Bright Scholar Education Holdings Limited (NYSE:BEDU) Q4 2024 Earnings Call Transcript

Bright Scholar Education Holdings Limited (NYSE:BEDU) Q4 2024 Earnings Call Transcript November 25, 2024

Operator: Hello, ladies and gentlemen, thank you for standing by, for Bright Scholar’s Fourth Quarter and Fiscal Year 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. After the managements’ 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 from 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 fourth quarter and fiscal year 2024. 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. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company’s results may materially differ from today’s views. For the 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. Additionally, Bright Scholar’s earnings press release and this conference call include discussions of our 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. Ruolei Niu, who will provide a company overview and update on our strategic initiatives with highlights from the quarter and the fiscal year. 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, Mr. Ruolei Niu. Please go ahead, sir.

Ruolei Niu: Thank you. Hello, everyone, and thank you for joining us on today’s call. We posted with our global business and operations throughout this year, showing up our foundation for future growth, despite ongoing macro challenges with geographic expansion in our overseas business, delivering continued double-digit year-over-year revenue growth in our overseas schools business for the full fiscal year. Our primary objectives remain laser focused on strengthening our high growth, high return core business. With this focus, I’d pleased to announce that we have completed divestiture of all non-core business on our Complementary Education Services segment, and we’ll be concentrating our efforts on our global recruitment initiatives, providing service positions with ambitions to study overseas.

Q&A Session

Meanwhile, the integration of our headquarters and overseas management team has also helped us with reducing management costs and increase our organizational productivity significantly, allowing the group strategy to be executed more efficiently at the local level. In FY ’24, our streamlined global operations led to a 16% reduction year-over-year in headcounts at our overseas headquarters, and a 28% decrease in related costs for the upcoming financial year. Moving into fiscal year 2025. We plan to reinforce two engine growth strategy by focusing on continued expansion of our overseas school business, while propelling our global recruitment initiatives for prospective internal students. This will enable us to drive further expansion and capture more of the sizable market opportunities that will support our sustainable growth over the long-term.

Now I’d like to share some details on the fourth quarter and fiscal year for each of our business segments. First, as I said, overseas schools attained solid growth momentum and remain our strongest segment. For the fiscal year, revenue was up 17.5% year-over-year, accounting for 51.7% and 54.2% of our total revenue for the fourth quarter and the fiscal year, respectively. The ability to achieve exceptional academic outcome is one of the ways we are accelerating the enrollment. Our schools continue to foster students’ stellar academic performance this year. We are proud to share that our CATS Global Schools students achieved outstanding A level results, with 53% of grades being A* to A, while a remarkable 86.8% of St Michael’s School students grades were A* to A, propelling the school to a new high ranking of third place in the U.K. for A level results in 2024.

Moreover, many CGS students successfully gained admissions to their top choice universities, including the University of Cambridge, the University of Oxford, other G5 institutions, and the University of DR London (ph). Additionally, CGS students also received offers from ivy League schools in the United States. Those notes were the achievements are a testament to the dedication and diligence expressed by the — our students and our teachers. Moving forward, we aim to enhance our curriculum further by bringing superior quality teaching resources and sponsoring a collaborative learning environment. Beyond the remarkable academic accomplishment, our students have also excelled in athletics and art. In the fourth fiscal quarter, [indiscernible] collegiate schools graduates, secured gold medals at the 2024 Paris Paralympics, making three golds, one silver and two bronze.

Notably, two of these athletes honed their skills at the sports academy within PCS. In other sports, our CATS academy Boston is excelling in hockey and basketball with students representing a broad range of national teams. And in fashion, four of our Cambridge School of visual performing arts, students were nominated seven awards at gradual fashion week, the world’s largest special of arts fashion showcase, setting out our 2,000 entrants and showcasing the impressive talent and creativity. This exceptional blend of talent highlights our students diverse strength and reinforces the importance of holistic education programs that nurture both intelligence and creative pursuits. Looking ahead, we are dedicated to cultivating an environment that poses continued success inspiring the next generation of leaders across diverse fields.

Overall, we are pleased with the progress of our overseas school business during the fourth fiscal quarter. Our commitment to provide a premium education that prepares students for success in the global marketplace propels our business growth accelerating year-over-year increase in enrollments. Moving on to our Complementary Education Services. We saw a 19.7% year-over-year decline in revenue during the fiscal fourth quarter as we continue to wind down low return and underutilized programs. We have successfully divested our non-core business by the end of this quarter. Looking forward, we aim to drive innovation and enhance service delivery of our global recruitment initiatives to serve more students planning to study abroad. We are expanding our products and services offering on our existing China platform and make this available in more international markets.

All while aligning our efforts with our long-term vision and adapting to a dynamic environment. In the fourth fiscal quarter, we also enhanced our senior leadership team to help advance our near-term expansion goals in overseas markets and strengthen our global enrollment. A new principal has joined us to CATS Cambridge plus another highly experienced educator will take over the principal role, both with independent schools. In April next year, focusing on curriculum reform and team enhancement to advance the school’s development. Additionally, a new General Manager will join — will lead our sales and marketing efforts in China. These strategic appointments demonstrate our commitment to building a high caliber team with international expertise and leadership, promoting student enrollment, engagement and academic success, as well as the group’s long-term growth and development.

