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Edited Transcript of CO earnings conference call or presentation 24-Aug-18 12:00pm GMT

Q1 2019 Global Cord Blood Corp Earnings Call

Central Sep 11, 2018 (Thomson StreetEvents) -- Edited Transcript of Global Cord Blood Corp earnings conference call or presentation Friday, August 24, 2018 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Albert Chen

Global Cord Blood Corporation - CFO & Director

* Cathy Bai

Global Cord Blood Corporation - VP of Corporate Finance

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Conference Call Participants

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* Kent Charles McCarthy

Jayhawk Capital Management, LLC - Founder, CEO, and President

* Michael D. Schmitz

Jayhawk Capital Management, LLC - CFO and Chief Compliance Officer

* Patrick Terrell

* Peter Halesworth

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Presentation

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Operator [1]

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Welcome everyone to Global Cord Blood Corporation's Earnings Conference Call for the Fiscal Year of 2019 First Quarter. (Operator Instructions)

Now I would like to introduce Ms. Cathy Bai, VP of Corporate Finance, to begin the presentation.

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Cathy Bai, Global Cord Blood Corporation - VP of Corporate Finance [2]

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Thank you, Anna. Good morning, everyone. Welcome to our First Quarter Fiscal 2019 Earnings Conference Call. A press release discussing our financial results has already been published and a copy is available on our company's website. During the call, our management team will summarize corporate developments and financial highlights for the quarter. A question-and-answer session will follow.

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 the 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 fiscal 2019 first quarter financials given 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, investors and analysts. Welcome to our fiscal 2019 First Quarter Earnings Conference Call.

During the reporting period, the escalating U.S.-China trade tensions and the sluggish capital market in China continued to overshadow consumer sentiments towards cord blood banking. In order to defend against such challenging macroeconomic conditions, we put more efforts into educating and growing our addressable market.

Even though it became more difficult and took more time to convert a prospect client into a revenue-generating client, we are glad to announce that after the strong run-up in the past few quarters, we're seeing positive signs that new subscriber number is stabilizing at current levels. We're also delighted to report that we've recruited 20,601 new subscribers, which is in line with our quarterly target.

During the reporting quarter, Guangdong continued to be the key driver of client growth. By end of the quarter, our accumulated subscriber base has surpassed 682,000, further strengthening our leading status.

Looking ahead to the remainder of fiscal 2019, we believe that the near-term outlook will remain unexciting as negative macroeconomic news continue to dominate headlines. We remain agile and ready to adjust our sales and marketing strategy as well as development capabilities to cope with different scenarios.

As we proactively further our penetration in our local market, we will stay alert to the changes and developments of the entire value chain related to cord blood hematopoietic stem cells in both domestic and international markets.

In addition, we continue to screen for appropriate opportunities in the cord blood-related health care and treatment fields, aiming to provide our clients with more comprehensive health, protection and services.

This concludes my remarks regarding our fiscal 2019 first quarter results. Thank you for your ongoing support of GCBC.

I will now turn the call over to our CFO, Mr. Albert Chen, to review our first quarter financial performance in greater detail.

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Albert Chen, Global Cord Blood Corporation - CFO & Director [3]

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Good morning, everyone. Thank you for joining our call today. In the first quarter, revenue increased by 4.3% year-over-year to CNY 234 million, mainly driven by the increase in storage revenue. Accumulated subscriber base increased to over 682,000 by the end of June 2018, and first quarter storage revenue increased by 17% year-over-year to CNY 90 million. Storage revenue now accounted for 39% of total revenue, up from 34% of last year.

As mentioned in our CEO's remarks, we have successfully recruited 20,601 new subscribers even during this troubled time. As a result, first quarter processing revenue amounted to CNY 143 million, and Guangdong division remained the key driver.

First quarter gross profit increased by 6% year-over-year to CNY 191 million. Gross margin added up from 80% last year to 82% in the reporting quarter, as storage fees represent a larger portion of total revenue mix and our cost-saving efforts pay off.

As a result of the enhanced gross margin and lower operating expenses, operating income increased by 15% year-over-year to CNY 95 million. Operating income before depreciation and amortization and share-based compensation expense, or we simply refer to as non-GAAP operating income, increased by 18% year-over-year to CNY 109 million.

