Good morning, ladies and gentlemen. Thank you for standing by for So-Young's Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the management’s prepared remarks, there will be a question-and-answer session. As a reminder, today's conference call is being recorded. I would now like to turn the meeting over to your first speaker today, Investor Relations Director of So-Young, Ms. Vivian Xu. Please proceed.

Thank you, operator, and thank you for joining So-Young third quarter 2020 earnings conference call. Please note that, the discussion today will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities and the Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to those outlined in our public filings with the SEC, including our Annual Report on Form 20-F. So-Young does not undertake any obligation to update any forward-looking statements, except as required under applicable law. Joining us today on the call are Mr. Xing Jin, our Founder, Chairman and CEO; and Ms. Min Yu our CFO. At this time, I would like to turn the call to – over to Mr. Xing Jin. Yes, please.

[Foreign Language] Thank you, everyone, for joining us for our third quarter 2020 earnings call. The medical aesthetics and awareness industry faced significant challenges in China during the COVID-19 pandemic. As we emerge from this setback, we are seeing a recovery that is marked by a resilient and innovative response to rapidly changing consumer needs. We are leveraging the recovery by increasing engagement across our ecosystem. As a result, during the third quarter, we made significant progress in expanding our community of users and medical aesthetics professionals. Our third quarter results were solid, with total revenues of RMB 360 million, up 90% from last year. We grew our community with average mobile MAUs to 8.7 million, representing an increase of 154% year-over-year from 3.4 million during the same period of 2019. We also increased the number of paying medical service providers on our platform to 4,100, up 27% from 2019. We focused on two main initiatives to drive engagement and user growth during the quarter. Our strategy here is simple, to improve users' trust in our platform, we try to facilitate rationale decision making by providing reliable doctors, multilayer content and supportive medical treatment plans. The first part of our strategy was on our role as a trusted facilitator to help user make sound and rational treatment decisions. At the end of October, we launched the second version of our Emerald Doctor Lists, where we extended categories that are in high demand, but require very specialized and accurate information. We want to ensure that our users have visibility on who the best-in-class doctors while creating the opportunity for these doctors to raise the awareness. One of this doctor in Chongqing showed us that 43% of total treatments with more than 47% of revenue contribution was directly from the list. Our…

Thanks Chris. Please be reminded that all amounts quoted here will be in RMB. Please also refer to our earnings release for detailed information of our comparative financial performance on a year-over-year basis. For the third quarter 2020, total revenues were RMB359.6 million, up 18.9% year-over-year and in line with our previous guidance. The increase was primarily due to an increase in the number of paying medical service providers, whose practices have gradually recovered from the impact of COVID-19 pandemic, as it becomes better controlled in China. Within total revenues, information services revenue was RMB265.7 million, up 23.9% year-over-year. Reservation services revenue was RMB93.9 million, up 6.6% year-over-year. Cost of revenues were RMB54.7 million, up by only 1.6% year-over-year. Total operating expenses were RMB335.1 million, up 46.6% year-over-year. Sales and marketing expenses were RMB221.6 million, up 41.5% year-over-year, primarily due to an increase in expenses associated with branding and the user acquisition initiatives and payroll costs due to increased number of employees in the business development team. General and administrative expenses were RMB50.3 million, up 55.4% year-over-year, primarily due to increase in payroll costs associated with the expansion of administrative employees. Research and development expenses were RMB63.2 million, up 59.7% year-over-year. The increase was primarily a result of payroll costs associated with increased hiring to support product development, which is in line with the company's strategy of strengthening its technology and Big Data analysis capabilities. Income tax benefit was RMB16.3 million, compared with the income tax expenses of RMB2.9 million during the same period last year. The income tax benefit was derived from a change in the preferential income tax rate of one of So-Young's subsidiaries, which resulted in a refund of RMB16.4 million for tax net income -- for tax paid in previous periods. Net income was RMB0.9 million,…

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Thomas Chong from Jefferies. Please ask your question.

[Foreign Language] Thanks, management, for taking my questions. Can management give us some color about the industry trend after the pandemic? What are the challenges and opportunities? And what's the outlook for the industry next year? Thank you.

