Good morning, everyone. Welcome to the Day 1 of the Sidoti Conference. My name is Aashi Shah. I'm an analyst here at Sidoti. With me today, I have SBC Medical . It trades on NASDAQ under the ticker SBC. We have Yuya Yoshida, Company CFO and Executive Vice President, and Hikaru Fukai, Company's Head of Investor Relations. This is a pre-recorded session. Please send any questions to conference@sidoti.com, and we will forward them to the company's management. With that, I will let you take over. Thank you.
Thank you, Aashi. Hi, everyone. I'm Yuya Yoshida, CFO of SBC Medical Group Holdings. Thank you for taking the time out of your busy schedules to join us today. In this briefing, I will provide an overview of our company, financial status, the current market environment, our future direction, and the capital portfolio. Okay, first of all, a company overview and our business model. SBC primarily provides comprehensive management support services to franchise clinics focused on aesthetic medicine, generating income through franchise fees. In last September, SBC achieved a significant milestone by being successfully listed on the NASDAQ Stock Exchange. This listing not only reflects our strong financial performance and growth potential, but also marks the beginnings of our new chapter in our expansion, both domestically and internationally. While aesthetic medicine remains our primary area of focus, our franchise clinics have expanded their revenue to various medical services.
Okay, franchise clinics. While competition in Japan's aesthetic medicine market is enticing due to new entrants, our company has consistently maintained strong growth by implementing strategic pricing models and expanding our clinic network nationwide. These initiatives have enabled us to steadily increase our customer base despite the intensifying competition. Today, we serve more than six million patients annually, making us the largest provider in Japan. The scale not only demonstrates the widespread trust and recognition we have earned from our clients, but also provides us with valuable operational efficiencies and data-driven insights that further enhance our services. At the core of our success is a customer-centric philosophy. We place great importance on ensuring that customers feel they receive more value than they paid for. Next, our core business areas and multi-brand strategy.
As shown, our core business consists of aesthetic medicine, medical services, and overseas operations, each playing vital roles in driving our continuous growth and market presence. In addition to these main areas, we are focusing on strengthening the platform business, which serves as a fundamental infrastructure supporting the operations and development of the entire company. In the aesthetic field, we have adopted a comprehensive multi-brand strategy to meet the increasingly diverse needs of our customers. Next, our current financial situation. Now, about, yeah, although it may seem unclear at first glance, we conducted business restructuring in 2024, including withdrawal from the staffing business and excluding SBC Kijimadaira Resort and Skylight Academy from consolidations. As a result, revenue decreased by 14% year-over-year basis. Excluding these effects and the currency fluctuations, we achieved around 5% growth.
Our financial highlight, our EBITDA margin is approximately 52%, and the annualized ROE stands at 41%, maintaining strong profitability. Next, we're going to touch upon the balance sheet. We maintain a strong financial position supported by a healthy cash position and minimal debt obligations. This strong balance sheet provides us with the flexibility and resilience to pursue strategic growth opportunities. We plan to allocate our available capital toward a balanced mix of organic and inorganic investments, both within Japan and in the international market. These investments are well-focused on expanding our clinic network, enhancing technological capabilities, developing new services, and pursuing strategic partnerships or acquisitions that align well with our long-term visions. By leveraging our financial strengths, we are well-positioned to drive sustainable growth and create lasting value for our stakeholders. Next, strategic action. In the dermatology domain, we implemented a major overhaul of pricing in March 2025.
Previously, the widespread use of promotional campaigns and discount vouchers often made final pricing unclear, and in some cases, gave the impression that our services were more expensive than those of our comps. To address this, we streamlined our pricing structure by revising both standard rates and promotional strategies, resulting in a clearer, more attractive, and customer-friendly pricing model. Although prices were lowered, the overall cost efficiency, including marketing and promotional expenses, has improved considerably, contributing to a 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. These price increases were implemented to ensure fair access to services, optimize clinic scheduling, and maintain a high standard of care. Next, levy of franchise fees. 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 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 long-term success. While these changes are expected to result in a temporary decrease in revenue, the primary objective is to foster a healthier and more resilient franchise ecosystem. We believe this approach will contribute positively to the overall development and stability of the company. Yeah, future business policy and growth strategy. Our vision is to evolve into a global medical services company that meets a wide variety of customers' needs, with a strong emphasis 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 are focused on improving our robust business in international markets, which will play a key role in accelerating growth in the years to come. We will expand our strategy according to three pillars: aesthetic medicine, medical services, and overseas business. Yes, first, Japanese aesthetic medicine. The Japanese market continues to grow, with 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 our growing demand for middle-aged women seeking anti-aging treatment, as well as our male customers who are increasingly exploring aesthetic medicine. To capitalize on this emerging trend, we will continue to strengthen our multi-brand strategy to flexibly respond to these diverse needs. Inbound strategy. The inbound business is also a promising growth area.
