China Cord Blood Corporation Announces Results for the Quarter and Six Months Ended September 30, 2009
"We completed the second quarter with encouraging results," said Ms. TingZheng, China Cord Blood Corporation's chairperson and chief executive officer."As our prior efforts in cultivating the two markets are just starting to bearfruits, it is a great joy to see strong demand in both Beijing municipalityand Guangdong province. China's one child policy, rising public awareness ofumbilical cord blood stem cells and our effective marketing and promotionstrategies are important elements which contributed to our successful marketpenetration. As the exclusive operator in the Beijing municipality andGuangdong province, we continue to see growth in our local markets thanks tothe large addressable market size and their severe under penetration.Following the commencement of our new Beijing storage facility and Guangdongstorage facility, we are well equipped to capture the opportunities present inthese existing two markets."
Ms. Zheng continued, "Our recent listing on the New York Stock Exchangemarks a new era in our corporate history. It is a recognition of our company'sachievements as well as our team's dedicated effort. The listing platformoffers access and tools for growth, and with our proven execution capabilities,together form a solid foundation and paves the way for the next phase ofcorporate development. As China's first and largest cord blood bank operator,we will continue to leverage on our industry expertise and first moveradvantage to seize opportunities arising in China and the Asia Pacificregion."
Financial Results for the Second Fiscal Quarter Ended September 30, 2009
Net revenue for the quarter ended September 30, 2009 increased 30.4%year-over-year to RMB63.9 million (US$9.4 million) from RMB49.0 million. Netrevenue generated from processing fees recorded a 26.5% increaseyear-over-year to RMB52.6 million (US$7.7 million) due in part to the 11,371new subscribers signed up during the quarter, which increased from 9,552 newsubscribers for the same period last year. Net revenue from storage feesincreased 60.1% to RMB11.1 million (US$1.6 million) as our total subscriberbase continued to expand. The total accumulated number of subscribers reached105,812 as of September 30, 2009, up from 64,171 subscribers as of September30, 2008. For the quarter ended September 30, 2009, processing fees andstorage fees accounted for 82.3% and 17.4% of total net revenue, respectively,compared to 84.9% and 14.2% for the same period last year.
Gross profit reached RMB46.3 million (US$6.8 million), up from RMB37.3million for the same period last year, representing a gross margin of 72.4%.Gross margin was 3.8 percentage points lower year-over-year following thecommencement of the new Beijing storage facility and the new Guangdong storagefacility which came on line in April 2009 and September 2008, respectively.Direct cost for the quarter ended September 30, 2009 was RMB17.6 million(US$2.6 million) which was higher than the RMB11.7 million for the same periodlast year mainly due to the increase in overhead after the new facilitiescommenced operation.
Sales and Marketing Expense
Despite the ongoing marketing effort, management continued to tightlymonitor sales and marketing expense. Sales and marketing expense as apercentage of net revenue declined from 15.1% last year to 14.8% for thequarter ended September 30, 2009. Total sales and marketing expense for thequarter ended September 30, 2009 was RMB9.5 million (US$1.4 million), anincrease of 28.3% from RMB7.4 million for the same period last year.
General and Administrative Expense
To cope with the rising demand and better serve our existing markets, newstorage facilities were constructed which boosted total capacity more than sixfold, and as a result, in conjunction with work force expansion, totaladministrative expense for the quarter ended September 30, 2009 increased toRMB12.7 million (US$1.9 million) compared to RMB5.1 million for the sameperiod last year.
Operating income for the quarter ended September 30, 2009 was RMB24.1million (US$3.5 million) compared to RMB24.8 million for the same period lastyear because the increase in net revenue was offset by the increase inadministrative expense. Operating margin for the quarter ended September 30,2009 was 37.8%.
Earnings Before Interest, Taxes, Depreciation and Amortization ("non-GAAPEBITDA")
Non-GAAP EBITDA for the quarter ended September 30, 2009 was RMB28.9million (US$4.2 million), a slight increase of 8.9% year-over-year,translating into a non-GAAP EBITDA margin of 45.3%.
