Bright Scholar Education Holdings Ltd (BEDU) 2025 Q1 法說會逐字稿

Hello, ladies and gentlemen. Thank you for standing by for Bright Scholar's first quarter of fiscal year 2025 earnings conference call at this time. (Operator instructions)

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.

Thank you very much. Hello, everyone and welcome to Bright Scholar's earnings conference call for the first quarter of fiscal 2025. 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 US Private Securities Litigation Reform Act of 1,995. Forward-looking statements involve inherent risks and uncertainties 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 US SEC. The company does not assume any obligation to update any forward-looking statements except as required under the applicable law. Additionally, Bright Scholar's earnings press release and this conference call include discussions of unaudited GAAP and the 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 GBP. 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 Scholars. Chief Executive Officer, Mr. Robert Niu, please go ahead sir.

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 an evolving external environment in the first quarter. As we mentioned last quarter, we are consistently advancing our dual engine growth strategy by propelling our overseas school business expansion and executing our global recruitment initiatives for prospective international students.

This quarter, we successfully expanded our product and service offerings on our existing China platform and made these available in more international markets including Vietnam, Canada, the United States, Pakistan and Taiwan.

We have also developed local teams, local customers and local agents in these regions to provide consulting services for students to study abroad. Furthermore, we made great progress in optimizing our operation operating efficiency and drove significant decreases in our SG&A expenses year over year. Leveraging our established global network of schools and ecosystems, we believe we can accelerate our revenue growth and create sustainable value for both customers and shareholders over the long term.

Before I move on, please note that starting this quarter, we have reorganized our business structure and segment reporting to reflect our strategic focus. Cindy will give you full breakdown before her financial overview. But I want to point out that our previous Overseas School Business segment is now known simply as our Schools business. Now, I'd like to discuss that segment's performance for the quarter as well as our enhanced operational efficiency in more detail. The Schools business remains our primary revenue source this quarter accounting for around 57% of our total revenue. While the UK new VAT policy has impacted student enrollment to some degree. We have adjusted our strategic approach to respond to the changing market conditions. This includes leveraging the capabilities of our recruitment team, enhancing collaboration with various recruitment channels and ensuring management's active involvement in driving enrollment initiatives. We are confident that our intensified recruitment efforts and augmented student support services will fortify our competitive position in the market going forward.

Overall, we are pleased with advancements we have made in our Schools business during the first fiscal quarter. We are deeply committed to enhancing our students educational success by providing high quality teaching resources and promoting a collaborative learning atmosphere. As a result, our students have consistently excelled in various aspects of student life, especially in academics. During the quarter, 97 of our CATS Global School students received offers from prestigious Russell Group Universities. Furthermore, 64 of our CGS students receive offers from world's TOP 100 universities as ranked by QS world University rankings, one of the higher education's leading ranking systems.

Moving to operations. To achieve our goal of leaner and more efficient operations, we optimized our internal operational management and streamlined logistics processes during the first fiscal quarter. For example, through a recent pilot outsourcing canteen and cleaning services, we optimized the school's cost structure by cutting administrative expenses. This improved operational efficiency and quality, freeing up our resources to advance educational excellence. We also boosted service efficiency and customer satisfaction by leveraging our logistics vendors' expertise and technical solutions. We will implement regular evaluations and feedback mechanisms to drive ongoing improvements, fostering a virtuous cycle that offers faculty and students a more pleasant and convenient learning and living environment.

These initiatives will also elevate the school's overall management, ultimately optimizing both educational outcomes and logistics. As we move forward, our focus will shift towards integrating advanced technologies that streamline processes and drive innovation, ensuring sustained growth and resilience in an increasingly competitive landscape.

In summary, our first quarter performance reflects our business's continued resilience and steady improvement in the face of a dynamic market. Our priority remains on advancing our "dual-engine" growth strategy, expanding our Schools business and boosting global recruitment to serve more students planning to study abroad.

Our next goal for global recruitment initiative is to tap into Nepal, Malaysia and Thailand while continuing to explore North American markets. Meanwhile, we will persist in streamlining our global operations and enhancing efficiency as we work towards our long-term vision and adapt to the evolving environment. Looking ahead, we are confident we can seize the market's extensive growth opportunities to strengthen our market share and our position 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.

Thank you, Robert. Now I'd like to discuss our financial results for the first quarter of 2025. First let me review the changes to our segment reporting. As Robert mentioned starting this quarter, we have reorganized our business structure to better reflect our strategic focus. Accordingly, we are now reporting the following segments: Schools, Overseas Study Counseling and Others. Schools business refer to our previously Overseas School segment. The Overseas Study Counseling business is the overseas study counseling portion of our previous Complementary Education Services segments. Finally, our Others segment include our previous Domestic Kindergartens and K-12 Operation Services and Complementary Education Services excluding overseas study counseling. In addition, this quarter, we changed our presentation currency from RMB to GBP to better align with our business activities. Please note all amounts are in GBP unless otherwise stated.

