Q4 2021 Bright Scholar Education Holdings Ltd Earnings Call

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Speaker 1: Bye! Let's begin!

Speaker 1: Good morning and thank you for standing by for Bright Scholars FY 2021 4th fiscal quarter earnings and fiscal year 2021 earnings conference call. At this time, all participants are...

Speaker 2: After management's prepared remarks, there will be a question-and-answer session.

Speaker 2: Today's conference is being recorded. I would now like to turn the meeting over to your host for today's conference, Ms. Ruby Yim, Investor Relations Counsel. Please go ahead.

Speaker 3: Thank you, operator. Good morning and good evening. Welcome to Bright Scholars for fiscal quarter end of August 31, 2021, at least call. Joining me today are Mr. Harry He, our Executive Vice-Chairman, Mr. Andy Chen and Ms. Wan-Mei Li, our Co-Chief Executive Officers, and Ms. Dara Li, our Chief Financial Officer.

Before we start the call first and foremost let us apologize for the slight inconvenience. We are closing due to the slight technical issue, which we are currently trying to resolve so you might not be able to download both the press release and the presentation at this moment, but it will be.

Speaker 3: Now, before we start the call, first and foremost, let us apologize for the slight inconvenience we are causing due to the slight technical issue, which we are currently trying to resolve.

Very soon.

Thank you.

I stopped as a reminder, today's conference call is being broadcast live via webcast. In addition, a replay will be available on our website. Following the call by now you should have received a copy of our press release, that's what district on December 21st.

So I just wanted to one after market close eastern time.

Speaker 3: 2021 after market closes Eastern Time.

You seem to have smoked it is available on our website after the call should the technical issue to resolve.

Before we get started let me remind you that today's call may contain forward looking statements within the meaning of section 21 of the Securities Exchange Act of 95 people its amended and as defined in the U S. Private Securities Litigation Reform Act of 1995 to four.

Speaker 3: Before we get started, let me remind you that today's call may contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, the company's business plan development, which can be identified.

Forward looking statements, including without limitation, the company's business plans.

Investment, which can be identified.

My terminology such as May will expect anticipate estimate.

Speaker 3: by terminology such as may, will, expect, anticipate, aim, estimate, intend, plan, believe, potential, continue, is more likely to.

We estimate intend plan believe potential continue eastern.

All likely too.

Well I'll just seem like expressions such statements are based upon management's current expectations and current not kept and operating conditions and we'd like to events that involve known and unknown risks uncertainties and other factors, which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual.

So performance or achievements this materiality of those in the forward looking statements further information regarding this and other risks uncertainties or factors is included in the company's filings with the U S Securities and Exchange Commission.

The company does not undertake any obligation to update any forward looking statement as a result of new information future events or otherwise except as required under law.

This call, we'll be referring to GAAP and non-GAAP financial measures, we use certain non-GAAP measures as supplemental measures to review and assess our operating performance just non-GAAP financial measures have limitations as analytical tools and investors should not consider them in isolation or as a substitute for net income.

Attributable to company or other consolidated statements of comprehensive income data prepared in accordance with U S. GAAP.

Note all numbers in our marriage made remarks I in RMB and all comparisons we tried to year over year comparisons unless otherwise stated.

And for all those who are neutral company we.

We have included the earnings presentation, a brief corporate introduction instruction one from slide five July.

Okay with that I'll turn the call over to our executive Vice Chairman Jerry He Jerry.

Not necessarily.

Good morning, and good evening.

Thank you for joining us on our fourth quarter and.

In our fourth fiscal year 2021 conference call. We appreciate your continued interest in putting in place got it.

On today's call and on behalf of the senior management team and prepared remarks will cover our quarterly and full fiscal year performance.

The progress and updates there with them provides details of our respective businesses and financial performance I will wrap up with a brief conclusion before open the call for questions.

Now that's again a C.

You may have seen for our earnings release, we kept off a challenging fiscal year 2020 one was the Saudi the fiscal fourth quarter, which is particularly notable in the face of this you're getting from the financial impact for the discontinued operations.

Entities in all domestic K 12 business as well as the continued uncertainty and the challenges in the regulatory and the business of operating environments.

Please turn to slide 11.

