YANGZHOU, China, April 14, 2023 /PRNewswire/ -- Meihua International Medical Technologies Co., Ltd. ("MHUA" or the "Company") (NASDAQ: MHUA), a reputable manufacturer and provider of Class I, II and III disposable medical devices with operating subsidiaries in China, today reported its financial results for the fiscal year ended December 31, 2022. All amounts below are in U.S. dollars.

Fiscal Year 2022 Financial Metrics:

• Revenue remained stable and decreased slightly by 1% to approximately $103.3 million for the year ended December 31, 2022, from approximately $104.0 million for the year ended December 31, 2021.

• Gross profit was approximately $38.1 million for the year ended December 31, 2022, compared with approximately $39.8 million for the year ended December 31, 2021.

• Gross margin decreased slightly to 37% for the year ended December 31, 2022, from 38% for the year ended December 31, 2021.

• Income from operations was approximately $10.8 million for the year ended December 31, 2022, compared to approximately $26.3 million for the year ended December 31, 2021.

• Net income attributable to shareholders was approximately $6.2 million for the year ended December 31, 2022, compared to approximately $20.9 million for the year ended December 31, 2021.

Mr. Yongjun Liu, Chairman of MHUA, commented: "The Company is pleased to announce resilient results for the past fiscal year, despite experiencing some uncertainty in the macro-environment and disturbances in the supply chain and logistics network especially during the fourth quarter. We reported stable revenue of approximately $103.3 million for 2022, compared to approximately $104.0 million in 2021 and maintained our gross margin at 37%. We believe that the Company is now better positioned for the upcoming year as it is fully geared to drive through new initiatives with diversification into high-end product offerings, as well as expansion to untapped global markets. Our strategy in the new fiscal year continues to focus on growing revenues with an emphasis on long-term opportunities across multiple business strings at scale."

Fiscal Year 2022 Financial Results:

Revenues

Revenues decreased by approximately $0.7 million, or approximately 1%, to $103.3 million for the year ended December 31, 2022 from approximately $104.0 million for the year ended December 31, 2021. The slight decrease was mainly due to a decline in demand for customer orders.

Cost of revenues

Cost of revenues primarily include cost of materials, direct labor costs, overhead, and other related incidental expenses that are directly attributable to the Company's principal operations. Cost of revenues increased by approximately $1.0 million, or approximately 2%, to approximately $65.2 million for the year ended December 31, 2022 from approximately $64.2 million for the year ended December 31, 2021. The increase was mainly due to an increase in the price of materials.

Gross profit and margin

Gross profit decreased by approximately $1.7 million, or approximately 4%, to approximately $38.1 million for the year ended December 31, 2022 from $39.8 million for the year ended December 31, 2021. Gross profit margin decreased from 38% for the year ended December 31, 2021 to 37% for the year ended December 31, 2022 due to an increase in the cost of materials.

Operating costs and expenses

Our operating costs and expenses consist of selling expenses, general and administrative expenses and research and development expenses.

-  Selling

Selling expenses increased by approximately $0.7 million, or approximately 10%, to approximately $7.1 million for the year ended December 31, 2022 from approximately $6.5 million for the year ended December 31, 2021. The increase was mainly attributable to the combined effects of the following:'

(a) Conference expenses increased by approximately $0.4 million to approximately $1.1 million for the year ended December 31, 2022 from approximately $0.8 million for the year ended December 31, 2021. The conference expense is mainly attributable to expenses related to the Company's market expansion, business development, business negotiation, medical expo, and exhibition affairs. These expenditures helped the Company promote its products, develop markets and channels, strengthen customer communication, and establish long-term and stable cooperative relations;

(b) Transportation expenses decreased by approximately $0.2 million, or approximately 8%, to approximately $2.6 million for the year ended December 31, 2022 from approximately $2.8 million for the year ended December 31, 2021. The decrease was mainly attributable to the reduction in business travel associated with business expansion, which was impacted by COVID-related controls implemented by local governments in fiscal year 2022;

(c) Salaries and benefits expenses increased by approximately $0.2 million or approximately 14%, to approximately $1.5 million for the year ended December 31, 2022 from approximately $1.3 million for the year ended December 31, 2021. The increase was mainly attributable to the fact that the COVID-19 pandemic in China had been brought under control and the local government canceling the social insurance relief policy; and

(d) Entertainment expenses increased by approximately $0.4 million, or approximately 50%, to approximately $1.2 million for the year ended December 31, 2022 from approximately $0.8 million for the year ended December 31, 2021. The increase was mainly attributable to the Company's business expansion and new customer acquisition.

-  General and administrative expenses

General and administrative expenses increased by approximately $8.1 million, or approximately 186%, to approximately $12.5 million for the year ended December 31, 2022, from approximately $4.4 million for the year ended December 31, 2021. The increase was primarily due to (a) service expenses increasing by approximately $7.0 million from approximately $0.2 million for the year ended December 31, 2021 to approximately $7.2 million for the year ended December 31, 2022, (b) entertainment expenses increasing by approximately $0.4 million, or 51%, from approximately $0.8 million for the year ended December 31, 2021 to approximately $1.2 million for the year ended December 31, 2022, (c) conference fee expenses increasing by approximately $0.3 million from approximately $0.5 million for the year ended December 31, 2021 to approximately $0.8 million for the year ended December 31, 2022, and (d) salaries and benefits increasing by approximately $0.1 million from approximately $1.2 million for the year ended December 31, 2021 to approximately $1.4 million for the year ended December 31, 2022.

-  Research and development expenses

Research and development expenses increased by approximately $0.2 million, or approximately 9%, to approximately $3.0 million for the year ended December 31, 2022, from approximately $2.7 million for the year ended December 31, 2021. The increase was mainly due to the increase in salaries and benefits expenses which was mainly attributable to that the pandemic in China had been brought under control and the local government had canceled the social insurance relief policy.

Income from operations

As a result of the factors described above, our income from operations decreased by approximately $15.5 million, or approximately 59%, to approximately $10.8 million for the year ended December 31, 2022 from approximately $26.3 million for the year ended December 31, 2021.

Net income

Our net income decreased by approximately $14.8 million, or approximately 71%, to approximately $6.2 million for the fiscal year ended December 31, 2022 from approximately $20.9 million for the fiscal year ended December 31, 2021. The decrease was mainly due to a sharp increase in service expenses and writing off the Tai He deposit.

Recent developments

On February 21, 2023, the Company announced that via its subsidiary company Hainan Guoxie Medical Technology Co., it entered into a cooperation agreement with Qionghai City of Hainan Province to build technology park project. Hainan Guoxie also entered into cooperation agreement with Hainan Free Trade Port Boao Hope City to build MHUA a medical research and development center in the Hope City.

On February 15, 2023, the Company announced it has built up a team to lead the research and development of a robotic surgical system and efforts to apply for approval for production launch. The Company plans to engage in the design of a surgical robotic assisted surgery ("RAS") system and the integration of related software and hardware.

On February 08, 2023, the Company announced plan to explore the application of ChatGPT technologies to develop online health consultation services and is now actively laying out the research and development of related facilities application and technology platforms.

On January 11, 2023, the Company announced that its subsidiary Jiangsu Huadong Medical Device Industrial Co., Ltd entered into a strategic cooperation agreement with Getein Biotech Inc. (SHA: 603387) to jointly produce and sell Covid-19 antigen test kits and other in vitro diagnostics (IVD) products.