Q4 2020 Puxin Ltd Earnings Call
Good day and welcome to the person Ltd fourth quarter and fiscal year 2020 earnings Conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.
After todays presentation, there will be and opportunity to ask questions and ask a question you May press star.
And then one on your touch downtown the wood.
Jos on the question to you. Please press Star then two.
Please note this event is being recorded.
And I'd like to turn the conference over to the audio on IR Director. Please go ahead.
Thank you Anita Hello, everyone and thanks for joining for since the first quarter and fiscal year, 2020 earnings conference call by the way off the introduction of South Sheila Investor Relations director at puts on the Manhattan and we appreciate the time and ongoing interest and pushing the Communist results were released earlier today.
And are available on how companies the IR website, and I, our dog T X and y dotcom.
On the call today, we have Mitchell you on those shops, the comedies founder and chairman and Chief Executive Officer, and meet our per well the comedy Chief Financial Officer, Mr. Sha will give us a quick the introduction of the company's business operations and highlights followed by Mr. Wong, who will go through the financials and guidance and they will.
Most of the available to Ontario patch and joined the Q&A session that follows.
Other reminds you that this call may contain forward looking statements made and are the safe Harbor provision of the private Securities Litigation Reform Act of 1995.
Statements are based on management's current expectations and current market conditions and the related to the events that involve known and unknown risks uncertainties and other factors all of them.
All of which are difficult to predict and may and many of which are beyond the company's control, which may cause the company's actual results performance or achievements to differ materially from those and the forward looking statements.
For information regarding these and other risks uncertainties and factors is included in the company's filings with the U S 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 as required by law.
And now I'll turn the call over to Mr Shah.
Mr. Sha will give his remarks in Chinese and weak Jessie Zheng from ICA, Oh, I, often agency will translate for him in English and Mr. Sha. Please go ahead.
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Thank you, ladies and gentlemen, good evening and good morning, and for you. All thank you for joining pushing Ltd fourth other and fiscal year 2020 earnings conference call in the fourth quarter of 2020 COVID-19 outbreak we found it in some cities, but what's the eventually effectively controlled by the Gulf of.
And.
In line with local epidemic prevention measures, we had two once again temporarily closed some of our learning centers and moved of course is on line.
Ensure the safety and health of our students and staff member, we have strengthened epidemic prevention and health measures in all of the learning centers.
Looking back on 'twenty, and 'twenty well of pushing its total revenue was were impacted by the pandemic.
Oh for K 12 to 20 of services, excluding pushing online school still achieved a steady growth what's the year over year increase of eight 9% in the revenues.
During 'twenty or 'twenty, pushing and have strategically focused on kato of offline to between the raise it by increasing the investment in R&D for products designed for elementary School and Junior High School students.
For instance, we formed a dedicated animation product team tasked with the mission to unleash the teaching materials for our elementary school students and to the inquiries and customer retention rates through enhancing and students' interest in learning.
And one where she and continue to further develop the online merge offline Oh I'm old model.
The Oh I'm on the model has allowed us to.
Seamlessly integrate offline and online can you talk to what kind of services to provide top notch and services that improve the quality of the teaching.
And customer satisfaction rate.
Pushes on wavering commitment of two of the K 12 children services and the effective cost control measures have empowered us to weather the storm in 'twenty or 'twenty.
And if anything from the exceptional operational capabilities of our P. B S system. The total operating expenses in 2020 fell 17.2% on a year over year basis.
Net revenues of K 12 children and services, excluding pushing the online school of Chi.
Chiefs and without it and 19 9 million of RMB in 2020.
We also made a positive progress and address the net loss attributable to pushing Ltd of K 12, tutoring services, excluding pushy on lines to achieving true Hungary, and 12 million RMB of substantial 130.
So the 137.3 per cent year over year increase.
The business the business of studying all of broad children and services has not yet fully recovered with RMB of 697.6, meaning in that revenue and 'twenty or 'twenty.
Our year over year decrease of 39, 9% from RMB 1160 point and 1 million in 'twenty and 19.
What's the worst threat of Covid, 19, vaccine Asia, and China and overseas as well as the anticipation of global economy recovery.
We expect the study of a broad market rebound in the coming years.
Moving forward in 'twenty or 'twenty, one what sort of we bought off the economy.
The question is confident to achieve of high policy growth in the year.
