Zhongchao Inc. Reports the Fiscal Year 2020 Financial Results
SHANGHAI,April 30,2021 -- Zhongchao Inc. (NASDAQ: ZCMD) ("Zhongchao" or the "Company"),a healthcare services company offering patient management,online healthcare information,professional training and educational services,today announced its financial results for the fiscal year ended December 31,2020.
Key Financial Highlights for the Fiscal Year 2020 as compared to the Fiscal Year 2019
For the Years Ended December 31,
($ millions,except per share data)
2020
2019
% Change
Revenues
$17.99
$14.88
20.9%
Gross profit
$11.87
$10.23
16.1%
Gross margin
66.0%
68.7%
-2.7 pp
Income from operations
$4.49
$3.64
23.3%
Operating margin
25.0%
24.5%
0.5 pp
Net income attributable to ordinary shareholders of
Zhongchao
$4.46
$4.05
10.2%
Earnings per share
$0.183
$0.187
-2.6%
* pp: percentage points
Revenues increased by 20.9% to $17.99 million for the fiscal year 2020,primarily due to the increasing orders for assistance services for patient-aid projects.
Gross profit increased by 16.1% to $11.87 million while gross margin decreased by 2.7 percentage points to 66.0% for the fiscal year 2020.
Operating income increased by 23.3% to $4.49 million for the fiscal year 2020,primarily due to the increased gross profit and partially offset by the increased operating expenses.
Net income attributable to the Company's ordinary shareholders increased by 10.2% to $4.46 million for the fiscal year 2020,primarily driven by the increased income from operations and partially offset by the increased income tax expenses.
Earnings per share was $0.183 for the fiscal year 2020,compared to $0.187 for last year.
Weiguang Yang,Chairman and Chief Executive Officer of Zhongchao,commented,"With revenues increasing by 20.9% to a record $17.99 million and operating income increasing by 23.3% to $4.49 million,our fiscal year 2020 financial results highlight continued strength in our businesses. Although our gross margin has a slight drawback,we expect to maintain a high-profit margin in the future for our reputation acknowledgment among leading pharmaceutical enterprises and non-for-profit organizations to design and produce high-quality professional content. In response to the outbreak of COVID-19,we,through our MDMOOC platform,have successfully developed and launched coronavirus curriculum with over 60 courses covering a wide range of medical specialties. In addition,our online courses increased 15% year-over-year in 2020. We are closely monitoring the fluid and uncertain situation of COVID-19,and we expect our revenues will continue to increase with the resume of work within China in the long-term."
Financial Results for the Fiscal Year Ended December 31,2020
Revenues
For the fiscal year 2020,revenues increased by $3.11 million,or 20.9%,to $17.99 million from $14.88 million for last year. The increase in revenues was primarily due to the increasing orders for assistance services for patient-aid projects.
Cost of revenues
Cost of revenue increased by $1.46 million,or 31.4%,to $6.12 million for the fiscal year 2020 from $4.66 million for last year. The increase in the cost of revenues was driven by the increases in professional service fees and outsourced labor cost as we employed increasing outsourced staff with an increase in patient-aid projects.
Gross profit
Gross profit increased by $1.65 million,or 16.1%,to $11.87 million for the fiscal year 2020 from $10.23 million for last year.
Gross margin decreased by 2.7 percentage points to 66.0% for the fiscal year 2020,compared to 68.7% for last year.
Operating expenses
Selling and marketing expenses increased by $0.25 million,or 7.7%,to $3.44 million for the fiscal year 2020from $3.20 million for last year. The increase in selling and marketing expenses was mainly attributable to the increase in advertising expenses to gain reputation in medical healthcare industry and the increase in salary and welfare to increase headcounts in selling and marketing department. As a percentage of total revenues,selling and marketing expenses was 19.1% for the fiscal year 2020,compared to 21.5% for last year.
General and administrative expenses increased by $0.60 million,or 23.8%,to $3.12 million for the fiscal year 2020from $2.52 million for last year. The increase in general and administrative expenses was mainly attributable to the increase in salary and welfare expenses as a result of combining effects of an increase of headcounts in supporting functions; the increase in professional expenses since the Company became listed since February 2020; and the increase in writing off doubtful accounts against accounts receivable in accordance with the bad debt policy. As a percentage of total revenues,general and administrative expenses was 17.4% for the fiscal year 2020,compared to 17.0% for last year.
