Q1 2021 Bright Scholar Education Holdings Ltd Earnings Call
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Yes.
Hello.
Good day and welcome to the bright scholar first quarter 'twenty 'twenty One earnings conference call. All participants will be in listen only mode should you need of Sig need assistance. Please signal conference specialist by pressing the star key followed by zero.
After todays presentation and there'll be an opportunity to ask questions. Please note. This event is being recorded and now I'd like to turn the conference over to management. Please go ahead.
Yeah.
Thank you operator, the morning, and good evening welcome to the bright scholar for physical ports and the November 30th 'twenty 'twenty earnings call. Joining me today I'll Miss the Jerry He our executive Vice Chairman, Mr and the Chen our co chief executive of yourself and missed.
Dora Li our Chief Financial Officer.
And so we mined though today's conference call is being broadcast live via webcast. In addition, and we play it will be available on our website. Following the call by now you should have received the copy of our press release that was just strictly on.
Generally the 20th trying to 'twenty, one after market close eastern time.
No. It just convey the bolt on the eye on section of our website.
And we get started let me remind you that today's call may contain forward looking statements, but he and the meaning of section and try and do you want on.
And the Securities Exchange Act of 19 people, that's the mandate and that's the fine and the U S. Private Securities Litigation Reform Act of 19 try to size. This forward looking statements include without limitation, the company's business plans and development.
Have you identified.
I kind of analogies such as of May well expect anticipate and.
And I estimate intend plan believe for kind of show continued its the law.
Unlikely to or other similar expression for.
The statements are based upon management's current expectation and current market and operating conditions and relate to events that involve known or unknown risks uncertainties and the other factors all of which are difficult to predict and many of the choppy on the company's control, which may cause the company's actual reached out for.
Almost all of achievements to differ materially.
The reality, sometimes in the forward looking statements.
So it's the information regarding this and other risks uncertainties and factors is included and the company's filing with the U S Securities and Exchange Commission.
The company does not undertake any obligation to update any forward looking statements as the result of new information future events stope at the life, except as required under the law.
And that's cool, we'll be referring to GAAP and non-GAAP financial measures, we use such of non-GAAP measures as supplemental measures to review and they'll set all of our operating performance. This non-GAAP financial measures have limitations as analytical tools and the muster somewhat close to the and isolation O S.
And so a substitute for net income attributable to the company or other consolidated statements of comprehensive income of data prepared in accordance with U S. GAAP.
Note all numbers all of M B and all comparisons we start the year over the year comparison.
Otherwise state that the that I turn the call over to our executive Vice Chairman Jerry Heath Terry.
Yeah.
That's the movie.
Good morning, and good evening and thank you for joining us our first fiscal quarter of Tucson, and 21 conference call again, we appreciate your continued interest and our company.
The pandemic remains excuse me of the destruction to the global economy, and our global business.
And particularly our overseas case all of the business.
On today's call on behalf of of the senior management team and I would provide the little bit context for our fiscal of 'twenty 'twenty, one and first quarter performance and discuss key trends and our business.
And we're also a highlight of our strategic priority for physical in 'twenty and 'twenty one day.
Further it has our market and position for long term growth.
Star Wars, then provide details of our business and the financial performance and then all of the data on all of our guidance of a wrap up and then we will take your questions.
For those of quote and Utah Company, we have included.
Our earnings presentation of a brief of corporate introduction and sexual one for on slide five to 11 of which you can download the part of our IR website again, all numbers are the RMB and the order of comparison referred to year over year, unless otherwise stated.
Let's start with slides 13 and for the highlights of our first fiscal quarter, which details the breakdown by the selective businesses inside the 14th.
In the quarter. The overall business performed for homeless or was significantly affected by our overseas school and oversee and lady of complementary business well.
While all other businesses and you're trying to have shown major improves on the year over year revenue.
Revenue growth.
The revenue for the first fiscal quarter was.
One point the O a one point.
051 billion RMB dropped by a full 0.2 per cent.
The company produced net income of the 199 million RMB down by six 6%.
Our domestic K 12 business, we're off to a very promising start and the more mundane two hour of business clearly has picked up in the first of the physical quarter.
Fluffy and China continues to return to new normal day.
The amount of for our K 12, who grew.
And in the quarter enrolment of International School by school and kindergarten all of of by nine seven per cent eight per cent and the 17% respectively.
In slide 15.
