Global Cord Blood Corporation Reports Financial Results for the Second Quarter and First Half of Fiscal 2021

HONG KONG, Nov. 24, 2020 /PRNewswire/ — Global Cord Blood Corporation (NYSE: CO) (“GCBC” or the “Company”), China’s leading provider of cord blood collection, laboratory testing, hematopoietic stem cell processing and stem cell storage services, today announced its unaudited financial results for the second quarter and first half of fiscal 2021 ended September 30, 2020.

Second Quarter of Fiscal 2021 Highlights

  • Revenues decreased by 8.9% year-over-year (“YoY”) to RMB285.6 million ($42.1 million).
  • New subscribers and accumulated subscriber base were 17,643 and 867,180[1], respectively.
  • Gross profit decreased by 9.1% YoY to RMB240.9 million ($35.5 million). Gross margin edged down slightly to 84.3% from 84.6% in the prior year period.
  • Operating income decreased by 3.7% YoY to RMB139.2 million ($20.5 million). Operating margin increased to 48.7% from 46.1% in the prior year period.
  • Operating income before depreciation and amortization (“non-GAAP operating income[2]“) decreased by 3.5% YoY to RMB151.4 million ($22.3 million).
  • Net income attributable to the Company’s shareholders increased by 9.2% to RMB131.4 million ($19.4 million), largely due to an increase in fair value of equity securities (“mark-to-market gain”).
  • Net cash provided by operating activities was RMB174.8 million ($25.7 million).

First Half of Fiscal 2021 Highlights

  • Revenues decreased by 3.5% YoY to RMB566.5 million ($83.4 million).
  • New subscribers and accumulated subscriber base were 34,876 and 867,180[1], respectively.
  • Gross profit decreased by 2.9% YoY to RMB478.4 million ($70.5 million).
  • Operating income increased by 6.2% YoY to RMB272.7 million ($40.2 million).
  • Non-GAAP operating income[2] increased by 5.5% YoY to RMB297.3 million ($43.8 million).
  • Net income attributable to the Company’s shareholders increased by 15.4% to RMB263.9 million ($38.9 million), mainly due to the decrease in operating expenses and the mark-to-market gain in the six reporting months.
  • Net cash provided by operating activities was RMB274.6 million ($40.5 million).

“We successfully managed to recruit 17,643 new subscribers in the second quarter, keeping us on track to meet our annual target despite challenges associated with Covid-19, a downward trend in newborns and an overall cautious consumer environment,” said Ms. Ting Zheng, Chairperson and Chief Executive Officer of GCBC. “Although future regulation in the cord blood banking industry in China remains unclear, we continue to prepare for multiple potential outcomes and carry on with our business expansion and risk diversification efforts.”

Summary – Second Quarter and First Half Ended September 30, 2019 and 2020




Three Months Ended September 30,


Six Months Ended September 30,




2019


2020


2019


2020

(in thousands)



RMB


RMB


US$


RMB


RMB


US$















Revenues



313,464


285,607


42,066


586,839


566,520


83,440

Gross Profit



265,149


240,909


35,483


492,775


478,359


70,455

Operating Income[3]



144,435


139,161


20,497


256,821


272,670


40,163

Change in Fair Value of   














  Equity Securities



(7,043)


5,699


839


2,936


24,104


3,550

Dividend Income




1,281


189


507


1,281


189

Net Income Attributable to
the Company’s
Shareholders



120,353


131,434


19,360


228,697


263,943


38,877

Earnings per Ordinary














  Share (RMB/US$)    














  – Basic   



0.99


1.08


0.16


1.88


2.17


0.32

  – Diluted



0.99


1.08


0.16


1.88


2.17


0.32















Revenues Breakdown (%)














Processing Fees and Other














  Services



63.9%


57.5%




62.7%


57.5%



Storage Fees



36.1%


42.5%




37.3%


42.5%

















New Subscribers (persons)



21,551


17,643




42,366


34,876



Total Accumulated
Subscribers (persons)



791,812


867,180[1]




791,812


867,180[1]



Summary – Selected Cash Flow Statement Items



Three Months Ended September 30,


Six Months Ended September 30,



2019


2020


2019


2020

(in thousands)


