Q4 2020 RYB Education Inc Earnings Call
Hello, Ladies and gentlemen, thank you for standing by for all of IV Education, Inc. 's fourth quarter and full year 'twenty 'twenty earnings Conference call.
At this time, all participants are in listen only mode.
After managements prepared remarks, there will be a question and answer session.
Today's conference call is being recorded I would now turn the call over to your House Serena Investor Relations manager for the company. Please go ahead sorry.
Thank you, Ken and Hello to everybody on today's call with me today are Ms. Young I shared our co founder director and CEO and Mr. Hao GUL our CFO.
Our earnings press release was issued earlier today through the Newswire services and is also posted on our Investor Relations website IR Dot are I E B, a b y dotcom.
On our website you will also find a webcast replay of today's call.
Please note that the discussion today will contain forward looking statements made under the safe Harbor provision of the U S. Private Securities Litigation Reform Act of 1995.
Forward looking statements involve inherent risks and uncertainties as such the company's actual results may be materially different from the views expressed today.
Further information regarding these and other risks and uncertainties is included in the company's annual report on form 20-F for the physical year ended December 31st 2019, and other filings as filed with the U S Securities and Exchange Commission. The company does not assume any obligation to update any forward looking statements, except as required under <unk>.
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During this call today management will also discuss certain unaudited non-GAAP financial measures for informational purposes only the.
Company's fourth quarter and full year 'twenty 'twenty earnings press release contains a reconciliation of the unaudited non-GAAP measures purity and honestly the most directly comparable GAAP measures.
Now I'll turn the call to make sure the her to take us through a review of the fourth quarter and provide an update on the business.
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Thank you to all of you who have joined US today I'll begin by reviewing our business and operating results for the fourth quarter and full year of 'twenty. 'twenty, then our CFO, Chris will follow with the more detailed review of the financials.
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I'm glad you reported that all of our directly operated kindergartens in China, and Singapore, we're running under normal condition with no school by school closures in the fourth quarter of 2020.
Thanks to the Doctor of containment of the spread of COVID-19 in China, and Singapore are you talked of the enrollment strategy and our dedicated preparation for the reopening of our facilities. The number of students enrolled in our directly operated kindergartens in China grew from 25808 of the end of 'twenty Nike and true.
28648 at the end of 2020 on approximately 11% increase year over year. Similarly, we see a 7% increase in the number of students enrolled at our facilities in Singapore compared to the same period of last year.
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So welcome back our students and make them feel comfortable at kindergarten, we hosted the various activities, including drawing contact sports events to help them adapt to kindergarten environment and got back to the norm with our teachers and fellow students.
Our directly operated kindergartens, the continuing to operate with COVID-19 protocols in place with a focus on the in house cleaning and strict hygienic practices as the.
The health and wellbeing of students and staff members remains our top priority.
We made sure our students' attendance was protected by consistent implementation of layer of preventative measures. For example, we've called all of our students to strictly fall out of the southern stopped true Washington procedures.
While we are encouraged by the 100% of resumption of right off of our directly operated kindergartens in the fourth quarter, given the uncertainties related to COVID-19, and its previous flare ups. We continue to stay alert for any changes and remain active and flexible in our responses and the corresponding measures.
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Most of our directly operated kindergartens, we continued to implement a rolling the room in the strategy we have.
Post the offline onsite visits by appointment and have online promotions, while keeping our timely and effective communication with parents to either concern if there are any.
As I've already mentioned, we have achieved our circle of 11% increase in the number of students enrolled in our directly operated kindergartens in China at the end of the fourth quarter compared to the same period of last year, and a 7% increase of that in Singapore.
Some of the end of December of 2020, the number of students who had registered with us but did not commence kindergarten after paying the fee was 2108.
All of the have reflected the company's advanced enrolment of the results and parents recognition of our services.
We will continue to keep our open dialogue with the with the parents taking in their feedback to make improvements to our operations and services, while keeping up with our current rolling of Roman practices, especially and those in the ramp up phase.
