SBC Medical (SBC) Q3 2026 Earnings Call Transcript

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DATE

Friday, Nov. 13, 2026

CALL PARTICIPANTS

• Head of IR Department - Hikaru Fukui
• Head of Global Planning Strategy - Stephen Rodgers
• Executive - Yuya Yoshida

TAKEAWAYS

• Total Revenue -- $59 million, increasing 35% year over year driven by management service fee revisions and the consolidation of the Waqoo segment.
• Income From Operations -- $26 million, growing 66% due to operating leverage realized following structural reforms in 2025.
• Adjusted EBITDA -- $28 million, representing a 66% year-over-year increase as profitability and revenue grew in tandem.
• Adjusted EBITDA Margin -- 47%, an expansion of 9 percentage points year over year reflecting the productivity of the MSO platform.
• Basic EPS -- $0.15, rising 25% year over year compared to $0.12 in the third quarter of 2025.
• Management Services Revenue -- Growing 73% year over year, following strategic revisions to service fee structures implemented in August 2026.
• Trailing 12-Month Patient Visits -- 7.06 million, a 9% increase supported by a growing clinic network and higher customer engagement.
• Unique Customers -- 2.26 million, representing a 10% year-over-year increase across the supported medical network.
• Average Spend Per Visit -- $290, up 4% year over year driven by strategic pricing and the introduction of advanced dermatological equipment.
• Clinic Network Size -- 293 locations, following the addition of 36 locations year over year across aesthetic and general medical services.
• Same-Clinic Revenue -- $836 million for the first nine months of the year, increasing 7% year over year.
• Waqoo Segment Revenue -- $5.6 million, contributing to total top-line growth following its consolidation into the group.
• Net Cash Balance -- $154 million, consisting of $198 million in cash and cash equivalents offset by $44 million in total debt and lease liabilities.
• Net Cash From Operating Activities -- $50 million for the nine months ended Sept. 30, 2026.
• Average Daily Trading Value -- Approximately $1 million in October 2026, reflecting a 4.1-fold increase since July 2026.
• Beneficial Shareholders -- 7,300 as of October 2026, a 1.6-fold increase over a three-month period.
• Operational Retention Rate -- 99.2% for the Atomic Software medicalforce platform adopted by over 800 clinics.
• U.S. Expansion Pipeline -- 8 to 10 new clinics planned for the OrangeTwist network within the next three to four months.
• Medical Conference Engagement -- 75 physician appearances at 28 medical conferences during 2025 to increase international brand awareness.
• AI Feature Performance -- Six proprietary features are in development to automate medical charting and optimize shift scheduling across 293 locations.

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RISKS

• Yoshida indicated that while growth is currently supported by multiple engines, "it may fluctuate in the short-term," though management remains confident in mid- to long-term trends.
• Yoshida acknowledged that "quite a few clinics closed their business in light of the intense competition" in Japan, as smaller competitors struggle to maintain profitability during market shifts.
• Yoshida noted that the "shortage of independent directors has continued," representing a current priority for governance restructuring and the board selection process.

SUMMARY

SBC Medical Group Holdings Incorporated (NASDAQ:SBC) reported revenue growth driven by revisions in management service fee structures and the consolidation of the Waqoo segment. Income from operations increased as a result of operating leverage established during a previous structural reform. Management indicated that underlying clinical performance remained steady throughout the first nine months of the year, with both visit volume and average spend per visit rising concurrently. The company is currently expanding its international clinic network while advancing a technology strategy centered on artificial intelligence and longevity diagnostics.

• Executive Yoshida stated, "Starting in November 2026, we will begin developing our own blood biomarker testing program, with the aim of eventually expanding it across our clinic network."
• Management reported the development of a local large language model foundation to secure patient data and reduce inference costs compared to public cloud APIs.
• Executive Rodgers noted that SBC-branded clinics may open in the United States within the next 6 to 12 months as part of a collaborative growth strategy with OrangeTwist.
• The company is developing voice-driven automatic charting AI designed to draft medical records in approximately one second, returning time from staff to patients.
• Executive Yoshida indicated that the selection process for independent directors is "concretely underway" to address board composition and governance standards for the global capital market.
• Management attributed higher average spend per visit to strategic pricing adjustments and the introduction of advanced medical equipment such as the NEO Skin Clinic laser systems.

