So-Younger Prime elevated 83% sequentially through the quarter and is more and more contribute to income.
Whereas So-Younger Prime has already demonstrated a lot potential, we now have cognitive that it’s nonetheless within the early phases of growth. We now have made important progress, however there may be nonetheless loads of room to strengthen its popularity as a model of premium {and professional} mild medical aesthetic procedures.
Along with broadening and increasing product classes, we wish to solidify the affiliation, our shut partnership with revered docs have with the individuality and specialization of our platform. As we now have reiterated — sorry, iterated a number of occasions in current quarters, the sunshine medical aesthetic service section is vital for our future development. So-Younger Prime ensures a high-quality person expertise, each on-line to off-line by its distinctive working mannequin and meticulous creation of services and products.
Lastly, I want to contact on our provide chain enterprise, which incorporates Wuhan Miracle. After years of analysis throughout the trade developed a deeper understanding of its dynamics, we imagine it is a perfect time for So-Younger to develop new income streams alongside the medical aesthetics — aesthetical trade worth chain by providing upstream merchandise.
In the course of the quarter, income from our provide chain enterprise was RMB 86.3 million, a rise of 32% year-over-year, accounting from 21% of whole income and more and more contributing to our backside line. We acquired Wuhan Miracle in 2021 to faucet into the medical laser market as a primary step. Final 12 months, we expanded additional upstream by securing the unique distribution rights for the Korea model [Elevess] for his or her injectable HA fillers. Final month, we secured unique 10-year distribution rights for [indiscernible] and new face filler merchandise.
We now have solely simply begun to discover alternatives by shifting upstream with these partnerships. And based mostly on their success thus far, we’re assured they’ll considerably improve our enchantment to customers and product portfolio within the mild medical aesthetic section.
In abstract, our legacy enterprise continues to see the tempo of restoration choose up tempo, which places us ready to confidently allocate sources in direction of new high-quality development ventures comparable to So-Younger Prime and our provide chain enterprise. We strongly imagine these new ventures mirror the way forward for the trade and the large alternatives its long-term development will create. Our focus all through the rest of the 12 months would be the additional driving high-quality development, refining operations methods, enhancing buyer acquisition channels, fastidiously managing prices and constantly bettering our monetary efficiency to create worth for all shareholders.
I’ll now flip the decision over to our CFO, Nick, to evaluation the monetary outcomes for the second quarter earlier than taking your questions.
Hui Zhao
Howdy, that is Nick.
Please be reminded that each one quantities quoted right here might be in RMB. Please additionally confer with our earnings launch for detailed details about our comparative monetary efficiency on a year-over-year foundation.
Whole revenues through the quarter had been RMB 412.1 million, up 33.3% year-over-year and exceeding the excessive finish of our steering. The rise was primarily because of the improve in common income per paying medical service supplier and different revenues generated by So-Younger Prime.
Earlier than I break down revenues additional, I might prefer to illustrate some monetary assertion presentation modifications we made this quarter to raised mirror the event of our strategic upstream provide chain enterprise.
Beginning this quarter, income from the gross sales of medical aesthetic injectable medicine, which had been included in data providers and different revenues in earlier quarters, is now mixed with the gross sales of apparatus and upkeep providers revenues. And the brand new line merchandise is now renamed gross sales of medical merchandise and upkeep providers.
With this in thoughts, data providers and different revenues had been RMB 298.9 million, up 40.2% year-over-year, primarily pushed by a rise in common income per paying medical service supplier and different revenues generated by So-Younger Prime. Reservation providers revenues decreased 12.1% year-over-year to RMB 26.9 million, primarily because of the working technique, which provides greater subsidies to finish customers. Gross sales of medical merchandise and upkeep providers revenues had been RMB 86.3 million, up 32.0% year-over-year, primarily attributable to a rise in gross sales of each gear and injectable medicine.
Value of revenues had been RMB 150.4 million, up 43.9% year-over-year. The rise was primarily attributable to a rise in value related to So-Younger Prime and Wuhan Miracle. As soon as once more, the monetary reporting modifications I discussed earlier than additionally utilized to value of revenues.
Inside value of revenues, value of providers and others had been RMB 106.5 million, up 54.4% year-over-year, primarily attributable to a rise in prices related to So-Younger Prime. Value of medical merchandise bought and upkeep providers had been RMB 43.9 million, up 23.6% year-over-year, primarily attributable to a rise in value related to Wuhan Miracle.
