Global Cord Blood Corporation Reports Financial Results for the Second Quarter and First Half of Fiscal 2021
HONG KONG, Nov. 24, 2020 /PRNewswire/ -- Global Cord Blood Corporation (NYSE: CO) ("GCBC" 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 2021 ended September 30, 2020.
Second Quarter of Fiscal 2021 Highlights
-- Revenues decreased by 8.9% year-over-year ("YoY") to RMB285.6 million
($42.1 million).
-- New subscribers and accumulated subscriber base were 17,643 and
867,180([1]), respectively.
-- Gross profit decreased by 9.1% YoY to RMB240.9 million ($35.5 million).
Gross margin edged down slightly to 84.3% from 84.6% in the prior year
period.
-- Operating income decreased by 3.7% YoY to RMB139.2 million ($20.5
million). Operating margin increased to 48.7% from 46.1% in the prior
year period.
-- Operating income before depreciation and amortization ("non-GAAP
operating income([2])") decreased by 3.5% YoY to RMB151.4 million ($22.3
million).
-- Net income attributable to the Company's shareholders increased by 9.2%
to RMB131.4 million ($19.4 million), largely due to an increase in fair
value of equity securities ("mark-to-market gain").
-- Net cash provided by operating activities was RMB174.8 million ($25.7
million).
First Half of Fiscal 2021 Highlights
-- Revenues decreased by 3.5% YoY to RMB566.5 million ($83.4 million).
-- New subscribers and accumulated subscriber base were 34,876 and
867,180([1]), respectively.
-- Gross profit decreased by 2.9% YoY to RMB478.4 million ($70.5 million).
-- Operating income increased by 6.2% YoY to RMB272.7 million ($40.2
million).
-- Non-GAAP operating income([2]) increased by 5.5% YoY to RMB297.3 million
($43.8 million).
-- Net income attributable to the Company's shareholders increased by 15.4%
to RMB263.9 million ($38.9 million), mainly due to the decrease in
operating expenses and the mark-to-market gain in the six reporting
months.
-- Net cash provided by operating activities was RMB274.6 million ($40.5
million).
"We successfully managed to recruit 17,643 new subscribers in the second quarter, keeping us on track to meet our annual target despite challenges associated with Covid-19, a downward trend in newborns and an overall cautious consumer environment," said Ms. Ting Zheng, Chairperson and Chief Executive Officer of GCBC. "Although future regulation in the cord blood banking industry in China remains unclear, we continue to prepare for multiple potential outcomes and carry on with our business expansion and risk diversification efforts."
Summary - Second Quarter and First Half Ended September 30, 2019 and 2020
Three Months Ended September 30, Six Months Ended September 30,
2019 2020 2019 2020
(in thousands)
RMB
RMB
US$
RMB
RMB
US$
Revenues 313,464 285,607 42,066 586,839 566,520 83,440
Gross Profit 265,149 240,909 35,483 492,775 478,359 70,455
Operating Income[3] 144,435 139,161 20,497 256,821 272,670 40,163
Change in Fair Value of
Equity Securities 5,699 839 2,936 24,104 3,550
(7,043)
Dividend Income 1,281 189 507 1,281 189
Net Income Attributable to 120,353 131,434 19,360 228,697 263,943 38,877
the Company's
Shareholders
Earnings per Ordinary
Share (RMB/US$)
- Basic 0.99 1.08 0.16 1.88 2.17 0.32
- Diluted 0.99 1.08 0.16 1.88 2.17 0.32
Revenues Breakdown (%)
Processing Fees and Other
Services 63.9% 57.5% 62.7% 57.5%
Storage Fees 36.1% 42.5% 37.3% 42.5%
New Subscribers (persons) 21,551 17,643 42,366 34,876
Total Accumulated 791,812
867,180[1] 791,812
867,180[1]
Subscribers (persons)
Summary - Selected Cash Flow Statement Items
Three Months Ended September 30, Six Months Ended September 30,
2019 2020 2019 2020
(in thousands) RMB RMB US$ RMB RMB US$
Net cash provided by
operating activities 208,255 174,814 25,747 378,011 274,643 40,450
Net cash provided by/
(used in) investing
activities 1,396 (3,876) (571) (5,229) (11,320) (1,667)
Net cash used in
financing activities (4,039) (6,074) (895) (4,039) (6,074) (895)
Second Quarter of Fiscal 2021 Financial Results
REVENUES. Revenues decreased by 8.9% YoY to RMB285.6 million ($42.1 million) in the second quarter of fiscal 2021, as the decrease in revenues from processing fees and other services from fewer new subscribers outpaced growth in storage fee revenues.
