Q2 2026 Almasar Alshamil Education Co CJSC Earnings Call
Speaker #1: Capital, I would like to welcome you to a conference call with Almasar Alshamil Management regarding the financial results of Q2 2026. I will hand over to Abdullah Saeed, Investor Relations Director, to start with the opening remarks.
Speaker #1: Abdullah?
Speaker #2: Thank you, Yared. Thank you so much, appreciate it. thank you everyone for joining. Wishing you all a lovely day. I have with me here the management team, as you know, Fadi Habib, our managing director.
Speaker #2: Mahjdar Mutairi, our CEO, and Ahmed Jamaluddin, our CFO. With that, I'll hand in to Fadi. Go ahead, Fadi.
Speaker #3: Thank you. Thank you, Abdullah. السلام عليكم جميعًا. Good afternoon. Thank you for joining us today. Let's start on slide 5 with an overview of our financial and operational performance for the first half of 2026.
Speaker #3: We are very pleased to report another strong period for Almasar, with continued growth across all business segments. For the first half, our revenues increased 22% year-on-year, reaching $350 million and our EBITDA grew 33% to $182 million.
Speaker #3: Earnings per share for the first half increased from $0.88 to $1.16. All this really reflects the continued profitable growth and strong operating leverage of our business.
Speaker #3: Operational performance remained very strong, total number of students and beneficiaries increased 21% year-on-year to approximately 29,000. Supported by strong momentum across both our special needs and higher education business segments.
Speaker #3: With our special needs segment, we increased our network to 56 facilities, following the addition of 3 new daycare centers in January, and that added another 1,000 above 1,000 capacity to our network.
Speaker #3: We have additional special needs facilities under development that will support our medium-term expansion pipeline. In higher education, Middlesex University achieved a record intake in January, with the new enrollments for the January intake growing 45% versus the same period last year.
Speaker #3: This really shows the strong demand we have for our services, supported by the continued investment we make in academic offering programs and our facilities.
Speaker #3: Also, during the period, we launched Middlesex University launched the London Sports Institute, and the new study hub in Dubai Media City. While expanding its academic offering in into healthcare and robotics, these are strong demand areas.
Speaker #3: Meanwhile, at NIMA, Abu Dhabi University introduced 19 new high-demand academic programs, and also signed a partnership with Epsom College UK to establish 2 new K-12 campuses in Abu Dhabi and Dubai that can accommodate up to 5,000 students.
Speaker #3: As we focus on our strategic expansion, we also signed an unbinding MOU for the acquisition of a 60% stake in Al Qalam Education, to support our strategy to expand into complementary adjacent education services.
Speaker #3: The proposed acquisition would represent an entry into the K-12 education segment through a high-growing quality service provider. We can move please to slide 6.
Speaker #3: Almasar is the region's leading integrated education platform, with operations across Saudi Arabia and the UAE, through our diversified education offering and continued expansion strategy.
Speaker #3: We remain very well positioned to capitalize on the long-term fundamental growth drivers in our core markets. Importantly, our scale and leadership has translated into strong financial performance, with revenues increasing 1.9 times, EBITDA and net profit 1.8 times over the last 3 years.
Speaker #3: Overall, our scale and market position really give us a very strong positioning and a strong foundation to continue growing in our core markets. I want to slide 7, please.
Speaker #3: Almasar Education is built on more than 20 years of operating experience in the specialized education segments over that period. We have built a market-leading position in both special education needs as well as higher education in the region.
Speaker #3: Moving on to slide 8, and to overview our continued disciplined execution of the four strategic pillars during the first half of 2026. In special needs, our beneficiaries increased 19% to 7,700, with the ramp-up of existing facilities driving 80% of that growth.
Speaker #3: Capacity utilization stands at 65%, which really gives us additional room for growth as these centers mature further. The network itself continued to increase. We added we reached 56 facilities today, 41 daycare centers, 15 schools, and added more than 1,000 in capacity in the period.
Speaker #3: In higher education, both Middlesex and NIMA increased enrollments by 21%, and now we're over 21,000 students in higher education. This is all supported by new programs: strong academic positioning and expanded footprint.
Speaker #3: We also expressed or progressed on the, you know, new growth opportunities. With the non-binding MOU for the acquisition of 60% of Al Qalam, as well as NIMA Holdings entering into a partnership with Epsom College, as well as continued exploration of additional expansion opportunities in Saudi Arabia.
