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SHANGHAI, March 28, 2023 /PRNewswire/ -- Noah Holdings Limited ("Noah" or the "Company") (NYSE: NOAH and HKEX: 6686), a leading and pioneer wealth management service provider in China offering comprehensive one-stop advisory services on global investment and asset allocation primarily for high net worth investors, today announced its unaudited financial results for the fourth quarter of 2022 and the audited financial results for the full year ended December 31, 2022. FOURTH QUARTER 2022 FINANCIAL HIGHLIGHTS Net revenues for the fourth quarter of 2022 were RMB882.1 million (US$127.9 million), a 30.0% decrease from the corresponding period in 2021, mainly due to 1) decreases in one-time commissions, as less insurance products distributed compared with last year and 2) less performance based income generated from public securities products and offshore private equity products amid market volatilities. Net revenues increased by 28.9% compared with the third quarter of 2022, mainly due to an increase in distribution of insurance products and performance-based income. (RMB millions, except percentages) Q4 2021 Q4 2022 YoY Change Wealth management 969.3 646.9 (33.3 %) Asset management 273.8 223.2 (18.5 %) Other businesses 17.0 12.0 (29.2 %) Total net revenues 1,260.1 882.1 (30.0 %) Income from operations for the fourth quarter of 2022 was RMB219.7 million (US$31.9 million), a 66.1% increase from the corresponding period in 2021, as we recorded RMB85.6 million credit loss for our other business in the fourth quarter of 2021; income from operations decreased by 5.2% compared with the third quarter of 2022, primarily due to an increase in selling expenses and provision for credit losses. (RMB millions, except percentages) Q4 2021 Q4 2022 YoY Change Wealth management 183.6 179.1 (2.5 %) Asset management 80.8 93.5 15.8 % Other businesses (132.1) (52.9) (60.0 %) Total income from operations 132.3 219.7 66.1 % Net income attributable to Noah shareholders for the fourth quarter of 2022 was RMB139.9 million (US$20.3 million), a 50.3% decrease from the corresponding period in 2021, due to a 30.0% decrease in net revenues and a 23.3% decrease from the third quarter of 2022, due to a provision of contingent litigation expenses related to the first-instance ruling disclosed in December 12, 2022. Non-GAAP[1] net income attributable to Noah shareholders for the fourth quarter of 2022 was RMB149.2 million (US$21.6 million), a 48.5% decrease from the corresponding period in 2021, and a 21.9% decrease from the third quarter of 2022. FULL YEAR 2022 FINANCIAL HIGHLIGHTS Net revenues in the full year 2022 was RMB3,100.4 million (US$449.5 million), a 27.8% decrease from the full year 2021, mainly due to decreases in one-time commissions and performance-based income. (RMB millions, except percentages) FY 2021 FY 2022 YoY Change Wealth management 3,194.9 2,200.0 (31.1 %) Asset management 1,041.5 834.5 (19.9 %) Other businesses 56.7 65.9 16.2 % Total net revenues 4,293.1 3,100.4 (27.8 %) Income from operations in the full year 2022 was RMB1,088.4 million (US$157.8 million), a 9.2% decrease from the full year 2021. (RMB millions, except percentages) FY 2021 FY 2022 YoY Change Wealth management 921.5 741.4 (19.5 %) Asset management 485.2 447.8 (7.7 %) Other businesses (207.8) (100.8) (51.5 %) Total income from operations 1,198.9 1,088.4 (9.2 %) Net income attributable to Noah shareholders in the full year 2022 was RMB976.6 million (US$141.6 million), a 25.7% decrease compared with full year 2021, due to decreases in net revenue and income from equity in affiliates amid market volatilities. Non-GAAP net income attributable to Noah shareholders in the full year 2022 was RMB1,008.6 million (US$146.2 million), a 26.5% decrease from the full year 2021. FOURTH QUARTER AND FULL YEAR 2022 OPERATIONAL UPDATES Wealth Management Business We offer investment products and provide value-added services to high net worth investors in China and overseas for our wealth management business. Noah primarily distributes private equity, private secondary, mutual funds and other products denominated in RMB and other currencies. Total number of registered clients as of December 31, 2022 was 437,288, a 6.1% increase from December 31, 2021 and a 0.9% increase compared with September 30, 2022. Total number of active clients[2] who transacted with us during the fourth quarter of 2022 was 12,904, a 26.1% decrease from the fourth quarter of 2021, and a 43.0% decrease from the third quarter of 2022. Total number of active clients who transacted with us during the full year 2022 was 35,877, a 16.1% decrease from the full year 2021. Aggregate value of investment products distributed during the fourth quarter of 2022 was RMB18.0 billion (US$2.6 billion), a 14.5% decrease from the corresponding period in 2021, mainly due to a decrease in the distribution of private secondary products due to the volatile secondary market. Product type Three months ended December 31, 2021 2022 (RMB in billions, except percentages) Mutual fund products 10.2 48.5 % 12.2 67.7 % Private secondary products 6.7 31.6 % 3.4 18.7 % Private equity products 3.0 14.5 % 1.4 8.0 % Other products[3] 1.1 5.4 % 1.0 5.6 % All products 21.0 100.0 % 18.0 100.0 % Aggregate value of investment products distributed during the full year 2022 was RMB70.3 billion (US$10.2 billion), a 27.7% decrease from the full year 2021, mainly due to a decrease in the distribution of private secondary products. Product type Twelve months ended December 31, 2021 2022 (RMB in billions, except percentages) Mutual fund products 37.1 38.2 % 43.1 61.4 % Private secondary products 37.8 38.9 % 13.1 18.6 % Private equity products 18.1 18.6 % 11.1 15.7 % Other products 4.2 4.3 % 3.0 4.3 % All products 97.2 100.0 % 70.3 100.0 % Coverage network in mainland China included 75 cities as of December 31, 2022, compared with 76 cities as of September 30, 2022, and 84 cities as of December 31, 2021. Number of relationship managers was 1,276 as of December 31, 2022, a 1.5% increase from September 30, 2022, and a 3.0% decrease from December 31, 2021. [1] Noah's Non-GAAP financial measures are its corresponding GAAP financial measures excluding the effects of all forms of share-based compensation, non-cash settlement expense and net of relevant tax impact, if any. See "Reconciliation of GAAP to Non-GAAP Results" at the end of this press release. [2] "Active clients" for a given period refers to registered investors who purchase investment products distributed or receive services provided by us during that given period. [3] "Other products" refers to other investment products, which includes insurance products, multi-strategies products and others. Asset Management Business Our asset management business is conducted through Gopher Asset Management Co., Ltd. ("Gopher Asset Management"), a leading multi-asset manager in China with overseas offices in Hong Kong and the United States. Gopher Asset Management develops and manages assets ranging from private equity, real estate, public securities to multi-strategy investments denominated in RMB and other currencies. Total assets under management as of December 31, 2022 remained relatively stable in the amount of RMB157.1 billion (US$22.8 billion), compared with RMB156.2 billion as of September 30, 2022 and RMB156.0 billion as of December 31, 2021. Investment type As ofSeptember 30,2022 Growth Distribution/ Redemption As ofDecember 31,2022 (RMB billions, except percentages) Private equity 132.8 85.0 % 1.4 1.1 133.1 84.7 % Public securities[4] 10.2 6.5 % 1.3 0.5 11.0 7.0 % Real estate 6.7 4.3 % 0.2 0.1 6.8 4.3 % Multi-strategies 5.1 3.3 % - 0.3 4.8 3.1 % Others 1.4 0.9 % - - 1.4 0.9 % All Investments 156.2 100.0 % 2.9 2.0 157.1 100.0 % Investment type As ofDecember 31,2021 Growth Distribution/ Redemption As ofDecember 31,2022 (RMB billions, except percentages) Private equity 130.9 83.9 % 11.0 8.8 133.1 84.7 % Public securities 11.2 7.2 % 2.1 2.3 11.0 7.0 % Real estate 6.6 4.3 % 1.4 1.2 6.8 4.3 % Multi-strategies 5.9 3.8 % - 1.1 4.8 3.1 % Others 1.4 0.8 % - - 1.4 0.9 % All Investments 156.0 100.0 % 14.5 13.4 157.1 100.0 % Other Businesses Our other businesses mainly aim to provide more comprehensive services and investment products to our clients. Ms. Jingbo Wang, co-founder and CEO of Noah, said, "I'm happy to report that our voluntary conversion to dual-primary listing in Hong Kong has been successfully completed, fully mitigating the ADR delisting risk. In the fourth quarter of 2022, we continued to see challenges in the domestic economy brought by the Covid-19 pandemic. Nevertheless, net revenues grew 28.9% quarter-on-quarter, supported by a 169.4% increase in one-time commissions and 191.1% increase in performance based income quarter-on-quarter. Despite a challenging capital markets environment, non-GAAP net income attributable to Noah shareholders for the full year was RMB1.0 billion, in-line with our annual guidance. Furthermore, The Board has approved an annual dividend of approximately RMB176.5 million (US$25.6 million) in total, which is equivalent to around 17.5% of our unaudited annual non-GAAP net income attributable to Noah shareholders. The annual dividend payment plan will be reviewed during and announced after the Annual General Meeting, which is expected to be held in June 2023." [4] The asset distribution/redemption of public securities also includes market appreciation or depreciation. FOURTH QUARTER 2022 FINANCIAL RESULTS Net Revenues Net revenues for the fourth quarter of 2022 were RMB882.1 million (US$127.9 million), a 30.0% decrease from the corresponding period in 2021, primarily driven by decreased one-time commissions and performance-based income. Wealth Management Business Net revenues from one-time commissions for the fourth quarter of 2022 were RMB266.1 million (US$38.6 million), a 43.6% decrease from the corresponding period in 2021, due to a decrease in insurance products distributed in fourth quarter of 2022. Net revenues from recurring service fees for the fourth quarter of 2022 were RMB318.6 million (US$46.2 million), a 23.6% decrease from the corresponding period in 2021. The decrease was primarily due to the service fees recognized upon liquidation of certain credit products with higher fee rates in the fourth quarter of 2021. Net revenues from performance-based income for the fourth quarter of 2022 were RMB14.1 million (US$2.0 million), compared with RMB47.7 million from the corresponding period of 2021, primarily due to a decrease in performance-based income from public securities products and offshore private equity fund products. Net revenues from other service fees for the fourth quarter of 2022 were RMB48.1 million (US$7.0 million), a 47.4% increase from the corresponding period in 2021, primarily due to more value-added services Noah offers to its high net worth clients. Asset Management Business Net revenues from recurring service fees for the fourth quarter of 2022 were RMB153.6 million (US$22.3 million), an 8.9% increase from the corresponding period in 2021, due to an increase in the amount of private equity investments managed by Gopher. Net revenues from performance-based income for the fourth quarter of 2022 were RMB66.3 million (US$9.6 million), a 47.1% decrease from the corresponding period in 2021, primarily due to a decrease in performance-based income from offshore private equity investments managed by Gopher. Other Businesses Net revenues for the fourth quarter of 2022 were RMB12.0 million (US$1.7 million), compared with RMB17.0 million in the corresponding period in 2021. Operating Costs and Expenses Operating costs and expenses for the fourth quarter of 2022 were RMB662.3 million (US$96.0 million), a 41.3% decrease from the corresponding period in 2021. Operating costs and expenses primarily consisted of compensation and benefits of RMB383.1 million (US$55.6 million), selling expenses of RMB142.8 million (US$20.7 million), general and administrative expenses of RMB84.0 million (US$12.2 million), provision of credit losses of RMB19.8 million (US$2.9 million) and other operating expenses of RMB38.3 million (US$5.5 million). Operating costs and expenses for the wealth management business for the fourth quarter of 2022 were RMB467.8 million (US$67.8 million), a 40.5% decrease from the corresponding period in 2021, primarily due to a decrease in relationship manager compensation, which is in line with decreased transaction value and a decrease in general and administrative expenses due to our cost control measures implemented. Operating costs and expenses for the asset management business for the fourth quarter of 2022 were RMB129.6 million (US$18.8 million), a 32.9% decrease from the corresponding period in 2021, primarily due to less performance fee compensation and less provision for credit losses. Operating costs and expenses for other businesses for the fourth quarter of 2022 were RMB64.9 million (US$9.4 million), a 56.5% decrease from the corresponding period in 2021, due to less credit losses recorded. Operating Margin Operating margin for the fourth quarter of 2022 was 24.9%, compared with 10.5% for the corresponding period in 2021. Operating margin for the wealth management business for the fourth quarter of 2022 was 27.7%, compared with 18.9% for the corresponding period in 2021, due to less general and administrative expenses incurred due to our cost control measures implemented. Operating margin for the asset management business for the fourth quarter of 2022 was 41.9%, compared with 29.5% for the corresponding period in 2021, due to less performance fee compensation recorded in 2022. Loss from other businesses for the fourth quarter of 2022 was RMB52.9 million (US$7.7 million), compared with RMB132.1 million in the corresponding period of 2021, primarily due to decreased provision for credit losses. Investment Income Investment income for the fourth quarter of 2022 was RMB62.2 million (US$9.0 million), compared with investment income of RMB3.5 million for the corresponding period in 2021, primarily due to unrealized gains of fair value changes from our certain equity investments. Income Tax Expenses Income tax expenses for the fourth quarter of 2022 were RMB60.5 million (US$8.8 million), a 71.3% increase from the corresponding period in 2021, primarily due to higher taxable income as well as dividend tax accrued in the fourth quarter of 2022. Income from Equity in Affiliates Income from equity in affiliates for the fourth quarter of 2022 was RMB12.3 million (US$1.8 million), compared with RMB160.5 million for the corresponding period in 2021, primarily due to the decrease in net income of the funds of funds that we manage and invest in as the general partner or fund manager. Net Income Net Income Net income for the fourth quarter of 2022 was RMB140.5 million (US$20.4 million), a 48.7% decrease from the corresponding period in 2021. Net margin for the fourth quarter of 2022 was 15.9%, down from 21.7% for the corresponding period in 2021, due to less income from equity affiliates recorded compared with corresponding period in 2021. Net income attributable to Noah shareholders for the fourth quarter of 2022 was RMB139.9 million (US$20.3 million), a 50.3% decrease from the corresponding period in 2021. Net margin attributable to Noah shareholders for the fourth quarter of 2022 was 15.9%, down from 22.3% for the corresponding period in 2021. Net income attributable to Noah shareholders per basic and diluted ADS for the fourth quarter of 2022 was RMB2.01 (US$0.29) and RMB2.01 (US$0.29), respectively, down from RMB4.18 and RMB4.16 respectively, for the corresponding period in 2021. Non-GAAP Net Income Attributable to Noah Shareholders Non-GAAP net income attributable to Noah shareholders for the fourth quarter of 2022 was RMB149.2 million (US$21.6 million), a 48.5% decrease from the corresponding period in 2021. Non-GAAP net margin attributable to Noah shareholders for the fourth quarter of 2022 was 16.9%, down from 23.0% for the corresponding period in 2021 Non-GAAP net income attributable to Noah shareholders per diluted ADS for the fourth quarter of 2022 was RMB2.14 (US$0.31), down from RMB4.28 for the corresponding period in 2021. FULL YEAR 2022 FINANCIAL RESULTS Net Revenues Net revenues for the full year 2022 were RMB3,100.4 million (US$449.5 million), a 27.8% decrease from the full year 2021, primarily due to a decrease in one-time commissions and performance-based income. Wealth Management Business Net revenues from one-time commissions for 2022 were RMB628.6 million (US$91.1 million), a 46.5% decrease from 2021, primarily due to less insurance products distributed. Net revenues from recurring service fees for 2022 were RMB1,226.5 million (US$177.8 million), a 16.1% decrease from 2021. The decrease was primarily due to the service fees recognized upon liquidation of certain credit products with higher fee rates for the full year 2021. Net revenues from performance-based income for 2022 were RMB201.5 million (US$29.2 million), a 56.8% decrease from 2021, primarily due to a decrease in performance-based income from public securities products and private equity fund products. Net revenues from other service fees for 2022 were RMB143.4 million (US$20.8 million), a 56.1% increase from 2021, primarily due to more value-added services Noah offers to its high net worth clients. Asset Management Business Net revenues from recurring service fees for 2022 were RMB678.3 million (US$98.4 million), a 6.6% increase from 2021. Net revenues from performance-based income for 2022 were RMB106.5 million (US$15.4 million), a 66.0% decrease from 2021, primarily due to a decrease in performance-based income from private equity fund products. Other Businesses Net revenues for 2022 were RMB65.9 million (US$9.6 million), a 16.2% increase from 2021. Operating costs and expenses Operating costs and expenses for 2022 were RMB2,011.9 million (US$291.7 million), a 35.0% decrease from the full year 2021. Operating costs and expenses for the full year 2022 primarily consisted of compensation and benefits of RMB1,441.9 million (US$209.1 million), selling expenses of RMB349.0 million (US$50.6 million), general and administrative expenses of RMB235.3 million (US$34.1 million), reversal of credit losses of RMB0.4 million (US$0.1 million) and other operating expenses of RMB115.7 million (US$16.8 million). Operating costs and expenses for the wealth management business for 2022 were RMB1,458.5 million (US$211.5 million), a 35.8% decrease from 2021, primarily due to a decrease in compensation and benefits, as well as general and administrative expenses. Operating costs and expenses for the asset management business for 2022 were RMB386.6 million (US$56.1 million), a 30.5% decrease from 2021, primarily due to a decrease in compensation and benefits, as well as general and administrative expenses. Operating costs and expenses for other businesses for 2022 were RMB166.8 million (US$24.2million), a 37.0% decrease from 2021, primarily due to a decrease in provision for credit losses. Operating Margin Operating margin for the full year 2022 was 35.1%, compared to 27.9% for the full year 2021. Operating margin for the wealth management business for 2022 was 33.7%, compared to 28.8% for 2021, mainly due to cost control measures implemented. Operating margin for the asset management business for 2022 was 53.7%, compared to 46.6% for 2021, mainly due to cost control measures implemented. Loss from other businesses for 2022 was RMB100.8 million (US$14.6 million), compared with RMB207.8 million for 2021, due to decreased provision of credit losses. Investment Income Investment income for the full year 2022 was RMB85.6 million (US$12.4 million), a 30.8% increase from the full year 2021, primarily due to unrealized gains of fair value changes from our certain equity investments. Income Tax Expenses Income tax expenses for the full year 2022 were RMB267.1 million (US$38.7 million), a 9.1% decrease from the full year 2021, primarily due to less taxable income. Income from Equity in Affiliates Income from equity in affiliates for the full year 2022 was RMB89.1 million (US$12.9 million), compared with RMB302.0 million in the corresponding period in 2021, primarily due to less income recognized from the funds of funds that we manage and invest in as the general partner or fund manager. Net Income Net Income Net income for the full year 2022 was RMB971.6 million (US$140.9 million), a 25.6% decrease from the full year 2021. Net margin for the full year 2022 was 31.3%, up from 30.4% for the corresponding period in 2021. Net income attributable to Noah shareholders for the full year 2022 was RMB976.6 million (US$141.6 million), a 25.7% decrease from the full year 2021. Net margin attributable to Noah shareholders for the full year 2022 was 31.5%, up from 30.6% for the full year 2021. Net income attributable to Noah shareholders per basic and diluted ADS for the full year 2022 was RMB14.29 (US$2.07) and RMB14.28 (US$2.07), respectively, down from RMB19.56 and RMB19.45, respectively, for the corresponding period in 2021. Non-GAAP Net Income Attributable to Noah Shareholders Non-GAAP net income attributable to Noah shareholders for the full year 2022 was RMB1,008.6 million (US$146.2 million), a 26.5% decrease from the full year 2021. Non-GAAP net margin attributable to Noah shareholders for the full year 2022 was 32.5%, up from 32.0% for the full year 2021. Non-GAAP net income attributable to Noah shareholders per diluted ADS for the full year 2022 was RMB14.75 (US$2.14), down from RMB20.32 for the full year 2021. BALANCE SHEET AND CASH FLOW As of December 31, 2022, the Company had RMB4,403.9 million (US$638.5 million) in cash and cash equivalents, compared with RMB3,404.6 million as of December 31, 2021 and RMB4,312.8 million as of September 30, 2022. Net cash inflow from the Company's operating activities during the fourth quarter of 2022 was RMB33.0 million (US$4.8 million), compared to RMB659.2 million in the corresponding period in 2021, primarily due to the reclassification of trading debt products from cash and cash equivalents to short term investments in the fourth quarter of 2022. Net cash inflow from the Company's operating activities during the full year 2022 was RMB632.9 million (US$91.8 million), compared to RMB1,521.8 million during the full year 2021, the variance was mainly due to a decrease in net income. Net cash inflow from the Company's investing activities during the fourth quarter of 2022 was RMB58.3 million (US$8.5 million), compared to net cash outflow of RMB67.4 million in the corresponding period in 2021. Net cash inflow from the Company's investing activities during the full year 2022 was RMB74.3 million (US$10.8 million), compared to net cash outflow of RMB2,572.1 million during the full year 2021, the cash outflow in 2021 was mainly due to cash payment for the acquisition of our new headquarter. Net cash inflow from the Company's financing activities was RMB8.0 million (US$1.2 million) in the fourth quarter of 2022, compared to net cash inflow of RMB20.9 million in the corresponding period in 2021. Net cash inflow from the Company's financing activities during the full year 2022 was RMB233.8 million (US$33.9 million), compared to net cash outflow of RMB513.1 million during the full year 2021. The cash inflow for 2022 was mainly due to net proceeds from our initial public offering and listing in Hong Kong, and the cash outflow in 2021 was mainly due to the share repurchase program. RECENT DEVELOPMENT Silicon Valley Bank ("SVB") Receivership As disclosed in the Form 6-K furnished with the SEC on March 13, 2023 (the "Press Release"), Noah informed its investors that its exposure to any liquidity concern as a result of the SVB's Receivership (as defined in the Press Release) is immaterial and that it has taken necessary measures to protect against or minimize the potential impact of the SVB's Receivership on the investment funds for which Noah acts as general partner or fund manager. As of the date of this press release, Noah has transferred out all its cash and cash equivalents previously deposited with SVB. In addition, as general partner or fund manager, Noah has also transferred out all funds cash balances from SVB to their designated accounts. As a result, Noah has no remaining exposure to the SVB Receivership. Resignation of Senior Management Member Mr. Jin Chen resigned from his position as the chief executive officer of Noah Digital International, effective on March 15, 2023, due to personal reasons. Mr. Chen will assist the Company in achieving a smooth transition of his job responsibilities. His resignation was not a result of any disagreements with the Company. CONFERENCE CALL Senior management will host a combined English and Chinese language conference call to discuss the Company's fourth quarter unaudited financial results and full year 2022 audited financial results and recent business activities. The conference call will be accessed via Zoom webinar with the following details: Zoom webinar details Conference title Noah Holdings 4Q22 Earnings Conference Call Date/Time Monday, March 27, 2023 at 8:00 p.m., U.S. Eastern Time Tuesday, March 28, 2023 at 8:00 a.m., Hong Kong Time Meeting ID: 910 2002 0524 Meeting Passcode: Noah4Q22 Dial in - New York: +1 929 205 6099 - Hong Kong: +852 3709 4942 - London: +44 207 660 2677 - Singapore: +65 6347 5852 A replay will be available on the same day of the conference call until April 18, 2023 at the Company's investor relations website under the Quarterly Results section at http://ir.noahgroup.com. DISCUSSION ON NON-GAAP MEASURES In addition to disclosing financial results prepared in accordance with U.S. GAAP, the Company's earnings release contains non-GAAP financial measures excluding the effects of all forms of share-based compensation, non-cash settlement expense and net of tax impact, if any. See "Reconciliation of GAAP to Non-GAAP Results" at the end of this press release. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for financial measures prepared in accordance with U.S. GAAP. The financial results reported in accordance with U.S. GAAP and reconciliation of GAAP to non-GAAP results should be carefully evaluated. The non-GAAP financial measures used by the Company may be prepared differently from and, therefore, may not be comparable to similarly titled measures used by other companies. When evaluating the Company's operating performance in the periods presented, management reviewed the foregoing non-GAAP net income attributable to Noah shareholders and per diluted ADS and non-GAAP net margin attributable to Noah shareholders to supplement U.S. GAAP financial data. As such, the Company's management believes that the presentation of the non-GAAP financial measures provides important supplemental information to investors regarding financial and business trends relating to its results of operations in a manner consistent with that used by management. ABOUT NOAH HOLDINGS LIMITED Noah Holdings Limited (NYSE: NOAH and HKEX:6686) is a leading and pioneer wealth management service provider in China offering comprehensive one-stop advisory services on global investment and asset allocation primarily for high net worth investors. In the full year 2022, Noah distributed RMB70.3 billion (US$10.2 billion) of investment products. Through Gopher Asset Management, Noah had assets under management of RMB157.1 billion (US$22.8 billion) as of December 31, 2022. Noah's wealth management business primarily distributes private equity, private secondary, mutual fund and other products denominated in RMB and other currencies. Noah's network covers 75 cities in mainland China, as well as Hong Kong (China), Taiwan (China), New York, Silicon Valley and Singapore. A total of 1,276 relationship managers provide customized financial solutions for clients through this network, and meet their international investment needs. The Company's wealth management business had 437,288 registered clients as of December 31, 2022. Through Gopher Asset Management, Noah manages private equity, public securities, real estate, multi-strategy and other investments denominated in Renminbi and other currencies. The Company also provides other businesses. For more information, please visit Noah at ir.noahgroup.com. FOREIGN CURRENCY TRANSLATION In this announcement, the unaudited financial results for the fourth quarter of 2022 and audited financial results for the full year ended December 31, 2022 are stated in RMB. This announcement contains currency conversions of certain RMB amounts into US$ at specified rates solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to US$ are made at a rate of RMB6.8972 to US$1.00, the effective noon buying rate for December 30, 2022 as set forth in the H.10 statistical release of the Federal Reserve Board. SAFE HARBOR STATEMENT This announcement contains forward-looking statements. These statements 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," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Noah 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 announcements, circulars or other publications made on the website of The Stock Exchange of Hong Kong Limited (the "Hong Kong Stock Exchange"), in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Noah's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. These statements include, but are not limited to, estimates regarding the sufficiency of Noah's cash and cash equivalents and liquidity risk. A number of factors could cause Noah's actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: its goals and strategies; its future business development, financial condition and results of operations; the expected growth of the wealth management and asset management market in China and internationally; its expectations regarding demand for and market acceptance of the products it distributes; investment risks associated with investment products distributed to Noah's investors, including the risk of default by counterparties or loss of value due to market or business conditions or misconduct by counterparties; its expectations regarding keeping and strengthening its relationships with key clients; relevant government policies and regulations relating to its industries; its ability to attract and retain qualified employees; its ability to stay abreast of market trends and technological advances; its plans to invest in research and development to enhance its product choices and service offerings; competition in its industries in China and internationally; general economic and business conditions in China; and its ability to effectively protect its intellectual property rights and not to infringe on the intellectual property rights of others. Further information regarding these and other risks is included in Noah's filings with the U.S. Securities and Exchange Commission and the Hong Kong Stock Exchange. All information provided in this press release and in the attachments is as of the date of this press release, and Noah does not undertake any obligation to update any such information, including forward-looking statements, as a result of new information, future events or otherwise, except as required under the applicable law. -- FINANCIAL AND OPERATIONAL TABLES FOLLOW -- Noah Holdings Limited Condensed Consolidated Balance Sheets As of September 30, 2022 December 31, 2022 December 31, 2022 (Unaudited) (Audited) (Audited) RMB'000 RMB'000 USD'000 Assets Current assets: Cash and cash equivalents 4,312,827 4,403,915 638,508 Restricted cash 10,311 23,203 3,364 Short-term investments 98,770 315,979 45,813 Accounts receivable, net 426,900 498,106 72,219 Loans receivable, net 566,933 465,780 67,532 Amounts due from related parties 424,821 443,424 64,290 Other current assets 184,506 166,739 24,175 Total current assets 6,025,068 6,317,146 915,901 Long-term investments, net 723,902 774,095 112,232 Investment in affiliates 1,516,292 1,491,820 216,293 Property and equipment, net 2,497,558 2,486,317 360,482 Operating lease right-of-use assets, net 189,906 168,192 24,386 Deferred tax assets 333,522 436,441 63,278 Other non-current assets 160,059 124,124 17,996 Total Assets 11,446,307 11,798,135 1,710,568 Liabilities and Equity Current liabilities: Accrued payroll and welfare expenses 543,435 668,953 96,989 Income tax payable 69,214 126,848 18,391 Deferred revenues 81,602 67,967 9,854 Contingent liabilities 483,727 568,018 82,355 Other current liabilities 458,079 473,175 68,604 Total current liabilities 1,636,057 1,904,961 276,193 Operating lease liabilities, non-current 101,110 83,171 12,059 Deferred tax liabilities 231,589 249,768 36,213 Other non-current liabilities 76,330 59,760 8,664 Total Liabilities 2,045,086 2,297,660 333,129 Equity 9,401,221 9,500,475 1,377,439 Total Liabilities and Equity 11,446,307 11,798,135 1,710,568 Noah Holdings Limited Condensed Consolidated Income Statements (unaudited) Three months ended December 31, December 31, December 31, Change 2021 2022 2022 Revenues: RMB'000 RMB'000 USD'000 Revenues from others: One-time commissions 472,566 266,592 38,652 (43.6 %) Recurring service fees 214,835 195,872 28,399 (8.8 %) Performance-based income 42,115 13,998 2,030 (66.8 %) Other service fees 54,296 60,870 8,825 12.1 % Total revenues from others 783,812 537,332 77,906 (31.4 %) Revenues from funds Gopher manages: One-time commissions 9,886 3,915 568 (60.4 %) Recurring service fees 346,747 278,376 40,361 (19.7 %) Performance-based income 131,988 66,819 9,688 (49.4 %) Total revenues from funds Gophermanages 488,621 349,110 50,617 (28.6 %) Total revenues 1,272,433 886,442 128,523 (30.3 %) Less: VAT related surcharges (12,379) (4,372) (634) (64.7 %) Net revenues 1,260,054 882,070 127,889 (30.0 %) Operating costs and expenses: Compensation and benefits Relationship manager compensation (382,160) (146,662) (21,264) (61.6 %) Others (349,004) (236,484) (34,287) (32.2 %) Total compensation andbenefits (731,164) (383,146) (55,551) (47.6 %) Selling expenses (139,906) (142,806) (20,705) 2.1 % General and administrativeexpenses (148,015) (83,952) (12,172) (43.3 %) Provision for credit losses (100,858) (19,836) (2,876) (80.3 %) Other operating expenses (19,644) (38,257) (5,547) 94.8 % Government grants 11,821 5,665 821 (52.1 %) Total operating costs and expenses (1,127,766) (662,332) (96,030) (41.3 %) Income from operations 132,288 219,738 31,859 66.1 % Other income (expense): Interest income 14,571 14,251 2,066 (2.2 %) Investment income 3,469 62,240 9,024 1,694.2 % Settlement reversal 719 - - N.A. Contingent litigation expenses - (99,000) (14,354) N.A. Other expense (2,313) (8,507) (1,233) 267.8 % Total other income (expense) 16,446 (31,016) (4,497) N.A. Income before taxes andincome from equity in affiliates 148,734 188,722 27,362 26.9 % Income tax expense (35,329) (60,530) (8,776) 71.3 % Income from equity in affiliates 160,510 12,331 1,788 (92.3 %) Net income 273,915 140,523 20,374 (48.7 %) Less: net (loss) income attributable to non-controllinginterests (7,397) 614 89 N.A. Net income attributable to Noah shareholders 281,312 139,909 20,285 (50.3 %) Income per ADS, basic 4.18 2.01 0.29 (51.9 %) Income per ADS, diluted 4.16 2.01 0.29 (51.7 %) Margin analysis: Operating margin 10.5 % 24.9 % 24.9 % Net margin 21.7 % 15.9 % 15.9 % Weighted average ADS equivalent[1]: Basic 67,348,790 69,593,068 69,593,068 Diluted 67,700,437 69,611,652 69,611,652 ADS equivalent outstanding atend of period 60,338,054 62,603,864 62,603,864 [1] Assumes all outstanding ordinary shares are represented by ADSs. Each ordinary share represents two ADSs. Noah Holdings Limited Condensed Consolidated Income Statements (Audited) Twelve months ended December 31, December 31, December 31, Change 2021 2022 2022 Revenues: RMB'000 RMB'000 USD'000 Revenues from others: One-time commissions 1,130,894 617,636 89,549 (45.4 %) Recurring service fees 913,700 768,980 111,492 (15.8 %) Performance-based income 391,903 184,048 26,684 (53.0 %) Other service fees 161,982 223,441 32,396 37.9 % Total revenues from others 2,598,479 1,794,105 260,121 (31.0 %) Revenues from funds Gopher manages: One-time commissions 140,522 63,809 9,251 (54.6 %) Recurring service fees 1,195,309 1,145,435 166,072 (4.2 %) Performance-based income 392,290 125,528 18,200 (68.0 %) Total revenues from funds Gopher manages 1,728,121 1,334,772 193,523 (22.8 %) Total revenues 4,326,600 3,128,877 453,644 (27.7 %) Less: VAT related surcharges (33,506) (28,505) (4,133) (14.9 %) Net revenues 4,293,094 3,100,372 449,511 (27.8 %) Operating costs and expenses: Compensation and benefits Relationship manager compensation (920,896) (497,147) (72,080) (46.0 %) Others (1,247,984) (944,735) (136,974) (24.3 %) Total compensation and benefits (2,168,880) (1,441,882) (209,054) (33.5 %) Selling expenses (437,131) (349,014) (50,602) (20.2 %) General and administrative expenses (383,321) (235,319) (34,118) (38.6 %) (Reversal of) Provision for credit losses (112,959) 424 61 N.A. Other operating expenses (107,844) (115,653) (16,768) 7.2 % Government grants 115,939 129,521 18,779 11.7 % Total operating costs and expenses (3,094,196) (2,011,923) (291,702) (35.0 %) Income from operations 1,198,898 1,088,449 157,809 (9.2 %) Other income (expense): Interest income 71,866 61,416 8,904 (14.5 %) Investment income 65,426 85,554 12,404 30.8 % Settlement expenses (19,908) - - N.A. Contingent litigation expenses - (99,000) (14,354) N.A. Other (expense) income (18,240) 13,130 1,904 N.A. Total other income 99,144 61,100 8,858 (38.4 %) Income before taxes and income from equity in affiliates 1,298,042 1,149,549 166,667 (11.4 %) Income tax expense (293,940) (267,108) (38,727) (9.1 %) Income from equity in affiliates 301,979 89,148 12,925 (70.5 %) Net income 1,306,081 971,589 140,865 (25.6 %) Less: net loss attributable to non-controlling interests (8,050) (4,982) (722) (38.1 %) Net income attributable to Noah shareholders 1,314,131 976,571 141,587 (25.7 %) Income per ADS, basic 19.56 14.29 2.07 (26.9 %) Income per ADS, diluted 19.45 14.28 2.07 (26.6 %) Margin analysis: Operating margin 27.9 % 35.1 % 35.1 % Net margin 30.4 % 31.3 % 31.3 % Weighted average ADS equivalent[1]: Basic 67,171,636 68,332,032 68,332,032 Diluted 67,563,546 68,396,142 68,396,142 ADS equivalent outstanding at end of period 60,338,054 62,603,864 62,603,864 [1] Assumes all outstanding ordinary shares are represented by ADSs. Each ordinary share represents two ADSs. Noah Holdings Limited Condensed Comprehensive Income Statements (unaudited) Three months ended December 31, December 31, December31, Change 2021 2022 2022 RMB'000 RMB'000 USD'000 Net income 273,915 140,523 20,374 (48.7 %) Other comprehensive income, net of tax: Foreign currency translation adjustments (14,094) (36,494) (5,291) 159.1 % Fair value fluctuation of available for saleInvestment (after tax) (243) - - N.A. Comprehensive income 259,578 104,029 15,083 (59.9 %) Less: Comprehensive loss attributable tonon-controlling interests (7,366) 598 87 N.A. Comprehensive income attributable to Noah shareholders 266,944 103,431 14,996 (61.3 %) Noah Holdings Limited Condensed Comprehensive Income Statements (Audited) Twelve months ended December 31, December31, December 31, Change 2021 2022 2022 RMB'000 RMB'000 USD'000 Net income 1,306,081 971,589 140,865 (25.6 %) Other comprehensive income, net of tax: Foreign currency translation adjustments (60,851) 137,555 19,944 N.A. Comprehensive income 1,245,230 1,109,144 160,809 (10.9 %) Less: Comprehensive loss attributable tonon-controlling interests (8,001) (4,895) (710) (38.8 %) Comprehensive income attributable to Noah shareholders 1,253,231 1,114,039 161,519 (11.1 %) Noah Holdings Limited Supplemental Information (unaudited) As of December 31,2021 December 31,2022 Change Number of registered clients 411,981 437,288 6.1 % Number of relationship managers 1,316 1,276 (3.0 %) Number of cities in mainland China under coverage 84 75 (10.7 %) Three months ended December 31, 2021 December 31,2022 Change (in millions of RMB, except number of active clients and percentages) Number of active clients 17,456 12,904 (26.1 %) Transaction value: Private equity products 3,041 1,452 (52.3 %) Private secondary products 6,659 3,362 (49.5 %) Mutual fund products 10,207 12,183 19.4 % Other products 1,136 1,003 (11.7 %) Total transaction value 21,043 18,000 (14.5 %) Twelve months ended December 31, 2021 December 31,2022 Change (in millions of RMB, except number of active clients and percentages) Number of active clients 42,764 35,877 (16.1 %) Transaction value: Private equity products 18,069 11,037 (38.9 %) Private secondary products 37,776 13,109 (65.3 %) Mutual fund products 37,169 43,133 16.0 % Other products 4,189 3,002 (28.3 %) Total transaction value 97,203 70,281 (27.7 %) Noah Holdings Limited Segment Condensed Income Statements (unaudited) Three months ended December 31, 2022 Wealth Management Business Asset Management Business Other Businesses Total RMB'000 RMB'000 RMB'000 RMB'000 Revenues: Revenues from others One-time commissions 266,592 - - 266,592 Recurring service fees 195,872 - - 195,872 Performance-based income 13,998 - - 13,998 Other service fees 48,245 - 12,625 60,870 Total revenues from others 524,707 - 12,625 537,332 Revenues from funds Gopher manages One-time commissions 576 3,339 - 3,915 Recurring service fees 124,040 154,336 - 278,376 Performance-based income 187 66,632 - 66,819 Total revenues from funds Gopher manages 124,803 224,307 - 349,110 Total revenues 649,510 224,307 12,625 886,442 Less: VAT related surcharges (2,563) (1,139) (670) (4,372) Net revenues 646,947 223,168 11,955 882,070 Operating costs and expenses: Compensation and benefits Relationship managers (137,016) (9,646) - (146,662) Others (152,971) (73,585) (9,928) (236,484) Total compensation and benefits (289,987) (83,231) (9,928) (383,146) Selling expenses (121,259) (20,611) (936) (142,806) General and administrative expenses (52,723) (22,609) (8,620) (83,952) Reversal of (Provision for) credit losses 249 1,068 (21,153) (19,836) Other operating expenses (9,344) (4,629) (24,284) (38,257) Government grants 5,224 408 33 5,665 Total operating costs and expenses (467,840) (129,604) (64,888) (662,332) Income (loss) from operations 179,107 93,564 (52,933) 219,738 Noah Holdings Limited Segment Condensed Income Statements (unaudited) Three months ended December 31, 2021 WealthManagementBusiness AssetManagementBusiness Other Businesses Total RMB'000 RMB'000 RMB'000 RMB'000 Revenues: Revenues from others One-time commissions 472,566 - - 472,566 Recurring service fees 214,835 - - 214,835 Performance-based income 42,115 - - 42,115 Other service fees 32,814 - 21,482 54,296 Total revenues from others 762,330 - 21,482 783,812 Revenues from funds Gopher manages One-time commissions 2,488 7,398 - 9,886 Recurring service fees 204,919 141,828 - 346,747 Performance-based income 5,905 126,083 - 131,988 Total revenues from funds Gopher manages 213,312 275,309 - 488,621 Total revenues 975,642 275,309 21,482 1,272,433 Less: VAT related surcharges (6,358) (1,496) (4,525) (12,379) Net revenues 969,284 273,813 16,957 1,260,054 Operating costs and expenses: Compensation and benefits Relationship managers (371,788) (10,372) - (382,160) Others (204,386) (127,455) (17,163) (349,004) Total compensation and benefits (576,174) (137,827) (17,163) (731,164) Selling expenses (112,287) (19,709) (7,910) (139,906) General and administrative expenses (103,142) (22,247) (22,626) (148,015) Provision for credit losses (2,691) (12,574) (85,593) (100,858) Other operating expenses (2,507) (687) (16,450) (19,644) Government grants 11,101 13 707 11,821 Total operating costs and expenses (785,700) (193,031) (149,035) (1,127,766) Income (loss) from operations 183,584 80,782 (132,078) 132,288 Noah Holdings Limited Segment Condensed Income Statements (Audited) Twelve months ended December 31, 2022 WealthManagementBusiness AssetManagementBusiness OtherBusinesses Total RMB'000 RMB'000 RMB'000 RMB'000 Revenues: Revenues from others One-time commissions 617,636 - - 617,636 Recurring service fees 768,980 - - 768,980 Performance-based income 184,048 - - 184,048 Other service fees 144,101 - 79,340 223,441 Total revenues from others 1,714,765 - 79,340 1,794,105 Revenues from funds Gophermanages One-time commissions 13,953 49,856 - 63,809 Recurring service fees 463,314 682,121 - 1,145,435 Performance-based income 18,407 107,121 - 125,528 Total revenues from funds Gophermanages 495,674 839,098 - 1,334,772 Total revenues 2,210,439 839,098 79,340 3,128,877 Less: VAT related surcharges (10,462) (4,630) (13,413) (28,505) Net revenues 2,199,977 834,468 65,927 3,100,372 Operating costs and expenses: Compensation and benefits Relationship managers (460,237) (36,910) - (497,147) Others (619,397) (285,101) (40,237) (944,735) Total compensation and benefits (1,079,634) (322,011) (40,237) (1,441,882) Selling expenses (299,769) (41,885) (7,360) (349,014) General and administrative expenses (153,643) (55,872) (25,804) (235,319) Reversal of (provision for) credit losses 718 386 (680) 424 Other operating expenses (15,412) (6,369) (93,872) (115,653) Government grants 89,223 39,120 1,178 129,521 Total operating costs and expenses (1,458,517) (386,631) (166,775) (2,011,923) Income (loss) from operations 741,460 447,837 (100,848) 1,088,449 Noah Holdings Limited Segment Condensed Income Statements (Audited) Twelve months ended December 31, 2021 WealthManagementBusiness AssetManagementBusiness Other Businesses Total RMB'000 RMB'000 RMB'000 RMB'000 Revenues: Revenues from others One-time commissions 1,130,653 241 - 1,130,894 Recurring service fees 912,506 1,194 - 913,700 Performance-based income 391,903 - - 391,903 Other service fees 92,352 1,390 68,240 161,982 Total revenues from others 2,527,414 2,825 68,240 2,598,479 Revenues from funds Gopher manages One-time commissions 50,247 90,275 - 140,522 Recurring service fees 557,094 638,215 - 1,195,309 Performance-based income 77,218 315,072 - 392,290 Total revenues from funds Gophermanages 684,559 1,043,562 - 1,728,121 Total revenues 3,211,973 1,046,387 68,240 4,326,600 Less: VAT related surcharges (17,076) (4,923) (11,507) (33,506) Net revenues 3,194,897 1,041,464 56,733 4,293,094 Operating costs and expenses: Compensation and benefits Relationship managers (900,921) (19,975) - (920,896) Others (753,368) (430,059) (64,557) (1,247,984) Total compensation and benefits (1,654,289) (450,034) (64,557) (2,168,880) Selling expenses (354,128) (55,790) (27,213) (437,131) General and administrative expenses (270,253) (70,686) (42,382) (383,321) Provision for credit losses (6,490) (13,275) (93,194) (112,959) Other operating expenses (53,616) (4,347) (49,881) (107,844) Government grants 65,368 37,905 12,666 115,939 Total operating costs and expenses (2,273,408) (556,227) (264,561) (3,094,196) Income (loss) from operations 921,489 485,237 (207,828) 1,198,898 Noah Holdings Limited Supplement Revenue Information by Geography (unaudited) Three months ended December 31, 2022 Wealth Management Business Asset Management Business Other Businesses Total RMB'000 RMB'000 RMB'000 RMB'000 Revenues: Mainland China 442,208 147,301 12,625 602,134 Hong Kong 182,111 54,976 - 237,087 Others 25,191 22,030 - 47,221 Total revenues 649,510 224,307 12,625 886,442 Noah Holdings Limited Supplement Revenue Information by Geography (unaudited) Three months ended December 31, 2021 Wealth Management Business Asset Management Business Other Businesses Total RMB'000 RMB'000 RMB'000 RMB'000 Revenues: Mainland China 849,846 205,797 21,482 1,077,125 Hong Kong 116,154 57,337 - 173,491 Others 9,642 12,175 - 21,817 Total revenues 975,642 275,309 21,482 1,272,433 Noah Holdings Limited Supplement Revenue Information by Geography (Audited) Twelve months ended December 31, 2022 Wealth Management Business Asset Management Business Other Businesses Total RMB'000 RMB'000 RMB'000 RMB'000 Revenues: Mainland China 1,548,395 672,785 79,340 2,300,520 Hong Kong 508,907 83,029 - 591,936 Others 153,137 83,284 - 236,421 Total revenues 2,210,439 839,098 79,340 3,128,877 Noah Holdings Limited Supplement Revenue Information by Geography (Audited) Twelve months ended December 31, 2021 Wealth Management Business Asset Management Business Other Businesses Total RMB'000 RMB'000 RMB'000 RMB'000 Revenues: Mainland China 2,479,576 768,203 68,240 3,316,019 Hong Kong 629,587 240,136 - 869,723 Others 102,810 38,048 - 140,858 Total revenues 3,211,973 1,046,387 68,240 4,326,600 Noah Holdings Limited Reconciliation of GAAP to Non-GAAP Results (In RMB, except for per ADS data and percentages) (unaudited) Three months ended December 31, December 31, Change 2021 2022 RMB'000 RMB'000 Net income attributable to Noah shareholders 281,312 139,909 (50.3 %) Adjustment for share-based compensation 12,435 12,316 (1.0 %) Add: settlement expense reversal (719) - N.A. Less: tax effect of adjustments 3,421 3,066 (10.4 %) Adjusted net income attributable to Noah shareholders(non-GAAP) 289,607 149,159 (48.5 %) Net margin attributable to Noah shareholders 22.3 % 15.9 % Non-GAAP net margin attributable to Noah shareholders 23.0 % 16.9 % Net income attributable to Noah shareholders per ADS,diluted 4.16 2.01 (51.7 %) Non-GAAP net income attributable to Noah shareholders per ADS, diluted 4.28 2.14 (50.0 %) Noah Holdings Limited Reconciliation of GAAP to Non-GAAP Results (In RMB, except for per ADS data and percentages) (unaudited) Twelve months ended December 31 December 31 Change 2021 2022 RMB'000 RMB'000 Net income attributable to Noah shareholders 1,314,131 976,571 (25.7 %) Adjustment for share-based compensation 51,036 42,300 (17.1 %) Add: settlement expense 19,908 - N.A. Less: tax effect of adjustments 12,374 10,279 (16.9 %) Adjusted net income attributable to Noah shareholders(non-GAAP) 1,372,701 1,008,592 (26.5 %) Net margin attributable to Noah shareholders 30.6 % 31.5 % Non-GAAP net margin attributable to Noah shareholders 32.0 % 32.5 % Net income attributable to Noah shareholders per ADS, diluted 19.45 14.28 (26.6 %) Non-GAAP net income attributable to Noah shareholders per ADS, diluted 20.32 14.75 (27.4 %)