Despite facing difficulties in the second quarter, the Company recruited 17,643 new subscribers. Revenues generated from processing fees and other services in the reporting quarter decreased by 18.1% YoY to RMB164.3 million ($24.2 million), representing 57.5% of total revenues compared to 63.9% in the prior year period.
The accumulated subscriber base as of September 30, 2020 expanded to 867,180([1]). Revenues generated from storage fees increased by 7.3% YoY to RMB121.3 million ($17.9 million) in the reporting quarter.
GROSS PROFIT. Gross profit for the second quarter decreased by 9.1% YoY to RMB240.9 million ($35.5 million). Gross margin decreased slightly to 84.3% from 84.6% in the prior year period, as raw material cost continued to exert margin pressure despite cost-saving efforts.
OPERATING INCOME. As cost-saving measures were implemented to counter the topline decrease, operating income for the reporting quarter decreased by 3.7% YoY to RMB139.2 million ($20.5 million). Operating margin improved to 48.7% from 46.1% in the prior year period, primarily due to measures taken to improve cost-efficiency. Depreciation and amortization expenses for the second quarter were RMB12.3 million ($1.8 million), representing a slight decrease from RMB12.5 million in the prior year period. Non-GAAP operating income([2]) decreased by 3.5% YoY to RMB151.4 million ($22.3 million) in the reporting quarter.
Research and Development Expenses. Research and development expenses decreased to RMB5.0 million ($0.7 million) from RMB6.4 million in the prior year period.
Sales and Marketing Expenses. Sales and marketing expenses decreased to RMB54.1 million ($8.0 million) from RMB64.9 million in the prior year period, due to the Company's ongoing efforts to effectively manage its sales, marketing and promotional activities in light of weak demand. In particular, the reduction in sales force head count and remuneration, as well as fewer promotional activities, kept sales and marketing expenses in check with the topline reduction. Sales and marketing expenses as a percentage of revenues decreased to 19.0%, compared to 20.7% in the prior year period and 19.6% in the prior quarter.
General and Administrative Expenses. General and administrative expenses decreased by 13.7% YoY to RMB42.7 million ($6.3 million) as a result of lower staff costs and provisions. General and administrative expenses as a percentage of revenues decreased to 14.9% from 15.8% in the prior year period and 15.9% in the prior quarter.
OTHER INCOME AND EXPENSES.
Change in fair value of equity securities. In the reporting period, the Company recognized a mark-to-market gain of RMB5.7 million ($0.8 million), compared to a mark-to-market loss of RMB7.0 million in the prior year period. The changes were mainly attributable to the Company's investments in equity securities.
Dividend Income. In the second quarter, the Company received RMB1.3 million ($0.2 million) dividend income from the Company's equity investments, whereas no such income was recorded in the prior year period.
NET INCOME ATTRIBUTABLE TO THE COMPANY'S SHAREHOLDERS. The recognition of mark-to-market gain and dividend income compensated for the decline in operating income. Income before income tax for the second quarter increased by 8.4% YoY to RMB156.2 million ($23.0 million). Income tax expense for the second quarter was RMB22.9 million ($3.4 million). Net income attributable to the Company's shareholders for the reporting quarter increased by 9.2% YoY to RMB131.4 million ($19.4 million). Net margin for the reporting quarter improved to 46.0% from 38.4% in the prior year period.
EARNINGS PER SHARE. Basic and diluted earnings per ordinary share for the second quarter of fiscal 2021 was RMB1.08 ($0.16).