Speaker #3: Overall, we remain focused on increasing utilization, expanding capacity, and capturing further organic and inorganic growth opportunities to create value for our shareholders. Moving on to slide 9.
Speaker #3: And just looking at our operating metrics, as mentioned, we've grown our really our driving element, which is the students and beneficiaries. We've grown that 21% year on year.
Speaker #3: We nearly 29,000 students and beneficiaries today across the network. In special needs, we added 5 new daycare centers and 5 new schools, reaching 56 total projects across the kingdom.
Speaker #3: And in Middlesex University, we've grown students by 16%, and now we have 54% of our student base being international students, up from 45% in the same period last year.
Speaker #3: Looking ahead, both our student and beneficiary numbers and our special need networks have consistently grown. Over the past, so if you look at the last 3 years, we have been consistently growing, and this growth continued in the first half of this year.
Speaker #3: On the financial side, on slide 10, the first half had very strong performance. As we said, 22% growth in revenues, 33% growth in EBITDA, and 29% growth in net income.
Speaker #3: This is just building on the track record over the last 3 years. So if you look at the K-growth before this year, it was 25% growth for revenue, 16% in EBITDA, 52% in net profit, and we continued and even accelerated in certain places the growth in the first 6 months of this year.
Speaker #3: And I'll hand it over to Ahmed to take you through the financial performance in more details.
Speaker #2: Thank you, Fedi, and welcome all to the call. Turning to revenue, we continued to deliver strong growth across all business segments, and revenue streams.
Speaker #2: In the first half of 2026, revenue increased 22% year on year, with both higher education and SIM contributing to growth, reflecting continued enrollment growth and network expansion.
Speaker #2: This momentum was also evident on a quarterly basis, with Q2 revenue increasing 22% year on year. The balance contribution from both segments demonstrates the strength of our diversified business model, and provides a solid foundation for sustainable long-term growth.
Speaker #2: Turning to EBITDA, in the next slide, again, profitability continued to grow at a faster pace than revenue demonstrating strong operating leverage across the group.
Speaker #2: In H1 '26, EBITDA increased 33% year on year, and the EBITDA margin improved from 48% to 52%, supported by strong underlying business performance and a higher contribution from NIMA.
Speaker #2: In Q2, EBITDA increased by 34% year on year, while the margin expanded from 52% to 59%. Overall, the continued growth in EBITDA and margin expansion demonstrates the scalability of the group's business model and ability to convert revenue growth into stronger profitability.
Speaker #2: Turning to net profits, the group continued to deliver strong earnings growth, supported by operating leverage and the increased contribution from NIMA. Net profit increased by 29% in the first half of 2026, with net profit margin expanding to 38% from 35% during the same period.
Speaker #2: This reflects strong revenue growth, improved operating efficiency, and a higher contribution from NIMA. In the second quarter, net profit also increased by 29%, with margin increasing to 40% compared to compared with increase to 42% compared to 40 in the Q2 in 2025.
Speaker #2: Mainly reflecting the impact of financing costs related to ongoing expansion initiatives. Profit attributable to the previous slide, profit attributable to equity holders increased by 31% year on year to 119 million, in the first half, while Q2 attributable profit increased by 29% to 65 million.
Speaker #2: Turning to average EBITDA, in the first half, EBITDA increased by 33%, as highlighted before, supported by consistent growth across all business units. Inex contributed $16 million, while HDC contributed $10.9 million, and NIMA was a larger contributor, adding $20.7 million.
Speaker #2: This was partially offset by $3.5 million higher head office costs, as well as other costs, while non-recurring items contributed $0.6 million. Moving to the net profit bridge, net profit increased by 29% year-on-year to $131.7 million. MDX contributed $10 million, while HDC contributed $4.1 million, and NIMA contributed $20.2 million, 0.7.
Speaker #2: This was partially offset by 6.3 million of higher head office costs, as well as the non-recurring items. Profit attributable to equity holders reached 118.6 million, representing 31% year on year growth.
Speaker #2: Turning to the cash position, the Group maintained a strong balance sheet and healthy net cash at the end of the first half. Cash and bank balances stood at 309 million at the end of June, after the distribution of 75 million in dividends during the second quarter.
