Bright Scholar Education Q2 2024 Earnings Call Transcript

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April 19, 2024

There are 4 speakers on the call.

Operator

Hello, ladies and gentlemen. Thank you for standing by for Bright Scholar's Second Quarter of Fiscal 20 24 Earnings Conference Call. At this time, all participants will be in a listen only mode. After the management's remarks, there will be a question and answer session. Today's conference call is being recorded.

Operator

I would now like to turn the call over to your host, Ms. Andrea Guoal, Investor Relations Counsel of the company. Please go ahead, Ms. Andrea.

Speaker 1

Thank you very much. Hello, everyone, and welcome to the Bright Scholar's earnings conference call for the Q2 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.bratzcholar.com. Please note that today's discussion will contain forward looking statements made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. Forward looking statements involve inherent risks and uncertainties.

Speaker 1

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 1

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

Speaker 1

Cindy Zhang, who 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 our Chief Executive Officer, Mr. Robert Liu. Please go ahead, sir.

Speaker 2

Thank you. And it's my pleasure to speak with you today. Our turnaround has taken root in fiscal 2024. We are actively restoring growth and profitability while strengthening our balance sheet. Last quarter, I discussed our strategic initiative to revive our business and how this will restore our growth in revenue and EBITDA.

Speaker 2

As promised, we continue to grow these metrics in the 2nd fiscal quarter, making our 2nd consecutive quarter of year over year improvement. In the 2nd fiscal quarter, our total revenues increased 17.2%. Gross profit surged 40.2 percent and our adjusted EBITDA was RMB 33,700,000 versus a loss for the same period last year. These gains reflect the strength of our strategic initiatives, showing we are on the right path to sustainable growth and profitability. Our operational efficiency is better than ever and our cost controls are proving effective as we continue to restructure our business portfolio.

Speaker 2

We are heavily focused on our CAS Global Schools network, while we look for opportunities to divest some of our non core assets. Leveraging our established global network of schools and the ecosystem, we believe we can accelerate our overseas revenue growth and create sustainable value for both customers and shareholders over the long term. Now, I'd like to share some details from the quarter on each of our business segments. First, the recovery of our overseas school segment is still the strongest, With revenue up 20.5% year over year in the 2nd fiscal quarter, this business is our primary revenue source and will continue to be our growth engine. Year to date, a total of 224 students have accepted our offer and registered at our overseas K-twelve schools for enrollments in September, marking a 20% year over year increase.

Speaker 2

This demonstrates the growing demand for the high quality education our schools deliver, as well as the unique advantages we can offer. Scale and better utilization will drive our top line growth while expanding our bottom line through increased operating leverage. All of our schools are driven to continually improve the quality of offerings we provide. These efforts are proving effective and we are gaining increasing attention and recognition that continues to support enrollment in the wake of pandemic. In February this year, the Telegraph named our St.

Speaker 2

Michael Schools as the best value school in the UK in 2024. Out of more than 2,500 other independent schools, St. Michael's was named the number one school in the UK, offering the highest academic return on fees. Many of our students go on to prestigious colleges based on their stellar education we provide that prepares them for their next educational success. 6 of our CAST Global Schools students receive offers to study at University of Cambridge, the University of Oxford and 2 students receive offers to study at Ivy League Universities, setting a new company record.

Speaker 2

These results are made possible by the huge monitoring efforts provided by our dedicated teaching teams. Our key profession program leaders provide personalized advice on the combination of academic subjects, independent study, research projects and extra curriculum experience relevant to their students' specific choice of degree. As part of this service, students receive support with applications, admission tests and interview preparation, including advice for alumnis and university lecturers. Overall, we made significant progress with our Bright Scholar's overseas schools business in the 2nd fiscal quarter. Our commitment to providing our students with a world class education and preparing them for in the global marketplace remains central to our growth and ability to accelerate enrollments.

Speaker 2

Moving on to our complementary education services, this segment sustained steady revenue growth of 19.5% year over year in the fiscal Q2, mainly driven by the recovery of our overseas study counseling business. Meanwhile, revenue from our domestic kindergartens and K-twelve operation services segment declined by 1.5% year over year, which aligns with our internal expectations. In addition, we continue to build leaner, more efficient operations throughout the period. In the 2nd fiscal quarter, we remained focused on refining our products and services. We further prioritize streamlining our overseas schools offerings to enhance their operational efficiency, while recognizing the diverse needs of students from different parts of the world.

