SBC Medical Group Holdings Incorporated Q2 FY2026 earnings call

Core Business Update

• SBC Medical completed 2025 structural reforms and entered a phase of re-accelerated growth in Q2 2026, with profit growth outpacing revenue growth even amid the headwind of a weaker yen for reported USD results.
• Growth was driven primarily by expanded management services revenue from points business expansion after the June 2025 operating policy change, plus a service fee revision.

Strategic Priorities

• The company’s long-term goal is to become Japan’s leading longevity-focused healthcare platform, serving customers via two verticals: aesthetic medicine (appearance-focused) and non-aesthetic general medicine (function-focused). Four core growth strategies are: 1) accelerate multi-brand strategy in aesthetic dermatology; 2) expand non-aesthetic business; 3) disciplined global expansion; 4) strengthen competitiveness and cut costs via AI integration.

Aesthetic Medicine Developments

• To capture diverse customer demand, the company is rebranding Shonin Aesthetic Dermatology to SBC Skin Clinic to lower entry barriers for basic treatment customers, and adding new locations for high-value specialty brands: 3 new Neo Skin Clinic locations (total 4) and 1 new June Clinic location (total 7). Two new formats are launching for under-served segments: The Laser (large-scale hair removal) and SBC Men's Flash (specialized men's beard removal).
• Guerrilla Clinic uses low-cost entry services (hair removal, oral AGA treatments) to funnel customers to higher-value dermatology treatments, driving 19% first-half transaction growth via deeper existing customer penetration.

Non-Aesthetic Medicine Expansion

• Non-aesthetic healthcare is positioned as the company’s second core growth engine, with significant upside from its current 16% revenue share. A dedicated non-aesthetic leadership team, led by a former executive from a major healthcare IT talent platform, was established in June 2026. The company will raise utilization and revenue at existing clinics while pursuing M&A to expand locations in categories including orthopedics, fertility, regenerative medicine, and dentistry.

Global Expansion Progress

• In the United States, SBC is collaborating with minority-stake investee Orange Twist (24 locations across 6 states, with recurring revenue accounting for >40% of sales). SBC is sharing operating know-how and expanding service menus, with a medium-to-long term goal of exporting the U.S.-developed model back to Japan and Asia.
• In Southeast Asia, SBC uses an asset-light Powered by SBC model: local partners provide capital and on-the-ground operations, while SBC supplies procurement, operational standardization, staff training, and patient acquisition in exchange for recurring revenue-linked fees. The model is being tested at the first Thai clinic (Blizz Clinic), with plans to expand across ASEAN. Existing operations are already live in Vietnam, Singapore, and Thailand, with early rapid growth in Vietnamese patient volume.

AI Integration as a Competitive Advantage

• SBC leverages 26 years of accumulated operational data to build AI capabilities that create a hard-to-replicate competitive moat, supporting both network expansion and operational efficiency. Already launched tools include an AI chatbot for 24/7 customer inquiries and TalkBridge AI interpreter (to capture inbound international demand). Marketing AI is rolling out in phases, with call center AI scheduled for launch in 2026 to improve answer rates and reduce missed calls.
• AI tools for network expansion include site candidate recommendation AI (which aggregates population, foot traffic, and competitor data to speed site selection) and knowledge-sharing AI (which institutionalizes 26 years of operational know-how to improve new clinic success and speed staff onboarding). These tools enable faster, higher-quality network expansion.
• As AI and other support functions improve, SBC is raising service fees for affiliated clinics in stages. Two fee increases (for enhanced call center functions and enhanced support for Gorilla/Lyse clinics) are expected to add ~$15 million in annual full-year revenue, with limited incremental cost, further supporting profitability.

Capital and IR Strategy

• The company’s core policy is to grow EPS and achieve a normalized market valuation in parallel, to drive long-term shareholder value. SBC holds ample cash to invest in both organic growth and disciplined M&A.
• SBC’s shareholder base has grown ~4.7x year-on-year as of July 2026, and the company is increasing IR outreach including participation in conferences in New York, Hong Kong, non-deal roadshows, one-on-one investor meetings, and retail investor outreach to build recognition, particularly among U.S. institutional investors. The company is also working to expand sell-side analyst coverage.