BAODING, China, March 24, 2023 /PRNewswire/ -- IT Tech Packaging, Inc. (NYSE American: ITP) ("IT Tech Packaging" or the "Company"), a leading manufacturer and distributor of diversified paper products in North China, today announced its unaudited financial results for the fourth quarter and audited financial results for the fiscal year ended December 31, 2022. Mr. Zhenyong Liu, Chairman and Chief Executive Officer of the Company, commented, "In fiscal year 2022, our business execution was reflected as we generated approximately $100.35 million in revenue and approximately $4.75 million in gross profit. With the domestic business and markets resumption in an orderly manner as the pandemic is gradually under control in China, we expect that the market demand for our products will recover gradually. " Fourth Quarter 2022 Financial Results For the Three Months Ended December 31, ($ millions) 2021 2022 % Change Revenues 45.05 21.37 -52.6 % Regular Corrugating Medium Paper ("CMP")* 32.66 17.28 47.1 % Light-Weight CMP** 7.00 3.77 46.1 % Offset Printing Paper 2.97 - -100.0 % Tissue Paper Products 2.28 0.25 -88.9 % Face Masks 0.15 0.06 -60.7 % Gross profit 4.34 1.03 -76.3 % Gross profit (loss) margin 9.6 % 4.8 % -4.8pp**** Regular Corrugating Medium Paper ("CMP")* 9.6 % 8.3 % -1.3 pp**** Light-Weight CMP** 12.2 % 10.3 % -1.9 pp**** Offset Printing Paper 21.5 % - - Tissue Paper Products*** -13.9 % -315.2 % -301.3 pp**** Face Masks 25.2 % 27.5 % 2.3 pp**** Operating income (loss) 1.95 -0.49 -125.2 % Net income (loss) 4.16 -11.91 -386.6 % EBITDA 8.66 3.77 -56.5 % Basic and Diluted earnings (loss) per share 0.45 -1.19 -364.4 % * Products from PM6 ** Products from PM1 *** Products from PM8 and PM9 **** pp represents percentage points Revenue decreased by 52.6% to approximately $21.37 million, primarily attributable to an decrease in sales volume of all categories of products and decrease in ASP of CMP. Gross profit decreased by 76.3% to approximately $1.03 million. Total gross margin decreased by 4.8 percentage point to 4.8%. Loss from operations was approximately $0.49 million, compared to operation income of approximately $1.95 million for the same period of last year. Net loss was approximately $11.91 million, or loss of $1.19 per basic and diluted share, compared to net income of approximately $4.16 million, or earnings of $0.45 per basic and diluted share, for the same period of last year. Earnings before interest, taxes, depreciation and amortization ("EBITDA") decreased by 56.5% to approximately $3.77million. Revenue For the fourth quarter of 2022, total revenue decreased by approximately $23.7 million, or 52.6%, to approximately $21.4 million from approximately $45.0 million for the same period of last year. The decrease in total revenue was mainly due to the decrease in sales volume of CMP, offset printing paper and tissue paper products and the decrease in ASP of CMP and offset printing paper. The following table summarizes revenue, volume and ASP by product for the fourth quarter of 2022 and 2021, respectively: For the Three Months Ended December 31, 2021 2022 Revenue ($'000) Volume (tonne) ASP ($/tonne) Revenue ($'000) Volume (tonne) ASP ($/tonne) Regular CMP 32,662 57,410 569 17,281 41,941 412 Light-Weight CMP 6,996 12,543 558 3,768 9,365 402 Offset Printing Paper 2,967 3,911 759 - - - Tissue Paper Products 2,278 2,292 994 253 234 1,083 Total 44,903 76,156 590 21,302 51,540 413 Revenue ($'000) Volume (thousand pieces) ASP ($/thousand pieces) Revenue ($'000) Volume ($/thousandpieces) ASP ($/thousand pieces) Face Masks 146 3,014 49 57 1,330 43 Revenue from CMP, including both regular CMP and light-Weight CMP, decreased by $18.6 million, or 46.9%, to approximately $21.1 million and accounted for 98.5 % of total revenue for the fourth quarter of 2022, compared to approximately $39.7 million, or 88.0% of total revenue, for the same period of last year. The Company sold 51,306 tonnes of CMP at an ASP of $410/tonne in the fourth quarter of 2022, compared to 69,953 tonnes at an ASP of $567/tonne in the same period of last year. Of the total CMP sales, revenue from regular CMP decreased by approximately $15.4 million, or 47.1%, to approximately $17.3 million, resulting from sales of 41,941 tonnes at an ASP of $412/tonne, during the fourth quarter of 2022, compared to revenue of approximately$32.7 million, resulting from sales of 57,410 tonnes at an ASP of $569/tonne, for the same period of last year. Revenue from light-weight CMP decreased by approximately $3.2 million, or 46.1%, to approximately $3.8 million, resulting from sales of 9,365 tonnes at an ASP of $402/tonne for the fourth quarter of 2022, compared to revenue of approximately $7.0 million, resulting from sales of 12,543 tonnes at an ASP of $558/tonne for the same period of last year. Revenue from offset printing paper was $nil for the three months ended December 31, 2022, due to COVID-19, offset printing paper was suspended in 2022. Revenue from offset printing paper was approximately $3.0 million for the fourth quarter of 2021, with 3,911 tonnes sold at an ASP of $759/tonne. Revenue from tissue paper products decreased by $2.0 million, or 88.9%, to approximately $0.3 million, resulting from sales of 234 tonnes at an ASP of $1,083/tonne, for the fourth quarter of 2022, compared to revenue of approximately$2.3million, resulting from sales of 2,292 tonnes at an ASP of $994/tonne for the same period of last year. Revenue from face masks decreased by $89,508, or 61.2%, to approximately $56,774 for the fourth quarter ended December 31, 2022, from $146,282 for the same period of 2021. The Company sold 1,330 thousand pieces of face masks for the fourth quarter ended December 31, 2022, compared to 3,014 thousand pieces of face masks for the same period of 2021. Gross Profit and Gross Margin Total cost of sales decreased by $20.3 million, or 49.9%, to approximately $20.4 million for the fourth quarter of 2022 from approximately $40.7 million for the same period of last year. For paper products, overall cost of sales per tonne was $394 for the fourth quarter of 2022, compared to $533 for the same period of last year. The decrease in overall cost of sales was mainly due to the decrease in sales volume of CMP and offset printing paper and decrease of material costs of CMP in the fourth quarter of 2022. Costs of sales per tonne for regular CMP, light-weight CMP, offset printing paper, and tissue paper products were $378, $361, $nil and $4,494, respectively, for the fourth quarter of 2022, compared to $514, $490, $596, and $1,132, respectively, for the same period of last year. Total gross profit was approximately $1.0 million for the fourth quarter of 2022, compare to the gross profit of approximately$4.3 million for the same period of last year as a result of factors described above. Overall gross margin was 4.8% for the fourth quarter of 2022, compared to 9.6% for the same period of last year. Gross profit (loss) margins for regular CMP, light-weight CMP, offset printing paper, tissue paper products and face mask products were 8.3%, 10.3%, n/a, -315.2% and 27.5%, respectively, for the fourth quarter of 2022, compared to 9.6%, 12.2%, 21.5%, -13.9% and 25.2%, respectively, for the same period of last year. Selling, General and Administrative Expenses Selling, general and administrative expenses ("SG&A") decreased by $0.9million, or 36.4%, to approximately $1.5 million for the fourth quarter of 2022 from approximately$2.4 million for the same period of last year. Income (Loss) from Operations Loss from operations was approximately $0.5million for the fourth quarter of 2022, a decrease of $2.4 million, or 125.2%, from income from operations of approximately $2.0 million for the same period of last year. Operating loss margin was -2.3% for the fourth quarter of 2022, compared to operating margin of 4.3% for the same period of last year. Net Income (Loss) Net loss was approximately $11.9 million, or $1.19 loss per basic and diluted share for the fourth quarter of 2022, representing a decrease of $16.1 million, or 386.6%, from net income of approximately $4.2 million, or $0.45 earnings per basic and diluted share, for the same period of last year. EBITDA EBITDA was approximately $3.8 million for the fourth quarter of 2022, compared to approximately $8.7 million for the same period of last year. Note 1: Non-GAAP Financial Measures In addition to our U.S. GAAP results, this press release includes a discussion of EBITDA, a non-GAAP financial measure as defined by the Securities and Exchange Commission ("SEC"). The Company defines EBITDA as net income before interest, income taxes, depreciation and amortization. EBITDA is a key measure used by management to evaluate our results and make strategic decisions. Management believes this measure is useful to investors because it is an indicator of operational performance. Because not all companies use identical calculations, the Company's presentation of EBITDA may not be comparable to similarly titled measures of other companies, and should not be viewed as an alternative to measures of financial performance or changes in cash flows calculated in accordance with the U.S. GAAP. Reconciliation of Net Income to EBITDA (Amounts expressed in US$) For the Three Months Ended December 31, ($ millions) 2021 2022 Net income (loss) 4.16 -11.91 Add: Income tax 0.60 11.87 Net interest expense 0.28 0.24 Depreciation and amortization 3.62 3.57 EBITDA 8.66 3.77 Full Year Ended December 31, 2022 Financial Results For the Twelve Months Ended December 31, ($ millions) 2021 2022 % Change Revenues 160.88 100.35 -37.62 % Regular Corrugating Medium Paper ("CMP")* 111.08 82.30 -25.91 % Light-Weight CMP** 23.43 16.43 -29.89 % Offset Printing Paper 17.06 0 -100 % Tissue Paper Products 8.77 1.36 -84.53 % Face Masks 0.54 0.26 -52.1 % Gross profit 11.02 4.75 -56.9 % Gross profit (loss) margin 6.9 % 4.7 % -2.2 pp**** Regular Corrugating Medium Paper ("CMP")* 6.3 % 7.4 % 1.1 pp**** Light-Weight CMP** 8.7 % 9.4 % 0.7 pp**** Offset Printing Paper 18.2 % - - Tissue Paper Products*** -14.3 % -216.3 % -202.1 pp**** Face Masks 19.2 % 26.1 % 6.9 pp**** Operating income (loss) 1.46 -5.30 -463.5 % Net income 0.91 -16.57 -1930.0 % EBITDA 22.94 10.96 -52.2 % Basic and Diluted earnings (loss) per share 0.10 -1.66 -1,760.0 % * Products from PM6 ** Products from PM1 *** Products from PM8 and PM9 **** pp represents percentage points Revenue For the year ended December 31, 2022, total revenue decreased by $60.5 million, or 37.6%, to approximately $100.4 million from approximately$160.9 million for 2021. The decrease in total revenue was mainly due to the decrease in sales volume of CMP, offset printing paper and tissue paper and the decrease in ASP of CMP. The following table summarizes revenue, volume and ASP by product for the years ended December 31, 2021 and 2022, respectively: For the Twelve Months Ended December 31, 2021 2022 Revenue($'000) Volume (tonne) ASP($/tonne) Revenue($'000) Volume (tonne) ASP ($/tonne) Regular CMP 111,079 213,490 520 82,297 180,977 455 Light-Weight CMP 23,432 46,201 507 16,428 37,354 440 Offset Printing Paper 17,063 24,513 696 - - - Tissue Paper Products 8,770 8,255 1,062 1,356 1,273 1,065 Total 160,344 292,459 548 100,082 219,604 456 Revenue($'000) Volume (thousand pieces) ASP ($/thousand pieces) Revenue ($'000) Volume ($/thousand pieces) ASP ($/thousand pieces) Face Masks 538 12,664 42 258 5,625 46 Revenue from CMP, including both regular CMP and light-Weight CMP decreased by $35.8 million, or 26.6%, to approximately $98.7 million, and accounted for 98.4% of total revenue for the year ended December 31, 2022, compared to approximately$134.5 million, or 83.6% of total revenue for 2021. The Company sold 218,331tonnes of CMP at an ASP of $452/tonne in the year ended December 31, 2022, compared to 259,691tonnes at an ASP of $518/tonne in 2021. Of the total CMP sales, revenue from regular CMP decreased by $28.8 million, or 25.9%, to approximately $82.3 million, resulting from sales of 180,977 tonnes at an ASP of $455/tonne during the year ended December 31, 2022, compared to revenue of approximately$111.1 million, resulting from sales of 213,490 tonnes at an ASP of $520/tonne for 2021. Revenue from light-weight CMP decreased by $7.0 million, or 29.9%, to approximately$16.4 million, resulting from sales of 37,354 tonnes at an ASP of $440/tonne for the year ended December 31, 2022, compared to revenue of approximately$23.4million, resulting from sales of 46,201tonnes at an ASP of $507/tonne for 2021. Revenue from offset printing paper was $nil for the year ended December 31, 2022 compared to the revenue of $17.1 for the year ended December 31, 2021. Due to COVID-19, our paper production was restricted and production of offset printing paper was suspended in 2022. Revenue from tissue paper products decreased by $7.4 million, or 84.5%, to approximately $1.4 million, resulting from sales of 1,273 tonnes at an ASP of $1,065/tonne, for the year ended December 31, 2022, compared to revenue of approximately $8.8 million, resulting from sales of 8,255 tonnes at an ASP of $1,062/tonne for 2021. Revenue from face masks decreased by $0.3 million, or 52.1%, to approximately $0.3 million for the year ended December 31, 2022, from approximately $0.5 million for 2021. The Company sold 5,625 thousand pieces of face masks for the year ended December 31, 2022, compared to 12,664 thousand pieces of face masks for 2021. Gross Profit and Gross Margin Total cost of sales decreased by $54.2 million, or 36.1%, to approximately $95.6 million for the year ended December 31, 2022 from approximately $149.9 million for 2021. The decrease in overall cost of sales was mainly due to the decreased sales volume of CMP and offset printing paper and decreased material costs of CMP in the year ended December 31, 2022. Costs of sales per tonne for regular CMP, light-weight CMP, offset printing paper, tissue paper products were, $421, $398, $nil, and $3,370, respectively, for the year ended December 31, 2022 compared to $487, $463, $570, and $1,214, respectively, for 2021. Total gross profit decreased by $6.3 million, or 56.9%, to approximately $4.8 million for the year ended December 31, 2022 from approximately $11.0 million for 2021. Overall gross margin decreased by 2.2 percentage points to 4.7% for the year ended December 31, 2022 from 6.9% for 2021. Gross margins for regular CMP, light-weight CMP, offset printing paper, tissue paper products and face mask products were 7.4%, 9.4%, nil, -216.3% and 26.1%, respectively, for the year ended December 31, 2022, compared to 6.3%, 8.7%, 18.2%, 14.3% and 19.2%, respectively, for 2021. Selling, General and Administrative Expenses SG&A expenses increased by $0.5 million, or 5.24%, to approximately $10.1 million for the year ended December 31, 2022 from approximately $9.6 million for 2021. As a percentage of total revenue, SG&A expenses was 10.0% for the year ended December 31, 2022, compared to 5.9% for 2021. Income (Loss) from Operations Loss from operations decreased by $6.8 million, or 463.5% to approximately $5.3 million for the year ended December 31, 2022 from income from operations of approximately $1.5 million for 2021. Operating loss margin was -5.3% for the year ended December 31, 2022, compared to operating margin of 0.9% for 2021. Net Income (Loss) Net loss decreased by $17.5 million, or 1930.0%, to approximately $16.6 million, or losses per basic and diluted share of $1.66, for the year ended December 31, 2022, compared to net income of approximately $0.9 million, or earnings per basic and diluted share of $0.10 for 2021. EBITDA EBITDA decreased by $12.0 million, or 52.2%, to approximately $11.0 million for the year ended December 31, 2022 from approximately $22.9 million for 2021. Note 1: Non-GAAP Financial Measures In addition to our U.S. GAAP results, this press release includes a discussion of EBITDA, a non-GAAP financial measure as defined by the Securities and Exchange Commission ("SEC"). The Company defines EBITDA as net income before interest, income taxes, depreciation and amortization. EBITDA is a key measure used by management to evaluate our results and make strategic decisions. Management believes this measure is useful to investors because it is an indicator of operational performance. Because not all companies use identical calculations, the Company's presentation of EBITDA may not be comparable to similarly titled measures of other companies, and should not be viewed as an alternative to measures of financial performance or changes in cash flows calculated in accordance with the U.S. GAAP. Reconciliation of Net Income to EBITDA (Amounts expressed in US$) For the Twelve Months Ended December 31, ($ millions) 2021 2022 Net income (loss) 0.91 -16.57 Add: Income tax 5.55 11.71 Net interest expense 1.12 1.03 Depreciation and amortization 15.36 14.79 EBITDA 22.94 10.96 Cash, Liquidity and Financial Position As of December 31, 2022, the Company had cash and bank balances, short-term debt (including bank loans, current portion of long-term loans from credit union and related party loans), and long-term debt (including loan from credit union) of approximately $9.5 million, $11.2 million and $4.2 million, respectively, compared to approximately $11.2 million, $13.5 million and $3.0 million, respectively, at the end of 2021. Net accounts receivable was approximately $0.9 million as of December 31, 2022, compared to approximately $4.9 million as of December 31, 2021. Net inventory was approximately $2.9 million as of December 31, 2022, compared to approximately $5.8 million at the end of 2021. As of December 31, 2022, the Company had current assets of approximately $47.2 million and current liabilities of approximately $17.6 million, resulting in a working capital of approximately $29.6 million. This was compared to current assets of approximately $55.5 million and current liabilities of approximately $20.4 million, resulting in a working capital of approximately $35.1 million at the end of 2021. Net Cash provided by operating activities was approximately $10.7 million for the year ended December 31, 2022, compared to net cash used in operating activities of approximately $2.4 million for 2021. Net cash used in investing activities was approximately $10.9 million for the year ended December 31, 2022, compared to approximately $25.1 million for 2021. Net cash used in financing activities was approximately $0.9 million for the year ended December 31, 2022, compared to net cash provided by financing activities of approximately $34.2 million for 2021. About IT Tech Packaging, Inc. Founded in 1996, IT Tech Packaging, Inc. is a leading manufacturer and distributor of diversified paper products and single-use face masks in North China. Using recycled paper as its primary raw material (with the exception of its tissue paper products), ITP produces and distributes three categories of paper products: corrugating medium paper, offset printing paper and tissue paper products. With production based in Baoding and Xingtai in North China's Hebei Province, ITP is located strategically close to the Beijing and Tianjin region, home to a growing base of industrial and manufacturing activities and one of the largest markets for paper products consumption in the country. ITP has been listed on the NYSE American since December 2009. For more information, please visit: https://www.itpackaging.cn/. Safe Harbor Statements This press release may contain forward-looking statements. These forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including risks outlined in the Company's public filings with the Securities and Exchange Commission, including the Company's latest annual report on Form 10-K. All information provided in this press release speaks as of the date hereof. Except as otherwise required by law, the Company undertakes no obligation to update or revise its forward-looking statements. IT TECH PACKAGING, INC. CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2022 AND 2021 December 31, December 31, 2022 2021 ASSETS Current Assets Cash and bank balances $ 9,524,868 $ 11,201,612 Accounts receivable (net of allowance for doubtful accounts of $881,878 and $69,053 as of December 31, 2022 and December 31, 2021, respectively) - 4,868,934 Inventories 2,872,622 5,844,895 Prepayments and other current assets 27,207,127 25,796,640 Due from related parties 7,561,858 7,804,068 Total current assets 47,166,475 55,516,149 Prepayment on property, plant and equipment 1,031,502 43,446,210 Operating lease right-of-use assets, net 672,722 - Finance lease right-of-use assets, net 1,939,970 2,286,459 Property, plant, and equipment, net 151,569,898 126,587,428 Value-added tax recoverable 2,066,666 2,430,277 Deferred tax asset non-current - 11,268,679 Total Assets $ 204,447,233 $ 241,535,202 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Short-term bank loans $ 5,598,311 $ 5,958,561 Current portion of long-term loans 4,835,884 6,838,465 Lease liability 224,497 210,161 Accounts payable 5,025 10,255 Advance from customers - 39,694 Due to related parties 727,462 727,433 Accrued payroll and employee benefits 165,986 291,206 Other payables and accrued liabilities 5,665,558 5,250,539 Income taxes payable 417,906 1,108,038 Total current liabilities 17,640,629 20,434,352 Long-term loans 4,204,118 2,980,065 Deferred gain on sale-leaseback 52,314 155,110 Lease liability - non-current 579,997 152,233 Derivative liability 646,283 2,063,534 Total liabilities (including amounts of the consolidated VIE without recourse to the Company of$16,784,878 and $17,924,475 as of December 31, 2022 and 2021, respectively) 23,123,341 25,785,294 Commitments and Contingencies Stockholders' Equity Common stock, 50,000,000 shares authorized, $0.001 par value per share, 10,065,920 and 9,915,920 shares issued and outstanding as of December 31, 2022 and December, 31, 2021, respectively. 