Ladies and gentlemen, thank you for standing by and welcome to Concord Medical’s Second Quarter 2015 Earnings Conference Call. As a reminder, today’s call is being recorded. I would now like to hand the conference over to your speaker today, Mr. Bill Zima from ICR. Thank you, sir. Please go ahead..

Thank you, operator. Hello, everyone and welcome to Concord Medical’s second quarter 2015 earnings conference call. Concord Medical’s earnings release was distributed earlier today and you can find a copy on the company’s website as well as on respective Newswire services. Today, you will hear from Dr.

Jianyu Yang, Concord Medical’s Chairman and Chief Executive Officer and Mr. Adam Sun, Chief Investment Officer. After their prepared remarks, Dr. Yang and Mr. Sun will be available to answer your questions. Before we continue, please note that the discussion today will contain forward-looking statements under the Safe Harbor provisions of the U.S.

Private Securities Litigation Reform Act of 1995, within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations.

Potential risks and uncertainties include, but are not limited to those outlined in our public filings with the SEC. Concord Medical does not undertake any obligation to update any forward-looking statements except as required under applicable law.

Both our earnings release and remarks made during this call include discussions of certain unaudited non-GAAP financial measures. Our earnings release contains a reconciliation of the unaudited non-GAAP measures to the most directly comparable unaudited GAAP measures. As a reminder, this conference call is being recorded.

In addition, a webcast of this conference call will also be available on Concord Medical’s website. With that said, I would now like to turn the call over to Concord Medical’s Chairman and CEO, Dr. Yang. Please go ahead..

[Foreign language] Thank you, Bill. Welcome everyone to Concord Medical’s second quarter 2015 earnings conference call. [Foreign language] During the second quarter, we have achieved important strategic goal, first, the network business continues to experience healthy growth increasing 3.4% to RMB166.3 million compared to the prior year period.

We expect ongoing strong stable operation cash flow generated from our network business.

[Foreign language] An important part of our expansion strategy is to open secondary cancer hospitals around the country, the first such project, Sun’s [ph] Guangzhou Cancer Hospital is currently undergoing internal decoration, staff recruitment and training and other preparing work. We are now making great efforts in implementing the strategy.

[Foreign language] Second, we have successfully integrated the Fortis Surgical Hospital in Singapore into our operations. Fortis’s financial results were consolidated in the second quarter. Stronger financial results you can see the hospital was [Indiscernible] loss in the second quarter.

The reason for operating loss is that we are in the transition stage and currently we are in the process of changing the name of the hospital to Singapore Concord Cancer Hospital which we expect to be completed before the end of the year.

We are also working with MD Anderson Cancer Center to renovate the hospital to confirm with MDACC Medical Center if passing the internal screening of MDACC the Singapore Concord Cancer Hospital will join the MDACC internal association program.

[Foreign language] Third, we have acquired additional ownership in the MDACC Proton Therapy Center MDACC PTCH for short in August. Concord Medical has become the controlling shareholder of the management company of MDACC PTCH. We are very excited to strengthen our partnership with MD Anderson Proton Therapy Center.

We will continue to directly assist PTCH and our MD Anderson to apply advanced technology and management experience in China and provide better medical service for Chinese patients. Concord Medical plans to build and operate multiple proton centers in China.

This transaction will help Concord Medical learn from the leading treatment proton treatment center in the world and to build and exchange platform for academics and clinical expertise with physicians in China, the United States and abroad.

[Foreign language] Additionally, in our efforts to fully unleash the value in our business, the Company has decided to seek listing of its wholly owned subsidiary Beijing Concord Hospital Management Company Ltd on the National Equities Exchange and Quotations in China, also known as the New Third Board in China.

Beijing Concord’s Management Company is focused on providing management services to the Company's existing network centers and the secondary hospitals projects in the future as seek listing on the New Third Board will be able to create more value for our current and future shareholders. This concludes my comments.

At this point, I’d like to turn the call over to our Chief Investment Officer Mr. Adam Sun to review our financial results..

