Good morning, ladies and gentlemen, and thank you for standing by for So-Young's second quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the management's prepared remarks, there will be a question-and-answer session. As a reminder, today's conference call is being recorded. I would now like to turn the meeting over to your host for today's call, Ms. Vivian Xu. Please proceed.
Thank you, operator. Thank you for joining So-Young second quarter 2022 earnings conference call. Please note that the discussion today will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our public filings with the SEC, including our annual report on 20-F. So-Young does not undertake any obligation to update any forward-looking statement, except as required under applicable law. Joining us today on the call is Mr. Min Yu, our CFO. At this time, I would like to turn the call over to Mr. Min. Thank you.
Thank you all for joining our second quarter 2022 earnings conference call. Since the beginning of 2022, we have faced many challenges from the external environment, including the macro environment and particularly the resurgence of COVID-19 in multiple cities across China, which had a negative impact on business activities and the consumer sentiment. According to data from the National Bureau of Statistics of China, total sales of consumer goods in the first half of 2022 decreased by 0.7% year-over-year, while the situation further weakening in the second quarter when total sales of consumer goods decreased by 4.6% year-over-year. In Q2, the resurgence of COVID-19 affected the top four medical aesthetic consuming cities by GMV, with Beijing, Shanghai, Guangzhou, and Shenzhen.
Total GMV for the four cities from our platform in the second quarter of 2022 decreased by 71% year-over-year. We were actively adapting and adjusting the operation strategy of second and third tier cities, driving the revenue contribution of emerging cities to make up for the decline. As a result, in the second quarter, total revenue reached RMB 309 million, an increase of 3% from Q1. At the same time, we further increased the number of SKUs on our platform to optimize the online transaction experience with more transparent pricing and attractive incentives for end users, particularly as a way to make up for the decline in surgical GMV due to travel restrictions and safety risk considerations under the pandemic. GMV of nonsurgical treatments in the second quarter of 2022 increased 5% quarter-over-quarter.
GMV of nonsurgical treatments in June increased 33% compared with May and increased 40% compared with April. Meanwhile, we were prudent with our expenses management and narrowed our losses in the quarter by improving operating efficiency. In the second quarter of 2022, sales and marketing expenses decreased by 41% year-over-year, among which branding and user acquisition expenses as a percentage of total revenue decreased to 20% from 33% a year ago. Operating loss narrowed by 46% quarter-over-quarter, and we had an operating profit in June. In terms of operating strategy, recently we launched the So-Young Select in cities including Beijing, Shanghai, Chongqing, Hangzhou, Shenzhen, and Wuhan. We strictly selected 80% of the local high quality and high standard service providers drawn from six categories by applying more than 30 rating criteria, including product, price, and service.
For service providers, strict selection criteria enabled them to strengthen their core competitiveness and support growth recovery in the post-pandemic period. For users, strict selection criteria addressed their preference, so they can benefit from the reliable consumer protection provided by us. This helps users improve their decision-making efficiency. Wuhan Miracle, which we acquired in the third quarter of 2021, also performed well in the second quarter of this year. According to its disclosure of reported results, the revenues were RMB 120 million in the first half of 2022, up 8% year-over-year despite the challenging industry environment. Wuhan Miracle is very focused on continuously improving the quality, functionality, and the marketability of its self-developed proprietary products. In the first half of the year, the sales of self-developed products accounted for more than 65% of total equipment sales.
We believe this business will continue to achieve stable growth in the future. Now let me give you an overview of our results for the quarter. Please be reminded that all amounts quoted here will be in RMB. While our business, especially in our top markets, was negatively impacted by COVID-19, the good news is that we saw a gradual recovery and a steady increase in revenues quarter-over-quarter. For the second quarter of 2022, total revenues were CNY 309.1 million, a 31.6% decrease from the same period in 2021, and a 3% increase from the previous quarter. Information services and other revenues were CNY 220 million, around 40% decrease from the same period in 2021, and a 10% increase from the previous quarter.