And the near term, we will continue to focus on cost control and margin improvement target K 12 tutoring services at the core of our growth strategy implement the Oh I'm. Most Reits are you more efficiently and the improved growth and profitability in order to deliver of long term subset of sustainable shareholder value.
Now I will hand, the call over to Mr. Wang Our CFO, who will walk you through all of the financial details for.
For America.
And.
Thank you.
Hello, ladies and gentlemen.
Please be reminded me of all amongst hoped and here will be RMB and the old percentage increases will be on the year over year basis, unless otherwise stated the.
Ultimately splurge of earnings release for detailed information of the applicant.
And the financial performance on a year over year basis.
And the software the financial results for the fourth quarter and <unk> 20.
Net revenues were at the.
$118 3 million a decrease of $16 four per cent year over year.
This decrease was primarily due to a decrease of student enrollment from Hamzah and the 72950 and the fourth quarter of 2019, two instead of 163000.
And so would you say the things here.
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Net revenues of the pay to tell the truth and services.
And with Cushing on the high school.
The 546 points of southern Midland.
The increase of five 3% from 500, and the 77 five minutes and bulk part of of 2019.
This decrease was primarily driven by a decrease of student loans, which was caused by the rebounded COVID-19 outbreak and some figures.
Gross revenue has decreased by 33 per cent to 400 and the full plant for Mellon.
Hi, and thank you and a decrease of staff costs, which reflect the decreased demand for studying blocks of which is attributable to the COVID-19 pandemic.
Cost of revenues.
And share based compensation expenses decreased by starting on 3% to $403 nine minutes.
Yes.
Gross profit was three.
330, and $13 nine melon a day.
Kris of 20.1 percentage of year over year.
Gross margin was $43 seven per cent compared to the $45 seven per cent for the same peer range in 2019.
Yeah.
Total operating expenses decreased by seven five per cent and year over year two of 450 <unk> on to a minute.
So I think expenses decreased by $7 six per cent year on year too.
299 Miller.
Selling expenses, excluding share based compensation expenses decreased by seven 2% to 287 non Miller.
The primary our primary of decreasing.
Due to the Christmas marketing expenses, and marketing and stock compensation.
General and administrative expenses decreased by seven 4% to $169 3 million.
General and administrative expenses, excluding share based compensation expenses decreased by $6 seven per cent to walk to 166 on finding all of them.
The decreases were primarily due to get crazy and stock compensation and the daily operating expenses.
Total share based compensation expenses allocated to related costs and revenues and operating expenses.
The increased by $34 one per cent to seats on for a minute.
The decrease was primarily due to a decrease of the number of options. That's the the fourth quarter 2020 compared to the same share rate of 2019.
Or put him on loss was 100, and the 36, one and three minutes.
Compared to 93 point in melanoma, and the fourth quarter and of 2019.
Operating margin was negative 19% in the fourth quarter of between countries.
Compared to net.
And nine 9% for the same share in 2019.
Adjusted operating loss was 100, and because of $9 9 million compared to $84, two mellon and the fourth quarter 2019 and.
Adjusted operating margin was negative $18, one per cent compared connecting the $9 99, 8% and the same period of the prior year.
Net loss attributable to push and limited it was 68 and melon and <unk>.
<unk> of 36, 8% year over year.
Basic and diluted net loss per ads.
To be able to push and Ltd.
With Europe on Saturday.
And the eight compared to $1 two eight.
During the same periods in the 19.
Adjusted net loss attributable to push and Ltd.
62 for millet and increase of $32 five per cent year over year.
And just the basic and diluted net loss per and yes. It should be able to close the ltd with zero point 17, compared to one point of view of things deal and the same period of the 2019.
EBITDA was negative $24 1 million compared to net this $68 2 million and the borgwarner between the 19th.
EBITDA margin was negative $3 for free.
And $3 four per cent in the fourth quarter of of 'twenty 'twenty compared for negative seven 9% and the same period 2019.
Adjusted EBITDA was negative $17 8 million compared to negative <unk> <unk>.
One 9 million in the fourth quarter of just the 19th.
Adjusted EBITDA margin was negative two five per cent compared from negative six point of zero percent interest and here in 2019.
And now for the financial results for the fiscal year 2020.
Net revenue this work two.
2000 <unk>.
103, 9 million a decrease of <unk>.
<unk> four per cent year over year.
This decrease was the primary due to a decrease in net revenues from our study abroad business.
And to be able to the out of loose impacts of the global COVID-19 pandemic.
This decrease was partially offset by the steady growth of our pay for them to tell.
