Q3 2024 Bright Scholar Education Holdings Ltd Earnings Call

Speaker Change: Hello ladies and gentlemen. Thank you for standing by for Bright Scholar's third quarter of fiscal 2024 earnings conference call.

Operator: 3rd Quarter of Fiscal 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. After management's remarks, there will be a question and answer session. Today's conference call is being recorded. I will now turn the call over to your host for Piacente Financial Communications, Andrea Guo, on the IR Council for the company. Please go ahead, Andrea.

Speaker Change: At this time, all participants are in listen-only mode. After management's remarks, there will be a question and answer session.

Speaker Change: Today's conference call is being recorded. I will now turn the call over to your host for Piacente Financial Communications, Andrea Guo, IR counsel for the company. Please go ahead, Andrea.

Andrea Guo: Thank you very much. Hello everyone, and welcome to Bright Scholar's earnings conference call for the third quarter of the 2024 fiscal year. The company's financial and operational results were released earlier today and are available online by visiting the IR section of our website at ir.brightscholar.com. Please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Security Statutory Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties.

Speaker Change: Thank you very much. Hello everyone and welcome to Bright Scholar's earnings conference call for the third quarter of the 2024 fiscal year. The company's financial and operational results were released earlier today and are available online by visiting the IR section of our website at ir.brightscholar.com.

Andrea Guo: As such, the company's results may materially differ from today's views. Further information regarding this and other risks and uncertainties is included in the company's prospectus and other public filings as filed with the U.S. SEC. The company does not assume any obligation to update any forward-looking statements except as required under applicable law.

Speaker Change: Please note that today's discussion will concern forward-looking statements made under the safe harbor provisions of the U.S. Private Security Statutory Reform Act of 1995.

Speaker Change: for looking statements involving high-risk uncertainties. As such, the company's results may materially differ from today's views.

Speaker Change: Further information regarding this and other risks and uncertainties is included in the company's prospectus and other public filings as filed with the UFSCC.

Andrea Guo: Additionally, Bright Scholar's earnings press release and this conference call include discussions of unaudited gap and non-gap financial measures. Bright Scholar's earnings press release contains a reconciliation of the unaudited non-gap measures. Please also note that all numbers are in RMB.

Speaker Change: The company does not assume any obligation to update any forelooking statements, except as required under applicable law. Additionally, Bright Scholar's earnings press release and this conference call include discussions of unaudited GAAP and non-GAAP financial measures.

Speaker Change: Bright Scholar's earnings press release contains a reconciliation of the unaudited non-GAAP measures. Please also note that all numbers are in RMB.

Andrea Guo: Participants on today's call will include our Chief Executive Officer, Mr. Robert Niu, who will provide a company overview and update on our strategic initiatives with highlights from the quarter. Our Chief Financial Officer, Ms. Cindy Zhang, will then provide details on the company's financial results for the period. We will then open the call for questions. I will now turn the call over to Bright Scholar's Chief Executive Officer, Ms. Robert Niu. Please go ahead, sir.

Speaker Change: Participants on today's call will include our Chief Executive Officer, Mr. Robert Niu, who will provide a company overview and update on our strategic initiatives with highlights from the quarter.

Cindy Zhang: Our Chief Financial Officer, Ms. Cindy Zhang, will then provide details on the company's financial results for the period.

Speaker Change: We will then open the call for questions.

Speaker Change: I will now turn the call over to Bright Scholar's Chief Executive Officer, Ms. Robert Niu. Please go ahead, sir.

Robert Niu: Hello, everyone, and thank you for joining us on today's call. We are pleased to announce that Bright Scholar achieved solid quarterly results amid the uncertain and evolving external environment in the third fiscal quarter. Our strategic execution was unwavering, propelling our dedicated initiatives that fueled our global business. We also made headway in optimizing our organizational structure, which improved our operating efficiency and drove another quarter of positive adjusted net income.

Robert Niu: Hello everyone and thank you for joining us on today's call. We are pleased to announce that Bright Scholar achieved

Speaker Change: Solid quarterly results amid uncertain and evolving external environment in the third fiscal quarter.

Speaker Change: Our strategic execution was unwavering, propelling our dedicated initiatives that fueled our global business.

Speaker Change: We also made headway in optimising our organisational structure.

