SBC Medical Group Holdings Inc (SBC) 2025 Q2 法說會逐字稿

It's time, so we would like to begin. Thank you very much for taking time out of your busy schedule for now to join SBC Medical Group Holdings' earnings call. Today, our CEO, Mr. Aikawa; and our Vice President, Mr. Yoshida, will present our second quarter results, business progress, and capital policy. At the bottom of your screen, you will find a question box.

If you have any questions, please enter them briefly and consciously. We will address them after the presentation. Now I will hand over to Mr. Aikawa, CEO. Mr. Aikawa, the floor is yours.

I'm Aikawa, CEO of SBC Medical Group Holdings. Thank you very much for joining our conference call today despite your busy schedule. I will now explain our results for the second quarter, progress of our business, and our capital policy.

First, let me provide an update on our franchise clinics. In this July, JUN CLINIC joined our network, expanding our total number of clinics nationwide to 259, an increase of a 36th clinics since last year. And in Japan's aesthetics medicine industry, the competition is severe. However, the customers are steadily increasing. Continuously with 6.31 million visits annually, this skill is unmatched in Japan.

Since our foundation, our top priority is to ensure that every customer feels that they are receiving value more than what they pay for. and make them become our repeaters. And as a result, even now, we are remaining a high repeat rate of 72%. And we believe this is our utmost strength.

However, having said that, while average customer spending continues to trend at a lower level than last year, we are seeing early signs of recovery in certain areas such as a Gorrilla Clinic. Therefore, moving forward with a high share by FAR and with the high repeat rate, we would like to provide the treatment that matches the customer needs and provide the differentiation of our clinics.

Next is our FY 2025 second-quarter earnings. In 2024, We strategically restructured our business, existing staffing services and deconsolidating some affiliates.

Furthermore, in April this year, we also revised our franchise fees. As a result, total revenue declined 18% year-on-year. However, this is a strategic restructuring to ensure future growth, and the groundwork has been laid. Therefore, the third quarter onward, we intend to accelerate growth and elsewhere increased the point redemption by customers at our clinics reduced revenue, which in turn impacted management of service revenues. On the other hand, procurement and rental revenues, those due to higher purchase of medical materials and replacement of hair removal devices. The elevated effective tax rate this quarter is mainly due to non-deductibility of some executive compensation and temporary timing differences in aircraft sales recognition between Japan and the United States. So more than what we have expected, the tax we have to pay in advance was higher. That is why the net profit became this way.

This is a one-time advance payment of tax. It's how we understand this. Next, JUN CLINIC has joined our network And also, I would like to explain our business strategy progress. This July, we acquired MV Career Lounge, bringing JUN CLINIC into our clinic network. JUN CLINIC operates six clinics across Japan and is known for customized laser treatments based on skin diagnosis provided by the adopters. So from the variety of lasers, the doctors will combine the lasers and provide a personalized recipe to the customer saying this is your matching treatment.

And that is the strength. The reason why we focused or had interest in JUN CLINIC is that the way they diagnose the customers has a characteristics, meaning that it is matching the current patient's needs and also they provide a fixed pricing, meaning they receive if it's JPY40,000, JPY40,000 upfront and will leave the treatment decision up to the doctor and therefore it had a unique characteristics. And that is why we have contacted them and asked them to join our network.

And as I said right now, this combination of fixed pricing and personalization delivers high customer satisfaction and retention. And also the marketing cost is extremely low and is achieving high profitability. Moving forward, The JUN CLINIC number is going to expand. Therefore, JUN CLINIC will become a key growth driver. for us is how I think.

Next is turning to dermatological aesthetic medicine in Japan. The dermatological aesthetics, looking at the data, it is having a higher growth rate. Therefore, this is a promising field with significant growth potential. And there's still room for us to further grow in this area as well. to respond precisely to diverse customer needs, we are implementing a multi-brand strategy tailored to different market segments.

And this April, relaunch. Neoskin Clinic, targeting expert level customers with a focus on early adoption of global advanced treatments. And once we have opened this clinic, it has already gained such popularity that secure appointments is becoming difficult. Up to now, we have been opening up different concept clinics. However, this Neoskin Clinic has been the fastest ramping up clinic. and we have high expectations towards it.

And moving forward, we will like to roll out this concept globally, not just keeping it in Japan. Average expense per customer exceeds that of our existing clinics. And as I mentioned before, the JUN CLINIC is also achieving an average spend per customer succeeding our existing clinics. So these Neoskin Clinic and Jin Clinic are going to become the two strong weapons for our future growth strategy. And moving forward, for the entry-level customers, we are preparing a new clinic format within the advanced countries, Japan. When it comes, the percentage of people receiving aesthetic medicine treatment is low.

So moving forward, we believe that the market is c expand by two-folds and three-folds. And in order to achieve that, as the number one group in our industry, we would like to implement initiatives that will enable us to do so. So for the people who are interested in aesthetic medicine, we would like to open up our doors. So the self-funded medical care and insurance covered treatments, because insurance covered treatments is something that the customers are easier to visit the clinic. So we are going to have a hybrid model aimed at those interested in beauty care with this combination.

