Four Seasons Education (Cayman) Inc (FEDU) 2021 Q2 法說會逐字稿

Hello, ladies and gentlemen. Thank you for standing by for the Four Seasons Education Second Quarter of Fiscal Year 2021 Earnings Conference Call. (Operator Instructions) Today's conference call is being recorded.

I now will turn the call over to your host, Ms. Olivia Li, Investor Relations Manager for the company. Please go ahead, Olivia.

Hello, everyone, and welcome to the Second Quarter of Fiscal Year '21 Earnings Conference Call of Four Seasons Education. The company's results were issued via Newswire services earlier today and are posted online. You can download the earnings press release and sign up for the company's e-mail distribution list by visiting the IR section of our website at ir.sijiedu.com.

Ms. Joanne Zuo, our Chief Executive Officer, will start the call by providing an overview of the company performance highlights for the quarter. Ms. Xun Wang, the company's Vice President of Finance, will provide details on the company's financial results and business outlook before opening the call for your questions.

Before we continue, 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 be materially different from the views expressed today. Further information regarding this and other risks and uncertainties is included in the complete prospectus as filed with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law.

Please also note that Four Seasons Education's earnings press release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. Four Seasons Education's press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures.

I will now turn the call over to our CEO, Ms. Zuo. Please go ahead.

Thank you, Olivia, and hello, everyone. Thank you for joining our call today. In the second quarter of fiscal 2021, we continued to focus on operational improvement on multiple fronts to further optimize the learning experience of our students. I'm happy to report that all of our learning centers across the country have reopened and fully operational during this quarter, delivering high-quality educational products to our students.

We are operating in a rapidly evolving environment that brings with it both significant challenges as well as new opportunities. Those challenges include the increasingly fierce competition from online peers in the aftermath of COVID-19 and the Shanghai Municipal Education Commission has adopted a fully randomized admission policy for private elementary and secondary schools since this year. Both of these changes impacted the customer demand. Given market uncertainty, we broadened our primary school courses to better serve and address the evolving customer demand due to the new policy.

Also we are pleased to see the growth of our middle school tutoring classes, primarily driven by our designated curriculum adapted for the new customer demand, in our diligent efforts to improve educational products. We remained dedicated to continuously enhancing our service quality by expanding our pre- and post-class education service package with more available subjects.

Last but not the least, I'd like to update you on other strategic initiatives as we continue to leverage our core capabilities to drive our growth in the long run.

Firstly, our nationwide expansion initiative remained intact and we are making progress in consolidating and upgrading nationwide applicable educational materials to prepare for our market expansion.

Second, we are making encouraging strides in collaboration with full-time schools, highlighted by 11 new school partnerships where we dually offered in-school tutorial courses and service for students. In addition, our math lab project continued to gain industry's recognition. We are pleased to be selected to participate in the Ninth Guangxi Education Equipment Exhibition and the 78th China Educational Equipment Exhibition separately in October. Both prestigious industry events.

Speaking of expansion of our industry -- of our interest-oriented course offerings, we entered into a strategic cooperation agreement with Shanghai STEM Cloud. We will jointly develop a STEM curriculum and organize activities to better address the increasing demand of the market. Our pilot STEM camp was launched this October and has been well received by the market. Looking ahead, we are excited about the opportunities that will come from our enhanced and deep portfolio of programs for STEM-ICT subjects, tutoring, interest nurturing and intellectual development.

As our online-merging-offline model further matures, we will continue to drive student enrollment and engagement avenues while simultaneously working to improve learning center network optimization and strategically growing course offerings. We believe our focus on our core strength and fundamentals will set the foundation for sustainable operations. We remain confident about the recovery and robust long-term prospects.

With that, I will now turn the call over to our Vice President of Finance, Ms. Xun Wang, who will discuss our key financial results.

Thank you, Joanne, and hello, everyone. Now I'd like to walk you through further details of our second quarter fiscal year 2021 financial results.

Revenue was RMB 83.8 million for the second quarter of fiscal year 2021, compared with RMB 128.8 million in the same period of last year, primarily due to latest regulatory policy and the extended impact of COVID-19.

Cost of revenue decreased by 16.7% to RMB 48.2 million for the second quarter of fiscal year 2021 from RMB 57.9 million in the same period of last year.

Gross profit was RMB 35.6 million for the second quarter of fiscal year 2021, compared with RMB 71.0 million in the same period of last year.

General and administrative expenses decreased by 7.0% to RMB 30.3 million for the second quarter of fiscal year 2021 from RMB 32.6 million in the same period of last year.

Sales and marketing expenses decreased by 20.6% to RMB 8.0 million for the second quarter of fiscal year 2021 from RMB 10.0 million in the same period of last year.

Operating loss was RMB 2.7 million for the second quarter of fiscal year 2021, compared with operating income of RMB 28.3 million in the same period of last year.

Adjusted operating income was RMB 4.5 million for the second quarter of fiscal year 2021, compared with RMB 35.7 million in the same period of last year.

Income tax expenses was RMB 1.8 million for the second quarter of fiscal year 2021, compared with RMB 9.2 million in the same period of last year.

Net income was RMB 4.0 million during the second quarter of fiscal year 2021, compared with RMB 20.3 million in the same period of last year.

Adjusted net income was RMB 6.8 million for the second quarter of fiscal year 2021, compared with RMB 26.9 million in the same period of last year.

Basic and diluted net income per ADS attributable to ordinary shareholders for the second quarter of fiscal year 2021 were both RMB 0.07, compared with RMB 0.40 and RMB 0.39, respectively, for the same period of last year.

Adjusted basic and diluted net income per ADS attributable to ordinary shareholders were both RMB 0.13 for the second quarter of fiscal year 2021, compared with RMB 0.53 and RMB 0.52, respectively, for the same period of last year.

Cash and cash equivalents as of August 31, 2020, the company had cash and cash equivalents of RMB 423.0 million, compared with RMB 404.7 million as of February 29, 2020.

To be mindful of the length of our earnings call, for the first 6 months of fiscal year 2020 (sic) [2021] financial results, I will encourage listeners to refer to our earnings press release for further details.

Looking forward, for the third quarter of fiscal 2020 (sic) 2021 , the company expects the general revenue in the range of RMB 62.1 million to RMB 67.2 million. The above outlook is based on the current market conditions and reflects the company's preliminary estimates of market and operating conditions and customer demand, which are all subject to change.

This concludes my portion of prepared remarks. We will now open the call to questions. Operator, please go ahead.

(Operator Instructions) All right. As there is nothing at the present time, I would like to turn the call to the company for any closing comments.

Thank you once again for joining us today. If you have further questions, please feel free to contact Four Seasons' Investor Relations through the contact information provided on our website or The Piacente Group Investor Relations.

Thank you. That concludes today's conference call. Thank you for attending today's presentation. You may now disconnect your lines.