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China Cord Blood Corporation (CO)
Q4 2019 Earnings Call
Jun 19, 2019, 8:00 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


And welcome everyone to Global Cord Blood Corporation's Earnings Conference Call for the Fourth Quarter and Full Year Fiscal 2019. All participant lines will be placed on mute during the presentation. After which there will be a question and answer session.

(Operator Instructions) Now, I would like to introduce Ms. Kathy Bian VP of Corporate Finance to begin the presentation, please.

Kathy Bian -- Vice President of Corporate Finance

Thank you, Ray. Good morning, everyone. Welcome to our fourth quarter and full year of fiscal 2019 earnings conference call. A press release discussing our financial results has already been published and a copy is available on our Company's website. During the call, our management team will summarize operational developments and financial highlights for the quarter. A question-and-answer session will follow.

Before we begin, please note that today's discussion will contain forward looking statements that are subject to certain risks and uncertainties and actual results could be materially different from these forward-looking statements. Kindly refer to our SEC filings for detailed discussions of potential risks.

In the interest of time, we will begin with our CEO's remarks followed by a detailed report of our fourth quarter fiscal 2019 financials given by our CFO Mr. Albert Chen. Our management will be available to answer questions during the Q/A session. In view of recent developments, we understand investors and shareholders have various questions to ask. To give everyone a chance to ask questions, we'd appreciate if you could ask one question at a time.

Today, on behalf of our CEO, Tina, I will read her prepared remarks. Let's begin the presentation.

Good morning, shareholders, investors, ladies and gentlemen. Welcome to Global Cord Blood Corporation's Fiscal 2019 Fourth Quarter Earnings Conference Call. During the reporting quarter, we recruited 22,194 new subscribers, up by 3.8% year-over-year and down by 6.2% quarter-over-quarter.

During fiscal 2019, despite newborn numbers in China trending downwards, the Group managed to acquire 88,906 new subscribers, in line with our expectations. By March 31st, 2019, we had accumulated 750,273 subscribers in total, consolidating our leading position in the Global Cord Blood Banking industry.

In the beginning of 2016, the universal two-child policy was officially released and the families in China were allowed to bear two children instead of one child. By the end of 2018, the boosting effect from this policy had waned and the total newborn number in China recorded a year-over-year decrease. Under current demographic trends and fertility levels, we do not expect such momentum to change drastically.

However, as a result of urbanization, the population is still growing in certain areas, particularly in Guangdong province. Therefore, we expect that in fiscal 2020, Guangdong will still be the main driver of our growth. Zhejiang will maintain its contribution. Beijing will still be constrained by a decreasing population, and in particular, fewer women of child-bearing age. Therefore, we need to enhance our ability to recruit new clients and to cater to local client's needs to penetrate existing market. In addition, we increased our processing fee by RMB3,000 to RMB9,800 in April 1st, 2019. The adjustment reflects our ongoing efforts to improve our service quality and client experience.

It also absorbs some of the costs associated with Cord Blood Processing. By increasing single client contribution and providing a buffer to counter the impact from the current demographic trends we just described, we believe such a measure will allow us to maintain our top line and margin levels. Taken together, we expect that the number of new subscribers for fiscal 2020 will range between 80,000 and 85,000.

Meanwhile, in order to expand our geographic coverage and revenue sources, we will continue to screen for business development opportunities inside and outside of the PRC that could offer synergies to our current services. Thank you all, again, for your support of GCBC.

I will now turn the call over to our CFO Mr. Albert Chen to review our fourth quarter financial performance in greater detail.

Albert Chen -- Chief Financial Officer, Director

Good morning everyone. In the fourth quarter, revenues increased by 8% year-over-year to RMB252 million. As our accumulated subscriber base increased to more than 75,0000 as of March 31st,2019, fourth quarter storage revenue increased by 20% year-over-year to RMB103 million, and storage revenue now accounted for 41% of total revenues, up from 37% in the same period of last year.

In the fourth quarter, we recruited 22,194 new subscribers and processing revenue increased to RMB149 million, up from RMB147 million of last year. Similar to prior quarters, the majority of the new subscribers came from our Guangdong division. In line with our top line growth, fourth quarter gross profit increased by 8% year-over-year to RMB204 million. Increased contribution from storage revenue helped to improve gross margin. But this was partially offset by an increase in raw material and labor costs. Consequently, gross margin edges up by 20 basis points and maintained at the 81% range in the reporting quarter.

