Q1 2021 OneSmart International Education Group Ltd Earnings Call
Ladies and gentlemen, thank you for standing by.
And welcome to one Smart International Education Group Ltd, first fiscal quarter of 2021, the earnings conference call.
At this time all participants are in a listen only mode.
There will be the presentation, followed by the question and answer session.
I must advise us of this conference is being recorded today.
I would now like the hand, the conference over to your first speaker Ms out of you.
That's the relation senior director of one sort of International Education Group Ltd. Thank you. Please go ahead.
Thank you operator, good morning, and the evening, everyone and thank you for joining one Smart International Education Group Ltd first fiscal quarter 2021 earnings Conference call.
The company's earnings results as well as supplementary slide presentation were released earlier today and are available on the company's IR website at IR dog once must Oh Archie.
Joining me today all of these cool, Mr. Steve Zhang Chairman and CEO and Mr. Brad the pool, our CFO and the Seattle.
I would remind you that this call may contain forward looking statements made under the safe Harbor provision of the private liquidity Securities Litigation Reform Act of 1995.
Such statements are based on management's current expectations and the current market and operating conditions and the relates to the event that the Evo Eagle no none of it.
Uncertainties and the other factors all of which are difficult to predict and the many of which are beyond the company's control.
Which may cause the company's actual results performance or achievements.
Differ materially from those in the forward looking statements.
But of the information regarding these and other risks uncertainties and the factor is included in the company's filings with the United States Securities and Exchange Commission the.
The company does not undertake any obligation to update any forward looking statements as a result of new information future events or otherwise except at the new law.
With that I would now turn the call over to Steve. Please go ahead.
Thank you.
Hello, everyone. We are delighted to report the school of thought being free.
So 2021.
All of the key metrics on the cover.
The year over year comparison.
Hello.
Although premium strategy.
Excuse me of the web from check with the kidneys can achieve the enhancement.
He has met the amazing products.
Kept all of that many centers in the free.
The net brand advantages.
All of the recently launched elite the IP products.
That's not true the junk cashed out exactly the picture.
Net of edit the premium offering empower lending of BD and the school admissions Oh.
The pop up of the basic of school improvement of the future.
Oh, the T shirt the ballpark.
Continuously improving.
They are highly selective we are true.
To satisfy the students of the patent evolving the academic true.
By the end of the January 2021, what do you have the beverage eighth U sleep of debt that NUCYNTA.
The upgrade at the center that is one of them.
While the Super experienced the applaud.
In addition, we are making great efforts from premium brand building the local market to want in fact, even the big drop happy customers.
One of my plan with the fishing premium through the you know.
The topic of 70.
Evidenced by the improved but at the collector.
With the cause of some ugly and China's education sector.
The premium K 12 after school education sector, you said the enormous and there's just the market.
We have continued to leverage all of the software.
And the way he brought up the subject.
To capture the growth opportunities as.
As the leading premium tier three instead of at the wider we are cognizant of spend.
The hallmark of shifting the plastic long sector like the two.
Achieved RMB compete at the that'd be the heartbeat.
By 2020 free.
With that I will now turn the call over to Greg with the wide you more detail about strategic achievements and then the update.
And the performance in Q1.
Please go ahead.
Yes.
Okay. Thank you Steve Hello, everyone. Thank you for joining us today.
I'd like to start with comments on the overall performance before I go to individual president puts and takes the slides, which was uploaded onto our company website the audio today.
But we keep all of the new fiscal year 2021 in September.
I'm, Dan the has generally been under control and the business activity in China and getting back to normal level. Thanks to the tremendous efforts made by the government and the people.
One smart has also moved to a new phase of growth post the pandemic and are proactively investing in our core business the build a longtime successful enterprise.
Our company wide cash sales year over year of growth. That's continued to trend up recording positive 14 per cent 23 per cent and the 37% in the December 2020 January 2021, and mid February of 2021, respectively.
The balance of all of them, we prepaid tuition and the reached all time record level, that's the RMB 2.75 billion.
The physical Q1.
This is a result of strong demand post normalized public school schedules enhance customer satisfaction, driven by our premium initiatives and the.
Our enhanced customer acquisition approach.
The go premium strategy that we launched in the beginning of fiscal 2021 is structurally resetting the unit economics of our business model, making it more financially attractive in the future.
Well year to date, that's why 21, the average unit price of new purchase of our core VIP segment was RMB 44, K price students on average basis.