INDUSTRY GLOSSARY

• MSO: Medical Services Organization, a company providing administrative and operational support functions to medical institutions.
• DNA Methylation: A biological process that tracks changes in biological age based on lifestyle and environmental factors.
• AGA: Androgenetic Alopecia, a form of hair loss treated through specialized clinics within the supported network.
• Waqoo Segment: A business unit focused on regenerative medicine and longevity research recently consolidated into the group financials.
• Medicalforce: An operating platform for self-pay clinics that integrates electronic health records, payments, and analytics.
• OrangeTwist: A United States-based network of med spas in which the company holds a minority equity investment.
• Local LLM: A large language model hosted on internal infrastructure to improve data security and operational efficiency.
• NEO Skin Clinic: A specialized clinic brand within the network focused on high-spend laser dermatological treatments.

Full Conference Call Transcript

Hikaru Fukui: Serving as your moderator. Today's presentation materials are posted on our IR website, and the transcript will be posted as soon as it is available. Please note that today's remarks include forward-looking statements. These are not guarantees of future performance, and actual results may differ due to various factors. For details, please refer to our SEC filings. We will also refer to certain non-GAAP measures. Reconciliation to GAAP provided in today's disclosure materials. Let me walk you through today's program. First, we will show an AI-powered presentation of approximately 10 minutes. Please rest assured that the content has been reviewed in advance.

Following the presentation, Yuya Yoshida will share a few remarks, after which we will move to the questions and answer sessions. To ask questions, please click the Q&A icon at the bottom of your screen, type message, and send it. Now, let us begin the presentations.

Speaker 1: Thank you for taking the time to join our conference call today. I will now walk you through our Results For The Third Quarter of Fiscal 2026, An Update On Our Business Strategy, And Our Capital and IR. If I had to sum up this quarter in a single sentence, it is the quarter in which SBC's growth clearly re-accelerated. Revenue rose 35% year-on-year. Income from operations grew 66%, and our adjusted EBITDA margin reached 47%. Growth and profitability are improving in tandem, exactly the operating leverage we have been building toward, and a clear demonstration of the strength of our highly profitable MSO model. Let me begin with the clinic highlights, which demonstrate the underlying strength of our business.

For the first nine months of the year, same-clinic revenue reached $836 million, up 7% year-on-year, continuing its steady growth. What is particularly encouraging is that our growth is being driven by both more customers and higher spend per visit, rising together. Over the trailing 12 months, we recorded 7.06 million customer visits, up 9% year-on-year, from 2.26 million unique customers, up 10%. At the same time, average spend per visit increased 4% to $290. Our clinic network also expanded by 36 locations year-on-year, reaching 293 locations. In short, our existing clinics are growing stronger while our network continues to expand, a powerful combination for sustainable growth. Next, our financial highlights. Third quarter revenue was $59 million, up 35% year-on-year.

Income from operations was $26 million, up 66%. Adjusted EBITDA was $28 million, also up 66%. And our adjusted EBITDA margin reached 47%, an improvement of 9 points year-on-year. Basic EPS was $0.15, up 25%. Profit grew far faster than revenue, and our operating margin expanded from 37% to 45% year-on-year. This is the operating leverage built into our MSO model. We grow not simply by adding clinics, but by raising the productivity and the fees per clinic at the same time. In the third quarter, we delivered strong revenue and profit growth, reflecting the continued strength of our MSO business model. Revenue increased by $15.2 million year-on-year, driven by three main factors.

First, management services revenue rose 73% year-on-year, reflecting the service fee revisions we announced in August alongside our second quarter results, together with lower promotional costs in our points business. Second, rental revenue grew on the back of medical equipment installed at newly opened clinics. And third, the newly consolidated Waqoo segment contributed $5.6 million in revenue. On the profit side, net income attributable to SBC Medical increased 22% year-on-year, supported by strong growth in our core business. Now to our business strategy update. Our long-term vision is unchanged, which is to become the name that comes to mind when people think of longevity, living young and vigorous for as long as possible.

