Concord Medical Reports Third Quarter 2015 Financial Results

Nov 18, 2015, 16:15 ET from Concord Medical Services Holdings Limited

BEIJING, Nov. 18, 2015 /PRNewswire/ -- Concord Medical Services Holdings Limited ("Concord Medical" or the "Company") (NYSE: CCM), a leading specialty hospital management solution provider and operator of the largest network of radiotherapy and diagnostic imaging centers in China, today announced its unaudited consolidated financial results for the third quarter ended September 30, 2015[1].

Third Quarter 2015 Highlights

  • Total net revenue increased by 7.7% from RMB143.2 million in the third quarter of 2014 to RMB154.3 million ($24.3 million) in the third quarter of 2015, including net revenue from the network business of RMB148.5 million ($23.4 million) and net revenue from Concord Cancer Hospital (formerly known as Fortis Surgical Hospital) of RMB5.8 million ($0.9 million).
  • Gross profit was RMB61.9 million ($9.7 million) in the third quarter of 2015, compared to RMB74.1 million in the third quarter of 2014.
  • Net income attributable to ordinary shareholders in the third quarter of 2015 was RMB22.3 million ($3.5 million), which includes the Net loss attributable to shareholders of Concord Cancer Hospital of RMB13.3 million ($2.1 million), compared to RMB34.5 million in the third quarter of 2014.
  • Basic and diluted earnings per American Depositary Share ("ADS")[2] in the third quarter of 2015 were RMB0.50 ($0.08) and RMB0.49($0.08), respectively, compared with RMB0.77 and RMB0.72 in the third quarter of 2014.
  • Adjusted EBITDA[3] (non-GAAP) was RMB48.8 million ($7.7 million) in the third quarter of 2015, compared to RMB88.2 million in the third quarter of 2014.

Dr. Jianyu Yang, Chairman and Chief Executive Officer of Concord Medical, commented, "During the third quarter of 2015, we achieved several important strategic milestones. First, we actively expanded our free-standing radiotherapy and diagnostic centers in China. The first free-standing radiotherapy center, Datong Meizhong Jiahe Cancer Hospital is at the final stage of equipment installation and internal decoration. It is expected to open and receive and treat patients by early 2016. We also have a strong pipeline of free-standing centers which will open to patients gradually. We are very glad to see that our strategic transformation is making solid progress. Secondly, Concord Cancer Hospital has received the approval from Singapore Ministry of Health to operate under the new name and will provide oncology as its main service, including medical oncology and surgical oncology. Our team is currently working with The University of Texas MD Anderson Cancer Center ("MDACC") to install the medical protocol and hire a qualified medical team to be in compliance with MDACC standards. We expect to see patient inflow improvement in 2016. Finally, Concord Medical has acquired an additional equity interest in the management company of MDACC Proton Therapy Center ("MDACC PTC") and become the majority shareholder of the management company of MDACC PTC. As a result, the company also acquired an additional interest in the MDACC Proton Therapy Center.

Additionally, the Company plans to list its indirectly wholly-owned subsidiary, CMS Hospital Management Co., Ltd, on the National Equities Exchange and Quotations ("NEEQ") in China, which is also known as the New Third Board in China. This is an effort to fully unlock the value in our business. We have submitted the listing application to the NEEQ and we expect the listing to be approved by the end of 2015.

Looking forward, Concord Medical is making concrete progress to establish a leading cancer hospitals network in China. Our premium cancer hospitals in Beijing, Shanghai and Guangzhou are all expected to start construction in 2016. Once completed, these hospitals are expected to become prime destinations for cancer treatment and diagnostics and our patients are expected to receive MDACC-standard Multiple Disciplinary Treatment ("MDT"). "

2015 Third Quarter Financial Results by Segment

Network Business

Net revenue from the network business increased by 3.7% to RMB148.5 million ($23.4 million) in the third quarter of 2015 from RMB143.2 million in the third quarter of 2014. The increase was primarily attributable to improvement in product mix, especially increased contribution from Cyber Knife centers in the network.

As of September 30, 2015, the Company operated a network of 127 centers in 53 cities in China and had entered into agreements to establish one additional center. The Company closed two radiotherapy centers in the third quarter of 2015.

Cost of revenue of the network business was RMB83.5 million ($13.1 million) in the third quarter of 2015, compared to RMB69.1 million in the third quarter of 2014. The increase was mainly due to the increased high-value medical consumable expenses and maintenance expenses for the network.