Depreciation and amortization expense in the first quarter remained steady at CNY 13 million. No share-based compensation expense was reported in the reporting quarter. Non-GAAP operating income margin increased to 46% in the reporting quarter.

In the reporting quarter, sales and marketing expense was CNY 51 million as compared to CNY 44 million last year. The increase was mainly due to lower sales and marketing expenses of last year led by the reversal of share-based compensation expense. Sales and marketing expense as a percent of revenue were 22% in the reporting quarter.

General and administrative expenses for the first quarter decreased to CNY 41 million from CNY 50 million of last year, largely due to the absence of share-based compensation expense. G&A expenses as a percent of revenue was 18% in the reporting quarter.

No interest expense occurred in the reporting quarter whereas CNY 3 million interest expense was recorded last year, which was related to convertible notes that were fully converted in April of 2017.

In the first quarter, CNY 9 million in unrealized holding loss for equity securities was recognized as other expenses under the new accounting standard, while the same item was recorded as other comprehensive loss last year. In the first quarter of last year, unrealized holding loss for equity securities was RMB 12 million.

Due to the increase in operating income and the absence of interest expense, which were partially offset by the unrealized holding loss for equity securities under the new accounting standard presentation, net income attributable to the company's shareholders for the first quarter increased to CNY 74 million from CNY 69 million of last year. Net margin for the reporting quarter was 31%.

Basic and diluted earnings per ordinary share for the first quarter was CNY 0.61.

These are the highlights of the first quarter results, and we're now happy to take any questions that you may have.

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Cathy Bai, Global Cord Blood Corporation - VP of Corporate Finance [4]

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Anna, we can go to the Q&A session now.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from Mike from Jayhawk Capital.

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Michael D. Schmitz, Jayhawk Capital Management, LLC - CFO and Chief Compliance Officer [2]

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I wanted to just get a couple of details on the breakdown by province for the subscriber and the payment plan breakdown, if you would.

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Albert Chen, Global Cord Blood Corporation - CFO & Director [3]

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In terms of new subscriber breakdown by geographical region, that actually was largely similar to the fourth quarter of last year. So new subscriber from Guangdong accounted for approximately 62% of total new subscribers, and about 19% came from Beijing and the other 19% came from Zhejiang. So that's the new subscriber mix breakdown in terms of geographical region. In terms of payment plan, about 55%, 56% new clients use normal payment, approximately 42% of new subscribers use upfront payment and roughly about 2% of clients choosing others, like paying everything within the 6 years time frame.

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Michael D. Schmitz, Jayhawk Capital Management, LLC - CFO and Chief Compliance Officer [4]

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Okay. Great. And then my other follow-up question on that was in terms of the agreement between Golden Meditech and the new majority owner, there was a net profit guarantee for this calendar year of RMB 432 million, which is about USD 65 million for the profit guarantee. And I know that there is some adjustments that are made under that calculation because it's not -- it doesn't follow the U.S. GAAP necessarily. But do you have any -- can you comment on whether or not you guys will -- you think you'll be -- you're on pace to meet that target?

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Albert Chen, Global Cord Blood Corporation - CFO & Director [5]

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Well, first of all, Mike, the performance undertaking is between Golden Meditech and the new owner, as you rightfully pointed out. And I think that profit undertaking is focusing on the calendar year of 2016, 2017, 2018, if I'm not mistaken. So the cutoff is slightly different. And also as you rightfully pointed out, that this is actually under a different GAAP and with a bunch of adjustment in there. While that -- whether or not we actually make the profit undertaking from Global Cord perspective is not really our responsibility, but at least based on the guidance that we provide in our June earning call, I think, we are progressing on track in achieving our new subscriber target for fiscal 2019.

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Operator [6]

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Your next question is from Peter, who is a private investor.

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Peter Halesworth, [7]

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Sorry to correct that. It's Peter Halesworth from Heng Ren. I'd just like to ask when the last visit was to the U.S.

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Albert Chen, Global Cord Blood Corporation - CFO & Director [8]

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The line's been cut off.

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Peter Halesworth, [9]

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That was in 2011, which was 7 years ago...