What is new this quarter is that we are putting a concrete roadmap behind that vision, with initiatives planned in stages through 2028. Longevity requires a complete cycle, which is diagnosis, personalized treatment, intervention, and verification of results. One of the hardest parts of building that cycle is establishing the medical infrastructure to actually deliver treatment, meaning licensed clinics staffed by doctors and nurses at scale. SBC already has that infrastructure. Our medical network spans 293 locations, covering both appearance-based and function-based care, including AGA, dentistry, orthopedics, ophthalmology, fertility treatment, and regenerative medicine. Starting in November 2026, we will begin developing our own blood biomarker testing program, with the aim of eventually expanding it across our clinic network.

Over time, we believe this initiative has the potential to generate recurring revenue while building a valuable foundation of longitudinal health data. In 2027, we aim to establish a longevity center, together with an online coaching and tracking platform. Looking further ahead to 2027 and 2028, we plan to develop AI-generated, doctor-verified treatment protocols and explore opportunities to expand our longevity services into the United States through OrangeTwist, as well as Southeast Asia. By combining the medical infrastructure we already have with new diagnostic capabilities and AI, we aim to build a differentiated and difficult-to-replicate position in the longevity market.

As part of step one, diagnostics, we have begun in-house development of a DNA methylation test to estimate biological age, drawing on the research and technology base our Waqoo Group has built in regenerative medicine. Unlike our underlying DNA sequence, DNA methylation can change with lifestyle and environment, making it a promising way to track changes in biological age over time and potentially assess the impact of interventions. Our development rests on three pillars, which are organ-by-organ mapping of biological age, research into non-invasive measurement methods that do not require a blood draw, and data specific to Japan, one of the most aged societies in the world.

The goal is straightforward but powerful: to make both biological age and the effect of treatment visible, and to turn that into data-driven, personalized care. Next, our AI strategy. We are building our own local large language model foundation that allows us to use patient data safely. Running our own local LLM does two things. First, it lets us develop proprietary features from SBC's unique clinical and customer data that a general-purpose AI cannot easily match. Second, it decouples our inference cost from cloud API pricing, improving the economics. On this foundation, we are developing six AI features spanning cost, risk, and revenue.

On cost, these include voice-driven automatic charting, designed to draft a medical record in about one second, returning time from doctors and nurses to patients, and AI shift scheduling, aimed at optimizing staffing across our medical network of 293 locations. On risk, we are developing AI monitoring of our clinical systems and data access. On revenue, the features include a clinic promotion planner, a treatment plan recommendation engine that draws on 26 years of case data to raise spend per visit, and personalized recommendations for each customer to lift lifetime value.

We have also entered a capital and business alliance with AtomicSoftware, the provider of medicalforce, one of Japan's largest operating platforms for self-pay clinics, adopted by more than 800 clinics with a 99.2% retention rate. The system integrates reservations, electronic charts, payments, customer management, and analytics in a way purpose-built for self-pay medicine, and it is currently used at one of our clinics, Hada no Aozora Clinic. Together, we plan to create value in three steps, which are co-developing AI features, implementing them in our own systems, and extending them to new brands and new formats.

Our goal is to build a more efficient, more standardized operating base that improves the profitability of existing clinics and shortens the ramp-up time for new openings, strengthening the earnings power of our scalable MSO platform as the business expands. Our brand strength is also earning outside recognition. In Newsweek's World's Best Hospitals & Clinics for Medical Tourism 2027, Shonan Beauty Clinic was selected in two plastic surgery categories, liposuction and breast augmentation, each among the top 75 facilities in the world. We believe this reflects the trust we have built in the medical community. In 2025, doctors from our group presented research at 28 medical conferences in Japan and abroad, with a total of 75 physician appearances.

We also offer multilingual support to meet growing inbound demand. We intend to leverage this international recognition to raise our brand awareness overseas and further accelerate our growth. Finally, our capital and IR. Our basic policy is unchanged, which is to pursue EPS growth and a normalization of our valuation in parallel, and so to enhance shareholder value over the medium to long-term. On liquidity and recognition, we are making steady progress. Average daily trading value in October was approximately $1 million, about 4.1x the level this past July. The number of our beneficial shareholders reached 7,300 as of October 2026, representing a 1.6x increase since July 2026.