10,066 9,916 Additional paid-in capital 89,172,771 89,016,921 Statutory earnings reserve 6,080,574 6,080,574 Accumulated other comprehensive (loss) income (7,514,540) 10,496,168 Retained earnings 93,575,021 110,146,329 Total stockholders' equity 181,323,892 215,749,908 Total Liabilities and Stockholders' Equity $ 204,447,233 $ 241,535,202 IT TECH PACKAGING, INC. CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 Year Ended December 31, 2022 2021 Revenues $ 100,352,434 $ 160,881,720 Cost of sales (95,598,238) (149,864,161) Gross Profit 4,754,196 11,017,559 Selling, general and administrative expenses (10,058,723) (9,558,190) (Loss) Income from Operations (5,304,527) 1,459,369 Other Income (Expense): Interest income 24,264 38,766 Subsidy income - 198,530 Interest expense (1,027,951) (1,124,702) Gain on acquisition 30,994 - Gain (Loss) on derivative liability 1,417,251 5,880,526 (Loss) Income before Income Taxes (4,859,969) 6,452,489 Provision for Income Taxes (11,711,339) (5,546,954) Net (Loss) Income (16,571,308) 905,535 Other Comprehensive (Loss) Income Foreign currency translation adjustment (18,010,708) 4,755,448 Total Comprehensive (Loss) Income $ (34,582,016) $ 5,660,983 (Losses) Earnings Per Share: Basic and Diluted (Losses) Earnings per Share $ (1.66) $ 0.1 0 Outstanding – Basic and Diluted 9,972,788 9,133,440 IT TECH PACKAGING, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 Year Ended December 31, 2022 2021 Cash Flows from Operating Activities: Net income $ (16,571,308) $ 905,535 Adjustments to reconcile net income to net cash provided by operatingactivities: Depreciation and amortization 14,788,036 15,358,452 (Gain) Loss on derivative liability (1,417,251) (5,880,526) Gain on acquisition (30,992) - (Recovery from) for bad debts 843,779 33,480 Share-based compensation and expenses 156,000 - Deferred tax 10,261,104 2,730,050 Changes in operating assets and liabilities: Accounts receivable 3,750,196 (2,430,495) Prepayments and other current assets (3,976,010) (8,350,716) Inventories 2,554,072 (4,531,263) Accounts payable (4,496) (589,371) Advance from customers (37,452) (44,366) Related parties 444,291 (785,097) Accrued payroll and employee benefits (103,683) 60,334 Other payables and accrued liabilities 677,840 254,966 Income taxes payable (614,738) 832,946 Net Cash (Used in) Provided by Operating Activities 10,719,388 (2,436,071) Cash Flows from Investing Activities: Purchases of property, plant and equipment (4,534,092) (25,071,372) Proceeds from sale of property, plant and equipment - - Acquisition of land (6,364,439) - Net Cash Used in Investing Activities (10,898,531) (25,071,372) Cash Flows from Financing Activities: Proceeds from issuance of shares and warrants, net - 41,837,553 Proceeds from short term bank loans 6,214,020 5,892,298 Proceeds from long term loans 59,195 - Repayment of bank loans (6,071,952) (6,512,703) Payment of capital lease obligation (206,114) (185,050) Loan to a related party (net) (874,745) (6,838,274) Net Cash Provided by (Used in) Financing Activities (879,596) 34,193,824 Effect of Exchange Rate Changes on Cash and Cash Equivalents (618,005) 372,794 Net (Decrease) Increase in Cash and Cash Equivalents (1,676,744) 7,059,175 Cash, Cash Equivalents - Beginning of Year 11,201,612 4,142,437 Cash, Cash Equivalents - End of Year $ 9,524,868 $ 11,201,612 Supplemental Disclosure of Cash Flow Information: Cash paid for interest, net of capitalized interest cost $ 320,568 $ 577,194 Cash paid for income taxes $ 2,049,911 $ 1,970,984
TOKYO, March 24, 2023 /PRNewswire/ -- Yoshitsu Co., Ltd ("Yoshitsu" or the "Company") (Nasdaq: TKLF), a retailer and wholesaler of Japanese beauty and health products, as well as sundry products and other products in Japan, today announced its unaudited financial results for the first six months of fiscal year 2023 ended September 30, 2022. Mr. Mei Kanayama, Principal Executive Officer of Yoshitsu, commented, "During the first six months of fiscal year 2023, our online sales revenue generated from the Chinese market was significantly impacted by the resurgence of COVID-19. To navigate the challenging conditions we faced, we actively shifted our business strategy to focus on selling our products in domestic franchise stores and through wholesale customers, which partially offset the decrease in online store sales. We anticipate revenue growth over the second half of fiscal year 2023, as recent revenue headwinds seem to be dissipating and we remain focused on executing our strategic initiatives. With the recovery from the COVID-19 pandemic and the resumption of business activities globally, we plan to expand our global footprint in Europe and America. We intend to operate online stores in these regions and our recently rented new warehouses in the U.S. and U.K. lay a foundation for our business expansion efforts. In addition, we are exploring the advertising business of key opinion leaders ("KOLs") through our recently acquired Shenzhen Qingzhiliangpin Network Technology Co., Ltd., to capture the rapid growth of the live streaming e-commerce market. Besides the business expansion in the global market, we strive to diversify our products offering and we launched locally-made food products in our stores in Japan last year, initiating the food product segment. We expect to launch more food products through our multiple distribution channels in the near future. We believe our strategic plan will increase our profitability, enhance our brand awareness in the global market and create significant value for shareholders in the long run." Mr. Youichiro Haga, Principal Accounting and Financial Officer of Yoshitsu, stated, "Despite the impacts of COVID-19 restriction in China and depreciation of the Japanese yen, the increase in our revenue generated from the domestic market during the first six months of 2023 demonstrates the success of our business strategy of focusing on domestic market. We are also pleased to see increased revenue from our directly-operated stores in Hong Kong, which we believe signifies the recognition of our brand. Looking forward, we will continue providing high-quality products and navigating our business strategy in today's challenging market by leveraging our strong capabilities. We believe we are on track to achieve long-term sustainable growth in both domestic and global expansion markets." Recent Development Acquisition of Tokyo Lifestyle Limited On July 20, 2022, the Company entered into a definitive agreement (the "Agreement") with All Seas Global Limited (the "Seller"). Mr. Mei Kanayama, the representative director of the Company, held 100% of the equity interests in the Seller, and hence, the Seller and the Company were related parties under common control. Tokyo Lifestyle Limited ("TLS") is a company principally engaged in the import and retail of Japanese beauty and cosmetic products in Hong Kong and engaged in the live e-commerce business through its wholly-owned subsidiary, Shenzhen Qingzhiliangpin Network Technology Co., Ltd. Pursuant to the Agreement, the Company agreed to acquire 100% of the equity interests in TLS in consideration of the sum of ¥392,673,800 in cash (US$2,842,173), subject to certain terms. The transaction contemplated by the Agreement was approved by the Company's board of directors at a special board meeting on June 27, 2022. The 100% of the equity interests in TLS were transferred to the Company on July 20, 2022, and cash consideration was paid in full and the transaction was closed on July 27, 2022. This acquisition is a critical initiative of the Company's business strategy to boost its business expansion in the Southeast Asia market and advance the digital transformation of live streaming e-commerce in its retail business. This transaction was accounted for as an acquisition of a business under common control, accordingly, the Company's comparative financial information prior to the acquisition date of July 20, 2022 was retrospectively adjusted to include the financial results of TLS. First Six Months of Fiscal Year 2023 Financial and Operational Highlights For the Six Months EndedSeptember 30, (USD millions, except per share data) 2022 2021 (1) % Change Revenue 77.6 113.8 (31.8) % Directly-operated physical stores 5.8 6.0 (3.3) % Online stores and others (2) 22.0 62.4 (64.7) % Franchise stores and wholesale customers 49.8 45.4 9.7 % Gross Profit 14.6 19.6 (25.5) % Gross Margin 18.8 % 17.2 % 1.6 pp* Income from Operations 1.0 4.3 (76.7) % Net Income 0.3 2.0 (85.0) % Earnings Per Share 0.01 0.07 (85.7) % * Notes: pp represents percentage points (1) The financial information presented has been retrospectively adjusted for the acquisition of Tokyo Lifestyle Limited. See "Recent Development" for more information. (2) Revenue of KOL advertising business was included in online stores and others. - Revenue was $77.6 million, a decrease of 31.8% from $113.8 million for the same period of last year. - Gross profit was $14.6 million, a decrease of 25.5% from $19.6 million for the same period of last year. - Gross margin was 18.8%, compared with 17.2% for the same period of last year. - Net income was $0.3 million, compared with net income of $2.0 million for the same period of last year. - Basic and diluted earnings per share were $0.01, compared with $0.07 for the same period of last year. - As of February 28, 2023, the Company's distribution channels consisted of (i) 11 directly-operated physical stores in Japan and seven directly-operated physical stores in Hong Kong, (ii) 21 online stores through our websites and various e-commerce marketplaces in Japan, China, and Korea, and (iii) nine franchise stores in the U.S., four franchise stores in Canada, one franchise store in the U.K., and approximately 102 wholesale customers in Japan and other countries, including China, the U.S., and Canada. First Six Months of Fiscal Year 2023 Financial Results Revenue Revenue decreased by $36.2 million, or 31.8%, to $77.6 million for the six months ended September 30, 2022 from $113.8 million for the same period of last year. The decrease in revenue was primarily due to decreased revenue from online stores and others and directly-operated physical stores, which was partially offset by increased revenue from franchise stores and wholesale customers. For the Six Months Ended September 30, 2022 2021 ($ millions) Revenue Cost of Revenue Gross Margin Revenue Cost of Revenue Gross Margin Directly-operated physical stores 5.8 4.7 19.0 % 6.0 5.0 16.7 % Online stores and others 22.0 17.9 18.6 % 62.4 52.0 16.7 % Franchise stores and wholesale customers 49.8 40.4 18.9 % 45.4 37.2 18.1 % Total 77.6 63.0 18.8 % 113.8 94.2 17.2 % Revenue from directly-operated physical stores decreased by $0.2 million, or 3.3%, to $5.8 million for the six months ended September 30, 2022, from $6.0 million for the same period of last year. Our revenue generated from our directly-operated physical stores in Japan (excluding the impact of foreign currency translation) remained relatively stable with a slight increase by 3.1% for the six months ended September 30, 2022 as compared to the same period of last year. However, due to the depreciation of the Japanese yen against U.S. dollars, the average translation rate for the six months ended September 30, 2022 and 2021 was at ¥1=US$0.007480 and ¥1=US$0.009110, respectively, a significant decrease of 17.9%. As a result, revenue generated from our directly-operated physical stores in Japan decreased by $0.8 million, or 15.4%, to $4.4 million for the six months ended September 30, 2022, from $5.2 million for the same period of last year. The decrease was partially offset by the increased revenue generated from our directly-operated physical stores in Hong Kong. During the six months ended September 30, 2022, revenue generated from our directly-operated physical stores in Hong Kong increased by $0.6 million, or 75.0%, to $1.4 million for the six months ended September 30, 2022, from $0.8 million for the same period of last year. The increase was due to revenue contributed from our newly-opened stores during the six months ended September 30, 2022. Revenue from online stores and others decreased by $40.4 million, or 64.7%, to $22.0 million for the six months ended September 30, 2022, from $62.4 million for the same period of last year. The decrease was mainly due to the decrease in online sales revenue generated from China during the six months ended September 30, 2022. Due to a resurgence of the COVID-19 pandemic in late March 2022 in China, which resulted in shipping container shortages and stricter border control protocols, shipments and customs clearance for overseas imports were delayed. Our online sales in China were significantly constrained, due to the inability to deliver the products to our customers as a consequence of mobility restrictions and lockdowns imposed in certain provinces across China. Although the situation has eased since June 2022, due to the continuous impact from the COVID-19 pandemic, our online sales volume in China did not return to its normal level as compared to the same period of last year. The decrease was exacerbated by the significant depreciation of the Japanese yen against U.S. dollars, as mentioned above. The decrease was partially offset by the increased revenue from KOLs due to the rapid growth of live streaming e-commerce market. Our revenue from KOLs increased by $0.9 million, or 941.1%, to $1.0 million for the six months ended September 30, 2022, from $0.1 million for the same period of last year. Revenue from franchise stores and wholesale customers increased by $4.4 million, or 9.7%, to $49.8 million for the six months ended September 30, 2022, from $45.4 million for the same period of last year. The increase was mainly due to increased revenue from domestic franchise stores and wholesale customers. Our revenue generated from domestic franchise stores and wholesale customers (excluding the impact of foreign currency translation) increased significantly by 4,989.8% for the six months ended September 30, 2022 as compared to the same period of last year. The increase was due to a shift in our business strategy when our overseas sales were significantly affected by the COVID-19 pandemic. With the high demand for the Company's products, the Company managed to modify its business strategy by developing and selling its products in the domestic market to either domestic customers or overseas customers who made purchases in Japan and bore the overseas shipment cost by themselves. The increase was partially offset by the significant depreciation of the Japanese yen against U.S. dollars, as mentioned above, as well as the decreased revenue generated from overseas franchise stores and wholesale customers. The Company's overseas shipments were delayed or limited due to the shipping container shortages caused by the COVID-19 pandemic and increased shipping charges, as well as fewer orders it received from its overseas franchise stores and wholesale customers when their business was impacted by the COVID-19 pandemic. Therefore, revenue generated from overseas franchise stores and wholesale customers decreased for the six months ended September 30, 2022 as compared to the same period of last year. Gross Profit and Gross Margin Total cost of revenue decreased by $31.2 million, or 33.1%, to $63.0 million for the six months ended September 30, 2022, from $94.2 million for the same period of last year. Gross profit decreased by $5.0 million, or 25.5%, to $14.6 million for the six months ended September 30, 2022, from $19.6 million for the same period of last year. Overall gross margin increased by 1.6 percentage points to 18.8% for the six months ended September 30, 2022, from 17.2% for the same period of last year. Gross margin for directly-operated physical stores, online stores and others, and franchise stores and wholesale customers were 19.0%, 18.6%, and 18.9%, respectively, for the six months ended September 30, 2022, compared to 16.7%, 16.7%, and 18.1%, respectively, for the same period of last year. Operating Expenses Operating expenses consist of selling and marketing expenses and general and administrative expenses, which primarily include payroll, employee benefit expenses and bonus expenses, shipping expenses, promotion and advertising expenses, and other facility-related costs, such as store rent, utilities, and depreciation. Operating expenses decreased by $1.8 million, or 11.8%, to $13.5 million for the six months ended September 30, 2022, from $15.3 million for the same period of last year. Our operating expenses (excluding the impact of foreign currency translation) increased for the six months ended September 30, 2022 as compared to the same period of last year, mainly due to increased payroll, and employee benefit expenses and bonus expenses, and consulting and professional service fees, which was partially offset by the decrease in shipping expenses and transaction commissions paid to third-party e-commerce marketplace operators. However, with the significant depreciation of the Japanese yen against U.S. dollars as mentioned above, our operating expenses in U.S. dollars decreased for the six months ended September 30, 2022 as compared to the same period of last year. Interest Expense, Net Interest expense, net includes interest expense calculated at interest rate per loan agreements and loan service costs, which are directly incremental to the loan agreements and amortized over the loan periods. Interest expense, net increased by $0.3 million, or 27.3%, to $1.4 million for the six months ended September 30, 2022, from $1.1 million for the same period of last year. The increase was primarily due to the increased weighted average loan balance for the six months ended September 30, 2022. Gain (Loss) from Foreign Currency Exchange Gain from foreign currency exchange was $981,017 for the six months ended September 30, 2022 as compared to a loss from foreign currency exchange of $107,541 for the same period of last year. The increase in the gain from foreign currency exchange was due to the significant fluctuations in foreign exchange rates during the six months ended September 30, 2022. Other Income (Expenses), net Other income (expenses), net primarily includes tax refunds, disposal gain or loss from property and equipment, government subsidies, and other immaterial income and expense items. Other net expenses increased by $587,747, or 123.9%, to other net expenses of $113,409 for the six months ended September 30, 2022, from other net income of $474,338 for the same period of last year. The increase was mainly due to an increase in loss from the disposal of property and equipment as well as the decreased government subsidies received during the six months ended September 30, 2022. Provision for Income Taxes Provision for income taxes decreased by $1.4 million, or 87.5%, to $0.2 million for the six months ended September 30, 2022, from $1.6 million for the same period of last year. The decrease in the provision for income taxes was mainly due to the decreased taxable income for the six months ended September 30, 2022. Net Income Net income was $0.3 million, or $0.01 per basic and diluted share for the six months ended September 30, 2022, compared to $2.0 million, or $0.07 per basic and diluted share for the same period of last year. Financial Condition As of September 30, 2022, the Company had cash of $9.2 million, compared to $18.3 million as of March 31, 2022. As of September 30, 2022, the Company had accounts receivable balances due from third parties of $55.4 million, compared to $41.0 million as of March 31, 2022. Approximately 63.5% of the September 30, 2022 balance has been subsequently collected, and the remaining balance is expected to be fully collected by June 30, 2023. The collected balances of such receivables provide cash available for use in the Company's operations as working capital, if necessary. As of September 30, 2022, the Company had merchandise inventories of $22.2 million, which the Company believes can be sold quickly, based on its analysis of the current trends in demand for its products, compared to $31.4 million as of March 31, 2022. Net cash used in operating activities was $21.9 million for the six months ended September 30, 2022, mainly derived from net income of $0.3 million for the period, and net changes in the Company's operating assets and liabilities, which mainly included an increase in accounts receivable from third parties of $21.8 million. Net cash used in operating activities was $16.4 million for the six months ended September 30, 2021, mainly derived from net income of $2.0 million for the period, and net changes in the Company's operating assets and liabilities, which mainly included an increase in merchandise inventories of $8.7 million and a decrease in account payables of $6.5 million. Net cash provided by investing activities was $0.1 million for the six months ended September 30, 2022, mainly due to repayments from related parties of $0.1 million. Net cash used in investing activities was $1.7 million for the six months ended September 30, 2021, mainly due to the purchase of property and equipment of $1.6 million. Net cash provided by financing activities was $16.4 million for the six months ended September 30, 2022, which primarily consisted of proceeds from short-term borrowings of $74.8 million, proceeds from long-term borrowings of $2.2 million, partially offset by repayments of short-term borrowings of $56.1 million, repayments of long-term borrowings of $1.5 million, and cash consideration paid for business combination under common control of $2.8 million. Net cash provided by financing activities was $8.7 million for the six months ended September 30, 2021, which primarily consisted of proceeds from short-term borrowings of $265.5 million and proceeds from long-term borrowings of $8.3 million, and capital contributions of $1.8 million, partially offset by repayments of short-term borrowings of $263.0 million and repayments of long-term borrowings of $0.7 million. Conference Call Information The Company will host an earnings conference call at 8:30 am U.S. Eastern Time (9:30 pm Japan Standard Time) on March 24, 2023. Dial-in details for the conference call are as follows: Date: March 24, 2023 Time: 8:30 am U.S. Eastern Time International: 1-412-902-4272 United States Toll Free: 1-888-346-8982 Japan Toll Free: 0066-33-812830 Conference ID Yoshitsu Co., Ltd Please dial in at least 15 minutes before the commencement of the call to ensure timely participation. For those unable to participate, an audio replay of the conference call will be available from approximately one hour after the end of the live call until March 31, 2023. The dial-in for the replay is +1-877-344-7529 within the United States or +1-412-317-0088 internationally. The replay access code is No. 6190194. A live and archived webcast of the conference call will also be available at the Company's investor relations website at https://www.ystbek.co.jp/irlibrary/. About Yoshitsu Co., Ltd Headquartered in Tokyo, Japan, Yoshitsu Co., Ltd is a retailer and wholesaler of Japanese beauty and health products, sundry products, and other products in Japan. The Company offers various beauty products (including cosmetics, skin care, fragrance, and body care products), health products (including over-the-counter drugs, nutritional supplements, and medical supplies and devices), sundry products (including home goods), and other products (including food and alcoholic beverages). The Company currently sells its products through directly-operated physical stores, through online stores, and to franchise stores and wholesale customers. For more information, please visit the Company's website at https://www.ystbek.co.jp/irlibrary/. Forward-Looking Statements All statements other than statements of historical fact in this press release are forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations and projections about future events and financial trends that the Company believes may affect its financial condition, results of operations, business strategy, and financial needs. Investors can identify these forward-looking statements by words or phrases such as "may," "will," "expect," "anticipate," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "is/are likely to," or other similar expressions. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. In addition, there is uncertainty about the further spread of the COVID-19 virus or the occurrence of another wave of cases and the impact it may have on the Company's operations, the demand for the Company's products, global supply chains, and economic activity in general. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the Company cautions investors that actual results may differ materially from the anticipated results and encourages investors to review other factors that may affect its future results in the Company's registration statement and in its other filings with the U.S. Securities and Exchange Commission. For more information, please contact: Yoshitsu Co., LtdInvestor Relations DepartmentEmail: ir@ystbek.co.jp Ascent Investors Relations LLCTina XiaoPresidentPhone: +1-917-609-0333Email: tina.xiao@ascent-ir.com YOSHITSU CO., LTD UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS September 30, March 31, 2022 2022 (1) ASSETS CURRENT ASSETS: Cash $ 9,152,662 $ 18,256,220 Accounts receivable, net 55,396,057 40,969,738 Merchandise inventories, net 22,238,242 31,351,002 Due from related parties 451,201 694,428 Prepaid expenses and other current assets, net 11,646,428 10,617,640 TOTAL CURRENT ASSETS 98,884,590 101,889,028 Property and equipment, net 11,220,697 13,319,503 Operating lease right-of-use assets 3,143,744 4,209,681 Long term investment 59,930 168,509 Long-term prepaid expenses and other non-current assets, net 5,187,275 7,366,719 Deferred tax assets, net 464,613 518,909 TOTAL ASSETS $ 118,960,849 $ 127,472,349 CURRENT LIABILITIES: Short-term borrowings $ 50,678,998 $ 40,328,982 Current portion of long-term borrowings 11,943,278 1,454,378 Accounts payable 5,406,687 8,035,353 Accounts payable - related parties 2,342 132,047 Due to related parties 43,102 193,841 Deferred revenue 170,160 104,663 Income tax payable 526,811 740,552 Operating lease liabilities, current 1,483,110 1,951,408 Finance lease liabilities, current 278,638 320,555 Representative's warrants liability 70,789 181,740 Other payables and other current liabilities 1,114,389 3,371,836 TOTAL CURRENT LIABILITIES 71,718,304 56,815,355 Operating lease liabilities, non-current 1,698,332 2,308,885 Finance lease liabilities, non-current 452,433 673,612 Long-term borrowings 8,157,334 21,117,985 Other non-current liabilities 2,371,785 2,104,472 TOTAL LIABILITIES $ 84,398,188 $ 83,020,309 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Ordinary shares, 100,000,000 shares authorized; 36,250,054 shares and 36,250,054 shares issued and outstanding as of September 30, 2022 and March 31, 2022, respectively 14,694,327 14,694,327 Capital reserve 9,078,892 11,921,065 Retained earnings 21,792,910 21,465,317 Accumulated other comprehensive loss (11,003,468) (3,628,669) TOTAL SHAREHOLDERS' EQUITY 34,562,661 44,452,040 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 118,960,849 $ 127,472,349 (1) The financial information presented in this report has been retrospectively adjusted for the acquisition of Tokyo Lifestyle Limited. YOSHITSU CO., LTD UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME ANDCOMPREHENSIVE INCOME (LOSS) For the Six Months Ended September 30, 2022 2021 (1) REVENUE Revenue - third parties $ 77,607,361 $ 112,385,277 Revenue - related parties 8,188 1,436,386 Total revenue 77,615,549 113,821,663 OPERATING EXPENSES Merchandise costs 63,052,437 94,229,541 Selling, general and administrative expenses 13,518,943 15,338,855 Total operating expenses 76,571,380 109,568,396 INCOME FROM OPERATIONS 1,044,169 4,253,267 OTHER INCOME (EXPENSE) Interest expense, net (1,372,444) (1,069,630) Gain (loss) from foreign currency exchange 981,017 (107,541) Other income (expenses), net (113,409) 474,338 Change in fair value of representative's warrants liability 89,049 - Loss from equity method investment (88,737) - Total other expenses, net (504,524) (702,833) INCOME BEFORE INCOME TAX PROVISION 539,645 3,550,434 PROVISION FOR INCOME TAXES 212,052 1,600,288 NET INCOME 327,593 1,950,146 OTHER COMPREHENSIVE LOSS Foreign currency translation loss (7,374,799) (365,634) TOTAL COMPREHENSIVE INCOME (LOSS) $ (7,047,206) $ 1,584,512 Earnings per ordinary share - basic and diluted $ 0.01 $ 0.07 Weighted average shares - basic and diluted* 32,678,625 27,526,689 * Retrospectively restated for effect of a 294-for-1 forward split on August 18, 2021. (1) The financial information presented in this report has been retrospectively adjusted for the acquisition of Tokyo Lifestyle Limited. YOSHITSU CO., LTD UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2022 AND 2021 Ordinary Shares Capital Retained AccumulatedOtherComprehensive Total Shareholders' Shares* Amount Reserve Earnings Loss Equity (1) Balance, March 31, 2021 27,327,594 $ 2,416,635 $ 501,053 $ 17,538,213 $ (159,452) $ 20,296,449 Capital contribution 2,672,460 920,192 902,224 - - 1,822,416 Capital contribution in the form of debt exemption - - 302,360 - - 302,360 Net income for the period - - - 1,950,146 - 1,950,146 Foreign currency translation loss - - - - (365,634) (365,634) - - Balance, September 30, 2021 30,000,054 $ 3,336,827 $ 1,705,637 $ 19,488,359 $ (525,086) $ 24,005,737 Balance, March 31, 2022 36,250,054 $ 14,694,327 $ 11,921,065 $ 21,465,317 $ (3,628,669) $ 44,452,040 Business combinations under common control - - (2,842,173) - - (2,842,173) Net income for the period - - - 327,593 - 327,593 Foreign currency translation loss - - - - (7,374,799) (7,374,799) Balance, September 30, 2022 36,250,054 $ 14,694,327 $ 9,078,892 $ 21,792,910 $ (11,003,468) $ 34,562,661 * Retrospectively restated for effect of a 294-for-1 forward split on August 18, 2021. (1) The financial information presented in this report has been retrospectively adjusted for the acquisition of Tokyo Lifestyle Limited. YOSHITSU CO., LTD UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended September 30, 2022 2021 (1) Cash flows from operating activities: Net Income $ 327,593 $ 1,950,146 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 514,000 314,452 Loss (gain) from disposal of property and equipment 304,133 (23,073) Loss (gain) from unrealized foreign currency translation (175,351) 62,920 Provision for doubtful accounts 87,250 50,568 Amortization of operating lease right-of-use assets 1,086,370 1,100,984 Deferred tax provision (benefit) (29,689) 11,883 Change in fair value of representative's warrants liability (89,049) - Investment loss from equity method investment 88,737 - Changes in operating assets and liabilities: Accounts receivable (21,785,420) (2,377,228) Merchandise inventories 4,774,980 (8,678,860) Prepaid expenses and other current assets (4,009,679) (2,622,613) Long term prepaid expenses and other non-current assets 1,681,064 (193,890) Accounts payable (1,509,149) (6,462,073) Accounts payable - related parties (211,615) (45,829) Deferred revenue 84,979 (19,218) Income tax payable (106,681) (487,058) Other payables and other current liabilities (1,894,627) 1,726,120 Operating lease liabilities (1,102,199) (1,043,423) Other non-current liabilities 26,812 362,176 Net cash used in operating activities (21,937,541) (16,374,016) Cash flows from investing activities: Purchase of property and equipment (45,472) (1,620,818) Proceeds from disposal of property and equipment 2,992 33,707 Collections from (advances made to) related parties 145,017 (130,512) Net cash provided by (used in) investing activities 102,537 (1,717,623) Cash flows from financing activities: Capital contribution prior to IPO - 1,822,416 Cash consideration paid for business combination under common control (2,840,957) - Proceeds from short-term borrowings 74,800,000 265,509,656 Repayments of short-term borrowings (56,100,000) (262,998,550) Proceeds from long-term borrowings 2,190,669 8,323,554 Repayments of long-term borrowings (1,450,671) (669,625) Advances received from related parties (48,632) (2,951,200) Repayment of obligations under finance leases (200,104) (338,043) Net cash provided by financing activities 16,350,305 8,698,208 Effect of exchange rate fluctuation on cash (3,618,859) (119,454) Net decrease in cash (9,103,558) (9,512,885) Cash at beginning of period 18,256,220 16,843,588 Cash at end of period $ 9,152,662 $ 7,330,703 Supplemental cash flow information Cash paid for income taxes $ 334,323 $ 2,106,469 Cash paid for interest $ 644,244 $ 423,911 Supplemental non-cash operating activities Purchase of property and equipment financed under long-term payment $ - $ 23,234 Purchase of property and equipment financed under finance leases $ 30,892 $ 340,615 Right of use assets obtained in exchange for operating lease liabilities $ 464,940 $ 2,790,466 Capital contribution in the form of debt exemption $ - $ 302,360 (1) The financial information presented in this report has been retrospectively adjusted for the acquisition of Tokyo Lifestyle Limited.
Q4 net revenues decreased by 1.7% year-over-year Q4 gross billings (non-GAAP) decreased by 23.3% year-over-year Q4 net income reached RMB181.0 million BEIJING, March 24, 2023 /PRNewswire/ -- Sunlands Technology Group (NYSE: STG) ("Sunlands" or the "Company"), a leader in China's online post-secondary and professional education, today announced its unaudited financial results for the fourth quarter ended December 31, 2022. Fourth Quarter 2022 Financial and Operational Snapshots Net revenues were RMB578.6 million (US$83.9 million), representing a 1.7% decrease year-over-year. Gross billings (non-GAAP) were RMB370.8 million (US$53.8 million), representing a 23.3% decrease year-over-year. Gross profit was RMB503.3 million (US$73.0 million), representing a 0.8% increase year-over-year. Net income was RMB181.0 million (US$26.2 million), compared with net income of RMB150.8 million in the fourth quarter of 2021. Net income margin, defined as net income as a percentage of net revenues, increased to 31.3% from 25.6% in the fourth quarter of 2021. New student enrollments[1] were 161,348, representing a 48.2% increase year-over-year. As of December 31, 2022, the Company's deferred revenue balance was RMB1,690.9 million (US$245.2 million). [1] New student enrollments for a given period refers to the total number of orders placed by students that newly enroll in at least one course during that period,including those students that enroll and then terminate their enrollment with us, excluding orders of our low-price courses. (In June 2019, we introduced low-price courses, including "mini courses" and "RMB1 courses," to strengthen our competitiveness and improve customer experience. We offer such low-price courses mainly in the formats of recorded videos or short live streaming.) Full Year 2022 Financial and Operational Snapshots Net revenues were RMB2,323.1 million (US$336.8 million), compared with RMB2,507.8 million in 2021. Gross billings (non-GAAP) were RMB1,496.7 million (US$217.0 million), compared with RMB1,970.0 million in 2021. Gross profit was RMB1,975.0 million (US$286.3 million), compared with RMB2,131.6 million in 2021. Net income was RMB643.0 million (US$93.2 million), compared with net income of RMB212.4 million in 2021. Net income margin, defined as net income as a percentage of net revenues, increased to 27.7% from 8.5% in the year 2021. New student enrollments were 534,280, compared with 434,228 in 2021. "Thanks to unwavering execution of our balanced growth and profitability strategy, we concluded 2022 with sustained growth in both new student enrollments and our bottom line in the fourth quarter," said Mr. Tongbo Liu, Chief Executive Officer of Sunlands. "We maintained our disciplined cost management practices and streamlined operations to boost our efficiency and profitability, driving our quarterly net income to RMB181.0 million in the fourth quarter and our full-year net income to RMB643.0 million, more than triple that of 2021." "During the quarter, we sharpened our strategic focus on diversifying our course content, enhancing our course and service quality, and improving student acquisition efficiency, leading to 48.2% year-over-year and 19.5% quarter-over-quarter increases in new student enrollments. Moreover, we further pursued the opportunities fueling the ongoing market demand for skill and interest courses by expanding our professional certification preparation, professional skills and interest programs, which yielded encouraging results. In addition to our continued product mix optimization, we have been prudently exploring new monetization opportunities to drive our future growth. As we progress into 2023, we remain committed to refining our products and services to fulfill a wider age group's learning needs while amplifying our operational efficiency improvement efforts to support our long-term, sustainable growth," concluded Mr. Liu. Ms. Selena Lu Lv, Chief Financial Officer of Sunlands, added, "Amid a persistently challenging macro environment, our net revenues came in at RMB578.6 million in the fourth quarter, representing a 1.7% year-over-year decrease but beating the high end of our guidance range by 7.1%. As we continued to execute cost reduction and efficiency optimization measures, we successfully brought our fourth quarter operating expenses down by 16.1% year-over-year, which contributed to enhanced profitability as reflected in our 20.0% year-over-year increase in net income. Our net income margin also expanded further to 31.3% in the fourth quarter from 25.6% in the same period of 2021 and 29.2% in the prior quarter. In 2023, we will continue to deepen our strategy balancing business growth and profitability as we strive to create incremental value for our stakeholders." Financial Results for the fourth quarter of 2022 Net Revenues In the fourth quarter of 2022, net revenues decreased by 1.7% to RMB578.6 million (US$83.9 million) from RMB588.9 million in the fourth quarter of 2021. The decrease was mainly driven by the decline in gross billings over the recent quarters. Cost of Revenues Cost of revenues decreased by 15.8% to RMB75.3 million (US$10.9 million) in the fourth quarter of 2022 from RMB89.4 million in the fourth quarter of 2021. The decrease was primarily due to declined compensation expenses related to headcount reduction of our cost of revenues personnel, including teachers and mentors. Gross Profit Gross profit increased by 0.8% to RMB503.3 million (US$73.0 million) in the fourth quarter of 2022 from RMB499.5 million in the fourth quarter of 2021. Operating Expenses In the fourth quarter of 2022, operating expenses were RMB336.0 million (US$48.7 million), representing a 16.1% decrease from RMB400.5 million in the fourth quarter of 2021. Sales and marketing expenses decreased by 19.7% to RMB272.5 million (US$39.5 million) in the fourth quarter of 2022 from RMB339.4 million in the fourth quarter of 2021. The decrease was mainly due to: (i) lower spending on branding and marketing activities; (ii) declined compensation expenses related to headcount reduction of our sales and marketing personnel and (iii) declined rental expenses due to the early termination of certain lease contracts. General and administrative expenses increased by 11.1% to RMB56.1 million (US$8.1 million) in the fourth quarter of 2022 from RMB50.5 million in the fourth quarter of 2021. The increase was mainly due to the increase in professional service fees. Product development expenses decreased by 30.8% to RMB7.4 million (US$1.1 million) in the fourth quarter of 2022 from RMB10.7 million in the fourth quarter of 2021. The decrease was mainly due to declined compensation expenses related to headcount reduction of our product development personnel. Other Income/Other Expense Other income was RMB4.9 million (US$0.7 million) in the fourth quarter of 2022, compared with other expense of RMB3.1 million in the fourth quarter of 2021. Net Income Net income for the fourth quarter of 2022 was RMB181.0 million (US$26.2 million), compared with RMB150.8 million in the fourth quarter of 2021. Basic and Diluted Net Income Per Share Basic and diluted net income per share was RMB26.03 (US$3.77) in the fourth quarter of 2022. Cash, Cash Equivalents, Restricted Cash and Short-term Investments As of December 31, 2022, the Company had RMB757.4 million (US$109.8 million) of cash, cash equivalents and restricted cash and RMB70.5 million (US$10.2 million) of short-term investments, compared with RMB676.7 million of cash, cash equivalents and restricted cash and RMB184.2 million of short-term investments as of December 31, 2021. Deferred Revenue As of December 31, 2022, the Company had a deferred revenue balance of RMB1,690.9 million (US$245.2 million), compared with RMB2,348.2 million as of December 31, 2021. Capital Expenditures Capital expenditures were incurred primarily in connection with information technology ("IT") infrastructure equipment and leasehold improvements necessary to support the Company's operations. Capital expenditures were RMB0.7 million (US$0.1 million) in the fourth quarter of 2022, compared with RMB5.2 million in the fourth quarter of 2021. Financial Results for the Year 2022 Net Revenues In 2022, net revenues decreased by 7.4% to RMB2,323.1 million (US$336.8 million) from RMB2,507.8 million in the year of 2021. Cost of Revenues Cost of revenues decreased by 7.5% to RMB348.2 million (US$50.5 million) in the year of 2022 from RMB376.2 million in the year of 2021. Gross Profit Gross profit decreased by 7.4% to RMB1,975.0 million (US$286.3 million) from RMB2,131.6 million in 2021. Operating Expenses In the year of 2022, operating expenses were RMB1,358.0 million (US$196.9 million), representing a 32.7% decrease from RMB2,017.4 million in 2021. Sales and marketing expenses decreased by 35.4% to RMB1,129.5 million (US$163.8 million) in 2022 from RMB1,748.4 million in 2021. The decrease was mainly due to: (i) lower spending on branding and marketing activities; and (ii) declined compensation expenses related to headcount reduction of our sales and marketing personnel. General and administrative expenses decreased by 10.6% to RMB185.7 million (US$26.9 million) in 2022 from RMB207.6 million in 2021. The decrease was mainly due to a decrease in compensation expenses related to headcount reduction of our general and administrative personnel. Product development expenses decreased by 30.2% to RMB42.8 million (US$6.2 million) in 2022 from RMB61.3 million in 2021. The decrease was primarily due to declined compensation expenses related to headcount reduction of our product development personnel. Other Income Other income for 2022 was RMB24.5 million (US$3.6 million), compared with RMB39.2 million in 2021. The decrease was primarily because value-added tax exemption offered by the relevant tax authorities as part of the national COVID-19 relief effort came to an end in April 2021. Net Income Net income for 2022 was RMB643.0 million (US$93.2 million), compared with net income of RMB212.4 million in 2021. Basic and Diluted Net Income Per Share Basic and diluted net income per share was RMB94.14 (US$13.65) in 2022, compared with RMB32.56 in 2021. Capital Expenditures Capital expenditures were incurred primarily in connection with IT infrastructure equipment and leasehold improvement necessary to support the Company's operations. Capital expenditures were RMB3.2 million (US$0.5 million) in 2022, compared with RMB16.5 million in 2021. Outlook For the first quarter of 2023, Sunlands currently expects net revenues to be between RMB530 million to RMB550 million, which would represent a decrease of 10.3% to 13.6% year-over-year. The above outlook is based on the current market conditions and reflects the Company's current and preliminary estimates of market and operating conditions and customer demand, which are all subject to substantial uncertainty. Exchange Rate The Company's business is primarily conducted in China and all revenues are denominated in Renminbi ("RMB"). This announcement contains currency conversions of RMB amounts into U.S. dollars ("US$") solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to US$ are made at a rate of RMB6.8972 to US$1.00, the effective noon buying rate for December 30, 2022 as set forth in the H.10 statistical release of the Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on December 30, 2022, or at any other rate. Conference Call and Webcast Sunlands' management team will host a conference call at 7:30 AM U.S. Eastern Time, (7:30 PM Beijing/Hong Kong time) on March 24, 2023, following the quarterly results announcement. The dial-in details for the live conference call are: International: +1-412-902-4272 US toll free: +1-888-346-8982 Mainland China toll free: 400-120-1203 Hong Kong toll free: 800-905-945 Hong Kong: +852-3018-4992 Please dial in 10 minutes before the call is scheduled to begin. When prompted, ask to be connected to the call for "Sunlands Technology Group." Participants will be required to state their name and company upon entering the call. A live webcast and archive of the conference call will be available on the Investor Relations section of Sunlands' website at http://www.sunlands.investorroom.com/. A replay of the conference call will be available 1 hour after the end of the conference call until March 24, 2023, by dialing the following telephone numbers: International: +1-412-317-0088 US toll free: +1-877-344-7529 Replay access code: 3501228 About Sunlands Sunlands Technology Group (NYSE: STG) ("Sunlands" or the "Company"), formerly known as Sunlands Online Education Group, is the leader in China's online post-secondary and professional education. With a one to many, live streaming platform, Sunlands offers various degree and diploma-oriented post-secondary