Ladies and gentlemen, thank you for standing by for So-Young's First Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to turn the conference over to your host for today's call, Ms. Mona Qiao. Please go ahead, ma'am.

Thank you, operator, and thank you, everyone, for joining So-Young's first quarter 2024 earnings conference call. Joining me today on the call is Mr. Xing Jin, our co-Founder, Chairman, and CEO; and Mr. Nick Zhao, CFO. 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 alternatives that may cause actual results to differ materially from our current expectations. Potential risks and alternatives include, but are not limited to, those outlining our public filings with 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. At this time, I'd like to turn the call over to Mr. Xing Jin.

[Interpreted] Hello, everyone. Thank you for joining the call today. Our business performed well in the first quarter, with total revenues reaching RMB 318.3 million, exceeding the upper end of our guidance. At the same time, this marks the first time in 5 years that we achieved non-GAAP profitability in the first quarter. Our new businesses continue to grow rapidly, with revenue from self-serve medical products and maternity services increased 23.3% year-over-year. Our pipeline of upstream products continues to further diversify its offerings, while So-Young Prime maintains healthy development. We have made significant progress in the expansion of our chain of clinics. In the first quarter, we opened [indiscernible] operations at 3 clinics, all of which post unit area efficiencies well above industry average at a notable price advantage. In the first quarter, the cumulative clients served by our clinics increased 77% quarter-over-quarter. We've also made steady headway of vertical integration from products to institutions, driving [ restructure ] of pricing system and value allocation in the industry. This will provide consumers with medical aesthetical services that are more cost efficient and help with sustainable development of medical aesthetic practitioners. In terms of products, institutions, and So-Young platform, as we made steady progress in these initiatives, we are confident in the growth opportunities for us going forward. In our POP segment, we continued to advantage our differentiated strategy to solidify our advantage within the premium segment of the market. By offering customer-sized and high-value services, we are not only able to serve high-end users, but also assist institutions in boasting their profits. During the quarter, our order value increased by 11.3% year-over-year. In terms of traffic acquisition, we reallocated our budget away from low ROI online channels and instead focused on cultivating and returning a target user base within our…

Hello. This is Nick. Please be reminded that all amounts quoted here will be RMB. Please also refer to our earnings release for detailed information of our comparative financial performances on a year-over-year basis. Total revenues during the quarter were RMB 318.3 million, up 2.6% year-over-year, exceeding the high end of our guidance. Growth was primarily driven by sales of medical products and maintenance services, which increased 23.3% year-over-year to RMB 86.5 million, driven by the sales volume increase of cosmetic products and medical equipment. Information services and other revenues were RMB 208.7 million, a slight decrease of 0.7% year-over-year. Reservation service revenues decreased 22.3% year-over-year to RMB 23.1 million, primarily due to the policy change for commission rates and subsidies. Cost of revenues were RMB 117.3 million, up 3.2% year-over-year, primarily due to increased costs associated with the sales of cosmetic products and medical equipment. Within cost of revenues, cost of services and others were RMB 74.2 million, down 8.9% year-over-year, primarily due to a decrease in payroll costs. Cost of medical products sold and maintenance services were RMB 43.1 million, up 33.7% year-over-year, primarily due to an increase in costs associated with the sales of cosmetic products and medical equipment. Total operating expenses were RMB 237.8 million, up 3.5% year-over-year. Sales and marketing expenses were RMB 113.3 million, up 0.7% year-over-year, primarily due to an increase in payroll costs associated with the expansion of our marketing team. G&A expenses were RMB 85 million, up 38.1% year-over-year, primarily due to an increase in payroll costs associated with the expansion of administrative employees to support the enhancement of our core and new strategic businesses. R&D expenses were RMB 39.6 million, down 29% year-over-year, primarily attributable to improvements in employee efficiency. Income tax benefits were RMB 2.6 million compared with income…

[Operator Instructions] The first question we have comes from Chloe Wei of CICC.

[Foreign Language] So let me translate myself, congrats on the solid first quarter result. The top-line was ahead of our expectation. So my question is about the full-year outlook. From what we got from the prepared remarks, I believe our [indiscernible] has turned more positive. So is there some trend and maybe management want to share with us? And given the headwinds from the macro, how should we think about our full-year top-line growth?

[Interpreted] Developments on medical aesthetics industry in the first quarter, is in line with our observation and expectation at the beginning of the year. First, the Chinese medical aesthetics market is gradually recovering with the overall consumption market. As retail sales of consumer goods in China increased by 4.7% year-over-year in the first quarter. Medical aesthetics consumption data has also reflected a gradual growth trend. Second, as the medical aesthetics user group tends to mature, user demands are more diversified. It's difficult to attract high-quality clients simply with low prices, more enriched products and services are required to cater to differentiated user demand. In 2024, we will maintain our strategies based on our existing business. We will establish a platform that's vertically integrates upstream supply chains, midstream operations and downstream distribution channels to fundamentally optimize cost and enhance efficiency. This strategic approach will enable us to deliver superior and more cost-effective services to consumers.

