iKang Healthcare Group, Inc. (“iKang” or the “Company”)
(Nasdaq: KANG), a major provider in China’s fast growing private
preventive healthcare services market, today announced its
unaudited financial results for the fiscal first quarter ended June
30, 2018.
Fiscal First Quarter Ended June 30, 2018
Financial Highlights
- Net revenues were US$150.2 million, an increase of 30.0%
year-over-year (an increase of 20.8% on RMB basis) (1)
- Gross profit was US$60.1 million, an increase of 24.3%
year-over-year (an increase of 15.6% on RMB basis) (1)
- Net income attributable to the Company was US$6.3 million,
an increase of 75.0% year-over-year (an increase of 62.7% on RMB
basis) (1)
- Non-GAAP net income attributable to the
Company(2) was US$6.5 million, an increase of 65.4%
year-over-year (an increase of 53.8% on RMB basis) (1)
- Basic and diluted income per ADS attributable to common
shareholders were US$0.09 and US$0.09, respectively, as
compared to US$0.05 and US$0.05, respectively, in the
fiscal first quarter of 2017
- Non-GAAP basic and diluted income per ADS(3) attributable
to common shareholders were US$0.09 and US$0.09,
respectively, as compared to US$0.06 and US$0.06,
respectively, in the fiscal first quarter of 2017
(1) RMB basis refers to the year on year
comparison made on local currency – Chinese Renminbi basis.(2)
Non-GAAP net income attributable to the Company is defined as net
income attributable to the Company excluding share-based
compensation expenses. For more information on these non-GAAP
financial measures, please see the section captioned under
“Non-GAAP Financial Measures” and the tables captioned
“Reconciliation of GAAP and Non-GAAP Results” set forth at the end
of this release.(3) Non-GAAP basic and diluted earnings per ADS is
defined as non-GAAP net income divided by the weighted average
number of basic and diluted ADS.
“Our Fiscal first quarter was a strong start for
fiscal year 2018, and we are pleased with our results, which
continue to be driven by broad-based strength across our expanding
and diverse service portfolio and across our nationwide network,”
commented Mr. Lee Ligang Zhang, Chairman and Chief Executive
Officer of iKang.
“We finished the quarter with total net revenue
of US$150.2 million and Non-GAAP net income of US$6.5 million,
representing a year-over-year growth of 30.0% and 65.4%
respectively (by 20.8% and 53.8% on RMB basis). Our customer base
has continued to expand with 19.1% increase in customer
visits.”
“The results of our performance for this quarter
reflected the strong market demand as well as the success we have
with our broad and increasingly integrated services portfolio.”
said Mr. Zhang “ As we continue to focus on taking care of our
customers and executing our iKangCare+ and iKangPartners+ plans, we
have the opportunity to establish iKang as a truly differentiated
leader in the private preventive healthcare industry as well as
provide new levers for business growth.”
“We believe that iKang is well positioned to
execute against the opportunity in the private preventive
healthcare market. We believe the demand remains strong across our
services and are confident in our long-term strategy to drive
organic growth and leverage our scale, innovation and capital to
deliver long-term value for customers and
shareholders.”
FISCAL FIRST QUARTER ENDED JUNE 30, 2018 UNAUDITED
FINANCIAL RESULTS
Net Revenues (1)
Net revenues for the fiscal first quarter
were US$150.2 million, representing a 30.0% increase
from US$115.6 million in the same period of the last
fiscal year. On a RMB basis, the revenue growth was 20.8%
compared to the fiscal first quarter of 2017. As of June 30,
2018, the number of self-owned medical centers totaled 113 compared
to 104 as of June 30, 2017. In this quarter, the Company
served approximately a total of 1.68 million customer visits under
both corporate and individual programs, representing an increase of
19.1% compared to the fiscal first quarter of 2017.
The table below sets forth a breakdown of net revenues:
(US$ million) |
Fiscal First Quarter Ended June 30, 2018 |
Fiscal First Quarter Ended June 30, 2017 |
YoY % Change |
Medical Examinations |
118.8 |
95.0 |
25.1 |
% |
Disease Screening |
17.2 |
9.7 |
78.3 |
% |
Dental Services |
5.3 |
2.9 |
83.5 |
% |
Other Services |
8.9 |
8.0 |
10.1 |
% |
Total |
150.2 |
115.6 |
30.0 |
% |
Medical Examinations: Net revenues for the
quarter were US$118.8 million, representing a 25.1% increase
from US$95.0 million in the same period of the last fiscal
year.