Speaker Change: which improved our operating efficiency and drove another quarter of positive adjusted net income.

Robert Niu: Our total revenues grew 6% quarter over quarter, led by ongoing growth in our dominant overseas schools business. This growth is testament to our business resilience and vitality. In addition, we further enhanced the utilisation of our facilities and teaching resources, with the utilisation rate of our overseas schools increasing to 62% for the quarter. Leveraging our established global network of schools and ecosystems, we believe we can accelerate our overseas revenue growth and create sustainable value for both customers and shareholders over the long term.

Speaker Change: Our total revenues grew 6% quarter over quarter, led by ongoing growth in our dominant overseas schools business.

Speaker Change: This growth is testament to our business resilience and vitality.

Speaker Change: In addition, our further enhanced and utilization of our facilities and teaching resources with utilization rate of our overseas schools increasing to 62%.

Speaker Change: for the quarter. Leveraging our established global network of schools and ecosystems, we believe we can accelerate our overseas revenue growth and create a sustainable value for both customers and shareholders over the long term.

Robert Niu: Now, I'd like to share some details from the quarter on each of our business segments. First, overseas schools maintained a solid growth momentum and remain our strongest segment. Revenue was up 19.4% year-over-year in the 3rd fiscal quarter, extending the double-digit year-over-year growth rate this segment has achieved for the past five consecutive quarters.

Speaker Change: Now, I'd like to share some details from the quarter on each of our business segments.

Speaker Change: First.

Speaker Change: Overseas schools sustained a solid growth momentum and remained our strongest segment. Revenue was up 19.4% year-over-year in the third fiscal quarter, extending the double-digit year-over-year growth streak.

Speaker Change: This segment has achieved for the past five consecutive quarters.

Robert Niu: This business is our growth engine and primary revenue source, accounting for nearly 48% of our total revenue for the period. Furthermore, our overseas schools' student enrollment grew by 8% year-over-year this quarter. Year-to-date, over 900 students have accepted offers for an hour September intake.

Speaker Change: This business is our growth engine and primary revenue source, accounting for nearly 48% of our total revenue for the period. Furthermore, our overseas school student enrollment grew by 8% year-over-year this quarter.

Speaker Change: Year-to-date, over 900 students have accepted offers from our September intake.

Robert Niu: Our students have demonstrated exceptional performance across different facets of school life, particularly showcasing impressive academic achievements. This year, three in every five of our CAST Global Schools students have received an offer from a prestigious Russell Group University, globally recognized for its commitment to world-class research and academic excellence. The Russell Group comprises 24 member universities, including Oxford and Cambridge.

Speaker Change: Our students have demonstrated exceptional performance across different facets of teaching

Speaker Change: school life, particularly showcasing impressive academic achievements.

Speaker Change: This year, 3 in every 5 of our CAST Global School students

Speaker Change: have received an offer from a prestigious

Speaker Change: Russell Group University, globally recognized for its commitment to world-class research and academic excellence.

Speaker Change: The Russell Group compromised 24 member universities, including Oxford and Cambridge.

Robert Niu: Furthermore, 24 of our Cat Global School students received offers from the renowned G5 universities of Oxford, Cambridge, Imperial College London, the London School of Economics, and University College London. We remain steadfast in our commitment to facilitating our students' educational excellency and creating opportunities for their academic success as well as well-rounded development. Overall, we are pleased with the advancements we made with our overseas schools business in the third fiscal quarter. Our dedication to delivering a top-tier education to our students and equipping them for success in the global market is driving this business growth and supporting accelerated year-over-year enrollment. Moving on to our complementary education services, revenue from this segment decreased 18% year-over-year in the fiscal third quarter as we strategically reduced lower return and underutilized programs, in alignment with our internal expectations.

Speaker Change: Furthermore, 24 of our Cat Global School students received offers from renowned G5 universities of Oxford, Cambridge, Imperial College London, the London School of Economics, and University College London.

Speaker Change: We remain steadfast in our commitment to facilitating our students' educational excellency and creating opportunities for their academic success as well as well-rounded development.

Robert Niu: We also divested our non-core career counseling business and international contest training business in June and May. Our divestment strategy is geared towards focusing our resources on our high-growth core overseas school business and streamlining our management efficiency. By reallocating resources, we aim to drive innovation and enhance Service Delivery in our Overseas School Business. As we move forward, we will continue to cultivate the international school market, aligning our efforts with our long-term vision and adapting to the dynamic environment.

