Q2 2021 Global Cord Blood Corp Earnings Call

2021 <unk>.

Well they fly will be paid on net giving back on pace.

There will be Oh I'm sorry.

[laughter] allow everyone attractive assets question during the question [laughter] limit your question to one question right.

No I won't get into this needs to be buying vice president of corporate finance to begin the presentation. Its.

[laughter] <unk> over to you.

[music] thank him soon.

Good morning, everyone welcome to our fiscal crisis, everyone second quarter earnings Conference call.

A press release discussing our financial results.

I've already published and copy it is available on all come from price.

There was a call on accidents are summarized hopefully development.

So I like the quarter.

[music] affecting that offer fashion will follow.

Before we begin please note that today's discussion will contain forward looking statements that are subject [laughter].

Actual results could be materially different from the forward looking statement.

[noise] I really like where assets are fine. So he's held discussion so far from it.

[noise] an interest on time, we will be easily our CEO Fremont followed by our record on philosophy spoke on just like the one second quarter financial given by our CFO Mr. Albert Chen.

[noise] on that's then well be available to answer your question you understand those assets.

Good day, everyone Atossa asks questions. We'd appreciate if you could ask one question at a time.

[music] today on behalf of always see you all soon now I will recap the pearsall.

I see okay.

[music] good morning, ladies and gentlemen.

Welcome to our second quarter, he so something like a one earnings conference call.

During the fourth quarter.

Tobey nice income damage on me I'm going to pass on consumer sentiment continues.

He also affect our operations.

[noise] as the management team.

<unk> adjusted net sales and marketing practice based on the changes in the field.

Uh-huh money recur 17600, I'm 40 free [laughter] fiber this quarter.

[noise] downside, 8.1% year over year I'm on slide two class focus on quarter over quarter.

We launched with massive uptake.

[noise] by September 30, so I just went on.

I will accumulate [laughter] why buffet expanded to over 867000.

[noise] during the second quarter.

There was a noticeable decline no four numbers across they came from Doe and your GAAP.

Although the magnitude of such decline varies across the different regions.

[noise] inhibition on.

I'm sorry from their net marker tend to vary from reducing debt.

At some hospitals still adopted <unk> and to access all the food.

Which hindered our ability to reach potential clients.

[noise]. Meanwhile, due to the Cobi nice Uh huh.

How price to prioritize spending related to on Garnet 'cause banker over other value added health care services.

Which further hindered our client conversion assets.

We also believe that consumers remain cautious on the races economic recovery has varied across industries and reserved on time.

Together these factors continue to weigh on our business operations.

[noise], that's being said.

Now that we are nine months into the pandemic.

Consumers are slowly adapting to the new normal.

On the expense of magnitude of depends on mix shop on consumer behavior has began to say.

[noise] every scratching school, our sales activity and consumer experience with offline.

We have also expanded our online marketing effort to reach a broader pool of potential consumer.

And intend to conceal income.

Moving on the online students full potential clients.

We have noted that our target consumer I see more willing to participate and engaged in an hour on my maxing activity compared to the free Tobey Nice era.

[noise] over all the management team remain hopeful that we will reach our net subscriber copy. So schools. These calls like this on to one of the three big.

The 2060 7000.

[noise] looking ahead the current one like this region and no more than seven licensed this policy will expire by the end of two incidents like.

The management team will continue to flow they communicate with various departments within the national health condition and prepare for multiple possible outcome in China cord blood banking.

[noise] the management team well simultaneously continue to see this this development opportunities in house that industry with a goal of expanding our business and revenue channel.

This concludes my math reading or regarding our second quarter fiscal 2021 and actual results.

Thank you for your support on global flip truck operations.

I will now turn the call over to our CFO Mr. average Chen.

Who will address our second fiscal quarter financial performance.

[noise] good morning, everyone. Thank you for joining our call today.

In the second quarter revenue decreased by 9% year over year to 286 million from Andy.

That's a decline in new subscribers resulted in a decrease in revenues from processing fees and other services.

[noise] various challenges we're still in place during the reporting quarter.

However, we managed to overcome these difficulties and remain on track to achieve our annual target.

In the second quarter, we recruited 17643 new subscribers.

Representing a decrease of 18% yield per year.

Correspondingly.

Revenues generated from processing fees and other services decreased by 18% year per year to 164 million renminbi.

Which accounted for approximately 58% of total revenues compared to 64% in the prior year period.

By the end of September 2020.