Disease Screening: Net revenues for the
quarter were US$17.2 million, representing a 78.3% increase
from US$9.7 million in the same period of the last fiscal
year. Disease screening services refer to the additional services
requested by individuals under the basic corporate medical
examination programs as a result of individual needs.
Dental Services: Net revenues for the
quarter were US$5.3 million, representing an 83.5% increase
from US$2.9 million in the same period of the last fiscal
year.
Other Services: Net revenues for the
quarter were US$8.9 million, representing a 10.1% increase
from US$8.0 million in the same period of the last fiscal
year.
(1) iKang adopted ASC 606 by using modified retrospective method
since April 1, 2018. The impact of applying this ASC is
insignificant.
Cost of RevenuesCost of
revenues for the quarter was US$90.1 million, representing a
34.0% increase from US$67.2 million in the same period of
the last fiscal year.
Gross Profit and Gross
MarginGross profit for the quarter was US$60.1
million, representing a 24.3% increase from US$48.4
million in the same period of the last fiscal year. Gross
margin for the quarter was 40.0%, as compared to 41.8% in the first
quarter of the last fiscal year.
Operating ExpensesTotal
operating expenses for the quarter was US$46.1 million,
representing a 17.0% increase from US$39.5 million in the
same period of the last fiscal year.
Selling and marketing expensesSelling and
marketing expenses for the quarter were US$24.3 million,
accounting for 16.2% of total net revenues as compared to 16.7% in
the same period of the last fiscal year.
General and administrative expensesGeneral and
administrative expenses for the quarter were US$21.0 million,
accounting for 14.0% of total net revenues as compared to 16.9% in
the same period of the last fiscal year. Excluding
share-based compensation expenses of US$292,000 for this quarter
and US$384,000 for the same quarter last year, the general and
administrative expenses for the quarter was US$20.7 million,
accounting for 13.8% of total net revenue as compared to 16.5% in
the same period of the last fiscal year.
Research and development expensesResearch and
development expenses for the quarter were US$0.8 million,
accounting for 0.5% of total net revenues as compared to 0.6% in
the same period of the last fiscal year.
Income from OperationsIncome
from operations for the quarter was US$14.0 million,
representing a 56.8% increase from US$8.9 million in the
same period of the last fiscal year. Excluding share-based
compensation expenses of US$292,000 for this quarter and
US$384,000 for the same quarter last year, non-GAAP income from
operations for the quarter was US$14.3 million as
compared to US$9.3 million, which reflected an increase of
53.4%.
Non-GAAP EBITDA Non-GAAP EBITDA
for the quarter was US$25.6 million, representing a 31.2% increase
from US$19.5 million in the same period of the last fiscal
year.
Net
Income Net income
attributable to the Company for the quarter was US$6.3
million, representing an increase of 75.0% from US$3.6
million in the same period of the last fiscal year.
Non-GAAP net income attributable to the Company
for the quarter was US$6.5 million, representing an increase
of 65.4% from US$4.0 million in the same period of the last
fiscal year.
Basic and Diluted Earnings per
ADSBasic and diluted loss per ADS attributable to common
shareholders were US$0.09 and US$0.09, respectively, as
compared to US$0.05 and US$0.05, respectively, in the same quarter
of 2017.
Non-GAAP basic and diluted loss per ADS
attributable to common shareholders were US$0.09 and US$0.09,
respectively, as compared to US$0.06 and US$0.06, respectively, in
the same quarter of 2017.
Cash and Cash
EquivalentsAs of June 30, 2018, the Company’s cash and
cash equivalents, restricted cash and term deposit totaled US$46.4
million, as compared to US$62.9 million as of March 31, 2018.
STATEMENT REGARDING UNAUDITED FINANCIAL
INFORMATION
The unaudited financial information set forth
above is subject to adjustments that may be identified when audit
work is performed on the Company’s year-end financial statements,
which could result in significant differences from this unaudited
financial information.
NON-GAAP FINANCIAL MEASURES
To supplement our consolidated financial
statements which are presented in accordance with U.S. GAAP, we
also use non-GAAP operating income, non-GAAP net income and
non-GAAP EBITDA as additional non-GAAP financial measures. We
present these non-GAAP financial measures because they are used by
our management to evaluate our operating performance. We also
believe that these non-GAAP financial measures provide useful
information to investors and others in understanding and evaluating
our consolidated results of operations in the same manner as our
management and in comparing financial results across accounting
periods and to those of our peer companies.
