Concord Medical Reports Financial Results for the First Half of 2022

Published: Sep. 23, 2022 at 3:00 PM CDT

BEIJING, Sept. 23, 2022 /PRNewswire/ -- Concord Medical Services Holdings Limited ("Concord Medical" or the "Company") (NYSE: CCM), a healthcare provider specialized in cancer treatment, research, education and prevention by establishing proton centers and cancer hospitals and operating an extensive network of radiotherapy and diagnostic imaging centers in China, today announced its unaudited consolidated financial results for the six months ended June 30, 2022[1].

2022 First Half Highlights

  • Total net revenues were RMB144.3 million (US$21.5 million) in the first half of 2022, representing a 25.2% decrease from total net revenues of RMB192.9 million in the same period last year. Total net revenues included the net revenues from the hospital business of RMB82.9 million (US$12.4 million) and the net revenues from the network business of RMB61.4 million (US$9.1 million).
  • Gross loss was RMB88.7 million (US$13.2 million) in the first half of 2022, compared to the gross profit of RMB2.4 million in the first half of 2021. The gross loss margin was 61.5% for the first half of 2022, compared to the gross profit margin of 1.2% for the same period last year.
  • Net loss attributable to ordinary shareholders in the first half of 2022 was RMB114.7 million (US$17.1 million), compared to RMB90.3 million in the same period last year.
  • Basic and diluted loss per share for Class A and Class B ordinary shares[2] in the first half of 2022 were both RMB0.87 (US$0.13), compared to RMB2.53, respectively, in the same period last year.
  • Non-GAAP[3] net loss in the first half of 2022 was RMB270.0 million (US$40.3 million), compared to non-GAAP net loss of RMB163.0 million in the same period last year. Non-GAAP basic and diluted loss per share for Class A and Class B ordinary shares in the first half of 2022 were both RMB0.93 (US$0.14), compared to RMB2.46 in the same period last year.
  • Adjusted EBITDA[4] (non-GAAP) was negative RMB194.3 million (US$29.0 million) in the first half of 2022, compared to negative RMB127.7 million in the same period last year.

Dr. Jianyu Yang, Chairman and Chief Executive Officer of Concord Medical, commented, "In the first half of 2022, our business was affected by the resurgence of COVID-19 pandemic caused by the highly contagious Omicron variant. In particular, our three medical institutions located in Shanghai temporarily closed since April 2022 for approximately two or three months, respectively. Our network business was also restricted by the COVID-19 resurgence, which affected the progress of order completion in the first half of 2022.

"The good news is, however, the recent performance of our Shanghai Meizhong Jiahe Cancer Center ("Shanghai Outpatient Department") has gradually returned to the level before the COVID-19 pandemic. Shanghai Meizhong Jiahe Medical Image Diagnosis Limited ("Shanghai Imaging Center"), which is located in the Shanghai Xinhongqiao International Medical Park (the "Xinhongqiao Park"), will also usher in new business opportunities. We expect that the gradual opening of the other medical institutions with differentiated expertise in the Xinhongqiao Park will drive patients to our Shanghai Imaging Center for high-quality diagnostic imaging services and contribute to our revenue.

"Our Guangzhou Concord Cancer Center ("Guangzhou Hospital"), which commenced operation in June 2021, is in the ramp-up period with improving operational performance evidenced by several operating indicators, such as the occupancy rate of patient beds, and the number of outpatient and inpatient visits. Notably, the proton center of Guangzhou Hospital is expected to start clinical trials in the second half of 2022, reaching a new milestone."

"Our network business is currently on track. We will accelerate the completion of existing orders and execute our market expansion as planned. Let's look forward to the good performance of Concord Medical for the full year of 2022."

2022 First Half Financial Results

Net Revenues

Hospital Business

Net revenues from the hospital business were RMB82.9 million (US$12.4 million) in the first half of 2022, representing a 29.2% increase from net revenues of RMB64.2 million in the first half of 2021, mainly due to the launch and ramp-up of Guangzhou Hospital since June 2021.

Network Business

Net revenues from the network business were RMB61.4 million (US$9.1 million), representing a 52.3% decrease from net revenues of RMB128.7 million in the first half of 2021, mainly because the delivery and acceptance process of our medical solutions was negatively affected by the COVID-19 outbreak in the second quarter of 2022.