For highlights of our fourth fiscal quarter and the full fiscal year performance for continuing operations in the quarter, we recorded a 23.3% of the growth in the revenue and the water in a five 6% in gross profit compared to the same period of fiscal year.

Our full fiscal year basis, our revenue was RMB, one 4 billion down by five 1% as compared to fiscal year 'twenty 'twenty. This performance is the direct testimony testaments to the strength of our multi visit growth strategy.

The agility of our diversified business.

Moving on to the performance of our respective business.

Domestic K 12 business or continue operation Cogs domestic a full profit kindergartens and the caito operation services.

It's all personal services.

K 12 schools, we plan to expand into management services and to offer a range of high quality professional support solutions, enabling schools to achieve the operating with excellence and efficiency.

Our team of experts assist the school leaders in the business managers with specialist otherwise.

We are Suez and it has all operating and support.

Yeah.

China's COVID-19 containment strategy provides a stable operating environment for continuous recovery.

Providing high quality education service is the key component of our vision.

Our performance demonstrates our unwavering commitment and delivering quality education as shown in slide talk.

As of August 31st 2031, approximately three <unk>.

5% of our 2021 and graduating class.

Whereas it means it has global top 50 institutions in the 97.7% were admitted to global top wander institutions.

So our 2022 graduating class we've made a historical breakthrough and obtain the one offer from Princeton University as of the date of this earnings release, we have also be leveraging our collaboration with the cats global schools, we enriched our offering and at the same time to expand into imagine that service.

Offering services, such as school operation in property management and the main place than it was.

It doesn't matter, whether it's student recruitment in this school branded.

We believe that especially into management services were provided.

Lastly, organizational benefits for future pottery schools, creating additional value for the vesting equity.

Education in China.

Our domestic are paid and the K 12 operation business is well positioned with the evolving regulatory environment in China designed to eyeglass quasi equity and all around the bottom of the China's education system.

On to slide 13 for a complementary education services.

Scott is it in full alignment with the blueprint of the government. The pause that's focused all around the lot of them are supposed to do it.

Our strategic roadmap is it based on our convictions out of both schools and in all schools Pantex.

Critical to students learning the too much.

Yes, well have been expanding our complementary learning programs, including started tours.

And the cats in there.

This is our offering by incorporating the overseas study company International pets International contacts training and and the career counseling.

We continued to see tremendous market opportunities.

Coming our way that's too bad for law School supplementary services has been growing at a phenomenal pace.

In the fiscal fourth quarter revenue of four complementary education services grew by 16, 5% year over year to RMB, one wonder 82 quarters six minute.

The pace of the girls has been affected by the ongoing power issues from original outbreaks of the pandemic in China and across the globe.

However.

In light of the Speediest response from the governments offering booster shots. We are optimistic that the pandemic will be contained to get in the meantime, we continue to execute on our strategy to expand our brand awareness broaden our service offerings diversified revenue sources and erratic.

You see the marketing opportunities well operating environment returns to normal.

Turning to slide 14 for our overseas school business recovery in the oversea market continues to be slow, but steady. Despite the travel restrictions that have been all in all I mean is the fast emergence of new variants.

However, our specific initiatives to streamline the business rebuild around new girls and optimized cost synergy.

Yeah.

Early results in the quarter revenue was recorded in cards and year over increase of nine 2%.

Our seeds business, which recently groups and the branded under tactical local schools to get there.

It's a strategically important to us.

And it's one of the key building blocks to address.

As our ambition I forgot what will Premier Education service company.

Our long term vision is to build a business that scales with a market leading global family of schools recognized for educational excellence I'm very pleased.

Just recall that we have completed.

Corporate branding campaign.

With great success, and it has a progress to the next phase of folks out integration as well inspection is of a high performing operating models for our group of schools.

We expanded this initiatives where forms a foundation upon which we will have to build our business for a post the pandemic feature.

And to be future ready company.

To conclude.

We're very pleased about the operation operational improvement that we have demonstrated in fiscal year 'twenty till you want in there.

The progress made on your.

Housing capabilities that'll provide a path towards our long term goals heading into fiscal 'twenty 'twenty. Two we are optimistic that our business will have its wrong alternate recovery our business fundamentals are strong and we remain well positioned to navigate the current operating environment.