Reconciliation of non-GAAP operating income,
non-GAAP net income and non-GAAP EBITDA to the most directly
comparable financial measures calculated and presented in
accordance with U.S. GAAP is set forth at the end of this release.
About iKang Healthcare Group,
Inc.iKang Healthcare Group, Inc. is one of the largest
providers in China’s fast-growing private preventive healthcare
space through its nationwide healthcare services network.
iKang’s nationwide integrated network of
multi-brand self-owned medical centers and third-party facilities,
provides comprehensive and high-quality preventive healthcare
solutions across China, including medical examination, disease
screening, outpatient service and other value-added services.
iKang’s customer base primarily comprises corporate clients, who
contract with iKang to deliver medical examination services to
their employees and clients, and receive these services at
pre-agreed rates. iKang also directly markets its services to
individual customers. In the fiscal first quarter ended June 30,
2018, iKang served a total of 1.68 million customer visits under
both corporate and individual programs.
As of September 27, 2018, iKang has a nationwide
network of 115 self-owned operating medical centers, covering 33 of
China’s most affluent cities: Beijing, Shanghai, Guangzhou,
Shenzhen, Chongqing, Tianjin, Nanjing, Suzhou, Hangzhou, Chengdu,
Fuzhou, Jiangyin, Changzhou, Wuhan, Changsha, Yantai, Yinchuan,
Weihai, Weifang, Shenyang, Xi’an, Wuhu, Guiyang, Ningbo, Foshan,
Jinan, Bijie, Qingdao, Wuxi, Kaili, Mianyang and Zhenjiang, as well
as Hong Kong. iKang has also extended its coverage to over 200
cities by contracting with over 400 third-party facilities, which
include select independent medical examination centers and
hospitals across all of China’s provinces, creating a nationwide
network that allows iKang to serve its customers in markets where
it does not operate its own medical centers.
Forward-looking StatementsThis
press release contains forward-looking statements. These
statements, including management quotes and business outlook, are
made under the “safe harbor” provisions of the U.S. Private
Securities Litigation Reform Act of 1995. These forward-looking
statements can be identified by terminology such as “will,”
"estimate," "project," "predict," "believe," "expect,"
"anticipate," "intend," "potential," "plan," "goal" and similar
statements. iKang may also make written or oral forward-looking
statements in its periodic reports to the U.S. Securities and
Exchange Commission, in its annual report to shareholders, in press
releases and other written materials and in oral statements made by
its officers, directors or employees to third parties. Such
statements involve certain risks and uncertainties that could cause
actual results to differ materially from those expressed or implied
in the forward-looking statements. These forward-looking statements
include, but are not limited to, statements about: the Company’s
goals and strategies; its future business development, financial
condition and results of operations; its ability to retain and grow
its customer base and network of medical centers; the growth of,
and trends in, the markets for its services in China; the demand
for and market acceptance of its brand and services; competition in
its industry in China; relevant government policies and regulations
relating to the corporate structure, business and industry;
fluctuations in general economic and business conditions in China.
Further information regarding these and other risks is included in
iKang’s filing with the Securities and Exchange Commission. iKang
undertakes no duty to update any forward-looking statement as a
result of new information, future events or otherwise, except as
required under applicable law.