First Half of Fiscal 2021 Financial Results
For the first half of fiscal year 2021, total revenues decreased by 3.5% YoY to RMB566.5 million ($83.4 million). The decrease was mainly due to the decline in new subscribers. Revenues from processing fees and other services decreased by 11.4% YoY to RMB325.9 million ($48.0 million), whereas revenues from storage fees increased by 10.0% YoY to RMB240.6 million ($35.4 million). Gross profit decreased by 2.9% YoY to RMB478.4 million ($70.5 million). Operating income increased by 6.2% YoY to RMB272.7 million ($40.2 million). Non-GAAP operating income([2]) increased by 5.5% YoY to RMB297.3 million ($43.8 million). Net income attributable to the Company's shareholders improved by 15.4% to RMB263.9 million ($38.9 million). Basic and diluted earnings per ordinary share was RMB2.17 ($0.32). Net cash provided by operating activities in the first half of fiscal 2021 was RMB274.6 million ($40.5 million).
Corporate Developments
-- On June 4, 2019, the Board of Directors of the Company (the "Board")
received a non-binding proposal letter from Cordlife Group Limited
("Cordlife"), a company listed on the Mainboard of the Singapore
Exchange Securities Trading Limited ("SGX"), pursuant to which Cordlife
proposed to combine the businesses of Cordlife and the Company, by way
of a statutory merger. According to the letter, Cordlife would issue
approximately 2,497.9 million ordinary shares at an issue price of
SGD0.5 per ordinary share in exchange for all of the outstanding
ordinary shares of the Company at $7.50 per ordinary share. Upon
completion of the proposed transaction, the Company's ordinary shares
would be delisted from the New York Stock Exchange, and Cordlife
ordinary shares would continue to trade on the SGX. On June 5, 2019, the
Board formed a special committee of independent directors (the "Special
Committee") who are not affiliated with Cordlife to evaluate such
proposal.
On November 11, 2019, the Company appointed Mr. Jack Chow as an independent non-executive director ("INED") of the Board. Mr. Chow has extensive professional experience and a broad network in the finance and investment industry. He replaced Mr. Mark Chen as a member of the Audit Committee and Ms. Jennifer Weng as a member of the Special Committee. Mr. Chow also joined the Board's Compensation Committee and Nominating and Corporate Governance Committee.
On February 6, 2020, the Company appointed Mr. Jacky Cheng as an INED of the Board. Mr. Cheng has extensive professional experience and knowledge in legal and compliance and Chinese laws. He joined the Board's Compensation Committee as a member and the Company's Special Committee as a member. Currently, the Special Committee is composed of four members, including Mr. Mark Chen, Dr. Ken Lu, Mr. Jack Chow, and Mr. Jacky Cheng.
-- The Company cautions its shareholders and others considering trading its
ordinary shares that no decisions have been made with respect to the
Company's response to the proposed transaction with Cordlife. The
proposed transaction is still subject to various conditions, including
but not limited to, completion of due diligence, parties entering into a
definitive agreement, and/or each of Cordlife and the Company obtaining
its relevant regulatory and shareholder approvals. In addition,
litigation has been filed in the Cayman Islands challenging the proposed
transaction. There can be no assurance that any definitive offer will be
made, that any agreement will be executed, or that this or any other
transaction will be approved or consummated.
Conference Call
The Company will host a conference call at 8:00 a.m. ET on Wednesday, November 25, 2020, 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.globalcordbloodcorp.com. A replay of the webcast will be accessible two hours after the conference call and available for seven days at the same URL above. Listeners can also access the call by dialing 1-646-722-4977 or 1-855-824-5644 for US callers, or +852-3027-6500 for Hong Kong callers, access code: 84298954#.
[1] During the three months and
six months ended September 30,
2020, 17,643 and 34,876 new
subscribers were recruited,
respectively. The Company
reclassified 396 and 790 private
cord blood units as donated cord
blood units during the three
months and six months ended
September 30, 2020,
respectively, after the Company
determined that the
recoverability of these prior
private cord blood banking
subscribers was remote.
Therefore, the Company
terminated their subscription
services according to the
subscription contracts and these
units are being treated as if
they were donated cord blood
units and will be part of the
Company's non-current
inventories. Hence, the net
accumulated subscriber base was
867,180 as of September 30,
2020.
[2] See exhibit 3 to this press
release for a reconciliation of
non-GAAP operating income to
exclude the non-cash items
related to the depreciation and
amortization expenses to the
comparable financial measure
prepared in accordance with U.S.
generally accepted accounting
principles ("U.S. GAAP").