We are enhancing our presence on social media, especially in China, which has led to a notable increase in visits and revenue from foreign tourists. In addition to enhancing our digital outreach, we are also strengthening our language support infrastructure by hiring more interpreters, ensuring a seamless and high-quality experience for international customers. These efforts will not only drive revenue growth but position us as a welcoming and accessible destination for tourists seeking aesthetic and medical services. Medical business growth outlook. In the medical field, we have focused on areas with high affinity to aesthetic medicine, such as orthopedics, ophthalmology, infertility, and health treatment. By aligning these services, we aim to create a holistic offering that appeals to a broader range of customer needs. We aim to differentiate ourselves from competitors by leveraging our expertise in marketing and management developed through private medical practice.
This unique combination of medical knowledge and business acumen positions us to deliver exceptional value and drive sustainable growth in these expanding fields. Overseas business. We are focusing on the U.S. and Asia for international expansion. The U.S. med spa market is growing rapidly, attracting major capital. SBC aims to establish a winning formula in this field and enhance 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 and four distinct brands. This acquisition marks a key milestone in our expansion strategy, serving as a critical hub for our patients across Asia.
We will continue our strategic expansion into neighboring countries, leveraging regional synergies and market insights to establish a strong and scalable presence across Asia. Let's start capital policy and share liquidity. We believe our current stock price still does not reflect the strengths of our underlying fundamentals, likely due to limited liquidity, which has also been a concern raised by institutional investors. With that, we are considering the following measures. First, improving supply and demand, attracting new major shareholders by repurchasing shares and/or paying dividends to enhance shareholder value. Second, additional liquidity measures, issuing new shares or partial sale of founder-owned shares. Plus, share buyback. As an initial step, we approved and published a 5 million share repurchase program. This decision reflects our confidence that the current stock price should be undervalued.
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 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 investment and dividend payment. This concludes our presentation on the current status and future direction of SBC Medical Group Holdings. Thank you very much for your attention.
Thank you so much for the presentation, Yuya. I just want to remind everybody, if you have any questions, you can email them to conference@sidoti.com, and we will make sure to send it to the management of the company. With that, can I ask a few of my questions?
Sure.
Yes.
Can we talk about what your view on the Japanese aesthetic medicine market is and what is the strategy that SBC follows in the Japanese market? Yeah, as I said in the presentation, while the market is becoming increasingly competitive and is also entering a phase of normalization, as less resilient players begin to exit, especially last year, exacerbated by the recent bankruptcies of major hair removal selling chains, we are seeing a rise in attractive M&A opportunities. This shifting landscape presents a chance to strengthen our market position through strategic acquisition and consolidation. Also, our growth strategy centers on enhancing customer value and increasing average unit prices. For example, in response to strong demand, we adjusted our pricing in the hair removal segment to reflect the value of our services, as I explained in the presentation.
At the same time, we introduced a more flexible and customer-friendly offering, such as extended clinic hours with early morning and late-night appointments, like 7:00 A.M. - 11:00 P.M. to improve accessibility and convenience. In addition, our multi-brand strategy continues to play a key role in addressing the diverse needs of the customer base by tailoring service across multiple brands that enable us to capture the more broader audience. Yeah.
Thank you. Can you tell us what the future growth drivers are for the company? Like, what should the investors be looking at in the next 12 months?
Yeah, again, I think we have three main drivers. First, strengthening dermatology and the SBC brand. High customer frequency means strong continuity and growth. That is in line with our global trend, which customers support a more non-invasive, non-surgical treatment but frequently visit our clinics.
Secondly, expanding B2B services on top of our B2C services, supporting other clinics with our management and systems. Third, overseas expansion. As I explained, we are planning to expand into the U.S. and Asia, probably utilizing a multiple M&A strategy. Yes.
Okay. Moving to the capital allocation, I have a question. Like, what is the rationale behind the share buyback? Do you think the management is going to keep doing that in the future as well?
Yes. As mentioned, we think the low liquidity has made it challenging for institutional investors to trade our stock efficiently. In that sense, this share repurchase marks an initial step toward improving supply and demand balance and enhancing overall market liquidity. Actually, we have seen a big rise in our market liquidity and the market volume in the recent trends.
We believe this action is necessary to signal our confidence in the company's undervaluations and to provide a clear exit mechanism for the large shareholders who wish to sell. In that sense, the repurchased shares are intended to be allocated to our upcoming stock compensation plans, aligning employee incentives with long-term shareholders' value. I think, yeah, in the foreseeable future, we will continue this share buyback program. Yeah.
Okay. What is your view on the risk of share dilution from the new share issuance? Yeah, although we fully recognize that some investors have shown their concern about dilution. However, at the same time, we have received feedback from the institutional investors suggesting that increasing the free float could improve supply-demand dynamics and even support a stock price increase despite the dilution.
Our target is to implement capital policies that are growth-oriented and help improve both the free float and the market liquidity. We will continue to engage carefully with our investors and make thoughtful decisions in this regard.
Okay. Thank you so much. That's all the questions that I had. If you want to share any closing remarks with the investors, please go ahead now.
Yeah, again, thank you for taking your time to join us. We sincerely appreciate your ongoing support. If you'd like to get in touch with our team, please feel free to reach us. Thank you so much.
Thank you. Thank you so much.