China Jo-Jo Drugstores Reports Third Quarter Fiscal 2021 Financial Results

HANGZHOU, China, Feb. 13, 2021 /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 third fiscal quarter ended December 31, 2020.

Mr. Lei Liu, Chairman and CEO of Jo-Jo Drugstores, commented, "We are pleased with our third quarter performance. We delivered another quarter of strong results. Our revenue and gross profit recorded $35.54 million and $8.09 million for the third fiscal quarter of fiscal year 2021, increased 6.5% and 11.0% compared to same period of last year.  During the COVID-19 pandemic, we made every effort to guarantee sufficient medicine supply, build a pandemic medicine center and provide online pharmacy consultation services. As a result, our revenue year-over-year from online pharmacy increased by 66.4%. Our robust performance is a strong indicator of the successful execution of our multifaceted growth strategy and strategic transformation."

Mr. Liu continued, "The environment surrounding COVID-19 accelerates our transformation. To address the tremendous pharmaceutical retail market in China, we enhanced various information and data systems, continued to develop the management system for patients with chronic diseases, upgraded our "Medical + Medicine" business model, introduced digital services such as Xiaoqiao robots to our customers, developed 24-hour service stores, launched a new OA system, and accelerated comprehensive budget management. Looking ahead, we will keep focusing on narrowing net loss, drive growth, and continue to deliver sustainable and long-term profitability to our shareholders." 

Third Quarter of Fiscal 2021 Financial Highlights

*Notes: pp represents percentage points

• Revenue increased by 6.5% to $35.54 million for the three months ended December 31, 2020 from $33.36 million for the same period of last year.
• Gross profit increased by 11.0% to $8.09 million for the three months ended December 31, 2020 from $7.28 million for the same period of last year.
• Gross margin increased slightly by 1.0 percentage points to 22.8% for the three months ended December 31, 2020 from 21.8% for the same period of last year.
• Net loss was $6.29 million, or $0.15 per basic and diluted share, for the three months ended December 31, 2020, compared to net income of $0.46 million, or $0.02 per basic and diluted share, for the same period of last year.

Third Quarter of Fiscal 2021 Financial Results

Revenue

Revenue for the three months ended December 31, 2020 increased by $2.18 million, or 6.5%, to $35.54 million from $33.36 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 by $1.50 million, or 7.0%, to $20.07 million for the three months ended December 31, 2020 from $21.57 million for the same period of last year. The decrease was primarily due to the negative effect on the overall economy from COVID-19, and also to the Company's strategic decision to cease selling certain low-profit margin products that are eligible for reimbursement by National Healthcare Security Administration ("NHSA" hereafter) since September 1, 2020.

Revenue from the online pharmacy business increased by $2.63 million, or 66.4%, to $6.60 million for the three months ended December 31, 2020 from $3.97 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. In the past, prescription drugs cannot be sold online due to safety concern. After the nation lifted the ban order, online prescription drug sales became popular. As a result, the sale of prescription drugs was $2.23 million in the three months ended December 31, 2020 as compared to none in the three month ended December 31, 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 to provide healthcare knowledge, and to remind 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 $1.05 million, or 13.4%, to $8.87 million for the three months ended December 31, 2020 from $7.82 million for the same period of last year. The increase was primarily accomplished by Company's ability to sell certain products in large quantity at its retail stores, to other vendors at competitive prices.

Gross profit and gross margin

Total cost of goods sold increased by $1.37 million, or 5.3%, to $27.45 million for the three months ended December 31, 2020 from $26.08 million for the same period of last year. Gross profit increased by $0.81 million, or 11.0%, to $8.09 million for three months ended December 31, 2020 from $7.28 million for the same period of last year. Overall gross margin increased slightly by 1.0 percentage points to 22.8% for the three months ended December 31, 2020, from 21.8% for the same period of last year.

Gross margins for retail drugstores, online pharmacy and wholesale were 32.6%, 8.1%, and 11.4%, respectively, for the three months ended December 31, 2020, compared to gross margins for retail drugstores, online pharmacy and wholesale of 28.7%, 8.2%, and 9.9%, respectively, for the same period of last year.

Income(loss) from operations

Selling and marketing expenses increased by $2.58 million, or 45.6%, to $8.26 million for the three months ended December 31, 2020 from $5.68 million for the same period of last year. The increase in selling and marketing expenses was primarily due to increase in annual employee compensation and online sales service fee as a result of the sale increase in the Company's online pharmacy.

General and administrative expenses increased by $5.14 million, or 487.5%, to $6.19 million for the three months ended December 31, 2020 from $1.05 million for the same period of last year. On December 21, 2020, the Company issued 3,790,000 shares of common stock according to its employee stock reward incentive plan and recorded stock-based compensation of $3.94 million. Additionally, for the three months ended December 31, 2020, bad debt direct write-off and provision amounted to $0.29 million, an increase of $1.09 million, as compared to reversal of bad debt allowance of $0.80 million for the same period a year ago. Excluding such effect, the general and administrative expenses increased by $0.11 million period over period, which reflects the increase in staff and administration expense.

