Ladies and gentlemen, thank you for standing by. Welcome to So-Young Third Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I’d like to hand the conference over to your first speaker today, Mr. Christian Arnell. Thank you. Please go ahead.

Thank you, Operator. Hello, everyone, and thank you for joining us today. So-Young’s third quarter 2019 earnings release was distributed earlier today and is available on the IR website at ir.soyoung.com, as well as through GlobeNewswire Services. On the call today from So-Young, we have Mr. Xing Jin, Co-founder and Chief Executive Officer; and Mr. Min Yu, Chief Financial Officer. They will both be available to answer your questions during the Q&A session that follows management prepared remarks. Before we begin, I would like to remind you that this conference contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended and as defined in the U.S. Private Securities Litigation Reform Act of 1995. Such statements are based upon management’s current expectations and current market and operating conditions, and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company’s control, which may cause the company’s actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties or factors are including in the company’s filings with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise except as required under applicable law. It is now my pleasure to introduce Mr. Min Yu. Please go ahead.

Thank you, Christian. And thank you everyone for joining us for our third quarter 2019 earnings call. We delivered another strong quarterly results as our business revenues exceeding the high end of our guidance range as we capitalized on the strength, quality and the stickiness of our platform. Our community of users continues to grow as a result of our enhanced user experience and the rich content offerings. Average mobile MAUs and total number of purchasing users are growing rapidly, increasing 144% and 60%, respectively, from the same period last year. Users are increasingly finding value in our diversified content offerings, which have now expanded beyond traditional beauty diaries on the recovery processes to include message boards, Q&A functions, short videos and live video broadcast. This is reflected in the 75% year-over-year increase in aggregate value of medical aesthetic treatment transactions facilitated by our platform to RMB976 million. Our transparent pricing reviews and service provider credentials, and the convenient access to a diverse array of content continues to enhance the user experience and is creating a truly unique community. Medical service providers on our platform also continue to see the unique value proposition our effective customer acquisition services, differentiated branding and ability to improve operating efficiency offer in driving growth across their businesses. The number of paying medical service providers on our platform increased by 34% year-over-year to 3,230 and a number for medical service providers subscribing to Information Services on our platform increased by 52% to 2,104. We have been rolling out additional tools for medical service providers to enhance conversion rates, strengthen their return on investments and gradually increased monetization of our services. These tools were developed based on the enormous amount of information we gather on our platform and was specifically customized with different user demographics in…

[Operator Instructions] Your first question comes from the line of Jing Qiang [ph] from CICC. Please ask your question.

Hi. Thanks management for taking my question and congratulations on the strong quarter. I have got two questions. First, we saw a rather strong MAU growth in this quarter, but the purchasing user numbers saw a sequential decline. So can management explain a little bit the mechanism behind? And second, we saw a like strong reservation service revenue growth, while like 1% sequential growth for Information Service this quarter. So can management share more color on the growth for both business lines in fourth quarter and going forward? And what is the comparative landscape behind this forecast and what is the strategic focus next year for the management? Thank you.

Okay. I think, I will leave the question -- I will let CEO, Mr. Xing Jin to answer the question. Just to give us a minute to translate the question to the -- to Mr. Jin.

[Foreign Language]

So the answer of the first question was so in the second quarter that the company started for the university and the schools some promotional programs and to the students around the specific program called the Kim Kwang-jin [ph] and this particular program, because it is targeting students, so we had lower ASP than our usual ASP for the other services. And so which is why that you saw in the Q3 that the actual paying customers experienced decrease Q-on-Q. However, if you exclude this one-off impact from the school promotional program you actually see that the purchasing users’ MAU actually maintained like a good growth level. And in Q3, overall, we had very strong MAU is because we actually -- the company started like a strong promotional branding exercise and we believe that this promotional exercise will have like a sustained positive impact going forward to our overall MAU growth.

[Foreign Language]

So the answer to your second question is that there were two different explanations. So, the first one was that the company had monetization system upgrade, which has affected especially the small and medium service providers, their spending on the Information Services part. So we have actually put more resources into this overall initiative and so the goal is actually to increase our longer term the actually penetration rates for these kind of service providers. And so we believe that going forward we should be able to see a good recovery in the growth rate for Information Services. The second part was that, for the Reservation Services, as you rightly pointed out that the growth for the third quarter was actually higher than the growth for the Information Services part, partly because we had the 618 program, which was for the second quarter and there was a time lag between the recognition for some of the fees, which will recognize actually in quarter three. And so, I think, overall, going forward, we should be able to see quite good growth for both Information Services and for Reservation Services.

