Q4 2019 Earnings Call
This time, all participants are in a listen only mode.
After managements prepared remarks, there will be a question and answer session.
Today's conference is being recorded.
I would now like to turn the meeting over to your host for today's conference Miss Ruby M Investor Relations Council.
Thank you operator, good morning, and could easily welcome to bright schools fourth fiscal quarter ending August but your trust 2019 earnings call. Joining me today Mr., Joe Ritchie <unk> Executive Vice Chairman Mr., Derrick, So our chief Executive Officer Mr.
I'd be out Chief financial Officer.
As a reminder, today's conference call is being bought cost life.
<unk> costs. In addition, we play would be available on our website. Following the cool I know you should try received a copy up opportunities that was distributed on November December 2019, after market close eastern time, if doesn't it just available on <unk>, Oh frictionless all website before.
We get stopped it.
Let me be viewed the forward looking statements regarding this conference call Dutchess statements relate to future lots pads events, often the dress expected future business and financial performance and financial condition and often contain words, such as well as threats PJ good day.
Believes expects anticipates intends potential plan all go what's going on they also make written or oral forward looking statements you not to reports in presentation immaterial delivered to shareholders I mean press releases.
In addition, preschoolers representatives may make although for what looking statements forward looking statements by the nature address not just oh, two different degrees on certain suggesting minutes about to companies go since strategies its future business development financial condition results of operations.
Its ability to retain and grow just customer base I'm not quite know schools.
And Oh and trends then.
The market's boy surfaces seem trying though the demand for and the market acceptance of this Brent and surfaces.
Petition in this industry in China, well listen to government policies and regulations would make teacher to corporate structure, that's supposed to an industry fluctuations in general economic and business conditions in China. So.
So the information regarding this and Alteris is included in bicycle this filing with the Securities and Exchange Commission Rightskill undertakes no duty to update any forward looking statements, except as required under applicable law. During this call will be referring to GAAP and non-GAAP financial measures.
We use certain non-GAAP measures a supplemental benefits to review and the festival operating performance. This non-GAAP financial measures have limitations analytical tool and the master she won't consider them in isolation or as a substitute for net income attributable to a company or outdoor cause some.
Three to statement of comprehensive income they true prepared in accordance with they do wescott.
Chris no on them, but I guess RMB and all comparisons we start to year over year comparisons.
Yes ought to watch state.
With that I'll turn the call over to our executive Vice Chairman, Joe Ritchie Jerry.
Thank you.
Good morning, do you mean to ever while who's joining our call today to review 2019 fourth fiscal quarter and that's a full fiscal year results.
You may notice data, we have refines its design of our earnings presentation with substantiation across all sections, including the company overview.
There was still tied to take a look again for those who are new to our company. We have include the a corporate introduction for on slide five to start to which you can download of for our IR website.
Our first start today's call with an update all where reason to acquisitions, then turn the call to Derek to provide an annual review of our business the operational performance and the shared with you our strategic initiative integration and the optimization Oh soon or your front, our fast expanding pull the Philadelphia business.
Well then pass the cost of dark spread did you all to find out her review before we take your questions.
Let's turn to slide 15.
Fiscal 2019, Lockset transformational year, as we heightened M&A activity to scale up our global business.
Expand our global footprint and the broaden our service offerings, we have access to that successfully expanding our global school networks through organic and acquisitive growth in particular, the acquisition of a Bull miles College Collegial School Cinemark of school.
First of course independent College, and the Caf College would you firmly established our positions outside of China.
I'm pleased to report data we have a completed this transactions by September 2019, and often November sub was 2019, we own several schools in the UK and no one boarding schools in the United States with a total for more than 2500 students you wrote.
Big Smashing into you kinda U.S. markets represent nearly a first step you want long term goal of growing our footprint beyond China.
Capitalizing on global growth opportunities.
That's off this release stage, we have a global network of 88 schools, We said total student capacity of our 67000 students.
As I mentioned, the all fiscal third quarter earnings call the financial impact of these transactions it's significant.
That's expand our Robin industries, and a structural change <unk> revenue mix.
The impact will be fully reflected in the revenue growth for fiscal 2020 and that weren't even it's too hard to provide you with more details later.
