Global Cord Blood Corporation (CO) on Q1 2022 Results - Earnings Call Transcript
Operator: Ladies and gentlemen, welcome everyone to Global Cord Blood Corporation Earnings Conference Call for the Fiscal 2022 First Quarter. [Operator Instructions] Now I would like to introduce Madam Cathy Bai, VP of Corporation Finance to begin the presentation. Madam, please go ahead. Cathy Bai : Thank you, Greg. Good morning, everyone. Welcome to our fiscal 2022 first 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. Kindly refer to our SEC filings for detailed discussions of potential risks. In the interest of time, we will begin with our CEO's remarks, followed by a report of our fiscal 2022 first quarter financials given by our CFO, Mr. Albert Chen. Our management will be available to answer questions during the Q&A session. We understand investors and shareholders have various questions to ask. 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, Tina, I will read her prepared remarks. Let's begin our presentation. Good morning, everyone, and welcome to our first quarter fiscal 2022 earnings conference call. During the reporting quarter, the group managed to recruit 19,673 new subscribers, up by 14.2% year-over-year as a result of the relatively low base in the previous year, and up by 1.6% quarter-over-quarter, in line with management's expectations. At the end of June 2021, our accumulated subscriber base had surpassed 920,000. As a result of the effective control measures implemented in China, the impact of COVID-19 among Chinese consumers has gradually alleviated. As our potential clients became less concerned about hospital admissions for childbirth, the pandemic impact on our business gradually decreased. Despite this progress, we remain cautious about the general business environment as overall newborn numbers remain on a downward trend. Certain hospitals continue to maintain strict access policies compared to prepandemic and occasional outbreaks in China still trigger localized lockdowns as economic activities resume. Overall, concerns about the cord blood banking licensing regime and biosecurity laws, have yet to subside, and the management team continues to pay close attention to new developments related to such policies has been potential industry-wide implications. We will not rule out the possibility that further details on government policy implementation will be announced from time to time. As such, the company will remain vigilant and be prepared to respond to any shift in the competitive industry landscape. Meanwhile, due to the lack of women of childbearing age and the persistence of high cost to raise child. The 3 child policy stimulus has yet to create a notable boost in the newborn numbers in our operating markets. Despite this, it is worth mentioning that our top government decision recently published on July 20 discusses our target plan to reduce the cost of raising children and increased fertility rate by 2025. In light of this, we will closely monitor future announcements and the impact of supportive policies and measures to follow. With this in mind, the management team has determined the fiscal 2022 new subscriber target is expected to remain in the range of 72,000 to 75,000. As a result of regulatory and market uncertainties, the management team actively communicates with relevant regulation agencies while continuing to evaluate alternative scenarios. We will carry on our efforts to expand our marketing and sales channels and pursue both on and offshore business development opportunities. We will continue to execute upon our goals to enhance customer viscosity, foster new business growth and income sources and improve the group's overall risk resistance capacity. This concludes my remarks regarding our fiscal 2022 first 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, who will discuss our first quarter financial performance. Mr. Chen, please go ahead. Albert Chen: Good morning, everyone. Thank you for joining our call today. In the first quarter, revenues increased by 12% year-over-year to approximately RMB 315 million, mainly driven by the increase in processing fee revenues. During the reporting quarter, the group recruited over 19,600 new subscribers, representing an increase of 14% year-over-year due to the relatively low comparable base in the first quarter of last year, coupled with gradually improved consumer sentiment as various COVID-19 containment measures started to take effect. As a result, revenues generated from processing fees and other services increased by 14% year-over-year to approximately RMB 185 million, which accounted for 59% of total revenues. By the end of June 2021, our accumulated subscriber base expanded to over 920,000. Accordingly, storage fee revenues for the first quarter increased by 9% year-over-year to RMB 130 million. Gross profit in the first quarter increased by approximately 13% to RMB 267 million. And gross margin improved by 30 basis points from last year period to approximately 85%. Operating income for the first quarter increased by 17% year-over-year to RMB 157 million. And operating margin improved to approximately 50% from 48% of last year because SG&A expenses only increased slightly. Depreciation and amortization expenses for the reporting quarter were approximately RMB 12 million. Non-GAAP operating income increased by approximately 16% year-over-year to RMB 169 million. And non-GAAP operating margin improved by 1 percentage point year-over-year to 53%. Sales and marketing expenses in the first quarter increased by 8% year-over-year to RMB 59 million, mainly due to an increase