RMB


RMB


US$


RMB


RMB


US$

Net cash provided by













 operating activities


208,255


174,814


25,747


378,011


274,643


40,450

Net cash provided by/ 













 (used in) investing













 activities


1,396


(3,876)


(571)


(5,229)


(11,320)


(1,667)

Net cash used in













 financing activities


(4,039)


(6,074)


(895)


(4,039)


(6,074)


(895)

 Second Quarter of Fiscal 2021 Financial Results

REVENUES. Revenues decreased by 8.9% YoY to RMB285.6 million ($42.1 million) in the second quarter of fiscal 2021, as the decrease in revenues from processing fees and other services from fewer new subscribers outpaced growth in storage fee revenues.

Despite facing difficulties in the second quarter, the Company recruited 17,643 new subscribers. Revenues generated from processing fees and other services in the reporting quarter decreased by 18.1% YoY to RMB164.3 million ($24.2 million), representing 57.5% of total revenues compared to 63.9% in the prior year period.

The accumulated subscriber base as of September 30, 2020 expanded to 867,180[1]. Revenues generated from storage fees increased by 7.3% YoY to RMB121.3 million ($17.9 million) in the reporting quarter.

GROSS PROFIT. Gross profit for the second quarter decreased by 9.1% YoY to RMB240.9 million ($35.5 million). Gross margin decreased slightly to 84.3% from 84.6% in the prior year period, as raw material cost continued to exert margin pressure despite cost-saving efforts.

OPERATING INCOME. As cost-saving measures were implemented to counter the topline decrease, operating income for the reporting quarter decreased by 3.7% YoY to RMB139.2 million ($20.5 million). Operating margin improved to 48.7% from 46.1% in the prior year period, primarily due to measures taken to improve cost-efficiency. Depreciation and amortization expenses for the second quarter were RMB12.3 million ($1.8 million), representing a slight decrease from RMB12.5 million in the prior year period. Non-GAAP operating income[2] decreased by 3.5% YoY to RMB151.4 million ($22.3 million) in the reporting quarter.

Research and Development Expenses. Research and development expenses decreased to RMB5.0 million ($0.7 million) from RMB6.4 million in the prior year period.

Sales and Marketing Expenses. Sales and marketing expenses decreased to RMB54.1 million ($8.0 million) from RMB64.9 million in the prior year period, due to the Company’s ongoing efforts to effectively manage its sales, marketing and promotional activities in light of weak demand. In particular, the reduction in sales force head count and remuneration, as well as fewer promotional activities, kept sales and marketing expenses in check with the topline reduction. Sales and marketing expenses as a percentage of revenues decreased to 19.0%, compared to 20.7% in the prior year period and 19.6% in the prior quarter.

General and Administrative Expenses. General and administrative expenses decreased by 13.7% YoY to RMB42.7 million ($6.3 million) as a result of lower staff costs and provisions. General and administrative expenses as a percentage of revenues decreased to 14.9% from 15.8% in the prior year period and 15.9% in the prior quarter.

OTHER INCOME AND EXPENSES.

Change in fair value of equity securities. In the reporting period, the Company recognized a mark-to-market gain of RMB5.7 million ($0.8 million), compared to a mark-to-market loss of RMB7.0 million in the prior year period. The changes were mainly attributable to the Company’s investments in equity securities.

Dividend Income. In the second quarter, the Company received RMB1.3 million ($0.2 million) dividend income from the Company’s equity investments, whereas no such income was recorded in the prior year period. 

NET INCOME ATTRIBUTABLE TO THE COMPANY’S SHAREHOLDERS. The recognition of mark-to-market gain and dividend income compensated for the decline in operating income. Income before income tax for the second quarter increased by 8.4% YoY to RMB156.2 million ($23.0 million). Income tax expense for the second quarter was RMB22.9 million ($3.4 million). Net income attributable to the Company’s shareholders for the reporting quarter increased by 9.2% YoY to RMB131.4 million ($19.4 million). Net margin for the reporting quarter improved to 46.0% from 38.4% in the prior year period.

EARNINGS PER SHARE. Basic and diluted earnings per ordinary share for the second quarter of fiscal 2021 was RMB1.08 ($0.16).