All of the future and services.
Of course, and by the increase and student enrollments.
Net revenues of the case and tell the truth of the services excluding for some online school.
Increased eight point and 9% to 2019 nine point of zero Mellon from $1927 4 million in 2019.
Net revenues on pay for tell the truth and services, excluding of course and online school.
And as a percentage of a true for revenue increased to 70 213 per cent from 61% interest and 19.
Cost of revenues decreased by four three per cent year over year of two $1558 six of them.
Primarily due to a decrease of staff costs, which reflected the decrease demand for study abroad services of people through the COVID-19 pandemic.
Cost of the revenues is.
Clothing share based compensation expenses.
Kris by $4 two per cent.
All of the year to one of all on.
On the $56 3 million.
Gross profit was 1000 for the hundreds of $45 for a minute.
The increase of eight 8% helium year over year.
Sure.
Gross margin was 46, 3%.
Compared to the 47 five per cent in 2019.
Total operating expenses decreased by 17, 2% year over year to $1517 seven minutes.
Selling expenses decreased by three great per cent year over year two of 1048 on finally on it.
Selling expenses, excluding share based compensation expenses decreased by $2 five per cent year over year to $1035 two of them.
General and administrative expenses decreased by 37, 3% year over year to 406 nine for two minutes.
General and administrative expenses, excluding share based compensation expenses decreased by 16.0 per cent year over year to $456 7 million.
The total share based compensation expenses allocated to related of course revenues and operating expenses.
Despite a $2 80.
And 87, 8% year over year, two and 380 of minimum.
Operating loss decreased by 50 180.
The one eight per cent.
Two 172 points formula and from $357 5 million and in 2019.
Operating margin was negative five 9% in 2020 compared to negative the 11, 5% and 2019.
Adjusted operating margin was negative 550 of person and.
The negative $4 one per cent for the same periods of 2019.
Net loss attributable of course, and lemonade plays and $32 2 million compared to them for.
$580 5 million in 2019.
This decrease was primarily driven by a decrease of these share based compensation expenses.
Loss on on changes in fair value of the Arabian shield liabilities and the other operational costs.
And by the coding of the exemptions of social insurance and valley and tax and also the gain on disposal of subsidiaries and the year 2020.
Basic and diluted net income per ads attributable to put your Ltd was zero point, we fix.
Compared to 6.06 during the same period of 2019.
Adjusted net income of trigger of pushing the limit it was for.
Pinpoint southern Midland.
And to adjusted net loss of two the book of.
$183 five of them for the same period and 15 19.
The adjusted basic and diluted net income per eds.
Putting the lemonade were zero and one nine.
Compared to negative.
True.
And one for you and the same period of 2019.
Adjusted net income attributable to which and limited of case and how children and services.
Excluding the <unk> online school.
200 and Chow.
Zero Mellon and increase of 137 per cent for.
18, nine points for the mill and in 2019.
EBITDA was $121 3 million compared connected for 100, and the $49 one and in 2019.
EBITDA margin was for one two per cent in 2020 compared to negative 11, 2% in the same here, Rick and 2019.
Adjusted EBITDA was $117 2 million compared to negative.
<unk> 14.1 of them in 2019.
Adjusted EBITDA margin was one of five nine and person come back negative zero and one five per cent in the sense here of it in 2019.
Next well move onto the balance sheet.
And for the December 31, 2020 than the company had two low cash and cash equivalents and the.
The portion of the restricted cash of.
500, and a 63.0 of millen compared of $606 3 million as of December 31019.
The current portion of the restricted cash consists of prime the deposits with the Chinese commercial banks as collateral for our of our bank borrowings within one year of churn.
Finally for guidance for the fifth quarter of in 2020 one.
He's on a deformation of available as of the date of this press release the.
And the expense expects net revenues to be between $683 7 million and 721 3 million, which represents a decrease of 4% to 9% year over year the.
This forecast reflects the company's current and preliminary views on the market and operational conditions, which.
And subject to change.
This concludes our prepared remarks, and now turn the call over to the operator and open the call up for Q&A. Operator, we are ready to take questions. Thank you.
Thank you, but it'll and <unk>.
And I'll begin the question and answer session to ask the question.
You May press Star One Star then one on your touch downtown if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw from the question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
The first question today comes from Mark Li with Citi. Please go ahead.
Hey Shah for Al Walsh of clients on the call. It a wash of watch the market and they go away.