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Cathy Bai, Global Cord Blood Corporation - VP of Corporate Finance [10]

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I'm sorry, Peter. We hear you on and off.

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Albert Chen, Global Cord Blood Corporation - CFO & Director [11]

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Do you mind repeating question again, Peter?

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Peter Halesworth, [12]

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Yes. Can you hear now?

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Cathy Bai, Global Cord Blood Corporation - VP of Corporate Finance [13]

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It's not quite clear.

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Peter Halesworth, [14]

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Is this better? Is this better?

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Albert Chen, Global Cord Blood Corporation - CFO & Director [15]

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Yes.

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Cathy Bai, Global Cord Blood Corporation - VP of Corporate Finance [16]

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Yes. Please go ahead, Peter.

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Peter Halesworth, [17]

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Yes. Sorry. Yes. So the last visit, according to your website, to the U.S. to meet investors was in 2011, that was 7 years ago. And Albert Chen, correct me if I'm wrong, but you were a sell-side analyst, and I wonder how would you have rated a company that hadn't visited investors for 7 years. You also list one analyst as covering the company from ROTH Capital; however, he has a different take. He doesn't cover your company, and he doesn't publish anything about your company. So the investor relations effort has been abominable and needs to change. You need to start to act like a public company. You look like a private company or enacting just like the company did prior enduring the botched buyout offer from the previous Chairman. And the share price is signaling that another low bid is coming. So now is the time to make a commitment and show shareholders that you care and will invest in the value -- and creating value for shareholders. I wish to hear that commitment today.

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Albert Chen, Global Cord Blood Corporation - CFO & Director [18]

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Peter, I appreciate your comment. I think the website may actually not be entirely up-to-date in terms of our travel plan. Actually, my latest visit was in February of 2018 after we attended a JPMorgan conference. We also did road shows, and also we may actually -- we are also planning on a visit coming to U.S. very soon. So on a routine basis, we normally will meet with investors doing tours in U.S. 1 or 2 times a year, but if you are interested in meeting, please send us your contact and -- so that we can actually reach out to you when we arrive in U.S.

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Peter Halesworth, [19]

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Right. Well, my information is with the company, and I appreciate that update. And also, what is being done by investor relations to gain coverage by sell-side analysts who -- currently, you have 0 analysts covering the company?

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Albert Chen, Global Cord Blood Corporation - CFO & Director [20]

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That's also -- it's a very good comment as well. We actually are cultivating several relationship at this stage. And if you have come across any interesting ideas or analysts, who indicated their interest in covering China-related public company in U.S., do send them our way.

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Peter Halesworth, [21]

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Well, you have an investor relations person and point person, are they pursuing these? And what is the status?

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Albert Chen, Global Cord Blood Corporation - CFO & Director [22]

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Working very hard on that. I mean, I'm looking at her right now. Working very hard on that. But as you know, I mean, analysts like to take things at their own pace. So obviously, more help is better than less. So again, I mean, we continue to push, and also, I hope that our investors as well as our shareholders will also help us in this crusade to gain more coverage as well. But you rightly pointed out that we should do more work and do more outreach to analysts as well.

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Operator [23]

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Your next question comes from [Jeff], who is a private investor.

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Unidentified Participant, [24]

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Albert, I've reached out on 4 different occasions via e-mail to your investor relations. And as Peter pointed out on the previous call, it doesn't seem to appear that you're running that deal like a public company because I haven't been able to get a response from you in 4 different tries. I've left several voicemails. And so if that's your efforts towards current investors, I can only imagine the efforts towards potential or possible investors. So I would also like to know: number one, I would like a response; and number two, I would like to know specifics about what you're planning on doing going forward. I also would like to know what appears to be excess cash on the balance sheet. Is there any intentions of issuing a dividend? And I was, quite frankly, embarrassed by the insignificant amount of the $0.08 dividend, and would like to know what the plans are going forward with respect to dividends? And if there is any consistent plans to go forward with those dividends.

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Cathy Bai, Global Cord Blood Corporation - VP of Corporate Finance [25]

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Hello, [Jeff]. This is Cathy. Maybe I'll answer your first question first.

