Bright Scholar Education Q1 2024 Earnings Report

Bright Scholar Education EPS Results

• Actual EPS: $0.28
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Bright Scholar Education Revenue Results

• Actual Revenue: $80.26 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Bright Scholar Education Announcement Details

• Quarter: Q1 2024
• Date: 2/5/2024
• Time: N/A
• Conference Call Date: Tuesday, February 6, 2024
• Conference Call Time: 8:00AM ET

Bright Scholar Education (NYSE:BEDU), an education service provider, operates and provides K-12 schools and complementary education services in China, Hong Kong, Canada, the United States, and the United Kingdom. The company operates in three segments: Overseas Schools; Complementary Education Services; and Domestic Kindergartens and K-12 Operation Services. It also offers a range of complementary education services, including camps and after-school programs, and international education consulting services, as well as career counselling and international contest training services. The company was founded in 1994 and is headquartered in Foshan, China.

Bright Scholar Education Q1 2024 Earnings Call Transcript

[Operator]

Good morning and thank you for standing by for Bright Scholar's First Fiscal Quarter of Fiscal 20 24 Earnings Conference Call. At this time, all participants are in listen only mode. After management's prepared remarks, there will be an opportunity to ask questions. Today's conference is being recorded. I would now like to turn the meeting over to your host for today's conference, Ms.

[Operator]

Ruby Yim, Investor Relations Counsel. Please go ahead.

[Speaker 1]

Thank you, operator. Good morning, good evening, everyone. I would like to welcome you to Bright Scholar's 1st fiscal quarter 2024 and November 30, 2023 earnings call. With me today on the call are Mr. Robert Niel, our Chief Executive Officer and Ms.

[Speaker 1]

Cindy Zhang, our Chief Financial Officer. The agenda today is Robert will start the call with an update on progress of our strategic initiatives to be followed by our business performance in 1st fiscal quarter and strategic priorities in fiscal year 2024. Before Cindy to walk you through our key financial performance, we will then open the call for questions. As a reminder, today's conference call being broadcast live via webcast. An additional replay will be available on our website following the call.

[Speaker 1]

By now, you should have received a copy of our press release that was distributed on February 5, 2024 after market closes Eastern Time. If you have not, it is available on the IR section of our website. Before we get started, let me remind you that today's call may contain forward looking statements within the meaning of Section 21E on the Securities Exchange Act of 1934, as amended and as defined in the U. S. Private Securities Litigation Reform Act of 1995.

[Speaker 1]

These forward looking statements include, without limitation, the company's business plans and developments, which can be identified by terminology such as may, will, expect, anticipate, aim, estimate, intend, plan, belief, potential, continue, is or are likely to or are the similar expressions. Such statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ materially from those 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.

[Speaker 1]

The company does not undertake any obligations to update any forward looking statements as a result of new information due to events or otherwise, except required under law. During this call, we will 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. These 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.

[Speaker 1]

GAAP. Please note, all numbers in our management remarks are in RMB and all comparisons refer to year over year comparisons unless otherwise stated. You can download a copy of our earnings presentation on our IR webpage. With that note, I'll turn the call over to our CEO. Robert, please go ahead.

[Speaker 2]

Thank you, Ruby. And I want to welcome you and thank you for joining our conference call. Today, I'm delighted to have the chance to speak with you in this setting. In our call, I'll begin with an overview of the strategic initiatives we've implemented as an ongoing effort to turn the business around, highlight the progress and accomplishments we've made over the past year, share my expectations on the company before briefly touch on our fiscal 1Q performance. Finally, I want to outline what we can expect from our management and global teams regarding our strategic priorities for the rest of the year and beyond.

[Speaker 2]

Our aspiration has always been to continuously build a global premier service company that offers world class education. Slide 6 displays our portfolio of companies. In less than 12 months, since joining the company in my previous role as CFO, I have had the opportunity to travel to and spend time with management teams in the UK and China offices. This experience has allowed me to gain a holistic understanding of our businesses, which has been profoundly impacted by the pandemic. Immediately, we recognize the immense opportunity, which has have been for the business recovery and convinced that we can unlock significant better outcomes if we fine tune the way we operate.

