Universe Pharmaceuticals INC Reports Fiscal Year 2023 Financial Results
JI'AN, China, Jan. 30, 2024 /PRNewswire/ -- Universe Pharmaceuticals INC ("Universe Pharmaceuticals" or the "Company") (NASDAQ:UPC), a pharmaceutical producer and distributor in China, today announced its financial results for the fiscal year ended September 30, 2023.
Mr. Gang Lai, Chairman and Chief Executive Officer of Universe Pharmaceuticals, commented, "Despite market fluctuations and the economic slowdown impacting our business in fiscal year 2023, we continued our efforts to deliver high quality products to our loyal customers. Our dedication to addressing the physical conditions of the elderly and promoting their longevity and general well-being remains unwavering. We maintain a positive outlook on the market development, particularly with China's elderly population reaching 260 million residents and their growing demand for health solutions. We will implement multiple strategic initiatives to improve our competitive position in the market. Our strategic initiatives include ongoing efforts to enhance our signature product, Guben Yanling Pill, addressing the needs of existing customers for better health while attracting new customers. Additionally, we are committed to strengthening our marketing strategies and expanding our sales channels. We will continue to build multiple sales teams and implement brand promotion and academic-driven marketing strategies to increase the recognition of our major brand, Bai Nian Dan, which is known for specializing in products targeted at the physical wellness of older population. We believe in the growth potential of the pharmaceutical and health industry. Leveraging our experience and expertise, we will continue to execute the strategic development plan, improve operating efficiency, and expand our business to capture this growth trend. We are confident that our dedicated team and capabilities will accelerate the Company's growth, bring Universe Pharmaceuticals to new heights, and create long-term value for shareholders."
Fiscal Year 2023 Financial Highlights
- Revenues were $32.3 million for the fiscal year ended September 30, 2023, compared to $40.1 million for the fiscal year ended September 30, 2022.
- Loss from operations was $3.5 million for the fiscal year ended September 30, 2023, compared to $7.4 million for the fiscal year ended September 30, 2022.
- Net loss was $6.2 million for the fiscal year ended September 30, 2023, compared to $8.7 million for the fiscal year ended September 30, 2022.
- Basic and diluted loss per share were $1.70 for the fiscal year ended September 30, 2023, compared to $2.41 for the fiscal year ended September 30, 2022.
Fiscal Year 2023 Financial Results
Revenues
For the Fiscal Years Ended September 30, | ||||||||||||
2023 | 2022 | |||||||||||
($ millions) | Revenue | Cost of | Gross | Revenue | Cost of | Gross | ||||||
TCMD products sales | 18.6 | 13.4 | 27.8 % | 24.0 | 8.2 | 65.9 % | ||||||
Third-party products sales | 13.7 | 8.6 | 37.5 % | 16.2 | 10.1 | 37.7 % | ||||||
Total | 32.3 | 22.0 | 31.9 % | 40.1 | 18.3 | 54.5 % | ||||||
Total revenues decreased by $7.8 million, or 19.5%, to $32.3 million for the fiscal year ended September 30, 2023 from $40.1 million for the fiscal year ended September 30, 2022.
Sales of traditional Chinese medicine derivatives ("TCMD") products decreased by $5.4 million, or 22.6%, to $18.6 million for the fiscal year ended September 30, 2023, from $24.0 million for the fiscal year ended September 30, 2022. The decrease in the sales of TCMD product was due to the following reasons:
a) A slowdown in the economy caused by the COVID-19 pandemic has led to a decline in customers' spending power, and the Company changed its pricing strategy by decreasing the per unit price of TCMD products in an effort to increase sales volume and market share during this challenging period. Average selling price of TCMD products decreased by $1.11 per unit, or 50.0%, to $1.11 per unit for the fiscal year ended September 30, 2023, from $2.22 per unit for the fiscal year ended September 30, 2022.
b) As a result of the Company's new pricing strategy, sales volume of TCMD products increased by 55.1%, to 16,753,432 units sold for the fiscal year ended September 30, 2023, from 10,799,254 units sold for the fiscal year ended September 30, 2022.
c) The average exchange rate between Renminbi ("RMB") and U.S. dollar ("US$") was US$1.00 to RMB7.0533 for the fiscal year ended September 30, 2023 as compared to US$1.00 to RMB6.5532 for the fiscal year ended September 30, 2022. The depreciation of RMB against US$ had a 7.6% negative impact on the Company's reported revenues.