Representing 73 per cent year over year increase from the same period off of.
Why 20.
They set up a much higher per student revenue, that's a much more robust unit economics down the road.
Encouraged by the initial success of the go premium strategy and the justified by the increased revenue profile.
We will continue to invest in our core product T. Chek credentials and then the center environment and the build our premium brands.
In the physical quarter one RMB.
Our marketing expenses accounted for 8% of cash cows.
Which was in line with the pre Covid FY 2019 level.
We primarily leverage of offline center presence and the resources to more effectively attracted customers sort of building the higher brand awareness and the crazy of local marketing activities, which mitigates the intensified online marketing competition in the industry.
True.
Yeah.
I will now turn to our earnings presentation slides.
I first start with page seven provides all the operational achievements.
Illustrated on the.
Presentation.
Of course, we have upgraded offerings across the I T products, including the successful launch of elite the extra product with value added premium offerings in learning ability and the school admission plenty.
Of cash sales from premium products picked up quickly in the fiscal Q1 accounting for 12 per cent and the 9% in one of my VIP business and the young children education business respectively.
Second by the end of January two of them 21, we had 83% 19 centers refurbished and the 12th flashy centers opened.
To enhance premium customer experience.
Third since December 2020, we have conducted a comprehensive marketing campaign from the PR events.
Including premium to the REIT product launch conference and other intensive but innovative local marketing activities.
As a result, the premium brand awareness right.
The improved by Twentyish percentage points.
The key cities for example, Hangzhou and Nanjing.
Fourth we have also upgrade of the teachers profile for elite VIP program by 35, 550, we I P of teachers so far.
Finally, we completed comprehensive training for central stuff the support co premise strategy, what's the 100 per cent courage.
Please turn to page eight of our latest performance trend.
We focus on the key theater of cash sales that's the it provides latest.
Status of our business and the useful visibility of future growth.
In the fiscal Q1.
Ah you September to November 2020.
We still had some COVID-19 impact in the few cities for one's mouth VIP business.
And for overall young children education business.
Heading into fiscal Q2, all of a company wide cash sales year over year of growth has continued to trend up recording 14 per cent 23 per cent and of 37% in the December 2020 January and mid February of 2021, respectively.
The key drivers for such accelerated growth include first the meant that students are back to normal study schedule.
In China, the boost post the pandemic recovery from offline center.
Oh premium strategy, and the marketing efforts and build up of customer satisfaction and the brand awareness.
And third the successful launch of VIP and premium products.
That's typically the new sales.
It takes one to two quarters to translate into class consumption E revenue recognition in our business the momentum.
Momentum has not yet been reflected in our current quarter P&L, but indicates.
Solid and visible future revenue growth.
Total premium strategy is increasing the unit price substantially.
Resetting of much higher unit comics and business model plus homepage NIE in the fiscal year 2021 to date.
<unk> September 2022 January two of them in 'twenty, one the unit price of new purchase was RMB 44, K of course students on average basis.
Presenting 73 per cent year over year increase from the same period of last year.
58 per cent increase for the full year of PS.
2020.
Typically a large number of students will renew the of course is towards the end of their first find money packages with us expect much higher lifetime value and the unit economics going forward.
The improved economics supports our ongoing investments in teachers learning centers and brands, creating a robust premium model.
Oh, what he started the data suggests the typical low season for revenue recognition in the fiscal Q1.
Due to less intensive study and exam schedules in September to November in the public schools of China as such the cash sales momentum recorded in recent months. It is.
Not yet reflected in fiscal Q1 quarterly earnings.
As shown on page 10, usually.
Quarterly revenue size for physical Q3, and the fiscal Q4, almost double that of physical Q1.
The adult our margins our software from fiscal Q1 due to other fixed cost and expenses as well as some upfront strategic spendings.
Less related to the revenue distribution pattern here.
Next I will report the updates for each of our three core businesses.
That's the first start with I'll call once my VIP business on page 12.
On a like for like basis for one on one program. Excluding one of the three program. The average monthly student enrollments were of unite with the same period of the prior year kind.
Company has the strategically discontinued the selling of one of three two is moving product since Q2, FY 'twenty to focus on the more premium one on one product, including the launch of elite the IP product.
Cash sales grew by 10% year over year or one of one program.