in sales incentives as we carefully redeploy sales and marketing resources during the consumer sentiment recovery phase while facing occasional localized lockdowns due to various COVID-19 clusters. Sales and marketing expenses as a percentage of revenue decreased to 19% from 20% in the prior year period. General and administrative expenses increased by 4% year-over-year to approximately RMB 46 million, mainly due to increases in account receivable provisions and professional fees but was partially offset by decrease in overhead spending. General and administrative expenses as a percentage of revenues decreased to 15% in the reporting quarter. In the first quarter, we recognized an approximately RMB 5.6 million increase in fair value of equity securities or mark-to-market gains compared to over RMB 18 million in mark-to-market gains in last year. In the reporting quarter, we also recorded approximately RMB 1 million in dividend income from equity investments compared to no such income in the prior year period. As a result of the increases in operating income and dividend income, partially offset by the decrease in mark-to-market gains. Income before income tax for the first quarter increased by 7% year-over-year to RMB 172 million. Net income attributable to the company's shareholders increased by 3% year-over-year to RMB 136 million. Basic and diluted earnings per ordinary share for the reporting quarter increased by approximately 3% to RMB 1.12. These are the highlights of our first quarter financial results. We are happy to turn the floor for any questions. Operator: [Operator Instructions] And we have one question from Mr. [Bill Jones]. Operator: [Operator Instructions] We have a new question from [Sam John from Mars Capital]. Operator: [Operator Instructions] It seems that there is no further question. At this point, I will turn the call back to Madam Cathy Bai. Cathy Bai: Thank you, Greg. This concludes our earnings conference call for the fiscal 2022 first quarter. Thank you all very much for your participation and ongoing support. Have a great day. Greg, you may now disconnect. Operator: Thank you. Ladies and gentlemen, this concludes today. You can now disconnect.
Class Action Lawsuit Filed Against Global Cord Blood Corporation by Rosen Law Firm
Rosen Law Firm's Class Action Lawsuit Against Global Cord Blood Corporation
Rosen Law Firm's announcement of a class action lawsuit against Global Cord Blood Corporation (NYSE: CO) (OTC: CORBF) has stirred significant attention among investors and market watchers. The lawsuit centers on allegations that the company engaged in misleading practices and failed to act in the best interests of its shareholders, particularly concerning its capital allocation strategy and the rejection of going-private offers in favor of a questionable acquisition. These actions, according to the lawsuit, were designed to benefit insiders and related parties at the expense of the broader investor base, leading to financial losses when these details became public.
The financial metrics of Global Cord Blood Corporation provide a backdrop against which these allegations gain further context. With a price-to-earnings (P/E) ratio of approximately 5.22, CO's shares appear to be trading at a low price relative to its earnings, suggesting that the market may have perceived the company as undervalued or that investors had high expectations for its future profitability. The price-to-sales (P/S) ratio of about 2.32 indicates that investors were willing to pay $2.32 for every dollar of sales, a metric that can reflect the market's optimism about the company's growth prospects. However, these seemingly positive financial indicators, including an earnings yield of roughly 0.19% and a strong liquidity position as evidenced by a current ratio of approximately 10.73, are overshadowed by the lawsuit's allegations.
The lawsuit's focus on the company's capital allocation decisions, particularly the rejection of going-private offers and the acquisition of Cellenkos Inc. for over $1 billion, raises questions about the alignment of these decisions with shareholder interests. The acquisition, paid for in part with Global Cord shares, and the decision to reserve funds for insiders, as alleged, could be seen as moves that potentially diluted shareholder value and diverted company resources away from profitable opportunities. These actions, if proven true, might explain why, despite favorable financial ratios, the company's stock performance and investor confidence could have been negatively impacted.
Investors who suffered significant losses are now faced with a critical deadline of June 24, 2024, to potentially serve as lead plaintiff in the class action lawsuit. The Rosen Law Firm's track record, including securing over $438 million for investors in 2019 alone, underscores the potential for recovering damages. However, the lawsuit also highlights the importance of transparency and fiduciary responsibility in corporate governance, especially in decisions that can significantly affect shareholder value.
For investors of Global Cord Blood Corporation, the unfolding legal battle and its implications for corporate governance and investor rights will be closely watched. The allegations, if substantiated, could not only lead to financial restitution for affected investors but also prompt a reevaluation of corporate practices and governance standards within the industry. As the case progresses, the financial metrics and the company's strategic decisions will be scrutinized in the context of their impact on shareholder value and the broader market's trust in CO.