[Speaker 2]

Following a thorough review, we've identified gaps for improvement and opportunities for the business recovery. Following a thorough review, we've identified gaps for improvement and opportunities to capitalize on, prioritize our strategy imperatives and initiate efforts to reengineer our cost base. Again, the goal of our post COVID turnaround strategy is to reset our business around economies that is designed to deliver sustainable high return growth in revenue, EBITDA and cash flow, advancing operational efficiency and the coveraging competitive cost structure are essential pillars for executing our strategic growth plan in the years ahead. Let me share with you the progress in slide 7, the areas and actions that have already been set in motion, and we are committed to sustaining these efforts throughout the ongoing year. Number 1, our first step involves restructuring and streamlining our operations at our China headquarters.

[Speaker 2]

These efforts, we have successfully made our operations leaner and more efficient. This included the removal of middle layers to facilitate direct and effective communications within senior management and business leaders, the outcome has been remarkably encouraging. Concurrently, our headquarters have decreased substantially by half. For our overseas operations headquartered in the UK, under the brand of Cash Global Foods, we have commenced various initiatives. Firstly, we have reinforced internal controls, establishing it as a key performance indicator for our management team and business leaders.

[Speaker 2]

As a result, we have successfully addressed and resolved the 2 material weaknesses identified in our 20 F of financial year 2022. Secondly, we initiated to conduct a comprehensive assessment of our organizational, operational and cost structure, seeking potential avenues for improvement. Thirdly, we continue to leverage organic growth opportunities through increase in utilization as readily achievable gains. Number 3, simultaneously, we took initial steps to improve our financial agility by strengthening our balance sheet. We paid off all the outstanding bank loans by July 2023.

[Speaker 2]

We have also initiated plans to decrease our liabilities and strengthen our balance sheet. Supplementing our continuous effort to boost return through cost reduction measures and operational efficiency enhancements. The focus on executing our turnaround strategy in fiscal 2023 enabled us to conclude the fiscal year strongly. This revenue greatly exceeded the top end guidance and bottom line improved with operating loss and income loss significantly reduced. This in turn leads us to our 1st fiscal quarter 2024 performance in slide number 8.

[Speaker 2]

We achieved our fiscal year 2024 with a solid start as we continue to make great strides in revitalizing our business and revamping our global operations. In the 1st fiscal quarter, we achieved 7.6% increase in revenue, coupled with a substantial improvement of 13.1% in gross profits, 14.8% in operating income and 40.9% in net income compared to the same quarter in the previous fiscal year. The recovery of overseas school segment remained the strongest, marked by a 28.4% increase in top line revenue during the 1st fiscal quarter. This segment continues to offer significant opportunities for scaling growth and the bottom line enhancement through increased operating leverage. Meanwhile, the complementary education services segment sustained steady revenue growth, predominantly driven by the recovery of overseas study counseling business, which achieved a 12.8% revenue increase in the 1st fiscal quarter.

[Speaker 2]

Conversely, the domestic kindergartens and K-twelve operation services segment continued its contraction, recording a 26.4% decrease in revenue, aligning with our internal expectations. As we progress into the remainder of fiscal 2024, the advancement and initiatives achieved during fiscal 2023 and the 1st fiscal quarter of 2024 have established a strong foundation for executing our multiyear strategic plan with the goal of shaping a portfolio business geared towards sustainable revenue growth, enhanced EBITDA and solid cash flow through heightened operational efficiency. The following slides offer an overview of our goals and priorities for our respective business segment. Slide number 9 shows you the business and operational structure of our overseas school segment with headquarters in U. K.

[Speaker 2]

Our primary focus in financial year 2024 is to maximize both internal and external value creation by optimizing, restructuring and operating leverage. With ultimate objective of building scale and high return business in the longer term, Strategic change we plan to implement in fiscal 2024 are expected to result in significant bottom line improvement in the years to come. As for the company mentioned, education services and domestic kindergarten and K-twelve operation services segment as shown in Slide 10. Our focus in financial year 2024 will be firmly on portfolio and cost optimization for further improved returns through divestments of non core education business. In brief, we'll intensify the restructuring of our portfolio and global operations through risk for profitability and strengthening the balance sheet.

