Concord Medical Services 2010 second quarter revenue increases 38.3%

Concord Medical Services Holdings Limited ("Concord Medical" or the "Company") (NYSE: CCM), the operator of the largest network of radiotherapy and diagnostic imaging centers in China, today announced its unaudited financial results for the second quarter ended June 30, 2010(1).

Second Quarter Fiscal 2010 Highlights -- Total net revenues in the second quarter of 2010 were RMB99.4 million ($14.7million), a 38.3% increase from the corresponding period in 2009. -- Gross profit in the second quarter of 2010 was RMB69.3 million ($10.2 million), a 39.2% increase from the corresponding period in 2009. -- Non-GAAP net income in the second quarter of 2010 was RMB34.9 million ($5.1 million), a 5.8% increase from the corresponding period in 2009. -- Both Non-GAAP basic and diluted earnings per American Depositary Share ("ADS")(3) for the second quarter of 2010 were RMB0.71 ($0.10). -- Adjusted EBITDA(4) (non-GAAP) in the second quarter of 2010 was RMB76.2 million ($11.2 million), a 22.6% increase from the corresponding period in 2009. -- Concord Medical added eleven centers in the second quarter of 2010, bringing the total number of centers in operation to 100 across 39 cities in China, as of June 30, 2010. To date, the Company has entered into agreements to establish 31 new centers. -- The number of treatment patient cases and diagnostic patient cases was 8,548 and 35,786 during the second quarter of 2010, respectively. Compared to the corresponding period in 2009, treatment patient cases increased by 26.6% and diagnostic patient cases increased by 47.6% . -- On July 1, 2010, Concord Medical entered into a joint venture agreement with Chang'An Hospital for the preliminary operation of Chang'An Hospital's cancer treatment facilities in preparation for the full operation of the future Chang'An CMS International Cancer Center (CCICC). -- On June 30, 2010, Concord Medical's board of directors approved a share repurchase program of up to $20 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 from RMB to U.S. dollars are made at a rate of RMB6.7815 to US$1.00, the effective noon buying rate as of June 30, 2010 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) Non-GAAP net income is defined in this announcement as net income excluding share-based compensation expenses, which amounted to RMB2.6 million ($0.4 million) for the second quarter of 2010. The Company did not incur share-based compensation expenses for the second quarter of 2009 and therefore no reconciliation for this period has been provided herein. (3) Each ADS represents three ordinary shares of the Company. (4) Adjusted EBITDA is defined in this announcement as net income plus interest, taxes, depreciation and amortization, share-based compensation expenses and other adjustments. Other adjustments include change in fair value of convertible notes, foreign exchange loss and other income.

"We saw another quarter of solid growth driven by healthy revenue increases in both existing and newly added centers," said Dr. Jianyu Yang, director, president and chief executive officer of Concord Medical. "In line with our expansion plan, we opened seven new centers and acquired four centers during the quarter. With a healthy acquisition pipeline and existing contracts for the opening of new centers, we remain confident to meet our target of adding 34 to 39 centers in 2010."

"We continue to build Concord Medical's brand awareness and reputation through high-profile marketing and academic activities," continued Dr. Yang. "In June, we hosted the largest cancer treatment and diagnosis forum in our history, attracting more than 350 established professionals. During the forum, we were proud to announce the publication of Concord Medical's clinical textbook on stereotactic body radiation therapy using the body gamma knife, a first in China."

"With a favorable regulatory environment and increasing consumer demand, the cancer treatment and diagnostic market in China continues to be very strong. We will continue to work to extend our leadership, educate the market and differentiate the Concord Medical brand. I am confident that Concord Medical is well positioned to maximize our potential in this rapidly developing market," Dr. Yang concluded.

Mr. Boxun Zhang, Concord Medical's corporate vice president, commented, "Healthy top line growth contributed to margin expansion compared to the first quarter, which is a seasonally slow period due to the Chinese New Year holiday. During the second half of the year, we plan to continue to enhance operational efficiency while strategically investing in network expansion to support profitable growth. We also continue to progress according to our schedule for fulfilling Sarbanes Oxley requirements."