Operating income in the reporting quarter increased significantly to RMB89 million, up from RMB42 million in last year period, despite higher sales and marketing expenses. This was mainly due to the absence of share-based compensation expenses related to the Company RSU schemes, as all of the RSUs were fully vested in last year period.

Share based compensation expenses for the last year period were RMB48 million. Depreciation and amortization expenses in the reporting quarter were RMB13 million. Fourth quarter operating income before depreciation, amortization and share-based compensation expenses or we commonly refer to as the non-GAAP operating income, amounted to RMB102 million compared to RMB103 million of last year.

Non-GAAP operating income margin was 41% compared to 44% of last year. In the fourth quarter, sales and marketing expenses increased by 13% year-over-year and 4% quarter-over-quarter to RMB67 million. This was mainly attributable to an increase in staff remuneration expenses and escalated marketing and promotional activities. Sales and marketing expenses, as a percentage of revenues, increased to nearly 27%.

In the context that the number of newborns gradually declined in our addressable markets, we remain focused on advocating existing and potential medical benefits of umbilical cord blood banking for the general public and believe it is necessary to do so in order to maximize our long-term market position and drive future client conversion rates.

General and administrative expenses for the fourth quarter dropped to RMB44 million from RMB84 million of last year, mainly due to the absence of share based compensation expenses. Aside from the absence of share-based compensation expense, we managed to keep various general and administrative expense items in check by further tightening other administrative cost items.

On a quarter over quarter basis, general and administrative expense decreased by 3%, as we continue to closely monitor our administrative costs. In the reporting quarter, we recognized a nearly RMB12 million increase in the fair value of equity securities or we commonly refer to as the mark-to-market gains as other income under the accounting standard adopted since April 1st, 2018.

Such gains were mainly related to our investment in Cordlife Group Limited. In the fourth quarter of last year, a decrease in fair value of equity securities of RMB2.5 million was recorded as other comprehensive loss. Due to the increase in operating income as well as the mark to market gain, net income attributable to the Company's shareholders for the fourth quarter nearly tripled to RMB91 million.

Net margin for the reporting quarter improved to 36% from 13% in last year period. The total number of shares issued and outstanding as of March 31st, 2019 was 121.55 million. Basic and diluted earnings per ordinary share for the fourth quarter improved to RMB0.74.

This pretty much wrap up my presentation. And these are the highlights for the fourth quarter. We are now happy to take any questions concerning our latest financial results and the recent developments.

Questions and Answers:


Thank you, sir. We will now begin our question-and-answer session. (Operator Instructions) The first question is from Danny David at Baker Botts. Please go ahead.

Danny David -- Baker Botts -- Analyst

Thank you. Last time the Company received a lowball offer, it assembled a Special Committee which took two years to decide to terminate any further evaluation and negotiation of that proposal. In the meantime, the pending offer served only to suppress the price of the stock. Given that the Company has now resurrected the same Special Committee; will the Special Committee move faster this time and reject the offer immediately?

Albert Chen -- Chief Financial Officer, Director

Thank you for the questions. As you are aware, the Special Committee is already formed to evaluate the non-binding offer from Cordlife Group Limited. The members of the committee are all independent non-Executive Directors who have no ties to Cordlife Group whatsoever. Obviously, I think this is for the benefit of the Company as well as for the benefit of the shareholders.

It will be ideal, if any actions or decisions to be made can be made within the relatively short period of time. I think it will be ideal. But at the same time, I think the committee would take a careful approach in evaluating the non-binding offer.

As we stated in our press release, the committee do intend to engage professional parties, including legal counsel, as well as financial advisor to assist in evaluating the nonbinding offer.

Since all the committee members have good experience dealing with similar type of situation in the past, I'm confident that the committee member would take into account the various aspects when reviewing the non-binding offer, including the time constraint or the expectations of the process that you just mentioned.

And I do believe that they will make the appropriate recommendation in the period of time when they deem -- when they think this is -- when they think it is appropriate.


Our next question is from Jeff Neal at Merrill Lynch. Please go ahead.

Jeff Neal -- Merrill Lynch -- Analyst

Good morning. My question is directed toward CEO and Chairperson, Ms. Zheng. Ms. Zheng, you have the dual-hatted responsibility of being CEO, responsible for the management of resources that the Board directs you. And you also have the unique position of Chairperson who has the responsibility of stewarding the Board and the resources of the Company. So in your capacity as Chairperson, I have a question.

