SBC Medical Group Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 13, 2025

Key Takeaways

  • Negative Sentiment: The company reported a 18% year-on-year revenue decline in Q2 due to strategic business restructuring and franchise fee revisions, though management expects growth to accelerate from Q3 onward.
  • Positive Sentiment: The franchise network expanded by 36 clinics to 259 nationwide, while maintaining a strong 72% customer repeat rate, highlighting consistent service value and loyalty.
  • Positive Sentiment: Acquisitions of Jun Clinic and the newly launched Neo Skin Clinic have rapidly ramped up operations with higher average spend per customer, positioning them as key growth drivers.
  • Positive Sentiment: The company continues its targeted M&A strategy across Japan, Asia and North America, leveraging past deals that converted nearly all acquired clinics from losses to profitability.
  • Neutral Sentiment: To improve share liquidity, management executed its first share buyback, was added to the Russell 3000 Index, and is considering further measures such as new share issuance or founder share sales.
AI Generated. May Contain Errors.
Earnings Conference Call
SBC Medical Group Q2 2025
00:00 / 00:00

There are 2 speakers on the call.

Operator

It's time, so we would like to begin. Thank you very much for taking time out of your very busy schedules now to join SVC 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.

Operator

At the bottom of your screen, you will find a question box. If you have any questions, please enter them briefly and concisely. We will address them after the presentation. Now I will hand over to Mr. Aikawa.

Operator

CEO Mr. Aikawa, the floor is yours.

Speaker 1

I'm Akawa, CEO of SBC Medical Group Holdings. I 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, June clinic joined our network, expanding our total number of clinics nationwide to two fifty nine, an increase of 36 clinics since last year.

Speaker 1

And in Japan's aesthetics medicine industry, the competition is severe. However, the customers are steadily increasing continuously with 6,310,000 visits annually. This scale 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.

Speaker 1

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 gorilla clinic, and 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 twenty twenty five second quarter earnings. In 2024, we strategically restructured our business, existing staffing services and deconsolidating some affiliates. Furthermore, in April, we also revised our franchise fees. As a result, total revenue declined 18% year on year.

Speaker 1

However, this is a strategic restructuring to ensure future growth, and the groundwork has been laid. Therefore, from the third quarter onward, we intend to accelerate growth. And elsewhere, increased point redemption by customers at our clinics reduced revenue, which in turn impacted management service revenues. On the other hand, procurement and rental revenues rose 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.

Speaker 1

So more than what we have expected, the tax we had to pay in advance was higher. That is why the net profit became this way. This is a onetime advanced payment of tax. It's how we understand this. Next.

Speaker 1

ZYN Clinic has joined our network, and also I would like to explain our business strategy progress. This July, we acquired MB 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 adapters. So, the variety of lasers, the adapters 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 June clinic is that the way they diagnose the customers has characteristics, meaning that it is matching the current patient's needs, and also they provide a fixed pricing, meaning they receive, if it's 40,000 yen, 40,000 yen upfront, and will leave the treatment decision up to the doctor.

Speaker 1

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 June clinic number is going to expand.

Speaker 1

Therefore, June clinic will become a key growth driver for us, is how I think. Next is turning to dermatological aesthetic medicine in Japan. 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.

Speaker 1

And this April, we launched Neo Skin 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 the joint appointments is becoming difficult. Up to now, we have been opening up different concept clinics. However, this immune skin clinic has been the fastest ramping up clinic, and we have high expectations towards it. And moving forward, we would like to roll out this concept globally, not just keeping it in Japan.

Speaker 1

Average spend per customer exceeds that of our existing clinics. And as I mentioned before, the Jun clinic is also achieving an average spend per customer exceeding 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.

Speaker 1

So moving forward, we believe that the market is going to expand by twofold and threefold. 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. 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.

Operator

Each brand is in a clearly position where the distinct and the strength in newly industrial build a strong presence in the non surgical aesthetic segment. We are also strengthening support for franchise clinics in response to market changes. Specifically, we advised on shifting to higher margin models and support their implementation. Two clinics completed a 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.

Operator

Next, please. Currently, gang is weakening. So there are many inbound tourists coming to Japan. So we are focusing on enhancing our medical tourism business. We are particularly focused on the Chinese tourists, enhancing log art through a popular platform, RED, increasing interpreters and hosting events in Shanghai.

Operator

These initiatives have yielded strong results. Orthopaedics and AGA treatment. Those are the high growth and high margin areas, so we will concentrate on the management resources moving forward. For example, in orthopaedics, we are expanding from short stature treatment into joint pain therapy and rehabilitation in response to ageing demographics to expand our business. Japanese aging society is advancing, so although business is going to be the business which has a high growth potential, we are ranked on the seventh right now in Japan.

Operator

But I think that we can increase the number of clinics from seven to 100 moving forward. Fertility business is another important business area, and our hair loss services include medication transplantation and laser therapies. This comprehensive approach asserts SPC a partner as most AGA clinics focus only on medication. So we are offering a comprehensive treatment, and that is our strength in Japan. We are ranked on the second place in terms of the market share in Japan.

Operator

So within this year or next year, we are trying to be number one. Our target within ten years is auto, fertility and AGI, we want to be the number one market leader in those areas in Japan moving forward. In our international business, we are currently enhancing our structure.

