Q4 2021 Global Cord Blood Corp Earnings Call

Welcome everyone to global caught that corporations earnings conference call for the physical and the detainee 1 soft quarter, all participants lines will be placed on mute during the presentation and afterwards.

There will be a question answer session. So alive.

To ask a question during the question answer session. This limit yourself to 1 question at a time now I would like to introduce MS. Cathy Bai VP of corporate finance to begin the presentation.

Thank you Jeff.

Good morning, everyone welcome to our fiscal 'twenty 'twenty, 1 fourth quarter earnings conference call.

A press release discussing our financial results has already been published and a copy is available on the company's website.

During the call on.

Our management team will summarize corporate developments and financial highlights for the quarter.

A question and answer session will follow.

Before we begin please note that today's discussion will contain forward looking statements that are subject to certain risks and uncertainties and actual results could be materially different from these forward looking statements.

Hot and we refer to our SEC filings for detailed discussion of potential risks.

And the interest of time, we will begin with our Ceo's remarks, followed by a report of our fiscal 2021 fourth quarter financials, given by our CFO Mr. Albert Chen.

Our management will be available to answer questions during the Q&A session.

To give everyone a chance to ask questions. We'd appreciate if you could ask 1 question at a time.

Today on behalf of our CEO and Tina I will read her prepared remarks.

And the presentation.

Good morning, ladies and gentlemen, welcome to our fourth quarter fiscal 2021 earnings conference call.

This quarter, we <unk>.

Experienced a recovery in consumer sentiment in China.

Due to the ongoing implementation of pandemic prevention and control measures.

And the groups continue to adjusted its strategies and tactics to deal with prolonged challenges from locational localized COVID-19 outbreaks.

We managed to recruit over 19000, new subscribers during the reporting quarter.

As a result of the relatively low base, new subscribers and the reporting quarter increased by 4.8% year over year and 8.8%.

Quarter over quarter.

By the end of March 2021.

Our accumulated subscriber base has surpassed 900000.

During the fourth quarter.

Hospitals, and our operating market continues to fight against the pandemic on the frontline and maintained relatively strict control over access which hindered our business growth.

In regards to policy trends on your board.

The Central Committee of the CPC and the state Council on officials.

Proved a new policy on May 31st 2021.

Which allows each couple of in China to have up to 3 children.

Although the 3 child policy intends to improve birth rates and realization will be and.

Carrington.

It will take time for policymakers to develop and release supportive measures and.

The results will be subject to a degree of acceptance by the new generation of expectant parents.

With respect to China cord blood banking industry regulations, and Biosecurity law.

Our management team proactively continue its effort to communicate with regulatory bodies.

However, the National Health Commission and other government agencies have yet to release any official updates or guidelines.

As we face new regulatory and market uncertainty.

<unk> will continue to engage with regulators, while maintaining its focus on the strengthening the brand expanding marketing channel panic.

Penetrating existing markets and sourcing new opportunities for business development.

Our accumulated client base has gradually expanded to a substantial amount.

And the management team will continue to explore opportunities to expand our lines of service.

As we aim to increase regular interactions with our existing clients to better serve them.

And hope to nurture growth and new income sources.

Looking ahead with the COVID-19 vaccination program in progress.

We expect to see a potential uptick in sentiment in China.

Despite the lesser impact of adverse pandemic effects.

We still may not be able to overcome the general trend of <unk>.

Fewer newborn.

In addition hospitals in our operating markets are likely to uphold strict and tight pandemic measures.

<unk> limiting our client access and promotion capabilities.

Taking these circumstances and other factors into consideration.

Management team expects the annual new subscriber target.

For fiscal 2022 to be in the range of 72000 to 75000.

This concludes my remarks regarding the fourth quarter fiscal 2021 financial results and outlook for the next fiscal year. Thank you very much for your ongoing support and will now turn the call over to our CFO, Mr. Albert Chen to discuss the company's financial performance for the reported.

Quarter.

Good morning, everyone.

And the fourth quarter revenue increased by 0.8%.

The year to approximately 302 million and renminbi.

Mainly driven by the increase and storage fee revenue.

During the reporting quarter the group recruiters over 19000, new subscribers.

Representing an increase of 5% yields a year.

Due to the ongoing COVID-19 impact and fewer newborn and our operating markets.

We offered additional pricing incentives to encourage subscription.

As a result revenues generated from processing fees and other services decreased by 4% year over year.

Approximately 176 million renminbi.

Which accounted for 58% of total revenue.

Compared to 61% of last year.

By the end of March 2021.

