Concord Medical Reports Financial Results for the First Half of 2020
BEIJING, Aug. 26, 2020 /PRNewswire/ -- Concord Medical Services Holdings Limited ("Concord Medical" or the "Company") (NYSE: CCM), a healthcare provider specializing in cancer care, research and prevention by operating a network of medically advanced comprehensive cancer hospitals and standalone radiotherapy and diagnostic imaging centers in China, today announced its unaudited consolidated financial results for the six months ended June 30, 2020([1]).
2020 First Half Highlights
-- Total net revenues were RMB83.0 million ($11.7 million) in the first
half of 2020, representing a 16.6% decrease from total net revenues of
RMB99.5 million in the same period last year. Total net revenues
included the net revenues from the network business of RMB37.7 million
($5.3 million) and the net revenues from hospital business of RMB45.3
million ($6.4 million).
-- Gross loss was RMB3.5 million ($0.5 million) in the first half of 2020,
compared to the gross profit of RMB3.1 million in the first half of
2019. The gross loss margin was 4.2% for the first half of 2020,
compared to the gross profit margin of 3.1% for the same period last
year.
-- Net loss attributable to ordinary shareholders in the first half of 2020
was RMB128.8 million ($18.2 million), compared to RMB140.1 million in
the same period last year.
-- Basic and diluted loss per share for Class A and Class B ordinary
shares([2]) in the first half of 2020 were both RMB2.23 ($0.32),
compared to RMB2.03, respectively, in the same period last year.
-- Non-GAAP net loss in the first half of 2020 was RMB155.0 million ($21.9
million), compared to non-GAAP net loss of RMB149.3 million in the same
period last year. Non-GAAP basic and diluted loss per share for Class A
and Class B ordinary shares in the first half of 2020 were both RMB2.15
($0.30), compared to RMB1.95 in the same period last year.
-- Adjusted EBITDA([3]) (non-GAAP) was negative RMB113.1 million ($16.0
million) in the first half of 2020, compared to negative RMB108.3
million in the same period last year.
Dr. Jianyu Yang, Chairman and Chief Executive Officer of Concord Medical, commented, "In the first half of 2020, the Company's business was affected by the coronavirus disease (COVID-19) epidemic. As the epidemic situation is under control in China, the Company's business has returned to normal. In particular, compared with the same period in 2019, our Shanghai Meizhong Jiahe Cancer Center nearly doubled its revenue."
"The Company's Shanghai Meizhong Jiahe Medical Imaging Diagnostic Center (the "Imaging Diagnosis Center") has been officially opened in April 2020, which will expand the Company's business income."
"The proton equipment of Guangzhou Concord Cancer Center (the "Cancer Center") has arrived and is expected to be hoisted in the recent months. Besides, the construction of the Cancer Center (exclude the proton part) is nearly competed, and the Company is starting the preparation for the opening of the Cancer Center. With the gradual operation of the Cancer Center to the mature stage, the Company's revenue will also be greatly improved in the next few years."
2020 First Half Financial Results
Network Business
Net revenues from the network business were RMB37.7 million ($5.3 million), representing a 44.6% decrease from net revenues of RMB68.0 million in the first half of 2019, primarily attributable to the effect of the COVID-19 epidemic and the closure of certain centers in our network of centers. With four centers closed in the first half of 2020, the Company operated a network of 27 centers in 20 cities in China as of June 30, 2020.
Cost of revenues of the network business was RMB14.6 million ($2.1 million), representing a 58.0% decrease from RMB34.8 million in the first half of 2019.
Gross profit from the network business was RMB23.1 million ($3.3 million), representing a 30.4% decrease from RMB33.2 million in the first half of 2019. The gross profit margin of the network business for the first half of 2020 was 61.3%, compared to the gross profit margin of 48.8% for the same period last year.
Selling expenses of the network business were RMB19.4 million ($2.7 million), representing a 108.6% increase from RMB9.3 million in the first half of 2019. Selling expenses as a percentage of net revenues from the network business was 51.5% in the first half of 2020, compared to 13.7% in the first half of 2019. The increase in selling expenses of the network business was mainly due to the increase in advertisement and promotion expenses.
General and administrative expenses of the network business were RMB56.9 million ($8.1 million), representing a 30.1% decrease from RMB81.4 million in the first half of 2019. General and administrative expenses as a percentage of net revenues from the network business were 150.9% in the first half of 2020, compared to 119.7% in the same period last year. The decrease was mainly because Zhongrong Fund management fees have been fully settled in the second half of 2019.
Comparing to RMB24.8 million in the same period last year, capital expenditures decreased to RMB3.9 million ($0.6 million) in the first half of 2020, primarily for procuring equipment for network centers.