First Half of Fiscal 2021 Financial Results

For the first half of fiscal year 2021, total revenues decreased by 3.5% YoY to RMB566.5 million ($83.4 million). The decrease was mainly due to the decline in new subscribers. Revenues from processing fees and other services decreased by 11.4% YoY to RMB325.9 million ($48.0 million), whereas revenues from storage fees increased by 10.0% YoY to RMB240.6 million ($35.4 million). Gross profit decreased by 2.9% YoY to RMB478.4 million ($70.5 million). Operating income increased by 6.2% YoY to RMB272.7 million ($40.2 million). Non-GAAP operating income[2] increased by 5.5% YoY to RMB297.3 million ($43.8 million). Net income attributable to the Company’s shareholders improved by 15.4% to RMB263.9 million ($38.9 million). Basic and diluted earnings per ordinary share was RMB2.17 ($0.32). Net cash provided by operating activities in the first half of fiscal 2021 was RMB274.6 million ($40.5 million).

Corporate Developments

  • On June 4, 2019, the Board of Directors of the Company (the “Board”) received a non-binding proposal letter from Cordlife Group Limited (“Cordlife”), a company listed on the Mainboard of the Singapore Exchange Securities Trading Limited (“SGX”), pursuant to which Cordlife proposed to combine the businesses of Cordlife and the Company, by way of a statutory merger. According to the letter, Cordlife would issue approximately 2,497.9 million ordinary shares at an issue price of SGD0.5 per ordinary share in exchange for all of the outstanding ordinary shares of the Company at $7.50 per ordinary share. Upon completion of the proposed transaction, the Company’s ordinary shares would be delisted from the New York Stock Exchange, and Cordlife ordinary shares would continue to trade on the SGX. On June 5, 2019, the Board formed a special committee of independent directors (the “Special Committee”) who are not affiliated with Cordlife to evaluate such proposal.

On November 11, 2019, the Company appointed Mr. Jack Chow as an independent non-executive director (“INED”) of the Board. Mr. Chow has extensive professional experience and a broad network in the finance and investment industry. He replaced Mr. Mark Chen as a member of the Audit Committee and Ms. Jennifer Weng as a member of the Special Committee. Mr. Chow also joined the Board’s Compensation Committee and Nominating and Corporate Governance Committee.

On February 6, 2020, the Company appointed Mr. Jacky Cheng as an INED of the Board. Mr. Cheng has extensive professional experience and knowledge in legal and compliance and Chinese laws. He joined the Board’s Compensation Committee as a member and the Company’s Special Committee as a member. Currently, the Special Committee is composed of four members, including Mr. Mark Chen, Dr. Ken Lu, Mr. Jack Chow, and Mr. Jacky Cheng.

  • The Company cautions its shareholders and others considering trading its ordinary shares that no decisions have been made with respect to the Company’s response to the proposed transaction with Cordlife. The proposed transaction is still subject to various conditions, including but not limited to, completion of due diligence, parties entering into a definitive agreement, and/or each of Cordlife and the Company obtaining its relevant regulatory and shareholder approvals. In addition, litigation has been filed in the Cayman Islands challenging the proposed transaction. There can be no assurance that any definitive offer will be made, that any agreement will be executed, or that this or any other transaction will be approved or consummated.

Conference Call

The Company will host a conference call at 8:00 a.m. ET on Wednesday, November 25, 2020, to discuss its financial performance and give a brief overview of the Company’s recent developments, followed by a question and answer session. Interested parties can access the audio webcast through the Company’s IR website at http://ir.globalcordbloodcorp.com. A replay of the webcast will be accessible two hours after the conference call and available for seven days at the same URL above. Listeners can also access the call by dialing 1-646-722-4977 or 1-855-824-5644 for US callers, or +852-3027-6500 for Hong Kong callers, access code: 84298954#.

