We were the largest dental services provider in the premium private dental service market in China in terms of total revenues in 2020, according to Frost & Sullivan, and also the third largest dental services provider in the overall private dental services market in China in terms of revenues during the same period. Founded in 1999, we have served patients in approximately 7.4 million visits in the past ten years, and have been instrumental in raising public awareness and driving consumer recognition of the importance of dental care and good oral hygiene in China. We have become a leading dental services group and have established a nationwide footprint in China, operating both Arrail Dental, a leading premium dental services brand, and Rytime Dental, a middle-end dental services brand. According to Frost & Sullivan, premium dental services generally refer to comprehensive and highly customized dental services targeting the upper market with listed prices at least 25% higher than the standard listed prices of the same types of dental services provided by Class III Grade A hospitals, while middle-end dental services generally refer to comprehensive dental services tailored to the middle and upper markets with listed prices approximately 10% higher than the standard listed prices of the same types of dental services provided by Class III Grade A hospitals.
Arrail Dental 瑞爾齒科
51 dental clinics primarily in Tier-1 cities as of September 30, 2021
Rytime Dental 瑞泰口腔
7 dental hospitals and 53 dental clinics primarily in Tier-1 and key Tier-2 cities, including Beijing, Shanghai, Chengdu, Chongqing, as of September 30, 2021
We have been providing dental services since we opened our first Arrail Dental clinic in 1999. We offer a diverse range of professional, personalized dental services spanning (i) general dentistry; (ii) orthodontics; and (iii) implantology. Through decades of commitment and endeavors in the dental healthcare industry, we have earned the trust of our patients. In addition, our repeat visit rates, defined as the percentage of patients that revisited our clinics or hospitals beyond six months after their initial visits and exclude follow-up consultations of the same treatment, were 42.1%, 41.4%, 45.8% and 47.6% in fiscal 2019, 2020 and 2021 and the six months ended September 30, 2021, respectively.
China’s market has more dental establishments operated by private services providers. This is because the private sector mainly comprises dental clinics which have less operational, regulatory and capital requirements, resulting in broader geographic coverage. As a subset of dental clinics, private dental clinics are broadly distributed geographically, with various business models corresponding to different market positioning. In addition to common dental diseases, private dental clinics also provide cosmetic and chronic care programs, pre-treatment consultation and other personalized customer services. The public sector mainly consists of dental hospitals, which primarily offer comprehensive and diverse dental treatments to customers in Tier-1 and Tier-2 cities, and general hospitals with dental departments, which are typically located in both urban and rural areas catering to common dental treatment demands of mass population. The number of dental establishments had been growing at a CAGR of 6.5% from 64,100 in 2015 to 87,700 in 2020. The number of dental establishments is expected to reach 144,500 in 2025 with a CAGR of 10.4%. In particular, private dental clinics accounted for 51.9% of the total dental services market in China in 2020, while dental hospitals and general hospitals with dental departments in aggregate accounted for 48.1% of the total market share.
We have successfully established an extensive presence in China, and are continuing to expand our footprint nationwide. As of September 30, 2021, we operated 111 hospitals and clinics, including four clinics in Changsha operated under exclusive consultation and service agreements, providing mid- to high-end dental care services in 15 predominantly Tier-1 and Tier-2 cities across China, with 882 experienced dentists. We have established this dental network through both organic growth and strategic acquisition, to systematically and effectively open and ramp up new clinics, as well as maintain and improve revenues and profitability at fully-fledged clinics.
We firmly believe that our corporate culture plays a significant role in ensuring the scalability of our business model and the consistency of our service quality. Since our inception, we aim to cultivate a service-oriented culture and incorporate our key values of “integrity, professionalism and being a good person” into our day-to-day operation. We also believe that our corporate culture enables our dentists and our staff to collaborate effectively and provide superior service to our patients. Our business philosophy is to provide “Proper Treatment”, which we define as most suitable and medically necessary treatment, for each of our patients. In order to ensure that our conduct is in accordance with our culture, we have developed a series of management framework, protocols and infrastructure to guide our daily operations.
