Welcome back, everyone. Next, we have SBC Medical Group Holdings Incorporated, trades on the NASDAQ under the symbol SBC, and is a medical services organization providing management support across a wide range of healthcare fields, including advanced aesthetic healthcare, dermatology, orthopedics, fertility treatment, gynecology, dentistry, alopecia treatment, and ophthalmology. Serving 6.76 million customers annually, the group is driving AI strategy to lead the future of healthcare. Today we have with us Hikaru Fukui, Head of IR, and Stephen Rogers, Head of Global Planning and Strategy. Before we get into it, let's watch this AI-generated presentation video to learn more.
Thank you very much for joining us today despite your busy schedules. I will now present SBC Medical Group's business overview and financial results for the first quarter of 2026. Let me begin by explaining how SBC actually operates, because our model is somewhat different from what many people initially expect. We are a medical services organization or MSO. We provide clinics with everything they need to operate efficiently, including marketing, procurement, technology, hiring, and training. Everything is managed centrally, which makes the model highly scalable. As the clinics grow, our earnings grow alongside them. Our flagship brand is Shonan Beauty Clinic, the largest beauty medical group in Japan. We founded the business in 2000, listed on NASDAQ in 2024, and are now ready to expand this proven model globally. SBC is not a single-brand business.
We have built a portfolio of brands covering a broad spectrum of beauty and medical services, ranging from quick, affordable treatments to high-end surgical procedures. In general healthcare, we also operate specialized brands in hair loss treatment, fertility, orthopedics, eye care, and dental services. The reason behind this strategy is straightforward. Different patients have different needs. By offering the right brand for each segment, we can serve a broader market more effectively. In addition, patients often move between our brands over time, allowing us to maintain long-term relationships within our network. Next, let me highlight our clinic business. We currently operate 284 clinics, primarily in Japan, and serve 6.7 million customers annually. This extensive network and strong customer base provide a powerful foundation for sustainable growth and reinforce our leadership position in the market.
Both the number of customers and average revenue per visit increased year-over-year, driving continued revenue growth, including solid growth at existing clinics. Going forward, we will continue enhancing our service levels through our multi-brand strategy, which enables us to address increasingly diverse customer needs with precision. Combined with the continual development of new services, we believe this will further strengthen our competitive advantage and support long-term growth. People often ask us, "If this model works so well, why has nobody else replicated it over the past 26 years?" The answer is the loop we have built. When patients receive great care, they trust us. When they trust us, they come back. When millions of patients come back, we accumulate an enormous amount of data. That data improves our training, strengthens our AI capabilities, and sharpens our marketing, which leads to even better care, the cycle continues.
The key point is this. New competitors do not simply face a cost disadvantage. They face a 26-year data gap. You cannot buy your way out of that. That is a moat built over 26 years. Next, let me move to our consolidated income statement. Total revenue for the first quarter of 2026 was $43 million. While this represented a 9% year-over-year decline, the primary factor was a fee structure revision implemented in April of last year. This revision reduced franchising revenue by $6.2 million and management services revenue by $2.4 million, for a total negative impact of $8.7 million. In addition, procurement revenue and rental services revenue declined year-over-year. Meanwhile, growth in point revenue partially offset the decline in management services revenue.
Please also note that net income attributable to SBC Medical Group declined year-over-year, partly because the prior year quarter included a one-time life insurance surrender gain of $8.7 million. As mentioned earlier, the reported revenue decline was primarily attributable to the fee structure revisions. Excluding the $8.7 million impact from those revisions and further adjusting for the $1.3 million difference related to the AHH consolidation period, underlying revenue grew 11% year-over-year. Similarly, excluding the $8.7 million impact from the fee structure revisions, underlying EBITDA increased 17% year-over-year. While the headline figures show declines in both revenue and profit, I would like to emphasize that excluding the impact of the prior year fee structure revisions, both revenue and EBITDA demonstrated solid underlying growth. Now, let me turn to where we are heading.
Everything we are building points toward one central idea, longevity, helping people stay healthier and feel younger for longer. We approach this opportunity from two sides, the appearance side through our aesthetic medical services and the physical health side through our general medical services. We are pursuing this vision through four key initiatives, and I will walk through each of them. Last year, we launched SBC Wellness, a health and wellness benefits program for corporate clients. We are now preparing to take it to the next stage with SBC Wellness 2.0. This next phase is centered around one key concept, longevity. In the United States, longevity medicine is already gaining significant momentum. Personalized health programs designed to help people perform at their best, not simply treat illness. In Japan, however, no clear leader has emerged yet. We intend to be first. We believe we are uniquely positioned to lead this market.