Gross profit from the network business was RMB65.0 million ($10.2 million) in the third quarter of 2015, compared to RMB74.1 million in the third quarter of 2014. The gross profit margin of the network business for the third quarter of 2015 was 43.8%, compared to 51.7% for the third quarter of 2014. The decrease in gross profit was mainly due to higher cost of revenue attributable to the increased high-value medical consumable expenses and maintenance expenses for the network. 

Selling expenses of the network business were RMB30.8 million ($4.9 million) in the third quarter of 2015, compared to RMB27.5 million in the third quarter of 2014. Selling expenses as a percentage of net revenue from network business was 20.8% in the third quarter of 2015, compared to 19.2% in the third quarter of 2014. The increase in selling expenses was mainly due to increased conference, office and travel expenses.

General and administrative expenses of the network business were RMB21.7million ($3.5 million) in the third quarter of 2015, compared to RMB20.1 million, excluding the gain from collection of bad debts of RMB20.0 million, in the third quarter of 2014. General and administrative expenses as a percentage of net revenue from network business was 14.6% in the third quarter of 2015, compared to 14.0% in the third quarter of 2014.

Capital expenditures of the network business were RMB105.4 million ($16.6 million) in the third quarter of 2015, compared to RMB16.7 million in the third quarter of 2014 due to the increase in deposits for Property, Plant and Equipment for our secondary hospital.

Accounts receivable from the network business was RMB257.7 million ($40.6 million) as of September 30, 2015, compared to RMB265.0 million as of December 31, 2014. The average number of days sales outstanding was 168 in the third quarter of 2015, compared to 173 days in the third quarter of 2014.

As of September 30, 2015, the Company, excluding Concord Cancer Hospital which was acquired in April 2015, had bank credit lines totaling RMB3.2 billion ($507.5 million), of which RMB1.2 billion ($185.2 million) were utilized.

During the third quarter of 2015, the Company handled 6,100 patient treatment cases and 78,766 patient diagnostic cases, representing a 0.4% decrease and 0.1% decrease, respectively, from the third quarter of 2014, mainly due to the closure of two radiotherapy centers during the third quarter of 2015.

Hospital Business

Concord Cancer Hospital[4] is a leading privately-owned, for-profit oncology hospital in Singapore. The Company acquired Concord Cancer Hospital, formerly known as Foritis Surgical Hospital, in April 2015 and is now transforming it into a specialty cancer hospital.

Net revenue from the hospital business was RMB5.8 million ($0.9 million or S$1.3 million [5]), which were comprised of:

  • inpatient revenue of RMB5.1 million ($0.8 million), representing 88.5% of net revenue from the hospital business;
  • outpatient revenue of RMB0.2 million ($0.04 million), representing 4.2% of net revenue from the hospital business; and
  • medicine revenue of RMB0.4 million ($0.1 million), representing 7.3% of net revenue from the hospital business.

Cost of service of the hospital business for the third quarter of 2015 was RMB8.9 million ($1.4 million or S$2.0 million).

Selling expenses of the hospital business were RMB0.03 million ($4618.8 or S$0.01 million) for the third quarter of 2015.

General and administrative expenses of the hospital business were RMB9.9 million ($1.6 million or S$2.2 million) for the third quarter of 2015, of which employee benefit expenses were RMB5.7 million ($0.9 million or S$1.3 million).

Capital expenditures of the hospital business was RMB0.8 million ($0.1 million or S$0.1 million) for the third quarter of 2015.

As of September 30, 2015, Concord Cancer Hospital had accounts receivable of RMB3.8 million ($0.6 million or S$0.8 million). The number of days sales outstanding was 52. The accounts receivable balance was mainly related to outstanding balances to be collected from local insurance program.

Concord Cancer Hospital operated 31 beds and had 85 medical and non-medical staff as of September 30, 2015.

Recent Developments

Receives name change approval for Singapore hospital – On October 14, 2015, Concord Medical received approval from the Singapore Ministry of Health to change the name of its acquired hospital in Singapore, Fortis Surgical Hospital, to Concord Cancer Hospital which will provide oncology as its main service, including medical oncology and surgical oncology.

Announces Establishment of Beijing Allcure Medical Information Technology Ltd. – On September 8, 2015, the Company announced that it span off its current telemedicine business and jointly set up Allcure with strategic investors. Concord Medical injected its telemedicine-related assets and staff into Allcure and brought in a professional management team.

