Q1 2020 Earnings Call

The information regarding this another is is included in bright Scholars 5.

With the Securities and Exchange Commission bright scholar undertakes, no duty to update any forward-looking statement except as required under applicable law drink. This call will be referring to gaap and non-GAAP financial measures. We use certain non-GAAP measures as supplemental measures to review and assess operating performance. This non-GAAP financial measures have limitations as analytical tools and investors should not consider them in isolation or as a substitute thousand net income attributable to company or other Consolidated statement of comprehensive income data prepared in accordance with The Gap please note on numbers are in our MB and all comparisons referred to a year-over-year comparisons unless otherwise stated with that. I'll turn the call log.

but to our Executive Vice chairman Jerry Jerry

Sax Rubik don't care who is joining our call today to review twenty twenty first fiscal quarter results first and foremost the enemy wish everyone a Happy New Year with every happiness good health and the continued prosperity in twenty twenties.

Now let's get started for those who are new to Bryce Carter. We have including our earnings presentation of brief introduction from Slide Five to thirteen which you can download from our website again, all numbers are in our MB and all compared to refer to our year-over-year unless otherwise stated I will start to this call before I talked to Derek to provide update on our business operational performance for the quarter and also share our strategic Initiative for fiscal 2020. So then provide a way to find out her review before we take your questions.

Please turn to slide 2:15. We are very pleased with the tremendous.

Plus we continue to make as a week Times Forum and scale bright scholar to better serve the evolving needs of our students. Yes, after changing education industry wage Strategic investment. We made across our business segments is a past years have given us a strong start.

to the 2020 fiscal year

We scared our business significance with acquired a business contributed to our 315 million R&B in revenue and the Forty Six Million Dead on the adjusted ebitda in the first round fiscal quarter of 2020.

In addition, we further direct site. You can refer to slide 16 revenue from domestic keto schools only accounting for close to 61% of our total revenue and the first quarter fiscal quarter of 2020.

The impact is as possible emotional as we move into the next phase of our growth Journey.

Bye.

Taking additional steps to further position brass collar as a global Premier education service provider. We see enormous opportunities in leveraging our Global platform to expand our business such as language training College counseling study tools and camps. We also see the benefits of entering into a residence Market offering career counseling service that will help our students posted education overseas.

What are the initiatives are in their early stage?

We believe the power of International Education ecosystem. We were continue to drive our long-term growth in the 2020 fiscal year. We remain firmly focused on three fronts first continue to build our Global Network and the capitalizing our our synergistic business opportunities for now domestic and overseas business second continue our organic growth initiatives in accelerating ramp up to improve utilization of amazing operational efficiency and abroad in our service offerings continue to stress in our leadership in International Education by acquisition of strategic assets following a Transformer fiscal year 2019. We remain committed to our strategy and expansion opportunities to drive enhance the value for our students employees wage.

shareholders and

Coders was this note. I will turn the call to dirt service.

Good morning, and good evening. We are off to a very strong start in the first physical Year. Please turn to slide 17 for our performance highlights and it's light bulb for detailed breakdown by seconds. I am very pleased to report that our overall Revenue grew by 69% and operating profit grow by 46.7% on a year-over-year more importantly the operating margins of our china-based operations, including domestic K-12 schools and the complimentary Education Services would continue to expand jump to slide twenty-seven. You can find that the adjusted sg&a of high quarter have declined year-over-year despite of increasing scale wage and and complexity of our businesses. These are the early results from the operational Improvement initiatives that we started last year. Meanwhile. Yep.

We expand our business.

To reduce risk exposure to domestic K twelve related regulations as well as to enhance competitive advantages. Our overall margin profile is also changing in a term driven by the different cost structure of the acquired overseas businesses. However, we have a number of initiatives underway including setting up shared services centers across the UK to achieve both revenue and cost synergies among all of our business activities that will enhance the overall margin overtime continue to slide 19th underpinning the performance of our domestic. K-12 schools was the strong enrollment growth of 25.2% with the expansion of our school network page including the newly required overseas schools of a global school network increased by 29.4% to eighty eight schools with capacity increased by faith.

