SBC Medical Group Holdings Incorporated (SBC) Earnings

Management highlights

Network Expansion and Customer Trends - Added 34 new franchisee clinics, growing total network to 258 locations - Annual total customers increased steadily to approximately 6.5 million - Average spend per customer visit is recovering, driven by optimized pricing and promotion strategies, plus a multi-brand dermatology strategy that successfully captured high-spending customer groups Strategic Growth Initiatives - Entered a consulting agreement with Thailand-based BlazeAzure Corporate Limited to launch proof-of-concept affordable laser treatments, marking the first step toward full entry into Thailand's fast-growing aesthetic medical market, with potential expansion to other Southeast Asian markets later - Launched a tender offer to acquire a majority stake and make Waku, a regenerative medicine and skincare R&D firm, a subsidiary; the deal aims to combine Waku's R&D capabilities with SBC's clinic network to accelerate innovation, expand new treatment offerings for AGA and orthopedics, and strengthen overall group competitiveness - U.S. market entry is in the exploratory phase; management is focusing on building local partnerships rather than immediate large-scale clinic expansion, and is also scouting new U.S. treatments and technologies to bring to Japan for first-mover advantage Balance Sheet and Capital Allocation - Maintains a sound, robust financial base with ample cash and deposits; recently secured new bank financing for working capital to support accelerated growth - Ample liquidity will be actively deployed for strategic investments, including organic growth and M&A in both domestic and overseas markets Capital Policy and Share Liquidity - Management recognizes that current share liquidity is too low, limiting access for many institutional investors - Plans to improve supply and demand for shares through measures including new share issuance and partial sale of founder-held shares to create a more investment-friendly environment - Open to share buybacks and dividends as tools to support share price and attract investors, but prioritizes allocating capital to high-potential strategic growth opportunities

Guidance

- Management confirmed that financial performance bottomed out in Q3 2025, and expects the positive growth trend to continue through Q4 2025 and into 2026, with the residual impact of franchise fee restructuring to be largely absorbed by that point. - Management expects more stable financial performance starting in Q4 2025, and confirmed this stability will include a return to revenue growth, but declined to provide specific numerical targets for revenue or profit growth at this time. - SBC is actively working to develop formal financial guidance to share with investors in the near future, in response to investor demand for clearer forward-looking performance expectations. - Near-term financial impact from the new Thailand market entry initiative is expected to be immaterial, as the company is first completing a proof-of-concept phase before pursuing broader expansion.

Segment performance

No explicit breakdown of financial performance by individual product segment, including absolute revenue figures or revenue contribution percentages, was provided in the call transcript. Overall company sales bottomed out in the quarter, supported by growth in points-related revenues after being impacted by franchise fee restructuring. COGS increased due to higher medical equipment lease costs and consolidation of the acquired Singapore-based AHH business. Operating income and net income saw improvement driven by lower risk-related costs, including reduced share-based compensation expenses.

Risks & headwinds

- Low share liquidity currently prevents many institutional investors from trading SBC stock, and the current share price is acknowledged by management to be too low, creating investor attraction and capital access risks. - Full international expansion (including the U.S. and Southeast Asia) carries market adaptation risk: the company's successful Japanese business model cannot be directly copied and pasted into very different overseas markets, requiring local partnerships and extensive market assessment to mitigate uncertainty. - There is unquantified uncertainty around the financial and operational synergies of the proposed Waku acquisition, as integration planning and synergy quantification will not be finalized until after the tender offer is completed. - While management sees no major current negative factors that would disrupt the current positive trend, there is still residual uncertainty around the absorption timeline for the impacts of prior franchise fee restructuring.

Analyst Q&A

• Q: Why did COGS increase in Q3 2025, and when will the impact of franchise fee restructuring be fully absorbed? /

  A: COGS rose due to higher medical equipment lease costs and consolidation of the recently acquired Singapore-based AHH business. Management confirmed performance bottomed out in Q3, and the positive trend will continue through the end of the year. The impact of restructuring will largely be absorbed by Q4, with no major unexpected negative factors identified so far.

• Q: What is the strategic rationale for the Waku acquisition, and what is the integration roadmap? /

  A: The core synergy is combining Waku's strong R&D capabilities in regenerative medicine and skincare with SBC's extensive franchise clinic network. Additional synergies include cross-selling Waku products, co-developing new pharmaceuticals and medical devices, and bringing current outsourced cell culture operations in-house. Detailed integration planning and synergy quantification will be finalized with Waku's management after the tender offer completes.

• Q: What is the status of SBC's U.S. business development? /

  A: SBC is currently in an exploratory market learning phase. The successful Japanese aesthetic clinic model cannot be directly copied into the very different U.S. market, so the company is prioritizing finding strong local partners rather than immediate large-scale clinic construction. The company is also scouting new U.S. treatments and technologies that could be brought to the Japanese market to gain first-mover advantage.

• Q: What is SBC's approach to M&A going forward, domestically and globally? /

  A: Domestically, SBC will continue its existing strategy of acquiring clinic and medical assets, and will also consider targets beyond aesthetic medicine in broader clinical healthcare. Globally, the company will focus on sectors it already knows well. For developed markets like the U.S., the firm prefers strategic investments over full acquisitions for now, as it continues to learn the new market landscape.