Good day, everyone. Thank you for joining us today for the Lithium Partners Spring 2025 investor conference. My name is Joe Dormey, Managing Partner of Lithium Partners. I would like to welcome SBC Medical Group, which trades on the NASDAQ under the ticker SBC. For today's webcast from the company are Stephen Rogers, Global Head of Planning and Strategy, and Hikaru Fukui , Head of Investor Relations. Stephen will be taking us through the slide presentation, followed by a brief Q&A session. Welcome, Stephen. I will now turn the floor over to you.
Great. Thank you, Joe, and welcome, everyone. I'm Stephen Rogers, Global Head of Planning and Strategy at SBC Medical Group Holdings. Thanks for taking the time out of your busy schedules to join us today. I'm really excited to tell you about all the cool things happening at SBC. I'll go over an overview of our company, financial status, the current market environment, our future direction, and capital policy. Go ahead and jump in. A little bit about SBC. We primarily provide comprehensive management support services to franchise clinics, generating income through franchise fees. One exciting note: in September 2024, SBC achieved a pretty significant milestone by being successfully listed on the NASDAQ stock exchange. We're really excited about that. It reflects a lot of our strong financial performance and growth potential.
It also marks the beginning of a new chapter in our expansion, both domestically and internationally. Aesthetic medicine remains our primary area of focus, but we are continually expanding our offerings to include a range of specialized medical services. You can see things like plastic surgery, ophthalmology, hair loss treatment, and infertility treatment. This diversification really allows us to meet a broader spectrum of patient needs, enhance customer retention, and it strengthens our position as a leader in the field of aesthetic and specialized medical care. While competition in Japan's aesthetic medical market is intensifying due to new entrants, our companies consistently maintain strong growth by implementing strategic pricing models and expanding our clinic network nationwide. We are able to increase our customer base despite intensifying competition. Today, we serve more than 6 million patients annually, making us the largest provider in Japan.
This scale demonstrates the trust and recognition we've earned from our clients, and it allows us to operate at a scale giving us valuable operational efficiencies and data to enhance our services. Really, at the core of all of this is a strong customer-centric philosophy. We place great importance on ensuring that customers feel they receive a lot more than they paid for. As a result of that, we've achieved really high repeat visit rates, which is just an indicator of how much the customer satisfaction, brand loyalty, and really just how much people love the SBC brand and service offerings. Our core business does consist of aesthetic medicine, medical services, and overseas operations. Each of these is playing a vital role in driving our continued growth and market presence.
In addition to these main areas, we are focusing on strengthening the platform business, which serves as the foundational infrastructure supporting operations and development of the entire company. In the aesthetic field, we've adopted a comprehensive multi-brand strategy to meet the increasingly diverse needs of our customers. You can see, for example, Shonan Beauty Clinic offers a diverse range of services designed to meet the needs of various age groups, aesthetic preferences, and budget levels. NeoSkin is more for that luxury experience. We have Gorilla and other clinics that focus for men, among other of our brand offerings. This strategy really enables us to meet a wide customer base, respond flexibly to shifting market trends, and consistently uphold a high standard of service across all of our brands. Now about the financial results of our Q1 fiscal year 2025.
Although it may seem unclear at first glance, we conducted a business restructuring in 2024, including withdrawal from the staffing business and excluding the SBC Kijimadaira Resort and Skynet Academy from consolidation. As a result, revenue decreased by 14% year- over- year. Excluding these effects and currency fluctuations, we've achieved around 5% growth. Our EBITDA margin is 52%, and annualized ROE stands at 41%, maintaining strong profitability. We maintain a strong financial position supported by a very healthy cash position and minimal debt obligations. This strong balance sheet provides us with flexibility and resilience to pursue strategic growth opportunities. We plan to allocate our available capital towards a balanced mix of organic and inorganic investments, both within Japan and international markets.
These investments, we're really going to focus on expanding our clinic network, enhancing technological capabilities, developing new services, pursuing strategic partnerships or acquisitions that align with our long-term vision. By leveraging our financial strength, I think we're really well positioned to drive sustainable growth and create lasting value for our stakeholders. In the dermatology domain, we have implemented a major overhaul of pricing in March 2025. Previously, the widespread use of promotional campaigns and discount vouchers really made the final pricing unclear and in some cases gave the impression that our services were more expensive than those of our competitors. To address this, we streamlined our pricing structure by revising both standard rates and promotional strategies, resulting in clearer and more attractive and a customer-friendly pricing model.
