Ladies and gentlemen, thank you for standing by for So-Young International Inc.'s Second Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management gives their prepared remarks, there will be a question- and- answer session. As a reminder, today's conference call is being recorded. I will now like to turn the conference over to your host for today's call, Ms. Mona Qiao. Please proceed, Mona.
Thank you, Operator, and thank you everyone for joining So-Young 's Second Quarter 2025 Earnings Conference Call. Joining me today on the call is Mr. Xing Jin, our Co-Founder, Chairman, and CEO, and Mr. Nick Zhao, CFO. Before we begin, please refer to the safe harbor statement in our earnings release, which applies to this call and we will be making forward-looking statements. Please also note that we will discuss the GAAP measures today, which are more thoroughly explained and reconciled to the most comparable measures reported under GAAP in our earnings release on our investor relations website and filed with the SEC. At this time, I'd like to turn the call over to Mr. Xing Jin.
[Foreign language]
Hello, everyone, and welcome to today's earnings call.
[Foreign language]
In Q2, our branded aesthetic center business maintained its robust momentum, achieving growth in both scale and quality. Our business model and the strategic direction we are headed have received strong market recognition. In Q2, we generated total revenue of RMB 379 million. Revenue from aesthetic center business reached RMB 144 million, surpassing the upper end of our guidance and making it our largest revenue contributing segment for the first time. This marks a critical inflection point in our multi-year strategic transition, ushering in a new phase with clear growth drivers and a more mature business model.
[Foreign language]
As of today, our SoYoung Clinic Life Medical Aesthetic center has grown to 33 centers. Due to rapid network expansion and ongoing investments, we recorded a net loss attributable to So-Young of RMB 36 million and a non-GAAP net loss of RMB 30.5 million in the second quarter. Going forward, as we further refine our service workflows, enhance customer experience, and strengthen our brand influence and reputation, we expect improved operational efficiency per center and enhanced customer loyalty. We remain confident in delivering sustainable, high-quality long-term growth.
[Foreign language]
Now, let me walk you through our Q2 operational highlights. Aesthetic treatment services revenue tanked strongly with momentum during the quarter, increasing 46% quarter- over- quarter and 426% year- over- year to RMB 144 million. Center performance also continued to improve. By the end of June, we operated 29 aesthetic centers. Among these, 20 have been open for more than three months. 19 turned operating cash flow positive in June, and 30 were profitable on a monthly basis. Alongside the continued network expansion, our overall service capacity is rapidly growing, with total number of active users exceeding 100,000 by June. Total number of verified treatment visits surpassed 67,400 in Q2, up 24% quarter- over- quarter and 381% year- over- year. The total number of verified aesthetic treatment performed reached over 154,500, up 25% quarter- over- quarter and 458% year- over- year.
The overall repeat purchase rate for our aesthetic center business exceeded 60%, while customer satisfaction score remained high at 4.99 out of 5. While we continue to expand our network in Q2, we maintained leadership in customer acquisition efficiency. Currently, our average customer acquisition cost remains in the hundred RMB range, with over 70% of new customers coming from low-cost private domain traffic and referrals from existing customers. Benefiting from improved operating efficiency, the gross profit margin of our aesthetic treatment services expanded by around 5 percentage points sufficiently. This achievement validates SoYoung Clinic's growing brand influence and operational efficiencies.
[Foreign language]
We remain committed to standardized service delivery, consistently focusing on healthcare quality, procedural compliance, and user experience. We have implemented a rigorous physician selection and training system, with all of our over 130 full-time doctors having either completed internships or standardized training at public hospitals, and nearly 90% of them being specialist dermatologists. Additionally, we are advancing end-to-end management through digitalization and AI-driven solutions, achieving full process standardization from self-service booking and check-in to testing, consultation, and treatment. This digitized approach provides every user with a clear, transparent, and truthful medical experience.
[Foreign language]
On new treatments, we launched a number of highly acclaimed offerings in Q2, including Miracle PLLA, Mermaid Skin Booster, and BBL Hero, which expanded our medical aesthetics portfolio, increased our pool, and reinforced our unique competitive edge.