For sure did you go can I'm sure on the auditing our unions are true.
And does your case shark and Nick just kind of why is it at the end of the monkey shares of Chicago and Seattle.
And I'm sure. So it isn't just for that but it seems like.
It's all of you and checking them and try the just yet for sure just for full copy of your and should they don't.
And so for all the true kits.
And the unfortunate and wallet share.
Oh and interest of Macau.
Let me translate my question sorry for two questions. The first one is the could you share more color on the 2021 the outlook and also do.
Do you see and updates all of the latest the aging.
Teaching of.
Flying off the sports authority of policy and.
Back to you and how is your strategy. Thank you.
Oh, yeah. Thank you Mark for for the two questions for the first question typically we do not give the yearly guidance for for for the topline are either for the bottom line, but I, yeah, I will give some color.
On the on.
On the top line of a case of of Tav and the other business units within the group and.
For the guidance, what's how far off the business and will be the core again, it will be the core business of pushing in 2021.
As.
You mean, how well known we we only one acquisition in the year of <unk>. So I'm looking at the 2021 and the case towards health business.
We expect them the primary driver of the day, the topline for pay for that business will be the.
Again in growth.
All of our current of our case would help a section.
So.
We are looking on a combination of on increased operating efficiency of the car and their centers and some.
The physical expansion with within the cities, we have the well established all the business.
So yes, we are looking at a.
Solid organic growth, we are not going to give the guidance of the or the yearly growth rate, but we are looking at the solid.
Organic growth of.
For the case would help business and as to the study abroad session. We are.
Now we are quite confident that the business is going to rebound with the the current towards COVID-19 viruses are in those developed countries like calling and other states U K and Canada, Australia. So we expect.
The study abroad business to rebound.
Probably in the second quarter in the second quarter of this year.
So well.
Well share will share more color on on the on the top of line of this business are you know what next earnings release.
And as to the second.
Question.
For the and that the that the.
And part of the the current policy firstly on.
We have Oh, we have half the experiences of and industrial regulatory movement of for example in the ear opinion T AR aging with the first quarter of 2019.
And I have to I have two points to share with you firstly on.
And some part of that.
Public company.
We are we.
We aim at.
Increasing the compliance of the the company.
Which.
I I believe will be a big a bigger impact.
For those of small and medium of size you know on players and in the industry.
Secondly.
We are we believe that our.
With the the regulatory you know policies.
The.
It will be in the favor of the larger players as the demand is still there and the the.
The effective supply is kind of a decrease.
So.
We we are expecting a short term.
The impact from this from the policies, but in the.
The medium term and long term, we are expecting a solid organic growth for the case of People's health business after the regulation and and policies.
Thank you.
Thank you. So may I have a quick follow up is so for the flying the tutoring and Beijing. So.
And the timeframe or color of wet weather.
Assume the offline tutoring.
Okay.
Well as far as I know I'm.
Posted and well be well be ready to re opening of of.
Learning centers.
Quite recently.
Well, yes, yes of course, we will yeah, we won't have a balance to be in full compliance with the.
The newly released our regulations.
Yeah.
But I believe.
Part of the learning centers in Beijing will be the open very soon.
Got it very helpful. Thank you.
Thank you.
The next question comes from Natalie <unk> with Haitong International. Please go ahead.
Yes.
Thanks This is free.
On behalf of not only of thanks management for taking my question. So I guess, that's part of question regarding your sales marketing strategy could you share with us more kind of all of US here are you at all the search market is tried and true this year on the west channels are you going to get all the more folks are spending on the.
Could you also share with us on what I tried to talk about share.
And I thought it would be very helpful. So let me translate the questions.
And then sort of how can share just short of she went on what kind of change I always try acquaintance I'm and senior and you're good at and so total for the U.
G of Fox, a bulk of triage telephone and they search for your dog you'd see a day and show you started come into the center one of them, Ohio and he said he called me Oh, Yeah sounds from Joe you Shockwave and switching and we're making sure all of the Skus signs of Iowa, and you've got the outside of the tissue tissue.
Okay.
Thank you for question per the and for the marketing and and the cells are channels and expenses I I have two points to share with you here.
And firstly.
And as the other core business of Cushing and the pace towards how section.
All of it will be the and will be our core for the for the coming years and.
We will phase of our business offline.
So we will move on.
Invest heavily on the internal.
Research and development and as Mr. Sha mentioned just now.
So.