We have accumulated 26 years of medical expertise, built a nationwide clinic network, and developed a large base of patient data. Together, these assets create a platform that is extremely difficult for others to replicate. By entering the market early with these advantages, we believe we can establish a dominant position before the market fully develops. We also believe the corporate channel is the most efficient way to scale this business. By offering Wellness 2.0 as an employee benefit sold directly to companies, we can reach large populations without relying heavily on traditional marketing spending. Companies want healthier and more productive employees, and we provide a compelling solution to support that goal. We believe the fit is very natural on both sides. Our second growth initiative is expanding the operational capabilities we developed in aesthetic medicine into broader healthcare categories.
There are three strengths we believe transfer effectively across medical fields. First, our marketing capabilities. We know how to attract patients and maintain long-term engagement. Second, our operational model. We have developed a standardized approach to clinic management that scales efficiently across multiple locations. Third, our ability to provide both cash pay and reimbursed care medical services within the same platform. We are already applying these capabilities in orthopedics, fertility treatment, and eye care, all of which are attractive and fast-growing healthcare markets that align naturally with our existing strengths. Turning to global expansion, our approach is disciplined and straightforward. Japan remains the strong foundation that supports everything else we do. We are not pursuing aggressive overseas expansion. Instead, we are expanding selectively, leveraging the operational model we have already proven in Japan. In the United States, we are partnering with OrangeTwist, a premium medical spa group operating 24 locations.
OrangeTwist has deep expertise in the United States market and delivers an excellent patient experience. SBC contributes strong operational capabilities and an efficient clinic model. Together, we are opening new locations and building a presence in the emerging longevity market. Over time, we also expect to bring the best elements of the United States operating model back to Japan and other Asian markets. The final component of our strategy is AI, and this is fundamentally about transforming how we operate. Today, our business requires significant human labor to manage. As we continue to scale, that naturally becomes more expensive and more complex. Our solution is to leverage 26 years of patient clinic and operational data to build tools that do the heavy lifting for us, including automated bookings, smarter marketing systems, AI support for clinic staff, and 24-hour patient communication services.
We are using AI to improve both sides of the business simultaneously, enhancing the patient experience to drive revenue growth while also increasing operational efficiency to reduce costs. This is not an either/or strategy. We are pursuing both growth and efficiency at the same time. The result is a business that can scale more rapidly without increasing headcount at the same pace. Other companies may attempt to build similar AI tools. However, they do not have access to the data we have accumulated over 26 years. That is our lasting advantage. Let me conclude by returning to the six key reasons we believe SBC represents a compelling long-term opportunity. First, our track record. SBC is Japan's largest beauty medical group by number of clinics. We started with a single clinic in 2000, and today we operate 284 locations across more than 20 brands.
We serve over 6.7 million patients annually, and 72% of them return to us. That level of loyalty sustained over more than two decades is not accidental. Second, we have built a business model that is extremely difficult to replicate, supported by a 26-year operational and data advantage. Third, we generate strong profitability. Net income reached JPY 51 million last year, up 9% year-over-year. Our EBITDA margin exceeds 40%, and we reinvest that cash flow back into future growth. Fourth, we believe we are still early in the development of Japan's longevity market, where no clear market leader has emerged. Fifth, we are now extending the operating model proven in Japan into international markets through partnerships and investments in Southeast Asia and the United States, including our strategic stake in OrangeTwist. Sixth, we have a strong management team.
Our inclusion in the Russell 3000 Index in 2025 reflects our position as a well-managed and increasingly recognized public company. We believe SBC is uniquely positioned to lead the next generation of healthcare and longevity services, both in Japan and globally. Thank you very much for your time today.
All right. Thank you for that presentation, everyone. Let's jump in with some questions. First of all, talk about why you operate under a franchise model in Japan rather than running de novo company-owned clinics, and how does the revenue structure work?
Thank you very much for your questions. Under Japanese medical regulations, medical corporations are classified as non-profit entities, and for-profit operating companies are not permitted to run clinics directly.
SBC, therefore, operates as a medical service organization, providing comprehensive operating support to independent medical corporations under a franchise model. SBC itself doesn't perform a medical procedure. We provide marketing, recruiting, training, accounting system, and medical equipment leasing. In return, we earn a franchise fee combining a fixed and a variable component, plus equipment lease income and revenue from consumable procurement. A key feature of this model is that it is highly asset-light. Clinic lease rather than our own real estate, and source expensive medical equipment from SBC headquarters on leasing basis. Thanks to SBC brand strength and marketing support in Japan, a newly opened clinic reached profitability in just five to six months on average, compared to more than one year typical for the normal clinics in the broader market.