The sales of equipment and the maintenance services revenues of Wuhan Miracle remained stable on a quarter-over-quarter basis. We also adjusted our operational expense management dynamically in response to weakening macroeconomic environment. Total operating expenses were CNY 246.6 million, a 26.5% decrease from the same period in 2021, and a 9.2% decrease from the previous quarter. Sales and marketing expenses were CNY 121.7 million, a 41.1% decrease from the same period in 2021, and a 4.3% decrease from the previous quarter, primarily due to a decrease in branding and user acquisition expenses. General and administrative expenses were CNY 61 point.
61.8 million, an increase of 9.4% year-over-year and a 5% decrease quarter-over-quarter. The increase was primarily due to the consolidation of Wuhan Miracle and the increase in professional service fee, service fee. Research and development expenses were 63.1 million, a 12.5% decrease from the same period in 2021, and a 20.1% decrease from the previous quarter. The decrease was primarily attributable to a decrease in payroll costs associated with a decrease in headcount. In the second quarter, So-Young's profitability improved quarter-over-quarter as we further optimized operations and improved cost control. The net loss attributable to So-Young International Inc. narrowed by more than 51% quarter-over-quarter.
Non-GAAP net loss attributable to So-Young International Inc., which includes the impact of the share-based compensation expenses, were 22.7 million RMB, narrowed by more than 53% quarter-over-quarter. Now for our balance sheet. As of June 30, 2022, cash and cash equivalents, restricted cash and term deposits, term deposits and short-term investments were RMB 1.6 billion, compared with RMB 1.75 billion as of December 31st, 2021. For the third quarter of 2022, So-Young expects total revenues to be between RMB 310 million and RMB 330 million. The above outlook is based on the current market conditions and reflects the company's preliminary estimates of market and operating conditions and the customer demand. Our key operating principles and financial objectives and include.
that include focus on quality growth, improve operating efficiency, and optimize cost structure and maintain net cash position. During the quarter, we have made progress in executing these objectives. We saw losses narrowed quarter-over-quarter. We currently have nearly CNY 1.6 billion cash position, which gives us the financial flexibility to grow the business. Looking ahead, we expect that the situation will remain very fluid and the impact of COVID-19 will affect consumer behavior and medical service provider operations in many ways. We remain optimistic about the long-term outlook of China's economy and long-term growth prospects of So-Young. We are uniquely positioned to swiftly adjust in a highly uncertain market environment and create value for our shareholders. This concludes our prepared remarks. I will now turn the call to the operator and open the call for Q&A. Operator, we are ready to take questions.
Thank you. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, we ask that you please pick up your handset before pressing the keys. To withdraw your question, please press star then two. If you do ask a question in Chinese, please repeat it in English immediately. We do ask you to limit yourself to one question at a time, and if you would like to ask more than one, please rejoin the queue. At this time, we will pause momentarily to assemble our roster. Today's first question comes from Thomas Chong with Jefferies. Please go ahead.
Thanks management for taking my question. My first question is about the marketing budget. Can management share some color about the trends in recent months and coming quarters? My second question is about the competitive landscape. Can you comment on both surgical?
Yes. Yeah. Please go ahead.
Okay. Yeah. Can you comment on both the surgical and non-surgical side? My last question is about the OpEx plan. I've been seeing some, most of the companies highlight about cost control and efficiency. How should we think about the OpEx plan? Thank you.
Yeah, the first question, the trend for sales marketing costs, the customer acquisition costs. We'll go ahead. For the sales marketing, it accounts around like 49% of the total revenue in the second quarter, and it includes the payroll costs for our sales marketing personnel and the offline BDs. Other than that, the expense spent on customer acquisition around 20%-30% in total of the revenue. Going forward, I think in the next few quarters, we will still keep a very prudent cost control approach. For sales marketing cost, for customer acquisition costs, we'll keep it within the 30%-35% range.