Additional Ownership Interest in MD Anderson Cancer Center Proton Therapy Center – On August 12, 2015, the Company closed the acquisition of additional ownership interest of The University of Texas MDACC Proton Therapy Center from an existing owner of the general partner.

Share Repurchase Program – On August 10, 2015, the Company announced a share repurchase program, under which Concord Medical is authorized to repurchase up to $20.0 million of its outstanding ADSs for cash in open market transactions or by other means as long as the price per ADS is no more than $7.99, depending on market conditions and other factors. As of November 17, 2015, Concord Medical has repurchased 330,730 ADSs, representing 992,190 ordinary shares, for an aggregate consideration of $1.7 million, including commissions. As of September 30, 2015, the Company had total 44.9 million outstanding ADSs.

 Notes:

[1] This announcement contains translations of certain RMB amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB6.3556 to $1.00, the effective noon buying rate as of September 30, 2015 in the City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York.

[2] Each ADS represents three ordinary shares of the Company.

[3] Definition of adjusted EBITDA: Adjusted EBITDA is defined as net income plus interest, taxes, depreciation and amortization, share-based compensation expenses, and other adjustments. Other adjustments include foreign exchange gain (loss), loss from disposal of property, plant and equipment, and other income or expense.

[4] The financial results of Concord Cancer Hospital were consolidated into our financial results in the third quarter in 2015. Please note that for the third quarter of 2014, the financial contribution from Chang'an Hospital was reflected as net income from discontinued operations.

[5] Translation of Singapore dollar amount into U.S. dollar amount is made at a rate of SGD1.3852 to $1.00, the effective noon buying rate as of September 30, 2015, as set forth in the H.10 statistical release of the U.S. Federal Reserve Board.

Conference Call Information

Concord Medical's management will hold an earnings conference call at 8:00 a.m. Eastern Time on November 19, 2015 (9:00 p.m. Beijing/Hong Kong time on November 19, 2015).

Dial-in details for the earnings conference call are as follows:

U.S. Toll Free:

1 866 519 4004

International:

65 67135090

U.K. Toll Free:

08082346646

Hong Kong Toll Free:

800-906-601

China Local:

400-620-8038 / 800-819-0121

Passcode:

CCM

A replay of the conference call may be accessed by phone at the following numbers for 7 days:

U.S. Toll Free:

1 855 452 5696

International:

61 2 8199 0299

Conference ID:

74380959

Additionally, a live and archived webcast of this conference call will be available at http://ir.concordmedical.com/.

About Concord Medical

Concord Medical Services Holdings Limited is a leading specialty hospital management solution provider and operator of the largest network of radiotherapy and diagnostic imaging centers in China. As of September 30, 2015, the Company operated a network of 127 centers with 76 hospital partners that spanned 53 cities and 25 provinces and administrative regions in China. Under long-term arrangements with top-tier hospitals in China, the Company provides radiotherapy and diagnostic imaging equipment and manages the daily operations of these centers, which are located on the premises of its hospital partners. The Company also provides ongoing training to doctors and other medical professionals in its network of centers to ensure a high level of clinical care for patients. As part of its high-end cancer hospital development strategy and oversea business extension, the Company acquired Concord Cancer Hospital, a private hospital in Singapore in April, 2015. For more information, please see http://ir.concordmedical.com.

Safe Harbor Statement

This news release may contain "forward-looking" statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "anticipate," "believe," "estimate," "expect," "forecast," "intend," "may," "plan," "project," "predict," "should" and "will" and similar expressions. These forward looking statements are based upon management's current views and expectations with respect to future events and are not a guarantee of future performance. Furthermore, these statements are by their nature, subject to a number of risks and uncertainties that could cause actual performance and results to differ materially from those discussed in the forward-looking statements as a result of a number of factors. Such factors include: the number of new radiotherapy and diagnostic imaging centers opened; the increase in the number of patients in existing centers; the establishment of specialty cancer hospitals; changes in the healthcare industry in China, including changes in the healthcare policies and regulations of the PRC government; technological or therapeutic changes affecting the field of cancer treatment and diagnostic imaging; and possible effects on consumers and hospitals, hospital construction, and suppliers, as a result of inflation and the Chinese government's policies and actions to control inflation. Further information regarding these and other risks is included in the Company's filings with the U.S. Securities and Exchange Commission, which are available at www.sec.gov. The Company does not assume any obligation to update any forward-looking statement, except as required by law.