[Speaker 2]

Beyond recovery, we will also pursue growth opportunity with our Go Global strategy, recapped in Slide 11 for your reference. To conclude, our focus remains on nurturing high growth, high return business while bolstering our financial standing through margin expansion, strengthening our balance sheet and enhancing cash flow. Our overarching goal is to establish a position of strength, providing ample room to pursue scalable business expansion with sustainable capability well into fiscal year 2025 and beyond. We firmly believe that this marks a pivotal step in driving forward looking value creation for our stakeholders in the long term. I'm fully aware that we are asking a great deal from our employees to walk through the necessary change And I deeply appreciate their support and ongoing commitment to deliver on our company's purpose.

[Speaker 2]

I extend my heartfelt gratitude to our talented global teams for their passion and steadfast dedication, which continues to drive our solid business and financial performance. With these notes, I'll turn the call over to Cindy.

[Speaker 3]

Thank you, Robert. Thank you, Ruby. Let's turn back to our financials. Please be reminded that all numbers are in RMB and all comparisons refer to year over year comparisons unless otherwise stated. Please also refer to our earnings press release for detailed information for our comparative financial performance on a year over year basis.

[Speaker 3]

Please turn to slide 13. We ended the 1st fiscal quarter with revenue up 7.6% to $572,700,000 Overseas Goods remain to be the best performing segment with revenue up 28.4 percent to 252,900,000. This is due to the recovery of overseas goods operating from the dynamic. For our complementary education services segment, the growth has been steady. Revenue was up 12.8 percent to 210,000,000 dollars which was primarily due to gradual recovery of our overseas study counseling business.

[Speaker 3]

However, our domestic kindergartens and K-twelve operation service has continued to experience a downward trend with revenue down 26.4 percent to RMB109.9 million. This is in line with our internal projection and we anticipate this change to persist throughout the fiscal year. On slide 14, cost of revenue for the fiscal quarter improved to 64.5 percent of total revenue compared to 66 0.2% of total revenue for the same fiscal quarter last year. The improvement was attributed to our ongoing initiatives to enhance our cost structure. This enhancement of our cost structure along with the solid recovery momentum in our business, especially within the overseas group segment, led to an upturn in gross profit and an improvement in gross margin.

[Speaker 3]

Our gross profit for the fiscal quarter was up 13.1 percent to 203,400,000 and the gross margin improved to 35.5 percent from 33.8% as shown in slide 15. Please moving to the slide 16 to have a look at the improvement in our SG and A expenses. Our ongoing efforts to optimize costs and operations at our headquarters have once again proven rewarding, resulting in decrease in SG and A as a percentage of total revenue to 24.1% from 26.3%. Slide 17 shows our adjusted EBITDA was up 0.8% to RMB90,800,000 Adjusted net income was up 37.3% to $61,900,000 and net income was up 40.9 percent to 59,200,000 This improvement in our bottom line is our top priority. As we move forward, our focus remains on prudent cost management and strategic portfolio restructuring to optimize return and strengthen our balance sheet and cash flow, which are essential for our future expansion in the years to come.

[Speaker 3]

Lastly, please refer to slide 19 for our management team. Slide 20 for the condensed income statement. Slide 21 for the consideration for net income and EBITDA on a GAAP to non GAAP result. And slide 22 for our condensed balance sheet and cash flow statement. This concludes my financial update and our prepared remarks And we'd like to open the call for questions.

[Speaker 3]

Operator, thank you.

[Operator]

We will now begin the question and answer session. With there being no questions, this concludes our question and answer session. Now I will turn to Robert for his closing remarks.

[Speaker 2]

Okay. Thank you, operator. I'm excited about our opportunities and our future. I look forward to leading Bright Scholar to new heights and sharing our progress with all of you along our journey. Thank you very much for joining this conference call.

[Speaker 2]

Please feel free to contact us if you have any further questions. We wish everyone a good day. Thank you.

[Operator]

The conference is now concluded. Thank you for