Average attrition fees of International school and the body of schools bilingual school have also.
A recording of the increase of 1.9% and five per cent.
And these are challenging times.
And we could not be more pleased the way the momentum across all of our domestic K 12 businesses.
Our near term priorities to drive enrollment growth optimize utilization and the improved operating efficiency.
The strength of our brand and the reflects our unwavering commitment to deliver a quality of education and consistently.
That's that's the general and 15th approximately 60% of five per cent of student and in the 'twenty 'twenty. One graduating class of our interest school have received over 400 of offers the first global top of the 50 institutions with the sixth conditional offers for and Oxford to for the Universe, Chicago and two from Cornell to.
For for and New York University, and the one for northwestern University of <unk>.
So in slide 16.
We expect the most students receive offers for the elite institutions.
And the academic and performance of our students will continue to improve across all age groups.
Our overseas business. The performance has been adversely impacted by devastating pandemic and.
The U K.
Where most of our the school overseas schools based the government of continuous to Institute Lockdown measures to control of the spread of virus and and address the emergence of the new virus vibrant.
The whole education of assistant continues to be of a and data by the ongoing health crisis and the school face the daily challenges in meeting the needs of our students which of all of the schools, nor learning centers opened for in person and learning.
Although we have been able to help schools to overcome these obstacles with online solutions the turnarounds of the army laws.
And the potential impact on student achievement.
Our topline was a sick leaves and the impacted by the absence of of traditional school based activities.
And in the quarter.
Oh, what's the revenue.
The dropped by 48.2 per cent.
During the quarter, we remain intently focused on both supporting our schools and students parents and teachers and staff the adaptive COVID-19 disruptions and delays.
And that's well manage the net effect of COVID-19, our student enrollment of financials.
And so we continue to lower cost and the increase efficiency, taking steps to reduce operating cost and the optimize our operation and improve our I T and infrastructure.
The benefits realized for the cost cutting measures and the investments taking over the last two quarters she's of bringing downturn of improvements to the cost structure of our O C business as well as the opportunities for significant gain in profit profitability once the operating environment reduced on.
Normalcy.
Again, our global network.
As of the strategic importance and realize the long term value with the enormous market opportunity and the synergies yet to be unlocked as shown in slide 17.
Let's move on to slide 18 for our complementary education of the services business.
The recovered the recoveries of evidence and.
And the demand for our services remained strong in China in the quarter. There was the Saudi the uptake in domestic after school training and the canvas business, which is revenue increased by 7.7 per cent and six out of 35 per cent respectively.
Respectively.
However, the ongoing pandemic and in Europe, but and there and the rising U S. China tensions continue to have adverse impact on all of our overseas related complementary business, including overseas study counseling.
Who's the revenue dropped by 49 point and 4%.
What's your return the fact that the overall business of performance for the quarter with the total revenue decreased by $5 80 per cent.
Yeah.
In spite of the challenges for overseas related business.
There are growing opportunities with the regulatory tailwind beginning to build in area of the online courses after school training and it started kind of a business.
And maybe the macro headwinds.
And I'm pleased to report that of of our AD Tech and it has been doing quite well with the revenue of 64 per cent of in the quarter, including the acquisition of and instituted.
Please turn to slide 19 for our AD Tech business. The COVID-19 pandemic has put a spotlight on the importance of education and technology for learning did.
Did you go digital adoption of home and school.
Education continues to accelerate the at a faster pace.
Well of gaining more traction for three of our global Academy and the other AD Tech initiatives. So we spent of our blended.
Traditional and digital learning solutions.
To meet their fast evolving ease of of students parents and teachers.
Looking forward.
So we face continuing and certainly our oversee operations in the coming quarter. The strategic of steps, we're taking are providing benefits of today and the more importantly, there are present in the US for continued success and post the COVID-19 business environment.
Before I turn the call to Dural I want you like I would like just share with you the key strategic priorities of show in slide 20.
And the.
'twenty 'twenty, one and fiscal year, our strategy, we're continuing to build upon on our four strategic pillars first for folks on maintaining organic growth you know all the domestic K 12 business would you provide the cash cow to feel the new growth initiatives and the acquisitions.
Second the focus on cost management and to lower our cost base and the improve our long term operating leverage and the profit and margin.
Third optimize the integration planning to unlock new revenue and the cost synergies and expand the complementary education offerings and finally continue to invest in education and technology and the company inventory of education services and deploy capital is ease.