So by satisfying reliability as a medical provider and interest in aesthetic care, we aim to develop a new customer base and expand our aesthetic medicine. Each brand is in a clearly position where the strength enabling us to build a strong presence in the non-surgical aesthetic segment. We are also strengthening support for franchise clinics and in response to market changes. Specifically, we advise on shifting to higher emerging models and support the implementation. Two clinics completed such transition in the first half, showing clear financial improvements. Three more clinics are currently undergoing similar transformations, contributing to stable medium to long term operations.

Next, please. Currently, the dam is weakening, so there are many inbound tourists coming to Japan. So we are focusing on and enhancing around the medical tourism business. We are particularly focused on the Chinese tourists enhancing log art, reading it through in the popular platform Red, increasing interpreters and hosting events in Shanghai. These initiatives have yielded strong results.

Next, orthopedics and AGA treatment. Those are the high growth and high emerging areas. So we will concentrate our management resources moving forward. For example, in orthopedics, we are expanding from short-stature treatment into a joint pain therapy and rehabilitation in response to aging. There are no graphies to expand our business. Japanese aging society is advancing, so although business is going to be the business which has the high growth potential. We are ranked on the seventh right now in Japan. But I think that we can increase the number of clinics from 7 to 100 moving forward.

And fertility in business is another important business area. And our hair loss services include medication transplantation and laser therapies. This comprehensive approach sets SPC apart as most ATA clinics focus only on medication. So we are offering a comprehensive treatment that is our strength.

In Japan, we are ranked on the second place in terms of the market share in Japan. So within this year or next year, we are trying to be number one. Our target within 10 years is skin and auto, fertility, and AGA. We want to be the number one market leader in those areas in Japan moving forward. I

n our international business, we are currently enhancing our structure. In the US, we now have a plastic surgeon, Dr. Stephen Cohen, joined as an advisor. And in April, Stephen Rogers, who previously employed my Amazon and Rakuten, with experience in business development and MNA joined as head of international strategy. In Singapore, where we acquired AHH last year, we had launched the Japanese language services to better serve the local Japanese community. So we are planning to expand our business.

We have also welcomed Xinya Inouye, our marketing leader, with a track record at P&G, Eli Lilly and Adobe as the CMO to drive global branding and marketing.

Next, financial base. They continue to maintain a robust financial base with sufficient cash on hand. These funds will be actively invested in both domestic and international organic growth. as well as strategic growth opportunities, including M&A. That's an aspiration.

Next please. Finally, regarding our capital policy, we recognize that liquidity in our shares remains limited and making trading difficult for many institutional investors. To address this, we are working to improve the supply demand balance and are considering new share issuance and punch yourselves in the bite of thunder. These steps aim to improve accessibility for a broader investor base.

From May to July, we conducted our first ever share buyback, which we believe contributed positively to our share price and liquidity. In June, we were added to the Russell 3000 index, which we understand will further enhance our visibility and liquidity.

Going forward, we will continue to monitor market conditions closely and take appropriate, timely actions. This concludes my presentation. Thank you very much for your attention.

CEO, Mr. Aikawa, thank you very much. Now from the participants that we have been receiving many questions, so we would like to answer them in order.

The first question, the new clinics, you are opening them up, many of them. Are the new clinics starting up as planned? And the male customers are using an increase in that? Please go ahead.

First of all, the newly opening clinics this year, we are seeing a steady visit by customers the Gorilla Clinic and as so that we live there, we are opening up the new clinics continuously. And as for the male customers, we are seeing a large number of them visiting our clinics and we are seeing an increase in that number. So compared to the female customers, the male customers, the growth rate we believe it has a lot of potential because there's not that many that are entering the market.

Next question. Pricing strategy. Future pricing trends. What is your perspective? And would you continue offering graphics? Would you continue to foresee the decreasing in price or the price will be stabilizing? What is your take?

As has been explained, we are taking multi-brand strategies. Shown in the odontology, offered relatively reasonable price with a high turnover. And when it comes to joint clinic or knee or skin clinic, those are positioned in the mid-range to in the high range prices. And customers' are focused on the high quality with a high price, or the other group of customers prefer to have more accessible service. So to meet those needs, we have respective pricing strategy. Thank you.

We'd to move on to the next question. Regarding the growth strategy is what I would like to know. The organic growth and inorganic growth, including M&A. Can you explain about that? What are your thoughts on this?

Well, first of all, as I had mentioned before, obviously in the orthopedics area is JUN CLINIC's AGA The next increase of bases in the market areas where we have a potential to grow, we're going to proactively open up a new clinic. And what was the other part of the question?

Other questions? The M&A side, yes.

And regarding M&A, we are conducting M&A almost every year. And even now as we speak, we are finding good M &A deals. And I can say this is one of the strengths of our group, which is that the clinics that we have acquired almost 100%. The cornix that were making losses after the acquisition turned into black ink. And the ones that were already making profits are further increasing their profitability. Therefore, moving forward, we would like to actively conduct M&A.