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Albert Chen, Global Cord Blood Corporation - CFO & Director [26]

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You have to confirm his last name first.

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Unidentified Participant, [27]

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I'm sorry.

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Albert Chen, Global Cord Blood Corporation - CFO & Director [28]

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[Jeff], may I confirm your last name is [Smith]?

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Unidentified Participant, [29]

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Yes.

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Albert Chen, Global Cord Blood Corporation - CFO & Director [30]

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Okay. So you can go ahead.

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Cathy Bai, Global Cord Blood Corporation - VP of Corporate Finance [31]

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Right. Okay. So regarding your first question, actually, we have received your multiple e-mails and on each occasion, we have replied, but somehow there is a technical issue and we always receive a bounce back from an e-mail system that is beyond our own. So we have actually sent you a letter letting you know our response. But I do apologize if you don't get response in time, but I suspect you probably will receive our letter in due time and maybe...

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Albert Chen, Global Cord Blood Corporation - CFO & Director [32]

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We are using the address on your website to send the mail to you so you should be able to get that thing.

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Unidentified Participant, [33]

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I've also listed my phone and never received a call back.

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Albert Chen, Global Cord Blood Corporation - CFO & Director [34]

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Yes. Because we normally do that in writing. Yes. So [Jeff] -- and also to answer your question with respect to dividend, I'm glad that you raised that question. I want to take this opportunity to clarify a couple of points. First of all, as you are aware, that we have recommended and declared a dividend when we reported our fourth quarter results, even though we cannot guarantee that similar dividend will be made in the upcoming year because the board hasn't approved it yet, but with that being said, I just want to make sure the investor and the investment community is aware that it is our intention to have a stable dividend policy. So the dividend which we declared in the fourth quarter of fiscal year 2018 is not meant to be a onetime thing. And the board will not rule out the possibility of adjusting that dividend payment going forward. However, I mean, like I pointed out in the beginning of my statement is that the board -- even though we have not guaranteed payment, it is our intention to have a stable dividend policy. So I hope this will kind of clear the air a little bit.

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Operator [35]

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Your next question comes from Kent who's from Jayhawk China Fund.

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Kent Charles McCarthy, Jayhawk Capital Management, LLC - Founder, CEO, and President [36]

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A couple of questions, but first, do appreciate the dividend, appreciate the comment about it being a stable dividend. I do think there's some confusion. For U.S. investors, New York Stock Exchange, stable dividend usually report to ongoing quarterly dividend. When you say stable dividend policy, do you mean you'll only be paying a dividend once a year? Or is it still subject to debate with the board? Or can you clarify on the stable dividend comment?

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Albert Chen, Global Cord Blood Corporation - CFO & Director [37]

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The intention, obviously, is to have a recurring dividend payment supported by a dividend policy. But with that being said, the next dividend payment has not been approved. So -- yet so -- which is why we cannot announce it. But it certainly is the intention to have a recurring dividend payment.

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Kent Charles McCarthy, Jayhawk Capital Management, LLC - Founder, CEO, and President [38]

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Recurring quarterly...

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Albert Chen, Global Cord Blood Corporation - CFO & Director [39]

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Well, I mean, I wouldn't go that far. I mean, recurring right now would be a fair statement. But I just want to mention that it is not the intention that we do a dividend onetime only. This is definitely not the intention.

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Kent Charles McCarthy, Jayhawk Capital Management, LLC - Founder, CEO, and President [40]

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I'm just trying to point out -- of course, we hope for a stable quarterly dividend because I think in the U.S., it's usually quarterly. I know in Hong Kong, though, it's often annually and sometimes with a semiannual interim dividend. But just for U.S. investors, I'm hoping you'll go to a quarterly dividend. Second thing is more a comment. I know it's tough for you guys with Sanpower, with House of Fraser going bankrupt and Brookstone, and they're publicly listed A-share, going from $0.38 to $0.10 and their share has been restricted, and the Chairman is on the airplane. Obviously, they've got major financial problems. I think it caused confusion in the stock price here since they are in charge of the SPV, but I'm hoping you can clarify the SPV that owns those shares, they would not -- they would lose everything if the stock is below $10.50. I mean, I can make that comment. It's public information, but is there anything -- you probably can't -- but is there anything you can do to alleviate investors' concerns about the majority shareholders' financial problems? Or any kind of clarification you can make? Or maybe a broader question would be, how concerned are you guys about the share price? And when you go on a road show, I'm sure you're going to get this question about Sanpower. Anyway, any information you can give us on that? Then I have one technical question after that.