And he and strategic acquisitions for long term growth.
Due to the uncertainties associated with COVID-19, and then macro it call it.
Economic headwinds.
Our our overseeing management team has annualized seller of scenarios that are contingent on the other depth and duration of the COVID-19 pandemic.
And then and that was it.
Is all of the impact of our overseas business, we have taken the most of the conservative approach.
The other forms the basis for our revised the guidance of which I will leave the too dark too for the details.
Oh It was just note the I turn the call to zoro.
Thank you Jerry.
Oh, that's come back to our financial please also be reminded that all numbers are in RMB and all comparisons refer to year on year comparisons unless 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 22 revenue for the quarter. Our overall the revenue was down for 2% to $1051 5 million RMB.
Revenue for our domestic K 12 schools, including international schools bilingual schools and the kindergartens was up 10, 9% for the quarter to 700, and a $42 4 million of content for 76 per cent of total revenue as compared to 69%.
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For International schools revenue was up 11, 1% to 300 and for 3 million, primarily due to the nine 7% increase of student enrollment and the one 9% increase in average of tuition fees.
Our bilingual schools revenue was up 13, 5% to $260 8 million due to the 8% increase and student enrollment and the 5% increase in average tuition fees.
For our kindergarten revenue was up $6 eight per cent to 177 3 million, primarily due to a 17% increase in student enrollment.
Our revenue from all of overseas of K 12 schools was down 48.2% to 134.2 million, primarily due to the impact of COVID-19.
Revenue for our Education Technology segment was up 64 per cent to $36 7 million, primarily due to the acquisition of the Institute.
Revenue from complementary education was down five 8% to 138.2, mainly due to the impact of overseas related the complementary business.
On slide 23 cost of revenue for the quarter was 57, 9% of total revenue compared to $56 nine and the same quarter of last fiscal year.
Teaching staff cost the primary cost of contribute or accounted for $32 six per cent of total revenue of from $29 five per cent for same.
Same quarter last year.
Our domestic K 12 schools average student and teacher ratio for the fiscal year for this fiscal quarter. It was nine point to compare to $8 nine in the same Peter it lost the physical year.
On slide 20 for the gross profit and margin.
Gross profit was down 6.5 per cent to 400, and the 42 8 million for the quarter and gross margin was 42.1 per cent compared to $43 one per cent.
Continuing on slide 25, adjusted SG&A expenses as a percentage of total revenue was 21% up from 18, 2% and the same quarter last fiscal year the increase in SG&A expenses.
It was primarily due to the incremental SG&A expenses associated with newly established International School and the Kinder Gardens and also the acquisition of new business on the comparable business basis.
To elaborate more on the adjusted SG&A expenses, please refer to our slide 26.
Continue to slide 27 of adjusted EBIDTA for the quarter was 326 million compared to $352 5 million and adjusted EBIT margin was 35 per cent compared to 32.1 per cent.
Yeah.
Adjusted net income for the quarter was 197 1 million compared to $223 million and adjusted net margin was $18 seven per cent compared to $20 three per cent.
On slide 28 shows our cash and on bank balance as of November 30, 'twenty and 'twenty, our cash and cash equivalents and the restricted cash totaled.
1690, 7 million or 258 point, and 1 million U S dollar as compared to.
4000, and 424 million on August 31st 2020.
We also have short term investment of 2000, and 175 million as of November for the 'twenty 'twenty.
Moving to slide 30.
And the one for 'twenty and 'twenty the board approved for the.
The third share repurchase program of the company.
Of up to 50 million U S dollar.
And as of January 15, 2021, the company has bought back.
61 solved on the 622 shares for the airports for me and in U S. Dollar.
Continuing to of continuing to slice of the one.
We are revising our guidance for the fiscal year ending August 31st 'twenty 'twenty. One we expect our total revenue in the range of three point faster and I feeling and the Street 0.6, 9 billion, representing a growth of 7% to 10 per cent based on existing.
And business and without any potential acquisitions.
We also expect every average students enrollment in our domestic and overseas the schools to be between approximately 56000, and the 57000, representing an increase of 8% to 10 per cent.
We also expect to open 19 kindergartens for physical 'twenty 'twenty, one and also beyond the physical 'twenty 'twenty, one we have seven schools and the 39 kindergartens contracted for accretion.
