Thank you very much for joining SBC Medical Group Holdings' fiscal year 2026 third quarter earnings call today. Today's call will be conducted by Yuya Yoshida, our CFO, COO, and AI Evangelist, Steven Rogers, our Head of Global Planning and Strategy, and myself, Hikaru Fukui, Head of Investor Relations, serving as your moderator. Today's presentation material are posted on our IR website, and the draft briefs will be posted as soon as it is available. Please note that today's remarks include forward-looking statements. These are not a guarantee 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 material. Let me walk you through today's program. First, we will show an AI-powered presentation of approximately 10 minutes. Please best assure that the content has been reviewed in advance. Following the presentation, Yuya Yoshida will share a few remarks. After speech, we will move to the questions and answers 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.

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 reaccelerated. 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%. 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 Waku 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 Orange Twist. 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 WACU 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're 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. and second, it decouples our inference costs from cloud API pricing, improving the economics. On this foundation, we're 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're developing AI monitoring of our clinical systems and data access. And 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. Hada no Aozora Clinic Thank you for joining us today. In Newsweek's World's Best Hospitals and 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 4.1 times the level this past July. The number of our beneficial shareholders reached 7,300 as of October 2026, representing a 1.6 times increase since July 2026. And 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, Thank you for listening.

Thank you very much. So, we will now move to the Q&A session. To ask a question, please click the Q&A icon at the bottom of your screen. Type your message and send it. So, first question is, wonderful quarter, are you revenue growth and margin growth are sustainable going forward? As well, what is the future growth of revenue and margin resulting from your AI efforts? Yes, the third quarter was one in which SBC's growth are clearly accelerated. Total revenue rose 35% year-over-year to US$59 million. Income from operations grew 66% year-over-year, and our adjusted EBITDA margin increased 9 points year-over-year to 47%. Profit growth well ahead of revenue growth is. We believe Clear evidence that the operating leverage we have built through our 2025 structural reform is now taking hold in arms. The revenue growth was supported by multiple factors. The revision of certain service fee structures announced in August Higher return revenue associated with newly opened clinic. The newly consolidated work segment within GIF, the third quarter was a period in which rental revenue was particularly strong. The underlying clinic business is robust. Over nine months basis, same clinic revenue grew 7%, with both the number of visits and average spend per visit rising together. Our existing clinics are becoming even stronger while our networks 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. Due to our AI efforts, we consider our profitability will improve going forward to some extent. And now we are trying several AI activities, so we consider we will find such results in the future. And the next question is... Next question is, will you please detail future plan in United States, including Orange Twist, and ASEAN expansion efforts? Thank you. So, Steven, can you explain about answer to this question?

Yes, absolutely. Thanks, Hikaru. Steven Rogers here, head of Global Planning Strategy, leading our Our expansion efforts in the U.S. and also overseas in Southeast Asia. Yeah, we're really excited about opportunities in the U.S. We continue expanding really along two axes. The first is the medical spa business through Orange Twist, which we have a minority stake. So that's 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're working with them to support that expansion and to continue to grow that business out. So we're really excited about the opportunity and all the work that they're doing there. And then we're 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 Orange Twists. 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're also looking at that with Orange Choice.

Thank you very much. So next question is regarding our clinic. Your clinics are showing very strong underlying performance with same clinic revenue at 7%, visits at 9%, and average spend at 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?

Sure. Yeah, let's go. were supported by multiple factors. Basically, we successfully took strategic pricing in the last couple of years. And then as a result, we established a very strong competitive position in the competition. So, as a result, we successfully, some of our treatment, so the prices of some of the treatment, we increased. So, that's the one initiative. And also, we introduced state-of-the-art medical equipment and treatment as well, so that we can track more Thank you very much.

So, the next question is regarding clinic network expansion. With the clinic network expanding to 293 locations and patient visits at 9%, what trends are you seeing in scientific reporting and spending, and how should we think about clinic expansion in 2027 across ethnic and non-ethnic services?

Okay, I will answer that question. So, as explained, the competitive environment is now favorable to us as a result of two years' consecutive restructuring and strategic pricing. So, in the foreseeable future, especially in the next year, I am convinced that we can expand our clinic's network continuously with this We are planning to expand our network of general medicine clinics including dentistry, orthopedics, and ophthalmology. Thank you so much. So next question is,

In terms of the revenue contribution, we expect a meaningful revenue contribution from around 2028, partially because longevity trend in Japan is still emerging.

But not like that of in the U.S. So longevity is the area we position as our largest growth opportunity over the medium to long term at this moment. So we have laid out a concrete roadmap through 2028. As you know, longevity is built on a cycle of testing, personalized recommendation, and intervention. So, as we already published, we will start biomarker testing, DNA initialization test, in the coming months. And our most 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. So I believe our clinic network is a decisive strength that others cannot easily copy.

Thank you very much. So, next question is regarding our margins. Could you share your outlook for the EBITDA margin and going forward?