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Albert Chen, Global Cord Blood Corporation - CFO & Director [41]

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Obviously, as you pointed out, there has been some -- a lot of development with respect to Sanpower side. But as you know, Sanpower basically is not directly a shareholder of the company. From a legal structure standpoint, it is a PRC-domiciled fund, which actually own the shares and Sanpower is merely one of the 2 GP in the fund. So in terms of ownership, it's actually -- the fund that actually own our shares, not Sanpower itself. Now with that being said, I only have with the -- that you rightfully pointed out with the transaction concerning the House of Fraser as well as Brookstone, there have been a lot of speculation going on, but at least what we can offer to investors is that from Global Cord perspective, our operation remain intact and we continue to achieve our various operational and financial targets. So from Global Cord perspective, our operations remained relatively intact and secured, and we continue to maintain our operational independency. I think that is very important as well.

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Kent Charles McCarthy, Jayhawk Capital Management, LLC - Founder, CEO, and President [42]

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Okay. I know it makes it tough for you guys dealing with that. So I'm sorry about that. My last question...

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Albert Chen, Global Cord Blood Corporation - CFO & Director [43]

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Some investors do raise that question. So it's a fair comment, Kent.

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Kent Charles McCarthy, Jayhawk Capital Management, LLC - Founder, CEO, and President [44]

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Okay. And then my last comment is, obviously, I've been pretty rough on the company for not buying back shares, and I do understand that and maybe I didn't understand the significance. So I know it's very difficult with current currency situation, but again, given that the stock has been dislocated, I think, primarily due to this concern over Sanpower or all this news that came out on Sanpower in July. Mechanically, I'm not saying you guys want to do a share repurchase or a tender, but mechanically, could it be done under the -- in the current situation by going to a bank and putting RMB on deposit and getting dollars? And I also know that -- also if it can be done, is it prohibitively expensive? I mean, could you trust the mechanics of a company with RMB if you wanted to repurchase shares in light of the current situation in China with currency controls? And again, I apologize maybe not understanding the magnitude of this issue right now of the external currency control issues.

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Albert Chen, Global Cord Blood Corporation - CFO & Director [45]

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Well, I mean, as you know, moving RMB and converting RMB into foreign currency always require SAFE approval. And there are certain times where obtaining SAFE approval will be tough, but there are also times where obtaining SAFE approval is relatively easy. I think it's a fair comment to say that now it's definitely not a time where getting SAFE approval is something that can be done relatively straightforward way. So I think this is definitely not a time where I would describe converting RMB into U.S. dollars is easy. So I wouldn't make that comment.

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Kent Charles McCarthy, Jayhawk Capital Management, LLC - Founder, CEO, and President [46]

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I mean, if it was easy with the stock at $1 or so above cash, would you consider a tender offer, if it was easier, if it was something you could do? Have you guys -- would you consider or a share repurchase?

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Albert Chen, Global Cord Blood Corporation - CFO & Director [47]

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Our position with respect to capital allocation has always been taking into consideration shareholders' interest, the development need of the company as well as the future development plans of the company. To a certain extent, the board, including myself have remained relatively open in terms of capital allocation decisions. This is also evident by the fact that we have started making dividend payments and declarations in June of this year. I think we will definitely visit this topic from time to time. I'm not in a position to say no to what you just mentioned.

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Operator [48]

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Your next question comes from [Al], who is also a private investor.

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Unidentified Shareholder, [49]

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I'm a U.K.-based shareholder, and I did send Cathy a note and I appreciate the response. I obviously watched the share price sink somewhere in sympathy with the House of Fraser saga. And I think we see that more closely here, the correlation is very, very high. I guess, listening to the call, I have a couple of questions. To start with, one which is a level of detail, Albert, can you tell me how much cash is on the balance sheet? And how much of that -- how do you analyze that as cash per share? So I'm looking for 2 numbers, the gross cash on the balance sheet and the cash per share.

