China Jo-Jo Drugstores Reports Second Quarter 2021 Financial Results

HANGZHOU, China, Nov. 13, 2020 /PRNewswire/ -- China Jo-Jo Drugstores, Inc. (NASDAQ: CJJD) ("Jo-Jo Drugstores" or the "Company"), a leading online and offline retailer, wholesale distributor of pharmaceutical and other healthcare products and healthcare provider in China, today announced its financial results for the second fiscal quarter ended September 30, 2020.

Mr. Lei Liu, Chairman and CEO of Jo-Jo Drugstores, commented, "We are pleased with our second quarter performance as we delivered another quarter of strong results. Our revenue and gross profit recorded $30.84 million and $7.01 million for the second fiscal quarter of 2021, up 8.8% and 4.8% compared to same period of fiscal year 2020. Revenue year-over-year from online pharmacy increased by 127.4%. We have always been deeply committed to our communities, and we have taken necessary measures to protect the safety and health of our customers and employees during the global COVID-19 pandemic while making solid progress on our transformation strategy of 'Medical Linkage & Technology Empowerment'. The environment surrounding COVID-19 is accelerating our transformation, giving us new opportunities to demonstrate our capabilities and gain retail market share in China. We are building a strong foundation for sustainable growth and setting the platform to engage with consumers, and we are remaining focused on creating value for all our stakeholders."  

Second Quarter of Fiscal 2021 Financial Highlights

• Revenue increased by 8.8% to $30.84 million for the three months ended September 30, 2020 from $28.35 million for the same period of last year.
• Gross profit increased by 4.8% to $7.01 million for the three months ended September 30, 2020 from $6.69 million for the same period of last year.
• Gross margin decreased slightly by 0.9 percentage points to 22.7% for the three months ended September 20, 2020 from 23.6% for the same period of last year.
• Net loss was $1.53 million, or $0.04 per basic and diluted share, for the three months ended September 30, 2020, compared to net loss of $1.35 million, or $0.04 per basic and diluted share, for the same period of last year.

Second Quarter of Fiscal 2021 Financial Results

Revenue

Revenue for the three months ended September 30, 2020 increased by $2.49 million, or 8.8%, to $30.84 million from $28.35 million for the same period of last year. The increase in revenue was primarily due to the growth in online pharmacy business.

Revenue from the retail drugstores business decreased slightly by $0.07 million, or 0.4%, to $17.93 million for the three months ended September 30, 2020 from $18.00 million for the same period of last year. The slight decrease was primarily due to the Company's strategical abandoning of the sales of certain low-profit margin products reimbursed by National Healthcare Security Administration ("NHSA" hereafter) due to its overall budget, elimination of a variety of drugs off the list of drugs reimbursed by the local NHSA since September 1, 2020, and the negative effect on the overall economy from COVID-19.

Revenue from the online pharmacy business increased by $3.00 million, or 127.4%, to $5.35 million for the three months ended September 30, 2020 from $2.35 million for the same period of last year. The increase was primarily caused by an increase in sales of prescription drugs via e-commerce platforms such as Tmall. Prescription drugs used to be prohibited from sales online due to safety concern. However, because the nation has lifted the ban order, online prescription drug sales become popular. As a result, the sale of prescription drugs was $1.76 million in the three months ended September 30, 2020 as compared to none in the three month ended September 30, 2019. Additionally, the Company maintained a membership care program targeted at customers with chronic disease. The Company has closely interacted with its members via WeChat by providing healthcare knowledge and reminding them to refill medicine. By implementing a personalized customer care program, the Company was able to promote its sales.

Revenue from the wholesale business decreased by $0.44 million, or 5.5%, to $7.56 million for the three months ended September 30, 2020 from $8.00 million for the same period of last year. The decrease was primarily due to the fact that a key salesperson was sick, which slowed certain business with customers.

Gross profit and gross margin

Total cost of goods sold increased by $2.17 million, or 10.0%, to $23.83 million for the three months ended September 30, 2020 from $21.66 million for the same period of last year. Gross profit increased by $0.32 million, or 4.8%, to $7.01 million for three months ended September 30, 2020 from $6.69 million for the same period of last year. Overall gross margin decreased slightly by 0.9 percentage points to 22.7% for the three months ended September 30, 2020, from 23.6% for the same period of last year.

Gross margins for retail drugstores, online pharmacy and wholesale were 31.3%, 11.3%, and 10.7%, respectively, for the three months ended September 30, 2020, compared to gross margins for retail drugstores, online pharmacy and wholesale of 30.7%, 13.6%, and 10.6%, respectively, for the same period of last year.

Loss from operations

Selling and marketing expenses decreased by $0.01 million, or 0.2%, to $6.48 million for the three months ended September 30, 2020 from $6.49 million for the same period of last year. The decrease in selling and marketing expenses was primarily due to the control of in-store advertising expense, offset by the increase in fee charged by various platforms as a result of sale increase in the Company's online pharmacy.

General and administrative expenses increased by $0.24 million, or 13.0%, to $2.06 million for the three months ended September 30, 2020 from $1.82 million for the same period of last year. In the three months ended September 30, 2020, the Company reversed bad debt allowance of $304,397 as compared to an increase in bad debt allowance of $9,018 in the same period of last year. Excluding such effect, the general and administrative expenses increased by $551,039 period over period, which reflects the increase in staff and administration expense.