Please refer to the table in slide 33, and the 34 for the condensed income statement slide 35 of shows the reconciliation for S. P and the expenses EBITDA and net income on the GAAP to non-GAAP results.
Slide 36 shows our balance sheet and the cash flow statement for the fiscal year ended up.
For the physical quarter ended November 30 of 'twenty and 'twenty. The company's capital expenditure was approximately $55 2 million down 25, eight per cent compared to the same period of last fiscal year.
Also on slide 37.
Shows our average student enrollment and average tuition and fees across our network.
This concludes my financial update now I will turn back to Jerry for his closing remarks Jerry.
Thank you Dara and I'm very pleased the way the way our company has adapted to the continuing challenges associated with COVID-19.
Well, Steve of conviction and a strong and resilient.
We are constantly looking for new ways of reaching the learning experience of our students at the school and at home.
For the new streams of revenue, while he has he and our competitive cost base to protect the out of operating income.
And case positions.
We remain sort of of our value proposition of of providing premier education and service to be supported by our global network of schools and the power to buy technologies.
We remain sort of our addressable market, we see enormous market opportunities and the synergies yet to be unlocked well most of that of bright scholar as the world positioned to weather the storm and to capitalize on the opportunities for the years to call for you.
And confident and our ability to deliver on our targets and the sustainable share shareholder values through this.
On precedence period of the pandemic uncertainty.
This concludes our prepared remarks, and then we would like to open the call to the questions operator. Please.
We will now begin the question and answer session.
To ask a question you May press stores and one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press star and then too.
The first question is from Timothy and draws from Goldman Sachs. Please go ahead.
Yeah.
Oh man and thank you.
And my question for just real quick one on your revenue guidance and I see the you cut on the revenue guidance of by around 5% on.
Can you kind of in the warranty tell about the rationale behind the I didn't know so all of them on your own group because that's the end of the fourth quarter and it seems that that's the method of goodness.
And quite well by the overseas revenue drop a lot of so what kind of recovery paths are you expecting for the all of US goodness. Thank you.
Okay.
And this is Jerry I took your question. So we lowered the guidance, mainly because what's going on with the second wave of pandemic because of we were when we did the guidance last time, we're expecting the sound of the studio where the delay registration for and force Master today spring semester of meaning they're going to come back in June.
Here are the data was before of course the go before the force master's started and the and of course, you know as we all know that the if you look at the new cases, and the U K back in April of last year, I think of the daily New cases of wasn't around for 5000 and as is the peak, it's actually went to 60000.
Which is more than 10 times, what it was prior peak so the the entire country is do the the lockdown, so and as we found out the the deferred students who are supposed to come back.
In January and now are they couldn't talk because of because of all of the travel restrictions of probably hurting and the news. Many many countries called their travel on connections of which was the U K. So that's so enrolment and with an outcome and of course always that and.
On the they are of course, who are registered already it would it be converting the online so everybody's the online other than those one campus in Cambridge, and where are we signed and student who are already there that you didn't go home for Christmas and so we kept the and the dorm, but even though they are taking classes online. So we're going to lose some revenue for them.
And the boarding as well, but it's still not account that we're going to lose out of small so now we basically factoring and all of that as the second wave of north so the the new variant if you will the virus and you knew a more presuming and more contiguous one so we basically say for whoever or not of all of our campuses now or not.
And I would just assume they couldnt income for the rest of the fiscal year. So we basically to write that down and that's that's contributed the drops of the three sort of basically the tuition and the boring and north of there are some of them. We also have a business in language training. The staff of house and are on the cats are of course the week.
Locked down and they're very limited teaching you can do over there as well so because of those three last week and revenue we will write down of our we we lowered our guidance for that.
And for the for the domestic US you mentioned most of the back to normal I forget and see the enrollment of the wind up and.
But I won't say, what you couldn't do much this year because of the pandemic and the increase of the tuition. So even though we got the most students, but we will do less of.
We were not able to increase tuition of as much of what we have down the of previous years, but at least you and was that a was there a sea of gross.
And you see the numbers and in domestic adult.
Okay.
Okay.
Sure.
Thank you.
Yeah.
But again if you have a question. Please press Star then one.
Okay.
Other no more questions and the queue. This concludes our question and answer session.
Like to turn the conference back over to Gerry.
For any closing remarks.
Oh stuck and they very much for joining the conference call. Please feel free to kind of asking you for have any further questions.
We wish everybody a good day and the great year. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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