Q2 2020 Earnings Call

Hello, Ladies and gentlemen, thank you for standing by for the four seasons Educations second quarter fiscal year 2020 earnings conference call.

At this time all participants are in a listen only mode.

After managements prepared remarks, there will be a question answer session.

Today's conference calls being recorded I will now turn the call over to your hosts missile Levy elite Investor Relations manager for the company. Please go ahead Olivia.

Hello, everyone and welcome to the second quarter fiscal year 2020 earnings conference call or a fourth season educating the company as a result floor issues via newswire services, Oh that today and I posted online you can download the earnings press release and sign up for the company's email distribution list.

Hi, This is mainly I asked section of our website at <unk> I had a C D E U they'll come.

MS John's <unk> director and Chief Financial Officer, well read seal remarks on behalf of Mr. pay TV, and our chairman and chief execute as officer and will provide details on the Companys financial results and business outlook. This will open in the core frail question.

Before we can pay no. Please know that today's discussion will contain forward looking statements made a under the safe Harbor provisions of the U.S. Private Securities Litigation Reform Act up 1995.

Oh looking statements involve inherent risks and uncertainties as such the company's results maybe material a different from the views expressed today.

The information regarding this and other risks and uncertainties is included in the company's professors Assad with the U.S. and could raise any change in mission.

The company does not assume any obligation to update any forward looking statements, except as required under applicable to war.

Please also note that four seasons and patient earnings press release and this conference call include discussions on order that gap financing formation as that audits and non-GAAP financial measures Scorsese's Education press release contains a reconciliation of the audit and non-GAAP measures to the on all that and most directly.

Comparable GAAP measures.

I would now turn the coral loved to our CFO Min Xu. Please go ahead.

Oh, Thank you all Libya and Hello, everyone. Let me first to read this year remarks on behalf of Mr., Tim We achieved strong quota was remarkable operating and financial performances. Thanks to our successful strategy and they're good lunch approach to optimize and adjust our operation.

In the second quarter total student enrollment to reach.

So do you know I saw the and 357, we're presenting a vigorous growth of 90.8% year over year.

The active student participation reflect a truck NIM attractiveness of our programs and our enhanced brand awareness, we consider insulate you rich and to diversify across all three so a couple of more got X doesn't make sense subject and education, though topics.

With differentiated programs designed for different great levels, we have efficiently extended courses to broad the age groups.

Oh, such section the optimization program for learning Center network in previous quarter has paid off well, we've set instructor enrollment to E learning centers, both he and adopt Shanghai. The addition, we prudently expand on that work in key cities that we already have presence.

Your next second quarter, we added an additional 90 cents, a intune cheap and the Washington jet Oh cities economically dynamic markets that we'd be have great growth potential for K 12 After school education.

As of August So do you want to own 90, we had to 54 learning centers, including 44 in Shanghai and the 10 other cities.

Besides the solid gross off a student base and healthy development of our learning centers, we have made encouraging strides across our other interest oriented educational programs.

During the second quarter four seasons education team achieved outstanding performances in various who do crew and bridge match, including Winnie After your top was to eat national activities.

Especially not for this year, we launched office bridge, some of cab, where students harvested and enjoyable experience in learning in the history and the technique off bridge cards. All these interest oriented activities English illustrated that we have not only an excellent territories.

Provider well students' academic improvement, but also an attractive and the reps at night to community for students to develop their interest in various logically thinking games with friends.

Well the mall that's pulled I'm also started its in school collaboration.

With multiple interest oriented the education the project on track.

Leveraging our stress in mass teaching to nurture students enthusiasm for study and the subsidiary to their learning experiences.

As we mentioned, let's go to or 19 with it yeah I'll transformation part the company, where we proactively adjusted our business adapted to the new regulatory environment and the evolving market demands.

Our efforts are bearing fruit in fiscal two or 20, especially our standing second quarter results demonstrates the success of our strategic adjustment.

We believe we have gained a true just trajectory of healthy development following a stage of transformation.

Without like sense of educational capability and successful operating experience, we'll we'll focus solidifying our strength and the advantages in Shanghai and other sitting where we already established presence.

While we will remain cool events and the diligence and you all expansion plan with a goal of maintaining quality growth.

More importantly, we are always dedicated to bringing diversified educational content and enriched the learning experience to students at different age.

Now, let's move onto the financial results first I would like to emphasize a few financial highlights for the reporting Chinese which were all could be introduced the later English.