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Albert Chen, Global Cord Blood Corporation - CFO & Director [50]

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Gross cash on the balance sheet is approximately RMB 4.4 billion. It's mainly component derived from the deferred revenue, as you know, that actually accounted for about RMB 2.2 billion roughly, give or take. And so if you take the gross amount and just simply divide it by number of shares outstanding following the dividend allocations, I think it's about 121 million shares outstanding.

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Unidentified Shareholder, [51]

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Okay. And then a follow-up is, just remind us what is the annual cash flow -- what is the free cash or the positive cash flow that comes in this year?

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Albert Chen, Global Cord Blood Corporation - CFO & Director [52]

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Sorry. Do you mind repeating the questions, again?

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Unidentified Shareholder, [53]

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What's the annual operating cash flow? What's the free cash flow that comes in this year?

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Albert Chen, Global Cord Blood Corporation - CFO & Director [54]

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Well, I mean, for the first quarter, our cash flow is roughly, I think, about RMB 175 million, if I'm not mistaken. That's the operating cash inflow.

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Unidentified Shareholder, [55]

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And that's for one quarter?

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Albert Chen, Global Cord Blood Corporation - CFO & Director [56]

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Yes.

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Unidentified Shareholder, [57]

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Okay. And so then what percentage of the cash flow is the actual dividend?

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Albert Chen, Global Cord Blood Corporation - CFO & Director [58]

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Then you'll be making reference to prior year, which is fiscal year 2018.

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Unidentified Shareholder, [59]

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That would be fine.

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Albert Chen, Global Cord Blood Corporation - CFO & Director [60]

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Yes. If I'm not mistaken, roughly about RMB 70 million out of the RMB 260 million net profit attributable to shareholders. So that's kind of like 50s or it's like 28%.

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Unidentified Shareholder, [61]

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And so do you have investment opportunities for the other 80% as opposed to a sense that it might be better off -- and I realize it's a follow-on to some of the other questions, but I'm quite curious as to how you think of that cash coming in and what your thoughts are to invest that in?

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Albert Chen, Global Cord Blood Corporation - CFO & Director [62]

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Well, investment take twofolds, investment taking into the opportunity to enhance our service portfolio or opportunity to allow us to expand our services geographically. So that's twofolds in terms of capital that can be used for investment. Is that your question?

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Unidentified Shareholder, [63]

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Yes. How would it be used? In other words, you have a lot of cash on the balance sheet above the deferred revenue. You're bringing -- you've started a dividend and a dividend policy would be great. You're bringing in 80% more cash than the dividend without a clear understanding how that's going to be used. And I only say there is no clear understanding about how it would be used is because there is so much other cash on the balance sheet that's not being used.

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Albert Chen, Global Cord Blood Corporation - CFO & Director [64]

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The capital deployment in terms of our resources on hand, we'll mainly look at couple of areas. For example, expansion opportunities, which I just mentioned a moment ago. If there is absence of expansion opportunities, then maybe reallocation and giving capital back to the shareholders also is one of the possibility, which is part of the reason why we started doing the dividend. And those will be the 2 primary areas, including the -- using existing capital to continue to penetrate existing market but that's kind of like a given.

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Unidentified Shareholder, [65]

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Right. So there is no clear investment opportunities right now. There is nothing that would absorb cash within your operating expansion. So straightforward expansion either in more sectors or bringing on more clients, there is no real clear use of cash within your planning in the next, shall we say, 3 to 12 months?

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Albert Chen, Global Cord Blood Corporation - CFO & Director [66]

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That actually is not entirely correct. But at the same time, because if you look at our -- for example, our CEO remarks, you will notice that we've mentioned about potential expansion opportunities now given the fact that there are several things that are going on, while -- which haven't been materialized yet, but if there is any opportunity that will materialize, I think -- which is a stage where we can now, we will definitely announce it. I tried to answer your question without, like, violating the confidentiality and the thinking. Sorry.