Accounts receivable were RMB61.1 million ($8.6 million) as of June 30, 2020, compared to RMB67.1 million as of December 31, 2019. The average period of sales outstanding for accounts receivable (also known as "Days Sales Outstanding") was 298 days in the first half of 2020.
During the first half of 2020, the Company handled 3,837 patient treatment cases and 40,444 patient diagnostic cases, representing a 28.1% decrease and a 45.9% decrease from the same period last year, respectively. The decreases in patient treatment and diagnostic cases were mainly due to the influence of the COVID-19 epidemic.
Hospital Business
Net revenues from the hospital business were RMB45.3 million ($6.4 million) in the first half of 2020, representing a 43.8% increase from net revenues of RMB31.5 million in the first half of 2019, mainly because the operation of Shanghai Meizhong Jiahe Cancer Center Co., Ltd. has gradually matured and the Imaging Diagnostic Center opened in this April.
Cost of revenues of the hospital business in the first half of 2020 was RMB71.8 million ($10.2 million), representing a 16.6% increase from cost of revenues of RMB61.6 million in the first half of 2019, mainly because of the preparation and operation of the Imaging Diagnostic Center.
Gross loss from the hospital business was RMB26.5 million ($3.8 million) in the first half of 2020, compared to RMB30.1 million in same period last year. The gross loss margin of the hospital business for the first half of 2020 was 58.5%, compared to the gross loss margin of 95.8% for the same period last year.
Selling expenses of the hospital business were RMB2.7 million ($0.4 million) in the first half of 2020, representing an 80.0% increase from selling expenses of RMB1.5 million in the first half of 2019. Selling expenses as a percentage of net revenues from the hospital business was 6.0% in the first half of 2020, compared to 4.8% in the first half of 2019. The increase was mainly because the market research cost increase for the Imaging Diagnosis Center and the Cancer Center.
General and administrative expenses of the hospital business were RMB77.5 million ($11.0 million) in the first half of 2020, of which employee benefit expenses were RMB31.7 million ($4.5 million). In the same period of last year, general and administrative expenses of the hospital business were RMB58.1 million. The increase was mainly due to the increase in salary and rental fees for hospitals. General and administrative expenses as a percentage of net revenues from the hospital business was 171.1% in the first half of 2020, compared to 184.4% in the first half of 2019.
Comparing to RMB410.5 million in the first half of 2019, capital expenditures of the hospital were RMB364.9 million ($51.6 million) in the first half of 2020. The decrease was mainly related to the decrease in construction fees and medical equipment payment for Beijing Proton Medical Center, Shanghai Concord Cancer Center and the Cancer Center.
As of June 30, 2020, accounts receivable from hospital business were RMB11.2 million ($1.6 million), representing an 18.2% decrease from accounts receivable of RMB13.7 million as of December 31, 2019. The number of Days Sales Outstanding was 50 days in the first half of 2020.
As of June 30, 2020, the Company had bank loans and other borrowings totaling RMB2.0 billion ($288.6 million).
Recent Developments
The Imaging Diagnosis Center commenced operation in April 2020. The Imaging Diagnosis Center is located on the second floor of the Medical Technology Center of Shanghai Xinhongqiao International Medical Park (the "Park"), which is the center of the Park. The Imaging Diagnosis Center provides high-quality diagnostic imaging services, such as radiology, ultrasound and nuclear medicine, diagnosis and remote consultation, education and training, to all the medical institutions, premium clinics and medical institutions around the Park. Advanced imaging diagnostic equipment, such as CT, magnetic resonance, PET-CT and PET-MRI, have been installed in the Imaging Diagnosis Center.
Notes:
[1] This announcement contains
translations of certain RMB amounts
into U.S. dollars at specified
rates solely for the convenience of
the reader. Unless otherwise noted,
all translations of RMB into U.S.
dollars are made at a rate of
RMB7.0651 to $1.00, the noon buying
rate in New York City for cable
transfers payable in RMB, as
certified for customs purposes by
the Federal Reserve Bank of New
York on June 30, 2020.
[2] The Company adjusts for the
accretion of mezzanine equity in
the calculation of loss
attributable to ordinary
shareholders of the Company used in
the loss per share for Class A and
Class B ordinary shares
calculation.
[3] Adjusted EBITDA is defined as
net income plus interest, taxes,
depreciation and amortization,
share-based compensation expenses
and other adjustments. Other
adjustments include foreign
exchange gain (loss), net, loss on
disposal of long-lived equipment,
income from disposal of associate
companies and other income.