[Foreign language]
Turning to branding, we teamed up with international IP Betty Boop around our Miracle PLLA series to stage So-Young's theater pop-up events in Beijing and Shenzhen CBDs during the quarter. Through IP co-branding and immersive experiences, this campaign attracted massive young customers' participation, with nearly 10,000 users sharing their experiences on Red Note, significantly boosting brand visibility and offline engagement. Meanwhile, we partnered with self-media influencer Min Yu and her team to reinforce our everyone deserves youth philosophy via emotionally resonant storytelling. The campaign resonated strongly with our core female user base, effectively reinforcing SoYoung Clinic Life Medical Aesthetic center's professional reputation and brand positioning among smart, beauty-conscious women.
[Foreign language]
In the upcoming third quarter, we plan to open around 10 aesthetic centers, expanding not only in first-tier cities but also into core second-tier cities. Looking ahead to the full year, we expect the total number of our aesthetic centers to reach 50. This will further expand the accessibility of SoYoung Clinic Life Medical Aesthetic center's services nationwide. We will also continue to strengthen standardized operations and product innovation capabilities, further cementing our market's leading positions in China's life medical aesthetic industry.
[Foreign language]
Building upstream business, we continue to build out our comprehensive medical aesthetic supply chain, driving nationwide penetration of both self-developed and exclusively distributed products. By the end of Q2, the number of institutions we served with supply chain solutions for injectables exceeded 1,600, with shipments of elastic reaching around 39,100 units in Q2, up over 40% sequentially. As our upstream products acquire additional certifications and scale, we expect to further enhance our advantage and improve cost efficiency while solidifying our mode of industry chain synergy.
[Foreign language]
Our POP business remained stable during the quarter. GMV for verified medical aesthetic services reached roughly RMB 300 million, with per capita in center GTV growing by 6% year- over- year. We continue to provide digital operations support for partner institutions, maintaining healthy and orderly development for our platform.
[Foreign language]
Looking to the second half of 2025, we will continue to increase the density of our aesthetic center network in first-tier cities, targeting both prime commercial zones and high potential areas, while increasing our presence in second-tier cities to broaden market coverage. As center density grows, we will drive localized brand building to increase the customer reach of SoYoung Clinic in each city. We remain committed to optimizing user experience and center operational efficiency, strengthening our core competitive edge and laying a solid business foundation to deliver long-term value to our shareholders. We see the proof of that as a springboard, and we'll keep innovating to create greater user value and unlock broader growth opportunities.
[Foreign language]
Now I hand over to our CFO, Nick , who will walk through the financial results followed by the Q&A session.
Hello, this is Nick. Please note that all amounts are quoted in RMB. Please also refer to our earnings review for detailed information of our comparative financial performances on a year-over-year basis. Total revenues during the quarter were RMB 378.7 million, down 7% year-over-year , primarily due to a decrease in the number of medical service providers subscribing to information services on our platform. Aesthetic treatment service revenues reached RMB 144.4 million, soaring 426.1% year-over-year , exceeding the high end of our guidance, primarily due to the business expansion of our branded aesthetic centers. Information and reservation services revenues were RMB 135.2 million, down 35.6% year-over-year , primarily due to a decrease in the number of medical service providers subscribing to information services on our platform.
Sales of medical products and maintenance services were RMB 76 million, down 28.1% year-over-year , primarily due to a decrease in the order volume of medical products. Other services revenues were RMB 23.2 million, down 64% year-over-year , primarily due to a decrease in SoYoung Prime. Cost of revenues were RMB 184.6 million, up 19% year-over-year , primarily due to a business expansion of our branded aesthetic centers. Within cost of revenues, cost of aesthetic treatment services were RMB 109.4 million, up 405.5% year-over-year , primarily due to the business expansion of our branded aesthetic centers. Cost of information and reservation services were RMB 16.7 million, down 47.4% year-over-year , which was in line with the decrease in revenue generated from information and reservation services.