Sales of third-party products decreased by $2.4 million, or 15.0%, to $13.7 million for the fiscal year ended September 30, 2023 from $16.2 million for the fiscal year ended September 30, 2022. Sales volume of third-party products decreased by 4.9%, to 8,777,877 units sold for the fiscal year ended September 30, 2023, from 9,226,027 units sold for the fiscal year ended September 30, 2022. Average selling price of third-party products decreased by $0.19 per unit, or 10.9%, to $1.56 per unit for the fiscal year ended September 30, 2023, from $1.75 per unit for the fiscal year ended September 30, 2022, due to a change in the Company's product mix and the 7.6% negative impact from foreign currency fluctuation as discussed above.
Cost of revenues and gross profit
Cost of revenues increased by $3.7 million, or 20.5%, to $22.0 million for the fiscal year ended September 30, 2023 from $18.3 million for the fiscal year ended September 30, 2022, due to an increase in sales volume and rising prices of traditional Chinese medicine raw materials caused by the imbalance between supply and demand starting from the fourth quarter of 2022.
Gross profit decreased by $11.6 million to $10.3 million for the fiscal year ended September 30, 2023, from $21.9 million for the fiscal year ended September 30, 2022. Gross margin decreased by 22.6%, to 31.9% for the fiscal year ended September 30, 2023 from 54.5% for the fiscal year ended September 30, 2022.
Operating expenses
Selling expenses decreased by $12.3 million, or 64.5%, to $6.8 million for the fiscal year ended September 30, 2023 from $19.1 million for the fiscal year September 30, 2023. Such decrease was primarily attributable to (i) a decrease in advertising expenses by $12.9 million, or 73.4%, from $17.5 million for the fiscal year ended September 30, 2022, to $4.7 million for the fiscal year ended September 30, 2023. In September 2021, the Company entered into an advertising service agreement with a third party, Guangdong Fengyang Legend Consulting Co., Ltd. ("Fengyang Legend") to promote the sales of the Company's major TCMD products, Bai Nian Dan and Guben Yanling Pill with a service period of one year, from October 1, 2021 to September 30, 2022. In March 2022, the Company entered into an advertising service agreement with a third-party, Health Headline to promote the Company's brand on the Health Headline's website and mobile app, with a service period of ten months from March 1, 2022 to December 31, 2022. In March 2023, the Company renewed the advertising services arrangement with Health Headline by entering a new service agreement with Health Headline with a service period of ten months from March 1, 2023 to December 31, 2023. As the Company's agreement with Fengyang Legend expired in September 2022, advertising expenses decreased significantly during the fiscal year ended September 30, 2023; and (ii) partially offset by an increase in shipping and delivery expenses by $0.4 million, or 61.9%, from $0.6 million for the fiscal year ended September 30, 2022 to $1.0 million for the fiscal year ended September 30, 2023, due to an increase in the Company's sales volume, increased freight cost and rising fuel prices during the fiscal year ended September 30, 2023.
General and administrative expenses decreased by $0.4 million or 15.5% to $2.2 million for the fiscal year ended September 30, 2023 from $2.6 million for the fiscal year ended September 30, 2022, primarily attributable to (i) a decrease in bad debt expense by $0.9 million, because the Company accrued less bad debt expenses based on its assessment of the collectability of the accounts receivable and advance to suppliers, partially offset by (ii) an increase in consulting fee by $0.2 million, or 28.6% due to consulting services retained to improve product knowledge and sales tactics of the Company's employees; and (iii) an increase in office supplies and utility expense by $0.1 million, or 43.2% due to the registration fees paid to U.S. Securities and Exchange Commission, annual listings fees paid to the Nasdaq Stock Market, and increased investor relations expense for the fiscal year ended September 30, 2023.
