So-Young Reports Unaudited Third Quarter 2022 Financial Results

Author: So-Young International Inc. / 2023-07-24 01:14 / Source: So-Young International Inc.

So-Young Reports Unaudited Third Quarter 2022 Financial Results

BEIJING,Nov. 18,2022 -- So-Young International Inc. (Nasdaq: SY) ("So-Young" or the "Company"),the largest and most vibrant social community in China for consumers,professionals and service providers in the medical aesthetics industry,today announced its unaudited financial results for the thirdquarter endedSeptember 30,2022.

ThirdQuarter 2022Financial Highlights

Total revenues were RMB323.3 million (US$45.5 million[1]),compared to RMB431.5 million in the corresponding period of 2021,in line with our previous guidance.

Net incomeattributable to So-Young International Inc. was RMB2.3 million (US$0.3 million),compared with net income attributable to So-Young International Inc. of RMB6.8million in the same period of 2021.

Non-GAAP net income attributable to So-Young International Inc.[2]was RMB9.9million(US$1.4million),compared with non-GAAP net incomeattributable to So-Young International Inc. of RMB28.9million in the same period of 2021.

Third Quarter 2022 Operational Highlights

Average mobile MAUs were 3.9 million,comparedwith 8.0 million in thethirdquarter of 2021.

Number of paying medical service providers on So-Young's platform was 6,199,an increase of 28.1% from 4,841in the thirdquarter of 2021.

Number of medical service providers subscribing to information services on So-Young's platform was 1,704,compared with 2,242in the third quarter of 2021.

Total number of purchasing users through reservation services was 136.7 thousand and the aggregate value of medical aesthetic treatment transactions facilitated by So-Young's platform was RMB363.7 million.

Recent Development

On November 18,2022,the board of directors of the Company authorized a share repurchase program under which the Company is authorized to repurchase up to an aggregate value of US$15 million of its shares (including in the form of ADS) during the 12-month period beginning from November 18,2022.

The Company's proposed repurchases may be effected from time to time in the open market at prevailing market prices,in privately negotiated transactions,in block trades and/or through other legally permissible means,depending on market conditions and in accordance with applicable rules and regulations. The Company's board of directors will review the share repurchase program periodically,and may authorize adjustment of its terms and size. The Company expects to fund the repurchases out of its cash balance.

Mr. Xing Jin,Co-Founder and Chief Executive Officer of So-Young,commented,"In the third quarter,we were pleased to see encouraging signs from our business despite what remained a challenging operating environment largely caused by COVID-19 outbreaks in many regions of China. Total revenues reached RMB323.3 million,an increase of 4.6% quarter over quarter,in line with our previous guidance. We continued to expand our cooperation with medical institutions by providing diversified services. The number of paying medical service providers on So-Young's platform increased 28.1% year-over-year to 6,199. Going forward,we are committed to having a healthy growth strategy and improving user service quality to reaffirm our leadership position."

Mr. Jin continued,"We narrowed our operating loss by 82.5% quarter-over-quarter and the non-GAAP net income attributable to the Company reached RMB9.9 million,benefiting from optimized cost structure,with sales and marketing expenses decreasing by about 34.6% from a year ago.Looking ahead,with abundant cash on hand and a healthy cash reserve,we remain optimistic about the growth potential of the Chinese medical aesthetics industry and confident in our ability to overcome short-term difficulties and build the most trusted medical aesthetic services platform."

[1]This press release contains translations of certain Renminbi (RMB) amounts into U.S. dollars (US$) solely for the convenience of the reader. Unless otherwise specified,all translations of Renminbi amounts into U.S. dollar amounts in this press release are made at RMB7.1135 to US$1.00,which was the U.S. dollars middle rate announced by the Board of Governors of the Federal Reserve System of the United States on September 30,2022.

[2]Non-GAAP net incomeattributable to So-Young International Inc. is defined as net income attributable to So-Young International Inc.excluding share-based compensation expenses.See "Reconciliation of GAAP and Non-GAAP Results" at the end of this press release.