[Foreign Language]

We are pleased to see that recently the industry has recovered to almost the level of the pre-pandemic. Our performance level showed that So-Young and the industry generally have bounced back. In terms of time line, the low point of the industry was in February and March right at the outbreak of the COVID-19. And we saw a series of small rebounds in May and in June, August and September was steady, year-end is a traditional peak season. And with big promotions on major platforms, there has been a new consumption boom in medical aesthetics treatments and services. By category, we saw the least pandemic impact in non-surgical treatments. The largest impact was on surgeries with higher average transaction levels. But these are recovering gradually. We – our total transaction volumes has recovered to the same level as the end of last year, but there are still gaps in total revenue size and ARPU. In terms of recovery, we see different trends in terms of volume and growth rate. Volume has almost recovered, but industry growth rate which was far from pre-pandemic level of 20%. Offline service providers still need more time to show confidence in advertising investment. Market education has helped to expand the consumption of medical aesthetics treatment and service from a niche marketing high fashion and beauty to the mainstream. Medical aesthetics concepts such as skin care, antiaging and hairing problems are accepted by more and more consumers. Besides that, medical aesthetics consumption is reaching a broader audience across more age groups and occupation backgrounds. Demand has also been resilient, rather than option for surgical treatment, especially for those who have higher demands for beauty. Due to the limitation of overseas travel, users who used to choosing treatments abroad in Japan and Korea, are now seeking for…

[Foreign Language] Thanks. That's all.

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

[Foreign Language] Okay. I will translate myself. Based on our advantage in user growth, what is So-Young's strategy for monetization in 2021? And is there any update for the CPL subscription product you mentioned before? Thank you.

[Foreign Language] User growth and particularly core medical set user growth will remain one of our key strategies in the next two to three years. With the expansion of user base, user characteristics and at different stage will show greater difference. We are keeping in reaching user products focusing on operations and understanding the needs and the pain points in decision-making process for users of different levels of experience with our Big Data and other technologies. By these approaches, we are shortening users decision-making cycle and improved monetizations. By doing this, we have several major products. One is -- the first one is Emerald Doctor List, which is establishing a machine-like model, enabling users to quick search and select the doctors. And the second one is we will continue to make efforts on the live video diagnosis to enable users to communicate face-to-face and high efficiently with doctors and professional consultants. And the third one is So-Young Beauty Cards, we think that through standardized mainstream live treatment and a strict selection of those service providers to ensure service delivery and user experience. And the last one is medical treatment plans. We think that, in this way, we could integrate resources of service providers and customized solutions for individual users. Due to the home market size reduction this year, service providers were more practical and cautious about their marketing strategies. Those -- they make less spend accept new monetization products. Based on such a situation, we made some strategic -- we will make some adjustment on the pace to promote our CPL products. And we are still starting and progressing in development of the new monetization products and also in improving the whole quality of our leads. We believe with the market recovery next year and in the near term, we will successfully launch more products to improve overall efficiency of monetization. Thank you that's all.

Thank you. Your next question comes from the line of Vincent Yu from Needham & Company. Please ask your question.

Hi, management. Thank you for taking my question, and congrats on the strong user growth and great quarter. My question is on the light treatment part or the like non-surgical business part. As the industry is seeing more non-surgical demand or light treatment demand will the growing demand for light treatments lead to changes in user behavior and their decision-making facets both online and offline? And how will So-Young adapt to the emerging trends? [Foreign Language]

[Foreign Language] Light medical aesthetics refers to non-surgical treatments including minimally invasive treatments like a body or face injections or thread lift, for example and energy-based services like laser treatments for skin tightening or spot removal purpose. Use of medical treatment adopts a variety of decision paths. Non-surgical treatments with high value such as -- and picosecond lasers generally cost from CNY5,000 to more than CNY10,000 each unit. So, besides their high prices, these treatments are risky and invasive and set high requirements for doctors too. The decision path for these treatments is similar to surgical procedures. Similarly, filler injections such as hyaluronic acid injections scalp nose forehead on the eye region and chins and thread lift also set high-technology -- technical requirements for doctors. As a result may vary significantly between different doctors and risks are high. So, those decision paths is also similar to surgical treatments. Although the above-mentioned light treatments are non-surgical, the consumer combination and decision paths are more or less the same as surgical treatments. So for these treatments much as for, surgical treatments were, provided consumers, with the tools for decision making. The toolkit includes, like we already provided like the true and supportive UGC content, massive SKUs with transparent pricing and authentic certification on both material and equipment used. We also made an innovative approach like Emerald Doctor List we mentioned before. And So-Young Beauty Cards to help improve decision-making efficiency and ensure service delivery quality. Another rapidly growing category in the non-surgical treatment is the beginning level treatment such as, Aqua-Oxygen and Needle-Free injections. These treatments have average transaction value below RMB200 or even below RMB100, which actually in some other platforms took more than 71% of total inventories. Almost no invasive surgery or risk and require no involvement of physicians. The beginning level treatments have more potential consumers, bringing growth for the medical aesthetics market. But however, overall spending power is weaker. And the conversion rate to big ticket item is relatively low. For such treatments consumer choice is dependent on price and the convenience for like the distance. So we are increasing supply and expanding to more service providers as well as providing more discounts to consumer with special subsidies.