Research and development ("R&D") expenses decreased by $2.8 million, or 36.4%, to $4.9 million for the fiscal year ended September 30, 2023 from $7.6 million for the fiscal year ended September 30, 2022, primarily attributable to (i) a decrease in R&D expense of $3.2 million to develop and test new Chinese medicine products in order to diversify the Company's future product portfolio. During the fiscal year ended September 30, 2022, the Company cooperated with external academic and research institutions to jointly develop and test eight new Chinese medicine products and accordingly incurred significant amount of R&D expense in connection with such efforts. As these development activities reached their final stage, expenditure on new product development decreased significantly in the fiscal year ended September 30, 2023; and (ii) an increase in the materials used in the R&D activities by $0.4 million. In order to develop new products and improve the formulation of several existing products, the Company conducted more testing on product stability and safety, and as a result, more materials were used in R&D activities for the fiscal year ended September 30, 2023 than the fiscal year ended September 30, 2022.
Other income (expenses), net
Total other income, net, decreased by $0.2 million, or 40.8%, to net other expenses of $0.3 million for the fiscal year ended September 30, 2023 from net other expenses of $0.5 million for the fiscal year ended September 30, 2022.
Provision for income taxes
Provision for income taxes was $2.3 million for the fiscal year ended September 30, 2023, representing an increase of $1.6 million, or 207.5%, from $0.8 million for the fiscal year ended September 30, 2022.
Net loss
Net loss was $6.2 million for the fiscal year ended September 30, 2023, representing a $2.6 million decrease from $8.7 million for the fiscal year ended September 30, 2022.
Basic and diluted loss per share were $1.70 for the fiscal year ended September 30, 2023, compared to $2.41 for the fiscal year ended September 30, 2022.
Balance Sheet
As of September 30, 2023, the Company had cash of $5.3 million, compared to $5.7 million as of September 30, 2022.
Cash Flow
Net cash provided by operating activities was $1.1 million for the fiscal year ended September 30, 2023, compared with net cash used in operating activities of $1.3 million for the fiscal year ended September 30, 2022.
Net cash used in investing activities was $44,169 for the fiscal year ended September 30, 2023, compared with $3,908,105 for the fiscal year ended September 30, 2022.
Net cash used in financing activities was $1.4 million for the fiscal year ended September 30, 2023, compared with net cash provided by financing activities of $3.3 million for the fiscal year ended September 30, 2022.
About Universe Pharmaceuticals INC
Universe Pharmaceuticals INC, headquartered in Ji'an, Jiangxi, China, is a pharmaceutical producer and distributor in China. The Company specializes in the manufacturing, marketing, sales and distribution of TCMD products targeting the elderly with the goal of addressing their physical conditions in the aging process and to promote their general well-being. The Company also distributes and sells biomedical drugs, medical instruments, Traditional Chinese Medicine Pieces, and dietary supplements manufactured by third-party pharmaceutical companies. Currently, the Company's products are sold in 30 provinces of China. For more information, visit the Company's website at http://www.universe-pharmacy.com/.
Forward-Looking Statements
Certain statements in this announcement are forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations and projections about future events and financial trends that the Company believes may affect its financial condition, results of operations, business strategy and financial needs. Investors can identify these forward-looking statements by words or phrases such as "may," "will," "expect," "anticipate," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "is/are likely to" or other similar expressions. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the Company cautions investors that actual results may differ materially from the anticipated results and encourages investors to review other factors that may affect its future results in the Company's registration statement and in its other filings with the U.S. Securities and Exchange Commission.
