China Cord Blood Corporation Reports Financial Results for the Second Quarter and First Half of Fiscal 2018
HONG KONG, Nov. 20, 2017 /PRNewswire/ -- China Cord Blood Corporation (NYSE: CO) ("CCBC" or the "Company"), China's leading provider of cord blood collection, laboratory testing, hematopoietic stem cell processing and stem cell storage services, today announced its unaudited financial results for the second quarter and first half of fiscal year 2018 ended September 30, 2017.
Second Quarter of Fiscal 2018 Highlights
-- Revenues for the second quarter of fiscal 2018 increased by 27.4% to
RMB234.6 million ($35.3 million) from RMB184.1 million in the prior year
period.
-- New subscribers and accumulated subscriber base were 23,647 and
620,680(1), respectively.
-- Gross profit increased by 30.2% to RMB188.9 million ($28.4 million) from
RMB145.1 million in the prior year period.
-- Gross margin increased to 80.5% from 78.8% in the prior year period.
-- Operating income increased by 39.4% to RMB76.3 million ($11.5 million)
from RMB54.7 million in the prior year period.
-- Operating income before depreciation and amortization and share-based
compensation expenses was RMB108.7 million ($16.3 million), up 31.2%
from RMB82.9 million in the prior year period.(2 )
-- Net income attributable to the Company's shareholders improved to
RMB67.6 million ($10.2 million) from RMB16.6 million in the prior year
period as no interest expense was recorded during this quarter.
-- Net cash provided by operating activities for the second quarter of
fiscal 2018 increased to RMB215.3 million ($32.4 million) from RMB136.3
million in the prior year period.
First Half of Fiscal 2018 Highlights
-- Revenues for the first half of fiscal 2018 increased by 28.5% to
RMB458.8 million ($69.0 million) from RMB357.1 million in the prior year
period.
-- New subscriber sign-ups reached 46,170, and accumulated subscriber base
expanded to 620,680(1.)
-- Gross profit increased by 31.3% to RMB368.4 million ($55.4 million) from
RMB280.6 million in the prior year period.
-- Operating income increased by 49.0% to RMB159.3 million ($23.9 million)
from RMB106.9 million in the prior year period.
-- Operating income before depreciation and amortization and share-based
compensation expenses increased to RMB201.0 million ($30.2 million), or
23.6% year-over-year, from RMB162.6 million in the prior year period.(2)
-- Net income attributable to the Company's shareholders increased
materially to RMB136.7 million ($20.6 million) from RMB32.4 million in
the prior year period.
-- Net cash provided by operating activities for the first half of fiscal
2018 increased significantly to RMB441.7 million ($66.4 million) from
RMB267.3 million in the prior year period.
"We are pleased with our growth in the second quarter, highlighted by the number of new subscribers reaching 23,647, which demonstrates the effectiveness of the tactics we adopted to fine-tune front line sales and nurture our markets. As the Guangdong division continues to display strong growth momentum, the Zhejiang market continues to ramp up and the Beijing market maintains a steady pace of growth, we are prudently optimistic about this year's prospect," said Ms. Ting Zheng, Chief Executive Officer of China Cord Blood Corporation. "While keeping our focus on the organic growth of our core business, we will also actively explore potential investment opportunities to build multiple revenue sources and boost profit growth as new challenges emerge to maintain our position as the industry leader."