In the fiscal Q2 to date of cash sales improved by 29% year over year for one of my VIP business or 27 per cent year over year for one of my VIP, excluding one of the three program.
This is the combined results of.
The student demand.
In fact, one of one two or three products.
Exams normalized here in China and to higher customer satisfaction due to the premium initiatives.
The products and centers and three ultra.
So actually the marketing campaign to build brand to attract new customers.
Moving on to page 13.
The support the launch of elite VIP program, we continue to invest in teachers profiles and the teaching services.
But we actually of teachers are certified by one smart star Pizza of framework with extensive teaching experience.
So far we have sort of your slide 550, VIP of teachers in light with our cash sales and the class consumption progress.
Elite VIP is also distinguished with its value and.
Value add premium offerings, which is the product upgrade in three dimensions, the support academic achievements, including personalized the school admission planning one O. One children by the I P teachers and the power of many.
Theory.
Our sense of expansion and upgrade is the well on track as shown on page 14 by the end of January of two of them 21, we have renovated and upgraded 83 per cent for all of all of our learning centers in China.
In addition, we opened 12 flagship VIP learning centers in operation in top cities, including five upgraded to the centers on the seven newly opened centers to provide a premium learning center experience.
In the fiscal Q1 elite VIP program accounts for 12 per cent of the cash sales from the once tomorrow VIP business.
Page 15 summarizes all of our marketing campaign works for which target customers and convert yourselves.
The beauty of our acquisition of advantages around learning centers and it's the local reach we have the enhanced premium brand building true upgrade the offline presence and high profile of PR events.
In addition, we have also upgraded its local marketing activities with more of your factory targeting by leveraging all of the center coverage of the local school of knowledge.
While we plan to increase marketing spending to support all of the go premium strategy.
The fiscal Q1, we kept marketing expense ratio at 8% of cash cells.
Which is the unite with the pre pandemic Q1, FY 19 level.
So all of our enhance the marketing approach the robust cash sales generated.
While the new student acquisition is of critical to our growth ex.
Instead of student base contributes majority of cash sales based off of historical results.
During the fiscal Q1 with yours and the referrals contributed 67 four per cent of the total cash sales up from 63, 6% Q1 last year kind of marry due to enhance the customer satisfaction, killing by our premium initiatives.
Let's turn to page 16, and 17 for upgrades of our young children education businesses.
During the fiscal Q1. This business has been more impacted by Covid, which has seen a much slower recovery compared to once a month VIP business.
Monthly average enrollments.
The slightly year over year increase of one three per cent and the cash sales continued to recover sequentially up 38 per cent from the prior quarter.
During the quarter one the average unit price of new purchase improved by 14% and the 29% year over year for half the mask and the fast track the English respectively.
Cash sales for these premium products picked up quickly and the cow.
Four 9% of the total cash sales for total young children education business in the fiscal Q1.
The standard of safety and the cleaning. It can also upgrade as you know we're happy in mass and the fast track the English learning centers to encourage a higher attendance rate among the young children students.
As of the end of fiscal Q1, 2021, happy mass of cheap and retention rates of 80 per cent.
Hi, S pre COVID-19 level.
Moving onto one small one night on page 18.
As explained in previous earnings calls, we are committed to a healthy girls tops, but once my all my by sticking to a positive cash flow and award the burning cash for scale.
The charges the skin.
All right, that's all offline offline programs.
That provides value add in terms of convenience and the complementary services through the other mall business model.
We constantly improved Oh, nice functionalities to enhance customer experience.
The operating life, all night classrooms meet the requirements of multiple class format and enhance the interactive teaching results and the visual effects.
Our teachers are well trained to adapt to the both online and offline teaching the environment.
The fiscal Q1 of 2021 all of my business contributed <unk>, 3% in total cash sales in the 4% in total net revenues.
Yeah.
Lastly, but importantly, we continue to strengthen our focus in the core business.
On page 19, we are pleased to announce the successful re org and the forming of a separate independent platform.
Combining several of previous opinion basket small class K 12 tutoring business is it.
<unk> cost you in and the Tianjin Whiting for better focus on the court one of one business.
We believe the the tremendous potential in the premium one on one segment and the top 20 cities based on our index understanding of customer needs and trends.
That's focused lays a solid foundation for both scale and the profitability for the next few years.
Before I the walks you through our financials in more details I'd like to recap comment our all of our.
Anticipated revenue growth and the margin expansion.