Third Quarter 2022Financial Results

Revenues

Total revenues were RMB323.3 million (US$45.5 million),a decrease of 25.1% from RMB431.5 million in the same period of 2021. The decrease was primarily due to a decrease in average revenue per paying medical service provider which was impacted by the resurgence of COVID-19 and remained under pressure from China's overall domestic consumer market.

Information services and other revenues were RMB235.7 million (US$33.1 million),a decrease of 26.7% from RMB321.6 million in the same period of 2021. The decrease was primarily due to a decrease in the number of paying medical service providers subscribing to information services.

Reservation servicesrevenues were RMB29.7 million (US$4.2 million),a decrease of 51.8% from RMB61.7 million in the same period of 2021. The decrease was primarily due to the impact of the resurgence of COVID-19 in China and adoption of an operating strategy which gave higher subsidies to end users.

Sales of equipment and maintenance servicesrevenues were RMB57.8 million (US$8.1 million) and RMB48.1 million in the third quarter of 2022 and 2021,respectively,from WuhanMiracle Laser Systems,Inc. ("Wuhan Miracle").

Cost of Revenues

Cost of revenues was RMB94.0 million (US$13.2 million),an increase of 4.9% from RMB89.6 million in the third quarter of 2021. The increase was primarily due to the consolidation of Wuhan Miracle. Cost of revenues included share-based compensation expenses of RMB2.0 million (US$0.3 million),compared with RMB4.8 million in the corresponding period of 2021.

Operating Expenses

Total operating expenses were RMB236.6 million (US$33.3 million),a decrease of 26.6% from RMB322.5 million in the third quarter of 2021.

Sales and marketing expenses were RMB124.8 million (US$17.5 million),a decrease of 34.6% from RMB190.7 million in the third quarter of 2021. The decrease was primarily due toa decrease in expenses associated with branding and user acquisition activities. Sales and marketing expenses included share-based compensation expenses of RMB0.7 million (US$0.1 million),compared with RMB2.2 million in the corresponding period of 2021.

General and administrativeexpenses were RMB59.8 million (US$8.4 million),an increase of 9.4% from RMB54.7 million in the third quarter of 2021. The increase was primarily due to an increase in payroll costs and professional services fees. General and administrative expenses included share-based compensation expenses of RMB4.5 million (US$0.6 million),compared with RMB10.0 million in the corresponding period of 2021.

Research and developmentexpenses were RMB52.0 million (US$7.3 million),a decrease of 32.6% from RMB77.1 million in the third quarter of 2021. The decrease was primarily attributable to a decrease in payroll costs.Research and development expenses included share-based compensation expenses of RMB0.4 million (US$0.1 million),compared with RMB5.1 million in the corresponding period of 2021.

Income tax (expenses)/benefits

Income tax benefits were RMB16.5 million (US$2.3 million),compared with income tax expenses of RMB4.3 million in the same period of 2021. The increase in income tax benefits was primarily due to the refund of income tax of RMB12.6 million in the third quarter of 2022 based on the final 2021 tax return filing result.

Net income/(loss) attributable to So-Young International Inc.

Net income attributable to So-Young International Inc. was RMB2.3 million (US$0.3 million),compared with a net income attributable to So-Young International Inc.of RMB6.8 million in the third quarter of 2021.

Non-GAAP net income/(loss) attributable to So-Young International Inc.

Non-GAAP net income attributable to So-Young International Inc.,which excludes the impact of share-based compensation expenses,was RMB9.9 million (US$1.4 million),compared with RMB28.9 million non-GAAP net income attributable to So-Young International Inc.in the same period of 2021.

Basic and Diluted Earnings/(loss) per ADS

Basic and diluted earnings per ADS attributable to ordinary shareholders were RMB0.02 (US$0.00) and RMB0.02 (US$0.00),compared with basic and diluted earnings per ADS attributable to ordinary shareholders of RMB0.06 and RMB0.06,in the same period of 2021.

Cash and Cash Equivalents,Restricted Cash and Term Deposits,Term Deposits and Short-Term Investments

As of September 30,cash and cash equivalents,restricted cash and term deposits,term deposits and short-term investments were RMB1,640.3 million (US$230.6 million),compared with RMB1,756.0million as of December31,2021.