Summary -- Second Quarter and First Half Ended September 30, 2016 and 2017
Three Months Ended September 30, Six Months Ended September30,
-------------------------------- -----------------------------
2016 2017 2016 2017
---- ---- ---- ----
(in thousands) RMB RMB US$ RMB RMB US$
Revenues 184,140 234,572 35,257 357,092 458,794 68,958
Gross Profit 145,052 188,928 28,397 280,571 368,368 55,366
Operating Income(3) 54,744 76,328 11,472 106,879 159,289 23,942
Interest Expense (29,801) - - (58,634) (3,257) (490)
Net Income Attributable to 16,641 67,595 10,160 32,363 136,730 20,551
the Company's
Shareholders
Earnings per Share 0.22 0.60 0.09 0.44 1.22 0.18
-- Basic and Diluted4
(RMB/US$)
Revenues Breakdown (%)
Processing Fees 62.5% 65.7% 62.2% 65.6%
Storage Fees 37.5% 34.3% 37.8% 34.4%
New Subscribers (persons) 18,037 23,647 34,674 46,170
Total Accumulated 536,877 620,6801 536,877 620,6801
Subscribers (persons)
Summary -- Selected Cash Flow Statement Items
Three Months Ended September 30, Six Months Ended September 30,
-------------------------------- ------------------------------
2016 2017 2016 2017
---- ---- ---- ----
(in thousands) RMB RMB US$ RMB RMB US$
Net cash provided by 136,277 215,293 32,359 267,291 441,710 66,390
operating activities
Net cash used in (5,151) (11,354) (1,706) (84,280) (22,017) (3,309)
investing activities
Net cash used in (60,000) - - (60,000) - -
financing activities
Second Quarter of Fiscal 2018 Financial Results
REVENUES. Revenues increased by 27.4% to RMB234.6 million ($35.3 million) in the second quarter of fiscal 2018 from RMB184.1 million in the prior year period. The increase was mainly driven by the strong growth in new subscribers and the Company's enlarged total subscriber base.
Revenues generated from processing fees and other services in the second quarter of fiscal 2018 increased by 33.9% to RMB154.1 million ($23.2 million) from RMB115.1 million in the prior year period. 23,647 new subscriber sign-ups were recorded during the reporting quarter compared to 18,037 new subscribers in the prior year period. Revenues generated from processing fees accounted for 65.7% of total revenues compared to 62.5% in the prior year period.
Revenues generated from storage fees increased by 16.7% to RMB80.5 million ($12.1 million) in the second quarter of fiscal 2018 from RMB69.0 million in the prior year period. The accumulated subscriber base as of September 30, 2017 was 620,680(1). Storage fee revenues accounted for 34.3% of total revenues compared to 37.5% in the prior year period.
GROSS PROFIT. Gross profit for the second quarter of fiscal 2018 increased to RMB188.9 million ($28.4 million), a 30.2% increase from RMB145.1 million in the prior year period. Benefiting from economies of scale, gross margin was 80.5%, up from 78.8% in the prior year period.
OPERATING INCOME. Operating income increased by 39.4% to RMB76.3 million ($11.5 million). The increase in sales and marketing expenses was reduced by slower growth in general and administrative expenses which resulted in operating margin expansion from 29.7% to 32.5%. Depreciation and amortization expenses for the quarter amounted to RMB12.4 million ($1.9 million), similar to the same period last year. Share-based compensation expense for the second quarter amounted to RMB20.1 million ($3.0 million) as compared to RMB15.5 million in the prior year period. Various sales and marketing expenses, excluding sales and marketing related share-based compensation expense, experienced an increase from the prior year period. As a result, operating income before depreciation and amortization and share-based compensation expense grew at a flatter pace of 31.2% to RMB108.7 million ($16.3 million).(2)
Research and Development Expenses. Research and development expenses was RMB3.7 million ($0.6 million) in the second quarter of fiscal 2018 compared to RMB2.4 million in the prior year period.
Sales and Marketing Expenses. Sales and marketing expenses amounted to RMB56.2 million ($8.4 million), as compared to RMB39.6 million in the prior year period. During the quarter, the Company continued to motivate its front line sales forces by stepping up performance incentives while escalating marketing and promotion activities. As a result, staff costs and promotion expenses continued to rise. However, sales and marketing expenses as a percentage of revenues were kept in check at 23.9%, which was similar to the fiscal year 2017 full-year average.