Our fiscal Q1 P&L results have not yet reflected the recent strong cash sales momentum and post COVID-19 recovery.
Is it too big of it takes the one to two quarters four sales per translate into class Consumptions of your revenue recognition in our business. In addition, the fiscal Q1 is the typical low season for class kind of consumption due to the less intensive.
<unk> and exam schedule of seen China historically, all of revenue in the physical Q3, and the fiscal Q4 double debt of.
The physical Q1 as a result, we observed temporary margin pressure in fiscal Q1.
In addition, the margin is affected by those upfront investments in teachers learning centers and the marketing for the gold premium strategy.
With the strong cash sales trend.
We just reported and significant higher new sales day S. P. We are optimistic about that's why 'twenty, one topline performance, particularly in the.
Fiscal Q3 and fiscal Q4, the pig study season.
We expect strong revenue growth and margin expansion in the second half FY 'twenty one.
With that I turn the call all of the Ida Ida piece.
Thank you Brad before we go through the key financial results lets review the performance of our one smart the I T centers ramp up as shown on page 24 of the performance has been solid and has a consistent trend as before but the I T centers in Shanghai that's happening.
Operating for over two years the thing.
However, operating margin 10, 18% and the high as 20% on the 30th for.
<unk> VIP learning centers in our top 10 cities outside of Shanghai, We have achieved a center level operating margin of 13% well don't have for those that have been operating for over two years and the 19% on the 30 year.
While taking a view from the city level Shanghai has a higher percentage of matured centers with normalized operating margin. The VIP learning centers in the other top 10 cities are maturing after years operation and the in house the brand awareness.
What we have achieved in Shanghai football in 10 years.
For the past 12 months, the total operating margin for the I T centers in Shanghai was 31 per cent and the 15% in the top 10 cities outside of Shanghai.
We are optimistic that the solid growth in our existing key C D well optimize our group level of profit growth and the margin expansion as we take a more focused growth strategy.
In the first quarter of fiscal 2021 cash sales totaled RMB 962 million decreasing by of 13, 3% year over year, but increasing by 26% from the fiscal Q1 of 2019.
Excluding the impact of what a free program cash sales.
Chris the by two 9% year over year or increase the by 49% from the fiscal Q1 of 2019.
Net revenues were RMB 685 million ads at the high end of guidance.
The thing by 14, 1% the over yet, but increasing by $5 eight per cent from the fiscal Q1 of 2019.
The year over year decrease was mainly attribute to academic or to adopt the in consumed class units as a result of the COVID-19 impact to the student study and exam schedule.
Cuts are partially offset by an increase in our E. S. P for class a units consumed.
Excluding the impact of a free program net revenue decreased by one 9% year over year, but increased by $18 three per cent from the fiscal Q1 of 2019.
Cost of revenues decreased by 7.8% year over year to RMB 477 million.
The year over year decrease was mainly attributable to lower staff costs relating to a decline in class units consumed partially offset by the slight increases in rental costs and the depreciation and amortization costs relating to the flagship VIP learning centers opening and upgrade.
In the key cities.
In the fiscal Q1 gross profit was RMB 208 million with gross margin of 37 per cent, but the second 0.4% debt.
Year over year decline in profit and the margin was mainly due to one of revenue drop plus the by the impact of COVID-19. In addition to.
Fiscal Q1 is traditionally.
Most of the little piece of important for our business.
Non-GAAP selling and the marketing expenses, which excludes share based compensation expenses were RMB 171 million accounting for 25% of net revenues or $17 80 per cent of cash sales a decrease of.
12, 3% from RMB 195 million accounting for 24, 4% of net revenues or 17, 6% of cash sales during the same here of really the last here.
The slight year over year increase in ratio was probably due to more efficient selling spending partially offset by proactive branding and the local marketing activities to reach target families in the execution of the premium strategy.
General and administrative expenses increased by 0.2% year over year to RMB 201 million non-GAAP G&A expenses, which exclude share based compensation were RMB 166 million accounting for it.
$24 three per cent of net revenues a decrease of three 7% from RMB, one time to $173 million.
Accounting for 21, 7% of net revenues during the same period last year.
The year over year, increasing the ratio was primarily due to the lower revenue in the fiscal Q1 as a result.
Out of the seasonality.
Let me now move on to cover some other key financial points for the first fiscal quarter of 2021.