For more information, please contact:
Ascent Investor Relations LLC
Tina Xiao
President
Phone: +1-646-932-7242
Email: [email protected]
UNIVERSE PHARMACEUTICALS INC. AND SUBSIDIARIES | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
As of September 30, | ||||||||
2023 | 2022 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | 5,285,247 | $ | 5,711,458 | ||||
Short-term investments | 13,219,005 | 13,148,594 | ||||||
Accounts receivable, net | 10,667,603 | 15,183,890 | ||||||
Due from related parties | 61,678 | - | ||||||
Inventories, net | 3,343,266 | 2,206,488 | ||||||
Advance to suppliers | 180,643 | 16,701 | ||||||
Prepayment for acquisition | 3,426,535 | 3,514,450 | ||||||
Prepaid expenses and other current assets | 626,241 | 1,724,099 | ||||||
TOTAL CURRENT ASSETS | 36,810,218 | 41,505,680 | ||||||
Property and equipment, net | 3,699,965 | 4,250,638 | ||||||
Prepayments made to a related party for purchase of property | 2,192,982 | 2,249,248 | ||||||
Prepayments for construction in progress | 9,092,996 | 9,326,296 | ||||||
Intangible assets, net | 148,584 | 157,451 | ||||||
Investment in equity securities | 685,307 | 702,890 | ||||||
Deferred tax assets | 656,980 | 1,347,672 | ||||||
TOTAL NONCURRENT ASSETS | 16,476,814 | 18,034,195 | ||||||
TOTAL ASSETS | $ | 53,287,032 | $ | 59,539,875 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Short-term bank loans | $ | 5,482,456 | $ | 3,936,184 | ||||
Accounts payable | 4,585,285 | 3,075,393 | ||||||
Taxes payable | 434,758 | 167,350 | ||||||
Due to related parties | 540,096 | 3,379,263 | ||||||
Accrued expenses and other current liabilities | 2,711,736 | 2,539,362 | ||||||
TOTAL CURRENT LIABILITIES | 13,754,331 | 13,097,552 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
SHAREHOLDERS' EQUITY | ||||||||
Ordinary shares, $0.01875 par value, 150,000,000 shares | 67,969 | 67,969 | ||||||
Additional paid in capital | 29,279,159 | 29,279,159 | ||||||
Statutory reserve | 2,439,535 | 2,439,535 | ||||||
Retained earnings | 10,159,304 | 16,322,365 | ||||||
Accumulated other comprehensive loss | (2,413,266) | (1,666,705) | ||||||
TOTAL SHAREHOLDERS' EQUITY | 39,532,701 | 46,442,323 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 53,287,032 | $ | 59,539,875 | ||||
* | Retrospectively restated for effect of 6-for-1 share consolidation. |
UNIVERSE PHARMACEUTICALS INC. AND SUBSIDIARIES | ||||||||||||
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME | ||||||||||||
For the Years Ended September 30, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Revenue | $ | 32,308,735 | $ | 40,143,151 | $ | 47,982,031 | ||||||
Cost of revenue | (21,993,601) | (18,251,815) | (22,655,854) | |||||||||
Gross profit | 10,315,134 | 21,891,336 | 25,326,177 | |||||||||
Operating expenses | ||||||||||||
Selling expenses | (6,783,703) | (19,083,135) | (2,973,531) | |||||||||
General and administrative expenses | (2,199,657) | (2,602,624) | (3,296,844) | |||||||||
Research and development expenses | (4,858,548) | (7,644,375) | (5,465,662) | |||||||||
Total operating expenses | (13,841,908) | (29,330,134) | (11,736,037) | |||||||||
Income from operations | (3,526,774) | (7,438,798) | 13,590,140 | |||||||||
Other income (expenses) | ||||||||||||
Interest expense, net | (156,788) | (162,400) | (101,604) | |||||||||
Other (expenses) income, net | (235,614) | 48,940 | (80,434) | |||||||||
Short-term investments income (loss) | 38,530 | (470,477) | 239,549 | |||||||||
Equity investment income | 31,072 | 38,588 | 30,827 | |||||||||
Total other (expense) income, net | (322,800) | (545,349) | 88,338 | |||||||||
(Loss) income before income tax provision | (3,849,574) | (7,984,147) | 13,678,478 | |||||||||
Income tax provision | (2,313,487) | (752,419) | (2,358,526) | |||||||||
Net (loss) income | (6,163,061) | (8,736,566) | 11,319,952 | |||||||||
Other comprehensive income (loss) | ||||||||||||
