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Global Cord Blood Corporation (CO -3.85%)
Q1 2021 Earnings Call
Aug 25, 2020, 8:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Welcome everyone to Global Cord Blood Corporation's Earnings Conference Call for the Fiscal 2021 First Quarter. All participants' 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. Cathy Bai, VP of Corporate Finance to begin the presentation. Ms. Cathy, please.
Cathy Bai -- Vice President, Corporate Finance
Thank you, Sheen. Good morning, everyone. Welcome to our fiscal 2021 first quarter 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 corporate 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 fiscal 2021 first quarter financials given by our CFO, Mr. Albert Chen. Our management will be available to answer questions during the Q&A session. 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.
ZHENG Ting, Tina -- Chairperson, Chief Executive Officer, Director, and Chief Executive Officer of Beijing Division
Good morning, ladies and gentlemen. Welcome to our fiscal 2021 first quarter earnings conference call. During the first quarter of fiscal 2021, we continued to face challenges brought on by the COVID-19 pandemic and downward pressure on the economy. As the management team adjusted our sales and marketing taxes, the Group managed to obtain 17,233 new subscribers this quarter, down by 17.2% year-over-year and 6.8% quarter-over-quarter. By the end of June 2020, our accumulated subscriber base reached 849,933.
During the quarter, the ongoing pandemic continued to affect our operations and business environment. At hospitals, which are one of our most important channels, our front line sales workers who were able to return to work continued to face resistance when trying to access potential clients. Meanwhile, consumer sentiments remained sluggish as measures taken to drive economic recovery were undermined by the recurrence of confirmed COVID-19 cases. In addition, some households altered their consumption behavior as income was diminished. These situations may potentially hinder our client accessing rate and conversion rate in the near future. Despite this, compared to the previous quarter when the COVID-19 pandemic first became part of people's daily lives, measures to fight against this virus have evolved. As consumers adapted to the new normal and seemed more willing to participate on online marketing activities like our pre-natal classes, we have gradually developed a response mechanism that enables us to cope with the long-term competencies.
Taking all these into consideration and given that the epidemic is largely under control in Beijing, Guangdong province, and Zhejiang province, the management team has decided to adjust the fiscal 2021 new subscriber target from the range of 60,000 to 65,000 upwards to the range of 62,000 [Phonetic] to 67,000.
Looking into the future, the current one license per region and no more than seven licenses policy in the cord blood banking industry in China will expire by the end of 2020. However, there is no additional guidance on the new policy that permits provincial healthcare commission to issue cord blood banking licenses in the free-trade zones at this time. The management team will continue to closely communicate with various departments within the National Health Commission, conduct scenario analysis to the fullest extent possible, and reserve resources to enable flexibility in our long-term strategic planning. Meanwhile, the management team will continue to look into business development opportunities in the healthcare industry that possess substantial synergies with our existing services or have the potential to expand our geographical coverage or revenue sources, thereby safeguarding the Group's long-term sustainable growth.
This concludes our remarks of our fiscal 2021 first quarter results. Thank you for your ongoing support. I'll now turn the call over to our CFO, Mr. Albert Chen, to review our first quarter financial performance in greater detail.
CHEN Bing Chuen, Albert -- Chief Financial Officer and Director
Good morning, everyone. In the first quarter, revenues increased by 3% year-over-year to RMB281 million. Top line growth was mainly driven by the increase in storage revenues as our subscriber base grew larger, which offset the decline in new subscribers due to the COVID-19 pandemic. By the end of June 2020, our accumulated subscriber base increased to more than 849,000. And our first quarter storage revenues increased by 13% year-over-year to RMB119 million. Storage revenues accounted for 43% of total revenues, up from 39% in the prior year period.
As mentioned in our CEO remarks, during the first quarter, the COVID-19 pandemic continued to affect our business environment and operations. Facing such challenges, we managed to recruit 17,233 new subscribers in the first quarter, representing a decrease of 17% year-over-year and 7% quarter-over-quarter. Revenues generated from processing fees and other services decreased by a lesser degree by less than 4% year-over-year to RMB162 million as the full period contribution of the revised processing fee pricing partially offset the decrease of new subscribers.
