Concord Medical first-quarter total net revenues increase 36.6% to $11.2 million

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 first quarter ended March 31, 2010.

First Quarter Fiscal 2010 Highlights -- Total net revenues in the first quarter of 2010 were RMB76.2 million ($11.2 million), a 36.6% increase from the corresponding period in 2009. -- Gross profit in the first quarter of 2010 was RMB49.1 million ($7.2 million), a 30.4% increase from the corresponding period in 2009. -- Non-GAAP Net income(2) in the first quarter of 2010 was RMB24.2 million ($3.5 million), a 10.7% increase from the corresponding period in 2009. -- Both Non-GAAP basic and diluted earnings per American Depository Share ("ADS")(3) for the first quarter of 2010 were RMB0.49 ($0.07). -- Adjusted EBITDA(4) (non-GAAP) in the first quarter of 2010 was RMB57.9 million ($8.5 million), a 19.8% increase from the corresponding period in 2009. -- Concord Medical opened one center in the first quarter of 2010, bringing the total number of centers in operation to 89 across 37 cities in China, as of March 31, 2010. To date, the Company has entered into agreements to establish 38 new centers. -- The number of treatment patient cases and diagnostic patient cases was 6,868 and 26,562 during the first quarter of 2010, respectively. Treatment patient cases increased by 18.2% from the corresponding period in 2009. Diagnostic patient cases increased by 100.8% from the corresponding period in 2009. (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 RMB6.8258 to US$1.00, the effective noon buying rate as of March 31, 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 first quarter of 2010. The Company did not incur share-based compensation expenses for the first quarter of 2009. (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 are pleased with our solid financial results for the first quarter despite the usual seasonality factor associated with the Chinese New Year holiday," said Dr. Jianyu Yang, director, president and chief executive officer of Concord Medical. "In addition, we made good progress toward our goal of operating at least 200 radiotherapy and diagnostic imaging centers by 2012. We opened one new center in the first quarter, acquired four centers in April, and our first specialty hospital, the Chang'an CMS International Cancer Center, is on track to begin operations in June 2010. Looking forward, we will continue to grow both organically and through acquisitions. On top of the four centers acquired in April, we also expect to open eight to ten centers organically in the second quarter, and will continue to explore additional acquisition targets for 2010."

Dr. Yang added, "We continue to receive encouraging signals from industry regulators. On May 7, 2010, the Chinese State Council issued a new statement reiterating its intention to enhance the scope and quality of healthcare services by attracting more private investments. As the operator of the largest network of radiotherapy and diagnostic imaging centers in China, we are confident that Concord Medical is well positioned to benefit from the favorable market environment supported by medical reform policies and increasing consumer demand for world-class cancer treatment."

Mr. Boxun Zhang, Concord Medical's corporate vice president, commented, "In the first quarter of 2010, we achieved strong top line growth and made good progress toward our full year operational and financial targets. For the rest of the year, we will continue to enhance operational and financial efficiency while supporting our network expansion with our strong financial resources. As a newly listed company, we are also committed to fulfilling the requirements of Sarbanes Oxley Section 404, and we are in the process of reviewing our internal control mechanisms accordingly."

First Quarter Fiscal 2010 Results

Concord Medical reported total net revenues of RMB76.2 million ($11.2 million) for the first quarter of 2010, representing a 36.6% increase from the corresponding period in 2009, primarily due to patient volume growth from established centers as well as from new centers opened in 2009.

Cost of revenues in the first quarter of 2010 was RMB27.0 million ($4.0 million), a 49.8% increase from the corresponding period in 2009, primarily due to increased depreciation expenses related to new centers opened in 2009.

Gross profit margin in the first quarter of 2010 was 64.5% as compared to 67.6% in the corresponding period in 2009. The marginal decrease was primarily due to new centers opened in the second half of 2009 having lower gross profit margin in their ramp-up periods comparing to established centers.

Operating expenses, consisting of selling expenses and general and administrative expenses, were RMB17.6 million ($2.6 million) in the first quarter of 2010, compared to RMB13.3 million in the previous quarter and RMB7.1 million in the corresponding period in 2009. The increase in operating expenses was mainly due to additional accrued expenses associated with post- IPO professional service charges, such as legal and auditing fees, and share- based compensation expenses, which are amortized through the year using the straight line method.

Operating Income was RMB31.5 million ($4.6 million), representing a 2.9% increase from the corresponding period in 2009. Operating profit excluding share-based compensation expenses (non-GAAP) was RMB34.1 million ($5.0 million), an 11.4% increase from the corresponding period in 2009.

Income tax expense was RMB8.5 million ($1.2 million), compared to an income tax expense of RMB6.7 million in the corresponding period in 2009. The effective tax rate for the first quarter of 2010 was 28.3% as compared to 22.9% in the previous quarter and 23.5% in the corresponding period in 2009. The increase in the effective tax rate was in relation to share-based compensation expenses and professional service expenses paid by off-shore subsidiaries being not directly tax deductable at on-shore entities.

Net income was RMB21.6 million ($3.2 million), representing a 1.2% decrease from the corresponding period in 2009. Both basic and diluted earnings per ADS for the first quarter of 2010 amounted to RMB0.44 ($0.06).

Net income excluding share-based compensation expenses (non-GAAP) was RMB24.2 million ($3.5 million), a 10.7% increase from the corresponding period in 2009. Both Basic and diluted earnings per ADS excluding share-based compensation expenses (non-GAAP) for the first quarter of 2010 amounted to RMB0.49 ($0.07).

Adjusted EBITDA (non-GAAP), was RMB57.9 million ($8.5 million) for the first quarter of 2010, representing a 19.8% increase from the corresponding period in 2009.

Capital expenditure for the first quarter of 2010 was RMB81.4 million ($11.9 million). Total depreciation expenses were RMB17.1 million ($2.5 million). In addition, amortization of acquired intangibles was RMB6.7 million ($1.0 million). The Company expects amortization of acquired intangibles to be approximately RMB26.8 million ($3.9 million) in 2010, assuming no additional intangibles are acquired through potential acquisitions.

As of March 31, 2010, the Company had total fixed assets with a net book value of RMB592.3 million ($86.8 million) and cash of RMB993.6 million ($145.6 million).

As of March 31, 2010, the Company had bank credit lines totaling RMB2.1 billion (US$314.2 million).

Accounts receivable was RMB112.5 million ($16.5 million) as of March 31, 2010, similar to RMB111.3 million as of December 31, 2009.

Outlook for Fiscal Year 2010

Taking into consideration the projected contribution from the four recently acquired centers, Concord Medical raises the estimated range of total net revenues for 2010 to RMB367 million to RMB398 million, which would represent a 25.5% to 36.1% increase from 2009.

Also as a result of the recent acquisition, the Company raises its network expansion target to 34 to 39 radiotherapy and diagnostic imaging centers in 2010, and the range of expected total capital expenditures related to these new centers to RMB400 million to RMB450 million.

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