Foreign currency translation adjustment | (746,561) | (3,755,464) | 1,193,369 | |||||||||
Comprehensive (loss) income | $ | (6,909,622) | $ | (12,492,030) | $ | 12,513,321 | ||||||
Earnings per share | ||||||||||||
Basic and diluted | $ | (1.70) | $ | (2.41) | $ | 3.58 | ||||||
Weighted average number of shares outstanding | ||||||||||||
Basic and diluted * | 3,625,000 | 3,625,000 | 3,163,470 | |||||||||
* | Retrospectively restated for effect of 6-for-1 share consolidation. |
UNIVERSE PHARMACEUTICALS INC. AND SUBSIDIARIES | ||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||
For the Years Ended September 30, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Cash flows from operating activities | ||||||||||||
Net (loss) income | $ | (6,163,061) | $ | (8,736,566) | $ | 11,319,952 | ||||||
Adjustments to reconcile net income to net cash provided by | ||||||||||||
Depreciation and amortization | 508,785 | 533,949 | 446,878 | |||||||||
Loss from disposal of fixed assets | 114 | 983 | 1,559 | |||||||||
Allowance for doubtful accounts | (439,327) | 419,353 | (230,175) | |||||||||
Inventory reserve | (49,166) | 15,774 | - | |||||||||
Deferred income tax benefit | 679,586 | (605,278) | (668,341) | |||||||||
Short-term investments income | (38,530) | 470,477 | (239,549) | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable | 4,718,118 | (1,549,312) | (3,867,457) | |||||||||
Inventory, net | (1,183,823) | 16,586 | (451,634) | |||||||||
Advance to suppliers, net | (170,016) | 2,681,214 | (2,717,085) | |||||||||
Prepayment for advertising | - | 7,385,695 | (7,434,240) | |||||||||
Advances to related parties | - | 236,982 | (237,720) | |||||||||
Prepaid expenses and other current assets | 1,091,022 | (1,699,929) | (168,188) | |||||||||
Accounts payable | 1,641,426 | (1,896,621) | 2,457,337 | |||||||||
Taxes payable | 280,939 | (904,127) | (298,620) | |||||||||
Accrued expenses and other current liabilities | 244,015 | 2,318,474 | 31,436 | |||||||||
Net cash provided by (used in) operating activities | 1,120,082 | (1,312,346) | (2,055,847) | |||||||||
Cash flows from investing activities | ||||||||||||
Purchases of property and equipment | (44,169) | (93,703) | (444,505) | |||||||||
Proceeds from disposal of fixed assets | - | 523 | - | |||||||||
Prepayments made to a related party for purchase of property | - | - | (2,457,600) | |||||||||
Prepayments for construction in progress | - | - | (10,629,120) | |||||||||
Prepayment for acquisition | - | (3,814,925) | - | |||||||||
Payments for short-term investments | - | - | (15,330,660) | |||||||||
Redemption of short-term investments | - | - | 1,801,927 | |||||||||
Net cash used in investing activities | (44,169) | (3,908,105) | (27,059,958) | |||||||||
Cash flows from financing activities | ||||||||||||
Proceeds from short-term bank loans | 5,671,104 | 4,272,716 | 4,300,800 | |||||||||
Repayment of bank loans | (3,969,773) | (4,272,716) | (2,764,800) | |||||||||
Gross proceeds from initial public offerings | - | - | 28,750,000 | |||||||||
Payment for deferred initial public offering costs | - | - | (2,792,543) | |||||||||
Proceeds from (prepayments for) related parties borrowings | (3,091,977) | 3,317,943 | (911,648) | |||||||||
Net cash (used in) provided by financing activities | (1,390,646) | 3,317,943 | 26,581,809 | |||||||||
Effect of exchange rate changes on cash | (111,478) | (463,942) | 553,702 | |||||||||
Net (decrease) increase in cash | (426,211) | (2,366,450) | (1,980,294) | |||||||||
Cash, beginning of year | 5,711,458 | 8,077,908 | 10,058,202 | |||||||||
Cash, end of year | $ | 5,285,247 | $ | 5,711,458 | $ | 8,077,908 | ||||||
Supplemental disclosure information | ||||||||||||
Cash paid for interest expense | $ | 190,184 | $ | 199,852 | $ | 149,303 | ||||||
Cash paid for income tax | $ | 863,800 | $ | 2,748,629 | $ | 3,271,219 | ||||||
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SOURCE Universe Pharmaceuticals INC