About Concord Medical
Concord Medical Services Holdings Limited is a healthcare provider specializing in cancer care, research and prevention. The Company operates a network of medically advanced comprehensive cancer hospitals and standalone radiotherapy and diagnostic imaging centres in China. The Company focuses on providing multidisciplinary cancer care approach in all areas of oncology services in its cancer hospitals. The Company also equips its hospitals with technologically advanced equipment such as the state-of-the-art proton therapy system in its Beijing, Shanghai and Guangzhou cancer hospitals. As of June 30, 2020, the Company operated a network of 27 centers based in 20 hospitals, spanning over 20 cities across 13 provinces and administrative regions in China. To ensure the commitment to the highest level of clinical care for patients, the Company offers ongoing education and training for doctors and other medical professionals in its network hospitals and centres in both local and overseas medical institutions. For more information, please see http://ir.ccm.cn.
Safe Harbor Statement
This announcement contains forward-looking statements. These forward-looking statements can be identified by words or phrases such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar expressions. Forward-looking statements are inherently subject to uncertainties and contingencies beyond the Company's control and based upon premises with respect to future business decisions, which are subject to change. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. The Company does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
About Non-GAAP Financial Measures
To supplement the consolidated financial statements presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), Concord Medical uses certain non-GAAP measures. The Company presents certain of its financial information that is adjusted from results based on GAAP to exclude the impact of share-based compensation expense. The Company believes excluding share-based compensation expense from its GAAP financial measures is useful for its management and investors to assess and analyze the Company's core operating results, as such expense is not directly attributable to the underlying performance of the Company's business operations and do not impact its current cash earnings. Concord Medical also believes these non-GAAP measures excluding share-based compensation expense are important in helping investors to understand the Company's current financial performance and future prospects and to compare business trends among different reporting periods on a consistent basis. In addition, Concord Medical also presents the non-GAAP measure of Adjusted EBITDA, which is defined in this announcement as net income plus interest, taxes, depreciation and amortization, and share-based compensation expenses and other adjustments. Other adjustments include foreign exchange gain (loss), net, loss on disposal of long-lived equipment, income from disposal of associate companies and other income. Furthermore, Adjusted EBITDA eliminates the impact of items that the Company does not consider to be indicative of the performance of the network business and hospital business. The Company believes investors will similarly use Adjusted EBITDA as one of the key metrics to evaluate its financial performance and to compare its current operating results with corresponding historical periods and with other companies in the healthcare services industry. The presentation of these additional measures should not be considered a substitute for or superior to GAAP results or as being comparable to results reported or forecasted by other companies. The non-GAAP measures have been reconciled to GAAP measures in the attached financial information.
Concord Medical Services Holdings Co., Ltd.
Consolidated Balance Sheets
(in thousands)
December 31, 2019 June 30, 2020
RMB
RMB
US
(audited)
(Unaudited)
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents 74,307 566,516 80,185
Accounts receivable 73,731 61,528 8,709
Prepayments and other current assets 94,868 288,727 40,867
Inventories 4,341 5,573 789
Net investments in direct financing leases, current portion 35,240 40,285 5,702
Total current assets 282,487 962,629 136,252
Non-current assets
Property, plant and equipment, net 1,898,861 2,092,567 296,184
Right of use assets, net 647,080 629,989 89,169
Net investments in direct financing leases, non-current portion 27,084 20,249 2,866
Goodwill 210,443 213,920 30,279
Intangible assets, net 532,489 524,882 74,292
Deposits for non-current assets 624,132 671,817 95,090
Long-term investments 64,948 321,496 45,505
Other non-current assets 9,921 13,684 1,937
Total non-current assets 4,014,958 4,488,604 635,322
Total assets 4,297,445 5,451,233 771,574
LIABILITIES AND EQUITY
Current liabilities
Accounts payable 8,275 5,992 848
Accrued expenses and other liabilities 277,101 256,106 36,249
Income tax payable 752 2,165 306
Operating lease liabilities, current 12,884 9,867 1,397
Short-term bank and other borrowings 285,500 440,177 62,303
Long-term bank and other borrowings, current portion 42,939 106,768 15,112
Total current liabilities 627,451 821,075 116,215
Non-current liabilities
Long-term bank and other borrowings, non-current portion 1,291,763 1,491,961 211,173
Deferred tax liabilities 165,438 166,624 23,584
Long-term secured borrowings - 116,800 16,532
Operating lease liabilities, non-current 218,817 211,716 29,966
Other long-term liabilities 104,738 104,529 14,799
Total non-current liabilities 1,780,756 2,091,630 296,054
Total liabilities 2,408,207 2,912,705 412,269
Contigently redeemable noncotrolling interests 1,909,606 2,737,552 387,475
EQUITY
Class A ordinary shares 68 68 10
Class B ordinary shares 37 37 5
Treasury stock (8) (8) (1)
Additional paid-in capital 1,759,941 1,823,366 258,081
Accumulated other comprehensive loss (97,285) (104,152) (14,742)
Accumulated deficit (1,785,517) (2,078,181) (294,148)
Total Concord Medical Services Holdings Limited shareholders' (122,764) (358,870) (50,795)
deficit
Noncontrolling interests 102,396 159,846 22,625
Total deficit (20,368) (199,024) (28,170)
Total liabilities, mezzanine equity and deficit 4,297,445 5,451,233 771,574
Concord Medical Services Holdings Co., Ltd.
