Good morning, everyone. Thank you for participating in the SIDOTI conference. With me today, I have SBC Medical Group. They trade under the ticker SBC, and I have Stephen Rodgers, the Head of Global Planning and Strategy, and Hikaru Fukui, the Head of IR at SBC with us today. Since we are doing this as a prerecorded session, if you have any questions, you can send the questions to conference@sidoti.com and we will forward the questions to the management. Thank you so much for participating today. Thank you. And with that, I will let Stephen take over.
Great. Thanks, Aashi, and thanks for having us here. I am really excited to talk about all the cool things that SBC is doing globally. I am the Head of Global Planning and Strategy, and, Hikaru, do you want to introduce yourself real quick?
Yeah. I am Hikaru Fukui. I am the Head of IR at SBC Medical Group Holdings. I am very happy to deliver our story to you.
Great. Yeah. And with that, we have got a short kind of overview of the company. So [friend], if you could go ahead and share that.
Thank you very much for joining us today despite your busy schedules. I will now present SBC Medical Group's business overview. Additionally, financial results and the update on our business strategies, capital, and IR strategy for the second quarter of 2026. Let me begin by explaining how SBC actually operates. Our model is somewhat different from what many people initially expect. We are a medical services organization, or MSO, behind Japan's number one aesthetic medical group. Built over 26 years, 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 our clinics grow, our earnings grow alongside them. On that base, it is strengthening its platform through AI and expanding into longevity and global markets, backed by strong profitability and a solid balance sheet. Our clinic highlights.
As of the end of June 2026, our number of locations reached 287, up 34 year-on-year, and the annual number of customer visits over the trailing 12 months was 6.92 million, up 10%. Year to date clinic revenue rose 11%, same clinic revenue was up 6%, and average spend per visit in the quarter increased 9%, with both customer volume and unit price rising together. Our clinic business is showing renewed strength. If I had to sum up this quarter in a single sentence, it is a quarter in which we completed the structural reforms we undertook in 2025, and SBC's growth entered a phase of re-acceleration. On the back of an expanding business base and more sophisticated support functions, including AI, we delivered profit growth that outpaced revenue growth. Our financial highlights. Second quarter revenue was $49 million, up 13% year-on-year.
Adjusted EBITDA was $20 million, up 32%, and our adjusted EBITDA margin was 41%. Profit growth outpaced revenue growth, with profitability improving. In the second quarter, we grew both revenue and profit despite a weaker yen. Because most of our business is conducted in yen, a weaker yen is a headwind for our reported results. Even so, we absorbed it and still delivered strong revenue and operating income. The main driver was higher management services revenue, reflecting the expansion of the points business following the change in our operating policy in June 2025. A revision of certain service fees also contributed. Now to our strategy update. We aim to be a healthcare platform that supports longevity, therefore living young and bigger lives, from two sides, aesthetic medicine, an appearance-based approach, and non-aesthetic or general medicine, a function-based approach.
Our goal is to become the name that comes to mind when people in Japan think of healthcare and AI. We believe four growth strategies will get us there. Accelerating our multi-brand strategy in aesthetic dermatology, expanding our non-aesthetic business, expanding globally, and strengthening our competitive means and reforming our cost structure through AI. I will briefly comment on each of these four growth strategies. We believe that AI is developing into a source of SBC's next competitive advantage. In aesthetic dermatology, we are accelerating our multi-brand strategy to capture increasingly diverse needs and raise lifetime value. First half transaction value grew a strong 19% year-on-year. To reach the customer segment that prefers basic dermatological treatments, which is driving market expansion, we are renaming Shonan Beauty Dermatology to SBC Skin Clinic.
The Skin Clinic name lowers the barrier to aesthetic medicine and broadens our appeal, and we will open two additional clinics. Next, our high-value brands for beauty-conscious customers who choose based on the expertise of doctors and equipment. We will add three NEO Skin Clinic locations for a total of four, and one JUN CLINIC for a total of seven. To meet solid demand in men's aesthetics and hair removal, we are launching two new formats, dlaser, a large-scale hair removal clinic, and SBC MEN'S FLASH, which specializes in men's hair removal with high-speed operations. Gorilla Clinic's first half transaction value was JPY 62 million, up 19% year-on-year. Using hair removal and oral HA treatments as entry points, we guide customers step by step toward dermatological and higher value treatments, and this deeper penetration of our existing customer base drove the growth.