Speaker #2: Bank financing increased to 106 million, mainly to support ongoing expansion projects and higher working capital requirements, as HDC continues to scale. Lease liabilities stood at 140 million, reflecting new facilities under reflecting the funding of the new facilities under development at HDC and additional leases placed at MDX, as we continue to expand the platform.
Speaker #2: Overall, the group had a net cash position of 63 million at the end of June 2026. This strong financial position provides flexibility to continue investing in strategic growth initiatives, while supporting long-term shareholders' value creation.
Speaker #2: Thank you, and now I will hand it over to Majid.
Speaker #1: Bismillahirrahmanirrahim, assalamu alaikum. Thank you, Ahmad. Please turn to slide 18. Turning to HDC, our special needs education and care platform continue to deliver strong operational financial performance during the first half of 2026, supported by network expansion and beneficiary growth, and increasing utilization.
Speaker #1: During the period, we expanded our network to 41 daycare centers and 15 schools. At the same time, our development pipeline remains strong, supporting future capacity expansion.
Speaker #1: Beneficiaries increased by 19 year-on-year, to approximately 7,700 beneficiaries, driven by the continued ramp-up of our existing facilities and sustained demand for specialized services.
Speaker #1: This translated into strong financial performance, with revenue increasing 23% year on year, supported by beneficiary growth, network expansion, and improved capacity utilization. Overall, HDC remained well positioned to capture the growing demand for special needs education and care, while continuing to expand its footprint across the Kingdom.
Speaker #1: Next, please. Special needs education and care delivered strong first-half financial performance, revenue increased 23% year on year, to 143.2 million, driven by network expansion, higher beneficiary numbers, and improving capacity utilization across existing facilities.
Speaker #1: EBITDA increased 25% year on year to SAR 55 million, while maintaining a healthy 38% EBITDA margin despite ramp-up costs associated with newly opened facilities.
Speaker #1: Net profit increased 14% year on year, to 32.6 million. The second quarter also delivered strong momentum, with revenue increased 26%, to 59.4 million, EBITDA increased 34%, to 21.2 million, and net profit increased 38%, to 10 million.
Speaker #1: Operationally, we continue expanding the education network, with five new daycare centers and five additional school applications commencing operations over the next 12 months. Beneficiary growth was supported by continued network expansion and improving utilization across both newly opened and existing facilities.
Speaker #1: We also maintained robust development pipeline for new facilities expected to support medium-term growth, continuing to constructive discussions with our regulators on expanding service offerings, including residential services, and actively assessing inorganic growth opportunities, including M&A and regional expansion across GCC.
Speaker #1: Next. Turning to middle sex university Dubai, MDX continued to deliver strong enrollment growth and advanced its academic offerings during the first half of 2026.
Speaker #1: Student enrollments grew 16% year on year, to 7,200, demonstrating strong demand for our higher education offering. During the period, MDX launched the London Sports Institution in February 2026, strengthening the university's regional brand positioning and expanding its academic portfolio through the introduction of new, highly demanded programs in health sciences and robotics.
Speaker #1: Looking ahead, the university continues to enhance its academic offerings through program innovation and targeted student recruitment initiatives. Next, the university delivered strong operational and financial performance during the first half of 2026.
Speaker #1: As of June 30, 2026, MDX served 7.2 thousand students across two campuses, with a record January intake for the current academic year, revenue increased 21% year on year, to 207.9 million, in the first half, while EBITDA increased 20%, to 94.1 million, with EBITDA margins of 45%.
Speaker #1: Net profit increased 16% year on year, to 72.6 million. The second quarter also delivered another strong performance, with revenue increasing 19%, to 1.4 million, EBITDA increasing 22%, to 50.4 million, and net profit increasing 13%, to 39.3 million.
Speaker #1: Operationally, the university successfully received CAA (Ministry of Higher Education accreditation) for 100% of all its undergraduate and postgraduate program portfolio, further strengthening its academic and international positioning.
Speaker #1: Strategically, we continue to expand the Dubai campus and to support future enrollment growth and enhance the student experience, while strengthening our academic offering and exploring geographical expansion.
Speaker #1: Next, please. Turning to NEMA Holding, the platform continued to deliver exceptional performance and momentum during the first half of 2026, supported by growth across both Abu Dhabi University and Leo University. Student enrollments increased 24% year-on-year to approximately 14,000 students, reflecting continued demand across both institutions and sustained operational momentum across the platform.
