China Jo-Jo Drugstores Reports Third Quarter 2020 Financial Results

HANGZHOU, China, Feb. 14, 2020 /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 provider of healthcare services in China, today announced its financial results for the third fiscal quarter ended December 31, 2019.

Mr. Lei Liu, Chairman and CEO of Jo-Jo Drugstores, commented, "We delivered outstanding financial results for the third quarter of 2020, with revenue recording $33.36 million, up 7.9% compared to the same period of last year. Benefiting from the growth in retail drugstores and online pharmacy businesses as well as our strong competitive position in the industry, all of our core businesses performed in line with our expectation. Looking forward, amidst the outbreak of 2019 Novel Coronavirus, we are striving to optimize our inventory and operational execution with effective distribution channels to meet the strong domestic demand of pharmaceutical and other healthcare products as well as healthcare services. We are confident that our professional team is able to deliver compelling value to our customers and the communities we serve. We will continue to focus on successful execution of our long-term growth strategies to unleash the full potential of our consumer-centric healthcare business model and create value for all shareholders." 

Third Quarter of Fiscal 2020 Financial Highlights

*Notes: pp represents percentage points

• Revenue increased by 7.9% to $33.36 million for the three months ended December 31, 2019 from $30.92 million for the same period of last year.
• Gross profit increased by 2.1% to $7.28 million for the three months ended December 31, 2019 from $7.14 million for the same period of last year.
• Gross margin decreased by 1.3 percentage points to 21.8% from 23.1% for the same period of last year.
• Net income was $0.46 million, or $0.02 per basic and diluted share, for the three months ended December 31, 2019, compared to net loss of $2.21 million, or $0.06 per basic and diluted share, for the same period of last year.

Third Quarter of Fiscal 2020 Financial Results

Revenue

Revenue for the three months ended December 31, 2019 increased by $2.45 million, or 7.9%, to $33.36 million from $30.92 million for the same period of last year. The increase in revenue was primarily due to the growth in retail drugstores and online pharmacy business.

Revenue from the retail drugstores business increased by $0.71 million, or 3.4%, to $21.58 million for the three months ended December 31, 2019 from $20.87 million for the same period of last year. The increase was primarily attributable to the consumer-facing benefits we provided, such as on-site medical care, chronic disease management services, incremental "Direct-to-Patient" ("DTP") business caused by continuous hospital medical reform, and maturing of stores opened a year ago.

Revenue from the online pharmacy business increased by $1.47 million, or 59.0%, to $3.96 million for the three months ended December 31, 2019 from $2.49 million for the same period of last year. The increase was primarily caused by an increase in sales via e-commerce platforms such as Tmall, offset slightly by the decline in sales via the Company's official site. Popular products at reasonable prices are key to success in online business. In order to promote the Company's sales, the Company focused on the selection of medical equipment suitable to local customers. Additionally, as more and more customers switch to online OTC drug shopping, the Company's OTC drug sales grew too.

Revenue from the wholesale business increased by $0.26 million, or 3.5%, to $7.82 million for the three months ended December 31, 2019 from $7.56 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 $2.30 million, or 9.7%, to $26.08 million for the three months ended December 31, 2019 from $23.78 million for the same period of last year. Gross profit increased by $0.14 million, or 2.1%, to $7.28 million for three months ended December 31, 2019 from $7.14 million for the same period of last year. Overall gross margin decreased by 1.3 percentage points to 21.8% for the three months ended December 31, 2019, from 23.1% for the same period of last year.

Gross margins for retail drugstores, online pharmacy and wholesale were 28.7%, 8.2%, and 9.9%, respectively, for the three months ended December 31, 2019, compared to the corresponding gross margins of 28.6%, 10.4%, and 12.1%  for the same period of last year.

Income (Loss) from operations

Selling and marketing expenses decreased by $1.01 million, or 15.1%, to $5.68 million for the three months ended December 31, 2019 from $6.69 million for the same period of last year. The decrease in selling and marketing expenses was primarily because the Company has outsourced logistic service to Astro Boy Cloud Pan (Hangzhou) Storage and Logistic Co. Ltd ("Astro Boy Logistic") since April 2019.

General and administrative expenses decreased by $1.52 million, or 59.0%, to $1.05 million for the three months ended December 31, 2019 from $2.57 million for the same period of last year. As the medical reform has been moving along in China, the central government of China promulgated a series of policies to significantly push down the prices of certain drugs covered by the National Health Insurance. Local government even deferred payments to certain clinics and drugstores on the drugs which the local government believes were sold above the government's designated price range. The price restriction and potential payment deferral may cut the profit and affect the Company's operating cash flow. To be safe, in the three months ended December 31, 2019, the Company actively negotiated with certain customers and made efforts to collect certain aged accounts receivable. As a result, the Company reversed bad debt allowance of $0.79 million. In comparison, the Company recorded additional bad debts allowance of $0.37 million in the three months ended December 31, 2018.