We stay committed to providing quality early education and are looking forward to providing our services to more students and families.
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Now moving onto our franchise play and learn center of business as mentioned in the previous quarter. One of the 90% of the franchise play and learn center of has resumed normal operations at the end of the third quarter of 2020.
However, during the fourth quarter, there were of surging recurrences of COVID-19 in some provinces in China.
Huh franchise play and learn centers in those regions temporarily suspended operations.
The end of the fourth quarter of 2020, approximately 80% of upper of franchise play and learn centers, where box of normal operations again.
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The COVID-19 of recurrences, and the seasonality factors, causing some impact on new franchisees signing in the fourth quarter of 2020.
With the got the control of the COVID-19, and the pickup in the economic recovery the concerns of potential franchisees will gradually ease.
Following that we look forward to a pickup in the number of new signings of new openings of those already in the pipeline we.
We have increased the number of in person training events and investment promotions increased marketing efforts in attracting new franchisees.
Our R&D team worked on upgrading the content for play and learn centers designing new courses and extending other product offerings, including teaching AIDS, which I'll lay a good base for future product sales.
Keeping the parents needs and willingness for their children's education in mind, we're confident that through the company's close relationship with existing franchisees and the strong marketing not work, we will be able to enhance our services and expanded the variety of our product has to achieve further growth in play of nursing her business.
Parents demand for good early education for their children is still an important factor contributing to the future development of the industry and it will also be an important driving force for business growth.
The company's efforts in preschool education services and resources over the years, we believe that franchise play and learn from our business will be back on track in the coming quarters.
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Lastly, we will further improve the management service system off directly operated kindergartens roll out of the trial management system for the play on nurse, the nurse and provide parents, but more of extended services and at home content.
All of our directly operated kindergartens have onboard of kindergarten all of my management and service the system with the aim of enhancing headquarters management of directly operated kindergartens and improving the operational efficiency and service quality of those facilities.
Furthering the improving the function of interaction of the system, we won't try to introduce the management systems. The other kindergarten operators in the future.
In the fourth quarter of 'twenty 'twenty, our management system for playing of alerts and or what's done developed.
And Ah pilot rollout will start it in some directly operated play of nurse enters the system.
Has multiple management modules, such as marketing sales management educational administration data management membership management and mobile office and.
The effective tool to help the play of nursing or achieve centered on operations and refined management.
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While the COVID-19 pandemic has brought upon challenges. It has also brought along new opportunities and the increased demands for more diversified early education.
The order to meet the demand will continue to improve our offerings and continue to provide students and parents with diversified online education content and services will continue to deliver quality of service offline and at the same time accelerate our digitalization process and achieve better online and offline integration to eventually.
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Given the Twenty-twenty the COVID-19 pandemic brought upon tremendous challenges soon.
Since the outbreak and the government undertook a series of stringent restrictions and measures aiming to contain the pandemic.
In accordance with this measures and requirements, we promptly adjusted our operations.
All of the heart of employees and staff members rose to the challenges and worked diligently during the outbreaks and in the post pandemic landscape.
Among other things never we never wavering in our dedication to early childhood education.
Looking ahead, we will continue to stay on track and deliver integrated quality education services and products to our students and families. As we look forward to the rest of 'twenty 'twenty. One we firmly believe in our long term growth potential I look forward to regaining momentum one of the operations across all of our business fully stabilized.
Despite fluid changes in market conditions, our commitment to creating and bringing value to students families and society remains firm.
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With that I'll turn it over to our CFO, Chris to provide highlights of fourth quarter and full year of 'twenty 'twenty financial results.
Okay. Thank you Grace and the Serena.
Now I'll go through our fourth quarter and full year financial results.
Please also refer to the earnings press release that we posted on our Investor Relations website for a complete review of our of our financial performance.
With the operations of recovery across the board in the fourth quarter, our revenues return to similar levels close to the same period in 2019.