Cost of Revenues

Hospital Business

Cost of revenues of the hospital business in the first half of 2022 was RMB179.7 million (US$26.8 million), representing an 89.4% increase from cost of revenues of RMB94.9 million in the first half of 2021, mainly because the labor cost increased for Guangzhou Hospital, which has been in operation since June 2021.

Network Business

Cost of revenues of the network business was RMB53.3 million (US$8.0 million), representing a 44.3% decrease from RMB95.7 million in the first half of 2021, generally in line with the decrease in the net revenues from medical solutions caused by the COVID-19.

Gross (Loss)/Profit and Gross Margin

Hospital Business

Gross loss from the hospital business was RMB96.8 million (US$14.4 million) in the first half of 2022, compared to RMB30.7 million in the same period last year. The gross loss margin of the hospital business for the first half of 2022 was 116.8%, compared to the gross loss margin of 47.8% for the same period last year. The decrease in gross profit margin of the hospital business was primarily attributable to (1) the substantial labor cost for Guangzhou Hospital, which was still at the ramp-up stage with comparatively low utilization rate, and (2) the decrease in revenue generated from our medical institutions in Shanghai because of the regional resurgence of COVID-19 pandemic in the first half of 2022.

Network Business

Gross profit from the network business was RMB8.1 million (US$1.1 million), representing a 75.6% decrease from RMB33.0 million in the first half of 2021. The gross profit margin of the network business for the first half of 2022 was 13.2%, compared to the gross profit margin of 25.6% for the same period last year. The decrease in gross profit margin of the network business was primarily attributable to the decrease in gross profit margin of medical solutions in the first half of 2022.

Operating Expenses

Selling expenses were RMB26.4 million (US$3.9 million) in the first half of 2022, representing a 93.3% increase from RMB13.7 million in the first half of 2021. Selling expenses as a percentage of net revenues was 18.3% in the first half of 2022, compared to 7.1% in the first half of 2021. The increase in selling expenses was mainly due to the increases in marketing expenses and travel related expenses as a result of the opening of our Guangzhou Hospital since June 2021.

General and administrative expenses were RMB130.5 million (US$19.5 million) in the first half of 2022, of which employee benefit expenses were RMB75.7 million (US$11.3 million). In the same period of last year, general and administrative expenses were RMB172.6 million. The decrease was mainly because (1) the employee benefit expenses of Guangzhou Hospital's medical staff were recognized in general and administrative expenses before the formal operation of the Guangzhou Hospital, which were subsequently recognized in cost of revenues after the formal operation since June 2021, and (2) the network business reduced as a result of the negative impact of COVID-19. General and administrative expenses as a percentage of net revenues was 90.4% in the first half of 2022, compared to 89.5% in the first half of 2021.

Capital Expenditures

Comparing to RMB414.4 million in the first half of 2021, capital expenditures were RMB184.0 million (US$27.5 million) in the first half of 2022, mainly due to (1) the decrease in construction fees and medical equipment payment for our hospital business, and (2) the reduced demands of procuring equipment for our network business as a result of the COVID-19 outbreak.

Accounts Receivable

As of June 30, 2022, accounts receivable were RMB89.3 million (US$13.3 million), representing a 30.2% decrease from accounts receivable of RMB127.9 million as of December 31, 2021. The average period of sales outstanding for accounts receivable (also known as days sales outstanding) was 286 days in the first half of 2022.

Bank Loans and Other Borrowings

As of June 30, 2022, the Company had bank loans and other borrowings totaling RMB2.9 billion (US$426.0 million).

[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 of RMB into U.S. dollars are made at a rate of RMB 6.6981 to US$1.00, the noon buying rate in New York City for cable transfers payable in RMB, as certified for customs purposes by the Federal Reserve Bank of New York on June 30, 2022.

[2] The Company adjusts for the accretion of mezzanine equity in the calculation of loss attributable to ordinary shareholders of the Company used in the loss per share for Class A and Class B ordinary shares calculation.

[3] Non-GAAP net loss and non-GAAP basic and diluted loss per share for Class A and Class B ordinary shares are defined as their most directly comparable GAAP measures excluding the impact of share-based compensation expenses.