Research and development expenses decreased by $0.05 million,or 5.5%,to $0.82 million for the fiscal year 2020 from $0.86 million for last year. As a percentage of total revenues,research and development expenses was 4.5% for the fiscal year 2020,compared to 5.8% for last year.
Total operating expenses increased by $0.80 million,or 12.1%,to $7.38 million for the fiscal year 2020 from $6.58 million for last year. The increase in operating expenses was mainly attributable to the increased selling and marketing expenses and general and administrative expenses and partially offset by the decreased research and development expenses.
Operating income
Income from operations increased by $0.85 million,or 23.3%,to $4.49 million for the fiscal year 2020 from $3.64 million for last year. The increase in income from operations was primarily driven by the increased gross profit and partially offset by the increased operating expenses.
Operating margin increased by 0.5 percentage points to 25.0% for the fiscal year 2020 from 24.5% for last year.
Interest and other income,net
Interest income decreased by $0.07 million,or 30.5%,to $0.15 million for the fiscal year 2020 from $0.21 million for last year.
Other income,primarily consisted of government subsidies,was $0.31 for the fiscal year 2020,compared to $0.53 million for last year.
Income before income taxes
Income before income taxes increased by $0.55 million,or 12.6%,to $4.94 million for the fiscal year 2020 from $4.39 million for last year. The increase in income before income taxes was primarily attributable to the increased income from operations and partially offset by the decreased interest and other income.
Income tax expenses increased by $0.10 million,or 25.2%,to $0.49 million for the fiscal year 2020 from $0.39 million for last year.
Net income and EPS
Net income increased by $0.46 million,or 11.4%,to $4.46 million for the fiscal year 2020 from $4.00 million for last year. The increase in net income was primarily due to the increased income from operations and partially offset by the increased income tax expenses.
Net margin decreased by 2.1 percentage points to 24.8% for the fiscal year 2020 from 26.9% for last year.
After deducting for non-controlling interests,net income attributable to the Company's shareholders increased by $0.41 million,or 10.2%,to $4.46 million for the fiscal year 2020 from $4.05 million for last year.
Basic and diluted earnings per share was $0.183 for the fiscal year 2020,compared to $0.187 for last year. Weighted average number of shares outstanding was 24,425,637 for the fiscal year 2020,compared to 21,600,135 for last year.
Financial Condition
As of December 31,2020,the Company had cash,and cash equivalents of $15.07 million,compared to $7.83 million as of December 31,2019. Accounts receivable were $10.32 million as of December 31,compared to $5.08 million as of December 31,2019. Working capital was $26.61 million as of December 31,compared to $12.15 million as of December 31,2019.
Net cash used in operating activities was $1.04 million for the fiscal year 2020,compared to net cash provided by operating activities of $1.41 million forlast year. Net cash used in investing activities was $4.09 million for the fiscal year 2020,compared to $0.20 million forlast year. Net cash provided by financing activities was $11.50 million for the fiscal year 2020,compared to net cash used in financing activities of $1.19 million forlast year.
Recent Business Highlights
In March 2021,renewing the contract with China Association for Health Promotion and Education and GlaxoSmithKline (China) Investment Limited to continue the medical education program "Pulmonary Arterial Hypertension Online Course – Connections with Famous Hospitals" in 2021.
In January 2021,co-sponsoring the National Annual Conference for Standardized Liver Cancer Diagnosis and Treatment with China Association of Health Promotion and Education and Chinese Society of Liver Cancer.
In November 2020,expanding the scope of cooperation with Takeda Pharmaceutical in China to provide a broad range of services in medical editing,document collation,and medical training and education.
About Zhongchao Inc.
Incorporated in 2012 with headquarter offices in Shanghai and Beijing,China,Zhongchao Inc. is an online provider of healthcare information,professional training and educational services to healthcare professionals under its "MDMOOC" platform (www.mdmooc.org) and to the public under its "Sunshine Health Forums" platform (www.ygjkclass.com) in China. The Company also offers patient management services under its "Zhongxun" platform (www.zhongxun.online). More information about the Company can be found at its investor relations website at http://izcmd.com.