15.6%

To a total of 67194 students our Blended utilization of the quarter was 77%

Let's continue on to cite 20 our efforts to improve the effectiveness of marketing and a student recruitment have yielded a very positive results in driving growth. You average student enrollment of domestic school K12 schools with the international schools bilingual schools and the kindergarten in the streets by 18.6% 12.3% and 23.1% respectively.

Our robots performance reflects our commitment to delivering quality education has shown in slight 21 as of December 19th 2019 at approximately 57.1% of students in the 2020 graduating class of our international schools have received over 310 offers from Global top 50 institutions, as of the release dates our Flagship school one don't countries are in school. They received 3 conditional offers from the University of Oxford Street consistently offers from the University of Cambridge and one unconditional offer from the University of Chicago where you expect more students will receive offers dead from these Elite institutions and the grades our students will continue to be improved across all age groups.

continue to

Twenty-two the Deep collaboration with the country garden is critical to expand our domestic network with an asset-light model as of the release date Thursday. We have signed 60 contracts including five outside Country Garden contracts to operate a total of 53 kindergartens off sprinkle schools and one international school where the total capacity of approximately $29,000 and eight hundred students. In addition. We have made a significant programs to capture incremental growth opportunities among our businesses first. We commands the international student recruitment for three Independent Schools. UK three cats.

Second we launched a basketball and a baseball pilot programs being too bright scholar schools with early success. These programs are after school and a week activities designed for students from both bright scholar and local communities. Finally. Our study to programs have been well received in our own schools in physical in the first quarter of 2020. We served over four thousand students with 80% from Bright scholar K-12 schools. We are extending our service offerings to better serve more students both from breast collar as well as schools outside our Network.

please turn to

523 driving integration of newly acquired overseas businesses is another strategic imperative. We are setting up shared service operations team. Okay, but not only could serve our business needs better. But also can significantly reduce costs. We're in phase one with focus on finance it human resources and legal functions of which were untracked complete by the end of this fiscal year, please to recover operation and procurement marketing and emission laws as well as risk and compliance of which we target complete before the end of physical to 20 21.

In closing I would like to reiterate that our number one goal remains to be helping students grow that means continue to invest in teachers and teacher training to offer complimentary service offerings and to expand Global programs that are can leverage our Global platform and resources. We believe that our focus on academic excellence in addition to driving an efficient business model will produce consistent growth in revenue and earnings for our shareholders. So at this point I'd like to turn off call over to Dora to discuss our financials Dora.

That's sent back to our financials. Please be reminded that old numbers are in R&B and all comparisons referred to year-over-year comparisons unless otherwise stated, please also refer to our earnings press release for detailed information of our financial performance on a year-over-year, Please tend to slide twenty-five revenue for the quarter was $1,098 Million up 69%

Revenue from our domestic K-12 schools, including International School bilingual schools and kindergardens for the quarter up 21.7% mm be 669.7 million accounted for 60.9% of total revenue as compared to 84.7% of last year's revenue for our international schools up 25.3% to 273.9 million primarily driven by 18.6% increase in students environment and a 5.1% increase in average tuition and fees during the comparable comparison. I'm not from our newly-acquired send you school was 16.1 million for the quarter.

Revenue for our bilingual schools up 18.5% to 229.8 million driven by 12.3% increase in students environment and a 5.5% increase in average tuition disease.

Well our kindergarten Revenue was up 20.5% to $166 million primarily driven by Twenty 3.1% increase in student enrollment.

The average tuition and fees was down 2.8% due to the impact from newly acquired teach help and kindergarten excluding impact. The registration fees would have increased by 3.1% the revenue contribution from she was 7.9 million for the quarter wage. You can refer to slide and slide nineteen and twenty four more detail on the environment and average tuition fees.

Revenue for overseas schools including Burnham Michael and the boss was and also cats for the quarter was 259.2 Million account for 23.6% of total revenue.

What was the school average number of students was 3220?

Revenue from our complimentary Education Services for the quarter up 69.7% to 169.1 million accounted for 15.5% of total revenues as compared to 15.3%

Revenue contribution from Hangzhou impression was 9.7 million and the dream big career odbc contributed 22.4 million for the quarter.

