China Jo-Jo Drugstores Reports First Quarter 2019 Financial Results

HANGZHOU, China, Aug. 14, 2018 /PRNewswire/ -- China Jo-Jo Drugstores, Inc. (NASDAQ: CJJD) ("Jo-Jo Drugstores" or the "Company"), a leading online and offline retailer and wholesale distributor of pharmaceutical and other healthcare products and a healthcare provider in China, today announced its financial results for the first quarter ended June 30, 2018.

Mr. Lei Liu, Chief Executive Officer and Chairman of Jo-Jo Drugstores, Inc., commented, "We continue to emphasize our retail strategy as we report our first quarter results for fiscal year 2019. Our gross margin for retail drug stores for the first quarter was 30.1%, up from 25.2% from the same period last year, as we emphasized increasing profit margins, introducing new suppliers, and renegotiating prices with our suppliers in our adjustments to corporate operational strategy. This margin expansion was coupled with a healthy 22.6% increase in revenue from retail drugstores year over year as we continue to execute on our strategy to capture the high-income Hangzhou urban center market. We are pleased with these strong results to start the new fiscal year as we continue to improve our business fundamentals and grow our market share in the expanding healthcare market."  

• Revenue increased by 5.1% to $22.77 million for the three months ended June 30, 2018 from $21.67 million for the same period of last year.
• Gross profit increased by 34.4% to $5.62 million for the three months ended June 30, 2018 from $4.18 million for the same period of last year.
• Gross margin increased by 5.4 percentage points to 24.7% from 19.3% for the same period of last year.
• Net loss attributable to Jo-Jo Drugstores decreased by 54.5% to $0.65 million, or $0.02 per basic and diluted share, for the three months ended June 30, 2018 from $1.42 million, or $0.06 per basic and diluted share, for the same period of last year.

First Quarter of Fiscal 2019 Financial Results

Revenue

Revenue for the three months ended June 30, 2018 increased by $1.10 million, or 5.1%, to $22.77 million from $21.67 million for the same period of last year. The increase in revenue was primarily due to the increase in retail drugstores business, partially offset by the decrease in online pharmacy business and wholesale business.

Revenue from the retail drugstores business increased by $2.95 million, or 22.6%, to $15.97 million for the three months ended June 30, 2018 from $13.02 million for the same period of last year. The increase was primarily due to new store sales contributions and benefits such as emphasis on onsite medical care, incremental Direct-to-Patient ("DTP") business caused by continuous hospital medical reform, and promotional campaigns.

Revenue from the online pharmacy business decreased by $1.11 million, or 35.5%, to $2.02 million for the three months ended June 30, 2018 from $3.14 million for the same period of last year. The decrease was mainly caused by a decline in our sales via e-commerce platforms and the suspension of OTC drug sales on e-commerce platforms, offset by the increase in business referred from Pharmacy Benefit Management ("PBM") providers, and. The Company is adding more non-medical health products such as nutritional supplements into our sales menu to counteract the decline in sales of OTC drug category via e-commerce platforms.

Revenue from the wholesale business decreased by $0.73 million, or 13.3%, to $4.78 million for the three months ended June 30, 2018 from $5.51 million for the same period of last year. The decrease was primarily due to the departure of a key salesperson, which caused the Company to suffer loss of certain business.

Gross profit and gross margin

Total cost of goods sold decreased by $0.34 million, or 1.9%, to $17.16 million for the three months ended June 30, 2018 from $17.49 million for the same period of last year. Gross profit increased by $1.44 million, or 34.4%, to $5.62 million for three months ended June 30, 2018 from $4.18 million for the same period of last year. Overall gross margin increased by 5.4 percentage points to 24.7% for the three months ended June 30, 2018, compared to 19.3% for the same period of last year.

