China Pharma Holdings, Inc. (CPHI) Q2 2018 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by and welcome to the China Pharma Holdings Inc. 2Q 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions]. I must advice you that this conference call is being recorded today, 15 of August, 2018. I would now like to hand the conference over to our first speaker today, Diana Huang. Please go ahead, ma’am.

Thank you, operator. Good morning, ladies and gentlemen, and good evening to those of you joining us from China. Welcome to China Pharma Holdings’ second quarter 2018 earnings conference call. I'm Diana Huang, the company's Investor Relations Manager. Speaking on the call today are China Pharma's President and CEO and Interim CFO, Ms. Zhilin Li; and Corporate Vice President, Mr. Sam Hsing. In addition, I will provide translation during the Q&A session of the call. I would like to remind our listeners that on this call, management's prepared remarks contain forward-looking statements, which are subject to risks and uncertainties and management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today due to such risks as market and customer acceptance and demand for our products, our ability to market our product, the impact of competitive product and pricing, the ability to develop and launch new products on a timely basis, the regulatory environment including government regulation in the PRC, our ability to obtain the requisite regulatory approvals to commercialize our products, fluctuations in operating results including spending for research and development and sales and marketing activities, and other risks detailed from time-to-time in our filings with the SEC. In addition, any projections as to the company's future performance represent management's estimates as of today, August 15, 2018. China Pharma assumes no obligation to update those projections in the future as market conditions change. Now, it is my pleasure to turn the call over to China Pharma's CEO and Interim CFO, Ms. Li to make her opening remarks in Chinese, which will be translated by Sam. Afterwards, Sam will continue translating Ms. Li’s detailed discussion of the company's second quarter 2018 financial results.

[Foreign Language]

Thank you, Diana, and good morning, everyone. I would like to thank each of you for joining us today and for your continued support of China Pharma. It is the company’s top priority to actively and steadily increase sales and it is encouraging to see increased revenue in this quarter. Management will continue to vigorously promote sales through active participation in recent provincial market openings to receive new drug tender offers and through further penetration into the market. The ongoing generic drug consistency evaluations and reform of China’s drug production registration and review policies will continue to have a significant impact on the current performance and future development of Chinese pharmaceutical manufacturers, including us, and may gradually change business patterns of the industry. We will continue to actively adapt to state policy guidance and further evaluate market conditions for our current existing products, pipeline products, and competition in the market in order to optimize our development strategy. I will now read the rest of Ms. Li’s prepared remarks in English. Now I would like to review our second quarter 2018 financial results and the balance sheet information. Revenue increased by 8.8% to $3.2 million for the three months ended June 30, 2018, as compared to $3 million for the three months ended June 30, 2017. This increase was mainly due to market volatility. Gross profit was $0.6 million for each of the three months ended June 30, 2018 and 2017. Our gross profit margin in the three months ended June 30, 2018 was 18.3% compared to 22.2% in the same period last year. This decrease was primarily due to an increase in sales of lower margin products during this period compared to the sales performance in the same period last year. Our selling expenses for the three months ended June 30, 2018 were $0.7 million, a decrease of $0.1 million compared to $0.8 million for the three months ended June 30, 2017. Selling expenses accounted for 22.5% of the total revenue in the three months ended June 30, 2018 compared to 27.5% in the same period last year. Our general and administrative expenses for the three months ended June 30, 2018 were $0.4 million, which represented a decrease of $0.3 million compared to $0.6 million in the same period last year. General and administrative expenses accounted for 11.1% and 21% of our total revenues in the three months ended June 30, 2018 and 2017, respectively. Net Loss for the three months ended June 30, 2018 was $1 million compared to net loss of $2.3 million for the three months ended June 30, 2017. Six months results. Revenue increased by 9.5% to $6.8 million for the six months ended June 30, 2018 as compared to $6.2 million for the six months ended June 30, 2017. This increase was mainly due to market volatility. Gross profit for the six months ended June 30, 2018 was $1.6 million compared to $1.4 million in the same period in 2017. The gross profit margin in the six months ended June 30, 2018 was 24.1% compared to 22% in the same period in 2017. The increase was mainly due to the increase in sales of higher margin products in the first half of 2018. Net loss for the six months ended June 30, 2018 was $1.3 million compared to net loss of $3.3 million in the same period 2017. The decrease in net loss was mainly the result of increase in revenue and the decreased expenses in the six months ended June 30, 2018. Turning to balance sheet. As of June 30, 2018, the company had cash and cash equivalents of $1.9 million compared to $2 million as of December 31, 2017. Working capital increased to $3.4 million as of June 30, 2018 from $3.1 million as of December 31, 2017; and the current ratio was both 1.3x at June 30, 2018 and December 31, 2017, respectively. Our net accounts receivable balance was $2.4 million as of June 30, 2018 compared to $2.3 million as of December 31, 2017. Overall, we will continue focusing on our business development and promote our sales and believe that this will support the fair evaluation of our shareholders interest in the future. With that, we will now open the call up to questions. Operator?

Certainly, sir. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions].

Sir, we have no questions at the moment. Back to you.

On behalf of the entire China Pharma team, we would like to thank you for your interest in the company, and your participation on this call. For any of you travelling to China, we always welcome and encourage any visitors, from our shareholders, potential investors, and analysts. This concludes China Pharma’s second quarter 2018 earnings call.

Thank you, sir. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may disconnect your phone lines now.