Okay, yeah, as we reported, our EVT margin improved 9 points year-on-year basis to 47% in the third quarter. And we believe we can raise this high level of profitability further over the medium to long term. So 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 a capital and business alliance with NeuroBrain Dynamics of Taiwan, which we just reported today, we are building our own local LM foundation that enables the secure use of patient data. And we are implementing AI features across cost, risk, and revenue. Yes, that's what we explained in the presentation, including voice-to-EML automation, such as AI shift scheduling. So because this is decoupled from cloud API pricing, so in terms of cost, that is quite efficient. And the second point is network expansion as an MSO. As the number of locations grows, the average 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 tolerance. So I'm convinced that There is still big room for the margin to expand in the near future. Thank you very much.

Next question is regarding our capital strategy. Your cash balance is now over 200 million US dollars. Can you please discuss your capital allocation priorities? Do you plan to utilize your share buyback authorization given the continuous dip discount to the valuation of your stock, which trades at only around 4 times 3 ¾ EBITDA and nearly 20% free cash flow is?

Okay. Yeah, first of all, the loss, In the area of 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 the de novo clinic. And second, improving the liquidity is a very important thing. We are not considering additional share buyback at this moment. As you can see, liquidity itself is improving. During this quarter, significantly, as we explained, average trading value in October was approximately now 1 million US dollars, about 4.1 times the July level. So, on top of that, the number of shareholders also increased significantly. Given that, again, we are not considering share buyback now. By far, we expect our free-for-all and liquidity continuing experience steadily from going forward.

Thank you very much.

Next question is regarding our Japanese business environment. Have you seen some newer competitors exit the market in Japan?

Sorry, exit?

Exit. Exit.

Exit?

Yes.

Oh, okay. Yeah, we acknowledge that quite a few clinics closed their business in light of the intense competition. Yeah, so as we explained, we take our strategic pricing. So some clinics cannot catch up with those downtrends in terms of the pricing. So yes, we understand quite a few clinics exit from the market.

Thank you very much. And the next question is regarding our Japanese business. What is the status of the brand initiatives announced last quarter? The naming clinics to SBC Skin Clinic, the laser, SBC Men's Flash Clinic, and the new Jun Clinic openings. How have customers spent so far? Responded so far?

Overall, ZOE's new clinics' performance looks very promising and generating good revenue, because we can capture the diversified needs of customers. And with the branding change, from the Dermatology Clinic to SBC Skin Clinic is working as well so that we can attract customers who want light non-surgical treatment more frequently. So our multi-brand strategy works very well in this corner as well. Thank you so much.

So Nick's question is to Steven. What progress has there been on the U.S. strategy since last quarter? Specifically, timing of the larger orange sweet steak, plan for fast SEC planned U.S. locations, and U.S. acquisition now in your pipeline?

Yeah, thanks for the question. So right now we're still Continuing to work with Orange Twist to, one, look at additional clinic expansion. So they are opening at least one more this quarter. And then we're hoping to get them to an additional eight new clinics, eight to ten in the next three to four months. So we're working through that process right now. And 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. So 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 six to 12 months here in the U.S. So you're going to see kind of a joint approach of continuing to partner with Orange Twist and feeling their growth as well as collaboration and building SBC clinics. We're continuing to look for other partners too. You know, we've kind of taken an approach of Thank you very much. So the next question is regarding the governance.

The shortage of independent directors has continued. How is the selection process progressing?

Okay, I will answer this question. Yes, when we met with embassies, we got a lot of inquiries about governance. And 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. And yeah, as I said, we received many questions. So appointing independent directors to the board is an extremely important matter. And investors want and other external board members who have a wide variety of knowledge, expertise and that they are independent and they act on behalf of the minority shareholders. So we are now advancing the selection process concretely and we will work to report the composition of the new board to you as early as possible timing. So again, we think individual candidates with strong expertise and the diversity who can contribute to the whole discussion and that represents shareholders. So through these efforts, we will build a governance structure benefiting the global capital market. Thank you very much.

As we have reached the end of our hour this time, this concludes our Q&A session. Before we close, I'd like to ask Yuya to share a few closing remarks.

Yuya, over to you. Thanks everyone for joining the conference call during the busy time. So let me tell you the important points again. So you have seen the numbers and let me tell you the important three points. So one, operating leverage. Revenue grew 35%, operating income grew 66%, adjusted EBIT margin reached 47%. So, profit grew twice as fast as revenue. And that is not a good quarter. That is a business model working. So, our clinics grow. Our health care does not. And the difference is your margin. So, your margin improvement will continue. So, second point. The next leg of the rules. Everyone can buy a diagnostic test. Almost no one owns 293 licensed clinics with physicians and nurses who can act on the results. So that's why longevity is critical for us with AI technology and the US expansion. So we will open the longevity centers next year with meaningful revenue from 2028. And the third one, capital. As you know, we hold ample net cash and fund every one of these initiatives from operating cash flow. So we do not need to dilute or yield to grow. And on the three questions you had asked us most, liquidity, the founders' stakes, and governance. So there's no evidence, no promises. Daily trading volume, again, is up four times since July. Our shareholder base is at 1.6 times, and the appointment independently next year is concretely underway. So, liquidity further approved in three months, so we are just getting started. So, yeah, thanks for your continuous support. We look forward to share our growth and profit-managing improvement going forward. Thanks so much.

Thank you again for joining SBC Group Holdings' Fiscal Year 2026 third quarter earnings call. We sincerely appreciate your continuous support. This concludes today's call. Thank you very much. Thanks so much.