So-Young Intl reports solid Q3 growth, targets 50 centers by 2025 with enhanced digital strategies and a focus on customer acquisition.

OPERATOR - (00:00:01)

By the end of 2025 we will reach 50 centers. Our goal is to lay a solid foundation focusing on improving customer acquisition efficiency and growing user base and the business skills. We will enter a new stage of development, relying more on digitalization and AI capabilities to replicate service processes. This will drive breakthroughs in the bottlenecks the industry often faces, providing support for a broader build out in the follow-up stage. The number of new centers to be opened next year will remain consistent with previous plans and will not be less than 35. We will keep the overall pace of center open and balanced, progressing on a quarterly basis to ensure every new cquickly enters the operation phase following its establishment. Our focus will remain on fourth tier cities since they have strong demand and high performance rate potential which will help us quickly build up regional density and amplify brand equity. At the same time, we will also systematically establish a presence in second tier cities with a mature consumer base to validate our model and gain experience for long term expansion. Thank you.

UNKNOWN - (00:01:30)

And how does she do that?

OPERATOR - (00:01:37)

The next question comes from Stacy Chen with Haitong International. Please go ahead.

Stacy Chen - Equity Analyst - (00:01:53)

Now, I'd like to express first of all, congratulations to the management for achieving such rapid growth even during the quarter. I noted that you have released the core member data this quarter, so could you explain more about the membership system for the Ethics center business and how we conduct the membership operations? Thank you.

UNKNOWN - (00:02:39)

Anyhow. The membership system is core to FFP Center's operations. Each time a user completes a visit, a record is created which helps us build a clear tiered membership system from level one to eight and identify high value users with most solutions and ongoing engagement. Level three and above are the Finance core members. They have higher center visit frequency and greater flexibility to select additional services with annual spending 2.5 times higher than the average, making them the good driver for Aesthetic Center. During Q3, they contributed a high double digit percentage of our Aesthetic center business revenue with a repurchase rate of near percent. We provide tiered benefits and service touchpoints based on individual user consumption patterns which ensures they continuously perceive brand value and receive positive reinforcement, further boosting repeat purchase rates. In Q3, our membership operations made solid progress. Users with verified visits increased by nearly 40,000 up 36% quarter quarter, including over 10,000 new Corps members up 40% quarter. Additionally, we've also enhanced repeat customer value operations, specifically repeat customer revenue reached RMB120 million in Q4 rate up 32% quarter quarter, accounting for 65% of aesthetic treatment service revenues verified treatment basis from repeat customers searched over four times year over year to 50,000. While ARPU also increased these metrics all exceeded our targets. Going forward we will focus on conversion of highway active users and and extending the life cycle of high value users. Thank you.

OPERATOR - (00:06:51)

The next question comes from Nelson Chuang with Citi. Please go ahead, Nelson. Is your line muted? Nelson, do you want to check if your line is muted? We will move on to James Wong with GS Securities. Please go ahead James.

James Wong - Equity Analyst - (00:08:11)

My question for company is how is the Miracle PLLA 3.0 selling since its end of September launch and what is new compared to the previous version and what's the plan for promoting it?

UNKNOWN - (00:08:53)

Miracle PLLA version 3 was an important upgrade on the supply chain in China's medical SF market. PLLA is still mostly used as an injectable for shipping before launching. We conducted research in South Korea and found that the Master ActiveSir adopts a more standardized and safer skin booster technique. After multiple rounds of testing, we launched system. In terms of products, its Ultra Macro Serum comes with five key features including Ultra Smooth, Ultra Solid, Ultra Fine, Ultra Pure and Ultra Active. Across safety results and longevity, this feature makes the product the best fit for single search. Moreover, with its overall performance upgraded Marico PLLE V3 is also more competitively priced offering consumers a high quality yet valuable mining experience. Shanji Regarding the promotion, we made upgrade based on the market landscape and user pinpoints. To capture user mind share, we adopted Sute EM Miracle more suitable for skin busters and introduced the concept of Ultra-Macro Spheres to take the lead in the segment. We also released two versions Marico Plla version 3 and version 3 Pro to address different users needs and budgets, thereby lowering the decision threshold for users. The first batch of 5,000 units was fully sold out because within a short time the max arrival is expected in late November. We will continue to drive market penetration rate for Maripo PLLA version 3, converting users more efficiently and increasing ARPU and user loyalty. Market feedback shows that miracle PLLA version 3 is received receiving a high attention, we implemented an online purchase limit of 1 per chance per user. From these purchases we can see that about 56% of users picked the Pro version priced at RMB 4,999 reflecting the trust they place in our bride as product. In the next year or two, the PLLA batch will we have been working on. Upstream is expected to receive approval for launch, which should reduce procurement cost by several times. Overall americorps PLLA version 3 is not just a product upgrade. It's an important part of supply chain construction. As blockbuster strategy, we will adopt the same approach for future categories. We will continue to deepen the vertical integration of our supply chain, further enhance safety and continuously convert upstream manufacturers into long term supply partners. Simultaneously, we will leverage our advantage in marketing products, doctors and channels to build differentiated barriers and solidifies our market position.