We will not rely heavily on on.
And those marketing and the sales instead, we will focus on the on the poly Chi of other programs and I'm proud of dogs and.
And as to the per student cost of acquisition cost, we believe and the the branding and quality of pushing on.
The increase year over year, the marketing and sales expenses are on per student will be steadily decreasing.
And for the channels.
Oh, well and for the cost of Oh, the trend of the skewed and acquisition of.
On.
The cost of good acquisition fan we.
And do not see and.
And increase.
In the marketing and the sales expenses.
Due to the to the competition.
Instead, we believe that and the the market is still a highly fragmented and.
And on the over 90% of the market shares are still in the smaller and mid sized players.
So in the summer.
And so some X and we can say.
Your marketing and the sales expenses rely more heavily on.
On the poly Chi of your teaching and services and teach and weighted services instead of the the market competition.
So thank you.
And it's been for us.
During the question.
That's just the have a follow up question regarding your share of expenses.
Eastern Europe, and even closed about 50% quarter over quarter Kietrice aircrafts of understand why you've searched Oh of course of all of the cause of basis. Thank you.
Okay, and that's the primary due to the increase easy and the quarterly share based compensations and AR and the bonus.
Bonuses and the sales and related expenditures.
The expenditures.
So yeah, that's the the primary reason.
Okay.
And that's kind of helpful. Thank.
Thank you.
Thank you.
The next question comes from E on Gin with Penguin. Please go ahead.
Paul I don't think of the silo.
The other piece on the younger they go what are the only didn't neither of the tool.
And I got that wasn't true.
And this is being along the years old woman, who was then tie the evening. Okay. So all of you like kind of a QC is the case all of you with the EMA.
Neither on the the.
The D and the whole Yoghurt, Google and then pardon me the Lucia you wouldn't need any type of kind of.
Are you a junior so easy he jumps on the yeah my opinion like handle lots of good Germany off on here so.
And so you just for you on Virginia and pushes on the on the Hood Jim on the call. This is Jean Paul what's the cause of sudden shipyard on the beyond that and the milken in switching and built out.
And the Nissan and the Belmond.
And then maybe another of the only thing he had the tissue.
Oh sure on.
On this day event has two questions. The first one is.
How is the profitability for the K 12 business and the fourth quarter and the second question is.
Q2 of the COVID-19 situation. The study abroad business has got a greatly impacted by the COVID-19 and.
And.
And.
Yeah.
The current business development of these sector and one day they reached the breakeven point for this year.
Okay.
And he said hold on.
Low partly offsetting the question as the two of the impact of COVID-19 on the study abroad.
Based on his section firstly as of the the the you know the vaccine process is still underway. So we are still on spraying experiencing a year you know our yearly.
Kris.
In the first quarter of 2019 2021 comparative of 2020 are around the 30% in the in the sector.
But we are quite confident as a way of content and the vaccines.
Rollout in the developed countries of course, and including China those of travel ban and the you know.
All of the restrictions will be removed by.
By the end of the second quarter or in the early on.
And in the early time after the third quarter. So we are looking and G E solid rebounding a of the study abroad business by the end of the second quarter or in the and you know already and first quarter.
So that's the of expectation for a stable business in the coming two quarters.
And the payoffs and pay the first question as do the case would help profitability in the Q for.
On the.
The the pace of hotel business and even the Kale for was in loss of.
Yeah, and again, primarily due to the you know.
So the resting in fact of the COVID-19, as we have several cities.
Who are who were negatively impacted by the you know the rebounding of COVID-19 and.
In the quarter for 2020 so for.
For the fourth quarter of 'twenty.
The 2020 of the.
They switch how old P March and was.
Okay.
And $8 for and active.
Hum.
Yeah, but for the <unk>.
And all year the pace of Chow.
Oh P margin, whereas for 5%.
And we expect that trend to go to.
To go on and Oh and in the and this year.
Thank you.
Yeah.
Yeah.
Hershey ADR.
Yeah.
Again, if you have a question. Please press Star then one.
And as there appears to be no further questions I would like to turn the conference back over to Naughty along for any closing remarks.
Yes.
Thank you Anita and closing on behalf of skin care management and came up with him I'd like to thank you again for your participation on today's call.
And further inquiries and the future. Please feel free to contact us and I are at P and K Whitehouse Com of course, and I think the Asia Dot com. Thank you.
Okay.
The conference has now concluded. Thank you for attending today's presentation, you may now of that.