Ridgetech, Inc.

For fiscal Q2 2014, revenue was $16.9 million, down 36.8% from $26.7 million a year ago. Gross profit was $2.9 million, down 13.8% year over year, while gross margin improved to 17.8% from 12.5%. Operating loss was $0.5 million versus income from operations of $9,000 last year, and net loss was $1.0 million; management also referenced a $0.5 million net loss after taking into account $1.3 million of marketing expenses related to the Jo-Jo Pharmacy 10-year anniversary. Online pharmacy sales increased 85.6% to $1.6 million. On the balance sheet, the company had $6.3 million of cash, $46.8 million in current assets, and $32.3 million in current liabilities. Forward-looking comments were qualitative rather than formal guidance: management expects sales and marketing expense to be lower in Q3, expects to continue opening clinics adjacent to drugstores, and plans to keep focusing on more profitable wholesale customers and cost reductions.

Dr. Liu said the company’s strategy is shifting toward profitability, better customer service, and higher-quality growth rather than pure sales volume. He highlighted plans to hire more clinic staff, open additional clinics next to drugstores, and continue identifying popular products for customers. His tone was cautiously optimistic, saying the market and healthcare reform in China could improve the company’s prospects over the coming years.

Frank Zhao emphasized the hard numbers behind the quarter: revenue fell to $16.9 million, gross profit was $2.9 million, and gross margin rose to 17.8% from 12.5% because wholesale margins improved. He noted sales and marketing expense increased 41.5% largely due to the 10-year anniversary campaign, but expected it to decline in the third quarter; G&A fell $0.8 million, or 62.5%, mainly because of a lower allowance for advances to suppliers. He also cited $6.3 million in cash and said the company is trying to keep expenses down while supporting clinic expansion and more profitable wholesale relationships.

There were no analyst questions, so the call ended without a Q&A discussion of concerns or follow-up issues. Management’s additional closing remarks repeated optimism about China’s healthcare reforms and said the market environment could improve by year-end. They also invited investors to visit the company and stressed confidence in future growth.