Although the prices were lower, the overall cost efficiency, including marketing and promotional expenses, improved a lot, which contributed to an overall healthier and more sustainable business model. On the other hand, for women's hair removal services, we adjusted pricing upward to reflect the high demand and the ongoing challenge of appointment availability. These price increases were implemented to ensure fair access to services, optimize our clinic scheduling, and maintain a high standard of care. We have revised the franchise fee structure to better support the long-term growth and sustainability of our franchise clinics. Under the previous model, the fee framework occasionally placed a financial burden, especially on newly opened clinics, potentially hindering their early-stage development. To address this, we implemented adjustments aimed at easing the initial cost pressures while aligning incentives for longer-term success.
While these changes are expected to result in temporary increased revenue, the primary objective is to foster a healthier, more resilient franchise ecosystem. We believe this approach will contribute positively to the overall development and stability of the company. Now, regarding our midterm growth strategy towards 2027, by 2027, our vision is to evolve into a global medical service company that meets an array of customer needs with a focus on aesthetic medicine. We aim to diversify and expand our service offerings, positioning ourselves as a leader in the global healthcare market. Alongside this, we're focused on building a robust business in international markets, which we see as key in accelerating growth in the years to come. We'll explain our strategies according to these three pillars: aesthetic medicine, medical services, and overseas business.
The Japanese market continues to grow with a penetration at around 10%, indicating substantial opportunities for growth. While our primary demographic has traditionally been women in their late teens to 30s, we anticipate a growing demand for middle-aged women seeking anti-aging treatments, as well as male customers who are increasingly exploring aesthetic medicine. To capitalize on these emerging trends, we'll continue to strengthen our multi-brand strategy, which gives us a lot of flexibility to respond to the various and expanding customer needs. The inbound business is also a promising growth area. In 2024, Japan saw a record number of tourists at nearly 37 million, which is incredible. We're enhancing our presence on social media, especially in China, which has led to a notable increase in visits and revenue. In addition to enhancing our digital outreach, we're also strengthening our language support infrastructure by hiring more interpreters.
This way, we can ensure a really high quality and seamless experience for international customers. We expect these efforts will not only drive revenue growth, but also position us as a primary destination for tourists seeking aesthetic and medical services. In the medical field, we focus on areas with high affinity to aesthetic medicine, such as orthopedics, ophthalmology, infertility, and hair loss treatment. By aligning these services, we aim to create a holistic offering that appeals to a broad range of customer needs. We aim to differentiate ourselves from competitors by really leveraging our expertise in marketing and management that we've developed through our 25 years of experience. We have a unique combination of medical knowledge and business acumen, which really positions us to deliver exceptional value and drive sustainable growth in these expanding fields.
In addition to expanding franchise clinics, we plan to offer consulting and system service to insurance-based clinics facing challenges due to declining reimbursements. We know this is an issue. This strategic move will enable us to expand our B2B business by offering valuable solutions to these clinics to help them improve their operational efficiency, optimize revenue, and navigate the evolving healthcare landscape. We are focusing on the U.S. and Asia for international expansion. The U.S. med spa market is growing, and it's attracting major capital. SBC aims to establish a winning formula in this field and expand its presence. Besides launching our own med spas, we are considering providing management and marketing services based on our experience in Japan.
On the Asia front, in November 2024, we strategically acquired AHH, a leading provider in Singapore that operates approximately 20 aesthetic and medical clinic locations under four distinct brands. This acquisition marks a key milestone in our expansion strategy, serving as a critical hub for the operations across Asia. We will continue our strategic expansion into neighboring countries, leveraging the synergies and market insights across Asia. We recently launched SBC Wellness. It is a corporate employee benefit program designed to meet the growing demand for employee satisfaction and health-oriented workplace initiatives. As interest in employee satisfaction and health management grows, a rising number of companies are incorporating our aesthetic and fertility services into their benefit offerings. This is great for employee motivation and engagement, but also opens a new and promising segment for us within the B2B space.
In addition, in September 2024, we announced a strategic partnership with B4A. This is a leading vertical SaaS provider specializing in solutions for aesthetic clinics. We aim to strengthen our systems and operational efficiencies across all of our clinics. We are really excited about this partnership and its role in driving digital transformation and supporting our growth through advanced technology infrastructure. All right, we will go through capital strategy here. We believe our current stock price does not accurately reflect the strength of our underlying fundamentals, likely due to limited liquidity, which has also been a concern raised by institutional investors. We are considering the following measures. One, improving supply and demand, attracting new shareholders by repurchasing shares and paying dividends to enhance shareholder value. Two, additional liquidity measures, issuing shares or partial sale of founder-owned shares.
