Aesthetic Medical International Holdings Group Limited (AIH) Q1 2023 Earnings Call Transcript

Aesthetic Medical International Holdings Group Limited (NASDAQ:AIH) Q1 2023 Earnings Conference Call May 17, 2023 8:00 AM ET

Company Participants

Derrick Shi - IR Associate Director

Toby Wu - CFO

Conference Call Participants

Operator

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the Aesthetic Medical International First Quarter 2023 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. As a reminder, today's conference call is being recorded.

On the call today from Aesthetic Medical International are Mr. Toby Wu, Chief Financial Officer; Mr. Derrick Shi, Investor Relations Associate Director. Mr. Derrick Shi will review the business operations and the company highlights following Mr. Toby Wu, who will introduce the company's financial performance. They will be available to answer your questions during the Q&A session that follows.

Before we get started, I would like to remind you that some of the information discussed will include forward-looking statements regarding future events and our future financial performance. These include statements about our future expectations, financial projections and our plans and prospects. Actual results may differ materially from those set forth in such statements.

For discussion of these risks and uncertainties, you should review the company's filings with the SEC, which includes today's press release. You should not rely on our forward-looking statements as predictions of future events. All forward-looking statements that we make during the call will be based on assumptions and beliefs as of today, and we undertake no obligation to update them except as required by applicable law.

Our discussion today will include non-IFRS financial measures, including EBITDA, adjusted loss and adjusted EBITDA. You should not consider EBITDA, adjusted EBITDA and adjusted loss as a substitute or superior to net income performance or net income prepared in accordance with IFRS.

Furthermore, because non-IFRS, measures are not prepared in accordance with IFRS, they are susceptible to varying calculations that may not be comparable to other similarly titled measures presented by other companies. You are encouraged to review the company's financial information in its entirety and not rely on a single financial measure.

At this time, I would like to turn the call over to Mr. Derrick Shi, Investor Relations Associate Director of Aesthetic Medical International. Mr. Derrick Shi, please go ahead.

Derrick Shi

Thank you, operator, and everyone for joining the call today. We are excited to share our first quarter 2023 earnings and operational highlights with our stakeholders. In the first month, a majority of our treatment centers were temporarily closed due to the widespread infection of COVID-19 resulting in a total revenue of RMB148.9 million, representing a decrease of 7.3% from RMB160.7 million in the first quarter of 2022. However, we were able to recover and achieve a net profit of RMB182,000 rebounded from a loss of RMB2.5 million in the first quarter of 2022.

As of the date of this report, we successfully divested two underperforming treatment centers. This was part of our ongoing strategy to optimize our portfolio and ensure sustainable growth. As a result of our divestment efforts SG&A, which means selling, general and administration expense as a percentage of revenue decreased by 7.4 percentage points compared to the previous year. This is a positive indication that our strategy is working and that we are on track to achieving our goals.

In April 2023, Shenzhen Pengcheng Hospital initiated the renovation of its department of energy-based equipment and the exterior package target (ph). This redevelopment is aimed at providing a modern and refreshed look to the building. The renovation project was launched after the successful renovation of Shenzhen Pengcheng, another flagship hospital and it is expected to be completed by June.

In May 2023, the share purchase agreement is closed in July 2022 is expected to be closed. This agreement was entered into by and among the company, Australia Wanda International Company Limited, Seefar Global Holdings Limited, Jubilee Set Investments Limited, Dr. Zhou Pengwu and Ms. Ding Wenting. Upon the closing of the agreement, Peak Asia Investment Holdings V Limited undertakes to convert its convertible note’s outstanding principal amount of $5 million as well as interest into the company’s ordinary shares at the price of RMB4.203 per share, which will further strengthen our financial position.

To protect our customers and employees from the second wave of COVID-19 and Influenza A, we strengthened our medical management personnel, implemented new safety protocols and adapted to the new working conditions to ensure that our customers continue to receive safe and stable services, as the economy begins to recover. We believe that the consumers will be more willing to invest in self-care and personal appearance as their financial situations improve. With this in mind, we are optimistic about the future of the Aesthetic medical industry and our performances in 2023.

Thank you, again for all your support and attention. And I would like now to turn the call to our CFO, Toby Wu, to introduce the financials and operations for the first quarter of 2023. Toby, please go ahead.

Toby Wu

Thank you, Derrick and hello, everyone. I will summarize some of the key unaudited financial results and operations result for the first quarter of 2023 ended March 31. In the first quarter of 2023, total revenue decreased by 7.3% year-on-year to RMB148.9 million, primarily attributable to the divestment of underperforming assets in 2022 as well as the temporary closing of a treatment center in the January 2023.

Gross profit was RMB72.6 million, representing a decrease of 18.4% year-on-year. Gross profit margin decreased 6.6 percentage points to 48.8%. The decrease was attributable to the temporary cause of a treatment center in the January 2023.

Selling expenses were RMB42.4 million, representing 28.5% of the company's total revenue in the first quarter of 2023. Selling expenses as of revenue decreased by 4.4 percentage points year-on-year. The reduction of the – the reduction in the selling expenses and its contribution was mainly a result of the company's strategy reduction on the online advertising budgets, as well as the divestment of underperforming assets in 2022.

General and admin expenses was RMB24.7 million, representing a decrease of 21.6% and general and admin expenses as of the revenue decreased by 3 percentage points year-on-year, primarily due to the divestment of underperforming assets in 2022. As a result of the foregoing, the company recorded a loss of RMB12.2 million for the first quarter of 2023 compared (ph) with a loss of RMB2.6 million in the first quarter of 2022. Basic and diluted loss per share was both earnings of RMB12.04 (ph) in the first quarter of 2023, compared with the basic and the diluted loss per share of RMB0.05 in the first quarter of 2022.

EBITDA for the first quarter of 2023 was a profit of RMB19.9 million compared with the RMB20 million in the first quarter of 2022. Adjusted EBITDA for the quarter of 2023 was RMB23.7 million compared with RMB26.9 million in the first quarter of 2022. Adjusted profit after tax for the first quarter of 2023 was RMB4 million, compared with the RMB4.3 million in the first quarter of 2022.

In terms of operating performance, as a result of divestment of treatment center and the company recorded a decrease of 8.7% year-on-year in the total aesthetic customers. Total number of non-surgical aesthetic medical treatment as a percentage of the total number of aesthetic treatment decreased by 8.4 percentage points.

Average spending per customer increased by 1.4% from RMB2,967 in the first quarter of 2022 to RMB3,009 in the first quarter of 2023, primarily driven by the strategic decision to remove most of the lower price treatment promotions from our service offering.

Looking ahead, we will continue to implement aforementioned strategy. We are dedicated to providing better and quality service to our customers and delivering sustainable long-term growth.

This concludes our preparation remarks. Thank you for joining us on today's call. We will now open to the call to questions. Operator, please go ahead.

Question-and-Answer Session

Operator

Derrick Shi

Okay. Thank you, operator. On behalf of our entire management team, I would like to thank everyone again for joining us today. If you have any questions, please contact us through e-mail at [e-mail]. We appreciate your interest and supporting Aesthetic Medical International and look forward to speaking with you again next time.

Operator, please go ahead.

Operator

Thank you, everyone, again for attending Aesthetic Medical International's first quarter of 2023 earnings conference call. This concludes the call today and we thank you for listening in. Good-bye.