Concord Medical Services Holdings Limited Reports Third Quarter 2014 Financial Results

BEIJING, Nov. 17, 2014 /PRNewswire/ -- Concord Medical Services Holdings Limited ("Concord Medical" or the "Company") (NYSE: CCM), an operator of specialty cancer hospitals and 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, 2014[1].

Third Quarter 2014 Highlights

  • Total net revenue, which consists of net revenues generated from the network business and hospital business, was RMB265.7 million ($43.3 million) in the third quarter of 2014, a 13.6% increase from RMB234.0 million in the third quarter of 2013.
  • Gross profit in the third quarter of 2014 was RMB88.6 million ($14.4 million), a 0.8% increase from RMB87.9 million in the third quarter of 2013.
  • Net income attributable to ordinary shareholders in the third quarter of 2014 was RMB34.5 million ($5.6 million), a 30.3% increase from RMB26.5 million in the third quarter of 2013.
  • Basic and diluted earnings per American Depositary Share ("ADS")[2] in the third quarter of 2014 were RMB0.77 ($0.13) and RMB0.72($0.12), respectively, compared with RMB0.59 in the third quarter of 2013.
  • Adjusted EBITDA[3] (non-GAAP) in the third quarter of 2014 was RMB111.4 million ($18.1 million), a 9.4% increase from RMB101.8 million in the third quarter of 2013.

Dr. Jianyu Yang, Chairman and Chief Executive Officer of Concord Medical, stated: "The past quarter was marked by our excellent operational and financial performances. Our top and bottom lines increased by 13.6% and 30.3%, respectively, over the period of the previous year, and the growth rate is also higher. We are seeing more contribution from our network centers, especially from the centers which provide high-end radiotherapy and diagnostic services to our patients, such as CyberKnife and PET-CT centers. It is our corporate strategy to provide the best treatment and services available to our patients. The strategy is paying off and we will continue to pursue the strategy, as we build Concord into a leading operator of cancer specialty hospitals and radiotherapy and diagnostic centers in China."

"During the quarter, we have achieved a great milestone in our corporate strategy. Datong Meizhong Jiahe Cancer Center has received the relevant government approvals. It is the first free-standing cancer specialty hospital in the Concord network. We plan to replicate the model in other cities in China, especially in cities we have existing centers in operation. Thus, we can take advantage of the medical and operational teams in place. The Datong Meizhong Jiahe Cancer Center is expected to open in the first half of 2015. Our business development team is actively exploring similar opportunities in other cities in China."

"Currently, the healthcare reform in China is progressing quickly. The reform is touching upon many historically challenging issues, such as multi-location practice for doctors and equipment licensing to private hospitals. We are very pleased to see that the new government initiatives have brought great feasibility and visibility to our strategic plans. As doctors enjoy more freedom of practice, similar to their foreign counterparts, we will be able to attract more talents to our future hospitals, providing Concord Medical with a strong advantage, as our hospitals will be operated and managed similar to the model of best hospitals in the world."

"Giving the solid operational and financial performance in the first three quarters of the year, we reiterate our full year guidance forecast."

Third Quarter 2014 Results by Segment

Network business

The total number of centers in operation was 141 in 56 cities around China as of September 30, 2014, same as the previous quarter. At the end of this quarter the Company entered into agreements to establish two additional centers.

Net revenues from the network business were RMB143.2 million ($23.3 million) for the third quarter of 2014, representing an increase of 9.2% from RMB131.1 million for the third quarter of 2013, primarily due to the increased contribution from PET-CT and CyberKnife centers.

Gross profit margin of the network business was 50.7% for the third quarter of 2014, as compared with 56.0% for the third quarter of 2013. The lower gross profit margin was primarily due to higher medical consumable expenses during the quarter.

Capital expenditure of the network business was RMB16.7 million ($2.7 million) for the third quarter of 2014, compared with RMB20.9 million in the third quarter of 2013.                                                                

Selling expenses in the network business were RMB27.5 million ($4.5 million) for the third quarter of 2014, representing an increase of 11.4% from the third quarter of 2013. The increase was consistent with the higher revenue during the quarter.

General and administrative expenses in the network business were RMB20.1 million ($3.3 million), compared with RMB13.3 million for the third quarter of 2013.The increase was primarily due to higher travel and meeting expenses. During the quarter, the Company collected RMB20 million historical bad debts that were previously written off, resulting in net general and administrative expenses of RMB0.1 million for the quarter.

Accounts receivable from the network business was RMB258.1 million ($42.1 million) as of September 30, 2014, compared to RMB281.9 million as of June 30, 2014. The average period of sales outstanding for accounts receivable, or Days Sales Outstanding (DSO), was 173 days for the third quarter of 2014, compared to 156 days for the second quarter of 2014.

As of September 30, 2014, the Company, not including Chang'an Hospital, had bank credit lines of RMB2,920.0 million ($448.3 million), of which RMB1,065.3 million ($173.6 million) was utilized, inclusive of the IFC loan of $50 million of which $20 million in convertible loans was utilized since Feb 2014. The company is working with IFC for the disbursement of the remaining $30 million in A-Loan currently.

