FISH Becomes a Growth Driver
3Q FY2007 Highlights
-- Net revenues increased by 64.2% year-over-year to RMB265.1 million
(US$36.3 million).
-- Non-GAAP adjusted net income, as defined below, increased by 34.9%
year-over-year to RMB124.8 million (US$17.1 million).
-- Non-GAAP adjusted diluted earnings per ADS*, as defined below,
increased by 29.9% year-over-year to RMB4.39 (US$0.60).
*One American Depositary Share ('ADS') = 10 ordinary shares
See 'Non-GAAP Measure Disclosures' below, where the impact of certain
items on reported results is discussed.
'We are pleased to report another strong quarter,' commented
3Q FY2007 Financial Results
The Company reported net revenues of RMB265.1 million (US$36.3 million) for 3Q FY2007, representing a 64.2% increase from the corresponding period of FY2006.
The Company's revenues are currently generated from three product lines, ECLIA diagnostic systems, FISH diagnostic systems and HIFU tumor therapy systems. ECLIA and FISH system sales include the sales of equipment and reagent kits.
ECLIA system sales for 3Q FY2007 were RMB96.7 million (US$13.3 million), representing a 74.4% increase from the corresponding period of FY2006. The strong year-over-year growth in the ECLIA system sales reflected the increasing utilization of ECLIA analyzers by hospitals and the introduction of new reagents, both of which drove increasing demand for reagent kits.
FISH system sales for 3Q FY2007 were RMB52.8 million (US$7.2 million) after the launch of our FISH systems in 1Q FY2007.
HIFU tumor therapy system sales for 3Q FY2007 were RMB115.6 million (US$15.9 million), representing a 9.0% increase from the corresponding period of FY2006. The year-over-year growth in this sector was driven primarily by increases in unit sales.
Gross margin decreased to 63.2% for 3Q FY2007 as compared to 72.6% for the corresponding period of FY2006. The decrease in gross margin was due to the amortization of FISH intangible assets of RMB18.2 million (US$2.5 million) and FISH equipment sales, which generated lower gross margin. Future FISH reagent sales will generate recurring revenue and higher gross margin for the Company. Excluding the impact of FISH amortization, gross margin would have been 70.0%.
Research and development expenses were RMB11.6 million (US$1.6 million) for 3Q FY2007, representing a 24.9% year-over-year increase. The increase was primarily due to the development of new ECLIA reagents and FISH reagents.
Sales and marketing expenses were RMB8.5 million (US$1.2 million) for 3Q FY2007, representing a 99.7% year-over-year increase. The increase was primarily due to the establishment and expansion of direct sales force for FISH systems and relevant promotional activities.
General and administrative expenses were RMB24.2 million (US$3.3 million)
for 3Q FY2007, representing a 78.4% year-over-year increase. The increase was
primarily due to an increase in the number of employees to accommodate the
Company's rapid growth, annual incremental adjustment of salary in
Interest income was RMB7.1 million (US$1.0 million) for 3Q FY2007, representing a 35.8% decrease from the corresponding period of FY2006. The decrease was primarily due to the payment for FISH acquisition and a decrease in interest rate for US dollar bank deposits.
Interest expense of convertible notes was RMB9.8 million (US$1.3 million) for 3Q FY2007. The notes bear interest at 3.5% per annum.
Interest expense of amortization of convertible notes issuance cost of
RMB2.0 million (US$0.3 million) for 3Q FY2007 was due to the US$150 million
convertible notes issued in
Other interest expense of RMB1.2 million (US$0.2 million) for 3Q FY2007
was due to the present value discounting of long term other payable of US$10
million for the final payment of FISH acquisition due in
Income tax expense was RMB22.7 million (US$3.1 million) for 3Q FY2007. The effective tax rate for 3Q FY2007 was 18.9%.
The
Net income was RMB97.8 million (US$13.4 million) for 3Q FY2007, representing a 10.6% increase from the corresponding period of FY2006.
Adjusted net income excluding stock compensation expense and amortization of acquired intangible assets (non-GAAP) was RMB124.8 million (US$17.1 million) for 3Q FY2007, representing a 34.9% increase from the corresponding period of FY2006. The lower growth rate compared to net revenues was primarily due to convertible note expenses of RMB11.7 million (US$1.6 million), a decrease in interest income and an increase in effective income tax rate.
Stock compensation expense for 3Q FY2007 was RMB5.1 million (US$0.7 million), which was allocated to research and development expenses (RMB0.5 million) and general and administrative expenses (RMB4.6 million), respectively.