OPERATOR - (00:14:45)

The next question comes from Nelson Chang with City. Please go ahead.

Nelson Chang - (00:15:05)

Now. Thanks for taking my question and congratulations on a solid quarter. With the expanding aesthetic center count, how do we ensure the safety and compliance of the entire chain system? And how does the internal quality control mechanism work? Thank you.

Buddha - (00:15:54)

Buddha. Safety is our top priority. We have built a six tailored compliance framework covering compliance, risk control, supervision, internal audit, medical service delivery and information security department and we will continue to make this framework more refined and systematic. We adhere to high standards and results. On the treatment side, we only offer safe, mature medical aesthetic treatments with clear mechanisms and solid user feedback to avoid potential risks. On the personnel side, we implement rigorous doctors' qualification assessments with an acceptance rate of around 10%. All doctors are also required to complete pre employment training and regular emergency drills to ensure the highest professional service and emergency response capabilities. Medical Service Delivery we implement a tiered diagnosis that matches treatments with doctors based on their qualification levels. We conduct regular online and offline inspections as part of our quality control, ensuring reliable medical service across all centers. If there is any user feedback or dispute, we handle it at headquarters with a crisis response team composed of key departments including user experience, PR, HR and legal. Currently, our average response time is under 2 hours with issue resolution completed within 2 days. The compliance rate is below 1%. Going forward, we will continue to uphold the highest standards of safety and compliance with digital and AI tools. We aim to further enhance core control efficiency and ensure consistent medical service quality and user safety across all centers as the business continues to grow rapidly. Thank you.

OPERATOR - (00:19:48)

The next question comes from Jenny Zhu with cicc. Please go ahead.

Jenny Zhu - Equity Analyst - (00:20:10)

Let me repeat it in English. So, how does the management view the potential for improving the profitability of the Aesthetic Center business in the future? Thank you. We believe the first priority now is to expand our user base and ensure the improvements of operating operating profit as it scales. As the operating model gradually matures, we are confident profitability will improve. On the cost side, we continue to optimize the structure of our customer acquisition channels, including referrals from existing customers and both public and private, continuously consolidating our advantage in customer acquisition costs. In addition, there is a significant room to lower the consumables costs. For instance, we recently upgraded miracle PLLA from version 2 to version 3. As the new product gains volume, it will strengthen our bargaining power with upstream partners and further optimize our cost framework in the future with a gradual realization of digitalization, AI and economics of scale, the fixed costs in their operations will be fully diluted on the revenue side, as users increasingly prioritize results and professionalism they are willing to spend on premium treatments. Coupled with a growing launch of high quality medical operations of the existing category trajectory leveraging our blockbuster strategy, treatment volume have gradually concentrated on its number of SKUs, with the revenue share of blockbuster products increasing. The top nine products contributed over 30% of revenue in Q3. This lays a solid foundation to further improve our profit margins through proprietary customized products. Once the number of aesthetic centers and verified treatment visits reach a center level, we will focus on enhancing LTV of core members, further driving profit margin. Therefore, we believe there is great potential for the profit margin quality of the aesthetic center business to increase from its current base. Thank you Operator.

OPERATOR - (00:24:24)

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.