[1] During the three months and six months ended September 30, 2020, 17,643 and 34,876 new subscribers were recruited, respectively. The Company reclassified 396 and 790 private cord blood units as donated cord blood units during the three months and six months ended September 30, 2020, respectively, after the Company determined that the recoverability of these prior private cord blood banking subscribers was remote. Therefore, the Company terminated their subscription services according to the subscription contracts and these units are being treated as if they were donated cord blood units and will be part of the Company’s non-current inventories. Hence, the net accumulated subscriber base was 867,180 as of September 30, 2020.

[2] See exhibit 3 to this press release for a reconciliation of non-GAAP operating income to exclude the non-cash items related to the depreciation and amortization expenses to the comparable financial measure prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).

[3] The reported operating income for the three months ended September 30, 2019 and 2020 included depreciation and amortization expenses related to property, plant and equipment and intangible assets of RMB12.5 million and RMB12.3 million ($1.8 million), respectively. The reported operating income for the six months ended September 30, 2019 and 2020 included depreciation and amortization expenses related to property, plant and equipment and intangible assets of RMB24.9 million and RMB24.6 million ($3.6 million), respectively.

Use of Non-GAAP Financial Measures

GAAP results for the three months and six months ended September 30, 2020, include non-cash items related to depreciation and amortization expenses. To supplement the Company’s unaudited condensed consolidated financial statements presented on a U.S. GAAP basis, the Company has provided adjusted financial information excluding the impact of these items in this press release. The non-GAAP financial measure represents non-GAAP operating income. Such adjustment is a departure of U.S. GAAP; however, the Company’s management believes that these adjusted measures provide investors with a better understanding of how the results relate to the Company’s historical performance. Also, management uses non-GAAP operating income as a measurement tool for evaluating actual operating performance compared to budget and prior periods. These adjusted measures should not be considered an alternative to operating income, or any other measure of financial performance or liquidity presented in accordance with U.S. GAAP. These measures are not necessarily comparable to a similarly titled measure of another company. A reconciliation of the adjustments to U.S. GAAP results appears in exhibit 3 accompanying this press release. This additional adjusted information is not meant to be considered in isolation or as a substitute for U.S. GAAP financials. The adjusted financial information that the Company provides also may differ from the adjusted information provided by other companies.

About Global Cord Blood Corporation

Global Cord Blood Corporation is the first and largest umbilical cord blood banking operator in China in terms of geographical coverage and the only cord blood banking operator with multiple licenses. Global Cord Blood Corporation provides cord blood collection, laboratory testing, hematopoietic stem cell processing and stem cell storage services. For more information, please visit the Company’s website at:
http://www.globalcordbloodcorp.com.  

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or the Company’s future financial performance. The Company has attempted to identify forward-looking statements by terminology including “anticipates”, “believes”, “expects”, “can”, “continue”, “could”, “estimates”, “intends”, “may”, “plans”, “potential”, “predict”, “should” or “will” or the negative of these terms or other comparable terminology. These statements are only predictions, uncertainties and other factors may cause the Company’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. The information in this press release is not intended to project future performance of the Company. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company does not guarantee future results, levels of activity, performance or achievements. The Company expectations are as of the date this press release is issued, and the Company does not intend to update any of the forward-looking statements after the date this press release is issued to conform these statements to actual results, unless required by law.

The forward-looking statements included in this press release are subject to risks, uncertainties and assumptions about the Company’s businesses and business environments. These statements reflect the Company’s current views with respect to future events and are not a guarantee of future performance. Actual results of the Company’s operations may differ materially from information contained in the forward-looking statements as a result of risk factors some of which include, among other things: the effects of the current COVID-19 outbreak, including the inability of the Company’s salesforce to return to work due to current lockdowns implemented in various cities in the PRC and the imposition by some hospitals in the PRC of restrictions on entrance to solely to hospital staff and patients; levels of consumer confidence in the healthcare services sector generally in the PRC as a result of the outbreak; the length of the COVID-19 outbreak and severity of such outbreak across the globe; the pace of recovery following the COVID-19 outbreak; continued compliance with government regulations regarding cord blood banking in the People’s Republic of China, or PRC and any other jurisdiction in which the Company conducts its operations; changing legislation or regulatory environments in the PRC and any other jurisdiction in which the Company conducts its operations; the acceptance by subscribers of the Company’s different pricing and payment options and reaction to the introduction of the Company’s premium-quality pricing strategy; demographic trends in the regions of the PRC in which the Company is the exclusive licensed cord blood banking operator; labor and personnel relations; the existence of a significant shareholder able to influence and direct the corporate policies of the Company; credit risks affecting the Company’s revenue and profitability; changes in the healthcare industry, including those which may result in the use of stem cell therapies becoming redundant or obsolete; the Company’s ability to effectively manage its growth, including maintaining effective controls and procedures and attracting and retaining key management and personnel; changing interpretations of generally accepted accounting principles; the availability of capital resources, including in the form of capital markets financing opportunities, in light of legislative developments in the U.S. affecting listed issuers whose independent registered public accounting firms are based in China and not subject to U.S. Public Company Accounting Oversight Board inspections, international pressure on trade and currency against the PRC and its potential impact on the PRC consumer behavior, as well as general economic conditions; the non-binding proposal letter from Cordlife and the potential transaction contemplated by such letter, and other relevant risks detailed in the Company’s filings with the Securities and Exchange Commission in the United States.