Business Outlook

For the fourth quarter of 2022,So-Young expects total revenues to be between RMB310 million (US$43.6 million) and RMB330 million (US$46.4 million),representing a 31.0% to 26.6% decrease from the same period in 2021. The above outlook is based on the current market conditions and reflects the Company's preliminary estimates of market and operating conditions,as well as customer demand,which are all subject to change,particularly in view of the potential impact of the COVID-19,the effects of which are difficult to analyze and predict.

Non-GAAP Financial Measures

To supplement the financial measures prepared in accordance with generally accepted accounting principles in the United States,or GAAP,this press release presents non-GAAP income/(loss) from operations and non-GAAP net income/(loss) attributable to So-Young International Inc. by excluding share-based compensation expenses from income/(loss) from operations and net income/(loss) attributable to So-Young International Inc.,respectively. The Company believes these non-GAAP financial measures are important to help investors understand the Company's operating and financial performance,compare business trends among different reporting periods on a consistent basis and assess the Company's core operating results,as they exclude certain expenses that are not expected to result in cash payments. The use of the above non-GAAP financial measures has certain limitations. Share-based compensation expenses have been and will continue to be incurred in the future. Thisisnot reflected in the presentation of the non-GAAP financial measures,but should be considered in the overall evaluation of the Company's results. The Company compensates for these limitations by providing the relevant disclosure of its share-based compensation expensesin the reconciliations to the most directly comparable GAAP financial measures,which should be considered when evaluating the Company's performance. These non-GAAP financial measures should be considered in addition to financial measures prepared in accordance with GAAP,but should not be considered a substitute for,or superior to,financial measures prepared in accordance with GAAP. Reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP financial measure is set forth at the end of this release.

Conference Call Information

So-Young's management will hold an earnings conference call on Friday,November 18,at 7:00 AM U.S. Eastern Time (8:00 PM on the same day,Beijing/Hong Kong Time). Dial-in details for the earnings conference call are as follows:

International: +1-412-902-4272

China： 4001-201203

US: +1-888-346-8982

Hong Kong： +852-301-84992

Passcode: So-Young International Inc.

A telephone replay will be available two hours after the conclusion of the conference call through 23:59 U.S. Eastern Time,November 25,2022. The dial-in details are:

International: +1-412-317-0088

US: +1-877-344-7529

Passcode: 1723328

Additionally,a live and archived webcast of this conference call will be available athttp://ir.soyoung.com.

About So-Young International Inc.

So-Young International Inc. (Nasdaq: SY) ("So-Young" or the "Company") is the largest and most vibrant social community in China for consumers,professionals and service providers in the medical aesthetics industry. The Company presents users with reliable information through offering high quality and trustworthy content together with a multitude of social functions on its platform,as well as by curating medical aesthetic service providers that are carefully selected and vetted. Leveraging So-Young's strong brand image,extensive audience reach,trust from its users,highly engaging social community and data insights,the Company is well-positioned to expand both along the medical aesthetic industry value chain and into the massive,fast-growing consumption healthcare service market.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Among other things,the Financial Guidance and quotations from management in this announcement,as well as So-Young's strategic and operational plans,contain forward-looking statements. So-Young may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission,in its annual report to shareholders,in press releases and other written materials and in oral statements made by its officers,directors or employees to fourth parties. Statements that are not historical facts,including but not limited to statements about So-Young's beliefs and expectations,are forward-looking statements. Forward looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement,including but not limited to the following: So-Young's strategies; So-Young's future business development,financial condition and results of operations; So-Young's ability to retain and increase the number of users and medical service providers,and expand its service offerings; competition in the online medical aesthetic service industry; changes in So-Young's revenues,costs or expenditures; Chinese governmental policies and regulations relating to the online medical aesthetic service industry,general economic and business conditions globally and in China; the impact of the COVID-19 pandemic to So-Young's business operations and the economy in China and elsewhere generally; and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in the Company's filings with the Securities and Exchange Commission. All information provided in this press release and in the attachments is as of the date of the press release,and So-Young undertakes no duty to update such information,except as required under applicable law.