About Non-GAAP Financial Measures

To supplement the consolidated financial statements presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), Concord Medical uses certain non-GAAP measures. The Company presents certain of its financial information that is adjusted from results based on GAAP to exclude the impact of share-based compensation expense. The Company believes excluding share-based compensation expense from its GAAP financial measures is useful for its management and investors to assess and analyze the Company's core operating results, as such expense is not directly attributable to the underlying performance of the Company's business operations and do not impact its current cash earnings. Concord Medical also believes these non-GAAP measures excluding share-based compensation expense are important in helping investors to understand the Company's current financial performance and future prospects and to compare business trends among different reporting periods on a consistent basis. In addition, Concord Medical also presents the non-GAAP measure of Adjusted EBITDA, which is defined in this announcement as net income plus interest, taxes, depreciation and amortization, and share-based compensation expenses and other adjustments. Other adjustments include foreign exchange gain (loss), loss from disposal of property, plant and equipment, and other income or expense. Furthermore, Adjusted EBITDA eliminates the impact of items that the Company does not consider to be indicative of the performance of the network business and hospital business. The Company believes investors will similarly use Adjusted EBITDA as one of the key metrics to evaluate its financial performance and to compare its current operating results with corresponding historical periods and with other companies in the healthcare services industry. The presentation of these additional measures should not be considered a substitute for or superior to GAAP results or as being comparable to results reported or forecasted by other companies. The non-GAAP measures have been reconciled to GAAP measures in the attached financial information.

For more information, please contact:

Concord Medical Services

Mr. Adam J. Sun (Chinese and English) +86 10 5957 5266 adam.sun@concordmedical.com

Ms. Fang Liu (Chinese and English) +86 10 5903 6688 (ext. 639) fang.liu@concordmedical.com

ICR Inc.

Mr. William Zima +1 203-682-8233 William.Zima@icrinc.com

 

Concord Medical Services Holdings Co., Ltd. 

Consolidated Balance Sheets

(in thousands)

December 31, 2014

September 30, 2015

RMB

RMB

US$

(audited)

(Unaudited)

(Unaudited)

ASSETS

Current assets

Cash and cash equivalents

478,682

158,367

24,918

Restricted cash, current portion

392,328

346,889

54,580

Accounts receivable

265,010

261,523

41,148

Inventories

2,986

3,752

590

Prepayments and other current assets

177,267

89,837

14,135

Net investments in direct financing leases, current portion

143,853

102,975

16,202

Deferred tax assets, current portion

3,556

5,006

789

Total current assets

1,463,682

968,349

152,362

Non-current assets

Property, plant and equipment, net

749,683

929,853

146,305

Intangible assets, net

61,243

47,557

7,483

Deposits for non-current assets

101,166

252,304

39,698

Net investments in direct financing leases, non-current portion

130,934

131,356

20,669

Deferred tax assets, non-current portion

17,183

19,172

3,017

Equity method investments

221,180

246,795

38,831

Cost method investments

-

24,365

3,834

Other non-current assets

52,892

43,563

6,852

Prepaid land lease payments

51,529

430,049

67,665

Restricted cash,non-current portion

109,840

139,100

21,886

Total non-current assets

1,495,650

2,264,114

356,240

Total assets

2,959,332

3,232,463

508,602

LIABILITIES AND EQUITY

Current liabilities

Short-term bank borrowings

322,128

520,270

81,860

Long-term bank borrowings, current portion

246,233

225,121

35,421

Accounts payable

1,064

1,227

193

Accrual for purchase of property, plant and equipment

11,784

4,816

758

Accrued expenses and other liabilities

130,193

169,529

26,674

Income tax payable

56,151

41,819

6,580

Deferred revenue, current portion

1,038

1,760

277

Deferred tax liabilities, current portion

1,228

1,228

193

Total current liabilities

769,819

965,770

151,956

Non-current liabilities

Long-term bank borrowings, non-current portion

335,479

390,210

61,396

Deferred tax liabilities, non-current portion

50,227

9,588

1,509

Other long term liabilities

3,749

3,182

502

Total non-current liabilities

389,455

402,980

63,407

Total liabilities

1,159,274

1,368,750

215,363

EQUITY

Ordinary shares

105

105

17

Treasuary stock

(5)

(5)

(1)

Additional paid-in capital

2,074,125

2,073,952

326,319

Accumulated other comprehensive loss

(18,651)

(42,291)

(6,655)

Accumulated deficit

(258,025)

(170,692)

(26,857)

Total Concord Medical Services Holdings Limited shareholders' equity

1,797,549

1,861,069

292,823

Noncontrolling interests

2,509

2,644

416

Total equity

1,800,058

1,863,713

293,239

Total liabilities and equity 

2,959,332

3,232,463

508,602

 

 

Concord Medical Services Holdings Co., Ltd. 