As we continue to convert some of our kindergartens to be coming close of one.
There was a slight decrease in revenues from our directly operated kindergarten compared to the same period of last year.
At the same time, but we see a meaningful increase in our profit margins of the directly operated facilities as well.
Looking back at 2020 of Tucson, Our 2019, the COVID-19 pandemic had ongoing impasse on the Companys business operations for more than half of year.
By cutting expenses and reducing costs of reasonably streaming line streamlining team structure and adjusting personnel, we successfully navigated through the challenges brought by the COVID-19, pandemic and maintained relatively healthy cash position by the end of the year 2020.
In 2021, we will continue to promote streamline and refine the operations focusing on providing quality education and improving the company's profitability.
We also strengthened our capabilities and providing management and operational services to third party facility operators and ultimately to have increased increasingly diversified revenue sources by creating a unique online merge offline business model.
Now I will go through our fourth quarter financials briefly.
Our net revenues decreased by seven 2% to $47 1 million from $50 7 million for the fourth quarter of 2019.
Service revenues for the quarter decrease the by a three 7% to $44 9 million.
The decrease was primarily caused by smaller initial franchise fee and training fees from franchisees, which is due to the slow recovery of the franchise business from the COVID-19 pandemic.
For the same reason product revenues for the fourth quarter decrease the by 47, 7% to $2 1 million from $4 1 million for the same quarter in 2019.
Which is primarily due to a decrease in the amount of merchandise that we sold through our franchise network.
Cost of revenues for the third quarter was $35 1 million U S dollars, which is of 14% decrease from $40 9 million over the same period of last year.
Cost of revenue support services for the fourth quarter of 2020 was $33 7 million.
Impaired two of $39 1 million for the same quarter in 2019.
The decrease was primarily due to the decrease in non staff compensation and our direct cost of the kind of directly operated kindergarten business.
Cost of products revenues for the fourth quarter was $1 4 million compared with $1 8 million for the same quarter last year.
The decrease was generally in line with the trend in our product revenues.
Gross profit for the fourth quarter increased by 21% to $11 9 million compared with $9 9 million for the same quarter in 2019.
Gross margin was 25, 3% compared with 19, 4% for the same quarter last year.
Total operating expenses were $10 8 million compared with the $6 5 million for the same quarter of 2019.
Selling expenses for the fourth quarter was 0.4 million compared with 0.7 million for the same quarter last year.
General and administrative expenses were $8 2 million, which is the 40% of increase from the $5 9 million last year.
The increase in the G&A expenses was primarily due to a one off credit loss of $3 8 million, while the other receivables and loan receivable the.
Share based compensation included in our G&A expenses, whereas the <unk> 7 million for the quarter.
We also recorded an impairment loss on long lived assets in the amount of two point of $1 million for the quarter relating to the intangible assets of the acquired the business as.
The leasehold improvement of the few directly operated facilities.
Operating income for the quarter was $1 2 million compared with $3 3 million for the same quarter last year a day.
Just at the operating income was $1 9 million for the fourth quarter compared with the $4 2 million over the same quarter of last year.
Net income attributable to ordinary shareholders of <unk> for the quarter was $9 3 million compared with a zero point of 2 million for the same quarter last year.
On the adjusted basis, the net income attributable to the ordinary shareholders of the company.
Which where we exclude the impact of 0.7 million of share based compensation expense.
Was $10 million, which is compared to the one point of 1 million for the same quarter of last year.
Okay.
In terms of EBITDA for the fourth quarter, we recorded an EBITDA of $5 2 million compared with $6 7 million for the same quarter of last year.
Now I'll move on to the unaudited 2024 year financials.
Net revenue for the full year were 100 of $9 7 million compared with the $182 3 million for 2000 and the 19th.
Services revenues for 2020 were 103 of <unk> 1 million compared with $166 2 million last year.
The decrease was primarily due to the temporary closure of our facilities in China caused by the COVID-19 pandemic during most of the first nine months period.
