Global Cord Blood Corp

OTC:CORBF

Good morning, everyone. Welcome to our fiscal 2022 3rd 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, I will begin with our CEO's remarks, followed by a report of our fiscal 2022 3rd quarter financials given by our CFO, Mr. Albert Chen. Our management will be available to answer questions during the QA session. We understand investors and shareholders have various questions to ask. [Operator Instructions]

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 third quarter fiscal 2022 earnings conference call. As COVID-19 outbreaks reemerged in winter seasons in the Northern Hemisphere during the reporting quarter, the group's operating regions continue to adopt a zero COVID strategy by implementing strict measures such as localized lockdowns and tightened access in hospitals, which continue to abstract the group's client access and client conversion efficiencies compared to the pre-COVID-19 era. Despite such difficulties, the group managed to recruit 18,985 new subscribers, up 6.6% year-over-year and down 0.4% quarter-over-quarter, in line with management's expectations. At the end of December 2021, our accumulated subscriber base surpassed 955,000.

In regards to industry regulation, the biggest regulatory uncertainties remain as the National Health Commission has yet to release any updates on the licensing regime for China's cord blood banking industry. By the end of the reporting period, the National Development and Reform Commission and Ministry of Commerce of the People's Republic of China published an updated version of the 2021 [ actual ] administrative measures for access of foreign investment, also known as the negative list, where there was no substantial change in the relevant regulations involving the group's business.

Meanwhile, as the overall number of women of childbearing age and new births continue to decline, the academic community and general public in China began vibrant discussions on how to stimulate population growth. In face of such a dynamic regulatory and business environment, the management 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 a goal to diversify business risks and cultivate new ways of growth.

Looking ahead, Year of 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 outbreaks in China. With this in mind, the management team expects new subscriber numbers in fiscal 2022 to be around the higher end of our previous guidance at 75,000.

This concludes my remarks regarding our fiscal 2022 3rd 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 fiscal 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 CNY 317 million as a result of the increase in revenues from processing fees and storage fees. The group recruited 18,985 new subscribers during the third quarter, which represents an increase of approximately 7% year-over-year 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% year-over-year to CNY 181 million, which accounted for 57% of total revenues, similar to last year.

By the end of December 2021, our accumulated subscriber base expanded to over 955,000. Storage fee revenues for the third quarter increased by 8% year-over-year to CNY 136 million. Gross profit in the reporting quarter increased by 10% to approximately CNY 270 million 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 top line growth, combined with cost control measures, operating income increased by approximately 21% year-over-year to approximately CNY 150 million in the third quarter. As a result, operating margin improved to 47% from 43% of last year.

Depreciation and amortization expenses for the reporting quarter were approximately CNY 12 million, again, similar to last year period. Non-GAAP operating income increased by approximately 19% year-over-year to CNY 162 million, 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 CNY 66 million. 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 CNY 47 million as the increase in professional fees 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 CNY 0.6 million in fair value of equity securities, or more commonly known as mark-to-market gains. And this is significantly less than the CNY 6 million mark-to-market gain, which we recorded last year. In the third quarter, income before income tax increased by 14% year-over-year to CNY 159 million. Income tax expense was approximately CNY 24 million. Net income attributable to the company's shareholders increased by 15% year-over-year to CNY 134 million. Net margin improved to 42% from 40% of last year. Basic and diluted earnings per ordinary share was CNY 1.11.

These are the highlights of our third quarter results. We are now happy to turn to the floor for any questions.

Thank you for the questions. In terms of geographical breakdown, new subscriber who signed up during the third quarter of our current fiscal year, approximately 11% of the new subscribers are 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, normal payment option accounted for approximately 30% in terms of new subscriber numbers. New subscribers electing upfront payment during the third quarter is approximately 38%, and approximately 32% of our new subscribers recorded in the third quarter elect installment payment option.

Thank you, Simon. This concludes our earnings conference call for the fiscal 2022 3rd quarter. Thank you all for your participation and ongoing support. Have a great day.