Gee those items sold yet I mean B E file by he told me again, especially to get until.

I couldn't be Marty do weight when she will get you go back from whom he sounds I buy chagas easier now got me right where to meet some channel by teaching ammonia told me, Jim, though if I should get done.

non-GAAP to me regulator, and we'd be down 10, whereby Jim Scheel, Runyon home, because actually should be a job.

Although Boston second quarter, two words out because I couldn't hear precedents saw strategy of providing comprehensive opposite square the accretion for K 12 students was an extensive and the variety of course offerings.

We reported excellent the total enrollment growth, while carrying the momentum of diversification with an increasing number of enrollment on now math courses and the Middle School program.

Most of the by the enormous market demand for high quality cost to our revenue world to reach a 37.9% year over year in the second quarter exceeding the high end up our guidance range. All learning Center network optimization program in previous quarters, let's see substantial expansion in gross margin.

Which was up 282 basis points, just 50, 50.1% in the second quarter compared to the year ago period.

Coupled with our efficient operation no cost control were thrilled to deliver strong operating income and profit, which grow 200 studying for <unk>, 9% under 217.8% year over year with operating margin and the margin of 22.0%.

And the 15.8 cents, respectively for the quarter.

Improving operational performance demonstrates the effective execution of our business model and its strategic transformation.

Stay true to our mission to unlock students intellectual potential through a high quality, an effective education, while bringing long term value to our shareholders.

Now I'd like to walk you through more details our second quarter fiscal two or 20 in fiscal <unk> financial results.

Revenue increased by 77.9% to RMB 128.8 million for the second quarter fiscal year 220 from RMB 93 point formula in the same period last year.

I'm ready to attributable to their house the ramp ups was out of new learning centers that company opened during the fiscal two or 19 and the increase in student enrollment as I was out of the expanded across all three with higher diversification.

Well, it's a revenue increased by 29.8, I said to RMB 57.9 million for the second quarter fiscal year, two or 20 from RMB 44.6 minutes in the same period of last year, primarily attributable to the increase in fact, what is best cost as well as learning centers.

Rental utilities and the maintenance cost.

Gross profit increased by 45.3% to on the 71.0 million for the second quarter office go to or 20 from RMB 48.8 minutes in the same period of last year.

General and administrative expenses increased by 1.8 cents to RMB 32.6 minutes for the second quarter fiscal two or 20 from RMB 32.0 million in the same period of last year.

Sales and marketing expenses increased by 20.4 percents to RMB 10 million for the second quarter fiscal year, two or 20 from RMB 8.3 million units impure of last year.

Really due to the increased advertising expenses.

Operating income increased the by 200, and a 34.9% to RMB 20.3, new land for the second quarter fiscal year, two or Twentys from RMB 8.5 million in the same period of last year, adjusted operating income, which excludes share based compensation.

Yes, it increased by 115.3% to on these studies 5.7 minutes for the second quarter fiscal year toward 20 from RMB 16.6 million in the same period up last year.

But sitting calm was RMB 24.0 saw the for the second quarter fiscal year, two or 20 compared to was on diesel port Formula in the same period of last year, primarily due to the subsidy income of unrestricted cash incentives there that company received from the local government authorities.

The amount of which varies from period to period interest income that was on you weren't once our minimum for the second quarter of fiscal year, two or 20 compared to was RMB 1.9 minutes in the same period of last year.

<unk> expenses net loss on de <unk> point 3 million for the second quarter fiscal year, two or 20 comparative was RMB 1.2 minute and the same period of last year, primarily due to whoever they change of foreign exchange fluctuations of investments net income increased up by 217.8% to.

20.3 million during the second quarter after school, yet toward 20, compared with RMB 6.4 million listen period of Rcs adjusted net income increased by 70.9% to RMB 26.9 million compared with RMB 15.7 minutes impaired off last year.

Yes.

Basic and diluted income per Ats attributable to ordinary shareholders for the second quarter After school, yet or 24, I'd be 40 cents, an army 79 cents.

Compared with RMB 14 cents and RMB 13 cents, respectively for the same period of last year.

non-GAAP basic and diluted net income per adss attributable to ordinary shareholders for the second quarter fiscal year, two or Twond. He was RMB 53 cents and RMB 62 cents.

Compared with RMB zero point, so usually an R&D study one cents respectively for the same period of last year.

Especially on the cash equivalents.