Whole working bills had been RMB 282.4 million, up 14.5% year-over-year. Gross sales and advertising and marketing bills had been RMB 137.9 million, up 13.3% year-over-year, primarily attributable to a rise in bills related to branding and person acquisition actions
G&A bills had been RMB 92.3 million, up 49.4% year-over-year attributable to a rise in payroll prices related to the growth of administrative staff to assist our enterprise improve and new strategic companies. R&D bills had been RMB 52.1 million, down 17.4% year-over-year, primarily attributable to enhancements in employees effectivity. Revenue tax advantages had been RMB 0.8 million in contrast with revenue tax advantages of RMB 0.1 million within the second quarter of 2022.
Internet loss attributable to So-Younger had been RMB 2.6 million in contrast with web lack of RMB 32.3 million throughout the identical interval final 12 months. Non-GAAP web revenue attributable to So-Younger was RMB 15.5 million in contrast with 22.7 million non-GAAP web loss attributable to So-Younger in the identical interval of 2022.
Fundamental and diluted loss per ADS attributable to extraordinary shareholders had been RMB 0.02 and RMB 0.02, respectively, in contrast with primary and diluted loss per ADS attributable to extraordinary shareholders of RMB 0.3 and RMB 0.3, respectively, throughout the identical interval of 2022.
Internet improve in money and money equivalents, restricted money and time period deposits, short-term investments on this quarter is RMB 56.3 million. And web money influx from working actions this quarter is RMB 90.9 million. We now have ample money readily available, with whole money and money equivalents, restricted money and time period deposits, time period deposits and short-term investments of RMB 1.5 billion as of June 30, 2023, in contrast with RMB 1.6 billion as of December 31, 2022.
For the third quarter of 2023, we anticipate whole income to be between RMB 380 million and RMB 400 million. The above outlook is predicated on our present market circumstances that mirror the corporate’s preliminary estimates of market and working circumstances and the client demand.
This concludes our key remarks. I’ll now flip the decision to the operator and open the decision for Q&A. We’re able to take questions. Thanks.
Query-and-Reply Session
Operator
[Operator Instructions] In the present day’s first query comes from Thomas Chong at Jefferies. Please go forward.
Thomas Chong
Hello. good night. Thanks administration for taking my questions. I’ve two questions. My first query is about what is the main driver behind the numerous development in income in Q2? And the place can we anticipate the medical aesthetic market to development in Q3 and the second half? [Foreign Language] And my second query is in regards to the cause for the numerous narrowing of the web losses in each year-on-year and on a sequential foundation. The place ought to we anticipate the profitability development within the second half?
Xing Jin
[Foreign Language] Thanks, Thomas. Let me translate and get again to you quickly. So the Q2 outcomes had been higher than anticipated, permitting us to regain a development trajectory. Whole income was RMB 412 million, a rise of over 30% each year-over-year and sequentially and a brand new quarterly excessive for the reason that early 2022.
On the person entrance, we launched a seasonally lovely eye marketing campaign in June, leveraging content material from our group and the favored SKU to advertise summer time offers, together with merchandise for eye anti-age, contouring, wrinkles and slimming amongst others. The variety of buying customers elevated by 24% year-over-year and GMV elevated by 40% year-over-year in Q2 in consequence, reflecting sturdy demand.
On the institutional entrance, sentiment has improved because it regularly elevated spending on data providers merchandise and the general advertising and marketing. In the course of the quarter, we optimized our infrastructure for algorithms and person suggestions to assist establishments enhance person acquisition and operational effectivity.
Lastly, we additionally profit from an rising various stream of revenues. Income from our upstream provide chain enterprise elevated by 32% in comparison with the identical interval final 12 months, contributing 21% of whole income. Having solely launched about one 12 months in the past, it is spectacular to see So-Younger Prime more and more start to contribute to income.
Wanting ahead to Q2 and the second half of this 12 months, we imagine the medical aesthetic advertising and marketing — market will development according to the general consumption atmosphere, regularly gaining momentum and trending upwards.
Regardless of uncertainties and volatility out there, we’ll preserve development momentum and alter our technique based on market dynamics. On the similar time, we’ll proceed to construct and develop infrastructure that can enable us to develop each upstream and downstream of the worth chain.
Hui Zhao
Thanks. I believe the rise in our web revenue — non-GAAP web revenue and the narrowing down of the GAAP web loss is principally because of the mixed influence of the rise in income and the advance in our operational effectivity. The operational — working loss narrowed by over 35% year-over-year and sequentially.
On a non-GAAP foundation, we had been worthwhile, with web revenue of RMB 15.5 million through the quarter and web revenue of RMB 12.7 million within the first half of the 12 months of 2023 in comparison with a lack of RMB 22.7 million and a lack of RMB 17.9 million in the identical interval final 12 months. Wanting ahead, we proceed to develop income, enhance working effectivity and create extra revenue for the corporate and our shareholders. Thanks.
