Q3 2022 Global Cord Blood Corp Earnings Call
Within transfer during the reporting quarter.
Groups operating regions.
He knew to adopt a zero COVID-19 strategy.
Implementing strict measures.
As localized lockdowns and Titan access in hospitals.
Which continue to obstruct the group client access and client conversion efficiencies.
Compare to the pre COVID-19 era.
Despite such difficulties the group managed to recruit 18985 new subscribers.
Up six 6% year over year.
<unk> down <unk>, 4% quarter over quarter.
In line with management's expectations.
At the end of December 2021.
Our accumulated subscriber base surpassed 955000.
In regards to industry regulation.
Biggest regulatory uncertainties remain as the National Health Commission has yet to release any updates on the licensing regime for China cord blood banking industry.
By the end of the reporting period, the National Development and Reform Commission and the Ministry of Commerce of the peoples Republic of China published an updated version of the 2021 actual administrative measures.
Access all foreign investment also known as the negative list.
Where there was no substantial change in the relevant regulations involving the groups business.
Meanwhile, as the.
The overall number of women of child bearing age.
A new birth continue to decline.
The academic community and general public in China began vibrant discussion on how to stimulate population growth.
In face of such a dynamic regulatory and business environment.
Our management team continues to closely monitor any potential development of industry regulations and policies.
And carry on efforts to operate existing lines of business.
Digging deeper into business development opportunities related to cord blood stem cells with the goal to diversify business risks and cultivate new ways of growth.
Looking ahead, yeah Tiger is generally considered a favorable year to have children in parts of China.
Which thereby may have a positive impact on birth rates.
At the same time, we must cautiously address the negative impact of the long term decline in birth rates.
And from the recurrence of COVID-19 outbreak in China.
With this in mind the management team expect new subscriber numbers in fiscal 2022 to be around the higher end of our previous guidance at 75000.
This concludes my remarks regarding our fiscal 2022 third quarter results.
Thank you for your ongoing support of global cord Blood Corporation.
Now I will turn the call over to our CFO , Mr. Albert Chen to discuss our third quarter financial performance.
Mr. Chen Please go ahead.
Good morning, everyone. Thank you for joining our call today.
In the third quarter.
Revenues increased by 9% year over year to approximately.
317 million renminbi as a result of the increase in revenues from processing fees and storage fees.
The group recruited 18985, new subscribers during the third quarter.
Which represents an increase of approximately 7% year over year. Despite.
Despite challenges from COVID-19, and the downward newborn trend.
As a result revenues generated from processing fees and other services increased by approximately 10% yield for the year to 181 million renminbi.
Which accounted for 57% of total revenues similar to last year.
By the end of December 2021.
Our accumulated subscriber base expanded to over 955000.
Storage fee revenues for the third quarter increased by 8% year over year to 136 million renminbi.
Gross profit.
In the reporting quarter increased by 10% to approximately 270 million renminbi do.
Due to economy of scale, but partially offset by higher labor costs.
Gross margin remained at 85% similar to last year.
As a result of topline growth combined with cost control measures.
Operating income increased by approximately 21% year over year to approximately 150 million renminbi in the third quarter.
As a result operating margin improved to 47% from 43% of last year.
Yeah.
Depreciation and amortization expenses for the reporting quarter were approximately 12 million renminbi.
Again, similar to last year period.
non-GAAP operating income increased by approximately 19% year over year to 162 million renminbi.
And non-GAAP operating margin improved to 51% from 47% of last year.
Taking into account labor cost savings.
Sales and marketing expenses in the third quarter decreased by approximately 5% year over year to 66 million renminbi.
Sales and marketing expenses as a percentage of revenue was 21% compared to 24% of last year.
General and administrative expenses increased by 8% year over year to approximately 47 million renminbi.
The increase in professional fees.
It was partially offset by lower staff costs and provisions.
General and administrative expenses as a percentage of revenue remained at 15%.
Similar to last year.
In the third quarter.
The company recognized an increase of approximately 0.6 million renminbi in fat value of equity securities or more commonly known as mark to market gains.
And this is significantly less than the 6 million RMB mark to market gains, which we recorded last year.
Yeah.
In the third quarter.
Income before income tax increased by 14% year over year to 159 million renminbi.
Income tax expense was approximately 24 million renminbi.
Net income attributable to the company's shareholders increased by 15% year over year to 134 million renminbi.
Net margin improved to 42% from 40% of last year.
Basic and diluted earnings per ordinary share was one point 11 renminbi.