Cost of medical products sold and maintenance services were RMB 39.5 million, down 25.8% year-over-year , primarily due to a decrease in costs associated with the sales of medical products. Cost of other services were RMB 19 million, down 60.8% year-over-year , primarily due to a decrease in costs associated with SoYoung Prime. Total operating expenses were RMB 241.3 million, down 1.8% year-over-year . Sales and marketing expenses were RMB 131.3 million, down 0.7% year-over-year , primarily due to the decrease of payroll costs. G&A expenses were RMB 78.8 million, up 11.3% year-over-year , primarily due to an increase in payroll costs associated with the expansion of administrative employees to support our business upgrade and the new strategic businesses. R&D expenses were RMB 31.2 million, down 26.6% year-over-year , primarily attributable to improvements in staff efficiency.
Income tax expenses were RMB 1.9 million, compared with the income tax benefit of RMB 2.6 million in the same period of 2024. Net loss attributable to So-Young International Inc. was RMB 36 million, compared with net income attributable to So-Young International Inc. of RMB 18.9 million during the same period last year. Non-GAAP net loss attributable to So-Young International Inc. was RMB 30.5 million, compared with non-GAAP net income attributable to So-Young International Inc. of RMB 22.2 million during the same period of 2024. Basic and diluted losses per ADS attributable to ordinary shareholders were RMB 0.35 and RMB 0.35, respectively, compared with basic and diluted earnings per ADS attributable to ordinary shareholders of RMB 0.18 and RMB 0.18, respectively, during the same period of 2024.
We have maintained a robust cash position with cash and cash equivalents, restricted cash and term deposits, term deposits, and short-term investments totaling RMB 998.6 million as of June 30th, 2025. Moving to our outlook for the third quarter of 2025, we expect aesthetic treatment service revenues to be between RMB 150 million and RMB 170 million, representing a 230.5% - 274.6% increase from the same period in 2024. This outlook reflects the ongoing ramping up of our branded aesthetic center network as we progress towards our year-end target of 50 centers. With ample cash reserves and a demonstrated track record of execution, we are now entering into the next phase of growth with increased confidence for the future.
As we scale and strengthen the influence of our aesthetic center network, we will continue to refine its standardized model to further enhance operational consistency and efficiency while establishing a robust base for recurring revenues. These efforts will reinforce our cost advantages, solidify our industry leadership, and create durable long-term value for our shareholders. This concludes our key remarks. I will now turn over the call to the operator and open the call for Q&A. Operator, we're ready to take questions.
We will now begin the question- and- answer session. To ask your question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Nelson Cheung with Citibank. Please go ahead. Nelson, your line is open. You may ask your question.
[Foreign language]
Let me translate my question into English. We are particularly interested in the expansion plan of your clinic. Can you provide any details on what the plan will look like this year and next year, and what's the current progress and strategy for our franchise model? Thank you.
[Foreign language]
We have a clear phased approach for expanding our network. We aim to grow the number of centers to 50 by the end of this year, with a large portion already opened and more than 10 planned to open in the second half. In key cities such as Beijing, we expect to reach 10 centers by year-end 2025. Next year's expansion plan will be finalized in Q4 this year, though initially we anticipate new openings will match or exceed 2025 levels. As our organizational capabilities continue to strengthen, our network will gradually expand to a wider range of cities. Long-term, with full confidence in our aesthetic center business, we target to achieve 1,000 centers within 8 - 10 years.
[Foreign language]
Franchising is not our immediate focus. This is primarily because self-operated centers have relatively manageable CapEx with shorter payback periods, and our ample cash reserves can already support rapid expansion. That said, as part of our long-term strategy, the franchise model will play an important role in future expansion. Thus, we plan to pilot 2-3 franchise centers in Q4 this year, and we will determine the pace of future franchise expansion based on the operational performance of these pilot centers.
[Foreign language]
Thank you.
The next question comes from Jinpeng He with CITIC. Please go ahead.