General and Administrative Expenses. During the reporting quarter, the Company continued to closely monitor its general and administrative expenses. As a result, general and administrative expenses as a percentage of revenues declined from 26.2% during the same quarter last year to 22.5% in the reporting quarter. In nominal value, general and administrative expenses increased from RMB48.3 million in the same period last year to RMB52.8 million ($7.9 million), and the increase was mainly driven by an increase in share-based compensation expense.
NET INCOME ATTRIBUTABLE TO THE COMPANY'S SHAREHOLDERS. As a result of an increase in operating income and the absence of interest expense, income before income tax for the second quarter of fiscal 2018 increased significantly to RMB83.2 million ($12.5 million) from RMB29.9 million in the prior year period. Income tax expense for the second quarter was RMB14.5 million ($2.2 million) compared to RMB12.6 million in the prior year period. Net income attributable to the Company's shareholders for the second quarter increased to RMB67.6 million ($10.2 million) from RMB16.6 million in the prior year period. Net margin for the second quarter of fiscal 2018 improved materially to 28.8% from 9.0% in the prior year period.
EARNINGS PER SHARE. Basic and diluted earnings per ordinary share for the second quarter of fiscal 2018 improved to RMB0.60 ($0.09)(4) from RMB0.22 in the prior year period.
LIQUIDITY. As of September 30, 2017, the Company had cash and cash equivalents of RMB3,927.3 million ($590.3 million) with aggregate current and non-current deferred revenues amounting to RMB2,103.4 million ($316.1 million). Net cash provided by operating activities for the second quarter of fiscal 2018 increased to RMB215.3 million ($32.4 million) from RMB136.3 million in the prior year period, when an interest payment was made to the Company's convertible note holder.
First Half of Fiscal 2018 Financial Results
For the first half of fiscal year 2018, total revenues increased by 28.5% to RMB458.8 million ($69.0 million) from RMB357.1 million in the prior year period. The increase was largely attributable to an increase in the Company's processing fees revenues from new subscribers. Revenues from processing fees and storage fees grew by 35.6% and 16.8%, respectively. Gross profit increased by 31.3% to RMB368.4 million ($55.4 million) from RMB280.6 million in the prior year period. Operating income increased significantly by 49.0% to RMB159.3 million ($23.9 million) from RMB106.9 million in the prior year period. Operating income before depreciation and amortization and share-based compensation expenses totaled RMB201.0 million ($30.2 million), up 23.6% from RMB162.6 million in the prior year period.(2 )Net income attributable to the Company's shareholders improved to RMB136.7 million ($20.6 million) from RMB32.4 million in the prior year period. Basic and diluted earnings per share attributable to ordinary shares increased materially to RMB1.22 ($0.18) from RMB0.44 in the prior year period. Net cash provided by operating activities in the first half of fiscal 2018 increased to RMB441.7 million ($66.4 million) from RMB267.3 million in the prior year period.
Conference Call
The Company will host a conference call at 8:00 a.m. ET on Tuesday, November 21, 2017 to discuss its financial performance and give a brief overview of the Company's recent developments, followed by a question and answer session. Interested parties can access the audio webcast through the Company's IR website at http://ir.chinacordbloodcorp.com. A replay of the webcast will be accessible two hours after the conference call and available for three weeks at the same URL above. Listeners can also access the call by dialing 1-720-452-9217 or 1-800-289-0438 for US callers, or +852-3008-1527 for Hong Kong callers, access code: 1974053.
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Use of Non-GAAP Financial Measures
GAAP results for the three months and six months ended September 30, 2017 include non-cash items related to the depreciation and amortization and share-based compensation expenses. To supplement the Company's unaudited condensed consolidated financial statements presented on a U.S. GAAP basis, the Company has provided adjusted financial information excluding the impact of these items in this press release. The non-GAAP financial measure represents non-GAAP operating income. Such adjustment is a departure of U.S. GAAP; however, the Company's management believes that these adjusted measures provide investors with a better understanding of how the results relate to the Company's historical performance. Also, management uses non-GAAP operating income as a measurement tool for evaluating actual operating performance compared to budget and prior periods. These adjusted measures should not be considered an alternative to operating income, or any other measure of financial performance or liquidity presented in accordance with U.S. GAAP. These measures are not necessarily comparable to a similarly titled measure of another company. A reconciliation of the adjustments to U.S. GAAP results appears in exhibit 3 accompanying this press release. This additional adjusted information is not meant to be considered in isolation or as a substitute for U.S. GAAP financials. The adjusted financial information that the Company provides also may differ from the adjusted information provided by other companies.
