Jun 19, 2015
Executives
Kathy Bian - VP of Corporate Finance Albert Chen - Chief Financial Officer, Director
Analysts
Brian Tanquilut - Jefferies Michael Schmitz - Jayhawk Capital
Operator
Welcome everyone to China Cord Blood Corporation's Earnings Conference Call for the Fourth Quarter and Full Year of Fiscal 2015. All participants' lines will be placed on mute during the presentation, after which there will be a question-and-answer session.
[Operator Instructions] Now, I would like to introduce Ms. Kathy Bian, VP of Corporate Finance to begin the presentation.
Kathy Bian
Thank you, Operator. Good morning, everyone.
Welcome to our fourth quarter and full year of fiscal 2015 earnings conference call. A press release discussing our financial results has already been released and the copy is available on our website.
During the call, our management team will summarize corporate developments and financial highlights for the quarter. A question-and-answer session will follow.
To allow everyone a chance to ask a question, please limit yourselves to one question at a time. Before we begin, please note that today's discussion will contain forward-looking statements that are subject to certain risks and uncertainties and actual results could be materially different from those forward-looking statements.
Kindly refer to our SEC filings for detailed discussions of potential risks. In the interest of time, we will begin with our CEO's remarks followed by a detailed report of our fourth quarter full year of fiscal 2015 financial performance by our CFO, Mr.
Albert Chen. Our management will be available to answer questions during the Q&A session.
Today, on behalf of our CEO, Tina, I will read her prepared remarks. Let's begin our presentation.
Good morning, ladies and gentlemen. Welcome to our fourth quarter fiscal 2015 earnings conference call.
Marching into the Chinese Year of Sheep, we witnessed a noticeable decline in terms of newborn babies' numbers, which resulted in a smaller new subscriber base for the company. During the fourth quarter, we recruited 15,982 new subscribers, representing a year-on-year decrease of 7% and a quarter-on-quarter decrease of 9%.
As of the end of March 2015, the company's accumulated subscriber base exceeded 441,000. New subscribers' compensation across regions remained vastly similar comparing the fourth quarter to the rest of fiscal year 2015.
Over half of the new subscribers came from Guangdong province. To tackle such challenging market, where newborn baby numbers declined, the management team continued to explore new means of channels to access potential client, including mobile platform, new media and B2C platforms, in addition we are continuing to prudently ramp up our commercialization effort in the Zhejiang market.
During this period, we recruited a total of RMB14 million share based compensation expenses, which related to the restricted share units granted pursuant to the restricted share units gain. Overshadowed by the year of Sheep, we believe fiscal year 2016 is likely to be a challenging year as number of newborn within our coverage regions continued to drop.
In order to mitigate the impact, we will continue to explore new promotion platforms and marketing channels to attract new subscribers. This concludes my remarks for fourth quarter financial results and recent developments.
I want to thank you for your ongoing support of CCBC. At this point, I would turn the call over to our CFO, Mr.
Albert Chen, to review our fourth quarter financial performance in greater detail.
Albert Chen
Well, good morning everyone. Thank you for joining our call today.
Revenues for the fourth quarter amounted to approximately RMB163 million, representing an increase of approximately 7% from RMB152 million in the prior year period. The growth was mainly driven by the increased storage revenues.
Entering into Chinese Lunar Year of the Sheep, newborn babies have decreased in the regions in which we operate which in turn have impacted our number of new subscribers during the fourth quarter this year. In this quarter, we recruited 15,982 million new subscribers as compared to 17,136 new subscribers in the same period last year.
In the fourth quarter, revenue from storage fees increased by 25% year-over-year to RMB55 million, which accounted for 34% of total revenues as compared to 29% in the prior year period. The accumulated subscriber base was approximately 441,000 as of the end of March 2015.
Revenue from processing fees, which also include other services, increased slightly to approximately RMB108 million in the March quarter. In terms of revenue mix, revenues derived from processing fees accounted for approximately 66% of our total revenue, down from 71% in the same period last year.
Gross profit for the fourth quarter amounted to approximately RMB129 million, representing a 3% increase year-over-year. Gross margin was 79% as compared to 82% of last year.
The difference is mainly due to the increase in depreciation expense and higher raw material costs. Sales and marketing expenses accounted for approximately 21% of our total revenues compared to 19% in the same period last year.
In terms of absolute amount, we recorded approximately RMB35 million as sales and marketing expenses in the fourth quarter comparing to RMB28 million in the same period of last year. The increase was mainly due to the share based compensation expense of $3.9 million, which was recorded in the fourth quarter of this year.
We did not incur any share based compensation expense in the fourth quarter of last year. Excluding the share based compensation expense, sales and marketing expenses remained largely in line as a percentage of revenue as compared to the same period of last year.
G&A expenses rose to approximately RMB41 million, up from RMB30 million of last year and this represent approximately 25% of our fourth quarter revenues. The increase was mainly driven by the recognition of the share based compensation expense, which was RMB9.8 million, and because no such expense were recorded in the fourth quarter of last year.
