So-Young's Pivot: A Mixed Bag of Progress and Challenges

So-Young International Inc. (SY) has reported its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2024, revealing a company in strategic transition with mixed financial performance. The headline net loss of RMB607.6 million (US$83.2 million) is concerning but requires context—it's primarily driven by a one-time RMB540 million goodwill impairment related to Wuhan Miracle subsidiary. This impairment charge, while significant, does not fully capture the underlying operational dynamics of the company.



Core revenue trends show the company's pivot is gaining traction. While total Q4 revenue declined 5.5% YoY to RMB369.2 million, their aesthetic treatment services segment grew an impressive 701.6% YoY to RMB81.3 million. This validates management's strategic shift toward company-operated centers. The center network expansion shows promising metrics: 19 aesthetic centers across nine cities, with 11 already generating positive monthly operating cash flow and a 60% customer retention rate. This standardized model appears scalable with improving unit economics.

Cost structure analysis reveals the transition's financial dynamics—information services costs decreased 48.2% while aesthetic treatment costs rose 702.3%, reflecting the business model shift. The declaration of a US$3 million special dividend ($0.0265 per ADS) signals management confidence in the company's liquidity position despite ongoing investments in growth. So-Young's transformation remains in early stages, with profitability challenges as they build scale in their direct operations. The non-GAAP Q4 loss of RMB53.2 million suggests the core business faces headwinds beyond the impairment charge, requiring further operational improvements to achieve sustainable profitability.



The company's strategic shift towards company-operated aesthetic centers is a bold move, but it comes with significant risks. The aesthetic treatment services segment's impressive growth is a positive sign, but the overall financial performance remains a concern. The company's ability to generate sustainable profitability will depend on its ability to manage costs, improve operational efficiency, and continue to expand its network of aesthetic centers.

In conclusion, So-Young's Q4 and fiscal 2024 results reveal a company in transition, with both progress and challenges. The company's strategic shift towards company-operated centers is gaining traction, but profitability remains a concern. Investors should monitor key performance indicators such as revenue growth in aesthetic treatment services, the number of aesthetic centers and their performance, customer retention rate, operational cash flow, cost structure, number of active users and verified paid visits, and special dividend to assess the success and sustainability of this new business model. The company's ability to navigate these challenges will determine its long-term success.