Perhaps the strongest single data point on the durability of this model, not a single medical corporation has ever terminated its franchise agreement with SBC in our 26 years history.
Wow, good to hear. Let's talk about the multi-brand response and resilience. Your top line saw a slowdown last year, but is now re-accelerating. Tell us what happened, what did you do, and how resilient is the business?
Thank you very much. From 2024 into early 2025, the Japanese aesthetic market saw many new entrants attracted by the sector profitability, intensified price competition. Average revenue per visit declined temporarily. In response, we moved away from excessive discount promotions and optimization pricing. Strengthening the management team, such as new CMO and CSO, accelerates our multi-branding strategy, assigning distinct brands to distinct customer segments, to avoid internal cannibalization while capturing differentiated needs. The results are showing up clearly in the numbers. Average revenue per visit reached JPY 316 in fourth quarter 2025, 11% up year-over-year. First quarter 2026 delivered revenue 11% up and EBITDA 17% up on the adjusted basis, excluding the impact of the last year fee structure revisions. Customer durability is intact. I mean, the 72% repeat rate and 94% of monthly visit in December 2025 came from existing customers.
On resilience, during COVID-19, our business actually expanded. Tighter Japanese regulation in 2025 has, if anything, strengthened our relative position versus smaller, less deeply rooted competitors who can't meet the higher operating bar.
Wonderful. Thank you for that. Tell us what are the major growth engines that drive SBC from here going forward?
Yeah. I think we see the growth coming from two areas within Japan, on top of which sits our global expansions. Number one, continued expansion of our core aesthetic medical market. Two structures are tailwinds. First, a sharp rise in male customer, who now accounts for more than 40% of our total customer base. The dramatic shift from a decade ago, driven by men's focused brands such as Gorilla Clinic and Men's Rize. Second, inbound medical tourism, supported by trust in Japanese brands and the current FX environment. Number two, expansion into non-aesthetic medical fields under the SBC Wellness 2.0 longevity theme. Japanese longevity market is estimated at approximately $34 billion, roughly 8.5 times the size of the aesthetic medical market of $4 billion. It is still unserved.
We are applying our aesthetic operating playbook to other categories such as AGA treatment, dentistry, orthopedics, fertility treatment, and ophthalmology. We are also building corporate benefits, B2B channel, turning employee into a new customer acquisition route, particularly effective in under-penetrated categories.
Wonderful. Let's talk about the U.S. How are you approaching the U.S. market, and what have you learned from your earlier U.S. attempt?
Hey, Anna. Stephen here. Happy to chat through that. Thanks for having us. I'm Stephen. I'm Head of our Global Planning and Strategy. I focus primarily on expansion into the U.S. and some other global markets. On your question, SBC entered the U.S. market a few years ago with some organic de novo clinics that we built. One of the things we learned early on is, one, you can't copy and paste necessarily what we've done in Japan and just try to bring it over to the U.S. We can't really follow that model. We need to take a look at who are the industry leaders in the U.S., and how can we better partner with them. The model in Japan is purpose-built for Japan. It works really well.
There's still a lot of room for it to continue to grow. It'll continue to do really well there. Trying to take that same model and just move it overseas is not really going to work for us. Now our strategy is focused on how do we find and partner with really great companies? We found OrangeTwist. OrangeTwist is an industry leader in the MedSpa space, specifically in luxury. They do a lot of non-invasive treatments. The experience there is amazing when you go in. We just really fell in love with the culture of the company, their dedication just to excellence in terms of the customer experience. It just fit really well with our values. We've partnered with them. We're helping them grow. They'll really be our growth engine on the MedSpa space.
We're continuing to look for additional partners too, in longevity and some other areas here in the U.S. You'll continue to see some cool things happening there. These will be relatively smaller positions. The core growth of the business will still be in Japan. This allows us to continue to look at unique opportunities in the U.S., take multiple different bets, feel like we get a better understanding of where the market's going. We can start to get smarter about it, while we still protect our core business in Japan. We're taking a longer-term approach to it. The next few years, you'll start to see more and more cool things happen. Long term, we're really excited about having a stronger presence here in the U.S. and other markets.
Perfect. Thank you, Stephen. Let's talk about AI. As you continue to roll out AI across the organization, what's the impact? How is it going to impact growth and margins?
