SBC Medical Group Holdings Incorporated Common Stock 2026 Q2 Earnings Call

Thank you for taking the time to join the second quarter 2026 conference call of SBC Medical Group Holdings, Incorporated. I will now walk you through our results for the second quarter of 2026, an update on our business strategies, and our capital and IR strategy. If I had to sum up this quarter in a single sentence, it is the quarter in which we completed the structural reforms we undertook in 2025, and SBC's growth entered a phase of re-acceleration. On the back of an expanding business base and more sophisticated support functions, including AI, we delivered profit growth that outpaced revenue growth. Let me begin with the clinic highlights. As of the end of June 2026, our number of locations reached 287, up 34 year-on-year, and the annual number of customer visits over the trailing 12 months was 6.92 million, up 10%.

Year-to-date clinic revenue rose 11%, same clinic revenue was up 6%, and average spend per visit in the quarter increased 9%. With both customer volume and unit price rising together, our clinic business is showing renewed strength. Next, our financial highlights. Second quarter revenue was $49 million, up 13% year-on-year. Adjusted EBITDA was $20 million, up 32%, and our adjusted EBITDA margin was 41%. Profit growth outpaced revenue growth, with profitability improving. In the second quarter, we grew both revenue and profit despite a weaker JPY. Because most of our business is conducted in JPY, a weaker JPY is a headwind for our reported results. Even so, we absorbed it and still delivered strong revenue and operating income. The main driver was higher management services revenue, reflecting the expansion of the points business following the change in our operating policy in June 2025.

A revision of certain service fees also contributed. Now to our strategy update. Our strategy is unchanged. We aim to be a healthcare platform that supports longevity, people living young and vigorous lives, from two sides, aesthetic medicine, an appearance-based approach, and non-aesthetic or general medicine, a function-based approach. Our goal is to become the name that comes to mind when people in Japan think of longevity. We believe four growth strategies will get us there, accelerating our multi-brand strategy in aesthetic dermatology, expanding our non-aesthetic business, expanding globally, and strengthening our competitiveness and reforming our cost structure through AI. I will briefly comment on each of these four growth strategies. We believe that AI is developing into a source of SBC's next competitive advantage. In aesthetic dermatology, we are accelerating our multi-brand strategy to capture increasingly diverse needs and raise lifetime value.

First-half transaction value grew a strong 19% year-on-year. To reach the customer segment that prefers basic dermatological treatments, which is driving market expansion, we are renaming Shonan Aesthetic Dermatology to SBC Skin Clinic. The Skin Clinic name lowers the barrier to aesthetic medicine and broadens our appeal, and we will open two additional clinics. Next are our high-value brands for beauty-conscious customers who choose based on the expertise of doctors and equipment. We will add three NEO Skin Clinic locations for a total of four, and one JUN CLINIC for a total of seven. To meet solid demand in men's aesthetics and hair removal, we are launching two new formats, THE LASER, a large-scale hair removal clinic, and SBC MEN'S FLASH CLINIC, which specializes in men's beard removal with high-speed operations. Gorilla Clinic's first half transaction value was JPY 62 million, up 19% year-on-year.

Using hair removal and oral AGA treatments as entry points, we guide customers step-by-step toward dermatological and higher value treatments, and this deeper penetration of our existing customer base drove the growth. Aiming for a Japan where longevity means SBC, we position non-aesthetic healthcare as our second growth engine. Our transaction value mix is still roughly 84% aesthetic and 16% non-aesthetic, which means the potential upside is significant. To drive this, we established a dedicated team in June 2026, led by Naoya Fujimoto, formerly an executive officer at a major healthcare and IT talent platform company. We will strengthen both customer acquisition and medical management. First, sharpening the acquisition and operations of existing clinics to raise utilization and revenue per clinic. In parallel, using M&A to expand the number of locations. The premise of our global expansion is a stable earnings base in Japan.

