SBC Medical Group’s Contradictory M&A Focus and Shifting Revenue Guidance in 2025 Earnings Calls

Date of Call: Mar 27, 2026

Financials Results

• Revenue: $174 million, a decrease of 15% from the prior year
• EPS: $0.50, increased 4% to

Business Commentary:

Revenue and Profitability Trends:

• SBC Medical Group Holdings reported full year revenue of $174 million, a 15% decrease from the prior year, primarily due to business restructuring and fee structure changes.
• Despite the revenue decrease, net income grew 9% year-over-year to $51 million, and EPS increased 4% to $0.50. The improvement is attributed to the absence of significant one-time costs from the prior year's listing process and asset revaluations, leading to a normalized cost structure.

Growth in Aesthetic Dermatology:

• The company's aesthetic dermatology segment grew steadily, with the overall market growing by 10% annually.
• SBC's focus on aesthetic dermatology, which constitutes 70% of its performance in this area, is aimed at achieving above-market growth rates.

Strategic Expansion and Market Positioning:

• SBC aims to become the number one player in Japan's dentistry, orthopedics, fertility treatment, and dermatology markets by 2035.
• The strategy involves leveraging its strengths in marketing, CRM, and clinic operations, with plans to expand through organic growth and targeted M&A.

AI and Wellness Platform Development:

• The introduction of the SBC Wellness 2.0 platform is part of a strategy to support longevity and integrate AI-driven healthcare services.
• This platform combines recurring subscription revenue with high-margin medical services, aiming to scale efficiently through corporate benefits programs and reduce marketing costs.

Sentiment Analysis:

Overall Tone: Positive

• Management emphasizes 'genuine momentum' and an 'important inflection point' with average revenue per customer rebounding 11% YOY. They express confidence in long-term growth, aiming for number one positions in Japan by 2035 and expanding into global markets.

Q&A:

• Question from Analyst/Participant: ...about the SBC Wellness business. SBC Wellness for fiscal year 2026, do you think this is going to be the driver for the growth in. Also, could you please give us your thought on the margin or profitability?
  Response: Not a large revenue driver in FY26; the goal is to expand the customer base first, with no specific revenue target or profitability discussed yet.

• Question from Analyst/Participant: ...about wellness. I’d like to have a clearer image about services using the existing clinics to deploy the services. Or are you going to set up the specialized clinics to expand?
  Response: Strategy for clinic rollout is still being developed; possibilities include specialized clinics in Japan and leveraging the OrangeTwist channel in the U.S.

• Question from Analyst/Participant: ...about AI. The new CTO has joined your team, and you are promoting the policies related to AI. Going forward, what kind of operational improvement do you expect or how this technology can lead to the enhanced revenue?
  Response: AI will enhance efficiency in headquarters, automate call centers, and improve clinic operations, with a focus on creating success cases in FY26 and potentially selling the technology externally.

• Question from Analyst/Participant: ...about M&A is the topic of the next question. In the future M&A strategy, what the company is considering?
  Response: M&A is considered to help achieve number one positions in Japan by 2035 in dentistry, orthopedics, fertility treatment, and dermatology, and also in aesthetic medicine and overseas B2B.

• Question from Analyst/Participant: ...about America. In December last year, minority investment was made into OrangeTwist. As a next step, what kind of next steps do you have in your mind?
  Response: Plan to share SBC's marketing expertise, enter the longevity market together, and optimize OrangeTwist's operations using AI to enhance profitability.

• Question from Analyst/Participant: ...another question about OrangeTwist. Into the future, collaboration in business, Asian markets and the entry into the Japanese market, are those under consideration?
  Response: Consider rolling out the OrangeTwist brand in Asia and Japan, focusing on building a global brand.

• Question from Analyst/Participant: ...about medical tourism going forward. For example, in Cancún, in Mexico, do you consider any potential medical tourism related business?
  Response: No plans for medical tourism from Mexico to Japan; focus is on attracting medical tourists to Japan from Asia for fertility treatment.

• Question from Analyst/Participant: ...a financial question. The company has a lot of cash, so, I have a question on that. The company has a lot of cash and interest seems to be a small amount. Any comment on this?
  Response: Cash is held in safe investments with limited interest; the primary strategy is to use it flexibly for growth investments and M&A.

• Question from Analyst/Participant: ...for fiscal year 2026, various measures are going to be taken for investment into new business areas. What size of the investment do you have in your mind?
  Response: Investment size for M&A depends on the opportunity and target scale, potentially using a combination of cash and borrowings.

• Question from Analyst/Participant: ...In December last year, a share buyback program was approved, and what’s your view on this program?
  Response: The buyback program is a flexible tool to be used if the market price falls below their valuation, but no repurchases have been made yet.

• Question from Analyst/Participant: ...In fiscal year 2026, what is going to be the biggest, strongest growth driver?
  Response: Aesthetic dermatology in Japan is the biggest growth driver and pillar for profitability in FY26.

Contradiction Point 1

M&A Strategic Focus

Shift from broad domestic M&A to specific field leadership targets.

Analyst/Participant - Analyst/Participant

2025Q4: The M&A strategy is aligned with the goal of becoming the number one provider in Japan in several fields by 2035 (dentistry, orthopedics, fertility treatment, dermatology). The company is open to M&A in aesthetic medicine as well if attractive deals arise. - [Yoshiyuki Aikawa](CFO)

What is the company's future M&A strategy? - Questioner (implied from context, not specified)

2025Q3: The M&A strategy is divided: 1) **Domestic (Japan):** Continue acquiring clinics, potentially expanding into more medical clinical areas beyond aesthetics. 2) **Global:** Focus on the medical aesthetic industry they are familiar with. - [Taishi Sakaguchi](CPO)

Contradiction Point 2

Financial Guidance Communication

Change in willingness to provide specific revenue growth guidance.

Analyst/Participant - Analyst/Participant

2025Q4: The biggest pillar for growth and profitability in 2026 is the rapid growth in the aesthetic dermatology market in Japan... It is too premature to set revenue targets for this business at this time. - [Yuya Yoshida](CFO)

Will the SBC Wellness business drive growth in fiscal year 2026, and what are your thoughts on its margin or profitability? - Questioner (implied from context, not specified)

2025Q3: Yes, it means a return to revenue and profit growth. However, the company cannot provide concrete growth numbers at this time but is actively considering providing financial guidance in the near future. - [Yuya Yoshida](CFO)