courses as well as online professional courses and educational content, to help students prepare for professional certification exams and attain professional skills. Students can access its services either through PC or mobile applications. The Company's online platform cultivates a personalized, interactive learning environment by featuring a virtual learning community and a vast library of educational content offerings that adapt to the learning habits of its students. Sunlands offers a unique approach to education research and development that organizes subject content into Learning Outcome Trees, the Company's proprietary knowledge management system. Sunlands has a deep understanding of the educational needs of its prospective students and offers solutions that help them achieve their goals. About Non-GAAP Financial Measures We use gross billings, EBITDA, non-GAAP operating cost and expense, non-GAAP loss/income from operations and Non-GAAP net loss/income per share, each a non-GAAP financial measure, in evaluating our operating results and for financial and operational decision-making purposes. We define gross billings for a specific period as the total amount of cash received for the sale of course packages, net of the total amount of refunds paid in such period. Our management uses gross billings as a performance measurement because we generally bill our students for the entire course tuition at the time of sale of our course packages and recognize revenue proportionally over a period. EBITDA is defined as net loss/income excluding depreciation and amortization, interest expense, interest income, and income tax expenses/benefit. We believe that gross billings and EBITDA provide valuable insight into the sales of our course packages and the performance of our business. These non-GAAP financial measures should not be considered in isolation from, or as a substitute for, their most directly comparable financial measure prepared in accordance with GAAP. A reconciliation of the historical non-GAAP financial measures to their respective most directly comparable GAAP measure has been provided in the tables included below. Investors are encouraged to review the reconciliation of the historical non-GAAP financial measures to their respective most directly comparable GAAP financial measures. As gross billings, EBITDA, operating cost and expenses excluding share-based compensation expenses, general and administrative expenses excluding share-based compensation expenses, sales and marketing expenses excluding share-based compensation expenses, product development expenses excluding share-based compensation expenses, non-GAAP net loss/income exclude share-based compensation expenses, and basic and diluted net loss/income per share excluding share-based compensation expenses have material limitations as an analytical metric and may not be calculated in the same manner by all companies, it may not be comparable to other similarly titled measures used by other companies. In light of the foregoing limitations, you should not consider gross billings and EBITDA as a substitute for, or superior to, their respective most directly comparable financial measures prepared in accordance with GAAP. We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure. Safe Harbor Statement This press release contains forward-looking statements made under the "safe harbor" provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Sunlands may also make written or oral forward-looking statements in its reports filed with or furnished 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. Any statements that are not historical facts, including statements about Sunlands' beliefs and expectations, are forward-looking statements that involve factors, risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors and risks include, but not limited to the following: Sunlands' goals and strategies; its expectations regarding demand for and market acceptance of its brand and services; its ability to retain and increase student enrollments; its ability to offer new courses and educational content; its ability to improve teaching quality and students' learning results; its ability to improve sales and marketing efficiency and effectiveness; its ability to engage, train and retain new faculty members; its future business development, results of operations and financial condition; its ability to maintain and improve technology infrastructure necessary to operate its business; competition in the online education industry in China; relevant government policies and regulations relating to Sunlands' corporate structure, business and industry; and general economic and business condition in China Further information regarding these and other risks, uncertainties or factors is included in the Sunlands' filings with the U.S. Securities and Exchange Commission. All information provided in this press release is current as of the date of the press release, and Sunlands does not undertake any obligation to update such information, except as required under applicable law. For investor and media enquiries, please contact: Sunlands Technology GroupInvestor RelationsEmail: sl-ir@sunlands.com UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except for share and per share data, or otherwise noted) As of December 31, As of December 31, 2021 2022 RMB RMB US$ ASSETS Current assets Cash and cash equivalents 626,715 753,642 109,268 Restricted cash 50,008 3,762 545 Short-term investments 184,159 70,542 10,228 Prepaid expenses and other current assets 176,349 98,272 14,248 Deferred costs, current 89,353 42,886 6,218 Total current assets 1,126,584 969,104 140,507 Non-current assets Property and equipment, net 857,648 813,783 117,987 Intangible assets, net 2,761 1,509 219 Right-of-use assets 362,335 274,643 39,819 Deferred costs, non-current 109,020 78,839 11,431 Long-term investments 54,844 73,513 10,658 Deferred tax assets 39,265 26,799 3,885 Other non-current assets 40,163 37,880 5,492 Total non-current assets 1,466,036 1,306,966 189,491 TOTAL ASSETS 2,592,620 2,276,070 329,998 LIABILITIES AND SHAREHOLDERS' DEFICIT LIABILITIES Current liabilities Accrued expenses and other current liabilities (including accrued expenses and other current liabilities of the consolidated VIEs without recourse to Sunlands Technology Group of RMB197,467 and RMB191,172 as of December 31, 2021 and 2022, respectively) 586,043 436,339 63,263 Deferred revenue, current (including deferred revenue, current of the consolidated VIEs without recourse to Sunlands Technology Group of RMB295,958 and RMB374,208 as of December 31, 2021 and 2022, respectively) 1,266,948 986,086 142,969 Lease liabilities, current portion (including lease liabilities, current portion of the consolidated VIEs without recourse to Sunlands Technology Group of RMB8,366 and RMB17,065 as of December 31, 2021 and 2022, respectively) 14,310 17,065 2,474 Long-term debt, current portion (including long-term debt, current portion of the consolidated VIEs without recourse to Sunlands Technology Group of nil and nil as of December 31, 2021 and 2022, respectively) 38,654 38,654 5,604 Total current liabilities 1,905,955 1,478,144 214,310 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS-continued (Amounts in thousands, except for share and per share data, or otherwise noted) As of December 31, As of December 31, 2021 2022 RMB RMB US$ Non-current liabilities Deferred revenue, non-current (including deferred revenue, non-current of the consolidated VIEs without recourse to Sunlands Technology Group of RMB257,071 and RMB251,080 as of December 31, 2021 and 2022, respectively) 1,081,231 704,860 102,195 Lease liabilities, non-current portion (including lease liabilities, non-current portion of the consolidated VIEs without recourse to Sunlands Technology Group of RMB318,598 and RMB316,844 as of December 31, 2021 and 2022, respectively) 404,133 316,844 45,938 Deferred tax liabilities (including deferred tax liabilities of the consolidated VIEs without recourse to Sunlands Technology Group of RMB2,312 and RMB1,122 as of December 31, 2021 and 2022, respectively) 21,782 5,984 868 Other non-current liabilities (including other non-current liabilities of the consolidated VIEs without recourse to Sunlands Technology Group of RMB963 and RMB1,063 as of December 31, 2021 and 2022, respectively) 11,698 6,770 982 Long-term debt, non-current portion(including long-term debt, non-current portion of the consolidated VIEs without recourse to Sunlands Technology Group of nil and nil as of December 31, 2021 and 2022, respectively) 181,973 143,319 20,779 Total non-current liabilities 1,700,817 1,177,777 170,762 TOTAL LIABILITIES 3,606,772 2,655,921 385,072 SHAREHOLDERS' DEFICIT Class A ordinary shares (par value of US$0.00005, 796,062,195 shares authorized; 2,085,939 and 2,982,516 shares issued as of December 31, 2021 and December 31, 2022, respectively; 1,839,553 and 2,618,698 shares outstanding as of December 31, 2021 and 2022, respectively) 1 1 - Class B ordinary shares (par value of US$0.00005, 826,389 shares authorized; 826,389 and 826,389 shares issued and outstanding as of December 31, 2021 and 2022, respectively) - - - Class C ordinary shares (par value of US$0.00005, 203,111,416 shares authorized; 4,002,930 and 3,481,353 shares issued and outstanding as of December 31, 2021 and 2022, respectively) 1 1 - Treasury stock - - - Accumulated deficit (3,456,073) (2,812,114) (407,718) Additional paid-in capital 2,364,313 2,309,740 334,881 Accumulated other comprehensive income 82,532 127,885 18,541 Total Sunlands Technology Group shareholders' deficit (1,009,226) (374,487) (54,296) Non-controlling interest (4,926) (5,364) (778) TOTAL SHAREHOLDERS' DEFICIT (1,014,152) (379,851) (55,074) TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT 2,592,620 2,276,070 329,998 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except for share and per share data, or otherwise noted) For the Three Months Ended December 31, 2021 2022 RMB RMB US$ Net revenues 588,883 578,588 83,887 Cost of revenues (89,378) (75,291) (10,916) Gross profit 499,505 503,297 72,971 Operating expenses Sales and marketing expenses (339,368) (272,477) (39,505) Product development expenses (10,656) (7,369) (1,068) General and administrative expenses (50,499) (56,129) (8,138) Total operating expenses (400,523) (335,975) (48,711) Income from operations 98,982 167,322 24,260 Interest income 3,018 7,040 1,021 Interest expense (2,900) (2,295) (333) Other (expense)/income, net (3,145) 4,860 705 Impairment loss on long-term investments (5,000) - - Gain/(loss) on disposal of subsidiaries 43,967 (319) (46) Income before income tax benefit/(expense) and (loss)/income from equity method investments 134,922 176,608 25,607 Income tax benefit/(expense) 20,581 (3,424) (496) (Loss)/income from equity method investments (4,731) 7,770 1,127 Net income 150,772 180,954 26,238 Less: Net (loss)/income attributable to non-controlling interest (3,104) 330 48 Net income attributable to Sunlands Technology Group 153,876 180,624 26,190 Net income per share attributable to ordinary shareholders of Sunlands Technology Group: Basic and diluted 22.89 26.03 3.77 Weighted average shares used in calculating net income per ordinary share: Basic and diluted 6,722,670 6,939,213 6,939,213 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Amounts in thousands) For the Three Months Ended December 31, 2021 2022 RMB RMB US$ Net income 150,772 180,954 26,238 Other comprehensive loss, net of tax effect of nil: Change in cumulative foreign currency translation adjustments (6,117) (15,938) (2,311) Total comprehensive income 144,655 165,016 23,927 Less: comprehensive (loss)/income attributable to non-controlling interest (3,104) 330 48 Comprehensive income attributable to Sunlands Technology Group 147,759 164,686 23,879 SUNLANDS TECHNOLOGY GROUP RECONCILIATION OF GAAP AND NON-GAAP RESULTS (Amounts in thousands) For the Three Months Ended December 31, 2021 2022 RMB RMB Net revenues 588,883 578,588 Less: other revenues (21,236) (39,344) Add: tax and surcharges 58,093 10,823 Add: ending deferred revenue 2,348,179 1,690,946 Add: deferred revenue in connection with disposal of subsidiaries 29,572 259 Add: ending refund liability 243,236 133,066 Less: beginning deferred revenue (2,540,886) (1,798,558) Less: beginning refund liability (222,266) (204,961) Gross billings (non-GAAP) 483,575 370,819 Net income 150,772 180,954 Add: income tax (benefit)/expense (20,581) 3,424 depreciation and amortization 9,651 18,584 interest expense 2,900 2,295 Less: interest income (3,018) (7,040) EBITDA (non-GAAP) 139,724 198,217 SUNLANDS TECHNOLOGY GROUP RECONCILIATION OF GAAP AND NON-GAAP RESULTS (Amounts in thousands, except for share and per share data, or otherwise noted) For the Three Months Ended December 31, 2021 2022 RMB RMB Cost of revenues (89,378) (75,291) Less: Share-based compensation expenses in cost of revenues (56) - Non-GAAP cost of revenues (89,322) (75,291) Sales and marketing expenses (339,368) (272,477) Less: Share-based compensation expenses in sales and marketing expenses (58) - Non-GAAP sales and marketing expenses (339,310) (272,477) General and administrative expenses (50,499) (56,129) Less: Share-based compensation expenses in general and administrative expenses (357) - Non-GAAP general and administrative expenses (50,142) (56,129) Operating costs and expense (489,901) (411,266) Less: Share-based compensation expenses (471) - Non-GAAP operating costs and expense (489,430) (411,266) Income from operations 98,982 167,322 Less: Share-based compensation expenses (471) - Non-GAAP income from operations 99,453 167,322 Net income attributable to Sunlands Technology Group 153,876 180,624 Less: Share-based compensation expenses (471) - Non-GAAP net income attributable to Sunlands Technology Group 154,347 180,624 Net income per share attributable to ordinary shareholders of Sunlands Technology Group: Basic and diluted 22.89 26.03 Non-GAAP net income per share attributable to ordinary shareholders of Sunlands Technology Group: Basic and diluted 22.96 26.03 Weighted average shares used in calculating net income per ordinary share: Basic and diluted 6,722,670 6,939,213 Weighted average shares used in calculating Non-GAAP net income per ordinary share: Basic and diluted 6,722,670 6,939,213 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except for share and per share data, or otherwise noted) For the Years Ended December 31, 2021 2022 RMB RMB US$ Net revenues 2,507,817 2,323,101 336,818 Cost of revenues (376,189) (348,150) (50,477) Gross profit 2,131,628 1,974,951 286,341 Operating expenses Sales and marketing expenses (1,748,436) (1,129,508) (163,763) Product development expenses (61,325) (42,834) (6,210) General and administrative expenses (207,602) (185,667) (26,919) Total operating expenses (2,017,363) (1,358,009) (196,892) Income from operations 114,265 616,942 89,449 Interest income 16,175 16,248 2,356 Interest expense (10,929) (10,059) (1,458) Other income, net 39,156 24,527 3,556 Impairment loss on long-term investments (5,000) (500) (72) Gain on disposal of subsidiaries 43,967 1,390 202 Income before income tax benefit 197,634 648,548 94,033 Income tax benefit/(expense) 19,618 (11,992) (1,739) (Loss)/gain from equity method investments (4,886) 6,453 936 Net income 212,366 643,009 93,230 Less: Net loss attributable to non-controlling interest (6,690) (950) (138) Net income attributable to Sunlands Technology Group 219,056 643,959 93,368 Net income per share attributable to ordinary shareholders of Sunlands Technology Group: Basic and diluted 32.56 94.14 13.65 Weighted average shares used in calculating net income per ordinary share: Basic and diluted 6,727,552 6,840,079 6,840,079 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Amounts in thousands) For the Years Ended December 31, 2021 2022 RMB RMB US$ Net income 212,366 643,009 93,230 Other comprehensive (loss)/income, net of tax effect of nil: Change in cumulative foreign currency translation adjustments (13,958) 45,353 6,576 Total comprehensive income 198,408 688,362 99,806 Less: comprehensive loss attributable to non-controlling interest (6,690) (950) (138) Comprehensive income attributable to Sunlands Technology Group 205,098 689,312 99,944 SUNLANDS TECHNOLOGY GROUP RECONCILIATION OF GAAP AND NON-GAAP RESULTS (Amounts in thousands) For the Years Ended December 31, 2021 2022 RMB RMB Net revenues 2,507,817 2,323,101 Less: other revenues (79,444) (125,864) Add: tax and surcharges 177,966 66,638 Add: ending deferred revenue 2,348,179 1,690,946 Add: deferred revenue in connection with disposal of subsidiaries 29,572 259 Add: ending refund liability 243,236 133,066 Less: beginning deferred revenue (3,024,443) (2,348,179) Less: beginning refund liability (232,859) (243,236) Gross billings (non-GAAP) 1,970,024 1,496,731 Net income 212,366 643,009 Add: income tax (benefit)/expense (19,618) 11,992 depreciation and amortization 37,916 46,684 interest expense 10,929 10,059 Less: interest income (16,175) (16,248) EBITDA (non-GAAP) 225,418 695,496 SUNLANDS TECHNOLOGY GROUP RECONCILIATION OF GAAP AND NON-GAAP RESULTS (Amounts in thousands, except for share and per share data, or otherwise noted) For the Years Ended December 31, 2021 2022 RMB RMB Cost of revenues (376,189) (348,150) Less: Share-based compensation expenses in cost of revenues (101) (33) Non-GAAP cost of revenues (376,088) (348,117) Sales and marketing expenses (1,748,436) (1,129,508) Less: Share-based compensation expenses in sales and marketing expenses 14 (4,166) Non-GAAP sales and marketing expenses (1,748,450) (1,125,342) General and administrative expenses (207,602) (185,667) Less: Share-based compensation expenses in general and administrative expenses (681) (2,982) Non-GAAP general and administrative expenses (206,921) (182,685) Operating costs and expense (2,393,552) (1,706,159) Less: Share-based compensation expenses (768) (7,181) Non-GAAP operating costs and expense (2,392,784) (1,698,978) Income from operations 114,265 616,942 Less: Share-based compensation expenses (768) (7,181) Non-GAAP income from operations 115,033 624,123 Net income attributable to Sunlands Technology Group 219,056 643,959 Less: Share-based compensation expenses (768) (7,181) Non-GAAP net income attributable to Sunlands Technology Group 219,824 651,140 Net income per share attributable to ordinary shareholders of Sunlands Technology Group: Basic and diluted 32.56 94.14 Non-GAAP net income per share attributable to ordinary shareholders of Sunlands Technology Group: Basic and diluted 32.68 95.19 Weighted average shares used in calculating net income per ordinary share: Basic and diluted 6,727,552 6,840,079 Weighted average shares used in calculating Non-GAAP net income per ordinary share: Basic and diluted 6,727,552 6,840,079
Company maintains priority focus on clinical programs to develop a novel functional cure for hepatitis B viral (HBV) infection and a potential first-of-its-kind treatment for postpartum depression (PPD) and major depressive disorders (MDD) Multiple Phase 2a proof-of-concept (POC) clinical data readouts and Phase 2b clinical trial initiations expected in 2023 Operations well-funded through 2025 Company to host conference call today at 8:00 PM HKT / 8:00 AM ET DURHAM, N.C. and BEIJING, March 24, 2023 /PRNewswire/ -- Brii Biosciences Limited ("Brii Bio," "we," or the "Company", stock code: 2137.HK), a biotechnology company developing therapies to improve patient health and choice across diseases with high unmet needs, today announced a corporate update and reported its annual results for the year ended December 31, 2022. "In 2022 we achieved several key clinical, commercial and corporate milestones that strengthen our overall position to tackle major public health challenges on behalf of patients." Stated Zhi Hong, Ph.D., Chairman and Chief Executive Officer of Brii Bio, "Throughout the upcoming year, we will continue to advance our lead clinical development programs as we work to bring a functional cure for hepatitis B viral infection to patients in China and potential first-of-its-kind treatment options for postpartum depression and major depressive disorders to patients in the U.S. Across our broader infectious and central nervous system disease portfolios, we look forward to adding new best-in-class partnerships and applying our proven internal discovery capabilities to strategically shape and position the Company for long-term growth and success." Beyond its lead clinical programs in hepatitis B viral (HBV) infection, postpartum depression (PPD) and major depressive disorders (MDD), Brii Bio and its partners are advancing a broad pipeline of more than 10 differentiated treatment options for anxiety and major depressive disorders, human immunodeficiency virus (HIV), multidrug resistant (MDR) and extensively drug resistant (XDR) Gram-negative infections and non-tuberculous mycobacterial (NTM) lung disease. In addition, Brii Bio has made the decision to discontinue its amubarvimab/romlusevimab antibody combination program for COVID-19 and has stopped manufacturing efforts in order to redirect resources to high-priority programs. This determination is based on constantly evolving COVID-19 trends and policy updates, as well as protracted regulatory inspections at our contract development and manufacturing organization (CDMO) sites. Fiscal Year 2022 and Recent Corporate Developments Brii Bio expanded its executive leadership team and strengthened its Board structure and corporate development initiatives with the additions of Dr. Ankang Li, Chief Strategy and Financial Officer, to the Board of Directors as an executive director and chair of the Strategy Committee, and Dr. Taiyin Yang as an independent non-executive director of the Board and co-chair of the Audit and Risk Committee. New additions to the Brii Bio senior leadership team included Dr. Susannah Cantrell, Chief Business Officer, Dr. Eleanor de Groot, Chief Technology Officer, Dr. Aleksandar Skuban, Central Nervous System Diseases Therapy Area Head, and Karen D. Neuendorff, Chief People Officer. Brii Bio strengthened the China leadership team, which included the appointments of Dr. Qing Zhu to Head of China Research & Development, and Mr. Rico Liang to General Manager of China. Brii Bio was added to the MSCI China Small Cap Index, an international benchmark for global institutional investors seeking to optimize their investment portfolios. Brii Bio commercially launched the amubarvimab/romlusevimab combination as a long-acting COVID-19 neutralizing antibody in China. Brii Bio continued to foster partnerships with key maternal health advocacy groups to address patient needs and preferences in the U.S., including supporting the Postpartum Support International's Climb Out of the Darkness event, and sponsorship of the 20/20 Mom Annual Forum, Maternal Mental Health Now, the 35th Annual Postpartum Support International Conference and the 2022 Black Maternal & Mental Health Summit. Brii Bio continues to receive broad industry recognition for its corporate and clinical development accomplishments across more than 10 awards and feature lists, including "50 Women in Tech" by Forbes China, "2022 Annual Biotechnology Innovation" by China Times, "Top 10 Chinese Pharmaceutical Listed Companies in ESG Investment Value in 2022" by Healthcare Executives, "2022-2023 Gold Bell Seal for Workplace Mental Health" by Mental Health America and more. Brii Bio also received an "A" rating by MSCI ESG Rating, a globally recognized assessment of a company's resilience to long-term