Our accumulated subscriber base had surpassed at 900000.

Accordingly.

Storage fee revenues for the fourth quarter increased by 9% year over year.

Approximately 127 million renminbi.

Gross profit in the fourth quarter remained at approximately 256 moving in renminbi.

And as higher raw material costs, and a slight increase and processing volume offset the increase and storage revenues.

Gross margin decreased slightly to 85%.

From 86% of last year.

Operating income for the fourth quarter decreased slightly by 0.7% year over year.

148 million renminbi.

And operating margin was 49% compared to 50% of last year.

Depreciation and amortization expenses for the reporting quarter were approximately 12 million renminbi.

To the prior year period.

Non-GAAP operating income decreased by less than 1% year over year to approximately 160 million renminbi.

Non-GAAP operating margin was 53% in the reported quarter.

Sales and marketing expenses and the fourth quarter decreased by 2% year over year to approximately 60 million renminbi.

In light of the reduction and sales force head count and limited promotional activities.

Sales and marketing expenses as a percentage of <unk> as a percentage of revenue was down to 19, 7%.

Compared to 22% of last year.

General and administrative expenses increased slightly by <unk>, 4% year over year to approximately 43 million renminbi.

Mainly due to the increase in provision for doubtful accounts and.

And administrative staff expenses.

Which were partially offset by reduction in professional fees.

G&A expenses as a percentage of revenue remained at 14% same as last year.

In the fourth quarter, we recognized and approximately 5 million renminbi fair value loss of equity Securities.

While mark to market loss as compared to 24 million renminbi Mark to market loss in the prior year period.

Income before income tax for the fourth quarter increased by 16% year over year to approximately 155 million renminbi.

Income tax expense for the reporting quarter was 24 million renminbi.

Net income attributable to the company shareholders increased by approximately 32% yield per year.

2.128 million renminbi.

Net margin for the fourth quarter.

Improved to 42%.

From 32% of last year's period.

Basic and diluted earnings per ordinary share for the reported quarter.

105 RMB.

These are the highlights of our fourth quarter results. We are now happy to and turns of the floor for any questions.

We will now begin the question and answer session on the participants for questions to pose. Please press <unk> 1 on 34 keep it and will be placed on the queue.

So the queue. Please press zero to once again.

Steady from Keybanc known to them.

Your line of tests to ask a question. Please limit yourself to 1 question and it's tight.

Our first question comes from Mr. Andy Mehta from evaluate research your question. Please.

Yes.

Congratulations on the solid result of the new China policy with regard to.

2 children and then our 3 children.

And what impact do you see that having on your business going forward. Thank you.

Thank you for the questions.

With respect to the so-called 3 child policy now.

Sure.

Overall, I think it should be a positive development because it signals the.

On the regulatory bodies is aware of the issues and also trying to make.

Measures to counter counter the decline in newborns number so we believe the overall.

Intention.

Cash is positive.

Unfortunately, though is that.

Is it fair to assume that it will have it will need to provide additional incentives and not before the general public and actually.

Incentify to have additional child.

As many of you are aware that the living expenses and China is skyrocketing and.

And having.

And having to take care of the elderly is at home and then raising additional children.

And the solar income earned as being the husband and wife and family. They basically has a lot of malls. So I guess it is fair to say that.

The overall and pension is fairly positive, but I think there are a lot of additional.

Support of smashes and need to be in place before the general public will be incentive fee.

If the number of newborns and China increase over the long run we believe that it should be positive for the economy as well as the couple of banking industry as a whole, but thats more like a long term benefit near term.

<unk>.

We do not anticipate a huge benefit on now and because.

Because for people.

Have a lot of economic resources.

A.

I don't think.

Let me put this way if thoughtful more economically affluent families. I think affording couple of banking is definitely on no.

And that's a no brainer.

But for people, who are actually thinking about having a second and third child when day economic resources is a little bit dredge.

Preventive healthcare measures may not be the first thing that comes with and mine. So so.

I think it I think.

I think the <unk>.

Immediate impact on the couple of banking front will be limited as compared to for example companies that manufacture milk formula.

All companies and manufacture consumables for children per kit.

<unk> like <unk>.

I mean, those companies are likely to be.

To benefit more from from such a policy.

Thank you Andy.

Okay.

A question to pose please bestseller Daddy from Keybanc and you'll be placed in the queue to cancel the queue. Please press.

And there too.

Once again.

Anthony from Keybanc.

To allow everyone a chance to ask a question. Please limit yourself to 1 question at a time.

The hefty chart from Al Altimo.

Your question Anthony.