This business is remarkably stable. It's consistently profitable. Margins are stable. The Company has no competition within the markets it operates, yet the capital efficiency ratios of the Company are among the worst I look at. And it is the reason the stock is where it is today. The share is closed below the Company's estimated cash value per share yesterday. And there is principally one reason for that, the inefficiency of capital the deployment.

So I'd like Ms. Zheng to enumerate the reasons that the Company maintains this policy with regards to basically capital storage as opposed to capital efficiency for shareholders. And please, I'm not interested in platitudes and generalizations. I'd like an enumeration of the specific reasons the Company has adopted the strategies that it has adopted. Thank you.

Albert Chen -- Chief Financial Officer, Director

Thank you for the questions. Even though Ms. Zheng is not here today I will try to answer this question on her behalf to the best I can. Internally, I should say, the capital allocation decision is one of the heavily debated issues and various members has expressed different views and concerns. And we are not taking this decision lightly because when it comes to capital allocation decisions, we look at the existing policy environment, the cord blood banking industry outlook within the PRC, especially when we are seeing the number of newborns in China gradually declining, and also the current economic weakness in the PRC market, and also taking into account the opportunities and strategic options available to us.

Needless to say that the recent non-binding proposal from Cordlife is -- make things a little bit complicated. But that said, as many of you are aware that the cord blood banking business in the PRC is our company's sole revenue source, and with the current cord blood banking license regime and policy expiring in 2020, we are basically retaining capital and getting ready for a possible change in regulatory landscape. This also urges us to revisit our business strategy as well as the Company's future direction. As we talked about in our previous calls, we are evaluating our strategic options whether or not to expand our service offerings beyond cord blood banking or to march into other geographical regions, but either way, to allow the Company to grow and lower our business concentration risk.

We talked about the non-binding offer from Cordlife, with the Special Committee is taking helm in leading the evaluation as well as negotiations, if any, but this non-binding offer is clearly a sign that the Company has to review the value propositions and carry on or even expedite our expansion strategy, if necessary. I hope this will give you a better sense about our -- about where we're heading.

Jeff Neal -- Merrill Lynch -- Analyst

Well actually it doesn't. And that continues to be the issue, I think. The lowball offers that I think most shareholders would view both the original Golden Meditech offer and the subsequent offer now from Cordlife are directly reflective of a stable policy, a policy that has been frozen in time essentially with regards to capital allocation and capital efficiency.

And despite the debates that you reference, there hasn't been a change. In fact it's very disappointing and I'm sure others will voice this morning of a lack of dividend (technical difficulty) small test dividend and much discussion over the course of the last year as to the dividend. So, no I'm -- and I'm sure I'm joined by many others on the phone, I don't understand the Company's decision, it's the Board's decisions, obviously, with regards to capital usage. I don't have another question so you may move on. Thank you.

Albert Chen -- Chief Financial Officer, Director

Thank you.


Our next question is from Mike Schmitz at Jayhawk. Please go ahead.

Michael Schmitz -- Jayhawk Capital Management -- Analyst

Good morning, Albert. And as the previous caller mentioned, I'm going to ask about the dividend policy. Over the past year, you've been very insistent that yes we have a dividend policy and it's to be stable and consistent even though as we pointed out several times, no one knew what that meant. So it actually wasn't stable and consistent and it appears that there is no dividend announcement here either.

You -- I believe seem to indicate that maybe because this non-binding proposal or offer was made, can you confirm whether or not that had an impact on deciding not to do a dividend right now and if so why that should have any impact on it? Or could you clarify that when you said stable and consistent, you meant that there would be no dividend policy at the Company?

Albert Chen -- Chief Financial Officer, Director

Thank you, Mike. First off, I mean, let me say -- let me say this. For not recommending dividend for the current year is a difficult decision. And it was very severely debated internally. But you also rightfully pointed out that in the past earnings call; we did mention that we prefer to have a stable and predictable dividend policy, because this is something which we think will be easier for market to understand.

But unfortunately, in light of the circumstances, we decided or the Board decided that we will not recommend dividend for this year. However, as we look at our strategic options available to us, we also examined the capital required, as well as the capital allocations. So we will constantly revisit this topic from time-to-time. And also as for the Cordlife non-binding offer, I mean fair to say that it certainly make my life extremely complicated.