Bill over arching strategy of a restaurant in slide 15 is to continue to expand our business portfolios.

So that's the operation operational performance across our global businesses.

It was introduced across the network broaden our service offerings and complementary education services.

We spun into measurement service for domestic K.

K 12 schools their restaurants around the screen brings the most value to our students hunters and the stakeholders, what's the slope I will take the call over to Dara.

Oh, Thank you Gerry.

That's come back to our financials. Please be reminded that all numbers are in RMB and all comparisons refer to year over year comparisons.

Otherwise stated.

Please also refer to our earnings press release for detailed information of our comparative financial performance on a year over year basis.

These tend to slide 17.

We ended the fourth fiscal quarter and the fiscal year at least steady recovery across all our business segment.

Part of the resurgence of pandemic.

They attributed by the strength of our diversified.

Hopefully all of you isn't it.

For continuing operations, our topline was up 23.3% to 320 million quarter and are down five 1% to 1400, and the $1 8 million on a yearly basis.

Revenue from overseas schools was up nine 2% for the quarter and down 39.9% on a yearly basis.

Revenue from complementary education was up 16, 5% for the quarter and up 15, 8%.

A yearly basis.

Revenue from domestic kindergartens, and K 12 operation services was up 84, 2% for the quarter and up 173, 4% on a yearly basis.

On slide 18 cost of revenue from continuing operation.

So it does remain effectively managing the involving regulatory and a dynamic business environment through maintaining cost discipline to enhance profitability.

For the quarter. The total cost of revenue was 200, and something about and plus 7 million an increase of 15, 1% and accounted for 84, 9% of total revenue compared to 99%.

On a yearly basis total cost of revenue increased by 11, 4% to 1180 points or a million and accounted for 84.2% of total revenue compared to 71, 8%.

That's cost the primary cost contributor accounted for 28% of total revenue in the quarter down from 61, 2% on a yearly basis staff cost was 24, 6% of total revenue.

Up from 22, 1%.

On slide 19, our gross profit and the margins from continuing operations.

Gross margin profile from continuing operations remains strong in the fourth quarter. Despite if you live can impact from discontinued operations of domestic K 12 business for the quarter gross profit was up 105, 6% and gross margin was up 6% to 15 point.

1%.

On a yearly basis.

Gross profit was down 46, 9% and gross margin was down $12 four to 15, 8%.

Continuing to adjust our SG&A expenses.

Yes.

SG&A expenses from continuing operation on slide 20.

We optimize operational efficiency across our business continuing to enhance our competitive cost base.

Adjusted SG&A expenses from continuing operation was $158 7 million down 0.4% for.

For the quarter and accounted for 49, 6% of total revenue compared to 61, 4% in the same quarter last fiscal year.

On a yearly basis adjusted SG&A expenses was 530 formula and down 6.8% and accounted for 38, 1% of total revenue compared to 38, 8% last fiscal year.

As shown in slide 21, the impact from discontinued operations is significant for the quarter adjusted EBITA.

Loss was $29 8 million up 51% from last off.

59 7 million.

The EBIT margin was negative nine points of the percent compare to negative 23%.

On a yearly basis adjusted EBIT loss was.

30.3 million down.

176, 2% from adjusted EBIDTA of $39 7 million.

Adjusted EBITDA margin was negative two 2% compared to 2.7%.

As disclosed in our earnings release net loss for the quarter was $478 2 million and consist of 217 9 million up $279 3 million loss from continuing operation and a $198 9 million loss from.

This continued operation.

In addition, what one off losses amounting to 261 plus million well recognized and included in the loss from discontinued operations.

Except for one off losses discontinued operations generated $62 4 million profit for the quarter.

Adjusted net loss for the quarter. It was $175 5 million as compared to adjusted net loss of $131 4 million for the same period of last fiscal year.

Net loss for physical year, it was $165 8 million and consist of $535 1 million loss from continuing operation.

And 369 3 million profit from discontinued operation.

Yeah additions one off losses.

Amounting to $261 3 million were recorded and included in income from discontinued operation for the whole physical year.

Except the one off losses, the discontinued operations generated 636 million profit for the fiscal year.