Hello, and thank you for taking my question on the first congratulation on the strong set of frizzell.

And especially on the cash generation and.

So actually I have 3 very little questions. The first 1 is bad.

Can you tell us a little bit about your acquisition strategy and maybe do you anticipate to do some acquisition and maybe outside of China to reduce your geographic risk. So is there any advanced projects on the side and.

And also second question is just about kilo and.

And you have a steak and <unk>, which is a value of old company, which is valued at around 13 million U S dollar and your balance sheets.

Just 2 reaching any dividend a day.

Do you do you expect to do something with that because I mean, the value on the balance sheet is just completely ridiculous based on the financials of keto and the last question is.

And just about a new regulation that is is that just coming.

Regarding secondary listing in Hong Kong.

At the end of March on.

Congrats on <unk> dropped to a project to broadens and qualification for secondary listing in Hong Kong actually to make it easier to get this thing on that releasing and especially.

Ongoing exchange plans to substantially lower capitalization qualification to let smaller companies raised funds in Hong Kong.

Based on the text of the regulation and you will be eligible. So do you do you anticipate potentially too to think about that based on the risk which is about 2 or 3 years from now so risk of delisting and the U S. Thank you very much.

Thank you for the questions.

First of all regarding the company's strategic direction.

And concerning the potential acquisitions.

The company is looking into.

Expanding our service revenue our service portfolio and.

And part of the expansion strategy definitely will involve acquisitions.

And we are not limiting ourselves to acquisition targets within the PRC.

If there are interesting opportunities, which we're currently exploring so.

Is it fair I guess it is fair to say that.

I think that definitely opportunities available.

But.

But none of that reach a announced simple stage fluid. This way so if we make and the mature developments on the acquisitions and we will definitely announce of the bucket.

And in the timely manner.

But.

As you also touch on the regulatory issues.

I also want to highlight that as many of you are aware at the end of 2020.

The authorities have made a public statement regarding the couple of banking policy and the PRC.

We always talk about the 1 license per region policy.

But in the latest publication and put out by the National Health Commission back in.

December 2020 are on not mistaken.

They are pretty much putting the licensing regime on hold.

By saying that they will not accept additional new license sales.

Not accept and new applications.

Regarding new licenses for year 2021.

So.

Like we pointed out in.

Previous earnings call.

Yes.

This new.

This.

And so call it the latest statement by the mesh and the health commissions.

And has definitely introduce some layer of uncertainties because.

On.

There is right now.

There is no official statement with on.

The 1 license policy is still ongoing.

On the.

The officials.

From the <unk>, basically, saying that and assessing any new applications. So.

And the absence of further guidelines all implementation details.

There is still a relatively high level of and the key with these and uncertainties with respect to a couple of banking and.

And also.

In April 2021, the new Biosecurity law has.

Become infected.

And it is concerning mostly regarding the human genetic resources and how it's being handled.

And on collection and storage and so forth. It certainly has an impact on couple of banking industry as a whole and.

But again.

Right now there is still lack of implementation details so.

We are still monitoring the situations because of all the.

Uncertainties surrounding the couple of banking industry regulations.

We believe that and it is.

We believe that it is prudent to look at opportunities outside of China, because to a certain extent not only we need to expand our service portfolio, but we also to the extent possible minimized our geographical risk and.

And on China's specific regulatory with as well so.

And so question, yes, we are looking at opportunities outside of China, as well as opportunities in China as well.

Regarding the.

The Hong Kong listing itself.

I need to apologize I'm aware that the.

And the latest.

<unk> K policy revision regarding listing requirement.

And I thought they increase the listing threshold rather than decreasing it but I'll certainly have looked at that as well.

As you rightfully pointed out the <unk> issue is certainly something that we are aware of and we are also monitoring the situation as well.

Thank you.

Other participants and ask questions of course. Please go ahead.

That is on keep that and youll be placed on the Q2.

Okay and Sir. Thank you. Please go ahead Sir.

And.

Once again to all of it.

No no.

Hello, everyone and a chance to ask a question. Please limit yourself to 1 question and time.

All participants on this question to Paul. Please press go on that is we'll keep it.

Please and acute.

So thank you please press <unk>.

Once again on it.

Telephone keypad now.

Okay.

At this point of that appears to be no further questions I will now turn the call back to Ms. Cathy Bai.

Thank you Jess This concludes our earnings conference call for the fiscal 2021 fourth quarter.

Thank you all for your participation and ongoing support.

Great day.

Thank you for your help Jeff you may now disconnect.

Thank you Ms. Katie The conference call has now and you may now disconnect.

Okay.