About China Cord Blood Corporation
China Cord Blood Corporation is the first and largest umbilical cord blood banking operator in China in terms of geographical coverage and the only cord blood banking operator with multiple licenses. Under current PRC government regulations, only one licensed cord blood banking operator is permitted to operate in each licensed region and no new licenses will be granted before 2020 in addition to the seven licenses authorized as of today. China Cord Blood Corporation provides cord blood collection, laboratory testing, hematopoietic stem cell processing, and stem cell storage services. For more information, please visit our website at http://www.chinacordbloodcorp.com.
Safe Harbor Statement
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or the Company's future financial performance. The Company has attempted to identify forward-looking statements by terminology including "anticipates", "believes", "expects", "can", "continue", "could", "estimates", "intends", "may", "plans", "potential", "predict", "should" or "will" or the negative of these terms or other comparable terminology. These statements are only predictions, uncertainties and other factors may cause the Company's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. The information in this press release is not intended to project future performance of the Company. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company does not guarantee future results, levels of activity, performance or achievements. The Company expectations are as of the date this press release is issued, and the Company does not intend to update any of the forward-looking statements after the date this press release is issued to conform these statements to actual results, unless required by law.
The forward-looking statements included in this press release are subject to risks, uncertainties and assumptions about the Company's businesses and business environments. These statements reflect the Company's current views with respect to future events and are not a guarantee of future performance. Actual results of the Company's operations may differ materially from information contained in the forward-looking statements as a result of risk factors some of which include, among other things: continued compliance with government regulations regarding cord blood banking in the People's Republic of China, or PRC and any other jurisdiction in which the Company conducts its operations; changing legislation or regulatory environments (including the relaxation of China's one child policy) in the PRC and any other jurisdiction in which the Company conducts its operations; the acceptance by subscribers of the Company's different pricing and payment options and reaction to the introduction of the Company's premium-quality pricing strategy; demographic trends in the regions of the PRC in which the Company is the exclusive licensed cord blood banking operator; labor and personnel relations; the existence of a significant shareholder able to influence and direct the corporate policies of the Company; credit risks affecting the Company's revenue and profitability; changes in the healthcare industry, including those which may result in the use of stem cell therapies becoming redundant or obsolete; the Company's ability to effectively manage its growth, including maintaining effective controls and procedures and attracting and retaining key management and personnel; changing interpretations of generally accepted accounting principles; the availability of capital resources, including in the form of capital markets financing opportunities, in light of industry developments affecting issuers that have pursued a "reverse merger" with an operating company based in China, as well as general economic conditions; the proposed transactions between an affiliate of Golden Meditech Holdings Limited and Nanjing Ying Peng Hui Kang Medical Industry Investment Partnership (limited partnership); and other relevant risks detailed in the Company's filings with the Securities and Exchange Commission in the United States.
This announcement contains translations of certain Renminbi amounts into U.S. dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from Renminbi to U.S. dollars as of and for the periods ending September 30, 2017 were made at the noon buying rate of RMB6.6533 to $1.00 on September 29, 2017 in the City of New York for cable transfers in Renminbi per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York. China Cord Blood Corporation makes no representation that the Renminbi or U.S. dollar amounts referred to in this press release could have been or could be converted into U.S. dollars or Renminbi, at any particular rate or at all.
For more information, please contact:
China Cord Blood Corporation
Investor Relations Department
Tel: (+852) 3605-8180
Email: ir@chinacordbloodcorp.com
ICR, Inc.