As an initial step, we approved a $5 million share repurchase program. This decision reflects our confidence that the current stock price does not fully represent the intrinsic value of our company. The buyback also offers liquidity to shareholders seeking to exit, thereby helping to alleviate overhang pressure in the market. The repurchased shares are intended to be utilized for our employee stock-based compensation plan, aligning employee incentives with long-term shareholder value and supporting talent retention. We aim to enhance shareholder value through effective capital allocation, including growth investments and dividend payments. All right, this concludes our presentation on the current status and future direction of SBC Medical Group . Thank you very much. With that, I'll hand it back to Joe.
Great. Thank you, Stephen. Thanks for the overview. Let's go over a few questions here.
First, what's your view on Japan's aesthetic medicine market and your strategy to address it?
Great. Thanks, Joe. Do you want me to—I can answer that one. While the market's obviously becoming increasingly competitive, it's also at the same time entering a phase of normalization. We're also seeing less resilient players begin to exit. Recently, there's been a few bankruptcies of major hair removal salon chains. At the same time, we're seeing a rise in attractive M&A opportunities and valuations. We think this shifting landscape presents a really cool opportunity to strengthen our position through different initiatives such as M&A and consolidation. Our growth strategy is really centered on enhancing customer value and increasing average unit prices.
For example, as I mentioned earlier, in response to strong demand, we adjusted the pricing in the hair removal segment to reflect the value of our services. At the same time, we introduced more flexible and customer-friendly offerings such as extended clinic hours with early morning and late-night appointments to make sure that we're providing improved accessibility and convenience. Finally, we also have our multi-brand strategy, which continues to play a key role in addressing the increasingly diverse needs of our customer base. With this, we can really tailor our services across different brands. We're able to segment the market effectively, capture a broad audience, be really flexible, and provide just a really cool, highly personalized customer experience.
That's very helpful. Can you provide more insight on what your future growth drivers are?
Yeah, I would break it down into three main drivers.
One is strengthening dermatology under the SBC brand. I feel like this is a very important area. High customer frequency and strong continuity and growth. This is one area we're really thinking a lot about. The second is expanding the B2B services, supporting other clinics with our management and systems. We also feel like we were able to leverage a lot of our 25 years of experience to continue to grow that space. The third is our overseas expansion, especially here in the U.S. and Asia, with multiple M&A projects underway. We're excited to bring—and at the same time, too, we're also excited to look at what U.S. innovations and cool things are happening here and how we can leverage that in Japan and throughout Asia.
That's great. Can you provide more color on the rationale and internal discussions behind the share buyback?
Yeah, great question.
Yeah, as mentioned, low liquidity has been challenging for institutional investors to trade the stock. This share repurchase marks an initial step towards improving supply-demand balance and enhancing overall market liquidity. While the buyback may temporarily reduce the number of shares available in the market, we do believe this action is necessary to signal our confidence in the company's undervaluation and to provide a clear mechanism for shareholders who wish to sell. The repurchased shares are intended to be allocated to our upcoming stock compensation plan, which I'm personally excited about, aligning employee incentives with long-term shareholder value.
I agree with that. Last question. What is your view on risk of share dilution from new shares being issued?
Yeah. We recognize that issuing new shares may create some short-term downward pressure on the stock price.
We also believe the current share price does not really reflect our business fundamentals. Moreover, we've received feedback from institutional investors suggesting that increasing the free float could improve supply-demand dynamics and even lead to a stock price increase. Our target is to implement capital policies that are growth-oriented and help improve both the free float and market liquidity. We're going to continue to engage carefully with our investors and make really thoughtful decisions around this.
That's great. Before we wrap up, Stephen, do you have any final comments?
No, thank you very much for all the questions. We'll continue to prioritize transparent communication with our investors and proactively share updates going forward. Yeah, really appreciate your time.
Wonderful. We appreciate you. And thank you. And thanks to everyone for watching.
If you have any questions or would like to schedule a meeting with SBC Medical Group , send me an email at doramey@lithiumpartners.com. Lastly, if you'd like to learn more about Lithium Partners, please visit our website at lithiumpartners.com. We hope you all enjoy the conference and have a great day.