On that foundation, we grow overseas with discipline. In the U.S., we are advancing our collaboration with OrangeTwist, in which we took a minority stake in December 2025. OrangeTwist has 24 locations across six states and a membership base where recurring revenue exceeds 40% of sales. We are currently sharing operating know-how and expanding the service menu. Over the medium to long term, we aim to export the model we establish in the U.S. to Japan and Asia. In Southeast Asia, we are exporting asset-light, the operating system honed in Japan, affordable, reliable, and standardized. We are proving this out at our first Thai clinic, Bleez Clinic. Under our Powered by SBC model, the local partner provides capital and operations while SBC supplies procurement, standardization, training, and patient acquisition, earning recurring fees linked to revenue in return.

This expands our footprint at a high return on invested capital, or ROIC, while holding down capital expenditure. Starting from Thailand, we will expand the model across ASEAN. AI is a foundational strategy supporting both growth and efficiency. We are leveraging more than 26 years of accumulated management data to support AI development, building a barrier that is hard to replicate. Strengthening our MSO platform through AI lifts growth in three directions at once, the number of locations, the fee per clinic, and the range of service menus. A more attractive platform draws in new clinics. More active transactions raise service fee levels, and the service menu expands. A virtuous cycle that we believe drives recurring consolidated revenue and EPS growth. We are progressively deploying AI that directly supports clinic management.

Our AI chatbot for around-the-clock inquiries and our AI interpreter, TalkBridge, which gives on-the-spot English and Chinese interpretation to capture inbound demand, are already released. Our marketing AI is rolling out in phases, and a call center AI to raise answer rates and prevent missed calls is scheduled for release during 2026. Together, these enhance the customer experience and our marketing, contributing to higher clinic revenue. We are also deploying AI that supports network expansion itself, a site candidate recommendation AI that gathers population, foot traffic, and competitor data to speed up site selection, and a knowledge-sharing AI that turns 26 years of on-the-ground know-how into a company-wide asset, improving the repeatability of new openings and helping staff ramp up quickly. This lets us expand the network with both precision and speed while maintaining high quality and strengthens our appeal as a franchise.

More sophisticated support functions, AI foremost among them, translate directly into greater value for clinics, and we are raising service fee levels in stages accordingly. Enhanced call center functions are expected to add roughly JPY 11 million per year, and stronger support for the Gorilla and Rize clinics is expected to add roughly JPY 4 million, together about JPY 15 million per year on a full year basis. On a win-win basis with the medical corporations, we aim to sustainably raise our average fee per clinic, or AFPC, at limited additional cost, which further supports profitability. Since our Nasdaq listing, we have reinforced our core platform and laid strategic groundwork overseas and in new domains.

From here, we enter a phase of multifaceted acceleration, expanding and rebranding domestic aesthetic dermatology, launching new formats, strengthening non-aesthetic healthcare, moving the United States into phase 2, expanding B2B and joint ventures in Southeast Asia, applying AI, and planning a longevity center for 2027. Through disciplined investment, we will pursue differentiated earnings and sustained EPS growth. Finally, our capital and IR strategy. Our basic policy is to pursue EPS growth and a normalization of our valuation in parallel, enhancing shareholder value over the medium to long term. Backed by ample cash, we are investing in both organic growth and disciplined M&A. At the same time, we recognize that SBC's recognition in the capital markets, particularly in the U.S., is still limited. That said, our investor base is broadening rapidly. Our shareholder base has grown roughly 4.7 times year on year as of July 2026.

Building on this momentum, in 2026, we have and will continue to actively participate in IR conferences in New York, Hong Kong, and elsewhere, and step up our year-round investor engagement, including NDRs, one-on-ones, and outreach to retail investors. We will also keep working to expand analyst coverage. Through all of this, with continuous EPS growth and the pursuit of an appropriate valuation in the capital markets as our two wheels, we expect to deliver even greater value to all our stakeholders, beginning with you, our shareholders. We hope you will look forward to what lies ahead for SBC. That concludes my remarks. Thank you very much for your attention.