These are the highlights of our third quarter results. We are now happy to turn to the floor for any questions.
Thank you.
If you do wish to ask a question. Please press zero one on your telephone keypad.
If you wish to restore your question you may do so by pressing zero to counsel.
To allow everyone a chance to ask a question. Please limit yourself to one question at the time.
We will take a brief pause while questions are being registered.
Yeah.
Our first question comes from Jeff Oliver with Lone Star funds. Please go ahead.
Hello, and thank you for taking my question can you comment on the geographical breakdown of new subscribers for the quarter also what was the payment option breakdown as well. Thank you.
Thank you for the questions.
In terms of geographical breakdown newest.
New subscriber who signed up during the third quarter of our current fiscal year approximately 11%.
Of the new subscribers.
Derived from our Beijing market.
Approximately 67% of new subscribers came from the Guangdong market and the remaining balance came from the Zhejiang market, which is approximately 22%.
In terms of payment option breakdown.
Dom will payment option accounted for approximately 30%.
In terms of our new subscribers.
Numbers.
New subscriber electing upfront payment during the third quarter is approximately 38%.
Yeah.
And approximately 32% of our new subscribers recorded in the third quarter you'd like installment payment option.
Yeah.
Yeah.
As a reminder, if you do wish to ask a question. Please press zero one.
On your telephone keypad.
Yeah.
Yeah.
Yeah.
Yeah.
At this point there appears to be no further questions I will now turn back to MS. Kathy Bae. Please go ahead.
Yeah.
Thank you Simone.
This concludes our earnings conference call for the fiscal 2022 third quarter. Thank you all for your participation.
And support have a great day.
Okay.
[noise].
Yes.
Yeah.
[music].
[music].
[music].
Welcome everyone to the global Cord Blood Corporation earnings Conference call for the fiscal 2022 third quarter.
All participants lines will be placed on mute during the presentation after which there will be a question and answer session.
To allow everyone a chance to ask a question during the Q&A session. Please limit yourself to one question at a time.
Now I would like to introduce MS. Cathy Bai VP of corporate finance to begin the presentation.
Good morning, everyone.
Welcome to our fiscal 2022 third quarter earnings Conference call.
A press release discussing our financial results has already been published and a copy is available on our company's website.
During the call.
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.
I believe we saw to our SEC filings for detailed discussions of potential risks.
In the interest of time I will begin with our Ceo's remarks.
I'll, let by a report of our fiscal 2022 third quarter financials, given by our CFO Mr. Albert Chen.
Our management will be available to answer questions during the Q&A session.
We understand.
Well that stirs and shareholders have various questions to ask.
To give everyone a chance to ask questions.
We'd appreciate if you could ask one question at a time.
Today on behalf of our CEO Tina I will.
Will read her prepared remarks.
Let's begin our presentation.
Good morning, everyone and welcome to our third quarter fiscal 2022 earnings conference call.
As COVID-19 outbreaks re emerged in winter seasons in the northern hemisphere during the reporting quarter.
The groups operating regions continue to adopt a zero COVID-19 strategy.
Implementing strict measures such as localized lockdowns and Titan access and hospitals.
Which continue to obstruct the group's client access and client conversion efficiencies.
Per to the pre COVID-19 era.
Despite such difficulties the group managed to recruit 18985 new subscribers.
Up six 6% year over year and down.
4% quarter over quarter.
In line with management expectation.
At the end of December 2021.
Our accumulated subscriber base.
Cost 955000.
In regards to industry regulation.
Biggest to regulatory uncertainties remain as the <unk>.
National Health Commission has yet to release any updates on the licensing regime for China cord blood banking industry.
By the end of the reporting period.
National Development and Reform Commission and the Ministry of Commerce of the peoples Republic of China published an updated version of the 2021 actual administrative measures.
Access of foreign investment also known as the negative list.
Where there was no substantial change in the relevant regulations involving the groups business.
Meanwhile.
The overall number of women of child bearing age and new birth continue to decline.
The academic community and the general public in China.
Dan vibrant discussion on how to stimulate population growth.
In face of such a dynamic regulatory and business environment.
<unk> team continues to closely monitor any potential development of industry regulations and policies.
And carry on efforts to operate existing lines of business.
While digging deeper into business development opportunities related to cord blood stem cells with the goal to diversify business risks and cultivate new ways of growth.
Looking ahead.
Tiger is generally considered a favorable year to have children in parts of China.
Which thereby may have a positive impact on birth rates.