environmental, social and governance (ESG) risks. Fiscal Year 2022 Clinical Pipeline Highlights and Upcoming Milestones Hepatitis B Virus (HBV) Program (China team core project) Led by Brii Bio's team in China and partners, Vir Biotechnology, Inc. ("Vir," NASDAQ: VIR) and VBI Vaccines, Inc. ("VBI," NASDAQ: VBIV), the Company is progressing multiple combination studies for the treatment of HBV to improve the probability of achieving a high rate of functional cure for chronic HBV patients in China. China has the largest prevalence of HBV in the world, with 87 million people impacted by this disease, yet there is no effective functional cure currently available for patients. BRII-179 (VBI-2601) in Combination with BRII-835 (VIR-2218) (Study conducted by Brii Bio) In February 2023, interim results were presented in an oral session at the Asian Pacific Association for the Study of Liver (APASL) 2023 indicating that combination therapy with BRII-835 (VIR-2218) and BRII-179 (VBI-2601) was safe and well-tolerated, induced stronger anti-hepatitis B surface antigen (HBsAg) antibody responses and led to improved HBsAg-specific T-cell responses, when compared with BRII-835 (VIR-2218) or BRII-179 (VBI-2601) alone. In the data presented at APASL, 50 participants in all cohorts achieved HBsAg reduction at the end of treatment with a mean decrease of -1.7 to -1.8 log10 IU/mL. In addition, two participants in combination cohorts achieved maximum reductions in HBsAg at or below the lower limit of quantification (LLOQ) by Week 40, along with robust HBsAg-specific antibody and T-cell responses. Additional data from the Phase 2 study of BRII-179/BRII-835 combination are expected in the second half of 2023. BRII-179 (VBI-2601) in Combination with PEG-IFN-α (Study conducted by Brii Bio) In December 2022, the Company completed patient enrollment in part one of a Phase 2 combination trial evaluating the addition of BRII-179 (VBI-2601) in chronic HBV patients already receiving pegylated interferon alpha (PEG-IFN-α) and nucleotide/nucleoside reverse transcriptase inhibitors (NRTI) treatment. Topline results are expected in the second half of 2023. VIR-2218 (BRII-835) in Combination with PEG-IFN-α (Study conducted by Vir) Vir announced end-of-treatment data from an ongoing Phase 2 trial of combination 48 weeks of VIR-2218 (BRII-835) with PEG-IFN-α at the American Association for the Study of Liver Diseases (AASLD) 2022 meeting, which demonstrated that nearly 31% of patients with chronic HBV infection achieved HBsAg seroclearance with anti-HBs seroconversion with no new safety signals. Additional data from the Phase 2 study led by Vir are expected in the first half of 2023. VIR-2218 (BRII-835) in Combination with VIR-3434 (BRII-877) (MARCH Study conducted by Vir) In November 2022, Vir presented initial end-of-treatment data at AASLD's The Liver Meeting® from Part A of its ongoing Phase 2 MARCH study evaluating VIR-2218 (BRII-835) in combination with VIR-3434 (BRII-877) in participants with chronic HBV infection who received NRTI therapy. The data indicated additive HBsAg reductions from VIR-2218 (BRII-835) and VIR-3434 (BRII-877) with combination regimens achieving a much greater HBsAg reduction than either alone in all patients with no safety signals. Additional data from Part A of Vir's ongoing Phase 2 MARCH trial are expected in the first half of 2023. Initial data to evaluate VIR-2218 (BRII-835) and VIR-3434 (BRII-877) with or without PEG-IFN-α, are expected in the second half of 2023 from Part B of Vir's ongoing Phase 2 MARCH trial. Brii Bio is working closely with the Center for Drug Evaluation (CDE) of the National Medical Products Administration (NMPA) to initiate a Phase 1 study of BRII-877 (VIR-3434) in China. Postpartum Depression (PPD) Program and Major Depressive Disorder (MDD) (U.S. team core project) Brii Bio is developing its internally-discovered BRII-296 therapeutic candidate as a first-of-its-kind one-time injection treatment with the potential to expand the PPD and MDD treatment landscapes for patients in the U.S. BRII-296 In September 2022, Brii Bio announced positive topline results from its Phase 1 study of BRII-296 with data that demonstrated a single administration of the investigational therapy at 600 mg delivered a favorable pharmacokinetic (PK) profile and was safe and well-tolerated in healthy subjects. Early feedback from physicians and patient communities is very positive and reinforces the potential for a first-of-its-kind single-injection treatment option for PPD. Brii Bio is working closely with the U.S. Food and Drug Administration (FDA) to align and agree on a PPD treatment protocol in preparation for its Phase 2 proof-of-concept (POC) study. The Company is actively working to expand the clinical indications for BRII-296 in 2023 and plans to initiate additional Phase 2 studies in the U.S. by the end of the year. BRII-297 Brii Bio has conducted Investigational New Drug (IND)-enabling studies with BRII-297 targeting various anxiety and depressive disorders. Brii Bio plans to initiate a first-in-human PK, safety and tolerability study with BRII-297 in Australia in the first half of 2023. Additional Clinical and Pre-Clinical Development Updates Human Immunodeficiency Virus (HIV) Program BRII-732 In October 2022, Brii Bio presented positive Phase 1 data showing that BRII-732 demonstrated an acceptable safety and tolerability profile, as well as a favorable and linear PK profile that achieved therapeutic targets in healthy volunteers, reinforcing its potential as an oral once-weekly therapy for the treatment of HIV infections. In December 2022, Brii Bio was notified by the U.S. FDA that it had lifted the clinical hold on the Company's planned Phase 1 study to investigate a lower oral dose of once-weekly BRII-732. The Company is exploring partnership opportunities to continue developing BRII-732 as part of a potential oral, once-weekly, long-acting combination treatment option for HIV patients. BRII-753 The Company also selected a new clinical candidate, BRII-753, as a long-acting subcutaneous injection therapy with the goal to extend the dosing schedule to once monthly, once quarterly or twice-yearly. BRII-778 Based on the PK data from a completed Phase 1 study, which determined additional development work was required to achieve optimal PK targets for the treatment of HIV, Brii Bio has made the decision to discontinue development of BRII-778. Multidrug- and Extensively Drug-Resistant (MDR/XDR) Gram-negative Bacteria Infections Program BRII-693 (QPX-9003) Qpex Biopharma, Inc. (Qpex) announced in early 2022 that BRII-693 received Qualified Infectious Disease Product (QIDP) designation by the U.S. FDA. In October 2022, Qpex presented at IDWeek interim Phase 1 results from its completed first-in-human clinical study, demonstrating that BRII-693 is safe and well-tolerated at all doses tested and supports continued development of BRII-693 for the treatment of Acinetobacter baumannii and Pseudomonas aeruginosa infections resistant to carbapenem. Qpex continues to work closely with the U.S. FDA to align its next steps in clinical development. Brii Bio plans to submit a pre-IND to the NMPA in the first half of 2023 for development of BRII-693 in China. BRII-672 (ORAvance™) Qpex announced in early 2022 that BRII-672, in combination with a non-disclosed oral beta-lactam antibiotic, received QIDP designation by the U.S. FDA. Preclinical data and interim Phase 1 clinical results were presented at IDWeek in October 2022. In the fourth quarter of 2022, Qpex completed the first-in-human Phase 1 study in the U.S. No subjects discontinued treatment due to adverse events (AEs) and no serious adverse events (SAEs) were observed in this Phase 1 single ascending dose (SAD) study. In December, Brii Bio submitted a pre-IND to the NMPA seeking regulatory guidance around a development plan for BRII-672 in China. Qpex continues to work closely with the U.S. FDA to align its next steps in clinical development. BRII-636 (OMNIvance®) Qpex announced in early 2022 that BRII-636 received QIDP designation by the U.S. FDA. Qpex completed a first-in-human Phase 1 study and a drug-drug interaction study and presented findings at IDWeek in the fourth quarter of 2022. This Phase 1 multiple ascending dose (MAD) study indicated that overall, BRII-636 (xeruborbactam), alone and in combination with meropenem, at doses associated with efficacy in animal models of infection was well-tolerated. Qpex continues to work closely with the U.S. FDA to align its next stages in clinical development. Non-tuberculous Mycobacterial (NTM) Lung Disease Program BRII-658 (epetraborole) Brii Bio's partner, AN2 Therapeutics, Inc. (NASDAQ: ANTX), is advancing a pivotal Phase 2/3 clinical trial for treatment-refractory Mycobacterium avium complex (MAC) lung disease. AN2 also completed and reported topline results from its Phase 1 bridging study designed to evaluate the PK, safety and tolerability of oral BRII-658 (epetraborole) in Japanese subjects. COVID-19 Program Following commercial launch in July 2022, Brii Bio sold substantially all available products of the amubarvimab/romlusevimab combination, with distribution to 25 provinces and 358 hospitals, with a revenue of RMB51.6 million. And as part of its commitment to ensuring humanitarian access and contributing to the containment of the pandemic outbreak, the Company donated nearly 3,000 doses for emergency use to 21 cities and 22 hospitals in China prior to the commercial launch. In January 2023, the amubarvimab/romlusevimab combination is the recommended antiviral treatment for COVID-19 in both the 10th COVID-19 Diagnosis and Treatment Guideline and the 4th COVID-19 Diagnosis and Treatment Protocol for Severe/Critical Cases. The Company has made the decision to discontinue its amubarvimab/romlusevimab antibody combination program and has stopped manufacturing efforts in order to redirect resources to high-priority programs. This determination is based on the constantly evolving COVID-19 trends including the upcoming expiration of the federal Public Health Emergency (PHE) by the U.S. Department of Health and Human Services' (HHS) in May 2023, as well as protracted regulatory inspections at our CDMO sites. The Company is working with the U.S. FDA to withdraw the Emergency Use Authorization (EUA) application at an appropriate time following the completion of activities required by the regulatory authority and also with the China NMPA to withdraw the Biologics License Application (BLA) in the third quarter of 2023 once all necessary regulatory requirements have been completed. No significant revenue is expected in the future from the commercialization of amubarvimab/romlusevimab injection combination either in China or in the U.S. and other territories. Full Year 2022 Financial Results The revenues increased by RMB51.6 million from nil for the year ended December 31, 2022. The increase was due to the commercialization of the long-acting amubarvimab/romlusevimab combination therapy in China for the treatment of COVID-19. Other income was RMB107.9 million for the year ended December 31, 2022, representing an increase of RMB8.9 million or 9.0%, compared with RMB99.0 million for the year ended December 31, 2021. The increase was mainly due to the increase in bank interest income of RMB30.7 million attributable to the increased bank and cash balances after the Global Offering. The increase was partially offset by the decrease in income recognized from PRC government grants. Research and development expenses were RMB440.6 million for the year ended December 31, 2022, representing a decrease of RMB54.0 million, or 10.9%, compared with RMB494.6 million for the year ended December 31, 2021. The decrease was primarily due to the decrease in third party contracting costs relating to COVID-19 programs. It was partially offset by the increase in the employee cost for our continuous development in clinical trials. Selling and marketing expenses increased by RMB26.9 million from nil for the year ended December 31, 2022. The increase was primarily attributable to the commercialization of COVID-19 therapy. Administrative expenses were RMB168.6 million for the year ended December 31, 2022, representing a decrease of RMB39.8 million, or 19.1%, compared with RMB208.4 million for the year ended December 31, 2021. The decrease was primarily attributable to the decrease in the employee costs. Total comprehensive expense for the year ended December 31, 2022 was RMB238.5 million, representing a decrease of RMB4,010.5 million, or 94.4%, compared with RMB4,249.0 million for the year ended December 31, 2021. The decrease was primarily attributable to the decrease in fair value loss on financial liabilities at FVTPL. Conference Call Information A live conference call will be hosted on March 24, 2023, at 8:00 PM Hong Kong time (8:00 AM U.S. Eastern Time). All participants are required to register in advance of the call. For the registration link, please click here. All participants shall use the link provided above to complete the online registration process in advance of the conference call. Upon registering, each participant will receive an email with important details for this call, including the call date, time and access link. This link is to be kept confidential and not shared with other participants. Additionally, a replay of the conference call will be available after the call and can be accessed by visiting the Company's website at www.briibio.com under the Investor Relations section. About Brii Bio's Programs Hepatitis B Virus (HBV) (Licensed from VBI and Vir, China team core project) As one of its leading clinical development programs, Brii Bio is building a broad pipeline of novel HBV therapeutic candidates in order to improve the probability of achieving a high rate of functional cure for each subpopulation of HBV patients. Each of Brii Bio's HBV candidates has a unique therapeutic modality with proven clinical benefit targeting this chronic infection, which allows the Company to explore an expansive set of potential combination treatment options for various patient subgroups. Brii Bio holds exclusive rights in Greater China to develop and commercialize BRII-179 (VBI-2601), BRII-835 (VIR-2218) and BRII-877 (VIR-3434). BRII-179 (VBI-2601) is a novel recombinant protein-based HBV immunotherapeutic candidate that expresses the Pre-S1, Pre-S2, and S HBV surface antigens, and is designed to induce enhanced B-cell and T-cell immunity. BRII-835 (VIR-2218) is a GalNAc-conjugated small interfering ribonucleic acid (siRNA) targeting all HBV viral RNAs that has shown to block viral transcription, reduce viral protein and alleviate immune suppression. BRII-877 (VIR-3434) is an investigational subcutaneously administered HBV-neutralizing monoclonal antibody designed to block entry of all 10 genotypes of HBV into hepatocytes and also to reduce the level of virions and subviral particles in the blood. BRII-877 (VIR-3434), which incorporates Xencor's Xtend™ and other Fc technologies, has been engineered to potentially function as a T cell vaccine against HBV in infected patients, as well as to have an extended half-life. Postpartum Depression (PPD) and Major Depressive Disorder (MDD)/Other CNS disorders (Internally discovered, U.S. team core project) Leveraging patient insights, Brii Bio is developing BRII-296 and BRII-297 to expand treatment options for patients with psychiatric disorders who are often underserved and overlooked across the industry. Utilizing applied drug formulation know-how to develop long-acting therapies, Brii Bio is focused on improving drug administration convenience and patient compliance to ensure potential treatment success. BRII-296 is a novel, long-acting, single injection therapeutic candidate in development for the treatment PPD and MDD. It acts as a gamma-aminobutyric acid A (GABAA) receptor positive allosteric modulator (PAM) and is designed to provide a rapid, profound and sustained reduction in depressive symptoms of PPD and MDD with the potential to lead to greater adherence, convenience and fewer side effects compared to the current standard of care. BRII-297 is a new chemical entity (NCE) discovered internally in development as a long-acting injectable (LAI) treatment of various anxiety and depression disorders. Human Immunodeficiency Virus (HIV) (Internally discovered, U.S. team project) Brii Bio is seeking partners to collaborate on the development of BRII-732 as a once-weekly oral single-tablet regimen for the treatment or prevention of HIV. Brii is also seeking development partnership for BRII 753, a novel low volume, subcutaneous injection therapy with potential to dose monthly to every six months. Both compounds demonstrate considerable promise to serve as a key component for long-acting HIV treatment regimens that will offer more discreet and convenient options for patients living with HIV, and as monotherapy for HIV prevention. BRII-732 is a proprietary prodrug NCE that, upon oral administration, is rapidly metabolized into EFdA and is under evaluation as a potential HIV treatment or prevention option. BRII-732 is a nucleoside analogue reverse transcriptase translocation inhibitor (NRTTI) that acts as both a chain terminator and translocation inhibitor of HIV. BRII-753 is an NCE currently in the preclinical stage of development. It has been internally discovered and is being developed as a long-acting subcutaneous injection with potential for dosing once monthly to once every six months. BRII-753 can be used in a combination therapy for HIV treatment and as monotherapy for pre-exposure prophylaxis (PrEP). Multidrug- and Extensively Drug-Resistant (MDR/XDR) Gram-negative Infections (Licensed from Qpex, China team project) Brii Bio is developing MDR/XDR therapies in collaboration with Qpex as part of their global development plan. Based on a licensing agreement with Qpex, Brii Bio has the exclusive rights to develop and commercialize BRII-636, BRII-672 and BRII-693 in Greater China. Qpex is progressing BRII-636, BRII-672 and BRII-693 in parallel with a goal of moving each to global Phase 3 studies, at which time Brii Bio will participate in the China-based arm of the global research protocols. BRII-636, BRII-672 and BRII-693 candidates all obtained QIDP designation from the U.S. FDA, which may receive incentives in the future. BRII-693 (QPX-9003) is a novel synthetic lipopeptide in development for the treatment of MDR/XDR Gram-negative bacterial infections. Based on a combination of increased in vitro and in vivo potency, and an improved safety profile compared with currently available polymyxins, BRII-693 has the potential to be an important addition to hospital-administered intravenous antibiotics. BRII-672 (ORAvanceTM) is a prodrug of BRII-636 and an oral beta-lactamase inhibitor (BLI) in development for the treatment of MDR/XDR Gram-negative bacterial infections. These agents were discovered by Qpex as part of their expertise in BLIs, using the boron atom as a part of its pharmacophore. BRII-636 (OMNIvance®) is an intravenously administered novel cyclic boronic acid derived broad-spectrum inhibitor in development for the treatment of MDR/XDR Gram-negative bacterial infections. Non-tuberculous Mycobacterial (NTM) Lung Disease Program (Licensed from AN2, China team project) Brii Bio's strategic partner, AN2 Therapeutics, is developing epetraborole (BRII-658) as a once-daily oral treatment for patients with chronic NTM lung disease, with an initial focus on treatment-refractory Mycobacterium avium complex (MAC) lung disease, which is the subpopulation of MAC lung disease with the highest unmet medical need for new therapies. Brii Bio holds a license to develop, manufacture and commercialize epetraborole (BRII-658) in Greater China. BRII-658 (epetraborole) is in development as a once-daily oral treatment for patients with chronic NTM lung disease, with an initial focus on treatment of refractory MAC lung disease. It is a boron-containing, small molecule inhibitor of mycobacterial leucyl-tRNA synthetase, or LeuRS, an enzyme that inhibits protein synthesis. COVID-19 (Discovered in collaboration with Tsinghua University and Third People's Hospital of Shenzhen through Brii Bio's subsidiary, TSB Therapeutics Ltd (Beijing) Co. Limited.) Amubarvimab and romlusevimab are non-competing SARS-CoV-2 monoclonal neutralizing antibodies derived from convalesced COVID-19 patients. They have been specifically engineered to reduce the risk of antibody-dependent enhancement and prolong the plasma half-lives for potentially more durable treatment effect. Approved by China's NMPA in December 2021, the long-acting amubarvimab/romlusevimab cocktail therapy is approved to be administered by intravenous infusion in two sequential doses for the treatment in adults and pediatric patients (age 12-17 weighing at least 40 kg) of mild- and normal-type COVID-19 at high risk for progression to severe disease, including hospitalization or death. The indication of pediatric patients (age 12-17 weighing at least 40 kg) is under conditional approval. In January 2023, the National Health Commission of China reiterated the amubarvimab/romlusevimab combination in its COVID-19 Diagnosis and Treatment Guidelines (10th Edition) for the treatment of COVID-19 and the 4th COVID-19 Diagnosis and Treatment Protocol for Severe/Critical Cases. The live virus testing data as well as pseudovirus testing data from multiple independent labs have demonstrated that the amubarvimab/romlusevimab combination retains activity against commonly identified SARS-CoV-2 variants B.1.1.7 (Alpha), B.1.351 (Beta), P.1 (Gamma), B.1.429 (Epsilon), B.1.617.2 (Delta), AY.4.2 (Delta Plus), C.37 (Lambda), B.1.621 (Mu), B.1.1.529-BA.1 (Omicron) and BA.1.1, BA.2, BA.2.12.1, BA.4/5, BF.7 (Omicron subvariants). This press release contains references to third-party information. Such information is not deemed to be incorporated by reference in this press release. Brii Bio disclaims responsibility for such third-party information. About Brii Bio Brii Biosciences ("Brii Bio", stock code: 2137.HK) is a biotechnology company developing therapies to address some of the world's most common diseases where patients experience high unmet medical needs, limited choice and significant social stigmas. With a focus on infectious and central nervous system diseases, the Company is advancing a broad pipeline of unique therapeutic candidates with lead programs to develop a novel functional cure for hepatitis B viral infection (HBV) and a first-of-its-kind treatment for postpartum depression (PPD). The Company is led by a visionary and experienced leadership team and has operations in key biotech hubs, including Raleigh-Durham, the San Francisco Bay Area, Beijing and Shanghai. For more information, visit www.briibio.com. Forward Looking Statement The information communicated in this press release contains certain statements that are or may be forward looking. These statements typically contain words such as "will," "expects," "believes," "plans" and "anticipates," and words of similar import. By their nature, forward looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There may be additional material risks that are currently not considered to be material or of which the Company are unaware. These forward-looking statements are not a guarantee of future performance. Against the background of these uncertainties, readers should not rely on these forward-looking statements. The Company assumes no responsibility to update forward-looking statements or to adapt them to future events or developments.