Michael Schmitz -- Jayhawk Capital Management -- Analyst

I guess, at some point you know what it seems like is that you know Sanpower, the person that control the majority stake of this Company and also in control of the Cordlife Company as well, clearly they're orchestrating this offer. You resigned from the Board of Cordlife, maybe at least an appearance at least in part because you were excluded from their decision to make this offer. At what point are the supposedly independent Board Members and even the Board Members of the senior management going to just stand up and say, No, we do what's right for the Company and not just cater to the whims of the majority owner.

Albert Chen -- Chief Financial Officer, Director

Well, I mean, for the decisions made with respect to CO is always being reviewed and examined in the context of the Company, as well as all the shareholders. Even though we have a majority shareholders and -- but like many shareholders, I mean we have to evaluate what's best for the Company and what's best for everyone. So I think this is how we have gone by in the past. And right now, I don't see how we are changing that philosophy. But that being said, I mean, their representative, certainly, is one of the Board members and their opinions will also be heard as well as -- just like the opinions and comments from the shareholders will also be heard.


(Operator Instructions) Next question is from Kent McCarthy at Jayhawk, please go ahead.

Kent McCarthy -- Jayhawk Capital Management -- Analyst

Hey, Albert. Obviously disappointed but not surprised on the dividend. And I think it's pretty clear that the Board the independent -- the so-called independent Board and Tina don't represent and never have the minority shareholders. This offer is a complete joke. It's made by a company that's broke, that owes everybody money, both you and Sanpower and Nanjing. Nanjing is under investigation.

Tina -- we've been a shareholder since say for 15 years or whatever it's been, and we, I think, rang the bell at 20 -- in 2009 at $6, when the stock was brought public. The stock right now is as cheap as it's ever been in relationship to cash. There is more cash on the books than the price and that does not count this mysterious Shandong receivable of $34 million nor the value of Shandong.

So in December, Tina and all the Golden Med Boards were sanctioned by Hong Kong Stock Exchange, Kam, Tina, Cordlife, Sanpower, Yuan and the so-called Independent Board members have been involved in all of these transactions, meaning they agreed your stock options, convertible bond that destroyed value for minority shareholders. And now you've got a Special Committee that got paid over $1 million to basically do nothing for two years, except suppress the stock price with another so-called non-binding offer. It was only rejected.

When the new plan came were Golden Meditech and Kam, with Tina's help received 11.70 a share. There was no investment bankers hired. There was no rejection of the bid. There was no communication for over two years. These guys were not independent; convertible bond, the diluted stock options, approving Sanpower's purchase of Golden Med stake at 11.70 to the exclusion of minority shareholders, failure to stop the self-dealing by Kam and Sanpower, approving projects where Kam and Yuan get side payment, like management contracts for the buildings of different plants.

We and every other shareholder, has asked for 10 years, for a share repurchase and a special dividend. The stock would be at 12, 15, 20, if you would have done that. And so this is another -- hopefully you're not involved, Albert. But this is clearly, just another insider deal with Tina, who we've never met. She's never on the call. So I think we all know what's going on here, and then Tina's comments which are almost hilarious, which say we're reviewing the capital outlay.

The Company that's making this proposal is owned by Sanpower. For sure Kam still has its fingers in it and Tina is involved in all of this. Tina and Kam in March had to resign from the Golden Med Board. Oh, and by the way, the stock has gone up 30%, probably an SFC investigation. What do we know publicly? This all relates around the lack of disclosure of a transaction between Golden Med i.e. Mr. Kam; Tina who's on the Board; and Sanpower with respect to a company called Funtalk. It wasn't disclosed also, and bad news came out, Kam was able to increase his position at extremely low prices and sell at much higher. Tina has been there all along.

Now, there is a $34 million -- there was a purchase of Shandong. Again, same cast of characters; Sanpower owns a 76%. We put down $34 million seven years ago as an option. Last year in the 20-F, it said we've moved this to receivable to get it out, the receivable, shuck (ph) . Sanpower can't pay anybody. And now they're making an offer of a failed company, that's absolutely tiny, that's been losing money.

And to add insult to injury, the stock around the time of this offer has moved up 60% and paid for research who's tried to make it into a good investment, you know recommending it. In the last year you said you'd look for new investors. We have no investors on this phone call -- no new investor. So it has been 10 years of stock suppression and whatever else. And so we're asking you to have Tina resign immediately, to reject this offer, and to get -- for future offers get independent Board members, not Board members who determine compensation or on the audit and have made lots of money. And their job is to (inaudible).

