Concord Medical's CEO Discusses Second Quarter Results - Earnings Call Transcript

Concord Medical (CCM)

Q2 2012 Earnings Call

August 21, 2012, 08:00 am ET


Tony Tian – Investor Relations Manager

Jianyu Yang – Chairman, CEO

Adam Sun – CFO


Isabella Hau – Morgan Stanley

Sean Wu – JPMorgan

(Mital Kraus) – Private Investor



Hello and thank you for standing by the Concord Medical second quarter 2012 earnings conference call. At this time, all participants are in listen-only mode. After management's prepared remarks, there will be a question-and-answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time.

I would now like to turn the meeting over to your host for today's conference, Tony Tian, Investor Relations Manager of Concord Medical. Mr. Tian, you may begin.

Tony Tian

Thanks. Hello, everyone, and welcome to Concord Medical's secdon quarter 2012 earnings conference call. Concord Medical's earnings release was distributed earlier today and you can find a copy on our website as well as on News Wire Services.

Today, you will hear from Dr. Jianyu Yang, Concord Medical's Chairman and CEO, and Mr. Adam Sun, Chief Financial Officer.

After their prepared remarks, Jianyu Yang and Mr. Sun will be available to answer your questions. Before we continue, please note that the discussion today will contain forward-looking statements made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995 and within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended.

Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include but are not limited to t hose outlined in our public findings with the SEC.

Concord Medical does not undertake any obligation to update any forward-looking statement except as required under applicable law.

Both our earnings release and remarks made during this call include discussions of certain unaudited non-GAAP financial measures. Our earnings release contains a reconciliation of the unaudited non-GAAP measures to the most directly comparable unaudited GAAP measures.

As a reminder, this conference is being g recorded. In addition, a webcast of this conference call will also be available on Concord Medical's website. I will now turn the call over to Concord Medical's Chairman and CEO, Dr. Jianyu Yang.

Jianyu Yang

First of all, I would like to welcome everyone to our 20112 second quarter earnings conference call.

Concord Medical had solid growth during the second quarter of 2012. Total net revenues were RMB137 million, a 10.2% increase from the same period of last year. Included in these results, revenues from our core network or at least in management services were RMB120 million, a 15.3% increase from the second quarter of 2012.

New centers in our networks continued to improve their operating efficiency and provide support to our overall business. Gross margin was 68.7% in Q2, a significant improvement from 58.4% in Q1.

This performance demonstrates that our initiatives to reduce cost and improve operational efficiency instituted at the beginning of the year are having a significant effect.

On June 18th we announced the successful closing of the acquisition of 52% ownership in Chang'an Hospital, a leading non-public general hospital located in Xi'an, Shaanxi Province.

The company announced the signing of a definitive agreement in connection with the acquisition of 52% equity ownership in Chang'an Hospital on March 22, 2012. Since then, the company has received all necessary government approvals including new business license of Chang'an Hospital and completed all registration procedures including Capital Verification Report, Share Ownership Report and Business Registration Change Report.

The financial results of Chang'an Hospital will be reflected in the consolidated financial statements of the company in the third quarter.

In addition, we have made significant progress on other hospital projects, including the Guangzhou joint venture project. We recently obtained the approval of establishing a medical institution from the ministry of Health of Guangdong Province. In early 2013, we plan to begin construction on the 400-bed cancer specialty hospital.

The ongoing healthcare reform in China will provide Concord Medical significant development opportunities. By 2015, it is projected that the number of private hospitals will increase to approximately 20% of the total number of hospitals in China according to China's Ministry of Health.

The successful closing of the acquisition of Chang'an Hospital as well as the near future establishment of the additional cancer specialty hospitals will enable CCM to become a leading hospital operation and management group.

Looking forward, we're confident in the growth of our overall business. As a leader in private healthcare services in China, we will take full advantage of the favorable regulatory environment by accelerating our effort in leading cancer specialty hospitals under our own brand and improving the operation level and efficiency of the existing center network.

We will continue to build Concord Medical into a leading cancer specialty hospital management group in Asia.

I want to express our appreciation again to investors and analysts for all of your support. Thank you. I will now turn the call over to Adam Sun, our CFO, who will walk you through our financials.

Adam Sun

Thank you, Dr. Yang, and hello, everyone, and thank you for joining us today. Let's look at some key financial results for the second quarter of 2012. By now I hope everyone has seen the 6-K that was filed by the company. This contains the full financials and so I will just go through some of the key highlights and then open the call to questions.

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