This announcement contains translations of certain Renminbi amounts into U.S. dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from Renminbi to U.S. dollars as of and for the period ended September 30, 2020 were made at the noon buying rate of RMB6.7896 to $1.00 on September 30, 2020 in the City of New York for cable transfers in Renminbi per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York. Global Cord Blood Corporation makes no representation that the Renminbi or U.S. dollar amounts referred to in this press release could have been or could be converted into U.S. dollars or Renminbi, at any particular rate or at all.

For more information, please contact:

Global Cord Blood Corporation
Investor Relations Department
Tel: (+852) 3605-8180
Email: [email protected]

ICR, Inc.
William Zima
Tel: (+86) 10-6583-7511
U.S. Tel: (646) 405-5185
Email: [email protected]

EXHIBIT 1


GLOBAL CORD BLOOD CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

As of March 31 and September 30, 2020



March 31,


September 30,


2020


2020


RMB


RMB


US$


(in thousands except share data)

ASSETS






Current assets






Cash and cash equivalents

5,473,373


5,729,503


843,864

Accounts receivable, less allowance for doubtful accounts






  (March 31, 2020: RMB111,869; September 30, 2020:      






  RMB120,582 (US$17,760))

104,251


121,722


17,928

Inventories

43,758


56,106


8,264

Prepaid expenses and other receivables 

44,785


67,604


9,957

Total current assets

5,666,167


5,974,935


880,013

Property, plant and equipment, net

522,679


514,153


75,726

Operating lease right-of-use assets

4,548


6,089


897

Non-current deposits 

347,360


343,250


50,555

Non-current accounts receivable, less allowance for doubtful






  accounts (March 31, 2020: RMB71,421; September 30,






  2020: RMB70,451 (US$10,376))

160,031


193,023


28,430

Inventories

85,109


88,335


13,010

Intangible assets, net

92,823


90,513


13,332

Investment in equity securities at fair value

101,306


120,670


17,773

Other equity investment

189,129


189,129


27,856

Deferred tax assets

50,701


52,823


7,780

Total assets

7,219,853


7,572,920


1,115,372







LIABILITIES






Current liabilities






Accounts payable

19,992


12,317


1,814

Accrued expenses and other payables

113,989


129,231


19,034

Operating lease liabilities

1,717


1,597


235

Deferred revenue

402,751


420,516


61,935

Income tax payable

32,329


31,542


4,646

Total current liabilities

570,778


595,203


87,664

Non-current deferred revenue

2,289,762


2,339,828


344,619

Non-current operating lease liabilities

1,782


1,724


254

Other non-current liabilities

450,900


467,236


68,816

Deferred tax liabilities

18,140


17,332


2,554

Total liabilities

3,331,362


3,421,323


503,907









EQUITY






Shareholders’ equity of Global Cord Blood






  Corporation






Ordinary shares






– US$0.0001 par value, 250,000,000 shares authorized, 






121,687,974 and 121,551,075 shares issued and 






outstanding as of March 31 and September 30, 2020, 






respectively

83


83


12

Additional paid-in capital

2,101,582


2,101,582


309,529

Treasury stock, at cost (March 31 and September 30,






2020: 136,899 shares, respectively)