During this year, through October, we have held 183 one-on-one investor meetings and participated in 22 IR conferences. We recognize that SBC's recognition in the capital markets, particularly in the United States, still has room to grow, and we will keep up this active engagement, encouraging a more diverse investor base, deeper liquidity, and a share price that properly reflects our medium-term to long-term corporate value. Let me close with why we are confident in SBC's trajectory. We combine three things that are not often found together in one company, namely high growth, high and rising margins, and a net cash balance sheet that funds its own expansion.

Our priorities are clear, which is to drive sustained EPS growth and earn a valuation that properly reflects our medium-term to long-term potential. Together, these will support lasting shareholder value creation. We hope you will look forward to what lies ahead for SBC. That concludes my remarks. Thank you very much for your attention.

Hikaru Fukui: Thank you very much. We will now move to the Q&A sessions. To ask questions, please click the Q&A icon at the bottom of your screen, type your message, and send it. First question is, wonderful quarter. Are your revenue growth and margin growth sustainable going forward as well? What is the future growth of revenue and margin resulting from new AI efforts? Yes. The third quarter was one in which SBC's growth clearly accelerated. Total revenue rose 35% year-over-year to $59 million. Income from operations grew 66% year-over-year, and our adjusted EBITDA margin improved 9 points year-over-year to 47%.

Profit growth well ahead of revenue growth is, we believe, clear evidence that our operating leverage we have built through our 2025 structural reform is now taking hold in earnest. The revenue growth was supported by multiple factors. The revision of certain service fee structures announced in August, higher rental revenue associated with newly opened clinic, and the newly consolidated Waqoo segment. Within this, the third quarter was a period in which rental revenue was particularly strong. The underlying clinic business is robust. On a nine-month basis, same-clinic revenue grew 7%, with both the number of visits and the average spend per visit rising together.

Our existing clinics are becoming even stronger while our network continue to expand, and this contribution drives sustained growth. Because this growth is supported by multiple engines, it may fluctuate in the short-term, but we are confident it will continue over the mid to long-term. Also, due to our AI efforts, basically, we consider that our profitability will improve going forward to some extent. Now, we are driving several AI activities, so we consider we will find such a result in near futures. Next question is, will you please detail future plan in United States, including OrangeTwist and ASEAN expansion efforts? Thank you. Stephen, can you explain about answer to these questions?

Stephen Rodgers: Yes, absolutely. Thanks, Hikaru. Stephen Rodgers here, Head of Global Planning Strategy, leading our expansion efforts in the U.S. and also overseas in Southeast Asia. We are really excited about the opportunities in the U.S. We continue expanding really along two axes. The first is the med spa business through OrangeTwist, which we have a minority stake. That is going to be our clear driver to expand into the med spa space. They have intention to continue to grow their network, expand their clinics, and so we are working with them to support that expansion and to continue to grow that business out. We are really excited about the opportunity and all the work that they are doing there.

We are also looking at how we can best leverage a lot of our unique brands that we have in Japan and our differentiated offerings that we feel like complement OrangeTwist, and collaboratively building something together here in the U.S. So, you may see some SBC-branded clinics in the next 6 to 12 months in the U.S. So, we are also looking at that with OrangeTwist.

Hikaru Fukui: Yeah. Thank you very much. Next question is regarding our clinic. Your clinic showing very strong underlying performance with same-clinic revenue up 7%, visits up 9%, and average spend up 4%. Can you please discuss what is driving this performance and how sustainable these trends are? Thank you. Yuya, can you answer to these questions?

Yuya Yoshida: Sure. Yeah, this growth was supported by multiple factors. Basically, we successfully took strategic pricing in the last couple years, and then as a result, we established very strong competitive position in competition. As a result, we successfully, some of our treatment, sorry, prices of some of the treatment, we increased. That is the one initiative. Also, we introduced state-of-the-art medical equipment and treatment as well, so that we can attract more customers with high literacy aesthetic medicine. For example, we expanded our network of NEO Skin Clinic that has a wide variety of laser equipment. With those effort, we successfully increased ASP.

Hikaru Fukui: Thank you very much. Next question is regarding clinic network expansions. With the clinic network expanding to 293 locations and the patient visit up 9%, what trends are you seeing in same-clinic volume and spending, and how should we think about clinic expansion in 2027 across aesthetic and non-aesthetic services?