Net Income Attributable To China Cord Blood Corporation Shareholders
Net income attributable to shareholders for the quarter ended September 30,2009 increased to RMB17.6 million (US$2.6 million), up from RMB5.8 million forthe same period of 2008. Net income attributable to shareholders margin forthe quarter ended September 30, 2009 was 27.6%, up from 11.8%. Basic earningsper share and fully diluted earnings per share attributable to ordinary sharesfor the quarter ended September 30, 2009 were RMB0.29 (US$0.04) and RMB0.27 (US$0.04), respectively.
Non-GAAP basic earnings attributable to shareholders for the September 30,2009 quarter amounted to RMB0.29 (US$0.04), up from RMB0.10 for the sameperiod last year.
Other Selected Data
As of September 30, 2009, the Company had total cash and cash equivalentsof RMB247.8 million (US$36.3 million) as compared to RMB161.4 million as ofMarch 31, 2009. As of September 30, 2009, the Company had a balance onshort-term loans of RMB45.0 million (US$6.6 million).
As of September 30, 2009, non-current inventories were RMB26.9 million(US$3.9 million) compared to RMB26.1 million as of March 31, 2009. Thirteenunits of donated cord blood stem cells were used for treatment during thequarter ended September 30, 2009.
For the convenience of readers, certain RMB amounts have been translatedinto U.S. dollars at the rate of RMB6.8262 to US$1.00, the noon buying rate inNew York City for cable transfers of RMB per U.S. dollar as set forth in theH.10 weekly statistical release of the Federal Reserve Board, as of Wednesday,September 30, 2009. No presentation is made that the RMB amounts could havebeen or could be converted into U.S. dollars at that rate or at any othercertain rate on September 30, 2009 or at any other dates.
Financial Results for the Six Months Ended September 30, 2009
Fiscal year 2010 first half net revenue amounted to RMB121.8 million(US$17.8 million), an increase of 48.7% year-over-year from RMB81.9 million.During this period, 21,752 new subscribers signed up for our services, anincrease of 47.1% year-over-year from 14,789.
Backed by the increase in subscriber numbers, gross profit for the sixmonths ended September 30, 2009 amounted to RMB87.9 million (US$12.9 million),an increase of 47.2% from RMB59.8 million for the same period last year.Fiscal year 2010 first half gross margin was 72.2%, similar to 72.9% for thesame period last year.
Fiscal year 2010 first half operating income increased 39.9%year-over-year to RMB47.2 million (US$6.9 million). Operating margin decreasedby 2.5 percentage points to 38.7% which was largely attributable to theincrease in overhead following the storage capacity and work force expansion.
Net Income Attributable to Shareholders
Net income attributable to China Cord Blood Corporation shareholders forthe six months ended September 30, 2009 was RMB13.0 million (US$1.9 million),compared to a loss of RMB12.3 million last year. During the six months endedSeptember 30, 2008, total write-off and impairment loss amounted to RMB37.3million and RMB21.6 million (US$3.2 million) for the six months endedSeptember 30, 2009.
Earnings Per Share
Fiscal year 2010 first half basic earnings per share and fully dilutedearnings per share attributable to ordinary shares were RMB0.12 (US$0.02) andRMB0.11 (US$0.02), respectively.
Earnings Before Interest, Taxes, Depreciation and Amortization ("non-GAAPEBITDA")
For the six months ended September 30, 2009, the Company recorded non-GAAPEBITDA of RMB56.7 million (US$8.3 million), up from RMB37.1 million sameperiod last year.
Non-GAAP Earnings Per Share
Non-GAAP basic earnings attributable to shareholders for the six monthsended September 30, 2009 amounted to RMB0.57 (US$0.08) comparing to a loss ofRMB0.21 same period last year.
Business Outlook for Fiscal Year 2010
The Company expects the total number of new subscribers for fiscal year2010 will increase by approximately 30% year-over-year or no less than 45,000new subscribers, which transpires into no less than 30% increase in total netrevenue. Accumulated total number of subscribers will be at least 129,000 byMarch 31, 2010. With intention in geographic expansion, the Company continuesto pursue active discussions with several existing licensees and licenseapplicants in certain other regions for potential acquisitions.
The Company's practice is to provide guidance on a full year basis only.Such expectations reflect the Company's current and preliminary views, whichis subject to change.