Income from operations was $0.55 million for the three months ended December 31, 2019, compared to loss from operations of $2.13 million for the same period of last year. Operating margin was 1.7% for the three months ended December 31, 2019, compared to operating loss of 6.9% for the same period of last year.

Net income (loss)

Net income was $0.46 million, or $0.02 per basic and diluted share for the three months ended December 31, 2019, compared to net loss of $2.21 million, or $0.06 per basic and diluted share for the same period of last year.

Nine months ended December 31, 2019 Financial Highlights

*Notes: pp represents percentage points

• Revenue increased by 7.3% to $87.00 million for the nine months ended December 31, 2019 from $81.10 million for the same period of last year.
• Gross profit increased by 8.0% to $20.04 million for the nine months ended December 31, 2019 from $18.55 million for the same period of last year.
• Gross margin increased by 0.1 percentage points to 23.0% from 22.9% for the same period of last year.
• Net loss was $3.27 million, or $0.09 per basic and diluted share, for the nine months ended December 31, 2019, compared to $4.51 million, or $0.14 per basic and diluted share, for the same period of last year.

Nine months ended December 31, 2019 Financial Results

Revenue

Revenue for the nine months ended December 31, 2019 increased by $5.90 million, or 7.3%, to $87.00 million from $81.10 million for the same period of last year. The increase in revenue was primarily due to the increase in wholesale and online pharmacy business.

Revenue from the retail drugstores business increased by $1.34 million, or 2.4%, to $56.31 million for the nine months ended December 31, 2019 from $54.97 million for the same period of last year. The increase was primarily attributable to the consumer-facing benefits we provided, such as onsite medical care, chronic disease management services, incremental DTP business caused by continuous hospital medical reform, and maturing of stores opened a year ago.

Revenue from the online pharmacy business increased by $2.12 million, or 32.0%, to $8.76 million for the nine months ended December 31, 2019 from $6.64 million for the same period of last year. The increase was primarily caused by an increase in sales via e-commerce platforms such as Tmall, offset slightly by the decline in sales via the Company's official site.

Revenue from the wholesale business increased by $2.44 million, or 12.5%, to $21.93 million for the nine months ended December 31, 2019 from $19.49 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 $4.41 million, or 7.1%, to $66.96 million for the nine months ended December 31, 2019 from $62.55 million for the same period of last year. Gross profit increased by $1.49 million, or 8.0%, to $20.04 million for the nine months ended December 31, 2019 from $18.55 million for the same period of last year. Overall gross margin increased by 0.1 percentage points to 23.0% for the nine months ended December 31, 2019, from 22.9% for the same period of last year.

Gross margins for retail drugstores, online pharmacy and wholesale were 29.8%, 11.3%, and 10.4%, respectively, for the nine months ended December 31, 2019, compared to the corresponding gross margins of 28.4%, 11.4%, and 11.1% for the same period of last year.

Income (Loss) from operations

Selling and marketing expenses increased by $1.59 million, or 9.6%, to $18.13 million for the nine months ended December 31, 2019 from $16.54 million for the same period of last year. The increase in selling and marketing expenses was primarily due to increases in labor related to the Company's store expansions and rising local cost of living.

General and administrative expenses decreased by $0.61 million, or 9.7%, to $5.73 million for the nine months ended December 31, 2019 from $6.34 million for the same period of last year. In the nine months ended December 31, 2019, the Company reversed bad debt allowance of $0.2 million. In comparison, the Company recorded additional bad debts allowance of $1.27 million for the nine months ended December 31, 2018. 

Loss from operations was $3.82 million for the nine months ended December 31, 2019, compared to $4.33 million for the same period of last year. Operating loss was 4.4% for the nine months ended December 31, 2019, compared to 5.3% for the same period of last year.

Net income (loss)

Net loss was $3.27 million, or $0.09 per basic and diluted share for the nine months ended December 31, 2019, compared to net loss of $4.51 million, or $0.14 per basic and diluted share for the same period of last year.

Financial Condition

As of December 31, 2019, the Company had cash of $11.86 million, compared to $9.32 million as of March 31, 2019. Net cash used in operating activities was $11.27 million for the nine months ended December 31, 2019, compared to $10.32 million for the same period of last year. Net cash used in investing activities was $1.71 million for the nine months ended December 31, 2019, compared to $6.85 million for the same period of last year. Net cash provided by financing activities was $12.70 million for the nine months ended December 31, 2019, compared to $7.98 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. In addition, Jo-Jo Drugstores cultivates herbs used for traditional Chinese medicine. 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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