I will now present SBC Medical Group 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. We provide clinics with everything they need to operate essentially, 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 September 2024, now are 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. By offering the right brands 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 a long-term relationship within our network. Next, let me highlight our clinic business. We currently operate 284 clinics, primarily in Japan, and served 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 the existing clinics.
Going forward, we will continue enhancing our service levels through our multi-branding strategy, which enables us to address increasingly diverse customer needs with precision. Combined with the continuous 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 a 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 the enormous amount of data. The data improves our training, strengthens our AI capabilities, and sharpens our marketing, which leads to even better care. The circle continues. The key point is this. New competitors don't simply face a cost disadvantage. They face a 26-year data gap.
You can't 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 JPY 43 million. While this represented 9% year-over-year decline, the primary factor was a fee structure revision implemented in April of last year. This revision reduced franchising fee revenue by $6.2 million, and management service revenue by $2.4 million, for total negative impact of . In addition JPY 8.7 millionn, our procurement revenue and rental services revenue declined year-over-year. Meanwhile, growth in point revenue partially offset the decline in management service revenue.
Please also note that net income attributable to SBC Medical Group Holdings declined year-over-year, partially because the prior year's quota includes a one-time life insurance surrender gain of JPY 8.7 million. As mentioned earlier, the reported revenue decline was primarily attributable to the fee structure revisions. Excluding the JPY 8.7 million impact from those revisions, further adjusting for the JPY 1.3 million difference related to the AHH consolidation period, underlying revenue grew 11% year-over-year. Similarly, excluding the JPY 8.7 million impact from the fee structure revision, underlying EBITDA increased 17% year-over-year. While the headline figures show declines in both revenue and profit, I'd like to emphasize that excluding the impact of the prior year fee structure revision, both revenue and EBITDA demonstrated solid underlying growth. Let me turn to where we are heading.
Everything we are building points towards one central idea: longevity, helping people stay healthier and feel younger and 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, health and wealth 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 U.S., longevity medicine is already gaining significant momentum. A personalized health program designed to help people perform at their best, not to 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 duplicate. By entering the market 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 these businesses. We 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 competing solution to support that goal. We believe the fit is very natural on both sides. Our second growth initiative is expanding the operational capability we developed in aesthetic medicine into broader healthcare categories.
There are three segments we believe transfer effectively across medical fields. First, our marketing capability. We know how to attract patients and maintain a long-term engagement. Second, our operational model. We have developed a standardized approach to clinic management that serves efficiently across multiple locations. Third, our ability to provide both cash pay and insurance-covered medical services within the same platform. We are already applied this capability in orthopedics, fertility treatment, and eye care. All of which are attractive and fast-growing healthcare market 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 U.S., we are partnering with OrangeTwist, a premium medical spa group operating 24 locations. OrangeTwist has deep expertise in the U.S. market that delivers excellent patient experience. SBC contributes strong operational capabilities and efficient clinic model. Together, we are opening new locations and building patients in the emerging longevity market. Over time, we also expect to bring the best elements of the U.S. 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, businesses require 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 a tool that does 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 business simultaneously, enhancing the patient experience to drive revenue growth while also increasing operational efficiency to reduce costs. This is not the 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 develop similar AI tools. However, they don't 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, the track record. SBC is Japan's largest aesthetic 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 26 years of 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 that 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 operational model proven in Japan into international markets through partnerships and investments in Southeast Asia and the U.S., including our strategic stake in OrangeTwist. Sixth, we have a strong management team. Our inclusion in the Russell 3000 Index last year 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 today.
Thank you so much for the presentation, Hikaru. I would like to remind everybody in the audience, if you have any questions, please submit them at the Q&A section at the bottom of your screen. Hikaru, with that, I would want to start with asking, can you talk to us a little bit about the industry trends that you're seeing in the current demand environment for aesthetic procedures in Japan compared to the last few years? How has the market changed post-COVID? It's been five years since COVID, how that has changed in the recent times.
Yeah. Thank you very much. As for the Japanese aesthetic medical market, in 2024 and early 2025, the market was a little competitive because many doctors working in the other medical areas considered this aesthetic medical market as very attractive because of the profitability. The number of new entrants in this market increased. The situation is very competitive. After that, I think that from the second quarter of 2025, the situation is getting better and back to the normal situations. For example, this page shows the clinic highlights, average revenue per visit, right up above light, increase 11% compared year-over-year. Total revenue increased to 10% and even the same clinic revenue increased to 6% compared with last year. I think the situation is getting better.
Right. If we talk about procedure trends, what category treatments are currently growing fastest across your network? Are non-invasive procedures continuing to take market share from surgical procedures?