And you know, Albert, there's many people that are willing to bid $10 for this asset. They need to be able to talk to somebody, go see and do due diligence and whatever else. It's just an insider deal. We have asked you and management and over the years, the Tina's management -- Tina decides what goes to the Board. We asked you to project what the GAAP earnings this year. You've got a company with really $900 million cash, probably. So my question is, when are you going to disclose and when are we going to get our money back from Shandong, and when are we going to get cash out of Shandong, our 24% asset, which according to Sanpower's publicly filed statements and Nanjing is making a lot of money and generating a lot of cash.

This again, is very similar to the Golden Med Funtalk situation, where we had this asset on the books since it was public, nothing. I wouldn't say, no cash payments, OK, there was cash payments. The cash payment we've had in is in 2015. So, will we receive the same platitudes we have; well it's strategic that we're receiving it. Why was it in the 20-F as being receivable and when will we get cash out of this asset, Shandong? What's being done to protect the minority shareholders and Sanpower who is involved in all this other stuff, will ultimately end up probably with that asset.

Thanks Albert, I sure hope you're not involved in this.

Albert Chen -- Chief Financial Officer, Director

Well, again, there is a lot of matters being mentioned. But I think to clear the air, Tina has been the CEO and Chairing the Company's and steering company for a long time. She has her prior Directorships as the non-executive Director at the Golden Meditech level because we used to be subsidiaries of Golden Meditech and she acting as the Non-Executive Director for one of these subsidiaries is totally understandable.

Matter for her to resign I think is inappropriate at this stage. I fail to see why this is -- will lead to her resignations, but I acknowledge that Golden Meditech has made public announcement regarding the sanctions and the Board has -- their Board has been criticized. But as you pointed out, that was a transaction which doesn't even involve our Company. As for the Shandong operations, Shandong is operationally, performing well. I think this is a fair statement, based on their public disclosure. But the ability to or whether or not Shandong decided to distribute all their earnings, it is a thing that's a little bit out of our control, I mean, but it is certainly something that we can voice out as something -- obviously something that we can push for.

But as you are aware that we don't have a Board representative at the Shandong cord blood bank level, but we can try to make an attempt to convince them to dividend out some of their earnings. But that will, once again, be subject to their own capital plan as well as their business expansion plan.


Our next question is from Jeff Oliver (ph) at Actis Funds. Please go ahead.

Jeff Oliver -- Actis Funds -- Analyst

Yes, thank you for taking my questions. With respect to the operations of your business, I wanted to ask you about your increase in processing fees in recent quarters. Can you provide some color on how this increase flows to and impact your bottom line profit? This would be helpful to understand. Thank you.

Albert Chen -- Chief Financial Officer, Director

Thank you for the questions. With respect to the recent revision in the processing fee, as many of you are aware that we recently increased our processing fees from RMB6,800 per client to RMB9,800 per client, since April 1st, 2019. But, fair to say that the accounting impact is actually not universal across Beijing, Guangdong and Zhejiang. We're using Beijing market as an example, because as probably that's best -- the easiest example to understand.

The processing fee increased from RMB6,800 to RMB9,800 for -- in Beijing. Whether or not the clients choose to pay their storage fee annually or choose to pay their storage fee in one lump sum, the have to pay the RMB9,800 processing fee per client. So this mean that we are actually getting RMB3,000 more from every new client who sign up with us. But as you know, Beijing only account for a fraction of our new subscriber numbers. Things get little bit complicated when you try to understand the other markets.

Now for example, before the price adjustment, if you are living in Guangdong and Zhejiang and you want to pay 18 years of storage fee in one lump sum payment. You will pay RMB17,640 plus insurance. And out of that RMB17,640, RMB6,800 will be recognized as processing revenue once the sample is collected, tested and proved viable for storage. Now, after the -- after April 1st, 2019 or after we adjust the processing fees, if you are living in Guangdong and Zhejiang and you elect to pay 18 years of storage fee in one lump sum your total payable is still RMB17,640 plus insurance. In other words, we are not asking Guangdong or Zhejiang new subscribe who elect lump sum payment option for more money.