[4] Adjusted EBITDA is defined as net income/(loss) plus interest expenses, net, income tax expenses, depreciation and amortization, share-based compensation expenses and other adjustments. Other adjustments include foreign exchange gain, net, and other income (expense), net.

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 expenses, such as non-GAAP net loss and non-GAAP basic and diluted loss per share for Class A and Class B ordinary shares. The Company believes excluding share-based compensation expenses 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 expenses 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/(loss) plus interest expenses, net, income tax expenses, depreciation and amortization, share-based compensation expenses and other adjustments. Other adjustments include foreign exchange gain, net and other income/(expense), net. 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.

About Concord Medical

Concord Medical Services Holdings Limited is a healthcare provider featuring a full cycle of premium oncology services including cancer diagnosis, treatment, education and prevention. The Company focuses on providing multidisciplinary cancer care in all aspects of oncology healthcare services in its cancer hospitals and equipping them with technologically advanced equipment such as the state-of-the-art proton therapy system. The Company is striving to improve the quality and accessibility of cancer care through its network of self-owned cancer hospitals and clinics as well as partnered hospitals across China. For more information, please see http://ir.ccm.cn.

Safe Harbor Statement

This announcement contains forward-looking statements. These forward-looking statements can be identified by words or phrases such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar expressions. Forward-looking statements are inherently subject to uncertainties and contingencies beyond the Company's control and based upon premises with respect to future business decisions, which are subject to change. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. The Company does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

Concord Medical Services Holdings Co., Ltd.

Consolidated Balance Sheets
(in thousands)



December 31,
2021


June 30, 2022



RMB
(Audited)


RMB
(Unaudited)


US$
(Unaudited)


ASSETS







Current assets







Cash and cash equivalents

157,386


74,984


11,195


Restricted cash, current portion

1,387


475


71


Accounts receivable

127,899


89,329


13,336


 Prepayments and other current assets

257,019


339,847


50,738


Inventories

38,085


69,825


10,425


Net investments in direct financing leases, current portion

2,699


3,518


525


Total current assets

584,475


577,978


86,290


 

Non-current assets







Restricted cash, non-current portion

138


-


-


Property, plant and equipment, net

3,145,025


3,223,423


481,244


Right-of-use assets, net

619,536


610,156


91,094


Net investment in direct financing leases, non-current portion

4,796


3,448


515


Goodwill

581,877


581,877


86,872


Intangible assets, net

657,837


643,123


96,016


Deposits for non-current assets

224,866


231,399


34,547


Long-term investments

390,625


421,012


62,855


Other non-current assets

20,776


18,565


2,772


Total non-current assets

5,645,476


5,733,003


855,915









Total assets

6,229,951


6,310,981


942,205


 

 

LIABILITIES AND EQUITY







Current liabilities







Accounts payable

102,508


107,815


16,096


Accrued expenses and other liabilities

382,177


348,882


52,086


Operating lease liabilities, current

20,484


23,272


3,474


Short-term bank and other borrowings

136,510


166,468


24,853


Long-term bank and other borrowings, current portion

162,842


167,418


24,995


Total current liabilities

804,521


813,855


121,504


 

Non-current liabilities







Long-term bank and other borrowings, non-current portion

2,178,596


2,517,458


375,847


Deferred tax liabilities

184,424


187,346


27,970


Derivative liability

5,863


6,162


920


Operating lease liabilities, non-current

214,225


214,525


32,028


Other long-term liabilities

98,601


94,925


14,172


Total non-current liabilities

2,681,709


3,020,416


450,937


 

Total liabilities

 

3,486,230


 

3,834,271


 

572,441


 

Contingently redeemable noncontrolling interests

 

3,680,782


 

-


 

-


EQUITY







Class A ordinary shares

68


68


10


Class B ordinary shares

37


37


6


Treasury stock

(7)


(8)


(1)


Additional paid-in capital

1,936,552


1,928,495


287,917


Accumulated other comprehensive loss

(29,496)


(71,385)


(10,657)


Accumulated deficit

(3,277,270)


(3,391,922)


(506,401)


Total Concord Medical Services Holdings Limited shareholders' deficit

(1,370,116)


(1,534,715)


(229,126)


Noncontrolling interests

433,055


4,011,425


598,890









Total equity/(deficit)

(937,061)


2,476,710


369,764









Total liabilities, mezzanine equity and equity/(deficit)

6,229,951


6,310,981


942,205


Concord Medical Services Holdings Co., Ltd.

