China Cord Blood's fiscal 2010 third-quarter net revenue up 23.5%

China Cord Blood Corporation ("CCBC" or "the Company") (NYSE: CO), China's leading provider of cord blood collection, laboratory testing, hematopoietic stem cell processing, and stem cell storage services, today announced unaudited financial results for the third quarter and first nine months ended December 31, 2009.

Highlights -- Net revenue in the third quarter of fiscal 2010 increased 23.5% year-over-year to RMB68.9 million (USD10.1 million) from RMB55.8 million in the third quarter of fiscal 2009. -- New subscriber sign-ups during the third quarter of fiscal 2010 increased 19.6% to 11,771 subscribers from 9,842 in the third quarter of fiscal 2009. -- Net income attributable to shareholders in the third quarter of fiscal 2010 increased 56.3% to RMB20.0 million (USD2.9 million) from RMB12.8 million year-on-year. -- Net revenue in the first nine months of fiscal 2010 increased 38.5% to RMB190.7 million (USD27.9 million) from RMB137.7 million last year. -- New subscriber sign-ups during the first nine months of fiscal 2010 increased 36.1% to 33,523 subscribers from 24,631 in the first nine months of fiscal 2009. -- Net income attributable to shareholders for the first nine months of fiscal 2010 increased to RMB33.0 million (USD4.8 million) compared to RMB0.6 million in the first nine months of fiscal 2009. -- On February 24, 2010, CCBC entered into agreement to acquire an effective interest of 19.92% in the Shandong Cord Blood Bank ("SCBB"), the exclusive cord blood bank operator for the Shandong province in China. Inclusive of the latest acquisition, the Company has gained exclusive strategic access into the Beijing municipality, Guangdong province and Shandong province, namely three of the six licenses issued by Ministry of Health of China. China Government adopts one license per region policy which means license holder will be the exclusive operator providing cord blood services in these markets.

"This is a very exciting time," said Ms. Ting Zheng, China Cord Blood Corporation's chairperson and chief executive officer. "We concluded the third quarter with remarkable results with record breaking new subscribers numbers. The robust performance reflected the team capabilities to deepen market penetrations in our existing markets in an effective, efficient and lucrative manner. Leveraging the rising acceptance of umbilical cord blood banking, China's single child policy and our dominant market presence, we expect our business will continue to flourish and we should capture a growing number of new subscribers."

"Also, our Group has made tremendous progress to expand our geographical reach following the recently announced Shandong acquisition. By acquiring a 19.92% equity interest and the right of first refusal, we open the doorway into Shandong province, which has approximately 1.1 million babies per annum. Together with our local partner, we will seize this opportunity and deploy our resources and market expertise to rapidly build out a significant presence in this affluent region of China. Beijing, Guangdong and Shandong together have a market size of 2.1 million new born babies per annum."

Third Quarter Fiscal 2010 Financial Results

Net revenue for the third quarter of fiscal 2010 increased 23.5% to RMB68.9 million (USD10.1 million) from RMB55.8 million in the third quarter of fiscal 2009. Net revenue generated from processing fees increased 18.1% year-over-year to RMB56.1 million (USD8.2 million), tracking a 19.6% increase in new subscribers to 11,771 from 9,842 from last year. Net revenue from storage fees increased 60.8% year-over-year to RMB12.7 million (USD1.9 million) from RMB 7.9 million on the back of a 58.9% increase in the total subscriber base to 117,583 subscribers, compared to 74,013 subscribers last year. Processing fees and storage fees for the third quarter of fiscal 2010 accounted for 81.4% and 18.4% of net revenue, respectively, compared to 85.2% and 14.1% for the prior year period.

For the third quarter of fiscal 2010, gross profit increased 23.7% to RMB52.2 million (USD7.6 million) from RMB42.2 million in the prior year period, due primarily to rising new subscriber numbers. The 75.7% gross margin was similar to the same period last year.

Sales and marketing expense was RMB10.4 million (USD1.5 million) in the third quarter of fiscal 2010 compared to RMB6.6 million for the prior year period. Third quarter sales and marketing expense as a percentage of revenue was 15.1%, up from 11.9% last year but similar on a quarter-on-quarter basis.

Administrative expense increased to RMB16.7 million (USD2.4 million) compared to RMB10.7 million in the prior year period in light of the Group's business expansion and the commencement of the new Beijing and Guangdong facilities and the increase in corporate overhead.

Operating income for the third quarter of fiscal 2010 was RMB25.1 million (USD3.7 million) compared to RMB24.9 million for the same period last year. Operating margin for the quarter was 36.4% compared to 44.6% in the prior year period. The decline in operating margin was largely attributable to the commencement of new Beijing storage facilities in April 2009 and the increase in administrative expense, related to legal and professional fees associated with being a newly public company.

Non-GAAP EBITDA in the third quarter increased 7.8% to RMB29.5 million (USD4.3 million).

Net income attributable to shareholders for the third quarter of fiscal 2010 increased 56.3% to RMB20.0 million (USD2.9 million) from RMB12.8 million for the prior year period. Net margin for the third quarter of fiscal 2010 increased to 29.0% from 23.0% in the prior year period.

Basic earnings per share and fully diluted earnings per share for third quarter of fiscal 2010 were RMB0.31 (USD0.05) and RMB0.29 (USD0.04), respectively.

Non-GAAP EPS for the third quarter amounted to RMB0.31 (USD0.05), up from RMB0.22 in the prior year period.

As of December 31, 2009, the Company had cash and cash equivalents of RMB386.1 million (USD56.6 million), compared to RMB161.4 million as of March 31, 2009.

Ms. Ting Zheng continued, "Adding the Shandong cord blood bank license, we now have direct access into the top three regions licensed for cord blood banking services. The acquisition of the Shandong cord blood bank illustrated our execution capabilities beyond Beijing and Guangdong regions, and more importantly, it is a recognition of the Company as the market leader in the industry. This will pave the way for future corporate developments in China and the Asia Pacific region."

Nine Months Fiscal 2010 Financial Results

First nine months of fiscal 2010, net revenue increased 38.5% to RMB190.7 million (USD27.9 million), from RMB137.7 million last year. During the first nine months of fiscal 2010, new subscribers sign-up increased by 36.1% to 33,523 new subscribers from 24,631 subscribers in the prior year period. Gross profit for first nine months of fiscal 2010 increased 37.4% to RMB140.1 million (USD20.5 million) from RMB102.0 million in the prior year period. For the first nine months of fiscal 2010, operating income increased 23.3% to RMB72.3 million (USD10.6 million). Net income attributable to shareholders in the same period was RMB33.0 million (USD4.8 million) compared to RMB0.6 million in the prior year period. Basic earnings per share and fully diluted earnings per share attributable to ordinary shares were RMB0.44 (USD0.06) and RMB0.42 (USD0.06), respectively. Non-GAAP EBITDA increased 33.7% to RMB86.2 million (USD12.6 million).

Financial Outlook

The Company expects total number of new subscribers for the 2010 fiscal year to increase by approximately 30% year-over-year or no less than 45,000 new subscribers which is expected to translate into not less than a 30% increase in total net revenue. Management also expects accumulated total number of subscribers will be at least 129,000 by March 31, 2010. In addition to organic growth on the existing markets, the Company plans to continue to pursue any opportunities with existing licensees and license applicants for potential acquisitions. The Company's practice is to provide guidance on a full year basis only. Such expectations reflect the Company's current and preliminary views, which are subject to change and the Company does not undertake any responsibility to update or correct any such forward-looking information.

SOURCE China Cord Blood Corporation