Recent Business Update

In July, Concord Medical began preliminary operations of its first specialty cancer treatment hospital under a joint venture agreement with the Chang'An Hosptal. Also in July, the Company's second specialty cancer treatment hospital, the Beijing Proton Medical Center, received approval from the Ministry of Health and is in the process of completing the remaining application process.

Second Quarter Fiscal 2010 Results

Concord Medical reported total net revenues of RMB99.4 million ($14.7 million) for the second quarter of 2010, representing a 38.3% increase from the corresponding period in 2009, primarily due to patient volume growth from established centers as well as from new centers added through organic development and acquisitions in 2009 and the first half of 2010.

Cost of revenues in the second quarter of 2010 was RMB30.2 million ($4.5 million), a 36.2% increase from the corresponding period in 2009, primarily due to the higher depreciation cost associated with the new equipment purchases in 2009 and the first half of 2010.

Gross profit margin in the second quarter of 2010 was 69.7% as compared to 69.2% in the corresponding period in 2009.

Operating expenses, consisting of selling expenses and general and administrative expenses, were RMB22.2 million ($3.3 million) in the second quarter of 2010, compared to RMB7.4 million in the corresponding period in 2009. The increase was largely due to the expanded business size and additional post-IPO related professional expenses.

Operating income was RMB47.1 million ($6.9 million), representing an 11.2% increase from the corresponding period in 2009. Operating profit excluding share-based compensation expenses (non-GAAP) was RMB49.7 million ($7.3 million), a 17.3% increase from the corresponding period in 2009.

Income tax expense was RMB12.9 million ($1.9 million), compared to an income tax expense of RMB8.8 million in the corresponding period in 2009. The effective tax rate for the second quarter of 2010 was 28.5% as compared to 28.3% in the previous quarter and 21.1% in the corresponding period in 2009.

Net income was RMB32.2 million ($4.8 million), representing a 2.1% decrease from the corresponding period in 2009. Both basic and diluted earnings per ADS for the second quarter of 2010 were RMB0.66 ($0.10).

Net income excluding share-based compensation expenses (non-GAAP) was RMB34.9 million ($5.1 million), a 5.8% increase from the corresponding period in 2009. Both Basic and diluted earnings per ADS excluding share-based compensation expenses (non-GAAP) for the second quarter of 2010 were RMB0.71 ($0.10).

Adjusted EBITDA (non-GAAP), was RMB76.2 million ($11.2 million) for the second quarter of 2010, representing a 22.6% increase from the corresponding period in 2009.

Capital expenditure for the second quarter of 2010 was RMB130.9 million ($19.3 million). Total depreciation expenses were RMB19.8 million ($2.9 million). In addition, amortization of acquired intangibles was RMB6.7 million ($1.0 million). The Company expects amortization of acquired intangibles to be approximately RMB28.5 million ($4.2 million) in 2010, assuming no additional intangibles are acquired through potential acquisitions during the year.

As of June 30, 2010, the Company had total fixed assets with a net book value of RMB677.1million ($99.9 million) and cash of RMB863.4 million ($127.3 million). The decline was mainly due to the increased fixed assets balance and prepayment for equipment purchase for our network expansion.

As of June 30, 2010, the Company had bank credit lines totaling RMB2.0 billion (US$297.9million).

Accounts receivable was RMB137.1 million ($20.2 million) as of June 30, 2010, as compared to RMB111.3 million as of December 31, 2009. The average turnover days was 113 days as of June 30, 2010, as compared to 119 days as of December 31, 2009.

Outlook for Fiscal Year 2010

Concord Medical reaffirms that its estimated range of total net revenues for 2010 is RMB367 million to RMB398 million, which would represent a 25.5% to 36.1% increase from 2009.

The Company reaffirms that it expects to add 34 to 39 radiotherapy and diagnostic imaging centers in 2010, and the range of expected total capital expenditures related to these new centers is approximately RMB400 million to RMB450 million.

This forecast reflects Concord Medical's current and preliminary view, which is subject to change.