Capital expenditures for Q1 was RMB 41 million of year over year decrease of <unk>.
45 per cent from RMB 19 million in the same periods of last year.
Capital expenditures accounted for six per cent of net revenues in Q1, representing a year over year decrease of 530 basis points from 11, 3% in the same period last year.
The decrease was mainly due to more selective expansion and upgrade in the key cities.
Well, it's not the prepayments from customers balance, which represents cash collected from any of those students for courses and the rest of the nice proportionately as the training sessions of deliver reached all time record high levels of RMB 275 billion at the end.
Our fiscal Q1 2021.
Presenting a sequential increase of eight 3% from the end of fiscal Q4, 2020, and a year over year increase of <unk>.
35% from the end of fiscal Q1 last year.
As of November 32020, the company had cash and cash equivalents with just the cash and short term investments of RMB, One point 45 billion.
Based on the latest estimate we expect to generate net revenues of RMB $850 million to $950 million for the fiscal Q2 of 2021 equivalent to 24 per cent to 39% increase.
The increase from the fiscal Q1 of 2021.
We expect our full year revenue to reach above fiscal 2019 level.
However, this outlook represents one of my current view, which is subject to change the.
This concludes our prepared remarks, I would now turn the call over to the operator and open for Q&A operator, we are ready to take the questions.
Thank you threw.
Your question. Please press Star then one on your telephone.
To withdraw your question. Please press Star then two.
Today's first question comes from Felix Liu with UBS. Please go ahead of it.
Hi, Good evening management of kind of thank you very much part of taking my question. So first of all of them. If they were glad to see the net revenue returned to growth.
In any of our next quarter guidance.
So I understand this is typically weak season could you maybe share some color on the margin.
Do we still expect to the client, killing here or improve our year on year for Q1 margin and also you mentioned that you expect the the full year revenue to return to pre COVID-19 level. So what about margin is Martin can margin returned to pre COVID-19 level as well and my second question is on.
Capacity I noticed that the number of VIP learning centers declined a little bit too long kill so could you maybe share some more color about the capacity expansion plans are going forward and my third question is on balance sheet I noticed that the cash in the short term the investment has Uh huh.
You know the has continued to come down now at one point of 4 billion and the and.
You're currently sitting at a $2 5 billion a current liability excluding prepayments from customers. So my understanding you know could you help us understand the liquidity situation of your balance sheet on and do you see you know on any of his car or need to raise more funding. Thank you.
Thank you Felix so that's the three questions. Let me take them one by one the first question is regarding.
The the forward view on margin and the revenue recovery. So that's how as many.
Many of you start with the overall comments of would have provided and also of the cash sales trends when the indicative data point to the provided which provide the piece.
Our strong do you have visibility for us to to see the recovery of our business. So as we mentioned the multiple reasons debt behind the the pretty strong top line growth for the second half, which supported by the cash out of strength, but most importantly, it's the result of uncle premium strategy.
When we improve the overall customer experience and how blend of images, which helped really for the retention of existing customer we call rose and also new acquisitions and so with that and in addition, we were able to increase the price.
The follow the only the unit we had people, but also for the the current the regular VIP products. So as we improve those experience we're able to charge a premium on those products. So we will have.
We're aware of show you of the strong ASP increase year over year as well. So this was the support the revenue.
Rose.
In the full year as we mentioned our guidance is for the full year is that.
We will have revenue.
Be more than the Pope pre COVID-19 of why 19.
19 level, which is of roughly RMB 4 billion.
As you know last year FY 'twenty, we had revenue of $3 4 billion only so this represented a pretty strong sequential increase as well as the recovery trend.
In terms of margin as.
The we explained in detail that Q1 is athene and low season for us so, but but also importantly, we have to.
Strategically invest in our business for the meet the long term growth prospect. So as you noticed we.
Equally bound revamped all of the learning centers, we are investing how teacher credentials will spend money on brand building, we improved the product dramatically. So all of that well have the short term impact the margin, but as I mentioned, that's the topline gross tons of back.
Oh, the margin will recover so.
It will be hard to predict the exact the margin number at this point, but we believe in the second half the margin expansion will be quite notable.
The second question regarding capacity.
You noticed a few.
The the drop of one learning centers you can compare the Q4 the members of the we had a total of 418 learning centers by this quarter. So yeah. We're all of it all.
The expenses upon is the one we mentioned we will stick to about 10 per cent.