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Unidentified Shareholder, [67]

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Okay. No. No. That's helpful. It gives some insight. As a follow-on to one of the earlier questions about how you manage investor relations and deal with shareholders. The one thing that doesn't come through, and this may be because I'm sitting in London and -- or even smaller investors in the U.S., but I think a very clear statement being on the phone today that the company truly cares about their global shareholder base and will organize a visible plan to address that shareholder base and increase the shareholder base, I think that in and of itself will be a very valuable statement from the company, and hopefully, from the board. So that the board actually states and creates clarity around an outreach program to increase the investor base, and there's a zillion reasons for that, not just because the stock has suffered in sympathy with House of Fraser or Sanpower, but given the value of the company, getting that stock price up allows you to use cash and they're completely in sympathy and it also allows you to use the stock down the road as a currency for other opportunities. And so it's a virtuous circle. Returning cash to shareholders raises the stock price, which allows you to use the stock for many other things. And I think a starting point would be a clear statement from the board that shareholder value is very important and then publish an outreach program. And a follow-up question to that is, what banks are you engaged with now that would help you? And what plans would you use to use those banks? So that's a long-winded question. I'd love to hear first, would you consider and can you ask the board to make a statement about shareholder value? And can you publish an outreach program? And what banks do you plan to work with?

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Albert Chen, Global Cord Blood Corporation - CFO & Director [68]

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Well, we will certainly take your comment in line and we will definitely be -- because the outreach program itself, right now we've been doing it on an ongoing basis. If there is a particular bank which you think we should consider engaging, I mean, I'm open to all recommendations. Right now, we are more focusing on 1 or 2 U.S.-based bulge bracket, yes, I should be able to say that. So not so much on the European side, though, but more U.S.-based bulge bracket bank to help us reach out to investor. But your comment is valid, and I think at some point, definitely work for me taking it back to the board and discuss about it.

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Operator [69]

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Your next question comes from Patrick from Terrell Group Management.

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Patrick Terrell, [70]

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It's been a long time. I actually was with you on your road show. I don't even know how many years ago, when we were selling the stock at $6 a share, it's sort of embarrassing and I'm sitting here today talking about a $7 stock. But I think, [Al], I want to commend Al for his -- lot of his comments. They were excellent comments. I hate to say it, but generally your conference calls, you guys talk about, "Well, we'll take this to the board, we'll take that to the board." I hate to say it, you don't ever come back with a plan and that's why we're sitting in this abysmal situation. It's sort of crazy that we have a stock trading at $7 and we have whatever we have in cash. The theme is reoccurring. It's very clear that all the stockholders are basically can give you 3 or 4 simple things to do and it would magically have a big impact on your stock price. It's not because we think it might work. We've seen it work time and time again. So I think it's time that the board really get active with the shareholders and give us a plan. Clearly, you need a quarterly dividend plan that needs to be meaningful, that should be a percentage of the cash that you're actually bringing in quarterly because at this point, you have so much cash on your balance sheet. If you just did something pretty relatively simple to do, it would have a profound impact on your stock. And as Al had pointed out, if your stock goes up, you would have a new currency to use should you want to do any kind of acquisitions and other things that people certainly take publicly traded stock as long as it's a stock that's respected. And at this point, clearly our stock has 0 respect in the marketplace. I don't have to really tell you all the ways you need to fix it because you've just heard 20 or 30 of them from people that really know what they're talking about, that are sophisticated investors. So I hope that I don't get on a conference call a quarter from now and hear us hiding behind the board. The board needs to get active, they need to get out in front. It's embarrassing the way they've run this company to date. I would say, operationally, you guys should be commended. You've done a beautiful job in executing operating plan. You've absolutely failed with shareholder relations. So I think at this time, it's clear that the way the board has been acting has been to the demise of your stock and it's time that we don't hide behind the board. It's time that, Tina, if she is going to be doing acquisition, she gives us some clear guidance on what she's doing so we understand where might she be in that plan. And we need to focus on the most important thing, which is our shareholder value. I hope I'm not having this discussion, as I said, 3 months from now. Clearly, we need a quarterly dividend. We should be announcing a dividend. It should be a meaningful dividend. Doesn't mean that if things change inside your business, you can't change that dividend plan, but we have way too much cash on our balance sheet and what we really need to do is focus on getting the shareholder price up. The fact that it's $1 up from the price that we had when we went public, I don't even know how many years ago, I was a young man when we went public. I'm an old man now. So it's sort of embarrassing. That's really just a comment in general. Obviously, getting into the mechanics of a dividend, I'm assuming getting a dividend through the mechanics of doing a dividend, can you speak to that how -- is there any challenge from a regulatory standpoint in doing a dividend?