Flight 26 I'll cost structure cost of removal quarter was 56.9% of total revenue compared to 54.4% in the same quarter of lost physical teaching staff of the primary contributor accounted for 29.5% down from 34.4 per month and also the average student teacher ratio for domestic schools for the quarter was 10.9 from 9 in the same quarter of last fiscal year off.

Can you to slide $27 for the first The 5th Quarter our adjusted sg&a as percentage of total revenue was 18.2% compared to 7.7% adjusted sg&a as percentage of revenue for Thomas schools was 11.1% down from 13% off. The headquarter expenses was 22.4 million compared to 29.8 million.

I suppose send it of Cooper Avenue headquarter sdn expense was down 2.6% from 4.6%

Flight 28 to elaborate or adjust sdn a revenue by type. The primary increase was due to our marketing efforts to drive. Our arraignment marketing expenses was 1.1% compared to 0.5% Also as presented revenue office manager of stuff cost was down to 9.8% from 10.2% also professional fee down to 1.7% from 2.6% off.

Flight 29 our GoSmart our gross profit and margins gross profit for the quarter up 59.9% and gross. Margin wage is 3.1% compared to 45 45.6% for K-12 schools close to profit up 23.6% and office margin up from 47.8 to 48.5%

move to

What was the schools gross profit was 83.4 million with gross margin of 32.2% our complimentary education schools profit for the quarter up 94.4% and goes margin was 38.6 up from 333.7 per cent.

Our effort to move to slice 30 or just the eBay for the quarter up 62% and adjusted ebitda margin was 32.1% compared to 33.5 last year, but just net income for the quarter up 34.5% to 225.4 million and took our adjusted net margin was 20.5% compared to 25.8%

We are.

Reaffirming our guidance for fiscal year twenty-twenty on slice 32 for the fiscal year ending August 31st, 2020. We expect our total package you in the range of R&B for billing to 4.1 billion representing a Nero year growth of 56% to 60% based on our existing business without any potential Acquisitions. We also expect our average student enrollment to be back in approximately $53,253 653600 representing a year-over-year increase of 14% to 15%

We expect to open 7 new kindergardens during fiscal year 2020.

We are also in preparation to open 13 kindergardens and three bilingual and international schools in physical 20 21 Beyond faithful 20 21, we have four schools and the city three kindergarten contracted for operation.

please

For to the tables in slide thirty-four and the 35 for the condensed income statement slide thirty-six shows the reconciliation for STNA ebay.com. Net income on a gaap to non-GAAP results a quick note our cash and the bank balance in slide thirty-seven as of November 13th, 2020 2019 the company's cash and cash equivalent and restricts the cash totaled R&B 2426.6 months or 345% $1 US dollar that's compared to RMB 3265 million as of August 31st 2019.

So the first physical quarter ended November 30th 2019. The company's capital expenditure was approximately 60.9 months up 90.8% compared to last fiscal year that including new kindergarten opening and Improvement and ramp-up type X for existing school. This concludes my financial update now I will tend to direct for this closing remarks. I'm moving forward and this is for your 2020. We are committed to the ongoing execution of a strategy in the next chapter of our transformation and growth as we work together to achieve our shared purpose to engage students learning experience. Our team remains focused on pursuing growth opportunities enhancing operational efficiency wage.

and and

Talking values for the benefits of our students teachers employees and shareholders. This concludes our prepared remarks and like to open up the call for questions operator. Thank you. We will now begin the question-and-answer session to ask a question. You may press * then 1 on your touchtone know if you were using a speaker phone, please pick up your handset before pressing the keys to withdraw your question, please press * then two as a reminder. Please limit yourself to one question and one follow-up question. If you have further questions, you may re-enter the question Queue at this time. We will pause momentarily to assemble our roster.

The first question today comes from of Morgan Stanley , please. Go ahead.

How old management thank you for taking my question. My question is about the margin Outlook because you also mentioned that the cost structure change with the acquisition of overseas schools. And on the one hand the margin of the oversee school is lower than the domestic but on the other hand the margin of your domestic schools, and also the elementary education service is going up year-on-year. So I like to know what do management see the emerging trend of this fiscal year. And also you mentioned that you have so many initiatives to improve the operation of overseas schools. So, do you have any life more details about how that will change the margin of overseas schools? Thank you.

