Q4 2020 Earnings Call

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Ladies and gentlemen, thank you for standing by for the four seasons Education's fourth quarter in fiscal year 2020 earnings Conference call.

Time, all participants are in listen only mode. After managements prepared remarks, there will be a question answer session. Today's conference call is being recorded I will now turn the cold over to your host Mr. Livia Lee Investor Relations manager for the company. Please go ahead Olivia.

Hello, everyone and welcome to the fourth quarter else. That's called <unk> are nice conference for a fourth season started patients the company as a result, what issued by Aneel spots Servicers, Florida today, and I posted online you can download the ornish probably.

For their complex email distribution list by routinely IR section all the website at <unk> <unk> deal with dotcom.

So our chief execute at all but what's the other core by providing an overview of the company performance highlights for the quarter.

Midstream walled accommodates vice President Finance will provide details on the Companys financial results, especially with all this world name for free all plots trends.

Before we continue please know that today's discussion will contain forward looking statements made on the safe Harbor provisions of the U.S. privacy quite honest litigation Reform Act of lighting Niday five full along these same thing.

Resscan all sorted taste.

As such the company's results may be material a different from the views expressed today.

Further information regarding these and other risks and uncertainties is included in the company's prospectus filed with the U.S. caught is an exchange Commission.

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

Please also note that four seasons education are nice press release at this conference core include discussions.

Audited GAAP financial information as I have on all the 10 Nongaap financial measures.

Four seasons Education press release contains our cancellation all the order 10, non-GAAP now just to the on all the most directly comparable GAAP measures.

I will now tell the core alluded to our CEO Mr. Walker. Please go ahead.

Thank you Olivia and Hello, everyone.

Providing an overview of our fourth quarter performance, we wouldn't like to extend our condolences to the families of those individuals who passed away due to the called at 90.

Were also profoundly grateful for the medical profession, those communities styles and all those people who have fought against other girl no virus at the front line.

I also want to spend all of our employees for their hard work and dedication that allowed us to overcome numerous challenges dream does present to the time.

In the fourth quarter office coat Twentytwenty, we achieved revenue growth of 10% year over year, a solid performance in light up the Corbett 90 epidemic in China.

After the outbreak off CRO not virus, we immediately kept precautionary measures to protect our student and <unk> E.

In response to governments containment, we switched to meet transition to our offline causes Oh sabic subject on cautious ensuring our students were able to take calls this online.

I'll put transaction to online Colossus has allowed us to successfully retained the majority off our student registered for our offline close it's just started with us online.

Concurrence with a cost migration. We also provided a superstar supplemental online services such as the cost me play off to cross question answer session and help walk with you.

And after that facilitate a smooth use experience both students and parents.

Additionally, in collaboration with East try not normal University press, we have officially launched one less so were exercised online courses Oh, probably school students during the fourth quarter.

Well less than one exercise, it's a well known and why they used to reference books here. It's a partnership with east try not normally when it was city press on the books theorist correspond the all in costs. It is that can be a testament to October two loved about a month capability.

This cost here is will also help us enhanced our brand awareness trial broader students audience.

Besides Oh I'm cautious in the fourth quarter. Our technology team has also established a more integrated operational system, that's bad to organize and streamline our resource offs teaching stops learning center operations cost where production and technology.

That's your consolidated operations amplify the efficiency northwest development costs monitor and internal Treaty. That's set the foundation of an advanced Oh, I budget offline, Oh Oh model.

Presently we expect it to we opened the majority off the awful lot of facilities in June following the guidance from the government.

Okay I had we plan to continue providing a considerable proportion of courses online without offline learning centers, we open and we do cost delivery.

Oh I do piece you provide students optimize what led to experience and improve the study results with unlimited cost would play and diversified the supplemental services.

Im sorry, it was significantly broaden our reach to the market and effectively extend our student base.

As a critical front of Oh involves strategy would will also increase our investment isn't all that infrastructure technology and content development.

Overall, the probably 90 epidemic.

Thank you the challenges as well as the very moment, well, we have to accelerate to the digital transformation off operation to embrace online education.

During this academic period, we have completely transitioned our academic often cause this delivery and do realize that seamless <unk> operations.

These efficient operation adjustment adjustments allowed a ball cohesive online and offline model, which would definitely benefit our business development the long but.

Face the was extraordinary Charlie just brought back five outbreak of probably 90, the last quarter I'll. Just go Twentytwenty, we successfully maintained to the majority to office student base.

Sustain the topline growth and expanded gross margin compared with the fourth quarter last year.