As a company, which is committed to delivering a second academic excellence.
We take great pride in our reputation that's a trusted to provide a premier education services.
The strategic investment over the last into fiscal year appears though to accelerated the pace of a building right Scott or into a global Premier Education Service company and our goal is to create as the best and learning Spears for all of a student and a substantial value for hours stakeholders.
It's probably even note objects a call I'll, let you Derrick dark please.
Thank you Jerry good morning, and even.
Right scholar delivered good third consecutive year of robust topline growth.
Well ahead of expectations and physical 2019.
Turn to slide 19 for fiscal fourth quarter, Oh, you're result.
Factoring in the contributions from caps.
Revenue for the quarter was 711 point Sixmillion represents a year over year growth over 82.6% of which 121.8 million came from cats.
Well the adjusted gross margin was up 102.3%, we incurred all pointing a night income loss as a result, all seasonality impact from cats, and how many related costs incurred to drive long term growth.
For fiscal 2019 revenue growth exceeded the top end Oh were revised guidance by 4.2 percentage points to 49.1%.
With 31.3% from organic growth and a 17.8% from acquisitions.
Adjusted gross profit adjusted operating income adjusted that you'd be Dol on an adjusted net income grew by 57.5%.
22%, 20.2% and a 15.2% respectively.
As Jerry mentioned.
Fiscal 2019 marked a transformational year on why scholar.
Well the company physical 29 team also represented a significant inflection point, you know business scale growing to 2.563 billing, 59.1% news stories from 1.719 billing you fiscal 2018.
Yeah, no need to 29% inquiries from 1.3 to eight billing in fiscal year 2017.
The year all following the IPO.
Furthermore, the growth of our overseas schools Uncomplimentary education segments have significantly expanded and diversified old business revenue streams as shown in slide 17.
The overseas schools and a complementary education segment accounted for 26.2% off the total revenue for fiscal 2019 as compared to 11.4% off the total revenue for fiscal 2018.
The revenue contributions from the two segments will be even more for fiscal 2020.
I live in its a door to share with you more details in her remarks.
You May also note that we have groomed our portfolio of businesses you three major segments, namely domestic K 12 data you includes international schools bilingual schools and acumen gardens in China overseas schools does that include Oh.
Our overseas schools, such as Bournemouth same Michaels walsworth other cats and complementary each location. How do you includes language training overseas study called Sling core your counseling cans and others.
Moving onto slide 18.
So you can see from the charts, our business is highly scalable and a we have a successful track record of expanding our global school capacities, we have expanded our global network of schools by 27.7% to 83 schools in physical 2019, including.
Like schools from overseas, our capacity maintain a steady growth of 15.3 person to a total capacity of 65000 at a 96 seats with a 3357 from overseas School segment, we have strong enrollment growth of 21.
7.4% for fiscal 2019, it's already best many marketing continued to yield returns.
Oh unwavering commitment to provide very high quality education services for our students has you can turn attributed it to our solid organic growth underpinning strong enrollment and the study you increased your U.S.P. as shown in slide 19.
For fiscal 2019 across international schools bilingual schools and the kindergartens you know domestic K 12 segment. The average tuition fees per student continued to maintain healthy gross.
Turning to slide 20.
Our ability to help students to achieve academic excellence consistently has further solidified our market leadership in the international and a bilingual school education space.
Our students continue to achieve supposed results with a 93% all of our 2019, graduating class we're committed to global top 50 institutions, adding 97% were admitted to global top 100.
Institutions.
Domestically, we have also achieved the breeland results in China zone call, which 82% of our great nine graduates from bilingual schools have been admitted into local top public high schools in 2019.
With all the fast growing portfolio of businesses I'd like to share with you the near term strategic initiatives I believe of Paramount importance to you effectively managing and it continuously growing our global business. Please turn to slide 21, the focus on our.
Three major business arguments on enhancing our capabilities.
Let's move onto slide 22.
We further advance operating synergies within the group across four key business functions in every off student recruiting with the lease trailing programs I'm joined recruitment events to optimize referral and cross sell opportunities you live development programs.
To optimize synergies between our UK schools, and our summer camp and study tours business.