Speaker 2

We continue to tailor our high quality educational products to meet these needs. We are committed to strengthening our each of our schools' strategic positioning and cultivating their unique specialties, aligning with the nuanced demands of their target students. In summary, the 2nd fiscal quarter has shown that our business has officially turned the corner through continued strong growth and profitability that we began at the start of this fiscal year. The dedicated blend of our better utilized resources and streamlined cost structure have sharpened our ability to revitalize our business. Our main goal remains to maximize our value, both internally and externally.

Speaker 2

We will do this by optimizing our restructuring and operations to scale and accelerate our high return business. Our progress will translate to ongoing year over year growth in our revenue, EBITDA and ultimately our cash flow. Meanwhile, we will continue to consolidate and strengthen our overseas business operation in the UK, while we have an established global network of renowned schools and an intensive ecosystem of educational resources. Looking ahead, we are gearing up to capture both growth opportunities and solidify our position as a global premier education service company. With that, I will turn the call over to our CFO, Ms.

Speaker 2

Cindy Zhang, who will discuss our key financial results. Please go ahead Cindy.

Speaker 3

Thank you, Robert. Now I'd like to discuss our financial results for the Q2 of fiscal 2024. Please note that all comparisons refer to year over year comparisons and for the Q2. Our total revenues increased by 17.2%, driven by increase in our older fiscal business and complementary education services, which grew 20.5% and 19.5% respectively year over year. Meanwhile, we achieved profitability for the Q2 and our gross margin increased by 510 basis points reflecting our ongoing optimizations in our cost structure and operation expenses.

Speaker 3

Next, I will walk you through more details of our Q2 financial results. Total revenue increased by 17.2 percent to RMB 521,400,000 from $445,100,000 for the same quarter last fiscal year. Overseas Group's revenue increased by 20.5 percent to $248,900,000 from RMB206 1,000,000 for the same quarter last fiscal year. This increase was mainly attributable to increase in both the number of students and the average tuition fees of overseas schools. Complementary Education Services revenue increased by 19.5% to $214,100,000 from $179,000,000 for the same quarter last year.

Speaker 3

The increase was mainly attributable to the recovery of our overseas study counseling business as well as upticks in our international contact training and other business. Domestic kindergartens and K-twelve operation service revenue was RMB59 1,000,000 compared to RMB60.1 million for the same quarter last year. Cost of revenue was RMB359.8 million or 69% of revenues compared with RMB 329 point 7,000,000 or RMB74.1 million for the same quarter last year. The improvement was mainly attributable to cost saving measures and efficiency enhancements at our headquarters. Our gross profit increased by 40.2 percent to RMB171.7 million from RMB115,400,000 for the same quarter last year.

Speaker 3

The increase was mainly attributable to revenue growth in our overseas schools and complementary education services. Gross margin increased to 31 percent from 25.9 percent for the same quarter last year. Adjusted gross profit increased by 38.3 percent to 1 $164,300,000 from $119,200,000 for the same quarter last fiscal year. Our SG and A expenses decreased by 5.8 percent to 146,800,000 from RMB155,900,000 for the same quarter last year. The decrease was mainly attributable to cost saving measures and efficiency enhancements at our headquarters.

Speaker 3

Our adjusted EBITDA was $33,700,000 compared with an adjusted EBITDA loss of $26,600,000 for the same quarter last year. Net income was RMB 2,900,000 compared with a net loss of RMB to RMB15.8 million for the same quarter last fiscal year. Adjusted net income was RMB7.1 million compared with the adjusted net loss of RMB47.8 million for the same quarter last fiscal year. As of the end of the February this year, the company had cash and cash equivalents and restricted cash of RMB496,900,000 compared with $467,200,000 as of August 31 last year. Looking ahead, we will remain focused on prudent cost management and strategic portfolio restructuring to optimize returns, while bolstering our financial spending through margin expansion, strengthening our balance sheet and enhance our cash flow.

Speaker 3

By maintaining a healthy balance between our growth momentum and cost, we are confident we can generate long term value for our customers and shareholders alike. Okay. This concludes all our prepared remarks today. We will now open the call to questions. Operator, please go ahead.

Operator

Thank you. We will now begin the question and answer session. And this concludes our question and answer session. I would like to turn the conference back over to Ms. Andrea Guoal for any closing remarks.

Operator

Please go ahead.

Speaker 1

Thank you once again for joining us today. If you have further questions, feel free to contact Red Scholar's Investor Relations through the contact information provided on our website.

Operator

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

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Bright Scholar Education Q2 2024
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