Next question please?

Sure. Our next question comes from the line of Vincent Yu from Needham and Company. Please ask your question.

Thank you. Hi, management. So I have two questions. One is on the progress of rollout of our new monetization tools from Information Service segment. Are we, like, what’s, like, the exact progress till now and will we see improvement in per user monetization next quarter? And my second question is on the -- like on the institutions side. So we see -- we saw some ad dollars shift to other platforms in the last quarter. Basically, some institutions are trying, like, say, May 20 Campaign [ph], Alibaba’s services and solutions some budget rates. Do we see this being gets improved in this quarter? [Foreign Language]

[Foreign Language]

So the answer to your two questions. For the first one is that the actual -- the monetization system is currently the upgrade in progress, because it is quite a complicated system and which we have to discuss with our service providers, so the actual timeline that we can see would be up until the first half of next year. As you know that the company, before it was transaction reservation i.e. e-commerce focused, but going forward, the company would like to move to more early stage in terms of monetization and to focus more on the sales leads and to help our service provider institutions to secure more customers early on in the whole purchasing process. The answer to your second question is that Baidu at the moment still has about 70% of the customers in terms of the overall customer acquisition in the medical aesthetics market. I think for So-Young the core target at the moment is to close our gap with Baidu and from where we can see that our key advantages of Baidu include our customer acquisition and our ROI in which our conversion rate is actually much higher. As you mentioned about the other platforms such as, Alibaba and May 20 Campaign. Well, we can see that our single month spending for our customers is around RMB6,000 and that is increasing and this ASP is much higher than the two platforms, which we mentioned, because we actually target in of our different customer bases. So we don’t see those platforms as our key competition, but rather than is Baidu.

Thank you.

Thank you.

Your next question comes from the line of Austin Moldow from Canaccord Genuity. Please ask your question.

Hi. Thanks for taking my questions. I wanted to ask more about marketing and user acquisition. First, can you share that total marketing and user acquisition expense for Q3, and the split between brand marketing and user acquisition, I think, the app store spending? And second, can you talk about what’s driving marketing efficiency and what your marketing strategy will be for the rest of the year?

Thanks. One second I will just translate quickly for CEO.

Hi, Austin. I will give you the answer for the first part -- first half of your question. The split in terms of sales marketing cost for customer acquisition. Third quarter we total have RMB155 million spending on sales, marketing, within that around RMB30 million is payroll. The remaining RMB125 million is actual customer acquisition cost and within RMB125 million one-third is for traffic acquisition and two-third are branding. And I think for your second part of the question, what’s the marketing strategy or customer acquisition strategy, I will leave to Mr. Xing.

[Foreign Language]

In terms of our advertising and the promotion strategy, so as you can see that from the second half of this year, the company has started quite an intensive branding exercise. The goal is actually to increase the overall branding and the reputation of the company, not only within the medical beauty users but around the wider public. And for next year, I think, is -- our key goal is fully on the strong and continued branding advertising campaign, we would like to convert some of those potential customers into actually purchasing customers. And we have also started a social media campaigns over the platforms such as DouYin, which has been very successful and also we have started using some particular the actual targeted online stores and other information kind of channels. Our ratio of the advertising split would still remain one to two and branding versus others.

Thank you. And if I could ask one quick follow up, I wanted to ask about average revenue per paying Information Service provider. I think, you mentioned, a few factors to why it the growth might have accelerated this quarter, but wondering if you can just summarize some of the main drivers of that growth acceleration in the Information Service ARPU number? Thank you.

Yeah. I think, I will try to answer your question here. So you see there is average ARPU for Information Services in terms of the institutions paying for Information Services a little bit increased in third quarter compared to the second quarter. The reason why I think it’s mainly because of the total number of Information Services is just increased by 1% quarter-on-quarter in the third quarter. But you do see the 100 -- around 100 institutions less to spending or to acquire Information Services. The reason we explains a little bit earlier is because we have strategic -- monetization strategy upgrade, which we tend -- we purposely decreased part of our resources available for invest by institutional service providers and those ones are relatively low ARPU service providers. They just buy a certain CPT resources at a fixed price and we do have those resources being replaced or decreased in the first page of our apps. And because of that we do see the third quarter Information Services have a very just stay the same compared to the second quarter. We don’t see any increase quarter-on-quarter and those low ARPU institutions they tentatively changed their investment in terms of branding or Information Services spending in the third quarter and we believe accompany with our strategy, our monetization strategy upgrades, we will have more tools or Information Services available for service providers to invest and it will help in the longer run or in the future we will see the penetration rates for information service payment with on our platform within the service providers will increased and we will see the recovery of increase in terms of service providers who paying for Information Services. So that’s hopefully I answered your question here.