We are pleased to kick off fiscal 2025 with solid first quarter results. Our SG&A expenses decreased significantly by 33% year-over-year, driven by our ongoing efforts to optimize cost structure and streamline operations. Furthermore, benefiting from our reorganized business structure, the Overseas Study Counseling business achieved year-over-year increase across multiple metrics including revenue.

In addition, we have initiated a share repurchase plan underscoring our commitment to enhancing shareholder value. Looking at our financial results for the first fiscal quarter in more details, our revenue from continuing operations was 44.7 million compared to [53.3] (corrected by company after the call) million for the same quarter last year. By segment, our Overseas Study Counseling revenue increased by 5.8% to $9.6 million. Schools and Others revenues were 25.7 million and 9.4 million respectively.

Gross profit from continuing operations was 13 million compared to 17.9 million for the same quarter last fiscal year. Gross margin from continuing operations was 29.2% compared to 33.5% for the same quarter last fiscal year. Adjusted gross profit from continuing operations was 13.2 million compared to 18 million for the same quarter last year. SG&A expenses from continuing operations decreased by 33% year-over-year to 8.4 million. The decrease was mainly due to the improvement in operational efficiency in our Schools business. Adjusted EBITDA was $6.4 million, compared to 7.6 million for the same quarter last fiscal year. Now turning to profitability, we recorded a net income of 4 million from continuing operations compared to 5 million for the same quarter last fiscal year. Adjusting net income was 4.4 million compared to 5.1 million for the same quarter last fiscal year.

Moving to our balance sheet. As of November [30] (corrected by company after the call), 2024, we had cash and cash equivalents and restricted cash of 47.5 million compared to 54.3 million as of August 31, 2024. Before I conclude my remarks, I would like to briefly update you that our board of directors approved a share repurchase plan under which the company may repurchase up to us $1.2 million of the company's ADSs over the next 12 months, a testament to our confidence in the company's growth strategy, business operations and outlook. We believe that the present external environment coupled with our strong financial foundation presents a compelling opportunity to deliver shareholder value. Looking ahead, we will continue to optimize our operations and strive to enhance profitability while expanding our high growth, high return business by maintaining our healthy balance sheet and consistently executing our "dual-engine" growth strategy. We are well positioned to capitalize the on the market's tremendous growth potential, delivering exceptional education to our students and creating sustainable shareholder value.

Okay. This concludes all our prepared remarks. Today. We will now open the call to questions, operator. Please go ahead.

We will now begin the question and answer session to ask a question. (Operator instructions)

The first question comes from Hieu Nguyen, XSTAR Fund Management.

Hi. Thank you for taking my question. Can you share the average enrollment for the overseas schools in 2025 or the last quarter?

Hi, this is Robert speaking. Thank you for your question.

For the enrollment number, are you referring our current existing students for this quarter? Or is it for September intake or for January intake.

Right, like the upcoming school year.

Okay. I have the new student intake for September and January, not sure if Cindy has the total enrollment at the moment. So for September 2024 we have got 1,103 new students for September and for January 2025 we have 213 new students. So our total enrollment, I don't have the exact number, but it's going to be very close to 3,000 in total.

Got it. Thank you.

(Operator instructions)

The next question comes from Tan Nguyen, Max Capital.

Could you help me understand the movement in cash in the last quarter? Because I saw that the net cash used in operating activities was US$7.2 million and then net cash generated from investing was US$4.5. So can you help me understand what went in there? And then the second question is regarding the decision to buy back share. My observation is liquidity in the stock is already quite low. So how do you think about between paying dividends and buying back shares.

Thanks for the question. For the first question, It's Cindy Zhang, I would like to answer the question. Your question is about the cash and cash equivalents movement between the last quarter and this quarter, right?

Yes. Specifically in the cash used in operating activities and cash generated from investing activities.

In general, I can present these questions into three aspects. First is from cash used in our operating activities. We cost around 5.7 million GBP for our operating activities. And for the investing activities, we generated 3.6 million GBP. And for the financing activities, we spent 4.4 million GBP. And the exchange gain or loss was a cash deduct for 0.3 million GBP and that results in our cash decrease. And for our operating activities, it is mainly attributable to that we received the tuition and accommodation fee in advance before the terms begin. So we receive the cash in advance in August and then we spend the money back for all the cost and expenses for our commissions to the new recruitment that may result in a decrease in our operation activities. And for the second question about the share repurchase and dividends. I would like to invite Robert to answer the question.