At the same time, we must cautiously address the negative impact of the long term decline in birth rates.
And from the recurrence of COVID-19 outbreak in China.
With this in mind the management team expect new subscriber numbers in fiscal 2022 to be around the higher end of our previous guidance at 75000.
This concludes my remarks regarding our fiscal 2022 third quarter results.
Thank you for your ongoing support of global cord Blood Corporation.
Now I will turn the call over to our CFO , Mr. Albert Chen to discuss our third quarter financial performance.
Mr. Chen Please go ahead.
Good morning, everyone. Thank you for joining our call today.
In the third quarter.
Revenues increased by 9% year over year to approximately <unk>.
317 million renminbi as a result of the increase in revenues from processing fees and storage fees.
The group recruited 18985, new subscribers during the third quarter.
Which represents an increase of approximately 7% year over year. Despite.
Despite challenges from COVID-19, and the downward newborn trends.
As a result revenues generated from processing fees and other services increased by approximately 10% yield for the year to 181 million renminbi.
Which accounted for 57% of total revenues similar to last year.
By the end of December 2021.
Our accumulated subscriber base expanded to over 955000.
Storage fee revenues for the third quarter increased by 8% year over year to 136 million renminbi.
Gross profit.
In the reporting quarter increased by 10% to approximately 270 million renminbi do.
Due to economy of scale, but partially offset by higher labor costs.
Gross margin remained at 85% similar to last year.
As a result of topline growth combined with cost control measures.
Operating income increased by approximately 21% year over year to approximately 150 million renminbi in the third quarter.
As a result operating margin improved to 47% from 43% of last year.
Yeah.
Depreciation and amortization expenses for the reporting quarter were approximately 12 million renminbi.
Again, similar to last year period.
non-GAAP operating income increased by approximately 19% year over year to 162 million renminbi.
And non-GAAP operating margin improved to 51% from 47% of last year.
Taking into account labor cost savings.
Sales and marketing expenses in the third quarter decreased by approximately 5% year over year to 66 million renminbi.
Sales and marketing expenses as a percentage of revenue was 21% compared to 24% of last year.
General and administrative expenses increased by 8% year over year to approximately 47 million renminbi.
As the increase in professional fees.
It was partially offset by lower staff costs and provisions.
General and administrative expenses as a percentage of revenue remained at 15%.
Similar to last year.
In the third quarter.
The company recognized an increase of approximately 0.6 million renminbi in fair value of equity securities or more commonly known as mark to market gains.
And this is significantly less than the 6 million RMB mark to market gains, which we recorded last year.
Yeah.
In the third quarter.
Income before income tax increased by 14% year over year to 159 million renminbi.
Income tax expense was approximately 24 million renminbi.
Net income attributable to the company's shareholders increased by 15% yields a year to 134 million renminbi.
Net margin improved to 42% from 40% of last year.
Basic and diluted earnings per ordinary share was one point 11 renminbi.
These are the highlights of our third quarter results. We are now happy to turn to the floor for any questions.
Okay.
Thank you.
If you do wish to ask a question. Please press <unk> one on your telephone keypad.
If you wish to withdraw your question you may do so by pressing zero to counsel.
To allow everyone a chance to ask a question. Please limit yourself to one question at the time.
We will take a brief pause while questions are being registered.
Our first question comes from Jeff Oliver with Lone Star funds. Please go ahead.
Hello, and thank you for taking my question can you comment on the geographical breakdown of new subscribers for the quarter also what was the payment option breakdown as well. Thank you.
Thank you for the questions.
In terms of geographical breakdown newest.
New subscriber who signed up during the third quarter of our current fiscal year approximately 11%.
After new subscribers.
Derived from our Beijing market.
Approximately 67% of new subscribers came from the Guangdong market and the remaining balance came from the Zhejiang market, which is approximately 22%.
In terms of payment option breakdown.
Dom will payment option accounted for approximately 30%.
In terms of our new subscribers.
Numbers.
New subscriber electing upfront payment during the third quarter is approximately 38%.
Yeah.
And approximately 32% of our new subscribers recorded in the third quarter, you liked installment payment option.
As a reminder, if you do wish to ask a question. Please press zero one on your telephone keypad.
Yeah.
At this point there appears to be no further questions I will now turn it back to MS. Kathy Bae. Please go ahead.
Yeah.
Thank you Simone.
This concludes our earnings conference call for the fiscal 2022 third quarter. Thank you all for your participation and ongoing support have a great day.