Safe Harbor Statement
This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans,objectives,goals,strategies,future events or performance,and underlying assumptions and other statements that are other than statements of historical facts. When the Company uses words such as "may,"will,"intend," "should," "believe," "expect," "anticipate," "project," "estimate" or similar expressions that do not relate solely to historical matters,it is making forward-looking statements.Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause the actual results to differ materially from the Company's expectations discussed in the forward-looking statements. These statements are subject to uncertainties and risks including,but not limited to,the following: the Company's goals and strategies; the Company's future business development; product and service demand and acceptance; changes in technology; economic conditions; the growth of the professional training and educational services market in China and the other international markets the Company plans to serve; reputation and brand; the impact of competition and pricing; government regulations; fluctuations in general economic and business conditions in China and the international markets the Company plans to serve and assumptions underlying or related to any of the foregoing and other risks contained in reports filed by the Company with the SEC,the length and severity of the recent coronavirus outbreak,including its impacts across our business and operations. For these reasons,among others,investors are cautioned not to place undue reliance upon any forward-looking statements in this press release. Additional factors are discussed in the Company's filings with the SEC,which are available for review at www.sec.gov. The Company undertakes no obligation to publicly revise these forward–looking statements to reflect events or circumstances that arise after the date hereof.
For more information,please contact:
At the Company:
Pei Xu,CFO
Email: xupei@mdmooc.org
Phone: +86 21-3220-5987
Investor Relations:
Sherry Zheng
Weitian Group LLC
Email: shunyu.zheng@weitian-ir.com
Phone: +1 718-213-7386
ZHONGCHAO INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Expressed in U.S. dollar,except for the number of shares)
For the Years Ended
December 31,
2020
2019
2018
Revenues
$
17,989,788
$
14,882,763
$
12,865,870
Cost of revenues
(6,117,640)
(4,655,827)
(4,456,353)
Gross Profit
11,872,148
10,226,936
8,409,517
Operating Expenses
Selling and marketing expenses
(3,441,941)
(3,196,469)
(2,261,258)
General and administrative expenses
(3,124,301)
(2,524,003)
(1,663)
Research and development expenses
(816,553)
(864,320)
(1,447,949)
Total Operating Expenses
(7,382,795)
(6,584,792)
(5,134,870)
Income from Operations
4,489,353
3,642,144
3,274,647
Interest income,net
146,965
211,479
191,609
Other income,net
305,566
534,020
37,364
Income Before Income Taxes
4,941,884
4,387,643
3,503,620
Income tax expenses
(484,787)
(387,144)
(502,131)
Net Income
4,457,097
4,000,499
3,001,489
Net loss attributable to noncontrolling interests
1,283
46,171
17,834
Net Income Attributable to Zhongchao Inc.'s shareholders
$
4,458,380
$
4,046,670
$
3,019,323
Other Comprehensive Income (Loss)
Foreign currency translation adjustment
1,259,984
(173,604)
(379,520)
Comprehensive Income
5,717,081
3,826,895
2,621,969
Total comprehensive loss attributable to noncontrolling interests
1,834
Total comprehensive income attributable to Zhongchao Inc.'s
shareholders
$
5,718,364
$
3,873,066
$
2,639,803
Weighted average number of ordinary share outstanding
Basic and Diluted
24,637
21,135
20,764,245
Earnings per share
Basic and Diluted
$
0.183
$
0.187
$
0.145
ZHONGCHAO INC.
CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. dollar,except for the number of shares)
December 31,
2020
December 31,
2019
ASSETS
Current Assets
Cash and cash equivalents
$
15,072,947
$
7,832,552
Short-term investments
2,032,928
-
Accounts receivable
10,321,837
5,078,419
Prepayments
554,298
325,496
Due from a related party
-
14,364
Other current assets
1,613,408
1,258,040
Total Current Assets
29,595,418
14,508,871
Investment in a limited partnership
1,787
-
Property and equipment,net
1,997,761
1,889,973
Deposit for property
700,884
-
Prepayments for lease of land
367,588
366,409
Intangible assets,net
34,973
37,323
Right of use assets
65,137
245,982
Deferred tax assets
795,547
688,994
Total Assets
$
34,816,095
$
17,737,552
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable
$
408,426
$
117,064
Advances from customers
6,760
73,961
Deferred government grants,current portion
-
323,192
Income tax payable
1,523,175
897,892
Operating lease liabilities,current portion
62,160
210,219
Accrued expenses and other liabilities
981,433
735,334
Total Current Liabilities
2,981,954
2,357,662
Operating lease liabilities,noncurrent portion
-
41,363
Total Liabilities
2,399,025
Commitments and Contingencies
Equity
Class A Ordinary Share (par value $0.0001 per share,450,000 shares
authorized; 19,435,423 and 16,102,420 shares issued and outstanding at
December 31,2020 and 2019,respectively)
1,944
1,610
Class B Ordinary Share (par value $0.0001 per share,50,000 shares authorized;
5,497,715 and 5,715 shares issued and outstanding at December 31,2020
and 2019,respectively)
550
550
Additional paid-in capital
22,775,154
12,044,855
Statutory reserve
801,502
415,813
Retained earnings
7,339,778
3,267,087
Accumulated other comprehensive income (loss)
915,213
(344,771)
Total Zhongchao Inc.'s Shareholders' Equity
31,834,141
15,385,144
Noncontrolling interests
-
(46,617)
Total Equity
31,338,527
Total Liabilities and Equity
$
34,552
ZHONGCHAO INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. dollar,except for the number of shares)
For the Years Ended
December 31,
2020
2019
2018
Cash Flows from Operating Activities:
Net income
$
4,097
$
4,499
$
3,489
Adjustments to reconcile net income to net cash (used in) provided
by operating activities:
Write off against accounts receivable
336,367
-
-
Depreciation and amortization expenses
202,325
102,905
38,699
Amortization of right of use assets
222,353
159,259
-
Recognition (reversal) of share-based compensation expenses
168,350
159,984
(14,483)
Deferred tax (benefits) expenses
(58,424)
(318,087)
60,975
Equity investment loss
25,622
-
-
Changes in fair value of short-term investments
10,331
-
-
Changes in operating assets and liabilities:
Accounts receivable
(5,486,914)
(3,065)
(792,031)
Prepayments
(197,402)
231,894
(583,613)
Other current assets
(1,143,200)
119,523
(659,145)
Accounts payable
260,350
94,461
(548,507)
Advances from customers
6,398
(476,261)
(125,872)
Income tax payable
535,981
618,120
296,904
Accrued expenses and other liabilities
179,738
408,725
85,954
Lease liabilities
(230,819)
(153,616)
-
Deferred government grants
(325,992)
(405,321)
552,277
Net Cash (Used in) Provided by Operating Activities
(1,037,839)
1,408,020
1,312,647
Cash Flows from Investing Activities:
Purchases of property and equipment
(160,602)
(1,941)
(668,067)
Payments of deposits for property purchase
(688,267)
-
-
Payment for land use rights
-
-
(418,520)
Investments in short-term investments
(2,043,259)
(2,460,879)
(2,920,260)
Investment in a limited partnership
(1,217,039)
-
-
Release from short-term investments
-
3,618,940
3,502,799
Buy out of a non-controlling interests
-
(33,718)
-
Loan repayment from (provided to) a related party
14,489
(14,476)
-
Net Cash Used in Investing Activities
(4,094,678)
(203,074)
(504,048)
Cash Flows from Financing Activities:
Proceeds from issuance of common stocks in connection with
initial public offering,net of offering cost
11,886,363
-
-
Payment of expenses relating to initial public offerings
(388,709)
(468,328)
-
Capital contribution from shareholders
-
-
3,580,260
Proceeds from bank borrowings
-
-
756,544
Repayment of bank borrowings
-
(723,788)
-
Net Cash Provided by (Used in) Financing Activities
11,654
(1,192,116)
4,336,804
Effect of exchange rate changes on cash and cash equivalents
875,258
(98,953)
(205,243)
Net increase (decrease) in cash and cash equivalents
7,240,395
(86,123)
4,940,160
Cash and cash equivalents at beginning of year
7,552
7,918,675
2,978,515
Cash and cash equivalents at end of year
$
15,947
$
7,552
$
7,675
Supplemental Cash Flow Information
Cash paid for interest expense
$
-
$
30,312
$
5,840
Cash paid for income tax
$
2,642
$
87,111
$
144,252
Noncash investing activities
Right of use assets obtained in exchange for operating lease
obligations
$
37,919
$
419,362
$
-