Consolidated Profit & Loss
(in thousands, except for number of shares and per share data)
June 30, 2019 June 30, 2020
RMB
RMB
US$
(Unaudited)
(Unaudited)
(Unaudited)
Revenues net of value-added tax
Network 68,046 37,674 5,332
Hospital 31,466 45,337 6,417
Total net revenues 99,512 83,011 11,749
Cost of revenues:
Network (34,799) (14,644) (2,073)
Hospital (61,596) (71,839) (10,168)
Total cost of revenues (96,395) (86,483) (12,241)
Gross profit/ (loss) 3,117 (3,472) (492)
Operating expenses:
Selling expenses (10,827) (22,095) (3,127)
General and administrative expenses (139,518) (134,397) (19,023)
Operating loss (147,228) (159,964) (22,642)
Interest expense (9,329) (20,835) (2,949)
Foreign exchange gain(loss), net 2,606 (1,736) (246)
Loss on disposal of long-lived equipment (2,781) (5) (1)
Interest income 6,124 4,050 573
(Loss) income from equity method investments (4,536) 1,252 177
Other income, net 2,671 4,958 702
Gain on disposal of an equity method investment - 8,151 1,154
---
Loss before income tax (152,473) (164,129) (23,232)
Income tax expenses (7,912) (1,833) (259)
Net loss (160,385) (165,962) (23,491)
Net loss attributable to noncontrolling interests (20,268) (37,167) (5,261)
Net loss attributable to Concord Medical Services Holdings (140,117) (128,795) (18,230)
Limited
Loss per share for Class A and Class B ordinary shares
Basic (2.03) (2.23) (0.32)
Diluted (2.03) (2.23) (0.32)
Weighted average number of class A and class B ordinary
shares outstanding:
Basic 130,161,668 130,241,995 130,241,995
Diluted 130,161,668 130,241,995 130,241,995
Other comprehensive loss, net of tax of nil
Foreign currency translation, net tax of nil (419) (6,867) (972)
Total other comprehensive loss, net of tax (419) (6,867) (972)
Comprehensive loss (160,804) (172,829) (24,463)
Comprehensive loss attributable to noncontrolling interests (19,123) (37,167) (5,261)
Comprehensive loss attributable to Concord Medical (141,681) (135,662) (19,202)
Services Holdings Limited's shareholders
Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures(*)
(in RMB thousands, except per share data unaudited)
For the six months ended June 30, For the six months ended June 30,
2019 2020
GAAP Adjustment
Non-GAAP GAAP Adjustment
Non-GAAP
Measure Measure Measure Measure
Operating loss (147,228) 11,130 (136,098) (159,964) 10,916 (149,048)
Net loss (160,385) 11,130 (149,255) (165,962) 10,916 (155,046)
Basic loss per share for Class A and Class B ordinary shares (2.03) 0.09 (1.95) (2.23) 0.08 (2.15)
Diluted loss per share for Class A and Class B ordinary shares (2.03) 0.09 (1.95) (2.23) 0.08 (2.15)
(*) The only adjustment is share-based compensation.
Reconciliation from net income to adjusted EBITDA(*)
(in RMB thousands, unaudited)
For the six months ended
For the six months ended
---
June 30, 2019
June 30, 2020
---
Net loss (160,385) (165,962)
Interest expenses, net 3,205 16,785
Income tax expenses 7,912 1,833
Depreciation and amortization 32,366 34,715
Share-based compensation 11,130 10,916
Other adjustments (2,496) (11,368)
Adjusted EBITDA (108,268) (113,081)
EBITDA margin -109% -136%
(*) Definition of adjusted EBITDA: Adjusted EBITDA is defined as net income plus interest,
taxes, depreciation and amortization, share-based compensation expenses and other
adjustments. Other adjustments include foreign exchange gain(loss), net, loss on disposal
of long-lived equipment, income from disposal of associate companies and other income
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SOURCE Concord Medical Services Holdings Limited