For the total sales marketing costs, we will still keep the same level in terms of the revenue going forward. For your second question, what's the competitive landscape for the industry, including surgical and non-surgical? I think for surgical services, it has been very challenging in the past few quarters. One of the reason is I think because surgical is relatively much more expensive than non-surgical services. The current macro economy conditions have been very challenging for the consumption market.
I think the other reason is for the COVID-19, the impact for the travel bans, because for surgicals, usually, the good doctors or the high-quality surgical service providers are all in large scale cities like Beijing, Shanghai, Chengdu, Nanjing, those very developed cities. Because of the travel bans applied by the government to contain COVID expansion, I think that it has impacted the consumers to travel to those cities to apply or take those services. For non-surgicals, I think for the competitive landscape against the surgical market, So-Young is still in the better position compared to other competitors. But it is still been a systematic negative impact to surgical.
It has been going down continuously for the past few quarters. For non-surgical services, you still keep developing at a relatively healthy pace. I think in terms of competitors are still mainly for like Meituan, Dianping and us as a major participants. Other than that, all other smaller competitors have been relatively less competitive compared to the previous years. That's the second part of your question. I think the third question is how the operating expenses going forward, how are we going to apply strict cost control. Sorry, operator, could you please keep yourself on mute? Okay. Yeah.
For the third part of the question, I think going forward we will still keep very strict cost control policies internally. In terms of operating costs or expenses, you can see the downward trends in the next couple of quarters. To keep the business in developing a much higher quality efficiently. I think that's the third part of the question.
Got it. It's very useful. Thank you.
Our next question today comes from Nelson Cheung with Citi. Please go ahead.
Hi. Thanks, management, for taking my question. I have two questions. My first question is regarding your guidance. We'd like to know whether your guidance reflect what kinds of consumption expectations or recovery trend for the company, and any metrics or trends that you could share in July and August about the business that would be great. My second question is regarding the information and reservation services. Given a weaker consumption demand right now, is there any further steps that you could do to retain or reacquire the user once the economy or the macro improves? Will it translate into additional acquisition costs for us? Thank you.
Okay. Yeah, for your first part of your question, it's Yeah, that guidance of RMB 310 million-RMB 330 million, it's, you know, that's currently our best estimation for the quarter. To be frank, the macroeconomic conditions here in mainland China is not as positive as we used to be expected. As you can see, the July economic numbers has been quite weak. Although we've seen a slow recovery in consumption, but it still needs time to recover to a pre-pandemic status. It still needs a couple of quarters to recover to, like, third quarter, fourth quarter of last year. For the second part of your question.
For the reservation.
Yeah, for the reservation revenues. Because of the economic condition has been quite challenging and, of course, the consumers being relatively more hesitant to spend money. We have been containing our costs in terms of sales marketing as well, to make sure efficiencies of marketing investments. In going forward, I think once we see a very clear trend of consumption recovery or personal disposable income increase, and we will, of course, try to spend more in terms of the customer acquisition. We are confident that once the market or consumption being recovered, we will still be able to acquire new customers in the market.
That's why we have a 300 and we still need to see the economic development in the next couple of months. Hopefully everything can have much more satisfactory conditions in the fourth quarter, which can have a better performance to conclude the year. I think that's the best estimate I can give, and hopefully it answers your question.
Thank you. That's very helpful. Thank you.
Thank you. Our next question today comes from Leo Chiang with Deutsche Bank. Please go ahead.
Hi. Thank you, management, for taking my question. I have two questions. First question is, we see the number of paying service providers still grow robustly this quarter. Can management share the reason behind that, the growth under the top quarter? My second question is about So-Young Prime. Can management share, like, the monetization model for So-Young Prime, and are we expecting to see the revenue contribution in the second half? Thank you.