Teachers training and the recruitment by integrating cats Trini model into all worse, and we could foreign teachers through can achieve I didn't catch and in the area. If I T. That's showing parts of the BBC CRM, an operating system with why scholar businesses.
We are seeing tremendous opportunities from our growing portfolio and the integration is key to unfold. The these opportunities in particular.
Our existing overseas schools driving incident integration existing oversee businesses is one of our top strategic imperatives.
Please turn to slide 23 for the broad framework of our initiatives. Our integration plan is proceeding well and we have made a measurable progress even number off areas.
We are developing a culture of collaboration among our portfolio companies at the same time as we integrate the overseas schools into the Bryce scholar family of companies do use collaboration will focus on your trust, we term opportunities across seven supporting functions to my.
Yes, my synergies optimized operational efficiency.
In concluding my remarks, we are extremely applaud offered a tremendous progress or Bryce dollar team has made it through I'll be your executing against our ambitious goal of building by scholar into a global premium age occasion service company.
Our overarching strategy to expand our business portfolios in hands academic performance strong operational performance optimize synergies from acquired businesses broaden our service offerings and diversify our revenue streams, we'll continue to deliver.
As a physical 2020 gets underway.
Were working from a strong position to vigorously pursue our exciting growth opportunities through three major business segments domestic K 12.
Overseas schools and complementary education, our teams remain focused on over over achieving our targets laid out last year and delivering sustainable value to our shareholders.
So at this point I like to turn the call over to door to discuss our financials door.
Oh, thank you.
Oh, that's come back to our financials. Please.
Please be reminded that all numbers are in R&D and all comparisons referred to you all year comparison.
Last otherwise stated.
Please also refer to our earnings press release for detailed information of our comparative financial performance on the year over year basis.
Please turn to slide 25.
[noise] physical 2019, Max they transformational year off by scholar also represents a significant inflection point in our business scale. Our revenue grew 49.1 person you owe year to 2.5, 66 3 billion exceeding our top.
Flying guidance by 4.2%.
For the quarter revenue was 710.6 million up 82.6%.
Revenue from domestic P., 12 segment, including international schools bilingual schools and the kindergarten maintain strong momentum with revenue up 24.1% to 1.89 feeling for the year on the 24.6%.
To 393.5 million for the quarter.
We have completed Casco section in early July unconsolidated the cat for July and August two months.
That's contributed 121.8 million revenue for the quarter ended the fiscal year.
Total revenue from over from I'll always these schools, including well in a mouse school for the quarter was 148.5 million and a 181.8 million for the fiscal year.
Fourth overseas school revenue accounted for 20.9% and the 7.1% for the quarter and on the yearly basis.
We have successfully goal our complementary education, so organic and acquisition.
Revenue from complimentary education for the quarter was 106 9.6 million up 129.3% accounted for 23.8% as compared to 19%.
On a yearly basis revenue was 490.8 million up 150.4% accounted for 19, 19.1% of total revenues compared to 11.4% last fiscal year.
Revenue contribution from acquired businesses, including Kinda Chief.
Oh Foundation hung go impression and the BBC was approximately RMB 285 million or 58% off the second full the physical year.
On slide 26, we remain focused on strengthening our school operation efficiency on improving our cost efficiency.
Cost of the off revenue for the quarter accounted for 70.2% for total revenue.
From 72.6%.
On the yearly basis cost of revenue was 61.9% down from 63.4%.
Teaching stuff cost the primary cost contributor accounted for 37.8%.
Quarter down from 49.5%.
Fiscal year basis staff cost was 38.2%.
I'm from 43.8%.
Our domestic a 12 average student teacher ratio full fiscal year 2019, what's consistent with last year at 8.8.
[noise] continue to slide 27.
During the past the fiscal year, we have successfully expanded our global school network through organic and acquisitive growth.
Oh through strategic investment to support our long term girls.
Aimed at some short term impact from a and I'm able to cost.
The fourth fiscal quarter.
Adjusted <unk> expenses as percentage of revenue was 55.6% up 7.9% of which 4.9% was due to an eight and I may related expenses.
For the fiscal year adjusted F G and H.
As percentage of revenue was 25% up 5.3% compared to that off last fiscal year, well and an eight and I'm a related expenses accounted to 3.2% for the increase.
