Concord Medical Reports Financial Results for the First Half of 2020

BEIJING,Aug. 26,2020 -- Concord Medical Services Holdings Limited ("Concord Medical" or the "Company") (NYSE: CCM),a healthcare provider specializing in cancer care,research and prevention by operating a network of medically advanced comprehensive cancer hospitals and standalone radiotherapy and diagnostic imaging centers in China,today announced its unaudited consolidated financial results for the six months ended June 30,2020[1].

2020 First Half Highlights

Total net revenues were RMB83.0 million ($11.7 million) in the first half of 2020,representing a 16.6% decrease from total net revenues of RMB99.5 million in the same period last year. Total net revenues included the net revenues from the network business of RMB37.7 million ($5.3 million) and the net revenues from hospital business of RMB45.3 million ($6.4 million).

Gross loss was RMB3.5 million ($0.5 million) in the first half of 2020,compared to the gross profit of RMB3.1 million in the first half of 2019. The gross loss margin was 4.2% for the first half of 2020,compared to the gross profit margin of 3.1% for the same period last year.

Net loss attributable to ordinary shareholders in the first half of 2020 was RMB128.8 million ($18.2 million),compared to RMB140.1 million in the same period last year.

Basic and diluted loss per share for Class A and Class B ordinary shares[2] in the first half of 2020 were both RMB2.23 ($0.32),compared to RMB2.03,respectively,in the same period last year.

Non-GAAP net loss in the first half of 2020 was RMB155.0 million ($21.9 million),compared to non-GAAP net loss of RMB149.3 million in the same period last year. Non-GAAP basic and diluted loss per share for Class A and Class B ordinary shares in the first half of 2020 were both RMB2.15 ($0.30),compared to RMB1.95 in the same period last year.

Adjusted EBITDA[3] (non-GAAP) was negative RMB113.1 million ($16.0 million) in the first half of 2020,compared to negative RMB108.3 million in the same period last year.

Dr. Jianyu Yang,Chairman and Chief Executive Officer of Concord Medical,commented,"In the first half of 2020,the Company's business was affected by the coronavirus disease (COVID-19) epidemic. As the epidemic situation is under control in China,the Company's business has returned to normal.In particular,compared with the same period in 2019,our Shanghai Meizhong Jiahe Cancer Center nearly doubled its revenue."

"The Company's Shanghai Meizhong Jiahe Medical Imaging Diagnostic Center (the "Imaging Diagnosis Center") has been officially opened in April 2020,which will expand the Company's business income."

"The proton equipment of Guangzhou Concord Cancer Center (the "Cancer Center") has arrived and is expected to be hoisted in the recent months. Besides,the construction of the Cancer Center (exclude the proton part) is nearly competed,and the Company is starting the preparation for the opening of the Cancer Center. With the gradual operation of the Cancer Center to the mature stage,the Company's revenue will also be greatly improved in the next few years."

2020 First Half Financial Results

Network Business

Net revenues from the network business were RMB37.7 million ($5.3 million),representing a 44.6% decrease from net revenues of RMB68.0 million in the first half of 2019,primarily attributable to the effect of the COVID-19 epidemic and the closure of certain centers in our network of centers. With four centers closed in the first half of 2020,the Company operated a network of 27 centers in 20 cities in China as of June 30,2020.

Cost of revenues of the network business was RMB14.6 million ($2.1 million),representing a 58.0% decrease from RMB34.8 million in the first half of 2019.

Gross profit from the network business was RMB23.1 million ($3.3 million),representing a 30.4% decrease from RMB33.2 million in the first half of 2019. The gross profit margin of the network business for the first half of 2020 was 61.3%,compared to the gross profit margin of 48.8% for the same period last year.

Selling expenses of the network business were RMB19.4 million ($2.7 million),representing a 108.6% increase from RMB9.3 million in the first half of 2019. Selling expenses as a percentage of net revenues from the network business was 51.5% in the first half of 2020,compared to 13.7% in the first half of 2019. The increase in selling expenses of the network business was mainly due to the increase in advertisement and promotion expenses.

General and administrative expenses of the network business were RMB56.9 million ($8.1 million),representing a 30.1% decrease from RMB81.4 million in the first half of 2019. General and administrative expenses as a percentage of net revenues from the network business were 150.9% in the first half of 2020,compared to 119.7% in the same period last year. The decrease was mainly because Zhongrong Fund management fees have been fully settled in the second half of 2019.

Comparing to RMB24.8 million in the same period last year,capital expenditures decreased to RMB3.9 million ($0.6 million) in the first half of 2020,primarily for procuring equipment for network centers.