Speaker 1

In The

Operator

US, renowned classic surgeon, Doctor Stephen Cohen, joined as an advisor. In April, Stephen Rogers, previously employed by Amazon and Rakuten, with experience in business development and M and A joined as Head of International Strategy. In Singapore, where we acquired Ah last year, we have 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 Inoue, our marketing leader with a track record at P and G, Elayli and Adobe as a CMO to drive global branding and marketing.

Operator

Next, financial base. We continue to maintain 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 and A. That's an aspiration. Next, please.

Operator

Finally, regarding our capital policy, we recognise 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 partial sale by the founder. 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 three thousand Index, which we understand will further enhance our visibility and liquidity.

Operator

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.

Speaker 1

CEO, Mr. Aikawa, thank you very much. Now, from the participants, 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?

Speaker 1

And the male customers are using 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 at Jose del Luise, we are opening up 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.

Speaker 1

So compared to the female customers, the male customers, the growth rate, we believe, many a lot of potential because there's not that many that are entering the market.

Operator

Next question. Pricing strategy. Future pricing trend. What is your perspective? And would you continue to foresee the decrease in price or the price will be stabilizing?

Operator

As has been explained, we are taking multi brand strategies. Shonen Bio Dermatology offers relatively reasonable price with a high turnover. And when it comes to June clinic or Neo Skin clinic, those are positioned in the mid range to high range prices, and customers' needs 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 a respective pricing strategy. Thank you.

Speaker 1

We'd like 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 and A, can you explain about that? What are your thoughts on this? Well, first of all, as I have mentioned before, within the orthopedics area, if June clinic, AGA, the net increase basis. In the market areas where we have a potential to grow, we are going to proactively open up new clinics.

Speaker 1

And what was the other part of the question? Other questions? The M and A side. Yes. And regarding M and A, we are conducting M and A almost every year.

Speaker 1

And even now, as we speak, we are finding good M and 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 clinics that were making losses after the acquisition turned into Black Inc. And the ones that were already making profits are further increasing their profitability. Therefore, moving forward, we would like to actively conduct M and A.

Operator

Thank you. As for M and A, for example, in regions, for example, in The US or Asia or Japan, any geography or type of M and A, what are the targets? Currently, in North America, we are researching for any possible projects 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 scrutinise and select the possible M and A and of course carefully examine the price as well as the business opportunities and decide. That's the important point.

Operator

So we scrutinise one by one. We are in the process. Thank you.

Speaker 1

Moving forward, for example, in Japan, how many clinics are you planning to open? Well, the pace of opening, we have about two sixty clinics. So on a clinical basis, within the next ten years, we would like to open up to 1,000 for sure. Thank you.

Operator

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.

Operator

So now to meet the time, we will make sure to secure sufficient margin and manage the businesses that are appropriately allocated or in a transformed business format, and those are important things. And what we have been engaging so far for an establishment of the new clinic is 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 margin will improve. That's our prospect. Thank you.

Speaker 1

For example, the reduction of fee 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, so the results were not so good, but because of that, because we have gone down once, moving forward, we believe that it 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.

Operator

Managing growth. It didn't grow much. SG and A, a slightly increase. In the second half, is it going to be normalized? Yes.

Operator

We made a high level of investment for laser, for example, the 100 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. Does she have any other follow-up? If I may, supplement.

Operator

As a consolidated group, consultation fees and capital policy, legal fees were partially impacted on the performance and easy response as well. So those are the factors contributing to push up the SG and A. So the 7%, the £12,000,000 is year on year and the £3,000,000 increase is not much big impact on our overall financial performance. Thank you.

Speaker 1

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 these?

Operator

Well,

Speaker 1

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 twenty five years since we have started the business, the number of customers is continuously increasing. And though the surrounding 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.

Speaker 1

Yoshida, if you want to add, yes. As of the listed consolidated group, at this point, we are not disclosing the EPS. On the other hand, from the investors, we 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 been explaining today, restructuring has been conducted and the one time expense has all been spent. Therefore, moving forward, we will be improving the business.

Speaker 1

At some point, we would like to consider us disclosing the EPS as well. Thank you.

Operator

Capital policy question. Looking at the current share price trend, shareholder response or the share price, is probably we need to enhance more. What is your thought on that? Every time when we have the earnings score now, we have are putting emphasis on the capital policy and particularly we are working on to improve the liquidity. For that purpose, we have been considering measures.

Operator

So since May, we conducted a share buyback and we saw some effect to some extent. And as has been said, not just the share buyback, but the dividend payment is under consideration. Meanwhile, business restructuring has been completed, so now we are entering into the phase of growth investment. As Nami Saigawa said, there are attractive M and A opportunities available in Japan and overseas. So shareholder return and growth investment for those two, we will not strike a good balance.

Operator

Thank you. Oh, if I may ask? This is Ai Para speaking. For the purpose of expanding our business, M and A is one of our strengths. So there, we put focus on it to make a proactive investment to focus on the fundamental business growth.

Operator

Ultimately, this will lead to no shareholder return as well.

Speaker 1

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 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, we would like, in order for that to be used for the investment, I think such a thing will be necessary to do. Thank you very much.

Operator

I'm conscious of time. So Mr. Aikawa, could you give the message now to the audience? Thank you very much indeed for kindly participating in this earnings call. We are the Syrian, the Syrian is in a quarter century, but we are relatively new.

Operator

Our strength is the spirit of never give up. So what we have been envisioning has been thoroughly executing and that is our strength. So I thank you in advance for your continued understanding and support. Thank you very much. With this, we would like to conclude this earnings call.

Operator

Thank you all very much for your kind attendance.

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