Just a SGN they for existing organic business, that's a whole was 20.7% compared to 18.6% off last fiscal year.
Move to slide 28.
Slide 28 elaborate just asked in a I supposed <unk>.
That's ended up revenue like defense TEP type.
The increase was primarily due to the increase in the compensation and the benefit incurred from additional general and administrative stuff to support the they expansion a marketing offense to promote our friend.
And they really cost and other professional service to supports that these growth that's at least the company.
Well, that's the incremental SDN <unk> expenses incurred a from acquired businesses.
On slide 29.
Slide 29 shows all gross profit and the gross profit margin.
All gross profit gross profit margin girls definitely across second quarter fiscal year.
Gross profit was 212.1 million fourth quarter, and a 977 million in for the year.
Up 98.8% on the 55.5% respectively.
Gross margin was 29.8% up from 27.4 precisely filter.
And 38.1% for the year up from 36 plus 6%.
Well its domestic K 12 second.
Including international schools bilingual schools and the kindergarten.
Gross profit for the quarter was 122 million up 38.1% and 755 million well the year up 30.4%.
Gross margin for domestic K 12 was 31% up from 28 for the quarter.
And the gross margin was 39.9%.
For the year up from 38%.
[noise], four oh, well overseas schools.
Probably the fourth quarter was 25.2 million with the gross margin of 17% on the yearly basis gross profit was 36.3 million musicals margin Oh.
19.9%.
[noise] for complementary education gross profit for the quarter was 64.9 million up 254.5% and 185.7 million for the year up 278.5%.
Gross margin for complementary education was 38.3% up from 24.8%.
Full physical you 2019 gross margin for complementary education was 37.8%.
From 25%.
Continue we continue on ice 30 [noise].
As mentioned before cats, what's consolidate it for July and August and incurred a loss for the last two month. This was due to the thesis seasonality impact as most of all of these schools hasn't minimal trend revenue recognized in this two month.
Therefore, the total adjusted EBITDA for the quarter with full mailing, including loss of 36.6 million from cats as compared to.
34 point time, meaning in the fourth quarter last fiscal year.
Adjusted EBITDA margin was 0.6% compared to 8.9% last quarter.
On the yearly basis, adjusted EBITDA was 491.6 million, that's compared to 400, and an 8.8 million last year adjusted EBITDA margin was 19.2 per cent compared to 23.8%.
Adjusted net loss for the quarter was 32.1 mean.
Oh, so including net loss of 39.9 million from path.
Fair to 23.8 million income last fiscal quarter.
Adjusted net margin was Oh, well just that market was negative 4.5% that's compared to 6.1% on.
On the yearly basis, adjusted net income was 327.7 million compared to 284.6 million.
Adjusted net margin was 12.8% as compared to 16.6%.
Moving onto guidance.
Our guidance full Cisco 2020 .
Please turn to slide 32.
For fiscal year, ending August 31st 2020 , We expect our total revenue in the range off for billing to 4.1 billion, representing a year over year girls off 56% to 60%.
Based on existing business and without potential acquisitions.
We expect our average student enrollment to be Chin, approximately 53000, 253600, representing a year over year increase a 14% to 15%.
We expect to opened seven new kindergarten doing physical 2020 .
We are also in preparation to open 11 kindergartners.
Two bilingual international schools for 2020 Watt.
Beyond 2021, we have for schools and the still do three kindergarten contracted full operation.
Please refer to table in slide 34, and the 35 for the contest income statement.
Slide 36 shows a reconciliation of four SDN a better on the income on a GAAP to non-GAAP resolved.
A quick note on our cash on the bank balance in slide 37.
As of August 31st 2019th the company's cash cash equivalent unrestricted cash totaled RMB 3.265 billion or.
446.4 million U.S. dollar that's compared to 2.057 billion.
As of May 31st 20 night team.
For the fiscal year ended August 31st 2019, the company's capital expenditure was up approximately.
165 million up 32% as compared to last fiscal year. This the capex spending, including Capex for new kindergarten opening and <unk> improvement on the run pop contracts for our existing schools.
This concludes my financial update now I will tend to direct for his closing remarks.
Thank you.
This past physical year has been a transformational one wash the expansion of our global network of schools.
