Tianyin Pharmaceutical Co., Inc. (TPI) F3Q 2011 Earnings Call May 17, 2011 9:00 am ET Executives James Jiayuan Tong – Chief Financial Officer and Chief Business & Development Officer Analysts Adam Waldo – Lismore Partners LLC Angel Liu – Pope Asset Management Iao Kiagra – Private Investor Presentation Operator
FQ3 2011 ending March 31 st 2011 financial highlights – Revenue increased 56.3% year over year to $24.9 million from $15.9 million the year earlier.Operating income increased 39.9% year over year to $5 million from $3.6 million a year earlier. Net Income increased 27.7% to $3.7 million year over year from $2.9 million a year earlier. Earnings per share of $.13 per basic share, or $.12 per diluted share, up from $.11 per basic share or $.09 per diluted share a year earlier. A gain of 19.3% and 35.5% respectively. Cash and cash equivalents totaled $31.1 million on March 31 st 2011 or $1.10 per basic share in cash. Sales for the quarter ended March 31 st 2011 was $24.9 million, up 56.3% as compared to $15.9 million for the quarter ended March 31 st 2010. Although our generic pharmaceutical sales have been under pricing pressure at the beginning of this third quarter, the channel expansion, optimized production facility usage, and the continuous stream of Tianyin Medicine Trading, TMT, distribution revenue supported the quarterly sales growth. With the current hospital coverage at 880 hospitals up from 850 hospitals from the beginning of fiscal year 2011, we are targeting to reach 900 hospitals by the end of fiscal year 2011 ending June 30 th 2011. Revenues from the top selling products are Gingko Mihuan Oral Liquid, GMOL, $5.6 million. Apu Shuangxin Benorylate Granules, APU, $1.8 million. Azithromycin Tablets, AZI, $.98 million. Xuellian Chongcao Oral Liquid, XLCC, $1.1 million. Qing Re Jie Du Oral Liquid, $.77 million. These products totaled $10.2 million in sales, representing 41.2% of the quarterly revenue. Cost of Sales for FQ3 was $14 million or 56.2% of sales as compared to $7.5 million or 47.2% of sales a year earlier. Our cost of sales consists of the raw material cost, labor, depreciation and amortization of manufacturing equipment and facilities and other overhead.
Gross Margin for FQ3 was 43.6% as compared to 52.8% for the quarter ended March 31 st 2010. The decrease in gross margin was attributable to the average 15% TMT distribution revenue. In addition, the pricing pressure on our generic product also leads to the gross margin reduction.During this quarter our 56 product organic portfolio delivered approximately 51.4% gross margin, about 1.4% lower than the gross margin of 52.8% from a year earlier. Given these trends we anticipate that our overall gross margin in the near term on a quarter to quarter comparison base may trend lower but on a sequential basis should stabilize and improve depending upon the revenue mix percentage of TMT revenue, upcoming JCM macrolide API revenue as compared to the proprietary portfolio's revenue performance. Operating Expenses for FQ3 were $5.8 million compared with $4.8 million for the quarter ended March 31 st 2010. Continuing sales payroll and marketing expenses are the main components of the operating expenses. Net Income was $3.7 million for the quarter ended March 31 st 2011 as compared to net income of $2.9 million for FQ3 2010, a net increase of $.8 million or 27.6% year over year. Net profit margins for the quarter ended March 31 st 2011 decreased to 14.9% from 18.3% for the quarter ended March 31 st 2010 mainly attributable to one; recent pricing pressure on the generic pharmaceutical business, two; lower margin TMT distribution revenue, three; increase of income tax provision to 25% starting January 2011 from the previous 15% for Chengdu Tianyin on the expiration of the three year tax benefit for high tech enterprise. We expect the stabilization of the net profit margin at approximately 15% going forward under the current condition. Read the rest of this transcript for free on seekingalpha.com