SHANGHAI, March 23, 2023 /PRNewswire/ -- 111, Inc. ("111" or the "Company") (NASDAQ: YI), a leading tech-enabled healthcare platform company committed to digitally connecting patients with medicine and healthcare services in China, today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2022. Fourth Quarter 2022 Highlights Net revenues were RMB4.1 billion (US$601.4 million), representing an increase of 19.9% year-over-year. Gross segment profit (1) increased by 23.8% year-over-year, with B2B segment profit increasing by 31.5% year-over-year. Loss from operations was RMB108.4 million (US$15.7 million), compared to RMB104.7 million in the same quarter of last year. As a percentage of net revenues, loss from operations decreased to 2.61% from 3.03% in the same quarter of last year. Non-GAAP loss from operations (2) was RMB39.7 million (US$5.8 million), compared to RMB76.9 million in the same quarter of last year. As a percentage of net revenues, non-GAAP loss from operations decreased to 0.96% from 2.22% in the same quarter of last year. RMB63.2 million (US$9.2 million) cash flow was generated from operating activities in the quarter. It was the second consecutive quarter that we achieved positive operating cash flow. Fiscal Year 2022 Highlights Net revenues were RMB13.5 billion (US$2.0 billion), representing an increase of 8.8% year-over-year. Gross segment profit increased by 35.2% year-over-year and gross segment margin improved from 5.0% to 6.2%. Loss from operations was RMB371.0 million (US$53.8 million), compared to RMB642.1 million last year. As a percentage of net revenues, loss from operations decreased to 2.7% this year from 5.2% last year. Non-GAAP loss from operations was RMB213.6 million (US$31.0 million), compared to RMB496.5 million last year. As a percentage of net revenues, non-GAAP loss from operations decreased to 1.6% this year from 4.0% last year. Cash and cash equivalents, restricted cash and short-term investments at the end of 2022 amounted to RMB 922.7 million (US$133.8 million) as of December 31, 2022. (1) Gross segment profit represents net revenues less cost of goods sold. (2) Non-GAAP loss from operations represents loss from operations excluding share-based compensation expenses. Mr. Junling Liu, Co-Founder, Chairman, and Chief Executive Officer of 111, commented, "We are pleased to report another solid quarter and the results brought us very close to profitability. Net revenue increased by 19.9% year-over-year to RMB 4.1 billion, marking the 18th consecutive quarter of year-over-year growth for 111 since the company's NASDAQ IPO. Our gross segment profit for the quarter increased by 23.8% and gross segment margin as a percentage of net revenues improved to 6.1% from 5.9% in the same quarter of last year. Non-GAAP loss from operation narrowed to 0.96% of net revenues as compared to 2.22% in the same quarter of last year. We are also pleased to report positive operating cash flow for the second consecutive quarter." Mr. Liu added, "Despite the disruption from the lockdowns across the country during the year, we managed to achieve net revenues growth at 8.8%, while significantly improving our margin profile. Our gross segment profit for the year increased by 35.2%, which was four times of our revenue growth rate. Gross segment margin for the year improved to 6.2% as compared to 5.0% last year. In addition, we continued to improve our operation efficiency. Our total sales and marketing expenses, G&A expenses and technology expenses, excluding share-based compensation, decreased by 15.5% year over year. As a result, on a full year basis, our Non-GAAP loss from operations as a percentage of net revenues decreased to 1.6% from 4.0% last year." "This result came from our consistent strategy to put our customers first and focus on creating value for them. We continue to strengthen our partnerships with pharmaceutical companies. Our market coverage from both upstream and downstream is increasing and customer loyalty continues to grow. We believe that we have achieved our initial strategic target since IPO, which is to rapidly build up suppliers and customers network with competitive pricing in order to achieve reasonable scale to compete in this market. We are now directly working with 500+ pharmaceutical companies and serving more than 435,000 retail pharmacies. Our revenue scale had rapidly increased 14 times in five years from RMB959 million in 2017 to RMB13.5 billion in 2022." "We believe that our efforts to achieve margin expansion, as well as to optimize our cost and improve our organizational alignment, have delivered positive results. We reached profitability at Non-GAAP operating income level in the month of December 2022. We are confident that our strong technology capabilities will continue to enable us to build scale, improve efficiency, and deliver profitability, maximizing values for our shareholders." Fourth Quarter 2022 Financial Results Net revenues were RMB4.1 billion (US$601.4 million), representing an increase of 19.9% from RMB3.5 billion in the same quarter of last year. (In thousands RMB) For the three months ended December 31, 2021 2022 YoY B2B Net Revenue Product 3,312,969 3,999,066 20.7 % Service 18,424 22,808 23.8 % Sub-Total 3,331,393 4,021,874 20.7 % Cost of Products Sold(3) 3,158,837 3,794,997 20.1 % Segment Profit 172,556 226,877 31.5 % Segment Profit % 5.2 % 5.6 % (In thousands RMB) For the three months ended December 31, 2021 2022 YoY B2C Net Revenue Product 116,285 119,354 2.6 % Service. 13,173 7,019 -46.7 % Sub-Total 129,458 126,373 -2.4 % Cost of Products Sold 97,330 99,758 2.5 % Segment Profit 32,128 26,615 -17.2 % Segment Profit % 24.8 % 21.1 % (3) For segment reporting purposes, purchase rebates are allocated to the B2B segment and B2C segments primarily based on the amount of cost of products sold for each segment. Cost of products sold does not include other direct costs related to cost of product sales such as shipping and handling expense, payroll and benefits of logistic staff, logistic centers rental expenses and depreciation expenses, which are recorded in the fulfillment expenses. Cost of service revenue is recorded in the operating expense. Operating costs and expenses were RMB4.3 billion (US$617.2 million), representing an increase of 19.4% from RMB3.6 billion in the same quarter of last year. Cost of products sold was RMB3.9 billion (US$564.7 million), representing an increase of 19.6% from RMB3.3 billion in the same quarter of last year. The increase was primarily due to our revenue growth in B2B business, which increased by 20.7% from the same quarter last year. Fulfillment expenses were RMB118.8 million (US$17.2 million), representing an increase of 13.3% from RMB104.9 million in the same quarter of last year. Fulfillment expenses accounted for 2.9% of net revenues this quarter as compared to 3.0% in the same quarter of last year. Selling and marketing expenses were RMB134.1 million (US$19.4 million), representing an increase of 7.0% from RMB125.3 million in the same quarter of last year. Excluding the share-based compensation expenses of RMB22.8 million for the quarter and RMB6.9 million for the same quarter last year, respectively, selling and marketing expenses as a percentage of net revenues, accounted for 2.7% in the quarter from 3.4% in the same quarter of last year. General and administrative expenses were RMB73.0 million (US$10.6 million), representing an increase of 45.0% from RMB50.4 million in the same quarter of last year. Excluding the share-based compensation expenses of RMB35.3 million for the quarter and RMB15.9 million for the same quarter last year, respectively, general and administrative expenses as a percentage of net revenues, accounted for 0.9% in the quarter as compared to 1.0% in the same quarter of last year. Technology expenses were RMB37.2 million (US$5.4 million), compared with RMB30.9 million in the same quarter of last year. Excluding the share-based compensation expenses of RMB10.6 million for the quarter and RMB5.0 million for the same quarter last year, respectively, Technology expenses as a percentage of net revenues, accounted for 0.6% in the quarter as compared to 0.7% in the same quarter of last year. Loss from operations was RMB108.4 million (US$15.7 million), compared to RMB104.7 million in the same quarter of last year. As a percentage of net revenues, loss from operations decreased to 2.6% in the quarter from 3.0% in the same quarter of last year. Non-GAAP loss from operations was RMB39.7 million (US$5.8 million), compared to RMB76.9 million in the same quarter of last year. As a percentage of net revenues, non-GAAP loss from operations decreased to 0.96% in the quarter from 2.22% in the same quarter of last year. Net loss was RMB104.1 million (US$15.1 million), compared to RMB101.7 million in the same quarter of last year. As a percentage of net revenues, net loss decreased to 2.5% in the quarter from 2.9% in same quarter of last year. Non-GAAP net loss (4) was RMB35.4 million (US$5.1 million), compared to RMB73.9 million in the same quarter of last year. As a percentage of net revenues, non-GAAP net loss decreased to 0.9% in the quarter from 2.1% in same quarter of last year. Net loss attributable to ordinary shareholders was RMB114.4 million (US$16.6 million), compared to RMB111.3 million in the same quarter of last year. As a percentage of net revenues, net loss attributable to ordinary shareholders decreased to 2.8% in the quarter from 3.2% in same quarter of last year. Non-GAAP net loss attributable to ordinary shareholders (5) was RMB45.7 million (US$6.6 million), compared to RMB83.5 million in the same quarter of last year. As a percentage of net revenues, non-GAAP net loss attributable to ordinary shareholders decreased to 1.1% in the quarter from 2.4% in same quarter of last year. (4) Non-GAAP net loss represents net loss excluding share-based compensation expenses, net of tax. Considering the impact of accretion of redeemable non-controlling interest for the fourth quarter and fiscal year ended December 31, 2022, non-GAAP net loss is used as a more meaningful measurement of the operation performance of the Company. (5) Non-GAAP net loss attributable to ordinary shareholders represents net loss attributable to ordinary shareholders excluding share-based compensation expenses, net of tax. Fiscal Year 2022 Financial Results Net revenues were RMB13.5 billion (US$2.0 billion), representing an increase of 8.8% from RMB12.4 billion last year. (In thousands RMB) For the year ended December 31, 2021 2022 YoY B2B Net Revenue Product 11,839,850 12,995,131 9.8 % Service 63,301 80,039 26.4 % Sub-Total 11,903,151 13,075,170 9.8 % Cost of Products Sold 11,391,474 12,331,657 8.3 % Segment Profit 511,677 743,513 45.3 % Segment Profit % 4.3 % 5.7 % (In thousands RMB) For the year ended December 31, 2021 2022 YoY B2C Net Revenue Product 491,855 408,305 -17.0 % Service 30,896 33,223 7.5 % Sub-Total 522,751 441,528 -15.5 % Cost of Products Sold 413,333 345,065 -16.5 % Segment Profit 109,418 96,463 -11.8 % Segment Profit % 20.9 % 21.8 % Operating costs and expenses were RMB13.9 billion (US$2.0 billion), representing an increase of 6.3% from RMB13.1 billion last year. Cost of products sold was RMB12.7 billion (US$1.8 billion), representing an increase of 7.4% from RMB11.8 billion last year. Fulfillment expenses were RMB401.4 million (US$58.2 million), representing an increase of 12.8% from RMB355.8 million last year. Fulfillment expenses accounted for 3.0% of net revenues this year as compared to 2.9% last year. Selling and marketing expenses were RMB457.9 million (US$66.4 million), representing a decrease of 10.8% from RMB513.1 million last year. We continued to see the improved sales efficiency and effectiveness. Excluding the share-based compensation expenses of RMB50.1 million for this year and RMB50.5 million for last year, respectively, selling and marketing expenses as a percentage of net revenues, decreased to 3.0% this year from 3.7% last year. General and administrative expenses were RMB205.6 million (US$29.8 million), representing a decrease of 0.7% from RMB207.0 million last year. Excluding the share-based compensation expenses of RMB87.0 million for this year and RMB69.7 million for last year, respectively, general and administrative expenses as a percentage of net revenues, decreased to 0.9% this year from 1.1% last year. Technology expenses were RMB139.5 million (US$20.2 million), representing a decrease of 26.3% from RMB189.3 million last year. Excluding the share-based compensation expenses of RMB20.3 million for this year and RMB25.3 million for last year, respectively, technology expenses as a percentage of net revenues, decreased to 0.9% this year from 1.3% last year. We completed major tech development programs last year and believe that current spending reflected the appropriate amount of investment in technology. Loss from operations was RMB371.0 million (US$53.8 million), compared to RMB642.1 million last year. As a percentage of net revenues, loss from operations decreased to 2.7% this year from 5.2% last year. Non-GAAP loss from operations was RMB213.6 million (US$31.0 million), compared to RMB496.5 million last year. As a percentage of net revenues, non-GAAP loss from operations decreased to 1.6% this year from 4.0% last year. Net loss was RMB376.1 million (US$54.5 million), compared to RMB621.0 million last year. As a percentage of net revenues, net loss decreased to 2.8% this year from 5.0% last year. Non-GAAP net loss was RMB218.7 million (US$31.7 million), compared to RMB475.4 million last year. As a percentage of net revenues, non-GAAP net loss decreased to 1.6% this year from 3.8% last year. Net loss attributable to ordinary shareholders was RMB416.9 million (US$60.4 million), compared to RMB669.8 million last year. As a percentage of net revenues, net loss attributable to ordinary shareholders decreased to 3.1% this year from 5.4% last year. Non-GAAP net loss attributable to ordinary shareholders was RMB259.5 million (US$37.6 million), compared to RMB524.2 million last year. As a percentage of net revenues, non-GAAP net loss attributable to ordinary shareholders decreased to 1.9% this year from 4.2% last year. As of December 31, 2022, the Company had cash and cash equivalents, restricted cash and short-term investments of RMB922.7 million (US$133.8 million), compared to RMB943.2 million as of December 31, 2021. Conference Call 111's management team will host an earnings conference call at 7:30 AM U.S. Eastern Time on Thursday, March 23, 2023 (7:30 PM Beijing Time on the same day). Details for the conference call are as follows: Event Title: 111, Inc. Fourth Quarter and Fiscal Year 2022 Unaudited Financial Results Registration Link: https://s1.c-conf.com/diamondpass/10029260-l0s35fu.html All participants must use the link provided above to complete the online registration process in advance of the conference call. Upon registering, each participant will receive a set of participant dial-in numbers, the Direct Event passcode, and a unique Registration ID, which can be used to join the conference call. Please dial in 15 minutes before the call is scheduled to begin and provide the Direct Event passcode and unique Registration ID you have received upon registering to join the call. A telephone replay of the call will be available after the conclusion of the conference call until March 30, 2023 on: China: 4001209216United States: +1-855-883-1031International: +61-7-3107-6325Conference ID: 10029260 A live and archived webcast of the conference call will be available on the website at https://edge.media-server.com/mmc/p/f8x22fcz. Use of Non-GAAP Financial Measures In evaluating the business, the Company considers and uses non-GAAP loss from operations, non-GAAP net loss, non-GAAP net loss attributable to ordinary shareholders, and non-GAAP loss per ADS, as supplemental measures to review and assess its operating performance. The Company defines non-GAAP loss from operations as loss from operations excluding share-based compensation expenses. The Company defines non-GAAP net loss as net loss excluding share-based compensation expenses, net of tax. The Company defines non-GAAP net loss attributable to ordinary shareholders as net loss attributable to ordinary shareholders excluding share-based compensation expenses, net of tax. The Company defines non-GAAP loss per ADS as net loss attributable to ordinary shareholders per ADS excluding share-based compensation expenses, net of tax per ADS. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. The Company believes that non-GAAP loss from operations, non-GAAP net loss, non-GAAP net loss attributable to ordinary shareholders, and non-GAAP loss per ADS help identify underlying trends in its business that could otherwise be distorted by the effect of certain expenses that it includes in loss from operations and net loss. Share-based compensation expenses is a non-cash expense that varies from period to period. As a result, management excludes the items from its internal operating forecasts and models. Management believes that the adjustments for share-based compensation expenses provide investors with a reasonable basis to measure the company's core operating performance, in a more meaningful comparison with the performance of other companies. The Company believes that non-GAAP loss from operations, non-GAAP net loss, non-GAAP net loss attributable to ordinary shareholders, and non-GAAP loss per ADS provide useful information about its operating results, enhances the overall understanding of its past performance and future prospects and allow for greater visibility with respect to key metrics used by the management in their financial and operational decision-making. The non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. The non-GAAP financial measures have limitations as analytical tools. One of the key limitations of using non-GAAP loss from operations, non-GAAP net loss, non-GAAP net loss attributable to ordinary shareholders, or non-GAAP loss per ADS is that it does not reflect all items of income and expense that affect the Company's operations. Further, the non-GAAP financial measures may differ from the non-GAAP information used by other companies, including peer companies, and therefore their comparability may be limited. The Company compensates for these limitations by reconciling the non-GAAP financial measures to the most comparable U.S. GAAP measures, all of which should be considered when evaluating the Company's performance. The Company encourages you to review its financial information in its entirety and not rely on a single financial measure. Reconciliation of the non-GAAP financial measures to the most comparable U.S. GAAP measures is included at the end of this press release. Exchange Rate Information Statement This announcement contains translations of certain RMB amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB6.8972 to US$1.00, the exchange rate set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System as of December 30, 2022. Forward-Looking Statements This press release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "target," "confident" and similar statements. Among other things, the Business Outlook and quotations from management in this announcement, as well as 111's strategic and operational plans, contain forward-looking statements. 111 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 are based upon management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the Company's control. Forward-looking statements involve inherent risks, uncertainties and other factors that could cause actual results to differ materially from those contained in any such statements. Potential risks and uncertainties include, but are not limited to, uncertainties as to the Company's ability comply with extensive and evolving regulatory requirements, its ability to compete effectively in the evolving PRC general health and wellness market, its ability to manage the growth of its business and expansion plans, its ability to achieve or maintain profitability in the future, its ability to control the risks associated with its pharmaceutical retail and wholesale businesses, and the Company's ability to meet the standards necessary to maintain listing of its ADSs on the Nasdaq Global Market, including its ability to cure any non-compliance with Nasdaq's continued listing criteria. Further information regarding these and other risks, uncertainties or factors is included in the Company's filings with the U.S. Securities and Exchange Commission. All information provided in this press release is as of the date of this press release, and 111 does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law. About 111, Inc. 111, Inc. (NASDAQ: YI) ("111" or the "Company") is a leading tech-enabled healthcare platform company committed to digitally connecting patients with medicine and healthcare services in China. The Company provides consumers with better access to pharmaceutical products and healthcare services directly through its online retail pharmacy, 1 Pharmacy, and indirectly through its offline virtual pharmacy network. The Company also offers online healthcare services through its internet hospital, 1 Clinic, which provides consumers with cost-effective and convenient online consultation, electronic prescription service, and patient management service. In addition, the Company's online platform, 1 Medicine, serves as a one-stop shop for pharmacies to source a vast selection of pharmaceutical products. With the largest virtual pharmacy network in China, 111 enables offline pharmacies to better serve their customers with cloud-based services. 111 also provides an omni-channel drug commercialization platform to its strategic partners, which includes services such as digital marketing, patient education, data analytics, and pricing monitoring. For more information on 111, please visit: http://ir.111.com.cn/. For more information, please contact: 111, Inc.Investor RelationsEmail: ir@111.com.cn 111, Inc.Media Relations Email: press@111.com.cnPhone: +86-021-2053 6666 (China) 111, Inc. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except for share and per share data) As of As of December 31, 2021 December 31, 2022 RMB RMB US$ ASSETS Current Assets: Cash and cash equivalents 661,390 673,669 97,673 Restricted cash 99,282 43,122 6,252 Short-term investments 182,556 205,861 29,847 Accounts receivable, net 404,469 488,875 70,880 Notes Receivable 90,734 43,332 6,283 Inventories 1,121,107 1,498,900 217,320 Prepayments and other current assets 242,199 282,066 40,896 Total current assets 2,801,737 3,235,825 469,151 Property and equipment, net 80,254 48,497 7,031 Intangible assets, net 4,909 3,267 474 Long-term investments 3,000 2,000 290 Other non-current assets 22,086 20,348 2,950 Operating lease right-of-use asset 233,847 163,877 23,760 Total Assets 3,145,833 3,473,814 503,656 LIABILITIES AND EQUITY Current Liabilities: Short-term borrowings 259,658 178,990 25,951 Accounts payable 1,347,352 1,764,849 255,879 Accrued expense and other current liabilities 522,968 781,271 113,273 Total Current liabilities 2,129,978 2,725,110 395,103 Long-term operating lease liabilities 165,614 100,469 14,567 Other non-current liabilities 1,537 - - Total Liabilities 2,297,129 2,825,579 409,670 MEZZANINE EQUITY Redeemable non-controlling interests 1,000,849 1,056,939 153,242 SHAREHOLDERS' DEFICIT Ordinary shares Class A 31 31 5 Ordinary shares Class B 25 25 3 Treasury shares (40,859) (40,859) (5,924) Additional paid-in capital 2,817,789 2,977,174 431,650 Accumulated deficit (3,009,678) (3,426,556) (496,804) Accumulated other comprehensive income 59,371 75,586 10,959 Total shareholders' deficit (173,321) (414,599) (60,111) Non-controlling interest 21,176 5,895 855 Total Deficit (152,145) (408,704) (59,256) Total liabilities, mezzanine equity and deficit 3,145,833 3,473,814 503,656 111, Inc. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (In thousands, except for share and per share data) For the three months ended December 31, For the year ended December 31, 2021 2022 2021 2022 RMB RMB US$ RMB RMB US$ Net Revenues 3,460,851 4,148,247 601,440 12,425,902 13,516,698 1,959,736 Operating Costs and expenses: Cost of products sold (3,256,167) (3,894,755) (564,686) (11,804,807) (12,676,722) (1,837,952) Fulfillment expenses (104,876) (118,806) (17,225) (355,836) (401,414) (58,200) Selling and marketing expenses (125,334) (134,053) (19,436) (513,146) (457,880) (66,386) General and administrative expenses (50,351) (73,014) (10,586) (206,981) (205,623) (29,813) Technology expenses (30,883) (37,232) (5,398) (189,284) (139,504) (20,226) Other operating expenses, net 2,065 1,186 172 2,012 (6,556) (951) Total Operating costs and expenses (3,565,546) (4,256,674) (617,159) (13,068,042) (13,887,699) (2,013,528) Loss from operations (104,695) (108,427) (15,719) (642,140) (371,001) (53,792) Interest income 1,559 2,096 304 9,776 8,118 1,177 Interest expense (1,649) (2,777) (403) (5,488) (13,443) (1,949) Foreign exchange gain (loss) 1,563 1,770 257 1,937 (7,875) (1,142) Other Income, net 1,478 3,262 473 14,890 8,132 1,179 Loss before income taxes (101,744) (104,076) (15,088) (621,025) (376,069) (54,527) Income tax expense - - - - - - Net Loss (101,744) (104,076) (15,088) (621,025) (376,069) (54,527) Net Loss attributable to non-controlling interest 4,535 3,783 548 27,819 15,281 2,216 Net Loss attributable to redeemable non-controlling interest 9,253 9,021 1,308 56,766 32,329 4,687 Adjustment attributable to redeemable non-controlling interest (23,390) (23,159) (3,358) (133,370) (88,419) (12,820) Net Loss attributable to ordinary shareholders (111,346) (114,431) (16,590) (669,810) (416,878) (60,444) Other comprehensive loss Unrealized gains of available-for-sale securities, 2,255 1,000 145 8,312 4,810 697 Realized gains of available-for-sale debt securities (2,159) (1,280) (186) (7,801) (4,464) (647) Foreign currency translation adjustments (3,298) (2,701) (391) (4,051) 15,869 2,302 Comprehensive loss (114,548) (117,412) (17,022) (673,350) (400,663) (58,092) Loss per ADS: Basic and diluted (1.34) (1.38) (0.20) (8.08) (5.00) (0.72) Weighted average number of shares used in computation of loss per share Basic and diluted 166,086,161 166,890,624 166,890,624 165,866,901 166,634,121 166,634,121 111, Inc. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) For the three months ended December 31, For the year ended December 31, 2021 2022 2021 2022 RMB RMB US$ RMB RMB US$ Net cash (used in) provided by operating activities (314,143) 63,209 9,166 (688,837) (23,152) (3,356) Net cash provided by (used in) investing activities 187,007 (118,198) (17,138) 60,138 (47,173) (6,840) Net cash provided by financing activities 190,228 21,818 3,163 74,339 22,735 3,296 Effect of exchange rate changes on cash and cash equivalents, and restricted cash (2,749) (9,274) (1,345) (3,502) 3,709 538 Net increase (decrease) in cash and cash equivalents, and restricted cash 60,343 (42,445) (6,154) (557,862) (43,881) (6,362) Cash and cash equivalents, and restricted cash at the beginning of the period/year 700,329 759,236 110,079 1,318,534 760,672 110,287 Cash and cash equivalents, and restricted cash at the end of the period/year 760,672 716,791 103,925 760,672 716,791 103,925 111, Inc. Unaudited Reconciliation of GAAP and Non-GAAP Results (In thousands, except for share and per share data) For the three months ended December 31, For the year ended December 31, 2021 2022 2021 2022 RMB RMB US$ RMB RMB US$ Loss from operations (104,695) (108,427) (15,719) (642,140) (371,001) (53,792) Add: Share-based compensation expenses 27,798 68,692 9,959 145,593 157,384 22,819 Non-GAAP loss from operations (76,897) (39,735) (5,760) (496,547) (213,617) (30,973) Net Loss (101,744) (104,076) (15,088) (621,025) (376,069) (54,527) Add: Share-based compensation expenses, net of tax 27,798 68,692 9,959 145,593 157,384 22,819 Non-GAAP net Loss (73,946) (35,384) (5,129) (475,432) (218,685) (31,708) Net Loss attributable to ordinary shareholders (111,346) (114,431) (16,590) (669,810) (416,878) (60,444) Add: Share-based compensation expenses, net of tax 27,798 68,692 9,959 145,593 157,384 22,819 Non-GAAP net Loss attributable to ordinary shareholders (83,548) (45,739) (6,631) (524,217) (259,494) (37,625) Loss per ADS(6): Basic and diluted (1.34) (1.38) (0.20) (8.08) (5.00) (0.72) Add: Share-based compensation expenses per ADS(6), net of tax 0.34 0.82 0.12 1.76 1.88 0.28 Non-GAAP Loss per ADS(6) (1.00) (0.56) (0.08) (6.32) (3.12) (0.44) (6) Every one ADSs represent two Class A ordinary shares.
A12 藝術空間
Earnings projections or forecasts
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