Aiming for a Japan where longevity means SBC, we position non-aesthetic healthcare as our second growth engine. Our transaction value mix is still roughly 84% aesthetic and 16% non-aesthetic, which means the potential upside is significant. To drive this, we established a dedicated team in June 2026, led by Naoya Fujimoto, formerly an executive officer at a major healthcare and IT talent platform company. It will strengthen both customer acquisition and medical management, first sharpening the acquisition and operations of existing clinics to raise utilization and revenue per clinic, and in parallel, using M&A to expand the number of locations. The premise of our global expansion is a stable earnings base in Japan. On that foundation, we grow overseas with discipline. In the U nited States, we are advancing our collaboration with OrangeTwist, in which we took a minority stake in December 2025.
OrangeTwist has 24 locations across six states and a membership base where recurring revenue exceeds 40% of sales. We are currently sharing operating know-how and expanding the service menu, and over the medium to long term, we aim to export the model we establish in the United States to Japan and Asia. In Southeast Asia, we are exporting asset-light, the operating system honed in Japan of affordable, reliable, and standardized. We are proving this out at our first Thai clinic, BLEZ Clinic. Under our Powered by SBC model, the local partner provides capital and operations while SBC supplies procurement, standardization, training, and patient acquisition, earning recurring fees linked to revenue in return. This expands our footprint at a high return on invested capital, or ROIC, while holding down capital expenditure. Starting from Thailand, we will expand the model across ASEAN. AI is a foundational strategy supporting both growth and efficiency.
We are leveraging more than 26 years of accumulated management data to support AI development, building a barrier that is hard to replicate. Strengthening our MSO platform through AI lifts growth in three directions at once, the number of locations, the fee per clinic, and the range of service menus.
A more attractive platform draws in new clinics, more active transactions, raised service fee levels, and the service menu expands, a virtuous cycle that we believe drives recurring consolidated revenue and EPS growth. More sophisticated support functions, AI foremost among them, translate directly into greater value for clinics, and we are raising service fee levels in stages accordingly. Enhanced call center functions are expected to add roughly JPY 11 million per year, and stronger support for the Galatea and Rize Clinics is expected to add roughly JPY 4 million, together about JPY 15 million per year on a full year basis.
On a win-win basis with the medical corporations, we aim to sustainably raise our average fee per clinic, or AFPC, at limited additional cost, which further supports profitability. Since our NASDAQ listing, we have reinforced our core platform and laid strategic groundwork overseas and in new domains. From here, we enter a phase of multifaceted acceleration, expanding and rebranding domestic aesthetic dermatology, launching new formats, strengthening non-aesthetic healthcare, moving the United States. into phase II, expanding B2B and joint ventures in Southeast Asia, applying AI, and planning a longevity center for 2027. Through disciplined investment, we will pursue differentiated earnings and sustained EPS growth. Finally, our capital and IR strategy. Our basic policy is to pursue EPS growth and a normalization of our valuation in parallel, enhancing shareholder value over the medium to long term. Backed by unpaid cash, we are investing in both organic growth and disciplined M&A.
At the same time, we recognize that SBC's recognition in the capital markets, particularly in the United States, is still limited. That said, our investor base is broadening rapidly. Our shareholder base has grown roughly 4.7 times year-on-year as of July 2026. Building on this momentum, in 2026, we have actively participated and will continue to participate in IR conferences in New York, Hong Kong, and elsewhere, and step up our year-round investor engagement, including NDR, one-on-ones, and outreach to retail investors. We will also keep working to expand analyst coverage through all of this with continuous EPS growth and the pursuit of an appropriate valuation in the capital markets as our two wheels. We expect to deliver even greater value to all our stakeholders, beginning with you, our shareholders. We hope you will look forward to what lies ahead for SBC. That concludes my remarks.
Thank you very much for your attention.
Thank you so much for doing the presentation. I would like to remind everybody, since this is a prerecorded session, if you have any questions for the team, you can email them at conference@sidoti.com, and we will forward them to the management. Just a few questions from my end for the both of you. You described this quarter as a re-acceleration of growth. What has changed, and do you expect this momentum to continue, and how so? Hikaru, you are on mute. I can't hear you.