Accounts receivable were RMB61.1 million ($8.6 million) as of June 30,2020,compared to RMB67.1 million as of December 31,2019. The average period of sales outstanding for accounts receivable (also known as "Days Sales Outstanding") was 298 days in the first half of 2020.

During the first half of 2020,the Company handled 3,837 patient treatment cases and 40,444 patient diagnostic cases,representing a 28.1% decrease and a 45.9% decrease from the same period last year,respectively. The decreases in patient treatment and diagnostic cases were mainly due to the influence of the COVID-19 epidemic.

Hospital Business

Net revenues from the hospital business were RMB45.3 million ($6.4 million) in the first half of 2020,representing a 43.8% increase from net revenues of RMB31.5 million in the first half of 2019,mainly because the operation of Shanghai Meizhong Jiahe Cancer Center Co.,Ltd. has gradually matured and the Imaging Diagnostic Center opened in this April.

Cost of revenues of the hospital business in the first half of 2020 was RMB71.8 million ($10.2 million),representing a 16.6% increase from cost of revenues of RMB61.6 million in the first half of 2019,mainly because of the preparation and operation of the Imaging Diagnostic Center.

Gross loss from the hospital business was RMB26.5 million ($3.8 million) in the first half of 2020,compared to RMB30.1 million in same period last year. The gross loss margin of the hospital business for the first half of 2020 was 58.5%,compared to the gross loss margin of 95.8% for the same period last year.

Selling expenses of the hospital business were RMB2.7 million ($0.4 million) in the first half of 2020,representing an 80.0% increase from selling expenses of RMB1.5 million in the first half of 2019. Selling expenses as a percentage of net revenues from the hospital business was 6.0% in the first half of 2020,compared to 4.8% in the first half of 2019. The increase was mainly because the market research cost increase for the Imaging Diagnosis Center and the Cancer Center.

General and administrative expenses of the hospital business were RMB77.5 million ($11.0 million) in the first half of 2020,of which employee benefit expenses were RMB31.7 million ($4.5 million). In the same period of last year,general and administrative expenses of the hospital business were RMB58.1 million. The increase was mainly due to the increase in salary and rental fees for hospitals. General and administrative expenses as a percentage of net revenues from the hospital business was 171.1% in the first half of 2020,compared to 184.4% in the first half of 2019.

Comparing to RMB410.5 million in the first half of 2019,capital expenditures of the hospital were RMB364.9 million ($51.6 million) in the first half of 2020. The decrease was mainly related to the decrease in construction fees and medical equipment payment for Beijing Proton Medical Center,Shanghai Concord Cancer Center and the Cancer Center.

As of June 30,accounts receivable from hospital business were RMB11.2 million ($1.6 million),representing an 18.2% decrease from accounts receivable of RMB13.7 million as of December 31,2019. The number of Days Sales Outstanding was 50 days in the first half of 2020.

As of June 30,the Company had bank loans and other borrowings totaling RMB2.0 billion ($288.6 million).

Recent Developments

The Imaging Diagnosis Center commenced operation in April 2020. The Imaging Diagnosis Center is located on the second floor of the Medical Technology Center of Shanghai Xinhongqiao International Medical Park (the "Park"),which is the center of the Park. The Imaging Diagnosis Center provides high-quality diagnostic imaging services,such as radiology,ultrasound and nuclear medicine,diagnosis and remote consultation,education and training,to all the medical institutions,premium clinics and medical institutions around the Park. Advanced imaging diagnostic equipment,such as CT,magnetic resonance,PET-CT and PET-MRI,have been installed in the Imaging Diagnosis Center.

Notes:

[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 of RMB into U.S. dollars are made at a rate of RMB7.0651 to $1.00,the noon buying rate in New York City for cable transfers payable in RMB,as certified for customs purposes by the Federal Reserve Bank of New York on June 30,2020.

[2] The Company adjusts for the accretion of mezzanine equity in the calculation of loss attributable to ordinary shareholders of the Company used in the loss per share for Class A and Class B ordinary shares calculation.

[3] Adjusted EBITDA is defined as net income plus interest,taxes,depreciation and amortization,share-based compensation expenses and other adjustments. Other adjustments include foreign exchange gain (loss),net,loss on disposal of long-lived equipment,income from disposal of associate companies and other income.