The company reports an overall second quarter 2026 revenue of $49 million, up 13% year on year. Adjusted EBITDA was $20 million, up 32% year on year, with an adjusted EBITDA margin of 41%. As of the end of June 2026, total clinic locations reached 287, up 34 year on year, with trailing 12-month annual customer visits at 6.92 million, up 10% year on year. Year-to-date clinic revenue rose 11%, same-clinic revenue rose 6%, and average spend per visit in the quarter increased 9%. Transaction value for the Guerrilla Clinic brand in the first half was $62 million, up 19% year on year. By product category, the revenue mix is approximately 84% aesthetic medicine and 16% non-aesthetic (general) medicine as of Q2 2026.

• The company expects current strong growth momentum to continue, with SBC outpacing overall market growth in Japanese aesthetic dermatology following marketing and operational structural reforms.
• The $15 million in annual incremental revenue from confirmed service fee increases will have full impact starting from the next fiscal year, with approximately half of the unrealized annual gain reflected in the second half (Q3 and Q4) of fiscal 2026. No impact (or minimal partial impact from June implementation) was seen in Q2 2026.
• SBC reaffirms its long-term target of 1,000 total clinics by 2035, supported by AI-driven operational efficiency that will allow the company to reach this scale without expanding headcount in indirect departments from current levels.
• Management expects the competitive landscape in Japanese aesthetic medicine to become more favorable for SBC: competition has already peaked, the number of smaller market participants will decline, and SBC will gain further market share leveraging its scale, multi-brand positioning, AI capabilities, and financial strength that cannot be matched by smaller single-brand peers.
• A dedicated longevity center is planned for launch in 2027 as part of the company’s long-term longevity market strategy.

• Intensified competition in the Japanese aesthetic medicine market between 2024 and 2025 led to stagnant growth for the company in that period, though management states competitive intensity has now peaked and SBC's position has strengthened.
• A weaker Japanese yen creates a reporting headwind for the company's USD-denominated results, though SBC absorbed this headwind to deliver strong top and bottom-line growth in Q2 2026.
• Limited brand recognition among U.S. investors may suppress SBC's current valuation, which the company is addressing via expanded IR outreach.

Q: What structural changes drove the improvement in aesthetic clinic performance after the 2024-2025 competitive slowdown, and can improvement continue? / A: SBC conducted full customer satisfaction analysis to identify competitive strengths and weaknesses, then completely revamped all public-facing content, pricing, and marketing channels. The company also appointed its first ever CMO to lead the marketing overhaul. Both customer volume and average unit price are now growing, and SBC's growth is outpacing overall market growth. Management expects this strong growth momentum to continue.

Q: SG&A expense came in higher than expected this quarter—what drove this increase, and is this a continuing trend? / A: The slight SG&A increase was driven almost entirely by one-time costs associated with SBC's recent secondary offering. There is no sustained upward trend in overall SG&A as a result of core business operations.

Q: What is the latest update on SBC's minority investment in U.S. aesthetic group Orange Twist, and what milestones are planned for the next 12 months? / A: Orange Twist recently underwent a leadership change that installed co-founder Clint Cardinal as CEO, which has significantly accelerated the pace of operational reforms. SBC is already implementing joint initiatives: leveraging SBC's procurement power to cut costs, revising marketing and customer protocols, and adding new longevity-focused products aligned with SBC's strategy. Over the next 12 months, SBC plans to explore launching SBC-branded locations in the U.S. to leverage synergies with Orange Twist.

Q: What additional impacts beyond service fee increases will AI have on SBC's business, and what is the deployment timeline? / A: Multiple new AI tools will launch over the next 6 to 12 months, including an AI call center and an AI training tool for nurses and clinic concierges, alongside a full AI-powered overhaul of core systems. Beyond cutting operational efficiency that allows SBC to scale to 1,000 clinics by 2035 without expanding indirect headcount, AI will also drive revenue growth by improving customer experience: AI tools will enable personalized treatment simulations and easier access to customer treatment history to boost conversion and retention.

Q: With net cash equal to almost 45% of SBC's current market capitalization, what are SBC's plans to deploy this cash to boost shareholder value? / A: SBC will use its cash balance to support targeted M&A in non-aesthetic categories (orthopedics, ophthalmology, aesthetic healthcare) to deliver on the long-term target of 1,000 clinics by 2035, turning the long-term target into a achievable reality rather than an abstract goal.