[Foreign language]
Let me briefly translate for myself. Thank you for taking my question, and I'm Jinpeng He from CITIC Securities. I have one question about the Chinese aesthetics market. How does the management view the growth potential of the Chinese medical aesthetics market? In this highly competitive market, how will you adapt to the challenge of the new player entering? That's my question. Thank you.
[Foreign language]
We remain optimistic about the prospects of China's medical aesthetic market. Compared with mature overseas markets, such as South Korea, where the penetration rate of medical aesthetics has exceeded 20%, China's current penetration remains below 5%, indicating substantial growth potential. The large medical aesthetics sector in China represents a fundamentally distinct model versus traditional plastic surgery, as it grows at a faster pace and can capture customer minds more easily. According to industry data, China's large medical aesthetic market will reach around RMB 340 billion by 2030. Our analysis forecasts that the penetration rate of large medical aesthetic chains in China will reach 30% in the future, and So-Young as an industry leader is poised to achieve roughly 25% market share, translating to nearly RMB 26 billion market opportunity.
[Foreign language]
We believe that to truly succeed as a large medical aesthetic chain brand, three core capabilities are essential. First, sustainable low-cost customer acquisition. Second, diversified upstream supply chain support. Third, organizational competence in operating a large-scale physical network. Other market players face inherent limitations in these areas. That's precisely why we will continue to focus on our business and hone our fundamental strengths around these three capabilities, further reinforcing our long-term competitive edge in the industry.
[Foreign language]
Thank you.
The next question comes from Daisy Chen with Haitong International. Please go ahead.
[Foreign language]
Maybe check my English, my questions into English. In So-Young's business model, customer acquisition cost is one of our significant advantages. What is the outlook for the customer acquisition cost and the marketing expenses in the future? Regarding the cost structure, can management share your views on the future trend of the consumables and the share of your cost structure? Thank you.
[Foreign language]
So-Young ranks among the industry leaders in customer acquisition efficiency. Currently, our average customer acquisition cost is only a few hundred RMB, with over 70% of new customers coming from low-cost private domain traffic and referrals from existing customers. Private domain customers are the launchpad we use in new cities and serve as a base for user community operations. Our performance in referrals from existing customers is particularly strong, with the conversion rate significantly higher than peers. This is driven by our incentive approach of no aggressive sales or prepaid membership card requirements. This allows existing customers to refer without pressure and lowers barriers for new customers.
[Foreign language]
Long-term, we believe sustainable low-cost acquisition hinges on accumulated brand influence. As our network densifies in key cities such as Beijing and Shenzhen, where penetration rates are consistently increasing, we will launch localized marketing initiatives focusing on high-frequency touchpoints such as subways and cinemas to enhance brand visibility, boost customer awareness, and improve marketing efficiency.
[Foreign language]
While improving customer acquisition efficiency, we are also optimizing cost structure by increasing the proportion of self-controlled offerings used in our aesthetic centers. For light-based treatments, we offer medical lasers, self-developed CC spots, and hold exclusive distribution rights for the premium American BBL Hero treatment. With new devices such as picosecond lasers and radio frequency microneedling in the pipeline, additionally, after entering the upstream injectable segment a few years ago, we have been collaborating with upstream manufacturers to launch new products, including blockbuster products such as skin boosters and PLLA. The skin boosters are expected to receive approval in Q4 this year. Both products carry exclusive China distribution rights, granting us brand positioning rights and pricing power. Furthermore, we expect our two proprietary animal-derived collagen products to gain approval in 2026 or 2027, further enriching our pipelines.
As self-controlled products are used more broadly across our network, the proportion of consumable costs will further decline. With 50 centers targeted this year and a thousand center long-term goal, the scaling of our network will significantly enhance our bargaining power in procurement and drive further reductions in consumable costs.
[Foreign language]
Thank you.
The next question comes from Jenny Xu with CITIC. Please go ahead.
[Foreign language]
Let me repeat in English. In traditional aesthetic centers, we believe both doctors and center managers play very important roles. In our aesthetic centers, as a network expanding, do we expect any bottlenecks when recruiting doctors in the future? Do we rely heavily on center managers? Thanks a lot.