[3] The reported operating income
for the three months ended
September 30, 2019 and 2020
included depreciation and
amortization expenses related to
property, plant and equipment
and intangible assets of RMB12.5
million and RMB12.3 million
($1.8 million), respectively.
The reported operating income
for the six months ended
September 30, 2019 and 2020
included depreciation and
amortization expenses related to
property, plant and equipment
and intangible assets of RMB24.9
million and RMB24.6 million
($3.6 million), respectively.
Use of Non-GAAP Financial Measures
GAAP results for the three months and six months ended September 30, 2020, include non-cash items related to depreciation and amortization 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 Global Cord Blood Corporation
Global 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. Global Cord Blood Corporation provides cord blood collection, laboratory testing, hematopoietic stem cell processing and stem cell storage services. For more information, please visit the Company's website at:
http://www.globalcordbloodcorp.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: the effects of the current COVID-19 outbreak, including the inability of the Company's salesforce to return to work due to current lockdowns implemented in various cities in the PRC and the imposition by some hospitals in the PRC of restrictions on entrance to solely to hospital staff and patients; levels of consumer confidence in the healthcare services sector generally in the PRC as a result of the outbreak; the length of the COVID-19 outbreak and severity of such outbreak across the globe; the pace of recovery following the COVID-19 outbreak; 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 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 legislative developments in the U.S. affecting listed issuers whose independent registered public accounting firms are based in China and not subject to U.S. Public Company Accounting Oversight Board inspections, international pressure on trade and currency against the PRC and its potential impact on the PRC consumer behavior, as well as general economic conditions; the non-binding proposal letter from Cordlife and the potential transaction contemplated by such letter, 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 period ended September 30, 2020 were made at the noon buying rate of RMB6.7896 to $1.00 on September 30, 2020 in the City of New York for cable transfers in Renminbi per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York. Global Cord Blood Corporation makes no representation that the Renminbi or U.S. dollar amounts referred to in this press release could have been or could be converted into U.S. dollars or Renminbi, at any particular rate or at all.
For more information, please contact:
Global Cord Blood Corporation
Investor Relations Department
Tel: (+852) 3605-8180
Email: ir@globalcordbloodcorp.com
ICR, Inc.
William Zima
Tel: (+86) 10-6583-7511
U.S. Tel: (646) 405-5185
Email: William.zima@icrinc.com
EXHIBIT 1
GLOBAL CORD BLOOD CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
As of March 31 and September 30, 2020
---
March 31, September 30,
2020 2020
RMB
RMB
US$
(in thousands except share data)
ASSETS
Current assets
Cash and cash equivalents 5,473,373 5,729,503 843,864
Accounts receivable, less allowance for doubtful accounts
(March 31, 2020: RMB111,869; September 30, 2020:
RMB120,582 (US$17,760)) 104,251 121,722 17,928
Inventories 43,758 56,106 8,264
Prepaid expenses and other receivables 44,785 67,604 9,957
Total current assets 5,666,167 5,974,935 880,013
Property, plant and equipment, net 522,679 514,153 75,726
Operating lease right-of-use assets 4,548 6,089 897
Non-current deposits 347,360 343,250 50,555
Non-current accounts receivable, less allowance for doubtful
accounts (March 31, 2020: RMB71,421; September 30,
2020: RMB70,451 (US$10,376)) 160,031 193,023 28,430
Inventories 85,109 88,335 13,010
Intangible assets, net 92,823 90,513 13,332
Investment in equity securities at fair value 101,306 120,670 17,773
Other equity investment 189,129 189,129 27,856
Deferred tax assets 50,701 52,823 7,780
Total assets 7,219,853 7,572,920 1,115,372
LIABILITIES
Current liabilities