IR Contact:
iKang Healthcare Group, Inc.Christy XieDirector
of Investor RelationsTel: +86 10 5320
8599Email: ir@ikang.com Website: www.ikanggroup.com
FleishmanHillardEmail: ikang@fleishman.com
IKANG HEALTHCARE GROUP,
INC.CONDENSED CONSOLIDATED BALANCE
SHEETS(In thousands of US dollars, except share
data and per share data)(Unaudited)
|
As of |
|
|
As of |
|
March 31, |
|
|
June
30, |
|
2018 |
|
|
2018 |
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
Current
assets: |
|
|
|
|
|
Cash and
cash equivalents |
$ |
62,901 |
|
$ |
46,388 |
Accounts
receivable, net of allowance for doubtful accounts of $23,142
and $24,526 as of March 31, 2018 and June 30, 2018,
respectively |
|
149,259 |
|
|
168,612 |
Inventories |
|
9,261 |
|
|
8,476 |
Amount
due from related parties |
|
7,019 |
|
|
7,247 |
Prepaid
expenses and other current assets |
|
66,939 |
|
|
78,180 |
|
|
|
|
|
|
Total current
assets |
$ |
295,379 |
|
$ |
308,903 |
|
|
|
|
|
|
Property and equipment,
net |
$ |
173,283 |
|
$ |
165,791 |
Acquired intangible
assets, net |
|
21,993 |
|
|
19,398 |
Goodwill |
|
117,995 |
|
|
112,461 |
Long-term
investments |
|
196,816 |
|
|
187,589 |
Deferred tax
assets-non-current |
|
39,380 |
|
|
43,770 |
Rental deposit and
other non-current assets |
|
20,309 |
|
|
20,174 |
|
|
|
|
|
|
TOTAL ASSETS |
$ |
865,155 |
|
$ |
858,086 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES, MEZZANINE
AND EQUITY |
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
Accounts payable
(including accounts payable of the consolidated VIEs without
recourse to iKang Healthcare Group, Inc. of $43,840 and $44,626 as
of March 31, 2018 and June 30, 2018, respectively) |
$ |
52,800 |
|
$ |
53,933 |
Accrued expenses and
other current liabilities (including accrued expenses and other
current liabilities of the consolidated VIEs without recourse to
iKang Healthcare Group, Inc. of $60,281 and $59,169 as of March 31,
2018 and June 30, 2018, respectively) |
|
76,586 |
|
|
77,733 |
Income tax payable
(including income tax payable of the consolidated VIEs without
recourse to iKang Healthcare Group, Inc. of $13,523 and $13,335 as
of March 31, 2018 and June 30, 2018, respectively) |
|
15,579 |
|
|
15,362 |
Deferred revenues
(including deferred revenues of the consolidated VIEs without
recourse to iKang Healthcare Group, Inc. of $87,388 and $82,790 as
of March 31, 2018 and June 30, 2018, respectively) |
|
95,422 |
|
|
92,153 |
Amounts due to related
parties (including amounts due to related parties of the
consolidated VIEs and VIEs’ subsidiaries without recourse to iKang
Healthcare Group, Inc. of nil and $3,480 and $4,713 as of March 31,
2018 and June 30,2018, respectively) |
|
3,692 |
|
|
4,916 |
Short term borrowings
(including short term borrowings of the consolidated VIEs without
recourse to iKang Healthcare Group, Inc. of $196,450 and $191,972
as of March 31, 2018 and June 30, 2018, respectively) |
|
196,450 |
|
|
191,972 |
|
|
|
|
|
|
Total current
liabilities |
$ |
440,529 |
|
$ |
436,069 |
IKANG HEALTHCARE GROUP,
INC.CONDENSED CONSOLIDATED BALANCE SHEETS -
continued(In thousands of US dollars, except share
data and per share data)(Unaudited)
|
As of |
|
|
As of |
|
March 31, |
|
|
June
31, |
|
2018 |
|
|
2018 |
Long-term borrowings
(including long term borrowings of the consolidated VIEs and
VIEs’ subsidiaries without recourse to iKang Healthcare Group, Inc.