Sorry, sorry. Thank you very much for asking. Yes, we do. Over the last two years, the market was competitive, so we reviewed almost every part of our businesses. We looked again at our marketing, pricing, services, and how we communicate with customers. We also strengthened our multi-branding strategy so that we can offer the right services at the right price to each customer group. We also made our marketing much more data-driven. We now look closely at customer needs and behavior and use that data to improve our decisions. We are now seeing the result. At this moment, we confirm not only number of customers visit, but also customer spending is growing. That is very different from the last two years. We believe this is not just a short-term recovery. We reflect a stronger business platform, and we are confident that this growth can continue.
Right. During the presentation, you said non-aesthetic healthcare was the second growth engine. Can you tell us how large this business can become, and how soon can it turn to revenue?
Yeah. Thank you very much. We see a very large opportunity. Today, about 84% of our transaction value comes from aesthetic and only about 16% comes from non-aesthetic healthcare, so there is a lot of room to grow. More importantly, we do not have to build this business from zero. Over 26 years, we have built a strong operating model in aesthetics, including marketing, customer acquisition, clinic operation, data, and AI. We can use the same model on other areas of healthcare. Our first step is improve the performance of our existing clinics. We want to increase the number of patients and improve revenue per clinic. At the same time, we will expand our network through M&A. We are not setting a specific target to the mix today.
Aesthetic will remain very important, but over time, we expect non-aesthetic healthcare to become a much larger part of SBC and an important second growth engine.
Right. Also, you have spoken about AI for a few quarters now and how you guys are using AI to get more customers. Can you talk to us about how AI actually led to revenue and EPS growth, and what functions in the day-to-day business does SBC use AI for?
Yes, thank you very much. For us, AI is not only about cutting cost, it is also about growth. There are three areas where AI can help us. First, it can improve the customer experience. We already have an AI chatbot, and we are developing AI tools for call centers, customer support, and more personalized services. This can help us serve more customers and increase revenue. Second, AI can help us grow our clinic network. For example, we can use data and AI to choose new clinic locations and share our knowhow across the group. This helps us open and operate clinics more efficiently. Third, AI helps us grow without adding the same level of cost. As the support of clinic becomes more valuable, we can also increase our service fee. We have already announced about JPY 15 million of annual service fee increase.
Importantly, these services require very little additional cost, so a large part of the additional revenue can flow directly to profit and EPS. This is why we see AI as a both growth driver and a margin driver.
Right. Now that the enhanced service fees have been implemented, what have you learned so far? Are franchisees seeing enough incremental value from the additional support that you feel comfortable with the reasonable co-fee structure, and should we view the second quarter contribution as a reasonable run rate going forward?
Yeah. Even we started the utilization AI, we consider there's many room to improve our operations for customer experience enhancement. I think that if we can provide more value to the medical corporations, we can develop the win-win relationship with them. Based on that win-win relationship, we can increase the service revenue accordingly. I think that there are still many room to improve our operation. I hope we can show some progress in near future.
Okay. How do you view your overseas business today, especially the U.S. and the Southeast Asia?
Yeah. Thanks, Aashi. I think the one thing that's important to remember is, although predominantly SBC is based in Japan, we really are a global company. We've got 21 clinics in Singapore, clinics in Vietnam, and then we're doing a clinic project in Thailand as well. There's been a lot of growth in Southeast Asia, where we feel like the Japan brand really resonates with that region because of just the quality, safety, compliance that SBC follows. We feel like there's a lot of opportunity for SBC to continue to grow, both organically and inorganically in that region over the next few years. There's a lot of upside there. But most importantly for us, our main focus is actually the U.S. We partnered with OrangeTwist, which has 24 med spa locations across six states. They're a luxury brand med spa.
When we partnered with them, they had 18 clinics. We've helped them grow to now 24, and we're really using them to propel our growth in the U.S. in the aesthetic space. You're going to continue to see really cool things happening there in terms of their growth. We've also been working with them to do cross-learning, uplevel their menus and treatments, and to really create a really unique, differentiated experience. We feel like they're going to be one of the leaders in the med spa space, in the U.S. We're excited about that. We're also looking at other partners that we can work with, in the U.S. too. We don't have operations here, so we really look at companies with strong management that we can get behind and partner, and then with the opportunity to acquire in the future.