The expansion rates for the VIP business.
We'll have a very disciplined and the motorist expansion sort of plan for the young children edgy.
Education business as that business still will take time to recover from the Covid.
For the VIP business, the 10% level is the the full year, but for Q1.
Notice is from September to November some of our cities is still being impacted by the Covid. So we.
Actual out of centers, mostly in Q2, which will report to you.
The mix.
The quarter.
As we also mentioned that some of our new openings will be flagship centers, which you have.
Visited before.
Lastly, we did as we.
The previously communicated in June.
The COVID-19 to it we looked at our existing portfolio.
Look their performance and positive locations.
Most importantly, whether those non incentives still city an hour of co premium strategy. So we were able to close down about four cities for the VIP business.
What sort of present, which has about.
The 14th 15th learning centers. So we did close some of those strategically to the cloud go Permian strategy. So I'll focus again for the full year will be 10 per cent expansion rate, which is pretty healthy, but more importantly will be at the good adjustments 12, 90% of portfolio for the co Permian strategy.
Your last question regarding balance sheet.
That's correct.
You'll notice all of our cash balance of 1.4 of 5 billion, which is very normal you can move from Q4, a twofold basically without the use of summer season takes Susan to our tier one which is a low season. So it's like the U a decrease from from Q4, but reasonable pretty strong level at 1.4 of five.
Yeah.
The liability I have to clarify our total debt.
<unk> onshore bank long as offshore bank loans offshore C. B that we issued.
About 2.15 billion of RMB. So we're in the slight net debt position, which but we're very comfortable with the other.
Is it.
We don't have that.
And the concern of liquidity.
For the simple fact of the demand for our products very strong as evidenced by the cash sales trend as you know the the tutoring business has a pretty.
Pretty good and strong cash.
Profile or what pattern, which means you can collect tuition not funds and the.
The deliberate the those are classes that it would take from.
The change the cash so so so at the moment with the 1.4 of 5 billion cash and cash equivalents at the hands and with the current strong cash sales trend we're pretty comfortable.
And in fact, we are planning to pay down some of the debt over.
Over the next few quarters as you've probably already noticed that all of the total debt.
It has.
It has come down about 180 million RMB in the interest cost of Q1.
We'll probably continue to do the to do that and the reason we had such a high level of debt because of we discussed earlier is that you've been doing the past the.
Past year, we had to we try to.
Build up our <unk>.
Safety Kyushu of cushion by raise a little bit that day.
Once of the COVID-19, because back then.
Nobody knows how the situation will unfold and more cash reserves will be clip sort of pulling from the business as as the situations.
The become kind of under control and all the cash flow has been robust well suddenly start to reduce the debt positions.
So with that I hope.
Hopefully I answer the question.
Thank you. Thank you very much of this is very clear. Thank you for taking my questions.
Our next question today comes from Sheng Zhong with Morgan Stanley. Please go ahead.
Hi, Good evening. Thank you for taking my question a few questions from me first one niche wanted to follow up Joe Q2 guidance.
So what's the guidance the song to pitching the story, especially you'll see I keep each of its growth outlook in that thought in Q2.
And secondly, thanks.
Thanks for the update on the V. I can at least per one and Oh can you share more can you share some more color on your EBITDA programs student profile.
And the last one want to understand more about your enrollment recovery pace. So normally in the past I think Q1, Oh from via key probably half of them, we actually business the key.
Two once enrollment is normally similarly soft Q4 on the in terms of average student enrolment most of them. So in this in this quarter as to why we see the similar trend. So can you keep some of breakdown the oh.
The I E. The program enrolment number and no more of the IP and.
And help us to understand what's your what's the recovery trend you will see in coming quarters. Thank you.
Got it. Thank you and appreciate your questions. So the first question regarding Q2 guidance. So we've provided guidance of RMB $850 million to $115 million for the fiscal Q2 of 2021 basically between November and.
The February that that represent pretty of strong sequential increase from the current Q1, which had a revenue of RMB only 485 minutes.
So that represents a 24% to 39% increase has all of the also we also noticed that the Q2 of last year, where the revenue of roughly roughly 885 million. So that also represent a pretty good picture of growth from year over year perspective.
Hmm.
So so we provide the best based on all of our current performance that is in the most importantly of.
The strong demand we observed from the from the markets.
In terms of breakdown by business lines, Yes I.
