Q1 2021 Four Seasons Education (Cayman) Inc Earnings Call

Hello, Ladies and gentlemen, thank you for standing by for the four seasons Educations first quarter fiscal year 2021 earnings conference call. At this time, all participants are no listen only mode.

After managements prepared remarks, there will be a question and answers.

Today's conference call is being recorded.

We'll now turn the call over to your host Ms., Olivia <unk> Investor Relations manager for the company. Please go ahead Olivia.

Hello, everyone and welcome to the fourth quarter Office Code, Yeah, 2021 earnings Conference core all four seasons education, the company's without floor issued by Aneel small services all that today and I posted online you can download the earnings press release and sign up for their companies email distribution list.

My bubble TV IR section of our website at <unk> IR, the F.I.E.G.I.E. deal dotcom.

MS Johnson, our chief execute as officer withdraw the call by providing an overview of the company performance highlights for the quarter and details on the Companys financial results and business outlook before opening the core free all classrooms.

Before we continue please know that today's discussion will contain forward looking statements made on bill that's safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.

Well, one looking statements involve anyhow risks and uncertainties as such the company's results may be materially different from the views expressed today.

Further information regarding this and other risks and uncertainties is included in the company's filings with the U.S. Securities and Exchange Commission.

The company's does not assume any obligation to update and therefore, well looking statements and.

Except as required under applicable law or.

Please know that four seasons education earnings press release, and this conference call in good discussions on what it has got financial information as well as audited non-GAAP financial measures.

Let's see this education press release contains a reconciliation of the unaudited non-GAAP measures to the AMOLED. They did most directly comparable GAAP measures.

I'll now turn the call, although 10 hours CEO Mr. Zhu. Please go ahead.

Thank you all Libya and Hello, everyone in the first quarter fiscal 221 would have been diligence late cultivating our online education offerings.

Yes, you students learning the.

Especially with Oh sunk cost this word restricted due to Corbett 90.

In addition, we continued to optimize our offline resources wellbore strengthened and cohesive online offline approach to prepare ourselves for market recovery.

Due to the prolonged depend d'amico containment measures and the restrictions on offline courses.

Most of our Colossus would deliver online during the quarter.

She's the swift to transition to online, but after Colby 90 outbreak <unk> early Twentytwenty, Oh, I live streamed and pre recorded a classes have received a very positive feedback from our students.

Aside from John makes subjected to twin close it we have also transition our future interest. It based of course is online to bring students more content that benefits the intellectual development and no trust that interest line.

To further strengthen our online capabilities was solid technical support we made a strategic investment into machine at work and all that education and training service provider so as to sustain the long term growth and development of Oh I indication.

Total student enrollment for the quarter decreased by 35% year over year, resulting from the impacted by the Colby 90 and their related to regulatory uncertainties.

In addition, though right.

Additionally, regular schools med, what's really delivered to cost is online during the quarter.

Well the Saco vision house after a long time Baltic using digital devices students tend to have less preference and participate <unk> additional after school on costs as you.

Enrollment Osama break learning will also impacted with due to a time might uncertainties for reopening offline learning centers.

Despite you these unfavorable practice it is encouraging for us to achieve 85% quarter over quarter enrollment growth even in factories seasonality. This growth stewed demonstrates demand recovery from college students and dug deep trusting all quality courses.

Well the Brad you work with assumption to normal daily life currently over 90% of <unk> existing learning centers have opened four offline Colossus delivery after receiving approval from government authorities, who have reviewed and evaluated the compliance that Oh facility.

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Moreover, we're privileged to be selected again, it's nice to have trusted the summit childcare a project to launch the by Shanghai Children Foundation, and shown quite a woman's situation that aims to provide a pleasant the environment and fulfilling some experience for the kids.

Being nice all this especially program demonstrates our best of class education, well equipped with the facilities and the high operating standards of our learning centers that have now been well recognize the fight government authorities.

Generally speaking we have expedited the digital transformation of operations under the development off on that education during the cold and matching pandemic at the same time parents and students have been increasingly aware off the importance of offline causes that provided the rasta in person teach.

And the generally bring more effective learning buzz out.

We will continue to make efforts in beauty, our learning center network and enrich our offline courses, which consistently providing a considerable amount of oncologists would believed that this strategic Oh, Oh model will provide the more flexibility to us student and allow us to quickly transition I'll close.

Liberate online in case of any inductive pandemic development.

More importantly, we believe our stellar reputation of high quality teaching coupled with superior cost experience will allow us to continuing attracting students through word of mouth referrals, we remain committed to southern students of all age.

With a broad array all courses and if that make a subject tutoring.

Interest to know 20, and the intellectually development, both at our learning centers and on the online platform.

Now, let's move onto the financial results.

Amid a challenging market environment with many uncertainties our topline performance for the first quarter fiscal 2021 was in line was all expectations impacted by the Colby 19 pandemic, adding to the lower enrollment in the fourth quarter fiscal Twentytwenty revenue decreased the bias so to sweep.

Right and 7% year over year to RMB 56.8 million.

The softer topline performance created the pressure on margins and profit levels in the first quarter.

Robert enrollment gradually recover sequentially in the first quarter driving our defense driving our deferred revenue up by 46% compared with compared with the level. So February 29 Twentytwenty.

Yeah. This year, we have been optimizing our learning centers for more efficient offline resource allocation, coupled with our that if the plane cost controls so as to further reduce cost and efficiently manage our campus network. Our cash position also remain solid demonstrates our house operations and enable.

<unk> us to make prudent investments that are constructive for our.

<unk> gross.

Now I'd like to walk you through for the details of our first quarter fiscal year 2021 financial results.