But right now, we're just looking for really strong partners across different verticals, which include med spa, aesthetic, longevity, wellness, and also technology as well. I know we talked about AI. We're also looking at AI companies that we can leverage for our global business as well.
Right. Stephen, just to follow up on the OrangeTwist. We're now several months into the OrangeTwist partnership. Of the initiatives you originally outlined, like marketing and customer acquisition, AI-driven cost reduction, which has progressed the furthest, and are you seeing any measurable results yet? I know we've spoken about this—
Yeah.
—a couple times, and each time it's been that, okay, the international revenue is still far away.
Yeah.
How far do you see that?
Well, I feel like OrangeTwist has come a long way already this year. They've already grown their clinic base by around 30%- 40% in the last six months. You'll continue to see really strong growth like that over the next 6- 12 months, with them specifically, and then continuing to leverage assets. The other thing that we're excited about too is we had the OrangeTwist team in Japan recently. We have 20 different brands across SBC, so we have a lot of different experiences that focus on different demographic groups. We're looking at which of those brands and services could really resonate in the U.S., and OrangeTwist is helping us leverage that and bring some of those to the U.S. Over the next probably 12 months as well, you'll probably see some partnerships with OrangeTwist with some SBC-branded clinics that complement OrangeTwist as well.
You're going to start to see some more additional growth in the med spa space over that time. Really excited about that. On the AI initiatives too, one of the things that we're, as Hikaru mentioned, there's obviously a lot of cost savings, improving customer experience. One of the things that's really unique about SBC is they've been in business for 26 years and have millions and millions of data points that are just not being leveraged yet. We feel like this is a huge opportunity for us to really create something unique and special that no one else in the market can create. We feel like that's a huge opportunity for us as well.
No, definitely.
Yeah.
I'm really excited to see what comes along the way.
Yeah.
What does longevity mean for SBC? We have been speaking about this also for a few quarters now, and I think that is another growth engine that you guys have in the pocket. Why do you believe SBC can win in this market?
There is a couple things. Longevity in the U.S. is very dynamic. It is moving so fast, and you are seeing this kind of convergence with aesthetic, wellness, longevity, kind of all coming together. One thing that we have been very actively doing is looking at longevity partners in the U.S. So we are really excited that we are probably going to be able to partner with some of the companies here. But at the same time too, longevity in Japan is still pretty nascent. Companies that are doing cool things here, health intelligence platforms, biological aging companies, we can leverage that for first-mover advantage in Japan. I feel like SBC, with our 280 clinics globally, is really well positioned to be in that market, both incorporating longevity treatments in our existing clinics, as well as creating unique longevity-specific clinics as well.
We have a very unique, I would say, asset class that positions us well to win the longevity space.
Right. I think probably this one is for Hikaru. If you can talk to us a little bit about the JPY 184 million of cash. How do you plan to increase the shareholder value with that, and why should investors look at SBC right now? That is probably the most important question that is right now.
Yeah. Thank you very much. Our first priority is growth. We have a strong cash position, and we plan to use the cash carefully for both organic growth and M&A. We have a long track record of growing businesses after bringing them into the SBC group. We believe M&A can be an important part of our future growth, especially as we expand into more areas in healthcare. At the same time, our goal is to grow EPS steadily. Our businesses has a high level of recurring revenue and strong margins. As we grow the clinic network, increase service fees, and use AI to make the platform more scalable, we believe we can continue to grow earnings. The other important point is market awareness. SBC is still not very well known in the U.S. capital market. This is why we are actively meeting investors and increasing our IR activities.
Our beneficial shareholder has already grown significantly over the past year, but we believe this is still a lot of room to improve awareness. We strengthen our foundation in 2025. Domestic growth is now re-accelerating. AI is creating new revenue and profit opportunity. We are building a second growth engine in non-aesthetic healthcare, and we are also starting to see progress overseas. We believe this is the beginning of the next stage of growth for SBC. Yeah, that's all.
Thank you. Thank you so much, and I really appreciate the time you guys spent with us and for doing the presentation. For the audience, thank you so much for participating with us. With that, we're at time, but thank you so much, and we look forward to hosting you guys again.
Great. Thank you.
Thanks.