William Zima
Tel: (+86) 10-6583-7511
U.S. Tel: (646) 405-5185
Email: William.zima@icrinc.com
EXHIBIT 1
CHINA CORD BLOOD CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
As of March 31 and September 30, 2017
-------------------------------------
March 31, September 30,
2017 2017
---- ----
RMB RMB US$
(in thousands except share data)
ASSETS
Current assets
Cash and cash equivalents 3,510,264 3,927,280 590,276
Accounts receivable, less allowance for doubtful accounts
(March 31, 2017: RMB46,858; September 30, 2017:
RMB56,829 (US$8,541)) 112,533 111,697 16,789
Inventories 30,987 38,756 5,825
Prepayments and other receivables - Third parties 17,524 22,576 3,394
Prepayments and other receivables - Related parties - 2,284 343
--- ----- ---
Total current assets 3,671,308 4,102,593 616,627
Property, plant and equipment, net 551,434 541,612 81,405
Non-current deposits - Third parties 237,487 236,903 35,607
Non-current deposits - Related party - 8,500 1,278
Non-current accounts receivable, less allowance for doubtful
accounts (March 31, 2017: RMB70,744; September 30,
2017: RMB68,696 (US$10,325)) 135,148 123,421 18,550
Inventories 68,775 69,843 10,497
Intangible assets, net 106,686 104,376 15,688
Available-for-sale equity securities 200,790 163,038 24,505
Other investment 189,129 189,129 28,426
Deferred tax assets 22,155 25,772 3,874
------ ------ -----
Total assets 5,182,912 5,565,187 836,457
========= ========= =======
LIABILITIES
Current liabilities
Convertible note, net 1,031,154 - -
Accounts payable 11,060 13,125 1,973
Accrued expenses and other payables 65,162 92,238 13,864
Deferred revenue 323,690 374,912 56,350
Amount due to a related party 4,679 10,428 1,567
Income tax payable 11,383 13,294 1,998
------ ------ -----
Total current liabilities 1,447,128 503,997 75,752
Non-current deferred revenue 1,569,579 1,728,471 259,792
Other non-current liabilities 302,233 330,455 49,668
Deferred tax liabilities 21,423 20,985 3,154
------ ------ -----
Total liabilities 3,340,363 2,583,908 388,366
--------- --------- -------
EQUITY
Shareholders' equity of China Cord Blood
Corporation
Ordinary shares
- US$0.0001 par value, 250,000,000 shares authorized,
73,140,147 shares issued and 73,003,248 shares
outstanding as of March 31, 2017 and 113,661,641
shares issued and 113,524,742 shares outstanding
as of September 30, 2017 50 78 12
Additional paid-in capital 936,417 1,987,057 298,657
Treasury stock, at cost (March 31 and September 30,
2017: 136,899 shares, respectively) (2,815) (2,815) (423)
Accumulated other comprehensive income/(loss) 24,428 (26,166) (3,933)
Retained earnings 879,775 1,016,505 152,783
------- --------- -------
Total equity attributable to China Cord Blood
Corporation 1,837,855 2,974,659 447,096
Non-controlling interests 4,694 6,620 995
----- ----- ---
Total equity 1,842,549 2,981,279 448,091
--------- --------- -------
Total liabilities and equity 5,182,912 5,565,187 836,457
========= ========= =======
EXHIBIT 2
CHINA CORD BLOOD CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months and Six Months Ended September 30, 2016 and 2017
Three months ended September 30, Six months ended September 30,
-------------------------------- ------------------------------
2016 2017 2016 2017
----
RMB RMB US$ RMB RMB US$
(in thousands except per share data)
Revenues 184,140 234,572 35,257 357,092 458,794 68,958
Direct costs (39,088) (45,644) (6,860) (76,521) (90,426) (13,592)
------- ------- ------ ------- ------- -------
Gross profit 145,052 188,928 28,397 280,571 368,368 55,366
Operating expenses