[Foreign language]
Regarding doctors, there are about 40,000 doctors in China's medical aesthetic sector, and we continue to see doctors moving from public hospitals into this sector. This forms a solid base for our talent pipeline. We focus on large medical aesthetic services, where technical requirements for doctors are easier to standardize. Newly recruited doctors can accumulate extensive practical experience in a short time and are quickly brought up to speed. Meanwhile, we are committed to building a high-quality team. All of our over 130 full-time doctors have either completed internships or standardized training at public hospitals, and nearly 90% of them are specialized in dermatology. We have established a tiered diagnosis and treatment system that matches treatments to doctors based on their level.
We are also building regional training centers to provide structural support for their professional growth, coupled with benefits such as two-day weekends, social insurance and housing fund coverage, and a transparent career path. So-Young remains a highly attractive choice for doctors.
[Foreign language]
Turning to center managers, our organizational structure naturally reduces reliance on center managers. We operate on an online appointment booking and onsite service verification model. Center managers mainly handle onsite management. We assess them primarily on operational metrics such as safety, customer experience, and consultation efficiency. Management of marketing, product management, pricing, and recruitment of doctors and nurses are handled by our dedicated center operations platform. This greatly improves day-to-day efficiency at each center. We have also built a digital dashboard that enables headquarters to monitor center operations in real time. Going forward, we will continue to enhance the maturity of digital management to further reduce management costs.
[Foreign language]
Thank you.
The next question comes from Yi teng Li with Haitong International. Please go ahead.
[Foreign language]
Let me translate myself. Congratulations first for achieving high-quality growth in the aesthetic center business, and I would like to ask what factors will differentiate So-Young 's product strategy and planning from others in the future. Thank you.
[Foreign language]
Our product strategy focuses on anti-aging treatments, with all treatments developed around this core theme to ensure consistency across our entire portfolio. Unlike some institutions that use low-priced single products to attract customers and then upsell to more profitable ones, we emphasize overall cost effectiveness. We make sure each treatment delivers a healthy gross margin and don't rely on loss-making products to attract customers.
[Foreign language]
We continue to advance our blockbuster strategy. The goal is to have a small number of core treatments contribute most revenue, with a focus on the treatment level rather than individual products. Our approach is similar to Sam's Club curated bestseller model, where only the very best options are selected to drive strong repeat business and positive word-of-mouth referrals.
[Foreign language]
Going forward, we will continue to optimize our product portfolio and dynamically adjust it to the blockbuster products. We will closely monitor change in market demand and competitive traits, as well as new product RFP and launch dynamics. This approach will allow us to introduce new products that address customer demand in a timely manner and have strong market potential to maintain our leading position.
[Foreign language]
Thank you.
The next question comes from James Zhou with Huafu Securities. Please go ahead.
Hi. Hello, this is James Zhou from Huafu Securities, and my question is, in addition to your aesthetic center business, we are also very interested in your POP business. Can management provide any updates on future development plans for the POP business?
[Foreign language]
Our POP business has always been a segment with relatively high gross margins and net margin. While revenue has fluctuated this quarter, it remains a key pillar of the group's profitability. We will maintain strict cost controls to preserve these healthy margins.
[Foreign language]
As our aesthetic center network continues to expand, we will actively promote synergies between the POP and aesthetic center business. Our aesthetic centers drive a large volume of high-quality traffic, including new customers acquired through referral programs and public domain traffic. While these customers receive standardized large medical aesthetic services at our SoYoung clinics, they also generate demand for non-standardized surgical and minimally invasive procedures. We plan to establish a more refined merchant classification and rating mechanism on our platform. By leveraging user behavior and preferences, we will be able to make targeted recommendations for high-quality POP merchants. This will improve traffic monetization efficiency and create new incremental growth for the POP business.
[Foreign language]
Thank you.
This concludes our question- and- answer session. I would like to turn the conference back over for any closing remarks. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.