Loss from operations was $6.37 million for the three months ended December 31, 2020, compared to income from operations of $0.55 million for the same period of last year. Operating margin was (17.9)% and 1.7% for the three months ended December 31, 2020 and 2019 respectively.

Net income(loss)

Net loss was $6.29 million, or $0.15 per basic and diluted share for the three months ended December 31, 2020, compared to net income of $0.46 million, or $0.02 per basic and diluted share for the same period of last year.

Nine Months Ended December 31, 2020 Financial Highlights

*Notes: pp represents percentage points

• Revenue increased by 12.0% to $97.44 million for the nine months ended December 31, 2020 from $87.00 million for the same period of last year.
• Gross profit increased by 15.2% to $23.08 million for the nine months ended December 31, 2020 from $20.04 million for the same period of last year.
• Gross margin increased slightly by 0.7 percentage pointsto 23.7% for the nine months ended December 31, 2020 from 23.0% for the same period of last year.
• Net loss was $8.21 million, or $0.20 per basic and diluted share, for the nine months ended December 31, 2020, compared to net loss of $3.27 million, or $0.09 per basic and diluted share, for the same period of last year.

Nine Months Ended December 31, 2020 Financial Results

Revenue

Revenue for the nine months ended December 31, 2020 increased by $10.44 million, or 12.0%, to $97.44 million from $87.00 million for the same period of last year. The increase in revenue was primarily due to the growth in retail drugstores, online pharmacy and wholesale business.

Revenue from the retail drugstores business increased by $0.50 million, or 0.9%, to $56.81 million for the nine months ended December 31, 2020 from $56.31 million for the same period of last year. However, after removing the impact of exchange rate fluctuation, the actual retail drugstores sales decreased by 0.8%. The actual decrease in the Company's retail drugstore sales is primarily due to the negative effect on the overall economy from COVID-19, and also to the Company's strategic decision to cease selling certain low-profit margin products that are eligible for reimbursement by NHSA since September 1, 2020.

Revenue from the online pharmacy business increased by $8.10 million, or 92.5%, to $16.86 million for the nine months ended December 31, 2020 from $8.76 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 $5.86 million in the nine months ended December 31, 2020 as compared to none in the nine months ended December 31, 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 to provide healthcare knowledge and to remind 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 $1.84 million, or 8.4%, to $23.77 million for the nine months ended December 31, 2020 from $21.93 million for the same period of last year. The increase was primarily accomplished by the Company's ability to sell certain products 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 $7.40 million, or 11.0%, to $74.36 million for the nine months ended December 31, 2020 from $66.96 million for the same period of last year. Gross profit increased by 3.04 million, or 15.2%, to $23.08 million for the nine months ended December 31, 2020 from $20.04 million for the same period of last year. Overall gross margin increased slightly by 0.7 percentage points to 23.7% for the nine months ended December 31, 2020, from 23.0% for the same period of last year.

Gross margins for retail drugstores, online pharmacy and wholesale were 32.7%, 10.8%, and 11.4%, respectively, for the nine months ended December 31, 2020. This compared to gross margins for retail drugstores, online pharmacy and wholesale of 29.8%, 11.3%, and 10.4%, respectively, for the same period of last year.

Loss from operations

Selling and marketing expenses increased by $2.88 million, or 15.9%, to $21.01 million for the nine months ended December 31, 2020 from $18.13 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 the sale increase in the Company's online pharmacy.

General and administrative expenses decreased by $4.64 million, or 81.1%, to $10.37 million for the nine months ended December 31, 2020 from $5.73 million for the same period of last year. On December 21, 2020, the Company issued 3,790,000 shares of common stock according to its employee stock reward incentive plan and recorded stock-based compensation of $3.94 million. Excluding such an effect, the general and administrative expenses increased by $0.70 million period over period, which reflects the increases in staff and administration expense as the Company's online business grows. 

Loss from operations was $8.30 million for the nine months ended December 31, 2020, compared to $3.82 million for the same period of last year. Operating margin was (8.5)% and (4.4)% for the nine months ended December 31, 2020 and 2019 respectively.

Net loss

Net loss was $8.21 million, or $0.20 per basic and diluted share for the nine months ended December 31, 2020, compared to net loss of $3.27 million, or $0.09 per basic and diluted share for the same period of last year.

Financial Condition

As of December 31, 2020, the Company had cash of $12.12 million, compared to $16.18 million as of March 31, 2020. Net cash used in operating activities was $12.45 million for the nine months ended December 31, 2020, compared to $11.27 million for the same period of last year. Net cash used in investing activities was $1.82 million for the nine months ended December 31, 2020, compared to $1.71 million for the same period of last year. Net cash provided by financing activities was $5.42 million for the nine months ended December 31, 2020, compared to $12.70 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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