[Foreign Language] Okay. That's all. Thank you.

Thank you. Your next question comes from the line of Leo Chiang from Deutsche Bank. Please ask your question.

[Foreign Language] So thank you for taking my question. We see the sector competition is becoming more intensive. My question is that, what initiatives will So-Young take to increase your market share, as the competition intensifies? Thank you.

[Foreign Language] First, answering two sides. One is on the merchant side. Because of the negative impact of the COVID-19, the total amount of spending by medical aesthetics service providers on user acquisition declined compared with the previous year. Despite this we were able to maintain revenue growth. So -- and in this way we believe, this is indicated that we continue to gain market share in the total addressable market. We believe sentiment will recover as industry growth gradually returns to normal at around 20% and that marketing spending will return to pre-pandemic level, or even larger than before. We have unique advantage to differentiate us from other players. We will retain this advantage. Meanwhile we will fine-tune each category, building our advantage on the doctor side with live video diagnosis, Emerald Doctor List and other innovations to provide better user experience and to attract more spending by service providers. Our monetization products enables more to medium service providers to acquire high-quality users through our platform. We are consistently improving this to highlight our ability to help those small-to-medium service providers and identified users through a high grade of accuracy and efficiency. On the user side, despite the pandemic we kept our own spending and investment a reflection of our commitment to build a trusted medical aesthetics platform, because we are optimistic about the long-term prospects of the industry as a result, our MAU has increased and recorded high, historically high laying solid ground for market share growth on the user side. To improve our competitive ability, we are enhancing our traditional advantage in surgical treatments especially on the doctor side. And have started to fine-tune operations penetrating into more categories to create higher entry barriers. For the non-surgical treatment, we have adopted a strategy of following the competition in beginning level treatments expanding the number of service providers and SKUs on our platform and providing subsidies to ensure our pricing advantage. We also improved cooperation with service providers to improve the quality of delivery. We launched the So-Young Beauty Card costing some non-surgical treatments. We selectively based on the current market conditions and also with our service deciding on the SOP services and also internally the training on those offline merchants to gain more market share with our better service experience. That's all. Thank you.

Thank you. Your next question comes from the line of [indiscernible] from 86Research. Please ask your question.

Hello. Thanks management for taking my question. I have a follow-up question on our new initiatives. Can management provide some more color or metrics of our new products such as [indiscernible] or our So-Young Beauty Card? And going into next year, do we have any other products in pipeline? Thank you. [Foreign Language]

Okay. Thanks. Let me try to answer your question for any new product in business for So-Young and [indiscernible] I think we don't have a lot of data to share at the moment. For So-Young, we have upgraded that service to a more comprehensive and dedicated team to have better services to our high value customers, but currently, they -- as well they are not contributing majority any substantial revenue on our top line. And for the beauty cards model, we just started at the second half of this year and we are trying to make the whole user experience and the whole operating process being more efficient and trying to tackle the light non-surgical market for new users. We have -- are quite confident on the future of the new services. And we probably can share more information and more data going forward in the next few quarters. And for other new products when we penetrate into the New Year, I think, dental services is always our new categories of services providing to customers other than medical aesthetics. We -- but dental clinics experienced more impacts from pandemic to be frank in the past few months and the operation recovered even slower. But next year we will continue to invest in dental treatments and attempt other products like insurance products and for dental treatments based on the new business model. But at present the business only accounts for still a very small portion of the revenue compared to the revenue generated from medical aesthetics. Hopefully, that answers your question. Thanks.

Thank you. Well, ladies and gentlemen, that's all the time we have for questions today. So with that we conclude our conference for today. Thank you for participating. You may all disconnect.