Gross margins for retail drugstores, online pharmacy and wholesale were 30.1%, 13.9%, and 11.1%, respectively, for the three months ended June 30, 2018. This compared to gross margins for retail drugstores, online pharmacy and wholesale of 25.2%, 9.3%, and 10.9%, respectively, for the same period of last year.

Loss from operations

Selling and marketing expenses increased by $0.71 million, or 18.1%, to $4.63 million for the three months ended June 30, 2018 from $3.92 million for the same period of last year. The increase in selling and marketing expenses was primarily due to increase in marketing and sales staff expenses related to store expansion, offset by a decline in expense of wholesale business.

General and administrative expenses decreased by $0.17 million, or 9.9%, to $1.55 million for the three months ended June 30, 2018 from $1.73 million for the same period of last year. The decrease in general and administrative expenses was caused by a decrease in administrative fees of wholesale business due to logistics outsourcing. Stock compensation has decreased by approximately $0.29 million as certain stock compensation has been fully amortized into the expenses in fiscal year 2018 and no additional expenses were incurred in the three months ended June 30, 2018. 

Loss from operations decreased by $0.90 million, or 61.4%, to $0.56 million for the three months ended June 30, 2018 from $1.46 million for the same period of last year. Operating margin was negative 2.5% for the three months ended June 30, 2018, compared to negative 6.8% for the same period of last year.

Net loss

Net loss decreased by $0.72 million, or 50.9%, to $0.70 million for the three months ended June 30, 2018 from $1.42 million for the same period of last year. Net loss attributable to common shareholders for the three months ended June 30, 2018 was $0.65 million, or $0.02 per basic and diluted share. This compared to net loss attributable to common shareholders of $1.42 million, $0.06 per basic and diluted share, for the same period of last year.

Financial Condition

As of June 30, 2018, the Company had cash of $8.91 million, compared to $15.13 million as of March 31, 2018. Net cash used in operating activities was $2.58 million for the three months ended June 30, 2018, compared to $3.61 million for the same period of last year. Net cash used in investing activities was $0.26 million for the three months ended June 30, 2018, compared to $0.51 million for the same period of last year. Net cash used in financing activities was $3.25 million for the three months ended June 30, 2018, compared to $0.34 million for the same period of last year.

About China Jo-Jo Drugstores, Inc.

China Jo-Jo Drugstores, Inc. ("Jo-Jo Drugstores" or the "Company"), is a leading online and offline retailer and wholesale distributor of pharmaceutical and other healthcare products in China. Jo-Jo Drugstores currently operates retail drugstores and an online pharmacy. It is also a wholesale distributor of products similar to those carried in its pharmacies and it cultivates and sells herbs used for traditional Chinese medicine. For more information about the Company, please visit http://www.chinajojodrugstores.com/. The Company routinely posts important information on its website.

Forward-Looking Statements

This press release contains information about the Company's view of its future expectations, plans and prospects that constitute forward-looking statements. Actual results may differ materially from historical results or those indicated by these forward-looking statements as a result of a variety of factors including, but not limited to, risks and uncertainties associated with its ability to raise additional funding, its ability to maintain and grow its business, variability of operating results, its ability to maintain and enhance its brand, its development and introduction of new products and services, the successful integration of acquired companies, technologies and assets into its portfolio of products and services, marketing and other business development initiatives, competition in the industry, general government regulation, economic conditions, dependence on key personnel, the ability to attract, hire and retain personnel who possess the technical skills and experience necessary to meet the requirements of its clients, and its ability to protect its intellectual property. The Company's encourages you to review other factors that may affect its future results in the Company's annual reports and in its other filings with the Securities and Exchange Commission.

For more information, please contact:

Company Contact: 

Frank Zhao
Chief Financial Officer
+86-571-88077108
frank.zhao@jojodrugstores.com

Steve Liu
Investor Relations Director
steve.liu@jojodrugstores.com

Investor Relations Contact:

Tina Xiao
Ascent Investor Relations LLC
+1-917-609-0333
tina.xiao@ascent-ir.com

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