Speaker Change: Overall, we are pleased with the advancements we made with our Overseas Schools business in the third fiscal quarter. Our dedication to delivering a top-tier education to our students and equipping them with the skills they need to be successful in their future careers.

Speaker Change: for success in the global market is driving this business growth and supporting accelerated year-over-year enrollment.

Speaker Change: Moving on to our Complimentary Education Services.

Speaker Change: Revenue from this segment decreased 18% year-over-year in the fiscal third quarter as we strategically reduced lower return and underutilized programs in alignment with our internal expectations.

Speaker Change: We also divest.

Speaker Change: our non-core career counseling business and international contest training business in June and May. Our divestment strategy is geared towards focusing our resources on our high-growth core overseas school business and streamlining our management efficiency.

Speaker Change: By reallocating resources, we aim to drive innovation and enhance

Speaker Change: service delivery in our overseas school business. As we move forward, we will continue to cultivate the international school market, aligning our efforts with our long-term vision and adapting to the dynamic environment.

Robert Niu: With our goal of leaner and more efficient operations, in the third fiscal quarter, we continue to optimize our organizational structure and enhance corporate governance. Additionally, we conduct a wide array of health checks to identify issues in our overseas schools' business and gain a deeper understanding of these overseas operations. We dispatched a management team from our headquarters to directly oversee the overseas business and school business, establishing clear management responsibilities and reporting mechanisms. In addition, we also implemented advanced IT systems to enhance collaboration between our different departments and internal control teams.

Speaker Change: With our goal of leaner and more efficient operations, in the third fiscal quarter, we continue to optimize our organizational structure and enhance corporate governance.

Speaker Change: We conduct a wide array of health checks to identify issues in our overseas schools' business and gain a deeper understanding of these overseas operations.

Speaker Change: We dispatched a management team from our headquarters to directly oversee the overseas business, school business.

Speaker Change: Establishing clear management responsibilities and reporting mechanisms.

Speaker Change: In addition, we also implemented advanced IT systems to enhance collaboration between our different departments and internal control teams.

Robert Niu: The gradual integration of our headquarters and overseas management teams not only helps reduce management costs but, more importantly, allows the group's strategy to be executed more efficiently at the local level. Our senior team can respond to market dynamics with more agility, paving the way for sustainable growth and innovation. In summary, the third fiscal quarter has demonstrated that our business remains resilient and is steadily improving in the face of the pandemic. Dynamic Market

Speaker Change: The gradual integration of our Headquarters and Overseas Management Teams not only help us.

Speaker Change: reduce management costs, but more importantly, allows the group's strategy to be executed more efficiently at the local level. Under this model, the organization's productivity has increased significantly.

Speaker Change: Our senior team can respond to market dynamics with more agility, paving the way for sustainable growth and innovation.

Speaker Change: In summary, the third fiscal quarter has demonstrated that our business remains resilient and is steadily improving in the face of the dynamic market.

Robert Niu: We are operating with increasing efficiency and will continue to refine our operations to align with our goals. Our priority remains expanding our steady overseas school business while seeking opportunities to divest non-core assets related to complementary education services and domestic kindergarten and K-12 openings. Moving forward, we will continue to advance our high-grade, high-return business and Gearing Up To Seize extensive growth opportunities that will strengthen our market share and make us a leading global education service provider. With that, I will turn the call over to our CFO, Ms. Cindy Zhang, who will discuss our key financial results. Please go ahead, Cindy.

Speaker Change: We are operating with increasing efficiency and will continue to refine our operations to align with our goals.

Speaker Change: Our priority remains on expanding our steady overseas school business while seeking opportunities to divest non-core assets related to complementary education services and domestic kindergarten and K-12 operations.

Speaker Change: Moving forward, we will continue to advance our high-grade, high-return business.

Speaker Change: gearing up to seize extensive growth opportunities that will strengthen our market share as a leading global education service provider.

Speaker Change: With that, I will turn the call over to our CFO , Cindy Zhang, who will discuss our key financial results. Please go ahead, Cindy.