Yeah. Thank you very much. One of our feature is we have a huge customer. As Anna mentioned at the beginning of the sessions, at this moment, we have roughly 6.7 million customers on annual basis. It means we have a huge data. We utilize that huge data to make the stronger marketing activity or develop very enhanced back office platform. We can utilize it to the improving our service level as well. I think the AI adoption is a support to boost our business size itself and also since it makes our platform stronger. I think our profitability also should be improved. I am very excited to such change.
Great. Wonderful. With a substantial cash position on the balance sheet, how are you thinking about capital allocation?
Yeah. Thank you very much. At our first priority, we would like to utilize that huge cash and capital to invest in the further growth, including the organic growth and the inorganic growth as well, and domestically and internationally. Since everybody understands that we have a strong appetite to invest further growth, and also we have a huge cash as well. Fortunately, we received many such informations. On our table, we have several options, and we are carefully investigate which option fits our business strategy and our culture and potential financial contribution as well. We also deployed two expertise in United States. Of course, one of them is Stephen Rogers, and they are now searching such new opportunity. Stephen, do you have any comment to that?
Oh, yeah. I think the cash position that we have is incredibly strong and I'd say it's very unusual for a company like this to have such a strong position. It just puts us in a really unique advantage. We're in a really good position for growth, and then we also have a unique opportunity to pick and choose how we want to grow, and how we want to invest, because our core business is so strong. Like Hikaru said, we'll continue to do acquisitions, clinic acquisitions, in Japan, expanding our current scope. We'll be looking to continue to grow into the medical field, and continuing to grow into unreached areas within Japan. A lot of our clinics are focused in highly dense demographic areas like Tokyo and Osaka. Getting broader reach out in the country, there's a lot of room opportunity there.
In the U.S. too, we're continuing to look for additional partnerships, potentially some acquisitions and some other cool things. Of course, we're also very interested in Southeast Asia. We did the acquisition in Singapore. We have 24 clinics there. We're also very excited about expand. The Japanese brand is very strong in that region. There's a lot of cool opportunities in Thailand and Malaysia, some other places. Definitely a lot of opportunity on the horizon. It's just a matter of picking and choosing what we feel like really works best for us, and making sure we're feeling really confident about where we're going.
Perfect. Let's talk about the current valuation discount. What are you doing to close it?
Yes, thank you very much. Of course, it's very difficult to evaluate our valuation by ourselves. I personally think that compared with our financial performance, our share price is not, how can I say, gets appropriate valuation from the market. I consider that there are some challenges. One challenge is limited visibility in U.S. Recently we made a minority investment in the OrangeTwist last December. Our U.S. business is very limited, so only few U.S. investors is aware of SBC. One of our challenge is improving visibility in U.S. Last year, Maxim Group LLC and BTIG kindly initiated their report about SBC. We consider it's not enough, so I'm now trying to expand the analyst coverage, and I'm now discussing that with several analysts as well. Of course, broadening the institutional investor base is also very important.
Now I'm trying to have a IR meeting as much as possible. For example, in June and May, I joined the five IR conferences. Also in this September and October, there are many IR conferences in U.S., I will visit to join such IR conferences. Yeah, this is my challenge.
Great, sounds fun. Let's close with this question, and either of you can answer. What do you believe SBC will look like five years from now in terms of clinic count, revenue, and profitability?
Yeah. Thank you very much. I think that we have a big potential to grow more. Historically, we opened our first clinic in 2000. It means that we have already 26 years as a history. We successfully expand our network and our revenue more than 10% on CAGR basis. We consider we still have a big room to growth in Japan as well. Of course, recently we are now trying to expand our international businesses, mainly in U.S. and Southeast Asia. Definitely our business area should be expanded. As for the margin, profit margins, I think that at this moment, our EBITDA margin is more than 40%. I think that it's still a very high profitability. yeah, again, utilizing the AI technology, I think that we can maintain this high level of profitability. yeah. That's my considerations.
Stephen, do you have any comments to add?
Yeah. I think from a global expansion perspective, today our global business represents about 1% of our total revenue, it's very small. I'd say in the next five years, our goal is to get it to roughly 25%, and to be one of the major growth engines for the business. Really excited about a lot of the opportunities there, and what lies ahead.
Wonderful. Well, thank you both for this presentation. It is really been interesting learning more about SBC Medical Group and seeing your expansion. We appreciate you guys joining us back on the conference today.
Great. Thanks so much, Anna.
Thank you very much.
All right, everyone, stay with us. We will be back soon with our next presenter.