Okay, so

So let me take on the question. So because we are just a consolidating the overseas a business into the portfolio. So therefore today is a six-month-old mathematical weighted-average off the margins as you can find out that the master business tend to have high margin or continue to go up and the international business because of the nature of the business model. So the margins are lower obviously because the margins over we also paid relatively lower price in addition to a mathematical weighted average, which you are seeing today and the way we would obviously confident that we can take various operating initiatives that would increase the weighted average irr time in comparison to a simple mathematic average. So for example right now as we mentioned we're building up share the services centers in the UK, which dead

That would have serve a several Acquisitions that we have acquired.

UK over the past year so that would have take out a some of the cost at the same time. We're also doing recruiting shareholders that were taking the cats Rico and capability to recruit International students for the other three, you can get that in colleges. So in the long run, we're certainly hoping we will do much better than today's mathematical wage. Does that answer your question?

Okay, understand. I just a follow-up question on the UK's goes you mentioned that the service center that will cause save the cost for like corporations. And do you have more details about how much that can help on the margin?

Oh, yes, so we can give you the specific numbers, but what I can tell you if you add up all the finance people labor cost of all the same as we having UK including the share the headquarters Finance staff in UK using that example as well as the cost with individual systems that we put them all together in relationship with the shared services going forward. We would see significant cost reduction.

Okay, I see. Thank you.

The next question today comes from Christine chill of Goldman Sachs. Go ahead.

Thank you for the presentation. I think just a follow-up to the previous question seems like the unallocated corporate expenses dropped quite nicely off. This quarter is this fair to read this as kind of the early results of the operational Improvement initiatives that we've discussed in detail and if so, is it fair to assume that it will continue to see a very similar Trend throughout the year and then secondly, if to the extent of how much you can share can you just elaborate on the impact of the newly acquired schools that were only Consolidated to this quarter? Thank you. Hi question just answer your first question regarding the so-called and allocate the corporate expensive. It's actually the headquarter expenses. We refer to that the domestic or China operation had called expenses dead.

So remember we have discussed, you know our initiative to lower our extremely expensive things last quarter and we have it taking.

But initiative to reduce the China operation or the headquarter expenses if you have coming over to Porche and so that's our headquarter. So that's that's that's the extent found the the the so-called the shared services Center attack just mentioned is is actually will be a overseas cost reduction issue. We just started after we you know, complete the acquisition or the closing of UK. So we'll see some, you know, we are expecting to see some you know, you know results from home, so we complete our first phase and and then second phase, you know, setting up of the shared centers. So does that answer your first question wrong?

Yeah, okay. Okay. Yeah, that's clear.

Yeah, so second question that it's also similar or related to the first one. So I'm really you know, gradually finished our share service center in UK will first complete-game, you know consolidation or Improvement in finance it and then legal Human Resources all these corporate functions for the overseas operation will be Consolidated. So we are expecting some improvement from the efficiency part after the centers are fully, you know operation.

yeah I see I I'm more referring to kind of the sales and being practiced from the consolidation that was nearly done in the first quarter

fourth-quarter sales yeah sorry could you repeat your question again

yeah sorry you know the new Consolidated Schools in the first quarter of 2002 schools that are neutered nearly Consolidated oh yeah yeah yeah yeah, it depends on the school which is a password and Michael yes those schools are Consolidated in the first quarter wage you are right

Yeah, so I was just wondering what roughly the size of the impact on sales and during this quarter from that consolidation.

actually

That's sweet Independent Schools are doing well on track in terms of our you know, if taxation I think that the the only you know, who who am I doing from the overseas segment the the only impact was from cats because cuz first quarter has had some impact from the intake doing some, you know, micro macro economic or political or you know reasons for the other three Independent Schools. They're doing okay.

Okay. Thank you.

Yeah, so basically the sorry the two schools are generally very small it didn't really too much to the first quarter those two schools I had together is approximately six eight hundred students in total so therefore they're not that material from overall perspective it's an idea this jerk just give you some idea of the size of the two schools last year the long run is it is approximately twelve million pounds. So if you Advocate the first quarter, I mean those two schools are reasonably stable so you can figure out you know, what possibly first, Okay. Thank you.

again

If you have a question, please press * then 1.

There are no further questions. This concludes our question-and-answer session. I would like to turn the conference back 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.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.