Speaker #1: During the period, NEMA signed a strategic partnership with EPSOM College in the UK to establish two new K-12 campuses in Dubai and Abu Dhabi, representing an important step in broadening the platform's education offering.
Speaker #1: Abu Dhabi University also had 19 new demand new programs were introduced, while the university also advanced 43 places to 3,400, 348 globally geared ranking, based on the year 2027 ranking.
Speaker #1: At Leo University, the institution completed its rebranding and successfully launched its new Al Ain campus, further strengthening its presence and supporting future enrollment growth.
Speaker #1: Overall, these strategic initiatives continue to strengthen NEMA platform, enhance its academic offering, and support its long-term growth trajectory next. As of June 2026, NEMA operated two universities across five campuses, serving 14,000 students.
Speaker #1: Revenue increased during the first half by 34% year-on-year to 445.4 million, while EBITDA increased 58% to 182.4 million. This resulted in an EBITDA margin of 41%, up from 35% in the first half of 2025.
Speaker #1: Net profit increased 82% year on year, to 131 million, with a net profit margin expanding to 29%, from from 22%. Q2 also delivered strong growth, with revenue increasing 33%, to 248.6 million, EBITDA increased 45%, to 111.8 million, and net profit increased 57%, to 85.3 million.
Speaker #1: Profitability performance reflects continued enrollment growth, higher credit hours, disciplined cost management, and improving operating leverage across the platform. NEMA is also assessing further organic and inorganic growth opportunities, including expanding its academic offerings and entering new verticals.
Speaker #1: Next. Turning to our core business pillars, these six strengths underpin Almasar Investment Case and long-term growth potential. We operate in a high-growth and underserved education segment that are aligned with the national strategies we hold market-leading positions in GCC, in special education, and UAE private higher education, while maintaining clear focus on inclusive, high-quality education and human capital development.
Speaker #1: Our strong financial growth, healthy margins, and robust cash generation provide a solid foundation for continued expansion. This is supported by scalable business model that allows us to build on our leading market positions.
Speaker #1: Finally, Almasar benefits from seasoned leadership team with a strong track record of execution. Together, these pillars position us to continue delivering a sustainable growth and long-term value creation.
Speaker #1: With this, I conclude our presentation and thank you for taking the time to be here today. Now, we open the floor for any questions.
Speaker #2: Thank you so much, Majid, and management. Ladies and gentlemen, if you wish to ask a question, please raise your hand or type it in the chat box.
Speaker #2: The first question comes from the line of Ibrahim Al-Assan. Ibrahim, you are unmuted. Please unmute locally and go ahead.
Speaker #3: Yeah. Hello. Thank you, Yad, and congratulations, management, on this set of results. So, two questions from me regarding the daycare centers. First, I want to ask about why you would consider acquiring an existing daycare center, given that new ones would require a ramp-up period and some time to become profitable.
Speaker #3: So this is my first question. The second question is on the students in the UAE—how do you see student enrollments in MDX, especially MDX, since we are almost in mid-August and the academic year starts on the 31st of August?
Speaker #2: Thank you, thank you for your question. To start with, let's begin with the first one, which is on the special needs side. If I understand correctly, you're asking why don't we acquire versus build.
Speaker #2: And I think there's a number of factors, not that we don't acquire. We do. We are open for acquisitions, and we have acquired historically.
Speaker #2: When we are acquiring, we look for a number of things. One, a suitable facility. We have upgraded many of our facilities. The newer facilities that we have are best in class.
Speaker #2: And not all available facilities meet the standards we require. And hence, we it might require too much investment after we take it over to get it up to the mark.
Speaker #2: And sometimes the owners' valuation expectations make it better for us to build than buy. But sometimes it does make sense. So maybe the one thing that I would push back on is that we do break even quite quickly.
Speaker #2: And we do ramp up in 24 months we typically start making a decent profit from the new center that we built. And hence, we do assess opportunities to acquire as well as build opportunities.
Speaker #2: And we'll continue to do so. So, it is one of the ways we grow. And regarding the other question on the students for Middlesex University, as we get closer to September, I think it's good to give everyone an update.
Speaker #2: So far, we are in a good position. We are tracking well on our targets, so we are in line with the targets that we have internally.
Speaker #2: The growth mix is maybe a little different than we have been used to over the last few years. We put a lot of extra effort and new initiatives this year to drive domestic growth.