About Concord Medical

Concord Medical Services Holdings Limited is a healthcare provider specializing in cancer care,research and prevention. The Company operates a network of medically advanced comprehensive cancer hospitals and standalone radiotherapy and diagnostic imaging centres in China. The Company focuses on providing multidisciplinary cancer care approach in all areas of oncology services in its cancer hospitals. The Company also equips its hospitals with technologically advanced equipment such as the state-of-the-art proton therapy system in its Beijing,Shanghai and Guangzhou cancer hospitals. As of June 30,the Company operated a network of 27 centers based in 20 hospitals,spanning over 20 cities across 13 provinces and administrative regions in China. To ensure the commitment to the highest level of clinical care for patients,the Company offers ongoing education and training for doctors and other medical professionals in its network hospitals and centres in both local and overseas medical institutions. For more information,please see http://ir.ccm.cn.

Safe Harbor Statement

This announcement contains forward-looking statements. These forward-looking statements can be identified by words or phrases such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar expressions. Forward-looking statements are inherently subject to uncertainties and contingencies beyond the Company's control and based upon premises with respect to future business decisions,which are subject to change. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. The Company does not undertake any obligation to update any forward-looking statement,except as required under applicable law.

About Non-GAAP Financial Measures

To supplement the consolidated financial statements presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"),Concord Medical uses certain non-GAAP measures. The Company presents certain of its financial information that is adjusted from results based on GAAP to exclude the impact of share-based compensation expense. The Company believes excluding share-based compensation expense from its GAAP financial measures is useful for its management and investors to assess and analyze the Company's core operating results,as such expense is not directly attributable to the underlying performance of the Company's business operations and do not impact its current cash earnings. Concord Medical also believes these non-GAAP measures excluding share-based compensation expense are important in helping investors to understand the Company's current financial performance and future prospects and to compare business trends among different reporting periods on a consistent basis. In addition,Concord Medical also presents the non-GAAP measure of Adjusted EBITDA,which is defined in this announcement as net income plus interest,and share-based compensation expenses and other adjustments. Other adjustments include foreign exchange gain (loss),income from disposal of associate companies and other income. Furthermore,Adjusted EBITDA eliminates the impact of items that the Company does not consider to be indicative of the performance of the network business and hospital business. The Company believes investors will similarly use Adjusted EBITDA as one of the key metrics to evaluate its financial performance and to compare its current operating results with corresponding historical periods and with other companies in the healthcare services industry. The presentation of these additional measures should not be considered a substitute for or superior to GAAP results or as being comparable to results reported or forecasted by other companies. The non-GAAP measures have been reconciled to GAAP measures in the attached financial information.

Concord Medical Services Holdings Co.,Ltd.

Consolidated Balance Sheets

(in thousands)

December 31,2019

June 30,2020

RMB

RMB

US

(audited)

(Unaudited)

(Unaudited)

ASSETS

Current assets

Cash and cash equivalents

74,307

566,516

80,185

Accounts receivable

73,731

61,528

8,709

Prepayments and other current assets

94,868

288,727

40,867

Inventories

4,341

5,573

789

Net investments in direct financing leases,current portion

35,240

40,285

5,702

Total current assets

282,487

962,629

136,252

Non-current assets

Property,plant and equipment,net

1,898,861

2,092,567

296,184

Right of use assets,net

647,080

629,989

89,169

Net investments in direct financing leases,non-current portion

27,084

20,249

2,866

Goodwill

210,443

213,920

30,279

Intangible assets,net

532,489

524,882

74,292

Deposits for non-current assets

624,132

671,817

95,090

Long-term investments

64,948

321,496

45,505

Other non-current assets

9,921

13,684

1,937

Total non-current assets

4,014,958

4,488,604

635,322

Total assets

4,297,445

5,451,233

771,574

LIABILITIES AND EQUITY

Current liabilities

Accounts payable

8,275

5,992

848

Accrued expenses and other liabilities

277,101

256,106

36,249

Income tax payable

752

2,165

306

Operating lease liabilities,current

12,884

9,867

1,397

Short-term bank and other borrowings

285,500

440,177

62,303

Long-term bank and other borrowings,current portion

42,939

106,768

15,112

Total current liabilities

627,451

821,075

116,215

Non-current liabilities

Long-term bank and other borrowings,non-current portion

1,291,763

1,491,961

211,173

Deferred tax liabilities

165,438

166,624

23,584

Long-term secured borrowings

-

116,800

16,532

Operating lease liabilities,non-current

218,817

211,716

29,966

Other long-term liabilities

104,738

104,529

14,799

Total non-current liabilities

1,780,756

2,091,630

296,054

Total liabilities

2,408,207

2,912,705

412,269

Contigently redeemable noncotrolling interests

1,909,606

2,737,552

387,475

EQUITY

Class A ordinary shares

68

68

10

Class B ordinary shares

37

37

5

Treasury stock

(8)

(8)

(1)

Additional paid-in capital

1,759,941

1,823,366

258,081

Accumulated other comprehensive loss

(97,285)

(104,152)

(14,742)

Accumulated deficit

(1,785,517)

(2,078,181)

(294,148)

Total Concord Medical Services Holdings Limited shareholders'

deficit

(122,764)

(358,870)

(50,795)

Noncontrolling interests

102,396

159,846

22,625

Total deficit

(20,368)

(199,024)

(28,170)

Total liabilities,mezzanine equity and deficit

4,445

5,233

771,574

Concord Medical Services Holdings Co.,Ltd.