Yeah. Thank you very much. I think that even the Japanese aesthetic medical market is similar to other area, including U.S. At this moment, non-invasive treatment is very popular, and the market size is expanding dramatically. Yeah. Again, and which is also not only ladies, but also the number of men's customer is also increasing. This is a very interesting situation for us.
Right. How does that impact the SBC business? Is SBC more towards surgery side of the business, or is it more towards the non-invasive surgical procedures?
Yeah. I think the important thing is capture such a growing market. I think that going forward, of course, we continue to provide aesthetic surgery services, of course. In the future, I think the aesthetic dermatology should grow. I think the good thing for the aesthetic dermatology treatment is this business is very recurring. Many patients, our clinic regularly, roughly one time for three months or something. I think this is a quite recurring business. This is a very good thing for us.
Okay. Can you talk to us a little bit about how SBC is seeing medical tourism? Is it a significant growth driver, and when do we start seeing it as a percentage of revenue? When does that start happening?
Yeah. Thank you very much. This is also very interesting question. Yeah, I think that because our number of customer is huge, I mean, at this moment, our total number of customer on annual basis is 6.7 million. I think that still the contribution of the medical tourist is limited. Especially for the Asian guy, Asian customers, I think the Japanese, our services considers very safety and high quality. Definitely, the number of the medical tourists to our clinic has been increasing. Recently, we utilize the AI technology to support the communication between the customers and doctors or something. I think such technology can support more, how can I say? Yeah, increasing the number of medical tourists.
Right. You just spoke about AI. Can you tell us how AI is changing patient acquisition, consultation, and treatment planning for you guys? If the patient and doctors are speaking with the help of AI, how does that change the business over time?
Yeah. Thank you very much. I think we view AI as both a growth lever and a margin lever as well. We have one of the largest medical datasets in Japan. As I mentioned, 6.7 million annual customer visit and tens of millions accumulated case records. We are systematically covering this data into AI capability across back-office processing, counseling support, and call center operations areas that historically required heavily human labor. On the growth side, AI enables more personalized customer engagement, improved conversion rate. On margin, AI is the most important tool we have to grow our revenue without growing our head count at the same pace. For a Medical Services Organization of our size, this is a key to improving margin.
There will be some upfront investment as we scale this capability. Over the medium to long term, we intend to translate the structural benefits of AI into further EBITDA margin expansion on top of our current 40% margin.
Right. Going back a little bit to medical tourism, can you tell us how the aesthetic market in Japan compare to, say, South Korea or Thailand or other Asian countries where there is a lot of usage of aesthetic treatments?
Thank you very much. I think that one of the feature of Japanese aesthetic medical treatment is many people consider Japanese treatment is more natural. It's a very tiny change, but we appreciate, I mean, their original face or original conditions. It's, I think that one of the good strength point of Japanese aesthetic medical. Also, many people consider Japanese treatment is very safe. I think that, of course, this is our medical services, so safetiness or trust is very important. This is also our strong point compared with other country.
Right. Lastly, if I can talk to you a little bit about your balance sheet and your capital allocation strategy.
How do you manage capital allocation priorities among share repurchases? You recently announced the JPY 20 million share repurchase, is that still going on? If you can just talk to us about the M&A strategy international expansion.
Thank you very much. Again, I think we are a very profitable company, our cash-generating power is very strong. As a result, at this moment, we have JPY 167 million cash equivalent. Our first priority, how to utilize this cash, is investing future growth, including the organically and inorganically, domestically and internationally. I think that the size of the M&A is different among Japan and the international, because, of course, we know Japanese market very well. For us, it's very easy to makes our acquired company more efficient, more profitable. It's very easy because we know everything. We have a very strong knowhow and, yeah, other people as well. International situation, I think the market is slightly different among Japan and international. That's why we will take the more careful step.
I mean, initially, we will find the very trusted professional guy as a very good partner. If we find the good way to win, a good way to expand the businesses, we expand the businesses. International acquisitions should be more careful compared with Japan.
Right. Do we, in the next 12- 24 months, see international businesses becoming a part of revenue? Is it still going to be just strategically investing and making more partnerships? Is international market going to be a part of revenue anytime soon?
Yeah. Thank you very much. Yeah. Of course, we consider the international market is very important for us. At this moment, we deployed two corporate development guy in the West Coast, and they are now seeking the new opportunity mainly in United States. I think that the U.S. market is very interesting. Of course, the market size itself is biggest in the world, and also the services is very cutting edge. We would like to import such cutting edge treatment or equipment machine or business model into Japan or the Southeast Asia. In the medical area, global company is very rare. Every medical company operates only their own country. We are very unique. We can import such-
Right
technology into the other area.
Right. Thank you very much, Hikaru. With that, we are at time. Thank you for doing the presentation with us, and I would like to thank everybody in the audience as well. Thank you for listening to us and spending your time with us today. Have a good day.
Thank you very much. Thank you