Okay. For the paying service providers, I think, because in the second quarter, it's been, like, in Shanghai and Beijing, those large cities, used to be very important or takes around, like, these, the top four cities account around, like, 30%-34% of our total revenues in 2021. All of them have impacted by the COVID-19. We try to help the service providers recover from the pandemic. Also we have different, we improved our operating policies or strategies in the lower tier cities to help service providers to get back to the platform and trying to acquire customers from our platform. We have different policies to let them have relatively lower cost and high efficiencies to acquire customers.
It helped to recruit more lower-tier cities service providers to the platform, and hopefully they can get return on their investment and get new customers in next few quarters. We'll see in the future how these trends can persist. But we still will be very conservative because of, I think, the macroeconomic condition is still very challenging. We will try our best to help customers or service providers to survive and/or even, like, get back to the revenues in the next few quarters. For the second question, So-Young Prime. It has been a new product we rolled out in July.
It still is being currently testing in the six cities I just mentioned in the remarks. From current data, it did help to improve the service providers user conversion rate. We will keep tracking the data. Although I have to say currently I can't disclose more on data how about the revenue contributions because of the So-Young Select. In probably the third quarter financial results, we will see more color.
That's very helpful. Thank you.
Thank you. Once more, if you have a question, please press star then one. Today's next question comes from Chloe at CIBC. Please go ahead.
Hi, management. Thanks for taking my questions. Congratulations on the solid result on the second quarter. My first question is about the ARPU. We have seen a 42% decrease year-over-year on the ARPU for the service providers in the second quarter. Should we expect the trend to be continued? My second question is that we acquired the Wuhan Miracle in the third quarter of 2021. Could you please give us some more color about the synergies and what is the future prospect of Wuhan Miracle? That's it. Many thanks.
Okay. For the first question, ARPU for service providers. I think it's different that it is because of the COVID impact. I think service providers invested less because of the COVID impact. It's same like as we invested less in customer marketing on other platforms as well. It's been very. I think it's a prudent approach to better cost for better cost control. For the future, that decreasing trend can continue. In the past couple of months, including June and July, I think currently August, we are not seeing further decreasing in terms of service provider spending on the platform. Gradually or slowly recovering, that's the current trend.
I think it's also in line with the current economy recovery trend. Hopefully, when all the pandemic impact being or the pandemic control policy being loosened, I think service providers will start to invest more on the platform, and the ARPU will also being back to a normal level. For your second question for the Wuhan Miracle synergies. We have tested new approach in terms of helping the Wuhan Miracle's product better approach the end users on the platform. We do see positive signs.
There is new products by Wuhan Miracle in the pipeline, and we will also apply the policies or cooperations together and help the new product being better accepted by the platform users and then also by the market. Although I think it can not currently being seen or reflected from the financial numbers, but we do expect that we'll have a better result in, I think in 2023, rather than in 2022.
Okay, thank you. Very helpful. I will have a next up question. About the ARPU, I'm wondering, is the decrease related to like we are exploring the lower tier cities and the institutions there are paying less than the higher tier cities?
I think the major reason is because of Shanghai and Beijing. These two cities account for the top four major cities account for 35% or 30% of the total revenues in 2021. In the second quarter, Shanghai basically we have no revenue in full quarter. In Beijing, we have like a third revenue or half of the regular quarter revenues because of the COVID-19. I think other than those impacts, for those lower tier cities, they have been spending or invested in a very stable status. They didn't see spending more, but also we also not seeing they are decreasing their spending on the platform. The major cities have been impacted materially.
I think if being back to normal, the Shanghai institutions will spending more and we will see the ARPU recovery from those major cities.
Okay. Many thanks. I have no further questions.
Thank you.
Ladies and gentlemen, this concludes our question and answer session. I'd like to turn the conference over to Vivian Xu for closing remarks.
Well, thank you for your participation in today's conference. You may now disconnect. Have a good day. Bye.
Thank you all. Bye.