Gross profit in the first quarter increased by 4% year-over-year to RMB238 million. Gross margin remained consistent at 85%, similar to the past few quarters. As we continue to maintain tight control over operating costs in such challenging times, operating income increased by 19% year-over-year to RMB134 million. Operating margin expanded to nearly 48% from 41% in the prior year period. Depreciation and amortization expenses were RMB12 million, similar to the first quarter of last year. Non-GAAP operating income increased by 17% year-over-year to RMB146 million.
In the reporting quarter, we continued to cut back on sales and marketing expenses and only maintained essential promotional activities. As a result, sales and marketing expenses decreased by 9% year-over-year and 9% quarter-over-quarter to RMB55 million. Sales and marketing expenses as a percentage of revenues were down to less than 20% from 22% of last year period. Altogether, these cutback had brought us to a level that was comparable to fiscal 2014.
We also reduced staff costs, fees, overhead and provisions. Therefore, general and administrative expenses decreased by 11% year-over-year to less than RMB45 million. General and administrative expenses as a percentage of revenues decreased to 16% from 18% in the prior year period. In the reporting quarter, we recorded an increase in fair value of equity securities or mark-to-market gains of RMB18 million, up from RMB10 million in the prior year period.
As a result of the increase in operating income and the increase in fair value of equity securities, income before income tax for the first quarter increased by 24% year-over-year to RMB160 million. Income tax expense for the quarter was RMB26 million. Net income attributable to the Company's shareholders increased by 22% year-over-year to RMB133 million. Net margin improved to 47%. Basic and diluted earnings per ordinary share increased by 23% year-over-year to RMB1.09.
These are just the highlights of our first quarter results. We are now happy to take on any questions that you may have.
Questions and Answers:
Operator
Thank you very much. We will now move on to the Q&A session. [Operator Instructions] I would like to call upon Mr. Jeff Oliver from Star Funds [Phonetic] to ask your question. The floor is yours. Mr. Jeff Oliver?
Jeff Oliver -- Star Funds -- Analyst
Yes, thank you for taking my question. Could you comment on your new subscriber breakdown and payment option breakdown for the quarter? Thank you.
CHEN Bing Chuen, Albert -- Chief Financial Officer and Director
Thank you for the questions. For the first quarter of fiscal 2021, in terms of new subscriber breakdown, approximately 67% of new subscribers were from our Guangdong province, 20% from our Zhejiang market, and the remaining 17% were from our Beijing market. In terms of our payment option breakdown, approximately 42% of our new subscribers elected the bullet payment option or more commonly known as the Option Two payment scheme. Approximately 29% choose installment and the remaining 29% choose the normal payment option.
So, one thing worth highlighting is that, as you are aware that this is a still challenging time. We have expanded our installment programs in order to maintain our market presence as well as to meet our target as well. But nonetheless, still a significant amount of our new subscribers elected through the payment option, which has generated a sizable amount of our cash inflows, but investors need to be aware that the installment payment option is now 29% as compared to a year ago, which is approximately 10%.
Jeff Oliver -- Star Funds -- Analyst
Thank you.
Operator
Thank you for your question. [Operator Instructions] At this point, there appears to be no further questions. I would now like to turn the call back to Ms. Cathy Bai. Ms. Cathy, the floor is yours.
Cathy Bai -- Vice President, Corporate Finance
Thank you, Sheen. This concludes our earnings conference call for the fiscal 2021 first quarter. Thank you all very much for your participation and ongoing support. Have a great day. Operator, you may now disconnect.
Operator
[Operator Closing Remarks]
Duration: 19 minutes
Call participants:
Cathy Bai -- Vice President, Corporate Finance
ZHENG Ting, Tina -- Chairperson, Chief Executive Officer, Director, and Chief Executive Officer of Beijing Division
CHEN Bing Chuen, Albert -- Chief Financial Officer and Director
Jeff Oliver -- Star Funds -- Analyst