Amortization of acquired intangible assets for 3Q FY2007 was RMB21.9 million (US$3.0 million), which was allocated to cost of revenues.
As of
As of
For the convenience of readers, certain RMB amounts have been translated
into U.S. dollars at the rate of RMB7.2946 to US$1.00, the noon buying rate in
Outlook for FY2007
During 4Q FY2007, the Company's BBE acquisition has begun to contribute to
the Company's revenues and the Company's FISH business, especially its
recurring reagent business, has grown rapidly. However,
As the result of the above, the Company maintains the current targets for FY2007. The current targeted net revenues for FY2007 range from RMB860 million (US$117.9 million) to RMB885 million (US$121.3 million). The current targeted adjusted net income excluding stock compensation expense and amortization of acquired intangible assets (non-GAAP) for FY2007 ranges from RMB410 million (US$56.2 million) to RMB420 million (US$57.6 million). The current targeted adjusted diluted earnings per ADS excluding stock compensation expense and amortization of acquired intangible assets (non-GAAP) for FY2007 ranges from RMB14.80 (US$2.03) to RMB15.10 (US$2.07), assuming a diluted number of ADS of approximately 31 million and excluding interest for convertible notes and amortization of convertible notes issuance cost.
These targets are based on the Company's current views on the operating and market conditions which are subject to change.
Non-GAAP Measure Disclosures
To supplement its consolidated financial statements presented in
accordance with
The Company's management believes excluding the non-cash stock compensation expense from its non-GAAP financial measures is useful for itself and investors as such expense will not result in future cash payment and is otherwise unrelated to the Company's core operating results.
The Company's management believes excluding the non-cash amortization expense of acquired intangible assets resulting from acquisitions from its non-GAAP financial measures is useful for itself and investors because they enable a more meaningful comparison of the Company's performance between reporting periods. In addition, such amortization will not result in cash settlement in the future.
The presentation of this additional financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measure, please see the financial statements included with this press release.
Conference Call
The Company's management team will host a conference call at
The dial-in details for the live conference call are as follows:
-- U.S. Toll Free Number 1-866-700-7101
-- International dial-in number 1-617-213-8837
Passcode CMEDCALL.
A live webcast of the conference call will be available on http://ir.chinameditech.com .
A replay of this webcast will be available for one month on this website.
A telephone replay of the call will be available after the conclusion of
the conference call through
The dial-in details for the replay are as follows:
-- U.S. Toll Free Number 1-888-286-8010
-- International dial in numbers 1-617-801-6888
Passcode 87116521
About
Safe Harbor Statement
This press release contains forward-looking statements. These statements constitute 'forward-looking' statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and 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 'will,' 'expects,' 'anticipates,' 'future,' 'intends,' 'plans,' 'believes,' 'estimates' and similar statements. Among other things, the quotations from management in this press release, the Company's strategic operational plans, as well as outlook for FY2007, contain forward-looking statements. Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks is included in the Company's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F. The Company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.
China Medical Technologies, Inc.
Unaudited Condensed Consolidated Balance Sheets
As of
March 31, September 30, December 31,
2007 2007 2007
RMB RMB RMB US$
(in thousands)
Assets
Current assets
Cash and cash equivalents 1,173,640 994,214 950,311 130,276
Trade accounts receivable 201,778 227,317 253,186 34,709
Prepayments and other
receivables 41,484 28,175 38,123 5,226
Inventories 27,991 34,423 31,858 4,367
Total current assets 1,444,893 1,284,129 1,273,478 174,578
Property, plant and equipment,
net 135,792 151,333 152,027 20,841
Land use rights 7,619 7,525 7,478 1,025
Intangible assets, net 1,565,362 1,480,877 1,425,519 195,421
Prepayments and other
receivables -- 164,842 298,605 40,935
Convertible notes issuance
costs 38,020 32,898 30,086 4,125
Deferred income taxes 542 46 -- --
Total assets 3,192,228 3,121,650 3,187,193 436,925
Liabilities
Current liabilities
Trade accounts payable 47,847 47,036 47,739 6,544
Accrued liabilities and other
payables 594,489 510,938 503,200 68,983
Income taxes payable 38,467 43,731 51,152 7,012
Total current liabilities 680,803 601,705 602,091 82,539
Convertible notes 1,158,480 1,123,920 1,094,190 150,000
Other payable - long term 67,206 67,902 67,265 9,221
Deferred income taxes -- -- 202 28
Total liabilities 1,906,489 1,793,527 1,763,748 241,788
Shareholders' equity
Ordinary shares US$0.1 par
value: 500,000,000
authorized; 273,600,001
issued and outstanding
as of March 31, 2007,
274,000,001 issued and
outstanding as of
September 30, 2007 and
274,006,667 issued and
outstanding as of December
31, 2007 225,125 225,425 225,473 30,910
Additional paid-in capital 504,795 515,909 521,596 71,504
Accumulated other comprehensive
loss (21,335) (29,267) (37,481) (5,138)
Retained earnings 577,154 616,056 713,857 97,861
Total shareholders' equity 1,285,739 1,328,123 1,423,445 195,137
Total liabilities and
shareholders' equity 3,192,228 3,121,650 3,187,193 436,925
China Medical Technologies, Inc.