As we as we explained in the Powerpoint presentations, the strong growth will be coming from the VIP business rather than the other two.
So we would expect very strong sequential.
The quarter over quarter of growth of the VIP business in Q2.
Hmm.
So roughly we can provide about 80 per cent of the revenue guidance will be from the VIP that that's up from the 71 per cent in the current Q1 earnings.
And then also the the.
For the all night will be about 3%, which pretty quite predictable. So the remainder will be deep the young children education business.
We said for the full year basis, the guidance will be the revenue would be go beyond the pre COVID-19 level. So as you'll know the noticed there too.
The uncertainty here one is the the COVID-19 recovery of the resurgence of situation, although we have pretty strong a data point showing the that's the gross.
And to is really our.
We are positioning of the bumping our business model to sort of go premier strategies.
Initial results are obviously very encouraging as we explained to us so for the two reasons, we may not provide as usually in the past few years the annual revenue guidance, but we're very confident the number of them.
We'd be above the 4 billion revenue of 2019, the pre COVID-19 level.
So this is the first question of the second question is regarding the elite program.
Profile of our students. So that's great question, we a rash of spend quite some time to do consumer studies. So we for example would be the survey of more than 1000.
It's to students and families.
Before we designed the products.
Industrial we found out a few things day I want to share with you in terms of demographics of grunts demographics, the harvesters of putting elite we of course.
The programs, but typically the affluent middle class families in the major cities of China, They have pretty decent level of income they have.
The company started the families are highly appreciate the.
Education.
They really pay attention that spend time.
With that child education as well in terms of the age the students are typically the middle schools.
The Middle School in China in the high school came from which our latest state of the K 12 profile. The goal obviously is to go to better schools or the idea of your top ranking schools, whether they are the local high public high schools or the top ranking universities here in China. So.
So they are looking for one of the total solutions one stop shop in terms of not only for school score improving children's services, but also the learning ability we call there's power in learning EBITDA, It is which represent the interest of the.
The probability of learning.
But also most importantly is the school admission planning packages as you noticed the.
The China.
Tony it's going through some school admission reforms and the reforms.
Provides some uncertainties and questions and the diet of even for the families.
So that demand will provide a comprehensive.
The programs.
Which address the school admission planning needs.
So and the the sort of the both understand the lots of families the debt.
She is not the you know how cheap the product how the attention of the not really on the cost side, but also but more importantly, the focus on whether you can provide the better teacher.
Your historical results of school improvements the result of school admissions.
The service quality the products well, 90% of environments all of that so the.
After all the studies were designed to sort of coverage you need to VIP program, which will free up very profit per per out to present here, but also very happy to share with you of the initial reads out.
Our Memphis of emphasizing and until you that as you probably also learned from the macro trends of the China. So China has been.
The growing.
Consumption upgrade to the many consumer sector. So some of these sectors.
Is the same in education, if you can provide the such of attractive elite and premium product. We believe the demand will will be tremendous.
As we explained in the previous earnings call once Mark although the market leader in the premium of education in China, We only have nothing three per cent amounts of share of the premium sector is so we are very optimistic for the growth potentials.
We continue to Marsha and develop this new product.
But lastly, I wanted to clarify debt, although we actually program is very important to us, but majority of all the IP business still the the original VIP regular VLT products.
We did also.
Booth on the revamped the product in terms of offerings and teach the profile of money center environments. So as of as a result, we were able to.
Also you could price for the the other the regular people lots of which.
For Q1 the.
Overall the S P of <unk>.
Sales for the VIP business has increased tremendously roughly 24% year over year, So that's a pretty strong.
We explained that we are.
How do the new students coming in for cloud consumption that ASP increase we're turning into revenue base fee increase which will help the margin point that I mentioned earlier.
The second question regarding the elite program profile your last questions regarding the.
Monthly average enrollments.
We were right debt.
We had some.
The decrease from.
Q1, So let me.
The remind the numbers for the variety of business Q1, FY 'twenty one total monthly average enrollments was 76000.
The Q4 was 96000 the he mentioned.
Hum in Q1, FY 'twenty last year, whereas the night 96000 as well.
The reason for the for the decrease I want to clarify because everybody is really at the men who isn't really the oh, the strategically positioned to.
The offering of the one month free for example for the 76 per of Q1, we only had about 8-K.
One of the three students remains as you know, we we stopped selling the the.