of $38,884 and $30,225 as of March 31, 2018 and June 30,
2018, respectively) |
|
38,884 |
|
|
30,225 |
Deferred tax
liabilities-non-current (including deferred tax liabilities
non-current of the consolidated VIEs without recourse to iKang
Healthcare Group, Inc. of $4,944 and $4,263 as of March 31,
2018 and June 30, 2018, respectively) |
|
5,917 |
|
|
5,194 |
Deferred revenues -
non-current |
|
- |
|
|
93 |
Long term payables |
|
- |
|
|
5,419 |
|
|
|
|
|
|
TOTAL LIABILITIES |
$ |
485,330 |
|
$ |
477,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
Total
iKang Healthcare Group, Inc. shareholders' equity |
|
355,707 |
|
|
358,451 |
Non-controlling interests |
|
24,118 |
|
|
22,635 |
|
|
|
|
|
|
TOTAL EQUITY |
$ |
379,825 |
|
$ |
381,086 |
|
|
|
|
|
|
TOTAL LIABILITIES AND
EQUITY |
$ |
865,155 |
|
$ |
858,086 |
IKANG HEALTHCARE GROUP,
INC.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(In thousands of US dollars, except
share data and per share
data)(Unaudited)
|
Three-month periods |
|
ended June 30 |
|
2017 |
2018 |
|
|
|
|
|
Net revenues |
$ |
115,599 |
$ |
150,237 |
Cost of revenues |
|
67,236 |
|
90,126 |
|
|
|
|
|
Gross profit |
$ |
48,363 |
$ |
60,111 |
|
|
|
|
|
Operating
expenses: |
|
|
|
|
Selling
and marketing expenses |
$ |
19,259 |
$ |
24,323 |
General
and administrative expenses |
|
19,489 |
|
21,039 |
Research
and development expenses |
|
706 |
|
782 |
|
|
|
|
|
Total operating
expenses |
$ |
39,454 |
$ |
46,144 |
|
|
|
|
|
Income from
operations |
$ |
8,909 |
$ |
13,967 |
Interest expense |
|
3,089 |
|
4,760 |
Interest income |
|
145 |
|
83 |
|
|
|
|
|
Income before income
tax expenses and loss from equity method investments |
$ |
5,965 |
$ |
9,290 |
Income tax
expenses |
|
1,550 |
|
2,333 |
Loss from equity method
investments |
|
(870) |
|
(640) |
|
|
|
|
|
Net income |
$ |
3,545 |
$ |
6,317 |
Less: Net income
attributable to non-controlling interest |
|
(31) |
|
60 |
|
|
|
|
|
Net income attributable
to iKang Healthcare Group, Inc. |
$ |
3,576 |
$ |
6,257 |
|
|
|
|
|
Net income attributable
to common shareholders of iKang Healthcare Group, Inc. |
$ |
3,576 |
$ |
6,257 |
|
|
|
|
|
|
|
|
|
|
Net income per share
attributable to common shareholders of iKang Healthcare Group,
Inc. |
|
|
|
|
Basic |
$ |
0.10 |
$ |
0.18 |
Diluted |
$ |
0.10 |
$ |
0.18 |
|
|
|
|
|
|
|
|
|
|
Net income per ADS (one
common share equals to two ADSs) |
|
|
|
|
Basic |
$ |
0.05 |
$ |
0.09 |
Diluted |
$ |
0.05 |
$ |
0.09 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares
used in calculating net income per common share |
|
|
|
|
Basic |
34,230,899 |
34,502,979 |
Diluted |
|
34,669,869 |
|
35,453,864 |
IKANG HEALTHCARE GROUP,
INC.RECONCILIATION OF GAAP AND NON-GAAP
RESULTS(In thousands of US dollars, except share
data and per share data)(Unaudited)
|
Three-month periods |
|
ended June 30 |
|
2017 |
2018 |
|
|
|
|
|
Income from
operations |
$ |
8,909 |
$ |
13,967 |
Add: |
|
|
|
|
Share-based compensation expenses |
|
384 |
|
292 |
|
|
|
|
|
Non-GAAP operating
income |
$ |
9,293 |
$ |
14,259 |
|
|
|
|
|
|
|
|
|
|
Net income attributable
to iKang Healthcare Group, Inc. |
$ |
3,576 |
$ |
6,257 |
Add: |
|
|
|
|
Share-based compensation expenses |
|
384 |
|
292 |
|
|
|
|
|
Non-GAAP net
income |
$ |
3,960 |
$ |
6,549 |
|
|
|
|
|
|
|
|
|
|
Income from
operations |
$ |
8,909 |
$ |
13,967 |
Add: |
|
|
|
|
Depreciation and amortization |
|
10,208 |
|
11,325 |
Share-based compensation expenses |
|
384 |
|
292 |
|
|
|
|
|
Non-GAAP EBITDA |
$ |
19,501 |
$ |
25,584 |
|
|
|
|
|
Non-GAAP net income
attributable to common shareholders of iKang Healthcare Group,
Inc. |
$ |
3,960 |
$ |
6,549 |
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income per
share attributable to common shareholders of iKang Healthcare
Group, Inc. |
|
|
|
|
Basic |
$ |
0.12 |
$ |
0.19 |
Diluted |
$ |
0.11 |
$ |
0.18 |
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income per
ADS (one common share equals to two ADSs) |
|
|
|
|
Basic |
$ |
0.06 |
$ |
0.09 |
Diluted |
$ |
0.06 |
$ |
0.09 |
IKANG HEALTHCARE GROUP, INC. (NASDAQ:KANG)
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