For more information,please contact:

So-Young

Investor Relations

Ms.Vivian Xu

Phone:+86-10-8790-2012

E-mail: ir@soyoung.com

Christensen

In China

Mr.Eric Yuan

Phone: +86-10-5900-1548

E-mail: eric.yuan@christensencomms.com

In US

Ms.Linda Bergkamp

Phone: +1-480-614-3004

Email: linda.bergkamp@christensencomms.com

SO-YOUNG INTERNATIONAL INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands,except for share and per share data)

As of

December31,

September 30,

2021

2022

RMB

US$

Assets

Current assets:

Cash and cash equivalents

1,331,968

713,646

100,323

Restricted cash and term deposits

15,119

17,920

2,519

Trade receivables

54,829

42,299

5,946

Inventories,net

91,812

105,194

14,788

Receivables from online payment

platforms

18,864

18,879

2,654

Amounts due from related parties

14,038

28,758

4,043

Term deposits and short-term investments

408,946

908,718

127,746

Prepayment and other current assets

91,842

147,877

20,788

Total current assets

2,027,418

1,983,291

278,807

Non-current assets:

Long-term investments

252,500

234,073

32,905

Intangible assets

193,955

175,594

24,685

Goodwill

540,693

76,009

Property and equipment,net

124,576

115,321

16,212

Deferred tax assets

47,520

53,828

7,567

Operating lease right-of-use assets

95,609

71,533

10,056

Other non-current assets

48,097

142,756

20,068

Total non-current assets

1,302,950

1,333,798

187,502

Total assets

3,330,368

3,317,089

466,309

Liabilities

Current liabilities:

Taxes payable

48,571

63,826

8,973

Contract liabilities

139,155

134,271

18,876

Salary and welfare payables

103,624

87,214

12,260

Amounts due to related parties

681

185

Accrued expenses and other current

liabilities

376,841

351,476

49,410

Operating lease liabilities-current

43,529

49,831

7,005

Total current liabilities

712,401

686,803

96,550

Non-current liabilities:

Operating lease liabilities-non current

62,356

32,685

4,595

Deferred tax liabilities

38,577

33,145

4,659

Total non-current liabilities

100,933

65,830

9,254

Total liabilities

813,334

752,633

105,804

SO-YOUNG INTERNATIONAL INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)

(Amounts in thousands,except for share and per share data)

Shareholders' equity:

Treasury stock

(217,712)

(30,605)

ClassA Ordinary shares (US$ 0.0005 par value;

750,000,000 shares authorized as of December 31,2021

and September 30,2022; 71,736,059 and 69,092,367

shares issued and outstanding as of December 31,2021,

72,128,429 and 69,484,737 shares issued and outstanding

as of September 30,respectively)

230

232

ClassB Ordinary shares (US$0.0005 par value; 20,000

shares authorized as of December 31,2021 and September

30,2022; 12,000 shares issued and outstanding as of

December 31,2021 and September 30,2022)

Additional paid-in capital

2,999,562

3,035,807

426,767

Statutory reserves

20,331

20,587

2,894

Accumulated deficit

(272,368)

(369,451)

(51,937)

Accumulated other comprehensive (loss)/income

(83,891)

24,495

3,443

Total So-Young International Inc. shareholders' equity

2,446,189

2,493,995

350,599

Non-controlling interests

70,845

70,461

9,906

Total shareholders' equity

2,517,034

2,564,456

360,505

Total liabilities and shareholders' equity

3,309

SO-YOUNG INTERNATIONAL INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands,except for share and per share data)

For the Three Months Ended

For the Nine Months Ended

September

30,2021

September

30,2022

September

30,2022

RMB

US$

RMB

US$

Revenues

Information services and others

321,593

235,723

33,138

960,140

654,597

92,021

Reservation services

61,737

29,733

4,180

234,680

102,702

14,438

Sales of equipment and maintenance services

48,120

57,847

8,132

48,120

175,429

24,662

Total revenues

431,450

323,303

45,450

1,242,940

932,728

131,121

Cost of revenues

(89,638)