Cindy Zhang: Thank you, Robert. Now, I would like to discuss our financial results for the third quarter of fiscal 2024. Please note that all amounts are in RMB unless otherwise stated. We are pleased to report healthy financial results for the third physical quarter. Our total revenues grew by 6.2% year-over-year, driven by gains in our overseas goods business. Ongoing optimizations in our cost structure and improved operating efficiency drove our growth margin up by 317 base points year-over-year and 560 basis points quarter-over-quarter, and we achieved profitability for the third consensitive quarter on a non-gap basis. Looking at our financial results for the third fiscal quarter in more detail, we achieved total revenue of $554 million in the third fiscal quarter.

Cindy Zhang: Thank you Robert. Now I would like to discuss our financial results for the third quarter of fiscal 2024. Please note all amounts are in RMB and not otherwise stated.

Speaker Change: We are pleased to report healthy financial results in the third physical quarter.

Speaker Change: Our total revenues grew by 6.2% year-over-year, driven by gains in our overseas goods business.

Speaker Change: Ongoing optimisation in our core structure and improved operating efficiency drove our growth margin up by 317 base points year-over-year and 560 base points year-over-year.

Speaker Change: basis point quarter over quarter and we achieve profitability for the set consensitive quarter on a non-gap basis.

Speaker Change: Looking at our dimension results for the third physical quarter in more detail.

Cindy Zhang: By segment, the largest proportion of our business, overseas goods, recorded revenue of $264.9 million, contributing 47.8% of total revenue and growing by 19.4% year-over-year and 6.7% quarter-over-quarter. Complementary Education Services and Domestic Kindergarten and K-12 Operations Services revenues were $169.5 million and $119.6 million, respectively. Both decreased year-over-year as we continue to advance our portfolio and optimize costs through the development of these non-core

Speaker Change: We achieved total revenue of $554 billion in the third fiscal quarter.

Speaker Change: by segment, the largest proportion of our business.

Speaker Change: Overseas Schools

Speaker Change: recorded revenue of $264.9 million, contributing 47.8% of total revenue and growing by 19.4% year-over-year and 6.7% quarter-over-quarter.

Speaker Change: Complementary Education Services and Domestic Kindergartens and K-12 Operations Services revenues were $169.5 million and $119.6 million respectively.

Speaker Change: Both decreased year-over-year as we continue to advance our portfolio and optimize costs through development of these non-core education businesses.

Cindy Zhang: The cost of revenues was $351.2 million, or 63.4% of total revenue in the third fiscal quarter. This compares with 67.1% for the same quarter last fiscal year, making the third consecutive quarter of improved year-over-year cost as a percentage of total revenue. This improvement was mainly attributable to our cost-saving measures and efficiency enhancements at our headquarters.

Speaker Change: Cost of revenues was $351.2 million or $60 billion.

Speaker Change: of 63.4% of total revenue in the third fiscal quarter.

Speaker Change: This compares with 67.1% for the same quarter last fiscal year, making the third consecutive quarter of improved year-over-year costs as a percentage of total revenue.

Speaker Change: This improvement was mainly attributable to our cost-saving measures and efficiency enhancements at our headquarters.

Cindy Zhang: Our gross profit increased by 5% year-over-year and 25.4%, quarter-over-quarter, to $202.7 million. The increase was mainly attributable to revenue growth in our overseas schools, with the segment's gross profit increasing 40.1% year-over-year. Growth margin increased to 36.6%, from 32.9% for the same quarter last fiscal year and 31% for the previous quarter, a testament to our robust course management system and enhanced utilization of facilities and teaching resources. Notably, our overseas business growth margin reached 33%, the highest level we've seen in the past three years.

Speaker Change: Our gross profit increased by 5% year-over-year and 25.4% quarter-over-quarter for $202.7 million.

Speaker Change: The increase was mainly attributable to revenue growth in our overseas schools, with the segment's gross profit increasing 40.1% year-over-year.

Speaker Change: Growth Margin increased to 36.6% from 32.9% for the same quarter last fiscal year and 31% for the previous quarter.

Speaker Change: to our robust course management system and enhanced utilization of facilities and teaching resources. Notably, our overseas business growth margin reached 33%, the highest level we've seen in the past three years.

Cindy Zhang: Adjusted gross profit was $205.9 million, representing a 4.7% increase year-over-year and a 24.9% increase quarter-over-quarter. FG&A expenses were $147 million compared with $142 million for the same quarter last fiscal year. The slight increase was mainly attributable to a rise in overseas personnel-related expenses.

