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SI

SHINECO, INC. (SISI)·Q1 2021 Earnings Summary

Executive Summary

  • Q1 FY2021 revenue declined 41% year over year to $4.14M as COVID-19 reduced yew tree demand and pharmacy traffic, though gross margin held at 21.9% vs 23.3% last year .
  • Loss from operations narrowed to $(0.95)M from $(1.84)M YoY; net loss improved to $(1.05)M (EPS $(0.35)) from $(1.77)M (EPS $(0.67)) on lower operating expenses and fewer inventory allowances .
  • Balance sheet quality deteriorated in the quarter: operating cash flow was $(9.10)M on higher advances to suppliers (+$6.8M QoQ) and higher receivables; cash fell to $23.13M from $32.37M QoQ .
  • Management emphasized COVID-19-driven demand disruption, a shift to cultivating mature yew for future Taxol extraction, and continued AR pressure; no formal guidance or earnings call transcript was found for the quarter .

What Went Well and What Went Wrong

  • What Went Well

    • Operating loss narrowed YoY as G&A fell (no 2019 one-time share comp; lower bad debt) despite softer sales: loss from operations $(0.95)M vs $(1.84)M YoY .
    • Gross margin resilience: total gross margin 21.9% (Q1 FY21) vs 23.3% (Q1 FY20); herbal products margin remained stable (approx. 21–22%) .
    • Management is pivoting from selling immature yew trees to cultivating mature yew for higher‑value Taxol extraction, aiming to improve unit economics over time: “we are now cultivating more matured yew trees, which can be used to extract Taxol” .

  • What Went Wrong

    • Top-line pressure: revenue down 41% YoY to $4.14M; agricultural (yew) revenue fell 73% YoY on COVID-19 demand shock .
    • Cash burn and working capital build: operating cash flow $(9.10)M as advances to suppliers rose by $6.56M QoQ and inventories +$1.95M QoQ; cash declined to $23.13M .
    • Continued credit stress: AR increased QoQ to $12.26M; allowance for doubtful accounts increased QoQ, and management noted customer payment delays amid COVID-19 .

Financial Results

Overall results (oldest → newest)

MetricQ3 FY2020 (Mar 31, 2020)Q1 FY2021 (Sep 30, 2020)Q2 FY2021 (Dec 31, 2020)
Revenue ($)3,734,322 4,143,383 3,062,981
Gross Profit ($)410,124 908,581 (2,655,070)
Net Income (Loss) ($)(3,792,426) (1,052,980) (13,483,527)
Diluted EPS ($)(0.14) (0.35) (4.09)

YoY comparison (Q1 FY2021 vs Q1 FY2020)

MetricQ1 FY2020 (Sep 30, 2019)Q1 FY2021 (Sep 30, 2020)
Revenue ($)7,046,781 4,143,383
Gross Profit ($)1,639,895 908,581
Gross Margin (%)23.3% 21.9%
Net Income (Loss) ($)(1,774,832) (1,052,980)
Diluted EPS ($)(0.67) (0.35)

Segment breakdown – Q1 FY2021 vs Q1 FY2020

SegmentRevenue Q1 FY2020 ($)Revenue Q1 FY2021 ($)Gross Profit Q1 FY2020 ($)Gross Profit Q1 FY2021 ($)
Luobuma (textiles)65,519 24,615 (165,985) (3,847)
Chinese Herbal Products3,300,321 3,135,406 700,917 642,943
Other Agricultural (yew/produce/logistics)3,680,941 983,362 1,104,963 269,485
Total7,046,781 4,143,383 1,639,895 908,581

Working capital / balance sheet KPIs (oldest → newest)

KPIJun 30, 2020Sep 30, 2020
Cash ($)32,371,372 23,130,106
Accounts Receivable, net ($)11,008,485 12,257,280
Advances to Suppliers, net ($)13,313,946 20,083,865
Inventories, net ($)1,799,876 3,843,944
Working Capital ($)48,172,673 49,347,765
Cash from Operations ($, QTD)—(9,100,028)

Notes: No separate Q4 FY2020 10‑Q exists; Q3 FY2020 is the latest prior quarter with full quarterly detail .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
————The Q1 FY2021 10‑Q provided no formal quantitative guidance or outlook ranges; no related 8‑K/press release was found for the quarter .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 FY2020 and Q2 FY2020)Current Period (Q1 FY2021)Trend
COVID‑19 impact on demand and logisticsQ3 FY2020: office/retail closures, transport disruption; revenue down, especially yew; noted continued uncertainty Q1 FY2021: management believes COVID‑19 had a negative impact; reduced incidence of other illnesses lowered herbal demand Persistent headwind
Yew business/product strategyQ3 FY2020: sharp drop in yew sales; occasional below‑cost sales to secure orders Shift to cultivating mature yew for future Taxol extraction; reduced near‑term sales of immature yew Strategic pivot; near‑term pressure
Credit risk/AR collectionsQ2 FY2020/Q3 FY2020: rising bad debts and AR allowances; customers stressed AR increased QoQ; allowance remained elevated; management cites slow collections due to COVID‑19 Deteriorating/ongoing risk
Inventory risk (agriculture/weather)———
Q2 FY2021 (subsequent): wrote off $2.63M of stock due to severe cold damaging yew trees New environmental risk surfaced in subsequent quarter

Management Commentary

  • “Our management believes the outbreak had a negative impact on our operation result during the three months ended September 30, 2020.”
  • “Instead of selling more unmatured yew trees, we are now cultivating more matured yew trees, which can be used to extract Taxol, a more valuable chemical substance…in the future.”
  • On operating expenses: G&A decreased YoY on lower share‑based compensation and lower bad debt expense for the quarter .

Q&A Highlights

No earnings call transcript was found for Q1 FY2021; the 10‑Q did not include a call Q&A section .

Estimates Context

Consensus estimates were not available; an attempt to retrieve S&P Global/Capital IQ consensus for Q1 FY2021 returned no usable data, suggesting limited sell‑side coverage at the time. As such, no beat/miss analysis versus Street estimates is provided.

Key Takeaways for Investors

  • Revenue mix remains pressured by COVID‑19, with yew (Other Agricultural) hardest hit; expect ongoing volatility in that segment near term .
  • Margin profile showed resilience (21.9% gross margin), but mix benefits could reverse as yew volumes recover; monitor segment margins quarterly .
  • Working capital intensity increased (advances to suppliers and inventories up sharply), driving $(9.1)M operating cash outflow; watch cash trends and supplier prepayments .
  • Credit quality remains a key risk: AR rose QoQ and allowances remain elevated; further bad debt could pressure future earnings .
  • Strategic shift to mature yew/Taxol aims to improve unit economics medium term, at the cost of near‑term revenue; execution risk exists .
  • Subsequent quarter (Q2 FY2021) revealed environmental risk (yew stock write‑off due to severe cold) and significant quarterly loss, underscoring volatility; risk controls on agricultural inventory are critical .
  • With no formal guidance or call, the near‑term narrative is driven by COVID recovery trajectory, AR collections, and working capital management .