<unk> August 31st of two or 19, the company had a cash in the country <unk> equivalent of RMB 516.3 million an increase of 17.5%.

Compared with RMB 400 under 39.6 minute until February 20, Eightth, two or 19.

Be mindful of the month of earning call for the first six months himself is Cotwo 20, if its financial results I would encourage listeners to refer to our.

[laughter].

Tony Press release for further details.

Looking forward to for the so called <unk> fiscal two or 20, the company expects to generate revenue Elaine jobs.

On the 100.3 minutes to RMB, 100, and up 4.8 million representing year over year growth of approximately 10% to 15%.

But above all look is based on current market conditions and reflect the company's preliminary estimate.

Of market, an operating conditions and the customer demand, which are all subject to change. This concludes my portion of prepared remarks, we're going out into the call two questions. Operator. Please go ahead.

Thank you.

We will now begin the question and answers fashion for the benefit of all participants on today's call. If you wish to ask your question to management and Chinese. Please immediately repeat your question in English to ask a question you May Press Star then one on her touchtone phone.

If you're using a speakerphone. Please pick up your handset prefer a pressing the keys to withdraw your question. Please press Star then to you're not Star then one to ask a question we will pause momentarily.

Once again at a star then one to ask a question, we'll pause momentarily.

But star then one.

Our first question comes from Hong Zhao.

Shang first securities. Please go ahead.

Good morning, Galvo from going from Securities firms I want to congrats accommodated for a solid performance during a cross border I have two questions are I hope you can kind of late.

Oh first notice that there are several bussing groups of student enrollments during the second quarter part of the reason was a change of Jewish and three collection schedule I Wonder discard policy reason, what's the organic gross of student enrollments was due to you know like Clos diversification and recruiting.

How about the average tuition fees.

Hi crush during his during the second fever viewer true News study center or wonder, what's the future blend of new studies and her geographically and pace and the surplus juniors. According to the Guardians of the third quarter gross of revenue is turning to 15% year over year.

So it's like a little slower compared to the first property your and second quarter is there any particular reason frontier.

Oh yeah.

Let me answer the questions. The first question, yes part of the result of due to the change Lucky collection schedule.

Hi, Mike.

Able to disclose the the you know a the.

The precise increase you know if we exclude those.

The recent also you know he collection schedule change, but that's another would be lower than Ah Ah, 90%, you can reach out to eye and Oh, we to schedule a separate call and maybe I can give you a you know rough range after all even though.

And you know how solution you know to exclude the those status. That's you know.

As a result is not the policy change and the two you asked a question on average tuition, yes in the in the summer a we increased the portion also a small cost and a flaw small cost we charge.

And a high hourly rates. That's also hotdog reasons why are you keeping robust and they are even in a a summer season, which has also been fiscal quarter I'm. So the revenue includes attributable to.

Who first it you know as to enrollment change and second the as the switching change.

And the two my second question or the New studies and you mentioned, our two studies sentence that we yes. We we open we opened a one new study center into he and the one engine jet.

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Most of these Ah onez important.

A important it's not like you see a in China was the last year.

Middle market potential and the product that we walk was a you know open house or something told me a one you know roughly a one year ago and Ah we already have seen the very good strong result from our children ablation and a we decided that we already to open.

So I think penta, and Oh, well run on a a brand as well received the that unfortunately send us an important market and this will be one off our top priority City, Iowa, especially plant also some hot we have whether they get dedicated he who Ah.

No deal the business is going to hopefully, we'll see some revenue rose and contribution from center, but because they are centered relatively new so right. Now we don't we we don't really have any I wish that yet.

Second question is the revenue guidance, yes, that's out for the as not as strong as a second quarter you know based on current estimate but no [laughter].

For the engine on November hopefully, we tend not be Dol commit guidance, but right now we want to be absolutely conservative.

So that's why that's part of the reason why we give a though yeah Saddam conservative guidance for the time be.

Okay. Thank you.

Once again they have a question. Please press Star then wine I cannot star then one to ask a question we will pause spent momentarily.

I'm not star then one.

This concludes our question and answer Sasha and I'd like to turn the call back over to the company for closing remarks.

I will turn the call over to the company.

[noise].

Thank you all the gale.

Thank you.

Once again for joining us [laughter] [noise].

You have for their passenger please feel free to contact sure fetus Investor relations through the contact information provided on our website older TPG Investor Relations.

[noise]. The conference has now concluded you may disconnect. Your line. Thank you.