Consolidated Profit & Loss

(in thousands,except for number of shares and per share data)

June 30,2020

RMB

RMB

US$

(Unaudited)

(Unaudited)

(Unaudited)

Revenues net of value-added tax

Network

68,046

37,674

5,332

Hospital

31,466

45,337

6,417

Total net revenues

99,512

83,011

11,749

Cost of revenues:

Network

(34,799)

(14,644)

(2,073)

Hospital

(61,596)

(71,839)

(10,168)

Total cost of revenues

(96,395)

(86,483)

(12,241)

Gross profit/ (loss)

3,117

(3,472)

(492)

Operating expenses:

Selling expenses

(10,827)

(22,095)

(3,127)

General and administrative expenses

(139,518)

(134,397)

(19,023)

Operating loss

(147,228)

(159,964)

(22,642)

Interest expense

(9,329)

(20,835)

(2,949)

Foreign exchange gain(loss),net

2,606

(1,736)

(246)

Loss on disposal of long-lived equipment

(2,781)

(5)

(1)

Interest income

6,124

4,050

573

(Loss) income from equity method investments

(4,536)

1,252

177

Other income,671

4,958

702

Gain on disposal of an equity method investment

-

8,151

1,154

Loss before income tax

(152,473)

(164,129)

(23,232)

Income tax expenses

(7,912)

(1,833)

(259)

Net loss

(160,385)

(165,962)

(23,491)

Net loss attributable to noncontrolling interests

(20,268)

(37,167)

(5,261)

Net loss attributable to Concord Medical Services Holdings

Limited

(140,117)

(128,795)

(18,230)

Loss per share for Class A and Class B ordinary shares

Basic

(2.03)

(2.23)

(0.32)

Diluted

(2.03)

(2.23)

(0.32)

Weighted average number of class A and class B ordinary

shares outstanding:

Basic

130,161,668

130,241,995

130,995

Diluted

130,995

Other comprehensive loss,net of tax of nil

Foreign currency translation,net tax of nil

(419)

(6,867)

(972)

Total other comprehensive loss,net of tax

(419)

(6,867)

(972)

Comprehensive loss

(160,804)

(172,829)

(24,463)

Comprehensive loss attributable to noncontrolling interests

(19,123)

(37,261)

Comprehensive loss attributable to Concord Medical

Services Holdings Limited's shareholders

(141,681)

(135,662)

(19,202)

Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures(*)

(in RMB thousands,except per share data unaudited)

For the six months ended June 30,2019

For the six months ended June 30,2020

GAAP

Measure

Adjustment

Non-GAAP

Measure

GAAP

Measure

Adjustment

Non-GAAP

Measure

Operating loss

(147,228)

11,130

(136,098)

(159,964)

10,916

(149,048)

Net loss

(160,385)

11,130

(149,255)

(165,962)

10,916

(155,046)

Basic loss per share for Class A and Class B ordinary shares

(2.03)

0.09

(1.95)

(2.23)

0.08

(2.15)

Diluted loss per share for Class A and Class B ordinary shares

(2.03)

0.09

(1.95)

(2.23)

0.08

(2.15)

(*) The only adjustment is share-based compensation.

Reconciliation from net income to adjusted EBITDA(*)

(in RMB thousands,unaudited)

For the six months ended

For the six months ended

June 30,2020

Net loss

(160,962)

Interest expenses,net

3,205

16,785

Income tax expenses

7,912

1,833

Depreciation and amortization

32,366

34,715

Share-based compensation

11,130

10,916

Other adjustments

(2,496)

(11,368)

Adjusted EBITDA

(108,268)

(113,081)

EBITDA margin

-109%

-136%

(*) Definition of adjusted EBITDA: Adjusted EBITDA is defined as net income plus interest,

taxes,share-based compensation expenses and other

adjustments. Other adjustments include foreign exchange gain(loss),loss on disposal

of long-lived equipment,income from disposal of associate companies and other income

View original content:/news-releases/concord-medical-reports-financial-results-for-the-first-half-of-2020-301118761.html