Accounts payable 19,992 12,317 1,814
Accrued expenses and other payables 113,989 129,231 19,034
Operating lease liabilities 1,717 1,597 235
Deferred revenue 402,751 420,516 61,935
Income tax payable 32,329 31,542 4,646
Total current liabilities 570,778 595,203 87,664
Non-current deferred revenue 2,289,762 2,339,828 344,619
Non-current operating lease liabilities 1,782 1,724 254
Other non-current liabilities 450,900 467,236 68,816
Deferred tax liabilities 18,140 17,332 2,554
Total liabilities 3,331,362 3,421,323 503,907
EQUITY
Shareholders' equity of Global Cord Blood
Corporation
Ordinary shares
- US$0.0001 par value, 250,000,000 shares authorized,
121,687,974 and 121,551,075 shares issued and
outstanding as of March 31 and September 30, 2020,
respectively 83 83 12
Additional paid-in capital 2,101,582 2,101,582 309,529
Treasury stock, at cost (March 31 and September 30,
2020: 136,899 shares, respectively) (2,815) (2,815) (415)
Accumulated other comprehensive losses (94,663) (99,304) (14,626)
Retained earnings 1,877,940 2,141,883 315,467
Total equity attributable to Global Cord Blood
Corporation 3,882,127 4,141,429 609,967
Non-controlling interests 6,364 10,168 1,498
Total equity 3,888,491 4,151,597 611,465
Total liabilities and equity 7,219,853 7,572,920 1,115,372
EXHIBIT 2
GLOBAL CORD BLOOD CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE
INCOME
For the Three Months and Six Months Ended September 30, 2019 and 2020
---
Three months ended September 30, Six months ended September 30,
2019 2020 2019 2020
RMB RMB US$ RMB RMB US$
(in thousands except per share data)
Revenues 313,464 285,607 42,066 586,839 566,520 83,440
Cost of revenues (48,315) (44,698) (6,583) (94,064) (88,161) (12,985)
Gross profit 265,149 240,909 35,483 492,775 478,359 70,455
Operating expenses
Research and development (6,399) (4,953) (729) (11,100) (9,298) (1,369)
Sales and marketing (64,880) (54,124) (7,972) (125,517) (109,184) (16,080)
General and administrative (49,435) (42,671) (6,285) (99,337) (87,207) (12,843)
Total operating expenses (120,714) (101,748) (14,986) (235,954) (205,689) (30,292)
Operating income 144,435 139,161 20,497 256,821 272,670 40,163
Other (expenses)/income, net
Interest income 6,502 8,810 1,298 12,722 15,577 2,294
Foreign currency exchange
(losses)/gains (162) 66 10 (190) 108 16
Change in fair value of equity
securities (7,043) 5,699 839 2,936 24,104 3,550
Dividend income 1,281 189 507 1,281 189
Others 422 1,195 176 762 2,918 430
Total other (expenses)/income,
net (281) 17,051 2,512 16,737 43,988 6,479
Income before income tax 144,154 156,212 23,009 273,558 316,658 46,642
Income tax expense (22,087) (22,890) (3,371) (41,563) (48,911) (7,205)
Net income 122,067 133,322 19,638 231,995 267,747 39,437
Net income attributable to
non-controlling interests (1,714) (1,888) (278) (3,298) (3,804) (560)
Net income attributable to
Global Cord Blood Corporation's
Shareholders 120,353 131,434 19,360 228,697 263,943 38,877
Earnings per share:
Attributable to ordinary shares
- Basic 0.99 1.08 0.16 1.88 2.17 0.32
- Diluted 0.99 1.08 0.16 1.88 2.17 0.32
Other comprehensive income/
(losses), net of nil income taxes
- Foreign currency translation
adjustments 12,800 (4,202) (619) 23,153 (4,641) (684)
Comprehensive income 134,867 129,120 19,019 255,148 263,106 38,753
Comprehensive income attributable to
non-controlling interests (1,714) (1,888) (278) (3,298) (3,804) (560)
Comprehensive income
attributable to Global Cord Blood
Corporation's shareholders 133,153 127,232 18,741 251,850 259,302 38,193
EXHIBIT 3
GLOBAL CORD BLOOD CORPORATION
RECONCILIATION OF NON-GAAP OPERATING INCOME
For the Three Months and Six Months Ended September 30, 2019 and 2020
---
Three months ended Six months ended
September 30, September 30,
2019 2020 2019 2020
RMB RMB US$ RMB RMB US$
(in thousands)
GAAP amount of operating
income 144,435 139,161 20,497 256,821 272,670 40,163
Depreciation and amortization
expenses[4] 12,455 12,266 1,807 24,900 24,622 3,626
Non-GAAP operating
income 156,890 151,427 22,304 281,721 297,292 43,789
[4] Depreciation and amortization expenses relate to property, plant and equipment and intangible assets respectively.
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SOURCE Global Cord Blood Corporation
