Aesthetic Medical International Holdings Group Limited
Q3 2020 Earnings Call Transcript

Published: 30 Nov 2020

[Operator:]

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Aesthetic Medical International's Third Quarter 2020 Unaudited Financial Results Conference Call. During today's presentation, all parties will be in a listen-only mode. This conference has been recorded today, Monday, November 30, 2020. Joining us today from Aesthetic Medical International are the company's Chairman and CEO, Dr. Pengwu Zhou; and the company's IRD, ; and the company's Financial Officer, Mr. Guanhua Wu. Before we get started, I would like to remind you that some of the information discussed will include forward-looking statements regarding future events and our future financial performance. These include statements about our future expectations, financial projections and our plans and prospects. Actual results may differ materially from those set forth in such statements. For discussion of the risks and uncertainties, you should review the company's filings with the SEC, which includes today's press release.

[Pengwu Zhou:]

Thank you operator and everyone for joining Aesthetic Medical International's third quarter 2020 unaudited earning conference call today. I will begin my remarks by providing an overview of the company's response to the COVID-19 outbreak during the third quarter 2020, followed by a summary of the company’s third quarter 2020 performance. Then Dr. will review our financial results and operations performance in more detail. And he will elaborate a few other items related to our outlook and the approaches we are taking to implement our initiative in this fiscal year. Despite the fact that the COVID-19 is under effective control in China at this current stage, we are implementing a thorough COVID-19 prevention scheme and measures, including, but not limited too regularly, sterilizing and ventilating the company's facilities, picking strict protective measures to protect our frontline employees and customers. Segregating employees’ lunchtimes, monitoring the body temperature of our employees and customers and keeping track of the travel history and health of our employees and immediate family members. I am very pleased to announce that for the third quarter of 2020, we recorded a total number of active customers of 83,222, achieving an increase of 16.4% from 71,502 in the third quarter of 2019. This reflects our management’s agility and business resilience despite the full brunt and the unpredictability brought by the COVID-19 pandemic. At the same time, our core business initiatives were well executed and our market share in the aesthetic medical industry was strengthened primarily through our completion of the acquisition of Guangdong Pengai Hanfei Hospital Management Co., Ltd. and our integration of the industry chain.

[Unidentified Company Representative:]

Thank you, Dr. Zhou, and good morning, everyone. Next on behalf of the management team, I will summarize some of the key unaudited financial results and operation results for third quarter 2020 and nine months ended September 30, 2020. So, first of all, third quarter 2020 unaudited financial results. In this quarter, our total revenue increased by 18.2% to RMB281.3 million, which is about US$41.4 million. The increase in the total revenue was primarily due to the acquisition of Guangdong Pengai Hanfei Hospital Management Co., Ltd. and the increased total number of active customers developed through the company’s enhanced marketing and advertising efforts. The gross profit was RMB179.7 million, which is US$26.5 million, an increase of 9.4% from RMB164.3 million in the third quarter of 2019, primarily as a result of the increase in revenue due to the acquisition of the Guangdong Pengai Hanfei and the expanded customer base. The gross profit margin was 63.9%, a decrease of 5.2 percent points from 69.1% in the third quarter of 2019, mainly due to the more competitive pricing strategy adopted by the company and its subsidiaries in response to the outbreak of COVID-19.

[Michael Irwin:]

Michael Irwin, Univest Securities. First question is, China has been recovering quite well from the COVID-19 outbreak and things are appearing to be mostly back to normal. Have you seen business returning to normal or above normal levels currently?

[Unidentified Company Representative:]

Thank you, Michael. We have – as you can see, we have a pretty good increase in numbers. And for some numbers we even made some new records for this year. So we are expecting even better report card for the next quarter. Yes.

[Michael Irwin:]

Okay. My next question is, are there any concerns about the two Shanghai locations with the sudden increase in cases in Shanghai region?

[Unidentified Company Representative:]

Yes. Thank you for the question. Shanghai is a very big city with millions of people. The population of Shanghai is almost as large as the population of Australia, so one or two single cases will not affect the entire picture. And the local government is doing a good job finding out those cases and treat them with the right treatment. So we are very optimistic about what's going on in Shanghai.

[Michael Irwin:]

Okay. And there has been a global trend of more males getting these aesthetic treatments. Have you also been seeing this trend in your centers with more males actually coming into your clinic to receive treatment as well?

[Unidentified Company Representative:]

Thank you. That's a very good question. Currently, we have about 5% of the male patients. But we are expecting more and more male customers in the long run, because the consuming behavior of the young Chinese is changing. So yes, we are expecting more in the future.

[Michael Irwin:]

Alright. Thanks so much. Thank you.

[Operator:]

The next question comes from Ivy Wang of Univest. Please go ahead.

[Ivy Wang:]

Hi. This is Ivy from Univest. I have two questions. The first is, what will the collaboration with Meb Network bring to AIH? Is there any data showing how many customers are attracted by this app to AIH? Thank you.

[Unidentified Company Representative:]

I think I'd be about – as you may know we are a very traditional and moderate company in an industry, which means currently we don't have too much genes in, well our lab. But we can let the professional do their part. So that's, for me it aligns with the Meb Network. It's going to help us in deal in few part. For example branding for example, we are getting more attention from the young customers and of course we are expecting increase in sales. Thank you.

[Ivy Wang:]

Yes. Okay. That's good to know...

[Unidentified Company Representative:]

I don't have the exact number. So maybe we can wait through the next quarter.

[Ivy Wang:]

Yes. Okay. Thank you. So, my second question is, can I know more about your future business development plans like, there are any further collaboration plans to build our brand awareness? Thank you.

[Unidentified Company Representative:]

Yes. After the IPO last year we are – we're expanding very quickly in the country and we are setting up a field satellite clinics, which is like small clinics surrounding big cities. So we are getting pretty good result from those. And also we are implementing our online to offline strategies. We are trying to cooperate with Tencent, maybe we are going to develop our own, like app in the future so that we can reactivate our patients, our old customers, and of course we can do a lot more on those apps. For example, like selling cosmetic products or other like consumption goods on that, so, yes, all-to-all strategy.

[Ivy Wang:]

Yes. Okay. Thank you. That's all my questions.

[Unidentified Company Representative:]

Thank you, Ivy.

[Operator:]

The next question comes from Steve Hopper with Cantor Fitzgerald. Please go ahead.

[Steve Hopper:]

Hi, good morning. I was just wondering how much cash did you use for the acquisitions that you completed in the third quarter?

[Unidentified Company Representative:]

Thank you. We already paid about 200 – sorry RMB220 million, yes, that's the cash that we already paid and we are going through a little bit more in the future.

[Steve Hopper:]

Are those structured as earn outs? And can you quantify what the earn out provisions are?

[Unidentified Company Representative:]

I don't have the exact number with me right now, but maybe you can share that in e-mail and we can send you the exact numbers back to you.

[Steve Hopper:]

Okay. Thank you.

[Unidentified Company Representative:]

Yes, okay. Thank you.

[Operator:]

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. for any closing remarks.

[Unidentified Company Representative:]

Thank you, Andrew. On behalf of our entire management team, I would like to thank everyone again for joining us today for our conference call. If you have any questions, please contact us through emails at [e-mail] or reach our IR portal consultant ascent Investor Relations at [e-mail], management will respond to your question as soon as possible. We appreciate your interest and support in Aesthetic Medical International and look forward to speaking with you again next time. Andrew, please go ahead.

[Operator:]

Thanks everyone again for attending Aesthetic Medical International’s third quarter 2020 unaudited earnings conference call. This concludes our call today, and we thank you all for listening, and goodbye.