(94,028)

(13,218)

(200,799)

(305,090)

(42,889)

Gross profit

341,812

229,275

32,232

1,042,141

627,638

88,232

Operating expenses:

Sales and marketing expenses

(190,740)

(124,781)

(17,541)

(639,828)

(373,734)

(52,541)

General and administrative expenses

(54,691)

(59,847)

(8,413)

(166,362)

(187,033)

(26,293)

Research and development expenses

(77,113)

(51,998)

(7,310)

(219,048)

(194,021)

(27,274)

Total operating expenses

(322,544)

(236,626)

(33,264)

(1,025,238)

(754,788)

(106,108)

Income/(loss) from operations

19,268

(7,351)

(1,032)

16,903

(127,150)

(17,876)

Other income/(expenses):

Investment income

2,272

493

8,004

3,997

562

Interest income

4,903

10,061

1,414

15,674

18,607

2,616

Exchange (losses)/gains

(446)

(4,799)

(515)

(72)

Impairment of long-term investment

(17,850)

(7,945)

(1,117)

(17,117)

Share of losses of equity method investee

(909)

(9,106)

(1,280)

(776)

(11,008)

(1,547)

Others,net

2,932

(781)

(110)

9,836

7,600

1,068

Income/(loss) before tax

10,170

(14,605)

(2,053)

26,992

(116,414)

(16,366)

Income tax (expenses)/benefits

(4,298)

16,486

2,318

(11,086)

18,542

2,607

Net income/(loss)

5,872

1,881

265

15,906

(97,872)

(13,759)

Net loss attributable to noncontrolling interests

896

429

3,459

1,045

147

Net income/(loss) attributable to So-Young International Inc.

6,768

2,310

325

19,365

(96,827)

(13,612)

SO-YOUNG INTERNATIONAL INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)

(Amounts in thousands,except for share and per share data)

For the Three Months Ended

For the Nine Months Ended

September

30,2021

September 30,2022

RMB

US$

RMB

US$

Net earnings/(loss) per ordinary share

Net earnings/(loss) per ordinary share attributable to ordinary shareholder - basic

0.08

0.03

0.00

0.24

(1.17)

(0.16)

Net earnings/(loss) per ordinary share attributable to ordinary shareholder -

diluted

0.08

0.03

0.00

0.23

(1.17)

(0.16)

Net earnings/(loss) per ADS attributable to ordinary shareholders - basic (13

ADS represents 10 Class A ordinary shares)

0.06

0.02

0.00

0.18

(0.90)

(0.12)

Net earnings/(loss) per ADS attributable to ordinary shareholders - diluted (13

ADS represents 10 Class A ordinary shares)

0.06

0.02

0.00

0.18

(0.90)

(0.12)

Weighted average number of ordinary shares used in computing earnings/(loss)

per share,basic*

80,895,891

82,946,796

82,796

81,805,945

82,578,596

82,596

Weighted average number of ordinary shares used in computing earnings/(loss)

per share,diluted*

81,471,931

83,281

82,954,414

82,596

Share-based compensation expenses included in:

Cost of revenues

(4,814)

(2,007)

(282)

(12,938)

(7,303)

(1,027)

Sales and marketing expenses

(2,245)

(670)

(94)

(6,089)

(6,342)

(892)

General and administrative expenses

(10,032)

(4,521)

(636)

(24,446)

(14,684)

(2,064)

Research and development expenses

(5,083)

(428)

(60)

(13,763)

(7,498)

(1,054)

*Both Class A and Class B ordinary shares are included in the calculation of the weighted average number of ordinary shares outstanding,basic and diluted.

SO-YOUNG INTERNATIONAL INC.

Reconciliation of GAAP and Non-GAAP Results

(Amounts in thousands,2022

RMB

US$

RMB

US$

GAAPincome/(loss) from operations

19,876)

Add back: Share-based compensation expenses

22,174

7,626