Speaker Change: Adjusted gross profit was $205.9 million, representing a 4.7% increase year-over-year and a 24.9% increase quarter-over-quarter.

Speaker Change: SG&A expenses were $147 million compared with $142 million for the same quarter last fiscal year. The slightly increase was mainly attributable to a rise in overseas personnel-related expenses.

Cindy Zhang: Adjusted EBITDA was $76.6 million compared with $96 million for the same quarter last fiscal year in the previous quarter. Now turning to profitability, due to a $133 million impairment loss on Google, we recorded a net loss of $90.3 million in the third fiscal quarter, excluding this one-time impact. Net income was $42.7 million, compared with a net loss of $37.7 million for the same quarter last fiscal year. Adjusted net income was $48.5 million, compared with an adjusted net loss of $34.9 million for the same quarter last fiscal year.

Speaker Change: Adjusted EBITDA was $76.6 million compared with $96 million for the same quarter last fiscal year in the previous quarter.

Speaker Change: Now turning to profitability, due to a $133 million impairment loss on Google, we recorded a net loss of $90.3 million in the third fiscal quarter.

Speaker Change: Excluding this one-time impact, net income was $42.7 million compared with the net loss of $37.7 million for the same quarter last fiscal year.

Speaker Change: Adjusted net income was $48.5 million compared with an adjusted net loss of $34.9 million for the same quarter last fiscal year.

Cindy Zhang: As for our balance sheet, our cash position rebounded this quarter. As of May 31, 2024, we had cash-on-cash equivalents and restricted cash of $537.2 million, compared with $496.9 million as of February 29, 2024. Moving forward, we will continue to prudently manage our costs and strategically reshape our portfolio to maximize returns while strengthening our financial position through margin improvement, fortifying our balance sheet, and increasing cash flow. Our strong cash position will continue to support us in mitigating market dynamics.

Speaker Change: As for our balance sheet,

Speaker Change: Our cash position rebounded this quarter. As of May 31, 2024, we had cash and cash equivalent and restricted cash of $537.2 million compared with

Speaker Change: 496.9 million as of February 29, 2020.

Speaker Change: 2024. Transcribed by https://otter.ai

Speaker Change: Moving forward, we will continue to prudently manage our costs and stress-free.

Speaker Change: Strategically, we shape our portfolio to maximize returns while strengthening our financial position through margin improvement.

Speaker Change: For fortifying our balance sheet and increasing cash flow, our strong cash position will continue to support us in mitigating the market dynamics.

Cindy Zhang: We are confident in maintaining a healthy balance sheet while achieving organic growth and creating sustainable value for our customers and shareholders in the long term. Okay, this concludes all our prepared remarks today. We will now open the call to questions. Operator, please go ahead.

Speaker Change: We are confident in maintaining a healthy balance sheet while achieving organic growth and creating sustainable value for our customers and shareholders in the long term.

Speaker Change: Okay this concludes all our prepared remarks today. We will now open the call to questions. Operator, please go ahead.

Operator: We will now begin the question and answer session. To ask a question, you may press Star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press Star, then 2. For the benefit of all participants on today's call, if you wish to ask your question to Management in Chinese, please immediately repeat your question in English. Again, if you have a question, please press star 1. To answer no questions in the queue, I would like to turn the call back over to Andrea Groh for closing remarks.

Speaker Change: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2.

Speaker Change: For the benefit of all participants on today's call, if you wish to ask your question to Management in Chinese, please immediately repeat your question in English.

Speaker Change: www.rubyyim.co.uk

Speaker Change: Again, if you have a question, please press star 1.

Speaker Change: www.rubyyim.co.uk

Speaker Change: To answer no questions in the queue, I would like to turn the call back over to Andrea Groh for closing remarks.

Speaker Change: www.rubyyim.co.uk

Speaker Change: www.rubyyim.co.uk

Andrea Guo: Thank you once again for joining us today. If you have any further questions, please feel free to contact Bright Scholars Investor Relations through the contact information provided on our website.

Andrea Groh: Thank you once again for joining us today. If you have any further questions, please feel free to contact Bright Scholars Investor Relations through the contact information provided on our website.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.