And the beginning of realizing some of the key benefits from the acquisitions made over the last few years.
I have formed a strong foundation for our future success.
As we begin the new physical year, we see tremendous focus and the energy throughout the company as we execute all year long term strategy. This passion will be a tailwind as we drive to accelerate global business expansion and delivering strong results during the quarters took home.
This concludes our prepared remarks, and we'll like to open the call for questions operator.
Thank you we will now begin the question and answer session. If you would like to ask your question. Please press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then to at this time.
Pause momentarily to assemble our roster.
Our first question today will come from Christine Cho with Goldman Sachs. Please go ahead.
Hi.
Thank you Jerry there I can drive further detailed explanation I have three quick questions. So one is related to the acquisition acquired oversee schools.
Oh, it seems like Steve Michaels and Bosworth was almost through consolidate it this quarter I can you just give us a rough impact on sales and I'll keep this quarter for these two schools as well.
Secondly, I think I think the guidance on the topline is very very clear, but I was wondering what would be would you be able to give us a rough guidance as to the impact on bottom line of these apart oversee schools in 2020, and lastly, I think in reading page 20.
And then a of the presentation is it fair to understand that there isn't any related costs, but I'm kind of break broke out that's more than one off related to the and any this quarter.
And then more that wouldn't be recurring going forward, but the and any portion that 1.2%.
There that would actually be continuing to come through over the next few quarters.
Right understanding.
Thank you.
Oh, Hi, Christine This is Dora first question.
In the past.
It's called her.
We only a complete either the transaction Oh has a the other two independent of school as Jerry mentioned during his remarks, we complete those two independent school in early September sold their contribution will be started in the first physical called her off 20.
Twond he.
I think less should should also your first question.
And second part and second question the guidance the in past calls the Oh overseas School.
Yes.
The data for this off now we haven't came out of the guidance for the bottom line yes.
Got it is for southern Virginia, Alex Bob They bought.
The third rock and ticket to sort of wireless while decentralize read about the M.I. athletes Unlevered ended the call because we have done that amount of Oh work on the I My closing a few so those are what happens even in Q4 going forward.
That set up for you as a deal by deal basis. So so you may or may not have happened, but I would it would not expect to be a continues like that.
For the for Ah that for every quarter, because we haven't lead a minimal dialing in the last quarter. Then then I guess is going to pass.
Thank you.
[noise] as a reminder, if you would like to ask your question. Please press Star then one.
Our next question will come from told me wrong with China Merchant Securities. Please go ahead.
[noise] [noise] Mr. Wang your line is open for questions.
[noise], Oh, Hi, sorry, I was I mean, sorry, Hi management.
Oh.
Quick question on the enrollment growth guidance can you kind of share was less <unk>, which are you guys and I spoke about a year. So kindergarten switch part of the enrollment growth will be.
You know faster or slower.
I think for.
19 actually both segments grocery five.
Is that going to continue in that 20 frenzy.
End of more even double digit growth and I was looking you also show some light on [laughter] because Oh you on this slide shows actually kindergarten to U.S.P. herself.
Yes, I used oil.
International student.
Oh, Thank you that's fun.
Yeah, I will probably a this is Eric I'll take it first of all I'll. We gave you. The overall you can grow together all together as a group I mean term all of the growth in each one of the socket sub segment, we would expect to be fairly consistent with the past.
Secondly, with regard to the ice piece that we have noted the Mckenna Garden section.
All the acquisition was being consolidated during the last year.
As a lower priced group opportunity cars and so therefore, the blended rate all the the impact on the ASP growth as being a negative 1%, but excluding that lower priced segment that was acquired our overall us cumin gardens, a high speed has been can.
Systems with the past U.S.P. grow.
Okay. Thank you I see okay.
[noise] as a reminder, if you would like to ask your question. Please press Star then one.
<unk>.
At this time there are no further questions in the question too and this will conclude our question and answer session I would now like to turn the call over to Derek thing for any closing remarks.
Thank you very much for joining the conference call. Please feel free to contact us. If you have any further questions. We wish everyone. A good day. Thank you very much.
The conference has now concluded.
Thank you for attending today's presentation and you may now disconnect.
[noise].
[noise].