Unaudited Condensed Consolidated Statements of Income
For the Three Months Ended
December 31, September 30, December 31,
2006 2007 2007
RMB RMB RMB US$
(in thousands except for per ADS information)
Revenues, net (1) 161,509 214,896 265,133 36,346
Cost of revenues (44,259) (82,687) (97,643) (13,386)
Gross profit 117,250 132,209 167,490 22,960
Operating expenses:
Research and
development (9,271) (8,096) (11,577) (1,587)
Sales and
marketing (4,252) (6,618) (8,490) (1,164)
General and
administrative (13,538) (20,929) (24,154) (3,311)
Total operating
expenses (27,061) (35,643) (44,221) (6,062)
Operating income 90,189 96,566 123,269 16,898
Other income 2,624 -- 3,033 416
Interest income 11,115 7,785 7,136 978
Interest expense -
convertible notes (5,160) (9,920) (9,755) (1,337)
Interest expense -
amortization of
convertible notes
issuance cost (1,046) (2,011) (1,978) (271)
Interest expense -
other -- (1,180) (1,181) (162)
Income before tax 97,722 91,240 120,524 16,522
Income tax expense (9,294) (13,855) (22,723) (3,115)
Net income 88,428 77,385 97,801 13,407
Earnings per ADS
- basic 3.30 2.95 3.73 0.51
- diluted (2) 3.24 2.88 3.52 0.48
Weighted average
number of ADS
- basic 26,765,505 26,210,004 26,238,264 26,238,264
- diluted (2) 29,175,363 30,989,602 31,080,129 31,080,129
Notes:
(1) Revenues, net
- ECLIA 55,428 92,585 96,663 13,251
- FISH -- 30,801 52,831 7,242
- HIFU 106,081 91,510 115,639 15,853
161,509 214,896 265,133 36,346
(2) In computing diluted earnings per ADS for the three months ended
December 31, 2007, interest expense and amortization in connection
with convertible notes were added back to net income before dividing
net income by the diluted number of ADS, which included shares that
may be issued from the conversion of convertible notes.
China Medical Technologies, Inc.
Reconciliations of Non-GAAP Adjusted Net Income to GAAP Net Income
For the Three Months Ended
December 31, September 30, December 31,
2006 2007 2007
RMB RMB RMB US$
(in thousands except for per ADS information)
GAAP net income 88,428 77,385 97,801 13,407
Adjustments:
Stock compensation
expense 315 5,538 5,074 696
Amortization of
acquired intangible
assets 3,729 22,182 21,876 2,999
Non-GAAP adjusted
net income 92,472 105,105 124,751 17,102
GAAP earnings per ADS
- basic 3.30 2.95 3.73 0.51
- diluted (1) 3.24 2.88 3.52 0.48
Non-GAAP adjusted earnings
per ADS
- basic 3.45 4.01 4.75 0.65
- diluted (1) 3.38 3.78 4.39 0.60
Weighted average
number of ADS
- basic 26,765,505 26,210,004 26,238,264 26,238,264
- diluted (1) 29,175,363 30,989,602 31,080,129 31,080,129
Note:
(1) In computing diluted GAAP and non-GAAP earnings per ADS for the three
months ended December 31, 2007, interest expense and amortization in
connection with convertible notes were added back to GAAP and non-GAAP
net income, respectively, before dividing the GAAP and non-GAAP net
income by the diluted number of ADS, which included shares that may be
issued from the conversion of convertible notes.
For more information, please contact:
Winnie Fan
China Medical Technologies, Inc.
Email: IR@chinameditech.com
SOURCE