Our accumulated subscriber base exceeded.

867000.

Accordingly.

Storage fees revenues for the second quarter increased by over 7% year over year to 121 million from MB.

Gross profit in the second quarter decreased by 9% year per year to approximately 241 million renminbi.

Gross margin decreased by 30 basis points to approximately 84%.

As raw material costs continued to add pressure to the margin this bike our cost saving efforts.

As we applied various measures to enhance cost efficiency and preserved on margins.

Operating income decreased by less than 4% year over year to 139 million from them be.

And operating margin improved to almost 49% from 46% of last year.

Depreciation and amortization expenses were approximately 12 million renminbi, representing a slight decrease from the prior year period.

Non-GAAP operating income decreased by less than 4% year over year to approximately 151 million renminbi.

While non-GAAP operating margin improved to 53% from 50% in the prior year period.

To cope with the current situation, we selectively reduce the size and removed the ration fall sales force as well as our promotional activities to optimize the efficiency.

As a result sales and marketing expenses decreased by 17% you if a year or two per cent quartile book quota to 54 million renminbi.

Sales and marketing expenses as a percentage of revenues decreased to 19%.

From 21% in the prior year period.

General and administrative expenses decreased by 14% year over year to approximately 43 million reminbi due.

Due to lower staff costs and provisions.

General and administrative expenses as a percentage of revenues decreased to less than 15%.

From approximately 16% in the prior year period.

In the second quota. We also recognized an increase of approximately 6 million RMB inside value of equity securities all more commonly known as mark to market gain.

Compared to a mark to market loss, all 7 million from and be in the prior year period.

This past reporting quota, we also received and approximately 1 million renminbi.

The net income from our equity investments, whereas no dividend income was recorded in the last year period.

As the recognition of mark to market gain and dividend income compensated for the decline in operating income.

Income before tax for the second quarter increased by 8% year over year to 156 million renminbi.

Net income attributable to the company's shareholders increased by 9% year over year to 131 million renminbi.

Net margin improved to 46% as compared to 38% in the prior year period.

Basic and diluted earnings per ordinary share for the reporting quota was 1.08 RMB per share.

These are the highlights of our second quarter results, we're now happy to turn to the flow for any questions.

Thank you very much you will now begin the question and answer session.

So allow everyone a chance to ask a question. Please limit yourself to one question at a time to.

To ask the question.

Black zero, one on your telephone keypad and you'll be placed in the queue. Thanks, but no one on your telephone keypad ideally placed in the queue.

Yes, we have a question from Mitch said, Jack Alright on loans from the floor is yours.

[noise] Hello, Thank you for taking my question.

So a question first is could you share your new subscriber price down by region and payment options. Please.

[noise] for the second quarter of fiscal 2021 in terms of new subscriber brick down about 69% of new subscribers.

Ah come on.

Came from peak on doing regions, approximately 20% came from the judge on regions.

And the and the remaining came from the Beijing regions.

In terms of payment option break down.

New subscribers, who elected normal payment option represent approximately about 28%.

Oh this quarter on new subscribers.

Bullet payment option subscribers accounted for 42% up this quarter total.

And the remaining.

28, 29% came from basically installment options across different regions.

Which remain at a relatively high level as compared to a year ago.

Okay. Thank you that's very helpful.

My second question is how do you feel about the current margins on levels do you believe they are sustainable.

Does actually very good questions on.

[laughter].

In order to to cope with the current situations on one hand, we have some lingering you fac free.

From a recent and not make a wish.

To a certain extent affected our access to potential clients.

And then and just at the same time, we have.

Looking at the market with falling number birth.

So I guess.

Two.

To maintain and.

Our cost efficiency, while at the same time trying to.

[noise] trying to control our costs in this in this troubled times.

We have on law will put in a lot of extra cost measures in place.

But with that being said you notice that in terms of absolute amount for example on our general and administrative expenses is now.

Standing at around 43 million RMB per quota as compared to for example in the first quarter of this year, which is only about 44.5 million and these are.

Relatively low level and we're trying to keep it that way and in terms of this EPS in marketing expenses as we highlighted on.

During the that the briefing it now only accounted for less than 20 per cent about revenue. This is.

This is probably one of the lowest level that we've seen.

In the past couple of years.

Obviously, the management is on a ongoing crusade to enhance the company operating efficiency and cost effectiveness.

But.

I I am, but I think that if we if things gradually recall food and as we to starting to tune up our marketing and promotion activities as we restart.