And In fact once the -- for the client who elected the lump sum payment options, once the cord blood is collected, tested and stored, we recognize RMB9,800 as processing revenue. And then we act -- we're actually giving them a bigger discount in the annual storage fees. So this is the difference in terms of payment options for Beijing versus Guangdong or Zhejiang.

Now, let's not forget, we do different types of promotions from time to time. Now in light of the weakness in the PRC economies as well as the consumer market, for example, if you are living in Guangdong and if you elect to pay your storage fee annually. Right now we are actually waiving your first year storage fee. So we're giving you a discount of RMB860 plus insurance. So and then we do the -- we do this type of promotion events from time to time, and we also use this as a way to adjust or match our services with the market demand.

So I think to sum up, because we have various payment options and different promotional activities, the increase in processing fee can sometime come in the expense of an adjustment in the annual storage fees. So in short, I think the accounting impact is not simply like one-plus-one-equals-two. I hope this answer your question.


Our next question from David Whitehall (ph) at Waterfall (ph) Asset Management. Please go ahead.

David Whitehall -- Waterfall Asset Management -- Analyst

Thank you for taking my call. My question is, it relates to the Special Committee. Are they going to ask their investment advisors and hopefully they're going to be employing a major New York investment bank to advise them? Are they going to solicit competing offers? I think that's very important to get to the bottom of whether what we're arguing in terms of value is truly correct.

Albert Chen -- Chief Financial Officer, Director

As we've stated in our prior release, this Special Committee is now formed and it is very likely and I think they do intend to solicit the appropriate financial advisor to advise them on this particular non-binding offer and also to review and evaluate this non-binding offer. I do believe that the committee will take the appropriate course of actions with the recommendation from the council, as well as their financial advisor as to how they should evaluate this non-binding offer and whether -- and what kind of recommendations they should make. So, I think we should let the Special Committee perform their duties and responsibilities based on what they see fit.


Our next question is from Jeffrey Morrison, Individual Investor. Please go ahead.

Jeffrey Morrison -- Individual Investor

Thank you for taking my call. Just to kind of reiterate what everyone else is saying. You know I hope the Special Committee will announce to us who their US based legal and/or financial and payment advisors are, so we can understand who those people are. Don't know if they're going to release those names. And you know two, for a Company that generates $120 million in operating cash flow a year and has $750 million on the balance sheet. You know I find it laughable that you guys are vigorously debating how to allocate capital. You don't allocate capital. You hoard it and I don't know what you're going to do with it. But you're consistently not looking out for the shareholders. And in particular there's one reason, Tina Zheng should resign, is look at the stock price. I don't care what everything else is going on, look at the stock price. She is not capable of leading this Company and obviously not wanting to speak with us as well. But would appreciate if you could provide some guidance that we'll understand who are the advisors that will be working with the Special Committee.

Albert Chen -- Chief Financial Officer, Director

I believe the Special Committee is -- based on prior practice, the Special Committee will do a -- will solicit their financial advisors. I mean they, as well as their legal counsels, so professional parties will normally submit their proposal to the Special Committee. Special Committee will evaluate and identify the appropriate advisor as well as the legal advisor based on prior experience.

I'm not saying that this will happen again, but this may. I mean at least based on prior experience is that once the engagement of professional parties are confirmed, they tend to put out a press release stating who is being engaged. This certainly happened in the past. I hope that if they complete the solicitation process, they will put out a press release again and that -- in that way, the market will know who is advising the Special Committee and who is doing what.


Thank you. That's all the time we have on today's call. I would turn the call back over to management for any closing remarks.

Kathy Bian -- Vice President of Corporate Finance

Thank you, Ray. That's all the time we have. So now, we come to the end of the Q/A, and this concludes our earnings conference call for the fourth quarter and full year of fiscal 2019. Thank you all for your participation. Have a great day. Ray, you may now disconnect. Thank you.

Duration: 49 minutes

Call participants:

Kathy Bian -- Vice President of Corporate Finance

Albert Chen -- Chief Financial Officer, Director

Danny David -- Baker Botts -- Analyst

Jeff Neal -- Merrill Lynch -- Analyst

Michael Schmitz -- Jayhawk Capital Management -- Analyst

Kent McCarthy -- Jayhawk Capital Management -- Analyst

Jeff Oliver -- Actis Funds -- Analyst

David Whitehall -- Waterfall Asset Management -- Analyst

Jeffrey Morrison -- Individual Investor

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