Speaker #2: And those are reaping rewards. We are seeing very strong growth year on year. In domestic enrollment so far. On international, the growth is there, but it's maybe less than previous years.
Speaker #2: But offset by much stronger growth in the domestic market. So, in international markets, some markets are very strong, but some markets are not growing as fast as in the last few years, which is not a surprise given international students are coming from outside the country and need visas to come.
Speaker #2: And hence, the regional tensions have maybe caused some people to delay, to wait to see a resolution before finally making the full registration and payment.
Speaker #2: However, overall, we are on target, driven more this time by very strong domestic growth, much higher than previous years, while international is growing. As well, but maybe not as high rates as in the prior years.
Speaker #2: So balance, the balance is there. Yeah. But overall, Alhamdulillah, very good so far. Much strong growth so far. Thank you, Ibrahim. The next question comes from the line of Sarah Bassam.
Speaker #2: Sarah, please unmute locally and go ahead.
Speaker #4: Hello. As-salamu alaikum. Thank you, management, for the call, and congratulations on the strong set of results. Mashallah, we saw your gross margins this quarter expanding by 5 percentage points year on year.
Speaker #4: From 44 to 49 percent, while GNA also rose at a similar magnitude from 21 to 25 percent of revenue. So I have two questions here.
Speaker #4: First, is this a genuine efficiency on a gross margin level or a reclassification of cost between Cox and GNA, given the two moved by a similar rate?
Speaker #4: And second, should we expect another similar rate of gross margin improvement for the remainder of the year?
Speaker #2: Thank you. Thank you, Sarah, for this. And first, there was no reclasses between GNA and Cox. It's the same accounting classification. On the improvement, it's mainly coming from HDC with improved STR.
Speaker #2: And containment of the staff cost at HDC level to generate some efficiency gains at the operating level. And so there's and this will be on the second, on the last quarter, on the third or the fourth year will be almost maintained on the within the same range.
Speaker #2: Okay. Thank you, Sarah, and thank you, management. I have a question from my end about the rates. From the both ministries, are there any changes that you are expecting in the coming period?
Speaker #3: Maybe Majid can address this. I think from one ministry, we might expect some potential improvement.
Speaker #2: Yeah, both.
Speaker #3: Yes, Ministry of Education, there is an intention to increase. However, this is tied, of course, to very specific requirements to do with quality, etc.
Speaker #3: So we are just anticipating the final guidelines on this. And inshallah, there will be potential for that increase. In terms of the Ministry of Human Resource Social Development, currently, there is no such plan.
Speaker #3: The drive is to reach as many beneficiaries as possible for now.
Speaker #2: Okay. And for the because I also noticed a big increase in the number of schools from around 10 to 15. So you increased it quite substantially.
Speaker #2: Is there a reason for that? Because the growth there is much faster than the growth in the centers. So you believe that there's more opportunity in the schools now because of a trend or more support from the Ministry of Education to make students within the normal schools, or is this something else?
Speaker #3: Yeah. I think when we look at it, we like both. We did grow schools a little bit faster more recently. And we are tilting we do see a lot of opportunity in the school segment.
Speaker #3: As Majid mentioned, there are indications that the fees will be increased for the schools. We haven't received the exact rates yet. Which is still subject to a certain assessment by the ministry.
Speaker #3: However, we do expect it to go up for the school students. On the daycare center side, there is a temporary suspension of new licenses currently, which will impact the ability to open new centers in the very near term.
Speaker #3: However, this is very much a temporary measure put in place by the ministry as they roll out new regulations in the sector.
Speaker #2: Okay. So it's per center, it's not per company. Basically, opening new branches and each branch will require a separate license.
Speaker #3: Yeah. So yeah, yeah. It's even a new license. Yeah, exactly. For new centers as well as even opening a new shift requires a new license.
Speaker #3: So all of that is temporarily suspended and so in September, we don't expect to have any new licenses on the center side.
Speaker #2: Okay. And regarding payment from both ministries, are you experiencing any delays in the payments or the grants for the teachers?
Speaker #3: No. Ahmed can thank you. Yeah. So no. On we do not see any payments, actually. The collections is on track and almost fully completed fully collected.
Speaker #3: For the September semester. And the giant semesters actually collection is faster than last year. And has started and lasted faster than last year. So this is on HDC side.