Thank you, Dr. Yang. Welcome everyone to our call. First, I would like to review the highlights of our second quarter 2015 financial results. Our total net revenue increased by 8.5% to RMB174.5 million or $28.2 million in the second quarter of 2015 or RMB160.8 million in the second quarter of 2014.

The total revenue is composed of revenue on the network business of RMB166 million and on the acquired Fortis Surgical Hospital of RMB8.2 million. Gross profit was RMB79.2 million or $12.8 million, compared to RMB93.6 million in the second quarter of 2014.

Our net income attributable to ordinary shareholders increased by 4.4% to RMB36.5 million or RMB5.9 million or RMB35 million for the second quarter of 2014, which includes the net loss of Fortis Surgical Hospital of RMB7.8 million or $1.3 million.

Our basic and diluted earnings per ADS for both RMB0.81 or $0.13 compared with RMB0.78 in the second quarter of 2014. Adjusted EBITDA non-GAAP was RMB66 million or $10.6 million compared to RMB92.4 million in the second quarter of 2014. Now let me talk about our financial results for the second quarter of 2015 by segment, network business.

Network business. In the network business, we closed three radiotherapy centers in the second quarter of 2015. As of June 30, 2015, we operated a network of 129 centers in 53 cities in China and have entered into agreements to establish two additional centers.

Total net revenue from the network business increased by 3.4% to RMB166.3 million or $26.8 million for RMB160.8 million in the second quarter last year. Cost of revenue for the network business was RMB81.8 million or $13.1 million compared to RMB67.2 million in the second quarter of last year.

We are very pleased to see significant growth in the revenue contribution by both PET-CT and Cyber Knife sectors the percentage of the total revenue has also increased year-over-year as our product mix improvement strategy paid off.

During the quarter, our PET-CT revenue increased 31% year-over-year and our Cyber Knife revenue increased 72% year-over-year. The two sectors accounted for about one third of our total revenue in the second quarter.

Gross profit from the network business was RMB84.8 million or $13.7 million and the gross profit margin of the network business for the quarter was 51.0%, compared to 58.2% for the second quarter of 2014. The decrease in gross profit was mainly due to higher cost of revenue attributable to the increased medical consumable expenses for the network.

We expect the gross margin of the network business to be stable at the current level for the rest of the year. In this quarter, our network developed in line with our expectations achieving both cost line and bottom line stable growths.

We will make more efforts in the product mix and efficiency improvement to our existing centers and selectively transform the existing centers into freestanding self-owned centers in the areas which we have existing resources and strong patient demand. Hospital Business.

Fortis Surgical Hospital is the leading private-owned for-profit hospital in Singapore which operates 31 beds and have 80 medical and non-medical staff. As an important part of our overall strategy, we acquired this hospital in March this year. Currently the Company is transforming it into a cancer specialty hospital.

Net revenues from the hospital business were RMB8.2 million or $1.3 million for the quarter of which in-patient revenue accounted for 88% of the total revenue and the rest includes outpatient revenue of 5% and the medical revenue of 7%. Cost of service of the hospital business was RMB13.8 million or $2.2 million.

Gross profit margin of the hospital business was negative due to the fact that we are in the process to transform the hospital into a speciality cancer hospital. When completed, the hospital will provide MD Anderson Standard Oncology treatment to cancer patients, the specialty high-end cancer patients from Mainland China.

The profitability [ph] of the hospital will see tremendous improvement. We expect the transformation will be completed by the fourth quarter of this year.

In addition, after closing the acquisition of additional ownership interest of the University of Texas and MD Anderson, Cancer Center Proton Therapy Center – Concord Medical is now the controlling shareholder of the management company of Proton Center and will consolidate its financial results beginning in the third quarter of this year.

We expect to see incremental revenue contribution from the business. That concludes our prepared remarks. Thank you for your attention. Now, we would like to open up for questions..

Once again, thank you for joining us today. Please don’t hesitate to contact us if you have further questions. Thank you for your continued support. Have a good day..

Thank you, ladies and gentlemen. That does conclude our conference call for today. Thank you for participation. You may now disconnect your lines..