Yuya Yoshida: Okay. I will answer that question. Yes, as explained, the competitive environment is now favorable to us as a result of two years consecutive restructuring and strategic pricing. In the foreseeable future, especially in the next year, I am convinced that we can expand our clinics network continuously with almost same pace as this year, and I mean the internals of aesthetic medical clinics. On top of that, we will plan to expand our network of non-aesthetic, I mean, general medicine clinics, including dentistry, orthopedics, and ophthalmology. That's a kind of organic growth. On top of that, we are now planning acquisition, M&A, of both aesthetic medicine and general medicine clinics network.

We will see the continuous growth of our clinic networks in the next year.

Hikaru Fukui: Thank you so much. Next question is regarding the longevity. Over what time horizon will longevity begin contribute to revenue?

Yuya Yoshida: Okay. Yes. In terms of the revenue contribution, we expect meaningful revenue contribution from around 2028, partly because longevity trend in Japan is still emerging, but not as developed in the U.S. Longevity is the area we position as our largest growth opportunity over the medium to long-term at this moment. We have laid out a concrete roadmap through 2028. Yes, as you know, longevity is built on a cycle of testing, personalized recommendation, and intervention. As we already published, we will start blood biomarker testing, DNA methylation test in the coming months. Our most moat, I mean, the strongest point is that we already have an extensive clinic network in the intervention layer.

That is the most difficult part our competitors will copy. I believe our clinic networks is a decisive strength that others cannot easily copy.

Hikaru Fukui: Thank you very much. Next question is regarding our margins. Could you share your outlook for the adjusted EBITDA margin going forward?

Yuya Yoshida: Okay, yeah. As we reported, or as I said, adjusted EBITDA margin improved 9 point year-on-year basis to 47% in the third quarter. We believe we can raise this high level of profitability further over the medium to long-term. From our point of view, there are two drivers. The first is an expansion of service fees driven by higher clinic productivity. For example, through our capital and business alliance with NeuroBrain Dynamics of Taiwan, which we just reported today, we are building our own local LLM foundation that enables the secure use of patient data. We are implementing AI features across cost, risk, and revenue.

Yeah, that is what we explained in presentation, including voice-to-EMR automation, and such as AI-shift scheduling. Because this is decoupled from cloud API pricing, in terms of cost, that is quite efficient. The second point is network expansion as an MSO. As the number of locations grows, the leverage of our platform increases, and the efficiency of the entire organization improves. The expansion of service fees arising from AI-driven service improvement and the expansion of our network advancing parallel. I am convinced that there is still big room for the margin to expand in the near future.

Hikaru Fukui: Thank you very much. Next question is regarding our capital strategy. Your cash balance is now over $200 million. Can you please discuss your capital allocation priorities? Do you plan to utilize your share buyback authorization given the continued deep discount to the valuation of your stock, which trades at only around four times third quarter adjusted EBITDA and nearly 20% free cash flow yield?

Yuya Yoshida: Okay. First of all, the growth in the area, longevity and AI utilization is quite important so that we can expand our clinic network more. In that sense, we will prioritize our cash investment in M&A and opening a de novo clinic. Second, improving liquidity is a very important theme for us. We address on an ongoing basis. With that, we are not considering additional share buyback at this moment. As you can see, actually, liquidity itself is improving during this quarter significantly. As we explained, our average daily trading value in October was approximately now $1 million, about 4.1x the July level. On top of that, the number of shareholders also increased significantly.

Given that, again, we are not considering share buyback now. Vice versa, we expect our free float and liquidity continue expanding steadily going forward.

Hikaru Fukui: Thank you very much. Next question is regarding our Japanese business environment. Have you seen some newer competitors exit the market in Japan?

Yuya Yoshida: Sorry, exit?

Hikaru Fukui: Exit.

Yuya Yoshida: Exit?

Hikaru Fukui: Yes.

Yuya Yoshida: Oh, okay. We acknowledge that quite a few clinics closed their business in light of the intense competition. As we explained, we take our strategic pricing, so some clinics cannot catch up with those downtrend in terms of the pricing. Yes, we understand quite a few clinics exit from the market.

Hikaru Fukui: Thank you very much. The next question is regarding our Japanese business. What is the status of the brand initiative announced last quarter? The Renaming clinics to SBC Skin Clinic, the launch of SBC MEN'S FLASH CLINIC, and the new JUN CLINIC openings. How have customers responded so far?

