So-Young International Q2 FY26 earnings call SY

So-Young Clinic expanded its footprint to 18 cities with a total of 65 centers by the end of Q2, marking a net addition of 11 centers during the quarter. This strategic expansion has significantly improved accessibility for consumers, reinforced brand awareness, and captured greater consumer mind share. The increased presence directly contributed to continued growth in treatment volume, with verified visits up 145% year-over-year, and an expanding user base, reaching over 350,000 active users.

The company's focus on refining operating workflows and tightening resource coordination has yielded tangible results in profitability. In Q2, the number of profitable centers rose to 47, with 51 centers generating positive operating cash flow, reflecting net additions of 6 and 3, respectively, from the prior quarter. This operational excellence also drove a 3.8 percentage point year-over-year improvement in the gross margin of the aesthetic treatment business, reaching 28.1%.

So-Young is actively deepening its collaboration with upstream partners, moving beyond traditional buyer-vendor relationships to product co-creation. A key example is the joint product 'Miracle Collagen' with Jimu biopharmaceutical, which launched in late April and has already sold over 66,000 units. The company also rolled out 'Lead Call' in June, featuring advanced technology for collagen regeneration. This model leverages real-world data to drive product development, optimize inventory, and accelerate technology integration from R&D to clinical use.

So-Young is integrating AI across its operations to innovate and expand, focusing on medical safety, user privacy, and data compliance. AI's core value is seen in transforming experience-driven procedures into uniform, visible offerings, and distributing premium medical resources. Current applications include product authentication, back-office control, and building data foundations. User-facing virtual medical dispensing platforms and real-time treatment SOP displays have been launched to boost user trust and standardize clinical care.

The company is committed to ongoing gross margin improvement through a dual strategy of scale and efficiency. This includes enhancing per square meter revenue and labor productivity by raising the aesthetic center capacity utilization benchmark by 50%, aiming for 15 treatments per bed per day. Furthermore, the expanding network provides greater bargaining power for procurement, unlocking cost advantages from larger volumes and securing competitive deals with upstream partners. A robust pipeline of new products is also expected to contribute to margin growth.

So-Young's strategy for achieving group-level profitability is centered on 'focus.' This involves concentrating resources on the profitable clinic business, which has maintained high growth and improving gross margins, while scaling back investments in other loss-making ventures. With operating leverage, fixed costs being diluted by scale effects, and an upcoming peak business season, the clinic segment is expected to reach overall profitability soon. Cost optimization in back-office operations and refined brand marketing investments will further support this goal.