Brazilians performances in the fourth quarter helped US concluded the fiscal year Twentytwenty with a solid topline growth of 16% year over year such results demonstrates the strength of our education content teaching capabilities costs, where an operation and the ball importantly.

Starting brand image.

Through our restaurants any on why merger off my model, we remain dedicated to providing diversified across offerings to K 12, she'd studer groups with superior learning experience to improve their academic performance and positive it the interest learning.

With that I would now to the call, but our vice President Finance Ministry Wong, who will discuss key financial results.

Thank you Glenn and Hello, everyone in the fourth fiscal year, we properly adjusted our upstream operations in response to the Koby Nineteena dynamic and efficiency maintain our student base and this quarter, our new enrollments decreased by 48% year over year because.

So we started all costs registration ahead of time, considering the already Chinese new year Holidaying tend to 20. Consequently, a considerable number it off enrollments were recorded during the third quarter. The cool what are the Cowen 19 outbreak also impacts to our enrollment for the quarter as a result told.

Enrollment.

The second half of fiscal year tend to 20 was relatively flat compared with a year ago period.

By the challenging situation due to cope koby 19, with do achieve about 10% year over year revenue growth to RMB 71 for their own median for the fourth quarter well continue every hour stringent cost control and all should know optimization to improve our profitability.

Although we will face also tend to ask the epidemic situation develops a constant in the long term potential of the after school education market in China with our ever strengthening on like facility in place and the more integrated OEM assistant that able to attract.

And even wider and larger student.

Traffic to study with a lot, but all these.

Oh, it's strong cash position and how the balance sheet enables us to upgrade our online and offline facilities.

Make appropriate investments with sufficient capital before.

No I'd like to walk you through further details of our fourth quarter fiscal year Twentytwenty financial results.

Revenue increased by 9.8% to RMB seven to 1.1 million for the first quarter of physical you're trying to try and he from RMB 64.7 million in the same period of last year, primarily primarily attributable to the how the ramp up of new learning centers.

Over the by the company during the fiscal yard to own lighting and the expanded cost offering cost of revenue increased by only.

One of their 0.6% Swabi fortys.

<unk> point Threemillion for the fourth quarter fiscal year tend to try and heat from RMB 46.

One zero million into same puerile of last year gross profit increased by 32.4.

Percentage to RMB 24.8 media for the fourth quarter fiscal year 10 to 20 from RMB 18.7 million in the same period of last year.

General and administrative expenses increased by 1.5 percents to RMB 39.8 million fall into fourth quarter fiscal year tried to try and he from RMB 39.2 million in the same period of last year.

Impairment loss on intangible assets and goodwill was RMB 145.4 median for the fourth quarter fiscal year to punch 20 Complera.

Compared to RMB their point 6 million in the same period of last year, mainly due to the decline in go.

Reporting units February.

Sales and marketing expenses decreased by <unk>.

15.0% to RMB 7.7 million for the fourth quarter fiscal year Twentytwenty from RMB 9.1 median and affect your read of last year, primarily attributable to the decrease of advertising due to the impact of Cowen that team.

Operating loss was RMB 168.2 million for the fourth quarter fiscal year Twentytwenty compared with RMB.

31, one made in the same period of last year.

Adjusted operating loss, which is calculated as operating loss, excluding share based compensation expenses and impairment loss, Oh intangible assets and goodwill was RMB 15.1 million for the fourth quarter old fiscal year, twentytwenty compared compared with RMB country.

<unk> <unk> meeting in December of last year.

Our income net was RMB 4.9 million for the fourth quarter fiscal year tens twentys.

Hum paired with RMB 2.7 million in December of last year, primarily due to investments fair value changes.

Income tax benefit was RMB 15.7 million for the fourth quarter fiscal year 10 to 20, compared with RMB 8.1 million in a sense here as of last year, mainly from the tax effect of intangible asset impairment.

That's loss was RMB 100, and a 45.4 median do during the fourth quarter all fiscal year 10 to 20.

Paired with RMB 18.5 meeting the same purity of last year.

Adjusted net loss, which is calculated asked it not loss excluding share based compensation expenses farewell to change of the company's investments and impairment loss on intangible assets and go will now the tax effect was RMB 4.7 million compared with RMB 11.7.

<unk> million in the same period of last year.

Basic and diluted net loss and yeah attributable to ordinary shareholder for the fourth quarter fiscal year Concertante, We're both RMB 3.11, compared with both our me.

<unk>.

Make sense for the same period of last year.