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Albert Chen, Global Cord Blood Corporation - CFO & Director [71]

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Well, I mean, Pat, thank you for your comment. Once again, like as I pointed early on in the call, it is our intention, so -- there's no guarantee, but it is definitely our intention to ensure that the payment of -- the dividend payment is a recurring item and we will not rule out the possibility that we will adjust the dividend payment going forward. But that being said, also according to my prior comments, there was a time where getting money in and out of China was relatively straightforward. If I have to compare now versus the straightforward time period, this is certainly not as straightforward as it used to be. I guess that's how I would like to answer your question.

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Patrick Terrell, [72]

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Okay. So can you convert your currency to cash and actually have it in cash -- or excuse me, in U.S. currency instead of renminbi? If -- can you actually have it on your balance sheet as U.S. currency?

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Albert Chen, Global Cord Blood Corporation - CFO & Director [73]

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You just have to get the regulatory approval to convert RMB into...

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Patrick Terrell, [74]

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Okay. But it could sit there for future dividends, if you convert it at the correct time to U.S. currency, correct? You don't have to convert it and hand it out right away. You can convert it and have some in renminbi and some in U.S. currency on your balance sheet, correct?

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Albert Chen, Global Cord Blood Corporation - CFO & Director [75]

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I think when you get SAFE approval for converting a currency, the conversion itself might serve the purpose.

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Patrick Terrell, [76]

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Well, let's say, it was for future dividends or stock repurchase that you wanted to have U.S. currency so you could do it at your -- at times that you chose to do it?

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Albert Chen, Global Cord Blood Corporation - CFO & Director [77]

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That will be not the way I've seen being done in the past. But I guess, there's no harm asking.

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Patrick Terrell, [78]

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Yes. We should probably explore that. So you have U.S. currency on your balance sheet, and therefore, you can act swifter towards a stock repurchase and dividend. Clearly, we should love buying our stock at $7 a share. I assume, if we went out and try to buy 5 million shares, we wouldn't be looking at $7 price anymore. Probably would be quite a bit higher. But anyhow, those are the types of things that a responsible board does. And I shouldn't be probably having to give advice on how to do these things, but I clearly feel at this point probably, we need to see results, we need to see some things improve. All of the -- clearly, the phone call, you have a bunch of frustrated shareholders, and it really is sort of sad that we're sitting here all being so frustrated when we have a company that's operating so well and performing so poorly in the stock market and...

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Albert Chen, Global Cord Blood Corporation - CFO & Director [79]

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Thank you for complimenting our operational abilities. Thank you.

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Patrick Terrell, [80]

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Yes. You guys have been a great operator and you should be commended, but we shouldn't be sitting here having what obviously has been 100% of your questions of frustrated shareholders trying to figure out what is the board going to do, what is the leadership going to do. And in the meantime, you print good quarter after quarter. So it's important that we hear a plan, as [Al] said. Al , you did a great job. I don't know you, but you did a great job on your questions today. And hopefully, the board is really listening and not taking us as, "Well, let's go have the same old crummy conference call 3 months from now." Anyhow, good job on running the company, Albert. We've got an A there, and we have an F in shareholder relationships. So we need to get rid of the F and get that to being A and everybody will be smiling.

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Albert Chen, Global Cord Blood Corporation - CFO & Director [81]

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All right. Thank you.

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Operator [82]

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At this point, there appears to be no further questions. I will now turn the call back to Ms. Cathy Bai. Please go ahead.

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Cathy Bai, Global Cord Blood Corporation - VP of Corporate Finance [83]

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Thank you, Anna. This concludes our earnings conference call for the fiscal 2019 first quarter. Thank you all for your participation and ongoing support. You all have a great day. Thank you.

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Operator [84]

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Ladies and gentlemen, that does conclude our conference for today. Thank you all for participating. You may all now disconnect.