Thank you for the question. So share buybacks and dividends has always been a question presented to the board to make a decision over the past few board meetings. So the decision made for share buybacks was based on number one that we think we have enough cash reserves to support our operational requirements and also the CapEx related in the schools.

And number two is looking at our financial performance last year. I think it has been the first year that we have just break even on the net profit level. So we haven't really accumulated a sizable distributable profits for last year and up until this financial year. So once we reach what we think is normalized profit level, we will be considering dividend over share buybacks. And in terms of the liquidity. We have observed the liquidity is very low in the market at the moment. However, we think it is probably because number one is the market price is very far from the intrinsic value of the company. So there's very little interest in the our shareholder groups to trade. And number two is the market cap at the moment is too small for any meaningful trading. So through this buyback decision, I think we will try to provide the market with confidence that we think that the management has confidence in the future operations in the profit growth in the coming quarters and years, so that will encourage more investors to come into the market.

And I think once the share value moves towards the intrinsic value of the company, the liquidity will improve. And I think that's a positive outcome for all current shareholders and also for any shareholders that take these opportunities to buy stocks. So I think this is a reason for people to start trading and buying and selling the stocks and that will increase the liquidity for the market.

Robert. Could I follow up with regard to your first answer?

Yes, please.

So you said that the company because it was not profitable before, so there's not enough cash, there was not enough distributable asset. Do you mean distributable, retained earnings in equity?

I think that the company has carried retained earnings in the balance sheet, but that earnings I think was accumulated over like a long time. So what I meant was over the last few years during the pandemic, I think that the company has been in a loss making situation and only last financial year, the company has turned around into the profitability. So we start to accumulate distributable earnings again. What I meant was we will be more comfortable if the retained earnings grow after this turnaround exercise has finished. And then we'll be looking at to distribute the earnings in a more stable and consistent manner without having to distribute the earnings or profits from the years way back.

So right now the accumulated retained earnings is positive, but you would prefer to pay from current year earnings. So you want to wait for current year earnings to be more sustainable before you want to pay out dividend or do other kind of shareholder return activity?

es, that's right. If we promote the dividends policy, we want it to be sustainable and consistent.

And do you mind if I have one last question, or I can get back in the line. Is there other investor asking?

May I ask you, do we have any other question in the queue?

Okay. I think you can go ahead, please.

Yeah, so I noticed that you have been trying to reposition the company. I see that there have been changes in the way that you categorize the different segments. There have been changes in reporting currencies.

So maybe, if you could give us a vision or give me the vision of how you want to position the company five years from now? How do you want Bright Scholar to be known to other stakeholders five to ten years from now? What kind of company? What are your focus? Which market or student group you're targeting, that sort of thing?

That's a very good question. And internally we have been thinking about this really hard and very serious. And I think in our previous earnings call, we have emphasized the new strategy that we call it a "dual-engine" strategy going forward. So one of the growth engines will be our Schools business, by that I mean international school business in the international markets. At the moment, our biggest school market is in the UK.

And that's exactly why we changed our reporting currency to the British Pound because that's the main revenue source. We will use the UK as a foundation just like a lot of other K-12 education groups and explore expanding opportunities beyond just UK. So we are interested in markets like the US where we already have one school and we are also interested in developing markets like Middle East, South America, Asia. We are actively looking at opportunities to grow our presence in these areas. So I would say in three to five years' time school business will still be the main business for Bright Scholar and we will be a much more international or global education group.

So I think we'll have more schools around the world in three to five years' time. And the other growth engine is international student recruitment. So in our recruitment business, historically Bright Scholar has a big platform in China that recruits students from China to send them overseas.

And over the years, I think we have accumulated intensive human capital and know-how for the market, I think we can duplicate that services to other parts of the world, especially the developing countries like you know, Southeast Asia, like India, Pakistan and South America. And these are the growing markets for international students. I think our know-how can definitely help students in these markets to study overseas other in countries like the UK, US, Canada, Australia and etcetera. So in five years' time, I think we'll have a much broader network of international student recruitment platform.

So overall we will try to become a major K-12 education service provider for international education. That means we will be providing educational services not only own the schools but also drive international student recruitment. I think at the moment, we are the biggest international group in terms of student recruitment in the UK. And we are in a very good position and we have a very good foundation to grow that into a global market. So that is the strategy we are currently pursuing. [Hope that answers your question] (added by company after the call).

Yes, it does. Thank you so much.

I appreciate it. Thank you.

(Operator instructions)

This concludes our question and answer session. I would like to turn the conference back over to the company for any closing remarks.

Thank you. Once again for joining us today. If you have further questions, please feel free to contact by scholars, investor relations through the contact information provided on our website.

This concludes the conference call. You may now disconnect your line. Thank you.