Speaker #3: So, collection actually is on track.
Speaker #2: Okay, thank you so much. The next question is from the line of Mohammed El Mashal. Mohammed, please unmute locally and go ahead. Mohammed, you can unmute locally from your phone and go ahead.
Speaker #4: Hello. Am I audible?
Speaker #2: Yes, you are. Please go ahead.
Speaker #4: Yes, thank you so much for having me, and congratulations to management on the results. I have two questions regarding what you mentioned, Majid, about the revenue improvement because of the ramp-up of utilization.
Speaker #4: Could you give us the Q2 utilization rates of schools and daycares, if possible?
Speaker #3: Yeah, on average, yeah. Thank you. Maybe then, thank you, Mohammed. On average, the utilization for centers is 60–61% utilization. And similar utilization at the owned schools, slightly lower, but both are improving year on year with the addition of the centers.
Speaker #3: Last year, at the same time, we had 36 daycare centers. By the end of June, we had 41 daycare centers. For the same schools, we had 10 schools.
Speaker #3: Now we have 15 schools.
Speaker #4: That's great. And my other question is regarding the in the release announcement, you mentioned that there was a seasonality effect because of HDC didn't recognize two months of tuition revenue.
Speaker #4: Could you just mention what these services are? And, going forward, do you expect the seasonality effect in Q3 and Q4 for all business segments?
Speaker #3: Yes, thank you, Mohammed. That's a good opportunity to explain this. For HDC, the academic year ends in May, so there is no revenue in June.
Speaker #3: So, comparing quarter over quarter, revenue is less at HDC mainly because it has only two months of revenue, given the academic year ends in May.
Speaker #3: And this is the normal seasonality. It's ongoing. It will happen on an annual basis.
Speaker #2: We also do have—it's important to note—there is seasonality in the business. As every year, we have the same, very similar cycle. And so in Q3, so that you are aware, in Q3, we have much lower revenues than in Q1, Q2, and Q4 because of the summer break, and hence the businesses will not be generating revenue in a large portion of the summer.
Speaker #2: And hence, there is seasonality. You should expect it. And it's the same seasonality that we have had in prior years. So nothing to be alarmed about or anything in Q3.
Speaker #2: There will be a reduction in revenue just because the schools and the centers are closed.
Speaker #4: That's great. Thank you very much.
Speaker #2: Thank you. I also have another question from my end. I noticed that you still haven't opened new centers in Jeddah. Based on the previous question about acquisitions or building yourself, and the license as well that you mentioned, what are your plans going forward for Jeddah, since it's a major city?
Speaker #2: Of course, it will open a good demand for you. Or good growth for you.
Speaker #3: Absolutely. I think maybe if we take a step back in special needs we see strong demand. As shown in the first six months of the year.
Speaker #3: There are as we mentioned, some changes in regulations that are coming through. And hence, the suspension of licenses. I think on the basis of that, we see over the next 12 to 24 months companies like ourselves will be able to manage through any changes because of our size, our scale.
Speaker #3: And our abilities. However, there might be many smaller players that will have one of two options: either maybe close, which will reduce overall market capacity and give us the ability to grow.
Speaker #3: Or two, we'll look to sell. And so, definitely, we see opportunities arising over the next 12 to 24 months to take share and potentially drive consolidation.
Speaker #3: However, we have to be really careful about the infrastructure that we're buying into to make sure it meets all the standards, or can be brought up to the standards with limited investment.
Speaker #3: So we do see that opportunity, especially with the licenses temporarily on hold. We think over the next 12 to 24 months we will have good opportunities to grow through consolidation and acquisitions.
Speaker #2: Okay, great. There's a question in the Q&A box: Given the current geopolitical situation, are you offering any discounts or special concessions in the UAE for international or local students?
Speaker #3: Not any more than usual. And actually, we're increasing the fees, so we're increasing the fees, and we have in place the same promotions as historically.
Speaker #3: So no additional or special promotions for this year.
Speaker #2: Thank you. There's a follow-up question from Sarah Bassem. Sarah, please unmute locally and go ahead.
Speaker #5: Thank you, Imad. Just a follow-up from my end. Mohammed, you previously mentioned improved STRs. Can you please provide some more color on which segments the STR improved?
Speaker #5: Was it HDC or MDX? And how much is the new versus the previous? Hello?