(2,815)


(2,815)


(415)

Accumulated other comprehensive losses

(94,663)


(99,304)


(14,626)

Retained earnings

1,877,940


2,141,883


315,467

Total equity attributable to Global Cord Blood  






  Corporation

3,882,127


4,141,429


609,967

Non-controlling interests

6,364


10,168


1,498

Total equity

3,888,491


4,151,597


611,465

Total liabilities and equity

7,219,853


7,572,920


1,115,372

EXHIBIT 2


GLOBAL CORD BLOOD CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Three Months and Six Months Ended September 30, 2019 and 2020




Three months ended September 30,


Six months ended September 30,



2019


2020


2019


2020



RMB


RMB


US$


RMB


RMB


US$



(in thousands except per share data)














Revenues


313,464


285,607


42,066


586,839


566,520


83,440

Cost of revenues


(48,315)


(44,698)


(6,583)


(94,064)


(88,161)


(12,985)

Gross profit


265,149


240,909


35,483


492,775


478,359


70,455

Operating expenses













Research and development


(6,399)


(4,953)


(729)


(11,100)


(9,298)


(1,369)

Sales and marketing


(64,880)


(54,124)


(7,972)


(125,517)


(109,184)


(16,080)

General and administrative


(49,435)


(42,671)


(6,285)


(99,337)


(87,207)


(12,843)

Total operating expenses


(120,714)


(101,748)


(14,986)


(235,954)


(205,689)


(30,292)

Operating income


144,435


139,161


20,497


256,821


272,670


40,163

Other (expenses)/income, net













Interest income


6,502


8,810


1,298


12,722


15,577


2,294

Foreign currency exchange 













  (losses)/gains


(162)


66


10


(190)


108


16

Change in fair value of equity













  securities


(7,043)


5,699


839


2,936


24,104


3,550

Dividend income



1,281


189


507


1,281


189

Others


422


1,195


176


762


2,918


430

Total other (expenses)/income, 













  net


(281)


17,051


2,512


16,737


43,988


6,479

Income before income tax 


144,154


156,212


23,009


273,558


316,658


46,642

Income tax expense


(22,087)


(22,890)


(3,371)


(41,563)


(48,911)


(7,205)

Net income


122,067


133,322


19,638


231,995


267,747


39,437

Net income attributable to 













non-controlling interests


(1,714)


(1,888)


(278)


(3,298)


(3,804)


(560)

Net income attributable to 













Global Cord Blood Corporation’s













Shareholders


120,353


131,434


19,360


228,697


263,943


38,877














Earnings per share:













Attributable to ordinary shares













–   Basic


0.99


1.08


0.16


1.88


2.17


0.32

–   Diluted


0.99


1.08


0.16


1.88


2.17


0.32



























Other comprehensive income/













 (losses), net of nil income taxes 













–  Foreign currency translation













  adjustments


12,800


(4,202)


(619)


23,153


(4,641)


(684)

Comprehensive income


134,867


129,120


19,019


255,148


263,106


38,753














Comprehensive income attributable to 












non-controlling interests


(1,714)


(1,888)


(278)


(3,298)


(3,804)


(560)

Comprehensive income 













attributable to Global Cord Blood













Corporation’s shareholders


133,153


127,232


18,741


251,850


259,302


38,193

EXHIBIT 3


GLOBAL CORD BLOOD CORPORATION

RECONCILIATION OF NON-GAAP OPERATING INCOME

For the Three Months and Six Months Ended September 30, 2019 and 2020




Three months ended 


Six months ended 



September 30,


September 30,



2019


2020


2019


2020



RMB


RMB


US$


RMB


RMB


US$

(in thousands)


























GAAP amount of operating













  income


144,435


139,161


20,497


256,821


272,670


40,163

Depreciation and amortization













  expenses[4]


12,455


12,266


1,807


24,900


24,622


3,626

Non-GAAP operating













  income


156,890


151,427


22,304


281,721


297,292


43,789


[4] Depreciation and amortization expenses relate to property, plant and equipment and intangible assets respectively.

SOURCE Global Cord Blood Corporation

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