The next question we have comes from [indiscernible] of CITIC Securities.

[Foreign Language] Just 2 questions. First is, how should consider a decline of the traditional metrics such as MAU? And what business -- different advantages in this intensified traffic competition?

[Interpreted] In terms of online traffic, all industries are experiencing intensified competition for traffic. For So-Young app, we continue to boost engagement and attract more organic user traffic through operation of community content and self-media resources. In addition, there were extensive private domain operations. We strive to connect So-Young app with private domains, expanding its traffic pool as we increase private domain retention rate and user engagements. This part of data is not reflected in our MAU. But judging from recent transition data such as GMV and online orders, it reflects -- it has remained basically stable. It testaments to the effectiveness of this strategy. It can also help lower traffic costs and enhance profits. Thirdly, in terms of cooperation with third-party traffic sources, we emphasized our traffic of accuracy and placement ROI, reduced budget for channels with low ROI to further reduce placement costs and increased margins of our platform. Compared to our peers, we have 2 core competitive advantages. First, we have high-quality users and a high average, order volumes. Second, we benefit from our own offline medical aesthetic institutions, including So-Young chain clinics and shared hospitals, which provide us with greater room for innovation. For surgical customers, we organized offline consultations and invite multiple renowned doctors to participate. Centralized consultations help users save time and transportation costs and face-to-face communication also increased users' decision-making efficiency. For high-end injection customers, we screen high-quality doctors on the platform and complete service deliveries within our own or cooperative institutions. With this approach, we have stronger control over the contract fulfillment and delivery process, while simultaneously commanding price power and conducting refined user operations in a closed-loop manner, thus avoiding the risk of user attrition.

The next question we have comes from Yibing of Haitong.

[Foreign Language] My question is about the So-Young Prime. I want to ask is the current progress of the opening new clinics on the So-Young Prime in line with your expectation? And what's your midterm to long-term plans for proprietary chain clinics?

[Interpreted] We planned to open 15 clinics in 2024 at the beginning of the year. By the end of the first quarter, we opened 3 clinics. Since then, we added 2 more before today's earnings. Now, we are opening 6 clinics in all generally in line with our expectation. During the process, we have established a comprehensive and standardized workforce system, covering everything from site selection and evaluation to client opening and operations. This has enabled us to expand at a pace that significantly surpasses industry average and set an industry record for the rollout of new clinics. Emphasizing on authentic products, cost performance and transparency, our aim is to position standardized light medical aesthetical services as the first choice of everyday cosmetic consumption. We expect to reach the scale of 100 to 150 clinics in the next 3 years. While expanding our chain of clinics, we continue to build our operation team, combining our advantages in product supply, development and innovation. We are driving the build out of a standardized management system for light medical aesthetics institutions as well as an end-to-end online process management capabilities to improve operating and management efficiency for institutions. In the future, we will continue to improve efficiency per staff and efficiency per unit area for our chain of clinics, increase penetration of our proprietary supply chain products, improve margin of our chain clinics while providing users with more cost-effective services. User satisfaction is fundamental to chain operation. With that in mind, we emphasized more on user satisfaction. From January to April, user satisfaction in our chain of clinics reached 98% and in line with our expectations.

The next question we have comes from Joey Chan of Jefferies.

[Foreign Language] And I have 2 questions. The first question is; can management share on your progress for upstream supply chain business? And the second question is with the cash reserves of [indiscernible] RMB 1.3 billion. What will be the planned usage?

[Interpreted] On product side, first Huawei maintained strong momentum, with sales increasing 80% year-over-year and revenue increased 56.5% year-over-year in the first quarter. In addition, we spent just 1 year to establish a mature distribution network covering 715 institutions through both direct and agencies of channels. In the future, we will continue to integrate our upstream supply chain help companies to increase profit and return to users with products of sound cost performance, reaching win-win situation. Second, we continue to expand our product pipeline. The launch of face lift product [indiscernible] further diversifies our photo-electric category with sales far exceeding expectations. This is a testament to the strength of our brand, word-of-mouth recognition among consumers and demonstrates how we are able to quickly bring new products to market and rapidly secure their market position to our expansive institutional network. We expect to add more products and continuously generate incremental revenue and profit growth from the supply chain business.

This is Nick. [Foreign Language] I will translate. We will use the cash for 2 purposes. First of all, we will continue expanding along upstream and downstream of the industry, including upstream product pipeline and downstream chain clinics to lay solid ground for our integrated industry platform. And secondly, we will share repurchase plan or potential dividend to return values to our shareholders. Thank you.

Thank you, sir. Ladies and gentlemen, we have reached the end of our question-and-answer session and our conference. Thank you for joining us today. You may now disconnect your lines.