Zhongchao Inc. Reports the Fiscal Year 2020 Financial Results

SHANGHAI, April 30, 2021 /PRNewswire/ -- Zhongchao Inc. (NASDAQ: ZCMD) ("Zhongchao" or the "Company"), a healthcare services company offering patient management, online healthcare information, professional training and educational services, today announced its financial results for the fiscal year ended December 31, 2020.

Key Financial Highlights for the Fiscal Year 2020 as compared to the Fiscal Year 2019

• Revenues increased by 20.9% to $17.99 million for the fiscal year 2020, primarily due to the increasing orders for assistance services for patient-aid projects.
• Gross profit increased by 16.1% to $11.87 million while gross margin decreased by 2.7 percentage points to 66.0% for the fiscal year 2020.
• Operating income increased by 23.3% to $4.49 million for the fiscal year 2020, primarily due to the increased gross profit and partially offset by the increased operating expenses.
• Net income attributable to the Company's ordinary shareholders increased by 10.2% to $4.46 million for the fiscal year 2020, primarily driven by the increased income from operations and partially offset by the increased income tax expenses.
• Earnings per share was $0.183 for the fiscal year 2020, compared to $0.187 for last year.

Weiguang Yang, Chairman and Chief Executive Officer of Zhongchao, commented, "With revenues increasing by 20.9% to a record $17.99 million and operating income increasing by 23.3% to $4.49 million, our fiscal year 2020 financial results highlight continued strength in our businesses. Although our gross margin has a slight drawback, we expect to maintain a high-profit margin in the future for our reputation acknowledgment among leading pharmaceutical enterprises and non-for-profit organizations to design and produce high-quality professional content. In response to the outbreak of COVID-19, we, through our MDMOOC platform, have successfully developed and launched coronavirus curriculum with over 60 courses covering a wide range of medical specialties. In addition, our online courses increased 15% year-over-year in 2020. We are closely monitoring the fluid and uncertain situation of COVID-19, and we expect our revenues will continue to increase with the resume of work within China in the long-term."

Financial Results for the Fiscal Year Ended December 31, 2020

Revenues

For the fiscal year 2020, revenues increased by $3.11 million, or 20.9%, to $17.99 million from $14.88 million for last year. The increase in revenues was primarily due to the increasing orders for assistance services for patient-aid projects.

Cost of revenues

Cost of revenue increased by $1.46 million, or 31.4%, to $6.12 million for the fiscal year 2020 from $4.66 million for last year. The increase in the cost of revenues was driven by the increases in professional service fees and outsourced labor cost as we employed increasing outsourced staff with an increase in patient-aid projects.  

Gross profit

Gross profit increased by $1.65 million, or 16.1%, to $11.87 million for the fiscal year 2020 from $10.23 million for last year.

Gross margin decreased by 2.7 percentage points to 66.0% for the fiscal year 2020, compared to 68.7% for last year.  

Operating expenses

Selling and marketing expenses increased by $0.25 million, or 7.7%, to $3.44 million for the fiscal year 2020 from $3.20 million for last year. The increase in selling and marketing expenses was mainly attributable to the increase in advertising expenses to gain reputation in medical healthcare industry and the increase in salary and welfare to increase headcounts in selling and marketing department. As a percentage of total revenues, selling and marketing expenses was 19.1% for the fiscal year 2020, compared to 21.5% for last year.

General and administrative expenses increased by $0.60 million, or 23.8%, to $3.12 million for the fiscal year 2020 from $2.52 million for last year. The increase in general and administrative expenses was mainly attributable to the increase in salary and welfare expenses as a result of combining effects of an increase of headcounts in supporting functions; the increase in professional expenses since the Company became listed since February 2020; and the increase in writing off doubtful accounts against accounts receivable in accordance with the bad debt policy. As a percentage of total revenues, general and administrative expenses was 17.4% for the fiscal year 2020, compared to 17.0% for last year.  

Research and development expenses decreased by $0.05 million, or 5.5%, to $0.82 million for the fiscal year 2020 from $0.86 million for last year. As a percentage of total revenues, research and development expenses was 4.5% for the fiscal year 2020, compared to 5.8% for last year.  

Total operating expenses increased by $0.80 million, or 12.1%, to $7.38 million for the fiscal year 2020 from $6.58 million for last year. The increase in operating expenses was mainly attributable to the increased selling and marketing expenses and general and administrative expenses and partially offset by the decreased research and development expenses.

Operating income

Income from operations increased by $0.85 million, or 23.3%, to $4.49 million for the fiscal year 2020 from $3.64 million for last year. The increase in income from operations was primarily driven by the increased gross profit and partially offset by the increased operating expenses.

Operating margin increased by 0.5 percentage points to 25.0% for the fiscal year 2020 from 24.5% for last year.