The Company will hold a conference call at 8:00 am EST on Friday,December 11, 2009 to discuss the Company's second quarter financialperformance and provide a brief overview of the Company's recent developmentfollowed by a question and answer session. Listeners may access the call bydialing 1-866-519-7010 for U.S. domestic callers, +61-2-96960911 forinternational callers, or 800-90-1036 and 800-93-0392 for Hong Kong callers,access code: 44327945. A replay of the call will be accessible throughDecember 18, 2009 by dialing +852-2888-1115, access code: 44327945.
About China Cord Blood Corporation
China Cord Blood Corporation is the first and the largest cord bloodbanking operator in China in terms of geographical coverage and is the onlycord blood bank operator with more than one license (i.e., Beijing andGuangdong). Under the current PRC government regulations, only one licensedcord blood bank operator is permitted to operate in each licensed region andonly six licenses have been issued as of today. China Cord Blood Corporationprovides cord blood collection, laboratory testing, hematopoietic stem cellprocessing, and stem cell storage services. For more information, please visitour website at http://www.chinacordbloodcorp.com .
About Non-GAAP Financial Measures
On June 30, 2009, holders of 100% of China Cord Blood ServicesCorporation's ordinary shares and holders of 76% of China Cord Blood ServicesCorporation redeemable ordinary shares exchanged their shares for a total of54,345,104 shares of the Company ordinary shares. Further in August 2009,holders of the remaining 24% of redeemable shares of China Cord Blood ServicesCorporation exchanged such shares for 3,506,136 shares of the Company'sordinary shares. The Non-GAAP basic income/(loss) per share attributable toChina Cord Blood Corporation shareholders for the three months and six monthsended September 30, 2009 give effect to the abovementioned share exchangetransaction as if they had been completed at the beginning of period. Proforma adjustments are made to add back the write-off of deferred reverserecapitalization costs and income attributable to redeemable noncontrollinginterests as if the above share exchanges with ordinary shareholders of ChinaCord Blood Services Corporation had been completed at the beginning of periodand all reverse recapitalization costs had been written off prior to thecompletion of the share exchanges with ordinary shareholders of China CordBlood Services Corporation.
Non-GAAP EBITDA represents operating income excluding acquired intangibleassets amortization expense and depreciation expense. We have presented EBITDAbecause we consider it an important supplemental measure of our performanceand believe it is frequently used by analysts, investors and other interestedparties in the evaluation of companies in our industry. Management uses EBITDAas a measurement tool for evaluating our actual operating performance comparedto budget and prior periods. Other companies in our industry may calculateEBITDA differently than we do, basing the determination on net income beforenet interest expense, income tax expense (benefit), depreciation andamortization. EBITDA is not a measure of performance under generally acceptedaccounting principles (GAAP) and should not be considered as a substitute fornet income prepared in accordance with GAAP.
The presentation of these non-GAAP financial measures is not intended tobe considered in isolation or as a substitute for the financial informationprepared and presented in accordance with GAAP. The non-GAAP measuresdescribed by the Company are reconciled to the corresponding GAAP measure inthe exhibits below titled "Reconciliations of non-GAAP results of operationsmeasures to the nearest comparable GAAP measures" and "Reconciliations ofnon-GAAP EPS to the nearest comparable GAAP measures".
The Company believes that these non-GAAP financial measures providemeaningful supplemental information regarding its performance and liquidity.The Company believes that both management and investors benefit from referringto these non-GAAP financial measures in assessing its performance and whenplanning and forecasting future periods. These non-GAAP financial measuresalso facilitate management's internal comparisons to its historicalperformance and liquidity. The Company believes these non-GAAP financialmeasures are useful to investors in allowing for greater transparency withrespect to the supplemental information used by management in its financialand operational decision-making.
