So-Young International Inc. — FY2023 Form 20-F
Reporting period: Fiscal year ended December 31, 2023; annual report filed April 25, 2024. This is not a quarterly filing. Financial statements are prepared under U.S. GAAP. Unless otherwise noted, amounts below are RMB millions.
Business context
So-Young operates a China-focused online medical aesthetics community and reservation platform, and sells medical equipment, cosmetic injectables and related services. Its Wuhan Miracle business manufactures and sells laser and other optoelectronic medical equipment. The Cayman Islands parent conducts operations through subsidiaries and contractual arrangements with VIEs; VIEs contributed 80.4% of 2023 revenue. ADSs trade on Nasdaq under SY; 13 ADSs represent 10 Class A ordinary shares.
Key financial metrics
| Metric | 2023 | 2022 | Change / context |
|---|---|---|---|
| Revenue | 1,498.0 | 1,257.9 | Up 19.1% |
| Gross profit / margin | 953.7 / 63.7% | 864.6 / 68.7% | Profit up 10.3%; margin down 5.0 percentage points |
| Operating loss / margin | (61.0) / (4.0%) | (102.8) / (8.2%) | Operating loss narrowed |
| Net income (loss) | 25.9 | (66.1) | Returned to net income; 2023 included RMB18.1 million income tax benefit |
| Net income (loss) attributable to So-Young | 21.3 | (65.6) | Basic and diluted EPS: RMB0.27 per ordinary share; RMB0.21 per ADS |
| Operating cash flow | 22.5 | (112.9) | Turned positive |
| Cash, cash equivalents and restricted cash | 432.7 | 701.0 | Down 268.3; includes restricted cash |
| Short-term borrowings | 29.8 | — | New borrowing; fixed annual rate of 1.4% |
Cash used in investing activities was RMB202.6 million and cash used in financing activities was RMB100.0 million. The latter included RMB125.6 million of share repurchases. At year-end, term deposits and short-term investments were RMB900.8 million current and RMB112.2 million non-current; these are distinct from reported cash and restricted cash. Total assets were RMB3,214.6 million and total liabilities RMB653.3 million. Lease liabilities totaled RMB115.9 million.
Revenue mix and material changes
- Information services and other revenue rose 22.2% to RMB1,063.2 million, with management citing So-Young Prime growth.
- Reservation services revenue fell 21.3% to RMB101.3 million, mainly reflecting higher user subsidies. Purchasing users rose 13.6% to 450,100, while average mobile MAUs fell 22.4% to 3.1 million.
- Medical products and maintenance services revenue increased 28.7% to RMB333.5 million, mainly on higher cosmetic injectable sales. This category represented 22.2% of revenue, compared with 20.6% in 2022.
- Cost of revenue grew 38.4%, faster than revenue, principally due to So-Young Prime and cosmetic injectables; gross margin consequently contracted. Paying service providers declined 46.6% to 3,796.
- Sales and marketing expense increased 10.2% to RMB520.5 million. General and administrative expense increased 11.7% to RMB290.8 million; research and development expense decreased 13.4% to RMB203.5 million.
- Comparability note: the company reclassified certain cosmetic injectable and equipment revenues into medical products and maintenance services, and retrospectively reclassified cost categories.
Outlook, risks and unusual items
- Outlook: No quantified revenue or earnings guidance is provided. Management said existing cash and anticipated operating cash flows should cover working capital and capital expenditure needs for at least 12 months, and plans to develop products, expand service offerings and continue optimizing marketing spend.
- Liquidity and cash access: 95.3% of cash, cash equivalents and restricted cash was held in China; 34.8% was held by VIEs and their subsidiaries. Transfers and distributions are subject to PRC foreign-exchange, statutory-reserve and other restrictions. Management’s liquidity assessment is based on forecasts and continued execution of its business plan.
- VIE and regulatory exposure: Investors own the Cayman holding company, not equity in the VIEs. Contractual control arrangements may be challenged or prove difficult to enforce. The company disclosed it lacks an Audio-Visual License for certain online video services; it says related revenue is insignificant. Additional licenses or approvals may be required.
- Consumer, medical and data risks: Medical procedure outcomes, provider conduct, product quality, advertising rules and consumer claims could affect reputation and results. The So-Young app was removed from app stores in November 2021 over personal-information collection practices and reinstated in April 2022 after remediation; future enforcement remains a risk.
- Wuhan Miracle and goodwill: The company recorded RMB540.7 million goodwill, mainly associated with Wuhan Miracle. No impairment was recorded in 2023, but the auditor identified the goodwill impairment assessment as a critical audit matter because valuation depends on projected revenue, operating results and discount rate.
- Capital returns and subsequent events: The company repurchased shares for RMB125.6 million in 2023. In March 2024, the board authorized a new share repurchase program of up to US$25 million and declared a special dividend of US$0.06 per ADS, approximately US$6.1 million in total. These are post-year-end actions, not 2023 operating results.
- Governance and market risks: Founder Xing Jin held 84.4% of voting power as of the disclosed date, reflecting the dual-class structure. The company believes it was a PFIC for U.S. tax purposes in 2023. PCAOB inspection access had been restored as of the filing, but future HFCAA-related restrictions remain possible.
- Legal matters and controls: Management reported no pending or threatened proceedings expected to have a material adverse effect; recorded litigation liabilities were RMB2.2 million at year-end, mainly related to intellectual-property claims. Management and the auditor reported effective internal control over financial reporting as of December 31, 2023.
Important facts for investors to verify
- Whether revenue growth from So-Young Prime and medical products can sustain margins, given the 5.0-point gross-margin decline and falling reservation revenue.
- Cash-flow durability and the availability of deposits and investments, including restrictions on cash held in China and VIE entities; also review the new borrowing and lease obligations.
- The status and potential consequences of required licenses, advertising and medical-service compliance, and data-protection controls following the app-store removal and reinstatement.
- The assumptions supporting Wuhan Miracle’s goodwill valuation and the progress and conditions of its proposed Beijing Stock Exchange IPO, which was under review at the filing date.
- The terms, funding and execution of the post-year-end dividend and repurchase program, alongside the concentrated voting control and VIE structure.