Loss from operations was $1.52 million for the three months ended September 30, 2020, compared to $1.62 million for the same period of last year. Operating margin was (4.9)% and (5.7)% for the three months ended September 30, 2020 and 2019 respectively.

Net loss

Net loss was $1.53 million, or $0.04 per basic and diluted share for the three months ended September 30, 2020, compared to net loss of $1.35 million, or $0.04 per basic and diluted share for the same period of last year.

Six Months Ended September 30, 2020 Financial Highlights

• Revenue increased by 15.4% to $61.90 million for the six months ended September 30, 2020 from $53.63 million for the same period of last year.
• Gross profit increased by 17.5% to $14.99 million for the six months ended September 30, 2020 from $12.75 million for the same period of last year.
• Gross margin increased by 0.4 percentage points to 24.2% for the six months ended September 20, 2020 from 23.8% for the same period of last year.
• Net loss was $1.92 million, or $0.05 per basic and diluted share, for the six months ended September 30, 2020, compared to net loss of $3.73 million, or $0.10 per basic and diluted share, for the same period of last year.

Six Months Ended September 30, 2020 Financial Results

Revenue

Revenue for the six months ended September 30, 2020 increased by $8.26 million, or 15.4%, to $61.90 million from $53.63 million for the same period of last year. The increase in revenue was primarily due to the increase in retail drugstores, online pharmacy and wholesale business.

Revenue from the retail drugstores business increased by $2.00 million, or 5.8%, to $36.74 million for the six months ended September 30, 2020 from $34.74 million for the same period of last year. The increase was primarily attributable to consumer-facing benefits such as emphasis on onsite medical care, chronic disease management services, incremental Direct-to-Patient ("DTP") business caused by continuous hospital medical reform, partially offset by the decline in sale reimbursed by NHSA in the second quarter of fiscal 2021, and maturing of stores opened a year ago.

Revenue from the online pharmacy business increased by $5.47 million, or 114.0%, to $10.26 million for the six months ended September 30, 2020 from $4.79 million for the same period of last year. The increase was primarily caused by an increase in sales of prescription drugs via e-commerce platforms such as Tmall. Due to the same reason discussed above, the sale of prescription drugs was $3.63 million in the six months ended September 30, 2020 as compared to none in the six month ended September 30, 2019. Additionally, the Company maintained a membership care program targeted at customers with chronic disease. The Company has closely interacted with its members via WeChat by providing healthcare knowledge and reminding them to refill medicine. By implementing a personalized customer care program, the Company was able to promote its sales.

Revenue from the wholesale business increased by $0.80 million, or 5.6%, to $14.90 million for the six months ended September 30, 2020 from $14.10 million for the same period of last year. The increase was primarily a result of the Company's ability to resell certain products, which the Company sold in large quantities at its retail stores, to other vendors at competitive prices.

Gross profit and gross margin

Total cost of goods sold increased by $6.02 million, or 14.7%, to $46.90 million for the six months ended September 30, 2020 from $40.88 million for the same period of last year. Gross profit increased by $2.24 million, or 17.5%, to $14.99 million for the six months ended September 30, 2020 from $12.75 million for the same period of last year. Overall gross margin increased by 0.4 percentage points to 24.2% for the six months ended September 30, 2020, from 23.8% for the same period of last year.

Gross margins for retail drugstores, online pharmacy and wholesale were 32.7%, 12.5%, and 11.4%, respectively, for the six months ended September 30, 2020. This compared to gross margins for retail drugstores, online pharmacy and wholesale of 30.5%, 13.9%, and 10.7%, respectively, for the same period of last year.

Loss from operations

Selling and marketing expenses increased by $0.30 million, or 2.4%, to $12.75 million for the six months ended September 30, 2020 from $12.45 million for the same period of last year. The increase in selling and marketing expenses was primarily due to increase in fee charged by various platforms as a result of sale increase in the Company's online pharmacy.

General and administrative expenses decreased by $0.50 million, or 10.6%, to $4.18 million for the six months ended September 30, 2020 from $4.68 million for the same period of last year. In the six months ended September 30, 2020, the Company reversed bad debt allowance of $286,076 as compared to an increase in bad debt allowance of $767,249 in the same period of last year. Excluding such an effect, the general and administrative expenses increased by $559,503 period over period, which reflects the increases in staff and administration expense as the Company's online business grew. 

Loss from operations was $1.94 million for the six months ended September 30, 2020, compared to $4.38 million for the same period of last year. Operating margin was (3.1)% and (8.2)% for the six months ended September 30, 2020 and 2019 respectively .

Net loss

Net loss was $1.92 million, or $0.05 per basic and diluted share for the six months ended September 30, 2020, compared to net loss of $3.73 million, or $0.10 per basic and diluted share for the same period of last year.

Financial Condition

As of September 30, 2020, the Company had cash of $21.65 million, compared to $16.18 million as of March 31, 2020. Net cash used in operating activities was $0.35 million for the six months ended September 30, 2020, compared to net cash provided by operating activities of $0.97 million for the same period of last year. Net cash used in investing activities was $1.76 million for the six months ended September 30, 2020, compared to $1.45 million for the same period of last year. Net cash provided by financing activities was $4.55 million for the six months ended September 30, 2020, compared to $6.38 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 and a provider of healthcare services in China. Jo-Jo Drugstores currently operates an online pharmacy and retail drugstores with licensed doctors on site for consultation, examination and treatment of common ailments at scheduled hours. It is also a wholesale distributor of products similar to those carried in its pharmacies. For more information about the Company, please visit http://jiuzhou360.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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