Speaker #3: Yes, yes. It's on HDC level, Sarah. And this improvement is to contain, as we highlighted, to contain cost and maintain and achieve operating efficiency.
Speaker #3: So, this is on HDC level.
Speaker #2: And Sarah, as the older centers mature, as we said, 80% of the growth in enrollments are from the existing centers. And hence, as these mature, and ramp up, there is an improvement in the gross margin item.
Speaker #5: Perfect. Thank you.
Speaker #2: Thank you. Another question from Al-Anoud—she's asking, Al-Anoud Al-Rashid—she's asking, have you secured any daycare licenses ahead of the suspension? Maybe she's asking if there's something in the pipeline that we expect for the remainder of the year.
Speaker #2: And she's asking: Do you have clarity on when all the suspensions will be lifted?
Speaker #3: On these questions so far, the licenses that we have in place, are in place. There is a potential for one more. That we are making the case that we applied prior to the suspension.
Speaker #3: However, we cannot guarantee whether it will be granted or not. And the clarity on the timing is something we are in constant discussion about.
Speaker #3: With the regulator, so far they have not given us a timeline. They stressed that it's temporary, but we may be asking them once a week when this will be lifted.
Speaker #3: But so far, we don't. We do not have that information.
Speaker #2: Another question from Ahmad Ishaqi. Ahmad, please unmute locally and go ahead.
Speaker #6: Assalamu alaikum. Am I audible?
Speaker #2: Wa alaikum assalam. Yes, you are.
Speaker #6: I just had one question. Firstly, congrats on a great set of results. So, one question from my end: given that we're already in mid-August, have you seen any decrease in enrollments in NEMA or MDX?
Speaker #6: And apologies if you already answered this question. I entered the call a bit late.
Speaker #3: No, Ahmad, thank you for the question. No, we have definitely seen no declines so far in the number of students that are registering and paying their deposit, so that gives us a sense of the new intake for September.
Speaker #3: Those numbers are tracking in line with our targets. They are growing year on year; the growth is just being driven more domestically this time around.
Speaker #6: So in terms of mix between international and local enrollments, what kind of change have you seen?
Speaker #3: Both are growing today; both are growing. So, international is growing. Payments today versus the same time last year are higher for international and much higher for domestic.
Speaker #3: Where typically it used to be kind of flipped, where domestic grows and international grows much higher, this time the dynamics have shifted. We put in some initiatives on the domestic market to try to grow it, which is a good thing.
Speaker #3: Because it's reaping rewards. However, the international is not growing as fast, probably because of the kind of the regional tensions. Once this is resolved, we expect that to grow.
Speaker #3: And then that will really give us a accelerated growth, both domestic is growing at what it's growing right now, and international goes back to historical, we would be in a really excellent position.
Speaker #3: But so far, we're growing year on year. We're on target, and so yes.
Speaker #6: So have you offered any discounts to domestic because if I recall during your IPO, the discounts were given to international students, rather than domestic.
Speaker #6: So have this changed?
Speaker #3: No, it's the same. It's the same policies as historically. And it's a 2 to 3 percent increase in fees, so expect it to be a 3 percent increase in fees.
Speaker #6: Perfect. Thank you. And all the best.
Speaker #2: All right. Thank you, Ahmad. I have some questions since you mentioned the pricing. So for the Saudi, for HDC, do you have any expectations about the percentage of increase that might come from the Ministry of Education?
Speaker #3: I think it's I think it's not maybe useful to speculate. What I can an increase would be quite beneficial for the margins of that segment.
Speaker #3: We have internal expectations. However, they haven't been communicated formally to us. The fees, generally, for the Ministry can reach levels that are higher than current by, say, 10% to 20%.
Speaker #3: And hence, depending on the full assessment of the Ministry of our facilities, then we will know for sure what the number is. This may be gives a data point.
Speaker #2: But you mentioned something about quality at the beginning. So maybe you will need to also improve something, hire more skilled people, and that will offset the margins.
Speaker #2: Well, that is not the case.
Speaker #3: I think they will judge us on where we are, which we think we are doing well where we are right now. And they'll give us an evaluation based on what we have in place.
Speaker #3: And hence, any increase would be positive because it's aligned with the existing service. Now, once we understand the evaluation metrics and everything, then we can assess in the future: do we want to get the highest, or maybe not the highest, rating if it requires or results in a reduction in margin.