Yuya Yoshida: Overall, those new clinics, the performance looks very promising and generating a good revenue because we can capture the diversified needs of customers. With the branding change from the dermatology clinics to SBC Skin Clinic is working as well, so that we can attract customers who want light, non-surgical treatment more frequently. Our multi-brand strategy works very well in this quarter as well.

Hikaru Fukui: Thank you so much. Next question is to Stephen. What progress has there been on the U.S. strategy since last quarter? Specifically, timing of the larger OrangeTwist stake, plan for first SBC brand U.S. locations, and U.S. acquisition now in your pipeline?

Stephen Rodgers: Yeah, thanks for the question. Right now we're still continuing to work with OrangeTwist to, one, look at additional clinic expansion. They are opening at least one more this quarter, and then we're hoping to get them to an additional eight new clinics, 8-10 in the next three to four months. We're working through that process right now. Then we're also doing a lot of market research in terms of which SBC brand initiatives could really be a compelling offering here in the U.S. We're doing a lot of currently on-the-ground market research on that and laying out the plan for how we can build that in the next 6-12 months here in the U.S.

You're going to see kind of a joint approach of continuing to partner with OrangeTwist and fueling their growth, as well as collaboration and building SBC clinics. We're continuing to look for other partners too. We've kind of taken an approach of finding really great management teams, platforms that we can get behind and support, get familiar with the U.S. market, and then take larger stakes or larger bets as needed when we feel more confident in our position. Yeah, feel really positive about the progress we've made so far and also feel really good about the next 6, 12 months. Thanks.

Hikaru Fukui: Yeah. Thank you very much. The next question is regarding the governance. The shortage of independent directors has continued. How is the selection process progressing?

Yuya Yoshida: Yeah. Okay, I will answer this question. Yes, when we met with our investors, we got a lot of inquiries about our governance. With that, strengthening governance is one of the most important management priorities for us. We discussed that point internally very well. Under our current structure, the CEO holds approximately 80% of the shares. Yeah, as I said, we received many questions. Appointing independent directors to the board is an extremely important matter, and investors want external board members who has a wide variety of knowledge, expertise, and that they are independent, and they act on behalf of the minority shareholders.

We are now advancing the selection process concretely, and we will work to report the composition of the new board to you at the earliest possible timing. We seek individual candidates with strong expertise and diversity who can contribute to our board discussion and that represent shareholders. Through this effort, we will build a governance structure benefiting the global capital market.

Hikaru Fukui: Thank you very much. As we have reached the end of our allotted time, this concludes our Q&A sessions. Before we close, I would like to ask Yuya to share a few closing remarks.

Yuya Yoshida: Yeah.

Hikaru Fukui: Yuya, over to you.

Yuya Yoshida: Yeah. Okay. Yeah. Thanks, everyone, for joining the conference call during the busy time. Let me reiterate our important point again. You have seen the numbers, and yeah, let me tell you the important three points. One, operating leverage. Revenue grew 35%. Operating income grew 66%. Adjusted EBITDA margin reached 47%. Profit grew twice as fast as revenue, and that is not a good quarter. That is a business model working. Our clinics grow, our headcount does not, and the difference is your margin. Margin improvement will continue. Second point, the next leg of growth. Everyone can buy a diagnostic test. Almost no one owns a 293 licensed clinic with physicians and nurses who can act on the result.

That is why longevity is critical for us with AI technology and the U.S. expansions. We will open the longevity centers next year with meaningful revenue from 2028. The third one, capital. As you know, we hold ample net cash and fund every one of these initiatives from operating cash flow. We do not need to dilute you to grow. On the three questions you have asked us most, liquidity, the founder stakes, and governance. There is now evidence, no promises. Daily trading volume again is up 4x since July. Our shareholder base is up 1.6x. The appointment of independent directors is concretely underway. Liquidity further improved in three months. We are just getting started. Thanks for your continuous support.

We look forward to share our growth and profit margin improvement going forward. Thanks so much.

Hikaru Fukui: Thank you again for joining SBC Medical Group Holdings fiscal year 2026 third quarter earnings call. We sincerely appreciate your continued support. This concludes today's call. Thank you very much.

Yuya Yoshida: Thanks much.

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