Products revenues for the full year were $6 6 million compared with the $16 1 million for last year.
This is due to a decrease in the amount of the merchandise that we sold through the company's franchise network during the COVID-19 pandemic impacted period.
Cost of revenue for 2020 was $116 9 million compared with $155 5 million for 2019.
Cost of revenues for the full year was $113 3 million compared with $147 7 million for 2019.
The decrease was primarily due to the decrease in staff compensation and decrease the direct cost of our directly operated kindergarten business.
Cost of products revenues for this year was $3 6 million compared with $7 9 million for 2019.
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Gross loss for the full year of 2022, the 2020 was $7 2 million.
Compared to a gross profit of $26 7 million in 2019.
Total operating expenses for the full year were $36 2 million compared with a $26 6 million for 2019.
Selling expenses were $1 3 million this year compared with $2 8 million last year.
We also had a total of $24 3 million four of general and admin expenses in 2020, compared with the $23 8 million for 2019 the.
The increase was primarily due to a one off credit loss that we mentioned in the amount of $4 3 million for other receivables and loan receivables incurred in the fourth quarter.
And it was also partially offset by the decrease in administrative expenses as a result of the cost control measures to combat the challenges brought by the COVID-19.
The impairment loss on goodwill was $8 5 million during 2020 compared with zero for 2019.
Actually due to the impact of the COVID-19 on our business operations.
The company concluded that and the impairment indicator existed at the end of the first quarter.
The fair value of certain reporting units are primarily those with new initiatives, where less than their carrying value.
And as a result of the impairment assessment, we determined that there was an impairment loss on goodwill of $8 5 million at the end of the first quarter in 2020.
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The company also performed impairment analysis at the end of the fourth quarter and concluded that no additional impairment losses required as of the end of 2020.
In addition, the impairment loss on our long lived assets was $2 1 million for the full year compared with zero for last year.
Operating loss for the full year of 2020 was $43 4 million.
Paired with the operating profit of zero point of 2 million fall 2019.
The impairment loss on long the long term investment for the full year was $2 4 million.
Compared with zero last year.
This is mainly due to the impairment losses on some of our long term investments at the end of the first the first and fourth quarter respectively.
Net loss attributable to ordinary shareholders of all of might be for the full year of 2020 was $37.3 million compared with the $2 4 million.
In 2019.
Adjusted net income attributable to ordinary shareholders of <unk>, B, which excludes the impact of share based compensation expenses and decrease in redeemed.
The mobile Noncontrolling interest for the full year of 2020 was $34 4 million, which is compared to $1 4 million for 2019.
And EBITDA for the full year of 2020 was a negative $29 3 million compared with a positive $12 9 million for 2019.
Yeah.
In terms of business outlook for the first quarter of 2021. The management currently expects net revenues to be between 35 and.
And so the $36 million.
And this is the representing a year on year increase of approximately 102, 2% two of 108%.
For the full year of 2021, the management expects net revenues to be between $188 million and 192 million, representing a year over year increase of approximately 71% to 75%.
The above outlook is based on the current market conditions and reflects the management current and print.
Preliminary estimates of market and the operating conditions.
Or demand and foreign exchange environment, all of which are subject to change.
Thank you for your attention we will now open the call to questions. The operators. Please. Please go ahead. Thank you.
Yes. Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone erosion of a speaker phone. Please pick up your handset before pressing the keys to try your question. Please press Star then two.
For the benefit of all participants on today's call. If you wish to ask your question to management in Chinese piece of immediately repeat your question in English.
Pause momentarily to assemble our roster.
Yeah.
And as there are no questions at this time I would like to return the conference back over to the company for any closing comments.
Thank you. Thank you to everyone for joining us today. If you have any further questions. Please do not hesitate to contact us at IR I R. I B B, a b Y dotcom, we hope you have a great day.
Thank you. The conference is all concluded. Thank you for attending today's presentation. You may now disconnect your lines.
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