In summary, our relentless focus on strengthening our high growth core business in fiscal year 2024 has placed us in a strong position to grow this fiscal year. Moving forward, we will continue to advance our dual engine growth strategy to expand our overseas — to expand our steady overseas school business and boost our global recruitment initiative. Meanwhile, we will proceed in streamlining our global operations and enhancing efficiencies to align our goals. We are confident that we can capture the extensive growth opportunities in overseas markets that will strengthen our market share and status as 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.

Zhang Hui: Thank you, Robert. Now, I’d like to discuss our financial results for the fourth quarter and fiscal year 2024. Please note all amounts are in RMB unless otherwise stated. We are pleased to report healthy financial results for the fiscal year, driven by ongoing development across our core businesses. Our total revenue for fiscal year 2024 remains stable with overseas group revenue increasing by 17.5% year-over-year. Our gross profit increased by 7.7% and gross margin by 2.3 percentage points year-over-year. We recorded an adjusted net income of RMB1.1 million compared to an adjusted net loss of RMB192.6 million for the prior fiscal year. We continue to streamline our operations and improve — and to improve operational efficiency reducing our SG&A expenses by 18% and 8% year-over-year for the fourth quarter and fiscal year, respectively, benefiting from the integration of our headquarters and overseas management team.

Notably, we significantly enhanced our cash position, increasing our cash and cash equivalent and restricted cash by 20% for the fiscal year. Looking at our financial results for the fourth quarter and fiscal year in more details. Our revenue from continuing operations for the fourth quarter was RMB358.3 million compared to RMB442.2 million for the same quarter last fiscal year. At segment, overseas goods revenue contribution was RMB195.1 million, complementary education services and domestic kindergartens and K-12 operation services revenues were RMB129.8 million and RMB43.3 million, respectively. For fiscal year 2024, we achieved total revenue of RMB1,755.2 million compared to RMB1,772.1 million for the last fiscal year. By segment, overseas school recorded revenue of RMB951.2 million, contributing 54.2% of total revenues and growing by 17.5% year-over-year.

Complementary Education Services and Domestic Kindergartens and K-12 operation services revenues were RMB495.1 million and RMB308.9 million, respectively. Gross profit from continuing operations for the fourth quarter was RMB35.9 million compared to RMB79.8 million for the same quarter last fiscal year. For the whole fiscal year, our gross profit was RMB503.6 million, representing a 7.7% increase year-over-year, driven by a 47.8% increase in overseas school’s gross profit. Gross margin from continuing operations for the fourth quarter was 10% compared to 18.1% for the same quarter last year. For the whole fiscal year, gross margin increased to 28.7% from 26.4% for the last fiscal year. The improvement was mainly attributable to cost-saving measures and efficiency enhancements.

Notably, our overseas business gross margin grew 4.1 percentage points and 4.9 percentage points for the fourth quarter and fiscal year, respectively. Adjusted gross profit from continuing operations was RMB36.9 million and RMB507.8 million for the fourth quarter and fiscal year, compared to RMB80.9 million for the same quarter last fiscal year and RMB471.8 million for the last fiscal year, respectively. SG&A expenses from continuing operations for the fourth quarter were RMB119.3 million, representing an 18.3% decrease year-over-year. For the fiscal year, SG&A expenses decreased by 8.1% to RMB469 million. This improvement was mainly due to our continuous efforts to streamline our global operations and improve operational efficiency in our headquarters.

Adjusted EBITDA loss from continuing operations was RMB81.8 million for the fourth quarter compared to RMB55 million for the same quarter last fiscal year. For the whole fiscal year 2024, adjusted EBITDA increased by 44.1% to RMB80.7 million from RMB56 million for the last fiscal quarter. Now turning to profitability. We recorded a net loss of RMB954.8 million and RMB869.1 million from continuing operations in the fourth quarter and fiscal year, compared to RMB285.1 million for the same quarter last year and RMB358.9 million for the last fiscal year, mainly due to an RMB852 million impairment loss on goodwill and intangible assets. Adjusted net loss from continuing operations for the fourth quarter narrowed by 24.3% year-over-year to RMB92 million.

For the fiscal year, adjusted net income was RMB101 million compared to an adjusted net loss of RMB192.6 million for the last fiscal year. As for our balance sheet, our cash position was significantly enhanced. As of August 31, 2024, we had cash and cash equivalents and restricted cash of RMB505.8 million, an increase of 20% from RMB419.9 million as of August 31, 2023. In addition, our net cash from operating activities also increased by 14 times year-over-year to RMB104 million for the fourth quarter and 5 times to RMB126 million for the fiscal year. Moving into fiscal year 2025. We will further enhance our operational efficiency and profitability while strengthening our service offerings. Supported by our healthy balance sheet, we are confident in our ability to execute our dual engine growth strategy, expanding our overseas schools business and promoting our global recruitment initiatives.

We believe this productivity approach will not only certify our competitive edge, but also drive long-term growth and profitability. Okay. This concludes all our prepared remarks today. We will now open the call to the questions. Operator, please go ahead.

Operator:

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

Operator: Thank you. This concludes today’s conference call. You may now disconnect your lines. Thank you, and have a wonderful day.