But the products are in Q2, FY 'twenty, so as the quarter runs by the because this was one of the students graduate of run off.
For Q4, the 90 6K, I mentioned that there had 21 K one of three of students.
The <unk>.
1990, 6K for Q1 last year.
We had 28 from one or two of the students, but that explains the major of that of decrease of the average enrollments.
I think that's on two other reasons behind the glucose one.
Normally as we move from Q4 of the summer seasons of Q1, the the low season, we have slight decrease of our student base, which is very normal.
<unk>.
And the other reason is really the Covid impact we mentioned debt during the Covid two of the from February to June July we had a loss of window because the last window from the students acquisitions, because we had the learning center shutdown the across the country. So we are gradually catching up.
As you see the cash sales numbers have been growing pretty strongly so but it will take a little bit time for our newest of most of its coming to take classes.
But let me out you know the.
The other true I think Americans.
None of the students enrollments as really the the launch of elite the extra products as we extend the earlier, we had a strong sales and market feedback on the media, we actually product. So as this statistic of product comes in and we're gradually replace the one of three products, which is really all the strategic purpose here.
Lots of it but most importantly.
The increase so although we had a little bit the decrease on a day.
Moments of numbers in Q1, but all of our ESP has been resumed growth right from the VIP business minorities of about 10% increase currently and I mentioned that 24% ASP increase for the cash sales, which we're gradually turning into revenue as the increase in the few quarters. So.
That will mitigate the.
The the the numbers of as well.
Yeah.
Yeah with that price to quit.
Yeah.
In net.
Hmm.
Apologies, ladies and gentlemen, if you would like to ask a question. Please press Star then one.
Today's next question comes from Joy Wei with interest.
Any such research. Please go ahead.
Thank you.
I have a question regarding the long term margin.
We understand that the.
The go premium strategy, well, helping improve the net lifetime operating margin, but do you have any quantitative color.
Considering the price increase and also a teacher of cost inflation et cetera. All of these combined and how and when will that be reviewed all of the company's financials in the following period. Thank you.
Okay.
Yep.
Thank you for the question I think we have talked a lot about margin today, we mentioned the topline will recover of strong growth and then the ASP increase.
Of course of reflecting the revenue in the Twentyish percentage growth year over year, which we talked about.
Oh, the new launch of the unit, we have true products of which we explained earlier the last earnings call.
You put the breaching the better.
Peter B profitability profiles.
But the but I Wanna.
It will be hard to predict the timing of when the margin group will return to what level, but in general to pointed out when the share with the number one.
Given all of these positive developments we mentioned.
We have two broad has a better margin profile, we also mentioned debt.
At the a S. P increases we study all of the unique items, which are we have demonstrated.
In the in the table on the pulp Powerpoint presentation.
That's very clear that gradually will return back to the the probability that we had before the.
The people of COVID-19, and also before the period when we hedge our rapid growth.
But also very important the other driver is.
The ramp up of our learning centers, we kept the providing the the rump up a record.
In details from the top 11 cities Shanghai, Shanghai, and then therefore, the vintages of learning centers both of the ramp up of all the generally on track right. So as you. If you follow all of our performance. The last two years you will notice that we had.
Periods of <unk>.
But can you really accelerating our capacity expansion in FY 18, or 2019. So this learning center was.
In the year, one and year two performance more money they don't have a good.
Probability profile, but as we roll over let's say of run Buck would.
Would you have proven the powerpoints that will turn into a strong.
Double digit Oh.
Operating margin profile philosophy to notice that we are very clear we want to focus on top 20 cities for scale the fault.
Better.
Colony of all scales. So this will also help US you know as I mentioned in the earnings call earlier that we have closed on four cities the remote area of China. So that we can more focus on the most developed top 20 cities. This focus will help of the margin as well.
So.
So with that.
Well it'd be hard to predict the win but but we're very confident and optimistic about the margin recovery profiles, you'll notice that as we mentioned in even in the coming Q2 of FY 'twenty one.
Thank you for the question again.
Yeah.
Yeah.
Thank you ladies and gentlemen, this concludes our question and answer session I would like to.
Turn the conference back over to the snow for final remarks.
Thank you operator.
In closing on behalf of all of the entire management team, we'd like to thank you again for your participation in today's call. If you have any for the inquiries in the future. Please feel free to contact US now you may disconnect. Thank you.
Yeah.
Thank you.
Yeah.
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