Operator
Thanks. And our subsequent query in the present day comes from [Li Xing with Guoyuan Securities]. Please go forward.
Unidentified Analyst
Hello, good night, and thanks for administration taking my query. I want to say congratulations first on the expansion momentum and the improved profitability on this quarter. And I’ve one query about MAU. What is the estimate for future MAU development? [Foreign Language]
Xing Jin
[Foreign Language] Thanks. In Q2, the variety of buying customers elevated by 24% year-over-year, whereas GMV elevated by 40% year-over-year. With demand regularly rising, conversion charges from MAU can be bettering. Visitors on our platform is principally generated from these three sources: So-Younger app, non-public domains and different operational channels. We’re assured that site visitors will proceed to develop.
Firstly, the MAU metrics disclosed within the earnings launch displays site visitors from So-Younger app, which is anticipated to proceed being the first supply going ahead. We’ll proceed to draw extra natural person site visitors by group content material operations just like the media and bettering engagement with progressive instruments.
Secondly, for these site visitors from non-public area, we’re growing methods to enhance person conversion, and we’ll leverage the expertise we now have gotten from So-Younger Prime and apply this to different enterprise as properly.
For site visitors from different channels, we’ll preserve our cautious method on the subject of spending and advertising and marketing. We’re putting extra of an emphasis on content material operations and leverage our aggressive benefit in rolling out content material to drive conversion charges on Douyin, Little Crimson Guide, Kuaishou whereas, on the similar time, buying extra customers by reside broadcasting. We may even try to introduce hyperlinks to our platform in channels to develop the direct person conversion channels. Thanks. That is all.
Operator
Thanks. And our subsequent query in the present day comes from [ Katrina Zhou ] with Citigroup. Please go forward.
Unidentified Analyst
Hello, thanks administration for taking my questions. That is [ Katrina ] from Citi asking on behalf of Nelson Cheung. Can administration share with us extra in regards to the progress of So-Younger Prime within the second quarter and the development within the second half of the 12 months? [Foreign Language]
Xing Jin
Thanks to your query. It has been only one 12 months for the reason that launch of So-Younger Prime final August. Over the previous one 12 months, we streamlined the method and alter the operational methods whereas constructing So-Younger Prime out to scale. With one 12 months of operational historical past behind us, So-Younger Prime now covers over 140 establishments into 28 cities, offering a premium service expertise for numerous customers.
As a one-stop nonsurgical medical aesthetic answer, we established in collaboration with establishments, So-Younger Prime continues to be within the early phases of growth. We launched a collection of promotional campaigns in Q2 to achieve important mile share amongst customers, strengthening its model and recognition as an expert nonsurgical medical aesthetic platform and has steadily expanded dimension and attain. In every Q1 and Q2 of this 12 months, fulfilled orders by So-Younger Prime elevated by over 80% sequentially, constructing upon sound phrase of mouth. In Q2, income generated by So-Younger Prime started more and more contributing in direction of income.
Wanting ahead to the second half of this 12 months, So-Younger Prime will proceed to strictly entry — assesses the standard of establishments and providers on the platform because it grows in dimension, enhance operational effectivity of collaborating establishments and strengthen its skilled nonsurgical medical aesthetic model picture.
We’re additionally exploring alternatives to construct partnerships with upstream gamers alongside the provision chain to scale back product working prices, bettering operational effectivity and establishing synergies between our varied enterprise segments.
Operator
Thanks. And our subsequent query in the present day comes from Chloe Wei with CICC. Please go forward.
Chloe Wei
Okay, thanks administration for taking my query. So my query is for Nick. And will you give us some shade on the rationale for the year-over-year lower within the gross margin and in addition to the traits in order occurring? [Foreign Language]
Hui Zhao
Okay. Thanks for the query. The lower in gross margin was primarily attributable to modifications in our income combine. In Q2 2023, our data and reservation providers maintained excessive margin. The gross margin for gross sales of medical merchandise and upkeep providers is decrease than our data and reservation providers.
Our So-Younger Prime enterprise continues to be within the early stage of growth with a decrease gross margin. As well as, we have launched promotional marketing campaign for So-Younger Prime throughout this quarter, leading to a lower in gross margin.
Within the brief time period, we anticipate gross margins to stay at roughly related degree as we proceed to spend money on So-Younger Prime’s promotional actions and develop gross sales of medical merchandise and upkeep providers. As we construct our provide chain capabilities and operational effectivity enhancements for So-Younger Prime at scale, gross margin will start bettering once more. Thanks.
Operator
Thanks. We at the moment are approaching the tip of the convention name. Thanks to your participation in in the present day’s convention. It’s possible you’ll now disconnect, and have a superb day.