Consolidated Profit & Loss

(in thousands, except for number of shares and per share data)








June 30,
2021


June 30, 2022


RMB


RMB


US$


(Unaudited)


(Unaudited)


(Unaudited)

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






Hospital

64,150


82,865


12,371

Network

128,737


61,397


9,166

Total net revenues

192,887


144,262


21,537

Cost of revenues:






Hospital

(94,855)


(179,686)


(26,826)

Network

(95,652)


(53,311)


(7,959)

Total cost of revenues

(190,507)


(232,997)


(34,786)







Gross (loss) / profit

2,380


(88,735)


(13,248)







Operating expenses:






Selling expenses

(13,665)


(26,416)


(3,944)

General and administrative expenses

(172,623)


(130,466)


(19,478)







Operating loss

(183,908)


(245,617)


(36,670)

Interest expense

(25,906)


(68,325)


(10,201)

Foreign exchange gain, net

18,489


33,881


5,058

Interest income

2,551


3,562


532

Income from equity method investments

9,088


5,488


819

Other income/(expense), net

2,662


(850)


(127)







Loss before income tax

(177,024)


(271,861)


(40,589)

Income tax expenses

5,331


9,677


1,445

Net loss

(171,693)


(262,184)


(39,144)







Net loss attributable to noncontrolling interests

(81,363)


(147,532)


(22,026)

Net loss attributable to Concord Medical Services Holdings
Limited

(90,330)


(114,652)


(17,118)







Loss per share for Class A and Class B ordinary shares






Basic

(2.53)


(0.87)


(0.13)

Diluted

(2.53)


(0.87)


(0.13)







Weighted average number of class A and class B ordinary shares
outstanding:






Basic

131,053,858


131,053,858


131,053,858

Diluted

131,053,858


131,053,858


131,053,858







Other comprehensive loss, net of tax of nil






Foreign currency translation, net tax of nil

6,234


(41,890)


(6,254)

Total other comprehensive loss, net of tax

6,234


(41,890)


(6,254)

Comprehensive loss

(165,459)


(304,074)


(45,398)

Comprehensive loss attributable to noncontrolling interests

(81,363)


(147,532)


(22,026)

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

(84,096)


(156,542)


(23,372)

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

(in RMB thousands, except per share data unaudited)




For the six months ended


For the six months ended



June 30, 2021


June 30, 2022







Non-






Non-



GAAP




GAAP


GAAP




GAAP



Measure


Adjustment


Measure


Measure


Adjustment


Measure

Operating loss


(183,908)


8,647


(175,261)


(245,617)


(7,861)


(253,478)

Net loss


(171,693)


8,647


(163,046)


(262,184)


(7,861)


(270,045)

Basic loss per share for
  Class A and

Class B ordinary
  shares


(2.53)


0.07


(2.46)


(0.87)


(0.06)


(0.93)

Diluted loss per share
  for Class A and

Class B ordinary
  shares


(2.53)


0.07


(2.46)


(0.87)


(0.06)


(0.93)














(*) The only adjustment
  is share-based

compensation.













Reconciliation from net income to adjusted EBITDA(*) (in RMB
thousands, unaudited)



For the six months ended


For the six months ended


June 30, 2021


June 30, 2022

Net loss

(171,693)


(262,184)

Interest expenses, net

23,355


64,763

Income tax expenses

(5,331)


(9,677)

Depreciation and amortization

38,476


53,732

Share-based compensation

8,647


(7,861)

Other adjustments

(21,151)


(33,031)

Adjusted EBITDA

(127,697)


(194,258)

EBITDA margin

-66 %


-135 %





(*) Definition of adjusted EBITDA: Adjusted EBITDA is defined as net loss plus interest expenses, net, income tax expenses,
depreciation and amortization, share-based compensation expenses and other adjustments. Other adjustments include foreign
exchange gain, net and other income/(expense), net.

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SOURCE Concord Medical Services Holdings Limited

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