Adjusted net loss for the fiscal year. It was $420 2 million as compared to adjusted net loss of $283 6 million fault lock physical year.

Aim the substantial loss from discontinued operation our top priorities remain focused on driving adjusted EBITDA growth.

We have a solid balance sheet that enabled us to navigate through the challenging period, that's shown in slide 22.

As of August 31st 'twenty, 'twenty, one our cash and cash equivalent unrestricted cash totaled RMB $1515 2 million or 234 go on slides, mainly U S dollar as compared to RMB two.

$2011 9 million as of August 31st 2020.

The company also had amount due from of affected entities of RMB 2002.

$28 9 million as of August August 31st 'twenty, 'twenty, one and most of which was settled as of this earnings release date.

Moving onto slide 24.

Our search share repos scrum ended in November of 'twenty 'twenty. One company has bought back 7 million shares for $3 1 million U S. Dollar.

We will continue to maintain our excess capital at the level, which can allow us the financial flexibility to grow our organic business and pursue acquisitions opportunities in the future.

Please refer to the table in slide 26 for the contest income statement Slide 27 shows the reconciliation for SG&A expenses, EBITDA and net income on a GAAP and non-GAAP results.

Slide 28 shows our balance sheet and the cash flow statement for the fiscal year ended August 31st 2021, the company's capital expenditure was approximately RMB $158 7 million up 6% compared to last fiscal year.

Finally on guidance for fiscal year 'twenty to 'twenty two for reasons stated in our earnings release. The company has decided not to provide financial guidance for fiscal year 2022 and to you. The company has a better and more definitive understanding of the outcomes of the impact the business disposal plan.

We will have on the company's financial performance.

This concludes my financial update now I will turn.

The call to Jerry fee for his closing remarks Jerry.

That's the Ah in clothing, our financial results reflect the exceptional execution by the entire.

<unk> team as we continue to navigate evolving regulatory environment and dynamic education industry.

We feel good about the underlying momentum and the trajectory of our diversified and complementary.

A photo of a business as we started the fiscal year 2022 will come.

Continuing to enhance the efficiency of our operations accelerated our growth strategy and advance our commitment to providing premier education services for our students and putters.

Optimistic about the future and excited about the opportunities.

Opportunities ahead to <unk>.

Drive.

Further business and earning expansion for our shareholders.

Creation over the long term this concludes our prepared remarks.

And we would like to open the call for questions operator. Please.

Thank you.

The IR website is now back online the earnings P. P T and earnings release are now available for download.

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Again, it is scar one if you'd like to ask a question.

And we will go ahead and take our first question from anything from T. Rowe price because he's go ahead.

Hi, Thanks management, Hi, Dara I I have a follow up on the comments you just gave on on that amount due from effect entities.

Because I noticed that there's a short term investments after restatement is zero. So I'm I'm just wondering cause driven previously my understanding is that the restricted cash was pledged offshore and you'll get a loan from onshore with the proceeds just put in a short term investment. So I'm just wondering is it.

E on on the effect it actually is and there is a mountain dew from affected entities to the Wuxi entity. So it's a show and ask do you from affected entities.

Oh, Hi, this is Dora yep.

Yes, the amount due from affected that is was part of the you know we continue to do some short term investment after all those when they first.

Because of the continuity of the investment the investment worse was invested through the sponsor company sponsored company Oh.

Based on all of the requirements from the you know rather of law and accounting requirement.

Yeah.

The sponsor company was also put into that it's kind of your operation. So so.

So as of August. So this August so they first by then the investments are still under the sponsor company. So on August 31st it shows amounts due.

From from the these all these countries of operation to the listing company, but right now it has been the old settled.

Okay. So by settled it I mean, it's now cash with the listed company.

Yes.

Okay got it thank you.

And as a reminder, it is star one if you would like to ask a question star one to ask a question.

For another moment to allow everyone an opportunity to signal for a question.

Okay.

Okay.

And that's one more reminder, it is star one if you would like to ask a question.

And it appears we have no further questions at this time.

Okay should we conclude the call.

Okay. Thank you very much for joining the conference call.

But does it feel free to contact us if you'd rather than any further questions.

Everybody have a great day. Thank you.

And with that that does conclude today's call. Thank you for your participation you may now disconnect.

Thank you.

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