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Chindex International (CHDX)

Q4 2012 Earnings Call

March 14, 2013 8:00 am ET


Roberta Lipson - Co-Founder, Chief Executive Officer, President and Director

Lawrence Pemble - Chief Operating Officer, Executive Vice President, Director and Chief Financial Officer of Chindex Medical Limited


R. Gregg Hillman

Colin Lee



Good day, ladies and gentlemen, and welcome to the Chindex International Fourth Quarter 2012 Financial Results. [Operator Instructions] As a reminder, today's conference is being recorded. I'd now like to turn conference over to your host, Ms. Roberta Lipson, CEO of Chindex International. Please go ahead.

Roberta Lipson

Thank you. Good morning, and welcome to Chindex International's Fourth Quarter 2012 Conference Call. Joining me on the call today is Larry Pemble, our Chief Operating Officer.

Before we proceed with the summary of operating results for the period and an update on recent events, I'll ask Larry to read the Safe Harbor statement. I'll make some brief comments, and Larry will then review the financial results. Finally, we'll open to Q&A.

Larry, please proceed with the Safe Harbor statement.

Lawrence Pemble

Yes, thank you, Roberta, and good morning, everyone.

Please note that this call will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our results may be materially different from the views expressed today.

A number of potential risks and uncertainties are outlined in our public filings with the SEC, including in our Form 10-K for the year ended December 31, 2012, which will be filed on Friday, March 15. Chindex does not undertake any obligations to update any forward-looking statements, except as required under applicable law.

Roberta Lipson

Thanks, Larry. As Larry noted, we announced our quarterly financial results on Wednesday after the market closed. An earnings release is now available on the company's website.

I'd like to begin the call with highlights about our financial performance in the fourth quarter and full year of 2012. Over the course of the year, our quarterly financial results have consistently reflected growth in existing facilities and increasing contributions from new facilities and new service lines. We are particularly proud to have finished 2012 with a solid quarter, in terms of both revenue and profitability.

For the fourth quarter, revenue grew 36% year-over-year to $43.5 million, representing the strongest ever quarterly revenue from healthcare services. Adjusted EBITDA grew 45% year-over-year to $9 million, representing a 20.6% adjusted EBITDA margin. The fourth quarter is historically our strongest quarter, and proportional share of revenue contributions from the main service lines remain consistent with historical levels. However, it is worth noting that as Beijing and other major Chinese cities experienced severe air pollution this winter, we saw a higher-than-usual number of patients checking in our clinic and hospitals for respiratory illnesses. For the full year of 2012, revenue grew 33% year-over-year to $152.4 million. Adjusted EBITDA grew 49% year-over-year to $28.2 million, representing an 18.5% margin. These data points are at the high end of our guidance range and illustrate our ability to execute on our expansion plans.

Next, I'd like to provide you with an overview of the progress we've made in our ambitious build-out plan over the past year. Beijing, our largest metropolitan market, remains our major source of revenue growth and thus, is a major focus of our expansion plan. Over the past year, we have introduced new advanced technologies here at Beijing United, UFH's flagship hospital, clinics and diversified services. At the BJU main campus, by the end of 2012, we have put into operation 70 available beds out of a total of 120 licensed beds. In step with demand growth, we'll continue increasing available beds in phases as we continue to move outpatient services to our off-campus clinics. Our marketing team has been employing multiple channels, including traditional media, social media and community outreach, to increase awareness of our recently enhanced surgery expertise and our other new service lines. Admissions have been increasing for our cardio and neurosurgery units, which have been making good use of our improved operating theater facilities.

During the fourth quarter, we completed the construction of Beijing United Family Rehabilitation Hospital. Currently, we're in the final stage of installing equipment and obtaining licenses for services. Based on government approval guidelines, we expect to start admitting patients as early as the second quarter, and we'll ramp up the new facility over the 2013, 2014 period. We're very excited about the potential of this premium quality rehab services hospital, the first of its kind in China. Our target patients are those recovering from surgeries or debilitating illnesses in the neurological, cardiac and orthopedic areas. As we continue building up treatment and surgical services at BJU's main campus, the rehab hospital will provide a valuable extension of our integrated health care offering.

In December of last year, we announced the opening of Beijing United CBD Clinic. The clinic's location in Beijing's preeminent commercial and lifestyle center not only meets local market demand, but offers a wide-ranging marketing platform to elevate UFH's profile among expatriates and affluent Chinese nationals who live and work in this area. At the New Hope Oncology Center, we reported last quarter that we received final certifications for the operation of our state-of-the-art linear accelerator, which now completes our offering of full ambulatory cancer treatment. Our patient census is increasing and our reputation in the field of cancer care is growing rapidly as well. As we announced last quarter, the United Family Home Health, or UFHH program, is another groundbreaking new service that United Family has introduced to China. It is early in the story but we feel confident in UFHH's long-term potential and its importance in deepening our distinctive integrated care offering. The extremely positive feedback we've received from the initial patients and our medical professionals that serve them reinforces this confidence.

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