Speaker #3: So we don't have these details today. So we're running the business as always. So the cost side is the same. If we get the increase, which we hopefully expect, then it will be a positive.
Speaker #2: Right. And therefore, HRDF, you mentioned that there are no price increases. Are you pushing for something or highlighting to the ministry that, yeah, the cost is high or the requirement is higher?
Speaker #2: Or they are aware that there should be an increase because to match the international quality or something like this?
Speaker #3: Maybe Majid can quite a bit on this front.
Speaker #5: Yeah. Basically, there is this constant dialogue there is a constant dialogue between the sector and the ministries. And there is effort on the part of the ministries, especially MESA, to assess the how do we compare regionally and internationally, be it for both sector, be it normal Ministry of Education level of schooling and services, or be it at the special needs at Ministry of Human Resource Development.
Speaker #5: There have been studies that have been completed and presented for both ministries. And we believe this has been an ongoing subject for a while now on the part of the ministries.
Speaker #5: I think the Ministry of Education has now taken some initial steps. We don't have the—as Fadi said—we don't have full clarity on that.
Speaker #5: They want to strike both they want to tie the increase into really an improvement in quality. So there is a matrix that they still working on.
Speaker #5: And we have yet to see that ties either fees to certain quality levels. The same thing, I think, an effort also on the part of Human Resource Development to reconsider some of that.
Speaker #5: However, the challenge for Human Resource Development is that they wanted to reach as many people as possible before their consideration for a tuition increase.
Speaker #2: Okay. And the other question about MDX: I noticed that quarter-on-quarter revenues were flattish, but net income increased significantly. So, is there a reason behind that?
Speaker #3: They might have a sense of, yeah, can you help us on this? Sorry, the revenues are?
Speaker #2: So quarter and quarter for MDX. I think the numbers are flat or it's not showing a very strong growth, but net profit was growing substantially.
Speaker #2: I think here you're referring to—so in Q1, it was 104, and in Q2, 104. It's not here in the year, in the document that we shared earlier.
Speaker #3: Yes. It's not here.
Speaker #2: But net income, or net profit.
Speaker #3: It's just thirty-nine. Go ahead, Ahmad. It's mainly because of the—yeah, yes. Thank you. Yes, mainly it's because of the April intake and MDX.
Speaker #3: And with some also with some efficiency on the cost of structure on the direct cost of structure.
Speaker #5: Are the marketing agency fees paid more in Q1 than in Q2? Is that potentially it? I'm not sure. There could be potential timing also, yeah, of certain costs.
Speaker #5: And when they're booked in the financials.
Speaker #3: Okay. Clear.
Speaker #2: The last question from the chat box is from Al-Anood. It's a follow-up question: Can you share the amount or percentage of the tuition increase that will be implemented next year for MDX?
Speaker #2: Will that increase be for domestic students, or for all?
Speaker #3: Two to three percent. And the way it works is we have a headline fees. Those will increase. And then for every and then we have certain discounts and promotions that are the same as prior years.
Speaker #3: So, overall, we expected to see the same net increase in both segments.
Speaker #2: Okay, thank you. Just one last thing.
Speaker #3: Mix will have, yeah. Mix will have, yeah. Go ahead.
Speaker #2: Just one last question before we conclude. Any updates about the residential segment?
Speaker #3: So far, the residential, like we said, we already have a couple of centers that are licensed. The Ministry began tendering some beneficiaries to the private sector.
Speaker #3: However, the tenders have been very much focused on certain cities. So the tenders were very focused and narrow, and our centers were not in those geographies.
Speaker #3: So we expect initially a tender approach. But our understanding is, over time, it will be similar to the daycare centers, where the parent can choose where they put their children and their relatives.
Speaker #3: But that's still an ongoing file with the ministry.
Speaker #2: Okay, thank you so much, Fadi and management, for taking the time to conduct this call. Any final remarks, Fadi, before we conclude?
Speaker #3: No, I think that's all. Thank you very much for your time. We're very happy with the results for the first half, and we look forward to speaking with you again in the future.
Speaker #3: Thank you.
Speaker #2: Insha'Allah. Thank you so much. It's in the capital. We'd like to thank Almasar Alshamil management for taking the time to conduct this call. We would also like to thank all participants for attending.
Speaker #2: Wish you a pleasant day. Thank you.