Revenue decreased by 31.5 cents to RMB 58.7 million for the first quarter fiscal years 2021.

From RMB 85.6 million in the same period up last year, primarily due to the impact of outbreak of Kobe 19.

Cost of revenue decreased by 21.6 cents to RMB 36.3 million for the first quarter fiscal year 2021 from RMB 46.3 million in the same period of last year.

Gross profit decreased by 43.1% to RMB 22.4 million for the first quarter fiscal year 2021 from RMB 39.4 million in the same period up last year.

General and administrative expenses decreased by 16.6% to RMB 28.0 million from first quarter fiscal year 2021 from RMB 33.5 million. It in the same period of last year.

So it's been a marketing expenses decreased by 11.5% to RMB 7 million for the first quarter fiscal year 2021 from RMB 7.9 million that in the same period. After last year, primarily attributable to the decrease of advertising due to the impact of Koby 19.

What do you lost this was RMB 21, five ninem for the first quarter fiscal year 20 to 21 compared with RMB 2.1 billion in the same period last year I.

Adjusted operating loss.

Was RMB 4.8 million for the first quarter fiscal year, two old 2020, compared to was adjusted operating income of RMB <unk> in the same period up last year.

Expenses not worse on the 2.8 million for the first quarter fiscal year 2021, compared to what are the income of RMB 2.4 million <unk>. The same period up last year, primarily due to investment fab as we change.

Income tax benefit was RMB 0.4 million for the first quarter fiscal year 2021, compared to was any income tax expense of RMB 4.5 minute in the same period up last year.

Net loss was RMB 11.5 million during the first quarter fiscal year 2021, compared with net income of RMB 4.2 million in the same period up last year I.

Adjusted net loss was RMB zero point Sixmillion compared with adjusted net income of RMB 11.2 million in the same period last year.

Basic and diluted net loss for Mds attributable to ordinary shareholders for the first quarter fiscal year 2021, we're both RMB 23 cents compared to with both RMB 80 cents Oh with.

Most RMB eight cents for the same period of last year.

Instead, the basic and diluted net income, but as a true <unk> attributable to ordinary shareholders were both arent you once and for the first quarter fiscal year 2021 compared to with both our you 22 cents for the same period up last year.

Cash and cash equivalents itself may 31st it 2020, the company had a cash and cash equivalents of RMB 430.3 million compared to was RMB 400, and the 4.3 billion EUR 400, and up 4.7 minutes on February 29 22.

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Looking forward for.

For the second quarter fiscal 2021, the company expects to generate revenue in the range of RMB.

79, when I admit into RMB.

86.3 minute.

The above outlook is based on the current market condition and the reflect the company's preliminary estimates of market, an operating conditions and the customer demand, which oh subject to change, particularly in consideration of uncertainties related to koby 90 outbreak among others.

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

We will now begin the question answer session to ask a question in a press Star then one on your Touchtone phone, if you're using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then too.

For the benefit of all participants on today's call. If you wish to ask your question to management in Chinese. Please immediately repeat your question in English.

At this time, we'll pause momentarily to assemble our roster.

The first question comes from Joy why was 86 research. Please go ahead.

Hi, I'm engine I think for taking my question. My question is regarding goal guidance on your guidance indicates a declining a young you couldn't management help us understand that the reasons behind all how much of the decline is due to the shot tend to some of that.

Patient.

And I have a follow up thank you.

Oh, we mentioned that because you know the uncertainty over the summer break punch schedule and the the parent.

The parents.

Determination to Ingo their kids to the some some a pull them Hudson infected that's one off the region and also you know a in some schools that Ah Ah Ah.

The the effect of reasons actually you know I'm a lots of those on players the issue the.

How would I put it some sort of price war right that you can get baby you know for like a 40 classes just fall why on B and we're not doing that so it's a it's ah.

The decline as a result of Ah Ah several could you know a several several factors, but our view we believe its short term because from the some and Oh, a fall enrollment should we see that but.

The the trend is back.

And Ah over the summer the parents also somewhat concerns or would they even though the called me 90.

Outbreak the the control measurement into Aflac facility, that's why we Oh, yeah, we are putting more efforts our resources no all in causes for the fourth in mass. So we actually opened up for both our online offline Colossus and try to.

Ah make oh and more model more smooth.

Yeah. So that's that's that's the reason why why.

To your question, while we see a decline in the in the summer guidance.

Got it and so we are offering Oh animal models for the full.

For some might see master so do have an expectation of for the revenue outlook for you. It's called 21, considering that you are rolling out this new model and.

It might help you bad hurting and attracting students.

Thank you.

Oh.

No I'm not giving out guidance on this call, but you can be child, Oh, and under we can pop separately, but Ah Ah the us I said, but Oh, you know China. The other patient administration also.

So issue than a policy OLED they go Hudson.

So we.

I'm doing.

So we make adjustment in all aspects to.

The two more let us not to make us more competitive in the market and more attempt <unk> adaptable to the market. Weve also are going to issue, a new program, which which is a more pay loved the COO.

Classroom textbook, so we'll do all kinds of things and a in general we are confident.

That's a the poor year.

The the full year all look is a in range was all internal cotton and Oh, a middle school or Middle School program Middle School businesses.

It's coming up pretty nicely and are we are making more investment in the which we also believe will be a strong cost driver of what the next quarter's took home.

Got it.

Thank you very much.

[noise] again, if you have a question 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.

Olivia do you have any closing remarks.

Thank you once again for joining US today, if you have for other questions. Please feel free to contact fourth season Investor relations through the.

Contact information provided on our website <unk> Investor relations.

This concludes this conference call you may now disconnect your lines. Thank you.