Our large, growing and high-caliber team of dentists with expertise and qualifications in a variety of therapeutic areas plays an important role in the competitiveness of our business. We understand the importance of talent acquisition and development in our industry, and have developed a robust system and proven strategy focused on recruiting, training, career progression and value sharing with our dentists. At the same time, we implement a standardized and digitalized platform model spanning across medical quality control, SaaS systems for dental operations, procurement, medical records management and patient relationship management to empower dentists to provide high-quality dental services to patients in an efficient and consistent manner across hospitals and clinics.
We have formulated a dual-brand strategy with our Arrail and Rytime brands to offer clear and distinctive value propositions to patients of different economic and geographic background. We believe that operating complementary brands and providing differentiated pricing enable us to expand rapidly in a variety of regions and locations, and tap into a more diverse patient pool to fuel further growth.
‧ Arrail. Arrail Dental is a leading premium dental services brand in China and targets affluent patients with high purchasing power and greater lifetime value, primarily in Tier-1 cities. Arrail clinics are able to charge premium pricing based on their excellent quality of dental services and patient care. As of September 30, 2021, most of our clinics under the Arrail brand are located at prime commercial locations and Class A office buildings.
‧ Rytime. Rytime Dental is our fast-growing brand targeting middle-class consumers primarily in Tier-1 and key Tier-2 cities across a broader geographic reach. Rytime is positioned to capture the greater middle-end dental services market by offering high-quality dental services at more affordable prices. We have achieved particular success with Rytime hospitals in attracting substantial patient flow and realizing economies of scale through offering a broad spectrum of dental specialties at a single location. As of September 30, 2021, we operated 7 hospitals and 53 clinics under the Rytime brand, most of which were located in densely populated residential areas.
Over the past two decades, we have developed a growing and loyal customer base. Our customers are primarily individual patients, and to a lesser extent, corporate clients such as corporations, industry-leading banks and insurance companies who provide dental care benefits to their employees and/or customers. For fiscal 2021 and the six months ended September 30, 2021, revenues generated from individual patients remained steady at 93% of our total revenues, respectively. See “Business—Our Customers” for further details.
We are well positioned to capture the enormous market opportunities in China, especially in the premium market, leveraging our market leadership and deep understanding of China’s private dental services market. Our growth is supported by powerful drivers such as increasing disposable income of the Chinese population, increasing per capita expenditure on healthcare services, rising awareness of dental health and aesthetics and favorable government policies. As a result, our business experienced rapid growth during the Track Record Period. According to the Frost & Sullivan Report, the market size of private dental services market in China increased from RMB43.3 billion in 2015 to RMB83.1 billion in 2020 with a CAGR of 13.9%, and is expected to further expand and reach RMB241.4 billion in 2025, representing a CAGR of 23.3% during the forecast period. Notably, the market size of premium private dental services market increased from RMB1.3 billion in 2015 to RMB2.6 billion in 2020, representing a CAGR of 15.2%. Along with the continuous growth in household disposable income, and commercial health insurance coverage for dental conditions, premium dental services with higher service standards, greater customization and more privacy become increasingly attractive. The underserved demand for high-quality dental services indicates a sizable underpenetrated private dental services market in China.
Our revenues continued to grow during the Track Record Period. Our revenues were RMB1,080.3 million in fiscal 2019, RMB1,099.9 million in fiscal 2020, and grew significantly to RMB1,515.1 million in fiscal 2021. Our revenues increased from RMB720.3 million for the six months ended September 30, 2020 to RMB841.3 million for the six months ended September 30, 2021. We had net losses of RMB304.2 million, RMB325.8 million, RMB597.8 million in fiscal 2019, 2020 and 2021, respectively. We had a net loss of RMB464.2 million in the six months ended September 30, 2021, compared to a net loss of RMB187.9 million in the same period in 2020, primarily due to the impact of the losses from changes in fair value of our convertible redeemable preferred shares, bond, and warrants and certain one-off expenses we incurred during such periods.
Source: Arrail Group (06639) Prospectus (IPO Date : 2022/03/09) |