Adjusted basic and diluted net loss.

Attributable to ordinary shareholders for the fourth quarter fiscal year 10 to 20, well both RMB seven cents compared with both RMB 22 cents for the same period of last year.

Cash cash equivalents as of February Tonight.

Uncertainty the company had.

Cash cash equivalents RMB 400.

And 4.7 million compared with RMB 400, and a 39.6 million I saw on February 28 to own 19.

Looking forward for the fourth quarter of fees Cold continued went one the company expects to Drano revenue into ranch of RMB 50 feet.

55.7 million to RMB 60 million.

The Buck outlook is based on the current market conditions and reflects the companys predominantly memory estimates of the market operation condition and the cost somebody men, which are subject to change.

Particularly in consideration of all 70 relating to the called uniting all break among others.

This concludes my portion the prepared remarks, we will now open the call. It two questions. Operator. Please go ahead.

To ask a question you May proceed Star then one on your Touchtone phone if you're using these speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then to at this time, we'll pause momentarily to assemble or roster.

Again, if you have a question. Please press Star then one.

First question is from joint wave from 86 research. Please go ahead.

Thanks for taking my question on.

My question is regarding the structural change of the after school tutoring market could management share your views on the development aligned occasion much do you think Oh, my indication will cannibalize offline Lucky and what's your strategy to conform to this trend. Thank you.

Oh. Thank you for the question first one for let me clarify what do you need by you know the change up the structure of the totally market you mean, the breakdown between online offline.

Yeah, because all light occasion mocking the is going back quickly it shows like taking market share.

So the whole market.

Yeah Oh.

Onto Chile has not going back five Stifel <unk>, yeah, no, especially for the past two years and there's a cold in 19 definitely accelerated that such close.

But we believe.

The the.

The results or the quality is two very different you know between online offline taking this that you know colon 19 as an example, many parents you know realized or that you know the the results the effectiveness of offline is.

Somewhat that to publish that you know well at least the very different from online I think it's a definitely you know the all I'm close you will catch up but awful lot has its own strategy and Oh <unk> <unk>, we believe the the core assets.

The tissue is that the content that faculty, which needed to the results of the tutoring online or offline just a method.

That's it would go why would need batches is that you know the whole cold the 19th.

Cool forced us to transform into an online you know hmm and all our model and Ah we adopted the to this change very quickly for us, it's a challenge and opportunity as well.

We pointed out a lot of young that's even that often resumed an awful lot. They said they took delivery of cost cost, whereas we were still resume us a significant portion off all deliberate online going forward all I will be part of our business model to with Blue.

Oh I'm much also <unk> as a as it is that what we will be good that because we have the best content. We have the bus that go to an online offline just the two means to me to each student.

[noise] <unk> yeah, that's helpful.

Well follow up question yards, she wouldn't acquisitions Junkie show, what's what's what we'll do a in the spring and also summer vacation period, two oclock de students considering the spring semester in shot and.

Yeah.

If you know online or the children's business is basically in most cases once a week. So it doesn't matter that to the full mowbray consultant.

You know weight and Ah well for us, we heavily but <unk> what off miles a that's levels and the fall season has already established brand in Shanghai.

You May note you actually may have noticed that historically and Oh, which is still the case that we have spent a veteran they put in marketing all the students came much less they close off the whats off Myles I thought the football and because all sub brand, which boasts the is a testament to.

A lot teaching quality, so going forward I think it this is to would be the main channel awful I student acquisition, which as you know all brand awareness and what else might refer those but we also started it to a invest a mall and <unk> marketing and advertising previously we we all.

Almost nothing nothing but nothing but a but we are we going to and we are getting back to that we will we will oh, we will cautiously increase our spending in Ah Ah the advertising or other marketing methods that will help us to acquire.

Students, but effectively.

Right right. It could you remind us the referral rate of being Norman and also probably also building in a retention rate.

Sorry, Oh, we don't disclose that publicly.

You can't schedule, a whole lot called without Oh ended we can do.

Later, and Ah Ah Ah, we don't we don't did disclose those two matrix.

Publicly for now.

Got it okay. Thank you very much.

Thank you.

Again, if you every question. Please press Star then one.

As there are no further questions now I'd like to turn the call back over to the company for any closing remarks.

Yes.

Thank you once again for joining us today, if you have filled they'll classrooms, please feel free to contact four seasons Investor Relations.

Contacting formation provided on our website, although Pearson group Investor Relations.

This concludes this conference call you May now disconnect. Your line. Thank you.

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