During the third quarter of 2014, the Company handled 7,700 patient treatment cases and 78,829 patient diagnostic cases in the center network, representing a 3.8% decrease and a 0.5% decrease from the third quarter of 2013, respectively.

Hospital business

Net revenues from the hospital business were RMB122.5 million ($20.0 million) for the third quarter of 2014, an increase of 19.0% from the third quarter of 2013. Net revenues from the hospital business for the third quarter of 2014 were comprised of:

  • outpatient revenues of RMB29.7 million ($4.8 million), representing 24% of the net revenues from the hospital business;
  • inpatient revenues of RMB39.3 million ($6.4 million), representing 32% of the net revenues from the hospital business; and
  • medicine revenues of RMB53.5 million ($8.7 million), representing 44% of the net revenues from the hospital business.

Cost of service for the hospital business for the third quarter of 2014 was RMB106.5 million ($17.3 million), of which the medicine cost was RMB44.4 million ($7.2 million) and the medical service cost was RMB62.1 million ($10.1 million).

Gross profit margin of the hospital business was 13.1% for the third quarter of 2014, as compared with 14.0% from the third quarter of 2013. Higher salary and compensation costs to the medical team were the main reasons for the decrease in gross profit margin.

Capital expenditure of the hospital business was RMB8.5 million ($1.4 million) for the third quarter of 2014, compared with RMB6.7 million for the third quarter of 2013.

General and administrative expenses in the hospital business were RMB4.7 million ($0.8 million) for the third quarter of 2014, compared with RMB4.5 million for the third quarter of 2013.

As of September 30, 2014, Chang'an Hospital had accounts receivable of RMB47.0 million ($7.7 million), compared to RMB43.9 million as of June 30, 2014. The number of day sales outstanding was 34 days, compared to 31 days for the second quarter of 2014. The accounts receivable balance was mainly related to medical revenues covered by various government-sponsored insurance programs. Chang'an Hospital settles the balance with the local social insurance bureau on a periodic basis.

Chang'an Hospital received 160,181 outpatients and 8,505 inpatients for the third quarter of 2014. The average bed utilization for the quarter was 85.2%. The average number of days of hospital stay was 8.8 days per patient for the quarter. Chang'an Hospital operated 1,015 beds as of September 30, 2014.

Chang'an Hospital is a leading private-owned for-profit general hospital, located in Xi'an, Shanxi Province. Established in 2002, Chang'an Hospital had 57 departments with over 1,502 medical and non-medical staff as of September 30, 2014.

Recent Developments

On October 27, 2014, the Company announced that it has received relevant government approvals to establish a free-standing radiotherapy cancer center, Datong Meizhong Jiahe Cancer Center ("Datong Center") in Datong City, Shanxi Province.

The Datong Center, a 100%-owned subsidiary of Concord Medical, will provide advanced, best-practice diagnostic and radiotherapy services. The 100 bed facility, once completed, will be the first free-standing center in the Concord Medical network. Construction is expected to begin in November 2014 and the center will be operational in 2015.

The Datong center will be registered as a specialty cancer hospital with all required departments, including radiation, imaging, test laboratory, inpatient, and nursing. This center will apply to join the local social insurance coverage. The Datong center represents an important step of the Company's broader strategy to build a nationwide chain of free-standing cancer treatment and diagnosis centers in the future.

2014 Outlook

For the 2014 fiscal year, the Company expects earnings in the range of $0.45 to $0.50 per ADS, or $20.3 million to $22.5 million in Net Income Attributable to Ordinary Shareholders. The Company forecasts construction will start on Datong Meizhong Jiahe Cancer Center during 2014.

These estimates are based on current market and operating conditions, are subject to change, and may be impacted positively or negatively by factors outside the Company's control, including but not limited to macroeconomic events in the markets in which the Company operates. See "Safe Harbor Statement" below for additional information regarding forward-looking statements.

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 RMB6.1380 to US$1.00, the effective noon buying rate as of September 30, 2014 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, changes in fair value of derivatives and other adjustments. Other adjustments include foreign exchange gain (loss), loss from disposal of property, plant and equipment and other income or expense.

Conference Call Information

Concord Medical's management will hold an earnings conference call at 8:00 a.m. Eastern  Time on November 18, 2014 (9:00 p.m. Beijing/Hong Kong time on November 18, 2014).

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

U.S. Toll Free: 

1 866 519 4004

International:

65 67239381

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:

6 12 8199 0299

Conference ID:

30474533

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 an operator of specialty cancer hospitals and the largest network of radiotherapy and diagnostic imaging centers in China. As of September 30, 2014, the Company operated a network of 141 centers with 81 hospital partners that spanned 56 cities and 25 provinces and administrative regions in China. Under long-term arrangements with top-tier hospitals in China, Concord Medical 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. For more information, please see http://ir.concordmedical.com.

To read full press release, please click here.

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