Yeah. Thank you very much and congratulations on the quarter.

[Operator Instructions] Your next question comes from the line of Thomas Chong from Jefferies. Please ask your question.

Hi. Thanks management for taking my questions. I have a question about our content strategy. Can management talk about our strategy over the rest [inaudible] and how are we seeing the changes in terms of the user behavior in while using the content. [Foreign Language]

[Foreign Language]

The answer to your question is that, on the content strategy, so the last few years, the company has gradually been building up an ecosystem for the content, it was before it was predominantly UGC, but now we have extended to include, for example, doctors and now you can see our platform that you can find the doctors Q&A session, you can find short videos and you can have the online video consultation with a doctor. In addition, on the doctors, there are also consultants on the platform and where the consultants can come to help is to the design of the actual beauty aspect for the potential customer and also there are certain celebrities, which we have been motivating them to actually -- to also to contribute to the content of our app and linked to the actual content. We have actually also diversified outside the normal beauty aesthetic channels into -- for example, into dental to include hair implants, to include eye operations, such as LASIK and also to include a slimming body treatments and also including dermatology to improve the skin. And how to help the monetization on this, the content strategy was that the content helps us to actually to build a bigger pool of the actual customers. As you know, one customer may only do one or two or a single-digit number of times in terms of the -- in terms of number of operations. However, we would like to increase the time spent on actually using the So-Young app and also to include their stickiness on app -- on using our app to improve the user experience. At the same time, we can cross-sell our other type of products. For example, before if they only use the medical beauty treatments, but now maybe they can also look at hair, dental, et cetera.

Thank you.

Your next question comes from the line of Brian Gong from Citigroup. Please ask your questions.

Thanks management for taking my question and congratulations on the solid results. I have three questions. First is that management just mentioned you expect the monetization upgrade to have significant improvement in the first half next year, right? So just wonder if you have contacted medical service providers regarding our new monetization course, if so, can you share how their feedback so far? And the second question is regarding the take rates on Reservation Services. The take rate seems to improve to 9% in the third quarter from 8.2% in the second quarter. May I know the reason behind it? And third question is regarding the MAU, I am not sure, if management can share the trend on the MAU in the fourth quarter so far? Thanks.

Yeah. Hi, Brian. This is Min Yu. I will try to answer your questions, all the three questions. First of all, the monetization strategy, we did discuss a lot in the previous questions. For the monetization strategy, we are in currently doing -- developing the shifting from the mainly focused on transaction monetization to leads monetization. So we are also in developing the new algorithm, providing new tools, for example, like, video broadcasting diagnosis and a lot of tools like testing or skin testing of face and we will generate leads and available for service providers to invest and acquire the valuable leads in terms of different service types and different categories of the customers. We are not monetizing aggressively currently on the leads in the fourth quarter. As I mentioned, and also in the third quarter, we don’t have any leads generated revenue. And as mentioned by Mr. Jin, next half -- neat year -- the first half of next year, we probably would see more revenue generated or more Information Services revenue generated from these leads based revenue type. So, but over the period we need to educate our BD team, we need to let the service providers change their -- or adjust their investment behavior and try to familiarize of our available tools and the leads available for them to invest and that need time. And we will also start to, probably, in the next few quarters you will see our Information Services generated from leads rather than just from CPC and CPT. And for the take rate question, our take rates still the same. Commission rate is 10% around -- across all different types of services. And why do you see the change in terms of take rate in the third quarter is also related to…

Okay. Great. Thanks, Mr. Yu. That’s helpful.

[Operator Instructions] There are no further questions at this time. I would like to hand the conference back to Mr. Christian Arnell for closing remarks. Please continue.

Thank you everyone for joining the call tonight. If you have any further questions or comments, please don’t hesitate to reach out to the IR team. Thank you and have a good night.

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may all disconnect.