Consolidated Profit & Loss

(in thousands)

September 30, 2014

September 30, 2015

RMB

RMB

US$

(Unaudited)

(Unaudited)

(Unaudited)

Revenues, net of business tax , value-added tax and related surcharges:

Network

143,208

148,507

23,366

Hospital

-

5,793

912

Total net revenues

143,208

154,300

24,278

Cost of revenues: 

Network

(69,141)

(83,494)

(13,137)

Hospital

-

(8,909)

(1,402)

Total cost of revenues

(69,141)

(92,403)

(14,539)

Gross profit

74,067

61,897

9,739

Operating expenses:

Selling expenses

(27,485)

(30,837)

(4,852)

General and administrative expenses

462

(31,540)

(4,963)

Operating income (loss)

47,044

(480)

(76)

Interest expense

(9,545)

(11,477)

(1,806)

Foreign exhange (loss) income

(982)

10,025

1,577

Loss from disposal of property, plant and equipment

(330)

(1,256)

(198)

Interest income

5,024

5,196

818

Equity pick up of equity investee

4,160

4,191

659

Other income

(438)

149

24

Income from continuing operations before income tax

44,933

6,348

998

Income tax expenses (benefit)

(13,185)

16,179

2,546

Net income from continuing operations

31,748

22,527

3,544

Net income from discontinued operations

5,287

-

-

Net income

37,035

22,527

3,544

Net income attributable to non-controlling interests

2,538

260

41

Net income attributable to ordinary shareholders

34,497

22,267

3,503

Earnings per ADS

Net profit from continuing operations

0.71

0.50

0.08

Net profit from discontinued operations

0.06

-

-

Basic

0.77

0.50

0.08

Net profit from continuing operations

0.66

0.49

0.08

Net profit from discontinued operations

0.06

-

-

Diluted

0.72

0.49

0.08

Weighted average number of ADS outstanding:

Basic 

44,945,433

44,933,081

44,933,081

Diluted

48,006,314

45,075,947

45,075,947

Other comprehensive  income (loss), net of tax

Foreign currency translation

7,123

(23,009)

(3,620)

Total other comprehensive income (loss), net of tax

7,123

(23,009)

(3,620)

Comprehensive loss

44,158

(482)

(76)

Comprehensive income attributable to noncontrolling interests

2,538

260

41

Comprehensive loss attributable to Concord Medical Services Holdings Limited's shareholders

41,620

(742)

(117)

 

Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures (*)

(in RMB thousands, unaudited)

For the three months ended September 30, 2014

For the three months ended September 30, 2015

GAAP Measure

Adjustment

Non-GAAP Measure

GAAP Measure

Adjustment

Non-GAAP Measure

Operating income (loss)

47,044

2,125

49,169

(480)

2,002

1,522

Net income

37,035

2,125

39,160

22,527

2,002

24,529

Basic earnings per ADS

0.77

0.05

0.81

0.50

0.04

0.54

Diluted earnings per ADS

0.72

0.04

0.76

0.49

0.04

0.53

(*) The adjustments include share-based compensation expense.

 

Reconciliation from net income to adjusted EBITDA(*)

(in RMB thousands, unaudited)

 For the three months ended

 For the three months ended

September 30, 2014

September 30, 2015

Net income from continuing opeartions

31,748

22,527

   Interest expenses, net

4,521

6,281

   Income tax expenses

13,185

(16,179)

   Depreciation and amortization

34,918

43,086

   Share-based compensation

2,125

2,002

   Other adjustments

1,750

(8,918)

Adjusted EBITDA

88,247

48,799

(*) Definition of adjusted EBITDA: Adjusted EBITDA is defined as net income plus interest, taxes, depreciation and amortization, share-based compensation expenses and other adjustments. Other adjustments include foreign exchange gain (loss), loss from disposal of property, plant and equipment, and other income or expense. 

 

SOURCE Concord Medical Services Holdings Limited