Thank you. That's for M&A, for example in regions, for example in the US, or Asia, or Japan, any geography or type of M&A, or an art atarius. Currently, in North America, we are searching for a possible project in Asia, Malaysia, Thailand, and Vietnam, as well as Indonesia. There are some offers. We don't intend to capture every opportunity, so we carefully scrutinize and select the possible M&A.

And of course, we carefully examine the price as well as the business opportunities. and decide. That's the important point. So we scrutinize one by one. We are in the process. Thank you.

Moving forward, for example, in Japan, how many clinics are you planning to open?

Well, the pace of opening, we have about 260 clinics. So on a clinical basis, within the next 10 years. We would like to open up to 1,000 for sure. Thank you.

Future profitability, prospect. Could you share with us?

Yes. we have been deploying in the business and there are some variations of the margin level depending on the business. So now to meet the time, we will make sure to secure sufficient margin and managing the businesses are not properly allocated or any transformed business form and those are important things. And what we have been engaging and establishment of the new clinic. It's estimated to be high margin. And there is still the market capacity available to be able to open 100 or 200 clinics. So that overall managing will improve. That's our prospect.

Thank you. For example, the reduction of C or one-time negative factors at this point is something that you can assume. At this point, do you think that all the bad factors or negative factors have been already taken care of?

Well, this time there was the concentration in a way of the negative factors. results were not so good. because of that, because we have gone down once, moving forward, we believe that is going to improve and go upward again. And we are already feeling that. Therefore, this time, as a one-time factor, it did go down, but this is something that we had to respond to.

Thank you. Managing growth, it didn't grow much. SG&A, a slight increase in the second half, is it going to be normalized?

Yes, we made a high level of investment for laser, example, units we bought. So those are the temporary expenditures we had in the first half, but in the second half. Not big investment is associated with the nature of our business, but we made a bold decision to make a big investment in the first half. But I think that is going to be settled in the second half. you.

Yoshida-san, any other questions?

If I may, and the consolidated group. And the consultation fees and the capital policy, legal fees were partially impacted on the performance and EC response as well.

So those are the factors contributing to push out the SG&A. So the 7%, the JPY12 million is a year, and JPY15 million, so the JPY3 million increase is not much big impact on our overall financial performance.

Thank you. Next is a question regarding the outlook. This fiscal year's ending or the outlook for next fiscal year and the EPS several years from now, how is it going to grow? Can you comment on the future outlook of the -- well, towards our target, we need to steadily expand the business.

And specifically speaking of how much of specific EPS growth we can achieve to say that now is difficult, but the track record, meaning for the last 25 years since we have started the business, the number of customers is continuously increasing. And though this running environment is changing, we are rebuilding the businesses that will match this changing environment. So moving forward, we will enter the phase of where the revenue is going to further increase.

Mr. Yoshida, if you want to add?

Yes. As the listed consolidated group, at this point, we're not disclosing the EPS. On the other hand, from the investors. are hearing voices that you would like to know such a guidance. So we would like to continuously consider that. I cannot disclose the specific numbers, but as I've been explaining today, the structuring has been conducted and the one-time expense has all been spent. Therefore, moving forward, we'll be improving the business. So at that some point, we would like to consider of disclosing the APS as well.

Thank you. Capital policy question. Looking at the current share price trend, the shareholder response or the share price measures, probably we need to enhance more. What did you have thought on that?

You'll see that's something. Every time, when we have an earnings score, we are putting emphasis on the capital policy and particularly we are working on to improve the liquidity. So for that purpose we have been considering measures.

So since May this year, we conducted a share buyback and we saw some effect to some extent. And as has been said, not just the share by bar but the dividend payment is under consideration. Meanwhile, again, business restructuring has been completed. So now we are entering into the phase of the growth investment and as Mr. Aikawa said, there are attractive M&A and opportunities are now available in Japan and overseas. So shareholder return and the growth of investment. For those two, we will now try to strike the good balance.

Thank you. This is Aikawa speaking. We for the purpose of expanding our business, M&A is in the vineyard of our strengths. But there, we put focus on it to make a proactive investment. to focus on the fundamental business growth. Ultimately, this will lead to a shareholder return as well.

Thank you very much. Next question is that moving forward, the shareholding of the CEO, do you have any thoughts on selling them moving forward? Well, as our challenge from the most of the institutional investors, we are told that the liquidity of our shares is low. So issuing new shares or selling the shares that I hold through that, the gains and proceeds from that, in order for that to be used for the next investment, I think such a thing will be necessary to do.

Thank you very much. I'm conscious of time. So Mr. Aikara, could you give the message now to the audience?

Thank you very much indeed for kindly participating in this earnings call. We are the Syrians, the sense is that the establishment is in the quarter century. But we are in the middle of the journey now. All this strength is the spirit of Never Give Up. We have been envisioning -- have been thoroughly executing that is our strength.

So I thank you in advance for your continued understanding and support. Thank you very much.

Thank you very much. With this, we would like to conclude this earnings call. Thank you all very much for your kind attendance.