We stopped all hiring engine again, I will not be surprised to see.

<unk> D S U and they start going back up again so.

So I guess the current margin level I think the current cost structure is a is already at a relatively low level Oh.

We tried to surprise as much as we can but if we can tune that up the activities going forward I will not be surprised to see that costs will start to go back up again.

I think this is probably the best way to answer your questions.

Okay understood that's helpful.

Lastly, do you have any update regarding the one license per region.

Yeah.

As many of you is aware.

D.

The one license per region policy is is expiring at the end of the current calendar year.

We are keeping.

We are we on a.

We are maintaining a ongoing dialogue with all of the industry experts and business intelligence.

In hope to gain in hope to gauge of pet understanding about with respect to the policy direction going forward.

But unfortunately, I think theres nothing to report at this stage, but obviously if there is any groundbreaking development with respect to policy direction, we will be the first one to put out a press release well.

We will be among the first few to put on the press release from respect with that.

But we are certainly.

Following up on on now and with respect to any potential leads and Hum.

Hopefully to get up.

Get a upper hand, the situations, but book that being said we are right now in a.

In the I. I guess, we are we have the we are preparing ourselves for multiple possible scenario at this stage.

Okay. Thank you very much.

Now they have been net.

Personally Dusty, though kishore from LT Miller asset management, the floor is yours Sir.

Yeah. Thank you. Thank you for the question. So congrats on on the result, I have a I have a quite simple question on or is it a fair assumption to says that the board on the board of directors will offer global cord blood is waging two gets.

Uh Huh try Richie you know on the older regulation stuff you know things are called blood banking industry before taking any decision regarding capital deployment like potential dividend per from share repurchase as a potential acquisition on a.

So because you are I mean, you are doing there when you are accumulating cash every quarter you have at least.

At least the 900 million used on our cash in your balance sheets. So of course, I think that all your share holders.

Our waiting to see what your with dual with all these cash you know.

So can you just elaborate a little bit thank you.

Thank you for the questions.

I think the capital deployed on decisions as I previously as I've mentioned on as I mentioned previously in other conference calls.

It has to it has to be in line with the company and shareholders interest as a whole, but we have to take into account the future strategic development direction of the company as well and whether or not there are opportunities available.

Obviously the.

The competitive landscape in China is is is subject to change 10 pending on the policy outcome on the pending on the on the revisions on the policies. So I think on capital deployment would definitely need to take that into considerations, but.

But I also mentioned in my other earnings call. My prior earnings call is that the company is looking for opportunities to.

Diversify some of his operation the risk such as the single country risk on single market rates I should say on.

On the single business risk so single line of business, mainly so I think.

Whether or not we can do on adult adult capital deployment decisions in the future.

Beyond 2020 breed depends on what directions that we are we will be choosing to have two watts.

But with that being said.

We will always be considering what is best for the company and show that as a whole and how to take the company forward.

What some of you who up in a in book the company for some time does on Golding policy renewal, which happened. Once every five years is definitely no fun.

So to the extent possible I mean, we should really look into how we can expand our service portfolio and.

And I and II and on to a certain extent is trying to mitigate any.

Any potential future impact as a result potential policy changes.

And also the better utilize house EPS Amani resources that we have rather than just selling one product.

So I hope this.

On several questions.

Yes, but I mean.

Just to clarify.

Can we can we expect that when you will get some clarity I mean, we don't know when it's maybe it's going to be beginning of two cents on twin Jawad, maybe it's going to be made to us in 2000 for Q1.

Don't know the date, but when you will get some clarity about future regulation can we expect as a shareholder that the board will take some day seizure. Unlike acquisition like you know.

Doing some stuff you know and.

That's just my question, but I guess the answer is yes, probably I hope so.

Thank you.

Thank you very much.

If you have if you would like to ask my question. Thanks, well below one our net on the top.

GAAP.

Yes questions on.

Well no one on that helpful.

If you would like to ask a question on the.

Thanks, Roger one on one on your telephone keypad.

I think there would be no question at this call per.

I would like to turn the call back to meet cash.

Thank you Shane and thank you everyone is simple our earnings conference call for that so thanks, everyone second quarter. Thank you all very nicely on participation and support have a great day.

[noise], ladies and gentlemen that we have come to the end of the conference call. Thank you for your participation and have a pleasant day you may now disconnect. Thank you.

[noise] [noise] E.

[music].