YANGZHOU, China, Oct. 2, 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 unaudited financial results for the six months ended June 30, 2023. All amounts below are in U.S. dollars.

First Half 2023 Financial Metrics:

• Revenues decreased by 12.1% to approximately $48.2 million for the six months ended June 30, 2023, from approximately $54.8 million in the same period of fiscal year 2022.

• Gross profit decreased by 17.8% to approximately $17.2 million for the six months ended June 30, 2023, from approximately $20.9 million in the same period of fiscal year 2022.

• Gross margin decreased from 38.1% in the six months ended June 30, 2022 to 35.6% in the six months ended June 30, 2023.

• Income from operations increased by 4.9% to $9.1 million for the six months ended June 30, 2023, from $8.7 million for the six months ended June 30, 2022.

• Net income increased by 7.3% to approximately $7.0 million for the six months ended June 30, 2023 from $6.6 million in the same period of fiscal year 2022.

Mr. Yongjun Liu, Chairman of the Company, commented: "With a rich legacy spanning over three decades, we have forged enduring partnerships with 334 distributors across Europe, North America, Asia, South America, Africa, and Oceania. We believe that this extensive network empowers us to cater to the discerning clientele on a global scale. Domestically, we have established a formidable presence, leveraging a robust network of 3,159 distributors nationwide to propel our brand. Moreover, we believe that our strategic collaborations with over 531 hospitals and direct sales channels have further propelled our market penetration, solidifying our influence."

"While we experienced a temporary downturn in revenue for the period ended June 30, 2023, our overall financial performance remains resilient. In the first half of 2023, we achieved revenues of $48.2 million, exhibiting a slight decrease from the corresponding period in 2022, which stood at $54.8 million. Notwithstanding this decrease in revenues, which we believe is temporary, we believe our unwavering focus on optimizing operational costs has yielded substantial growth in net income. During the same timeframe, our net income increased to $7.0 million, reflecting a commendable 7.3% increase from $6.6 million in 2022."

"Despite the impact of the global COVID-19 pandemic on the sales and market dynamics of certain essential medical products, leading to a partial decline in profits, our proactive strategic planning has helped to ensure the smooth progress in the development of our state-of-the-art medical facility in China's Hainan Province. As production and operations gradually regain momentum, we believe market demand for our future products will be poised to surge. We firmly believe that Meihua International's strategic transformation is on the cusp of yielding tangible results, gradually evolving into a cohesive entity. Through planning and strategic execution, we believe our future endeavors will enable us to transcend the confines of the traditional medical consumables market, and allow us to channel our efforts towards high-value products imbued with technological prowess. Consequently, we anticipate Meihua International will experience a stable rebound across our overall business, generating confidence in the future market landscape."

"Looking ahead, we remain steadfast in our commitment to continued growth and expansion. Through continuous innovation, expansion of our product portfolio, and an unwavering dedication to excellence, we are poised to reinforce our position as a global leader in the medical equipment industry. Harnessing our expertise and expanding our market influence, we are confident that we will continue to offer groundbreaking solutions that revolutionize healthcare outcomes on a global scale."

First Half 2023 Financial Results

Revenues

Revenue decreased by approximately $6.6 million, or 12.1%, to approximately $48.2 million for the six months ended June 30, 2023 from $54.8 million for the six months ended June 30, 2022. The decrease in revenues was primarily driven by 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 decreased by $2.9 million, or approximately 8.6%, to $31.0 million in the six months ended June 30, 2023 from $33.9 million in the six months ended June 30, 2022. The decrease was driven by an increase related to some ongoing fixed costs such as lease expense and salary of administrative employees, which was generally in line with our decrease in revenue experienced during the period.

Gross profit and margin

Gross profit decreased by $3.7 million, or approximately 17.8%, to $17.2 million in the six months ended June 30, 2023 from $20.9 million in the six months ended June 30, 2022. Gross profit margin decreased from 38.1% in the six months ended June 30, 2022 to 35.6% in the six months ended June 30, 2023. This decrease was due to some fixed cost that did not decrease proportionately with revenue.

Operating costs and expenses

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

Selling

Selling expenses decreased by $0.1 million, or approximately 4.5%, to $3.2 million in the six months ended June 30, 2023 from $3.3 million in the six months ended June 30, 2022. The decrease was mainly attributable to the combined effects of the following:

(a)  Conference expenses increased by $78,100, or approximately 18.8% to $0.5 million in the six months ended June 30, 2023 from $0.4 million in the six months ended June 30, 2022. Conference expenses are mainly 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 $0.3 million, or approximately 19.0%, to $1.1 million in the six months ended June 30, 2023 from $1.4 million in the six months ended June 30, 2022. The reduction in business travel was due to a decline in demand for customer orders;

(c)  Salaries and benefits expenses decreased by $89,193, or approximately 11.3%, to $0.7 million in the six months ended June 30, 2023 from $0.8 million in the six months ended June 30, 2022. The decrease was due to a decrease in salaries and benefits paid to the sales team, which was in line with the decrease in revenue; and

(d)  Entertainment expenses increased by $73,038, or approximately 17.1%, to $0.5 million in the six months ended June 30, 2023 from $0.4 million in the six months ended June 30, 2022. The increase was mainly attributable to new customer acquisition efforts.

General and administrative expenses

General and administrative expenses decreased by $1.3 million, or approximately 28.1%, to $3.5 million in the six months ended June 30, 2023 from $4.8 million in the six months ended June 30, 2022. The decrease was primarily due to (a) service expenses decreasing by approximately $1.8 million from approximately $2.5 million in the six months ended June 30, 2022 to approximately $0.7 million in the six months ended June 30, 2023, offset by (b) salaries and benefits increasing by approximately $137,000 from approximately $601,000 in the six months ended June 30, 2022 to approximately $738,000 in the six months ended June 30, 2023, and (c) entertainment expenses increasing by $125,000 or 26.1% from approximately $481,000 in the six months ended June 30, 2022 to approximately $607,000 in the six months ended June 30, 2023.

Research and development expenses

Research and development expenses decreased by $0.2 million, or approximately 11.1%, to $1.5 million in the six months ended June 30, 2023 from $1.6 million in the six months ended June 30, 2022. The decrease was mainly due to decrease in sample manufacturing expenses.

Income from operations

Income from operations, as a result of the factors described above, increased by $0.4 million, or approximately 4.9%, to $9.1 million in the six months ended June 30, 2023 from $8.7 million in the six months ended June 30, 2022.

Net income

Net income increased by $0.5 million, or approximately 7.3%, to $7.0 million in the six months ended June 30, 2023 from $6.6 million in the six months ended June 30, 2022.

Recent development

On May 15, 2023, the Company announced that its wholly-owned subsidiary, Jiangsu Huadong Medical Device Industrial Co., Ltd., has been invited to participate for the 12th consecutive year in the 87th China International Medical Equipment Fair, the largest and most prestigious medical industry fair in China. The event, which runs from May 14th to 17th, 2023, will provide an excellent platform for Jiangsu Huadong to showcase its cutting-edge medical devices and technologies.

On May 1, 2023, the Company announced that via its subsidiary Hainan Guoxie Technology Group Co., Ltd., has completed the purchase of land use rights in the South of Hainan Free Trade Port Boao Hope City in Qionghai city for investment and construction of an integrated medical industrial park. The Company plans to develop a comprehensive industrial park on the land, including a product research and development, production and sales training center, and import/export product assembly and technology license-in projects. The site will also include a hospital and a retirement and rehabilitation-integrated service center.