Safe Harbor Statement
This press release contains forward-looking statements as defined by thePrivate Securities Litigation Reform Act of 1995. Forward-looking statementsinclude statements concerning plans, objectives, goals, strategies, futureevents, performance and results of operations, and underlying assumptions andother statements that are other than statements of historical facts. Thesestatements are subject to uncertainties and risks including, but not limitedto, product and service demand and acceptance, changes in technology, economicconditions, the impact of competition and pricing, government regulation, andother risks contained in statements filed from time to time with theSecurities and Exchange Commission. All such forward-looking statements,whether written or oral, and whether made by or on behalf of the company, areexpressly qualified by the cautionary statements and any other cautionarystatements which may accompany the forward-looking statements. In addition,the company disclaims any obligation to update any forward-looking statementsto reflect events or circumstances after the date hereof.Highlights as of September 30, 2009 -- For the quarter ended September 30, 2009, net revenue increased 30.4% year-over-year to RMB63.9 million (US$9.4 million) from RMB49.0 million. Fiscal year first half net revenue reached RMB121.8 million (US$17.8 million), up 48.7% year-over-year from RMB81.9 million. -- For the quarter ended September 30, 2009, storage fees accounted for 17.4% of total net revenue, up 3.2 percentage points year-over-year from 14.2%. -- The Company had 11,371 new subscribers sign-up during the quarter ended September 30, 2009, up 19.0% from 9,552 in the same period last year. As of September 30, 2009, the total accumulated number of subscribers reached 105,812. -- The Company had an aggregate of 21,752 new subscribers signed up during the first half of fiscal year 2010, up 47.1% year-over-year from 14,789. -- Gross profit for the quarter and six months ended September 30, 2009 amounted to RMB46.3 million (US$6.8 million) and RMB87.9 million (US$12.9 million) respectively, representing gross margins of 72.4% and 72.2%. -- Non-GAAP EBITDA for the quarter and six months ended September 30, 2009 amounted to RMB28.9 million (US$4.2 million) and RMB56.7 million (US$8.3 million) respectively. -- RMB24.1 million (US$3.5 million) operating income was recorded for the quarter ended September 30, 2009 despite the increase in administrative expense. Fiscal year 2010 first half operating income rose 39.9% to RMB47.2 million (US$6.9 million) from RMB33.7 million in the same period last year. -- Quarter ended September 30, 2009, net income attributable to China Cord Blood Corporation shareholders was RMB17.6 million (US$2.6 million). Net income attributable to shareholders for the six months ended September 30, 2009 was RMB13.0 million (US$1.9 million). -- For the quarter ended September 30, 2009, basic EPS and fully diluted EPS attributable to ordinary shares were RMB0.29 (US$0.04) and RMB0.27 (US$0.04), respectively. For the six months ended September 30, 2009, basic EPS and fully diluted EPS attributable to ordinary shares were RMB0.12 (US$0.02) and RMB0.11 (US$0.02), respectively. -- Non-GAAP basic earnings per share attributable to shareholders for the quarter and six months ended September 30, 2009 amounted to RMB0.29 (US$0.04) and RMB0.57 (US$0.08), respectively. Summary - The quarter and six months ended September 30, 2009 and 2008 Three Months Ended Six Months Ended September 30, September 30, 2009 2008 2009 2008 US$ RMB RMB US$ RMB RMB (in thousands except percentage and operating data) Revenue 9,361 63,897 48,988 17,847 121,826 81,935 Gross Profit 6,778 46,265 37,321 12,882 87,938 59,760 Operating Income 3,537 24,144 24,832 6,914 47,199 33,735 Non-GAAP EBITDA 4,237 28,924 26,548 8,308 56,711 37,088 Net Income/(Loss) Attributable to China Cord Blood Corporation Shareholders 2,584 17,639 5,779 1,911 13,047 (12,260) EPS Attributable to Ordinary Shares - Basic 0.04 0.29 (0.01) 0.02 0.12 (0.43) Non-GAAP EPS Attributable to Shareholders - Basic 0.04 0.29 0.10 0.08 0.57 (0.21) Net Revenue Breakdown (%) Processing Fee 82.3% 84.9% 82.7% 83.1% Storage Fee 17.4% 14.2% 16.7% 15.7% Others 0.3% 0.9% 0.6% 1.2% New Subscribers (persons) 11,371 9,552 21,752 14,789 Accumulated Total Number of Subscribers (persons) 105,812 64,171 105,812 64,171
SOURCE China Cord Blood Corporation
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