Research and development (2,377) (3,664) (551) (4,326) (6,343) (953)
Sales and marketing (39,642) (56,152) (8,440) (77,834) (99,602) (14,970)
General and administrative (48,289) (52,784) (7,934) (91,532) (103,134) (15,501)
------- ------- ------ ------- -------- -------
Total operating expenses (90,308) (112,600) (16,925) (173,692) (209,079) (31,424)
------- -------- ------- -------- -------- -------
Operating income 54,744 76,328 11,472 106,879 159,289 23,942
------ ------ ------ ------- ------- ------
Other (expenses)/income, net
Interest income 4,438 5,790 870 8,715 10,617 1,596
Interest expense (29,801) - - (58,634) (3,257) (490)
Foreign currency exchange
(losses)/gains (15) 110 17 120 111 17
Others 576 993 149 728 2,142 322
--- --- --- --- ----- ---
Total other (expenses)/income,
net (24,802) 6,893 1,036 (49,071) 9,613 1,445
------- ----- ----- ------- ----- -----
Income before income tax 29,942 83,221 12,508 57,808 168,902 25,387
Income tax expense (12,639) (14,525) (2,183) (24,315) (30,246) (4,547)
------- ------- ------ ------- ------- ------
Net income 17,303 68,696 10,325 33,493 138,656 20,840
Net income attributable to
non-controlling interests (662) (1,101) (165) (1,130) (1,926) (289)
---- ------ ---- ------ ------ ----
Net income attributable to
China Cord Blood Corporation's
shareholders 16,641 67,595 10,160 32,363 136,730 20,551
====== ====== ====== ====== ======= ======
Earnings per share:
Attributable to ordinary shares
- Basic 0.22 0.60 0.09 0.44 1.22 0.18
==== ==== ==== ==== ==== ====
- Diluted 0.22 0.60 0.09 0.44 1.22 0.18
==== ==== ==== ==== ==== ====
Other comprehensive losses,
net of nil income taxes
- Foreign currency translation
adjustments (1,400) (8,376) (1,259) (8,360) (20,107) (3,022)
- Unrealized holding losses
in available-for-sale
equity securities (10,507) (18,562) (2,790) (16,977) (30,487) (4,582)
Total other comprehensive losses (11,907) (26,938) (4,049) (25,337) (50,594) (7,604)
------- ------- ------ ------- ------- ------
Comprehensive income 5,396 41,758 6,276 8,156 88,062 13,236
===== ====== ===== ===== ====== ======
Comprehensive income attributable to
non-controlling interests (662) (1,101) (165) (1,130) (1,926) (289)
---- ------ ---- ------ ------ ----
Comprehensive income
attributable to China Cord Blood
Corporation's shareholders 4,734 40,657 6,111 7,026 86,136 12,947
===== ====== ===== ===== ====== ======
EXHIBIT 3
CHINA CORD BLOOD CORPORATION
RECONCILIATION OF NON-GAAP OPERATING INCOME
For the Three Months and Six Months Ended September 30, 2016 and 2017
---------------------------------------------------------------------
Three months ended September 30, Six months ended September 30,
-------------------------------- ------------------------------
2016 2017 2016 2017
---- ---- ---- ----
RMB RMB US$ RMB RMB US$
(in thousands)
GAAP amount of operating
income 54,744 76,328 11,472 106,879 159,289 23,942
Depreciation and
amortization expenses5 12,563 12,354 1,857 25,147 25,106 3,773
Share-based compensation
expense6 15,546 20,060 3,015 30,605 16,622 2,498
------ ------ ----- ------ ------ -----
Non-GAAP operating
income 82,853 108,742 16,344 162,631 201,017 30,213
====== ======= ====== ======= ======= ======
5 Depreciation and amortization
expenses relate to property,
plant and equipment and
intangible assets respectively.
6 Share-based compensation
expense relates to the Company's
RSU scheme in which 7,300,000
RSUs were issued and outstanding
as of September 30, 2017.
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SOURCE China Cord Blood Corporation