Also, a slight increase of RMB0.5 million depreciation expense also contributed to the increase in G&A expense as well. Operating income for the fourth quarter was approximately RMB50 million compared to RMB64 million of last year.
Operating margin was 30% as compared to 42% in the fourth quarter of last year. The decrease, as I mentioned before, was mainly related to higher depreciation expense and also the recognition of share based compensation expense.
However, operating income before depreciation and amortization expense and share based compensation expense amounted to RMB77 million, representing a 4% year-over-year increase. EBITDA margin before share based compensation expense was approximately 47%.
The non-operating items, interest expense incurred in the fourth quarter amounted to RMB25 million as compared to RMB17 million in the prior year period. During the fourth quarter this year, we expensed all of our interest expenses, while in the same period of last year interest expense of approximately RMB7 million was related to the construction of the new facilities and such amount was capitalized.
Fourth quarter profit before tax amounted to RMB29 million, net income attributable to company shareholders was RMB17 million as compared to RMB40 million in the prior year period. Basic and diluted earnings per share for the fourth quarter were RMB0.23.
Net operating cash flow for the fourth quarter amounted to approximately RMB146 million. Now, these are the key highlights for the fourth quarter results and I think we can turn to the floor for any questions.
Operator
Thank you, sir. We will now begin the question and answer session.
[Operator Instructions] Your first question comes from the line of Brian Tanquilut from Jefferies. Your line is open.
Please go ahead.
Brian Tanquilut
Good morning, Albert. First question for you, historically, you give us a little bit of guidance on how to think about volumes.
Obviously, the Year of the Sheep is here, so I just wanted to hear what your thoughts are on how we should be thinking about new subscriber adds this year and also how you are driving that whether it is through increased sales force additions or how should we be thinking about the cost side of driving of volume growth?
Albert Chen
Thank you for the questions. As we started highlighting a couple of months ago regarding the potential impact for the Year of the Sheep, what we are experiencing is we are seeing a contraction in terms of number of babies born in the regions where we operate.
Even though the impact or the magnitude of decline seems varies, seems different from one region to another, we are definitely experiencing a shrinkage in the underlying market size and that will require additional work in order to recruit new subscribers. We have warned the market about it and we still believe that for the remaining of the calendar year, the operating environment will somewhat be challenging, but we do not believe this will be a recurring event and also we do not believe that impact will be devastating, so in terms of new subscriber package for the fiscal 2016, we believe a reasonable number can be achieved somewhere between 63,000 to 65,000.
That is assuming no massive - no further contraction in the underlying market as well. Obviously, if there's further changes in the markets, we will definitely keep the investor and alert about any new developments on that end.
In terms of the work that we have been putting, the additional resources and work that we are putting in to recruiting new subscribers, over the course of next 12 months you should at least see an increase in sales and marketing effort. Mainly, we are beefing up our sales team and specially for the Zhejiang province, and also you will see additional a program being deployed to investigate any new possibility or new channels to recruit new subscribers.
Platform such as new electronic platforms as highlighted in the CEO remarks, new B2C platforms and we are attempting to trying new additional recruitment effort that deviates from our old physical face-to-face, one-to-one, interaction marketing effort, so this will be the things that we are currently attempting and trying, so it is fair to assume that sales and marketing expenses in the near-term will likely to edge it up, but it is not going to be skyrocketing, but we do anticipate a higher sales and marketing expenses as a percentage of revenues.
Operator
Your next question comes from the line of Michael Schmitz of Jayhawk Capital. Please go ahead.
Michael Schmitz
Hello, Albert. Thanks for taking my call.
Could you comment on or give us your thoughts on, there has been some rumors out there regarding the Asia company Zhongyuan Union and its potential acquisition that it - speculating that it might be China Cord Blood, and I know that you guys have some ties to them. I know we kind of have been in contact with them [ph] before and could you give us your thoughts or comments if you can on that potential transaction and kind of related to that and how the progress of the deal with Golden Meditech is progressing as well?
Thank you.
Albert Chen
Michael, thank you for your questions. Well, first of all, I hope, yes, investor and also audience of the call understand that there is a limitation as to what I can discuss at this point in time, especially with respect to the pending transaction.
As of this time, we have only been serve a proposed [ph] and also we have set up a special committee to evaluate on this proposal as well, so I will say any negotiation or discussion or evaluation with respect to this pending transaction is the sole responsibilities of the special committee. Now, also going back to your earlier questions regarding with respect to the market rumor, I just wanted to highlight that it actually is not our policy to comment on any market rumor and it is the special committee responsibility to evaluate both, the proposal from Golden Meditech as well as any other alternatives and I think I will just leave it with that.
Operator
[Operator Instructions] It appears there's no further questions. Please go ahead sir.
Kathy Bian
Okay. If there's no more questions, then we will probably should conclude our earnings conference call of the fourth quarter and full year of fiscal 2015.
Thank you for your participation and ongoing support. Have a great day.
Operator, you may now disconnect.
Operator
That concludes today's conference. Thank you all for your participation.
You may all disconnect.