Interest and other income, net

Interest income decreased by $0.07 million, or 30.5%, to $0.15 million for the fiscal year 2020 from $0.21 million for last year.

Other income, primarily consisted of government subsidies, was $0.31 for the fiscal year 2020, compared to $0.53 million for last year.

Income before income taxes

Income before income taxes increased by $0.55 million, or 12.6%, to $4.94 million for the fiscal year 2020 from $4.39 million for last year. The increase in income before income taxes was primarily attributable to the increased income from operations and partially offset by the decreased interest and other income.

Income tax expenses increased by $0.10 million, or 25.2%, to $0.49 million for the fiscal year 2020 from $0.39 million for last year.

Net income and EPS

Net income increased by $0.46 million, or 11.4%, to $4.46 million for the fiscal year 2020 from $4.00 million for last year. The increase in net income was primarily due to the increased income from operations and partially offset by the increased income tax expenses.

Net margin decreased by 2.1 percentage points to 24.8% for the fiscal year 2020 from 26.9% for last year.

After deducting for non-controlling interests, net income attributable to the Company's shareholders increased by $0.41 million, or 10.2%, to $4.46 million for the fiscal year 2020 from $4.05 million for last year.

Basic and diluted earnings per share was $0.183 for the fiscal year 2020, compared to $0.187 for last year. Weighted average number of shares outstanding was 24,425,637 for the fiscal year 2020, compared to 21,600,135 for last year.  

Financial Condition

As of December 31, 2020, the Company had cash, and cash equivalents of $15.07 million, compared to $7.83 million as of December 31, 2019. Accounts receivable were $10.32 million as of December 31, 2020, compared to $5.08 million as of December 31, 2019. Working capital was $26.61 million as of December 31, 2020, compared to $12.15 million as of December 31, 2019.

Net cash used in operating activities was $1.04 million for the fiscal year 2020, compared to net cash provided by operating activities of $1.41 million for last year. Net cash used in investing activities was $4.09 million for the fiscal year 2020, compared to $0.20 million for last year. Net cash provided by financing activities was $11.50 million for the fiscal year 2020, compared to net cash used in financing activities of $1.19 million for last year. 

Recent Business Highlights

• In March 2021, renewing the contract with China Association for Health Promotion and Education and GlaxoSmithKline (China) Investment Limited to continue the medical education program "Pulmonary Arterial Hypertension Online Course – Connections with Famous Hospitals" in 2021.
• In January 2021, co-sponsoring the National Annual Conference for Standardized Liver Cancer Diagnosis and Treatment with China Association of Health Promotion and Education and Chinese Society of Liver Cancer.
• In November 2020, expanding the scope of cooperation with Takeda Pharmaceutical in China to provide a broad range of services in medical editing, document collation, and medical training and education.

About Zhongchao Inc.

Incorporated in 2012 with headquarter offices in Shanghai and Beijing, China, Zhongchao Inc. is an online provider of healthcare information, professional training and educational services to healthcare professionals under its "MDMOOC" platform (www.mdmooc.org) and to the public under its "Sunshine Health Forums" platform (www.ygjkclass.com) in China. The Company also offers patient management services under its "Zhongxun" platform (www.zhongxun.online). More information about the Company can be found at its investor relations website at http://izcmd.com.

Safe Harbor Statement

This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. When the Company uses words such as "may, "will, "intend," "should," "believe," "expect," "anticipate," "project," "estimate" or similar expressions that do not relate solely to historical matters, it is making forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause the actual results to differ materially from the Company's expectations discussed in the forward-looking statements. These statements are subject to uncertainties and risks including, but not limited to, the following:  the Company's goals and strategies; the Company's future business development; product and service demand and acceptance; changes in technology; economic conditions; the growth of the professional training and educational services market in China and the other international markets the Company plans to serve; reputation and brand; the impact of competition and pricing; government regulations; fluctuations in general economic and business conditions in China and the international markets the Company plans to serve and assumptions underlying or related to any of the foregoing and other risks contained in reports filed by the Company with the SEC, the length and severity of the recent coronavirus outbreak, including its impacts across our business and operations.  For these reasons, among others, investors are cautioned not to place undue reliance upon any forward-looking statements in this press release. Additional factors are discussed in the Company's filings with the SEC, which are available for review at www.sec.gov. The Company undertakes no obligation to publicly revise these forward–looking statements to reflect events or circumstances that arise after the date hereof.

For more information, please contact:

At the Company:
Pei Xu, CFO
Email: xupei@mdmooc.org 
Phone: +86 21-3220-5987

Investor Relations:
Sherry Zheng 
Weitian Group LLC
Email: shunyu.zheng@weitian-ir.com
Phone: +1 718-213-7386