So-Young International Bets on Clinics Amid Wider Loss

So-Young International ((SY)) has held its Q1 earnings call. Read on for the main highlights of the call.

So-Young International’s latest earnings call struck a distinctly growth-focused tone, with management emphasizing powerful top-line momentum from its branded aesthetic centers despite wider net losses at the group level. Executives argued that accelerating treatment volumes, rising clinic margins and deepening user engagement justify continued heavy investment, framing current losses as the cost of building scale.

Strong Top-Line Growth

Total revenue for the first quarter of 2026 came in around RMB 432.8–433 million, representing about 45.6% year-over-year growth and underscoring the pace of So-Young’s expansion. Management credited the jump largely to the rapid build-out of its branded aesthetic center network and a stronger supply-chain-driven product business.

Aesthetic Center Revenue Surge

Revenue from aesthetic treatment services surged to RMB 282.4 million, up roughly 185.8% year over year and now accounting for more than 65% of total revenue. This segment again landed at the high end of guidance for the fourth straight quarter, reinforcing the view that clinics are firmly established as the company’s growth engine.

Rapid Treatment Volume and User Growth

Verified treatment visits exceeded 148,000 in the quarter, a jump of about 172% year over year, while verified treatments performed topped 325,000, up around 164%. The active user base grew to roughly 310,000 by the end of March, with more than 63,000 Level 3 or higher members, pointing to deeper engagement among So-Young’s most valuable customers.

Per-Center Economics and Scale Progress

By quarter end, the company reported between 54 and 59 operating clinics, with some variation in the transcript, but consistent improvement in unit economics. Mature centers generated about RMB 150 million in aggregate, or roughly RMB 7.5 million each, while growth-phase centers produced RMB 109.5 million, or around RMB 4.8 million per center, and ramp-up centers delivered RMB 22.9 million, or about RMB 2.1 million per site.

More Clinics Turning Profitable and Cash-Generative

The number of profitable centers rose to 41, indicating that the model is increasingly proven at the site level even as new openings weigh on consolidated results. In addition, 48 centers generated positive operating cash flow, suggesting that once clinics pass their initial ramp-up, they can contribute meaningful cash to fund further expansion.

Improving Margins at the Clinic Business

The aesthetic center segment’s gross margin reached 27% in the quarter, marking an 8.4 percentage-point improvement year over year and a 3.3-point increase versus the prior quarter. Management linked the progress to greater operating efficiency and better scale in procurement and staffing, signaling that profitability per treatment is steadily improving.

Product and Supply-Chain Wins

Blockbuster products contributed around 41% of first-quarter revenue, with particularly strong demand for popular devices such as BBL and thermage. So-Young also launched new proprietary collagen and skin booster offerings through upstream partnerships and broadened its “Green Label” system, aiming to deepen control over quality and enhance brand differentiation.

Operational and Clinical Capability Investments

To support its expanding network, the company established a medical R&D and physician training center, along with a centralized safety and compliance control hub. Full-time physicians increased to about 230, up roughly 9% from year-end 2025, and So-Young rolled out physician-led consultation policies and digital diagnostic tools to lift service quality and conversion.

Widening Net Loss at Group Level

Despite robust revenue, the net loss attributable to So-Young widened to RMB 49.2 million in the first quarter of 2026, compared with RMB 33.1 million a year earlier. On a non-GAAP basis, net loss reached RMB 46.6 million versus RMB 31.5 million, with basic and diluted loss per ADS expanding sharply, underscoring the earnings drag from aggressive expansion.

Rising Cost of Revenue with Network Expansion

Total cost of revenue rose to RMB 251 million, up about 65.8% year over year, outpacing overall sales growth. Within that, cost tied specifically to aesthetic treatment services climbed to RMB 205.8 million, an increase of roughly 156.4%, reflecting the higher staffing, materials and facility costs that accompany the rapid rollout of clinics.

Higher Operating Expenses Pressure Profitability

Operating expenses jumped to RMB 239.7 million, up around 26.6% year on year, as So-Young continued to invest in brand building and infrastructure. Sales and marketing outlays increased 33.7% to RMB 130.8 million, while general and administrative expenses surged 42.5% to RMB 84.5 million, signaling that corporate overhead and customer acquisition remain hefty.

Weakness in Non-Clinic Segments

Outside the core clinic business, information and reservation services revenue slipped to RMB 8.3 million, down about 34% year over year, suggesting continued pressure on the legacy platform side. Other services revenue fell to RMB 2.9 million, a drop of roughly 39.3%, underscoring that So-Young’s future is increasingly tied to its offline aesthetic centers rather than ancillary digital offerings.

Cash Position Moderation Amid Investment

The company ended March with a combined RMB 880 million in cash, restricted cash, term deposits and short-term investments, down from RMB 936.4 million at the end of 2025. Management framed the reduction as a deliberate deployment of capital to accelerate clinic openings, but investors will watch how quickly new centers can offset these cash outflows.

Profitability Still Out of Reach for Now

While per-center performance is trending in the right direction, So-Young remains loss-making at the consolidated level, a reality management acknowledged on the call. The combination of rising cost of revenue, elevated sales and marketing spending and higher G&A tied to rapid scaling continues to postpone the inflection to group-wide profitability.

Guidance and Path Forward

Looking ahead to the second quarter of 2026, management guided aesthetic treatment service revenue to RMB 307–317 million, implying year-over-year growth in the 112.6% to 119.5% range and signaling confidence in sustained clinic momentum. Leadership reiterated a long-term ambition to build a network of 1,000 centers and expects faster ramp-up times, rising per-center revenue and ongoing efficiency gains to gradually carve out a clearer path to profitability, supported by a still-solid cash cushion.

So-Young’s earnings call painted a picture of a company leaning hard into growth, with its aesthetic centers driving impressive revenue and margin gains even as group losses widen. For investors, the key debate will be whether the improving unit economics, expanding user base and strong guidance can ultimately outweigh the near-term cash burn and elevated costs that accompany the company’s ambitious expansion strategy.