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Bright Scholar Announces Unaudited Financial Results for FY2019 Third Fiscal Quarter
2019-07-19

Raises Fiscal Year 2019 Guidance on Strong Acquisitive Growth Momentum

FOSHAN, China, July 18, 2019 /PRNewswire/ -- Bright Scholar Education Holdings Limited ("Bright Scholar," the "Company," "we" or "our") (NYSE: BEDU), the largest operator of international and bilingual K-12 schools in China*, today announced its unaudited financial results for the third fiscal quarter ended May 31, 2019.

FY2019 Third Fiscal Quarter Ended May 31, 2019 Financial Highlights (in comparison to the same period of the last fiscal year):

  • Revenue was RMB692.8 million, up 28.1% 
  • Gross profit was RMB318.0 million, up 36.8%; gross margin was 45.9%, up from 43.0% 
  • Adjusted gross profit(1) was RMB324.2 million, up 37.9%; adjusted gross margin(1) was 46.8%, up from 43.5%
  • Operating income was RMB166.8 million, up 6.9%; operating margin was 24.1% compared to 28.9% for the same quarter of the last fiscal year
  • Adjusted operating income(2) was RMB189.6 million, up 13.8%; adjusted operating margin(2) was 27.4% compared to 30.8% for the same quarter of the last fiscal year
  • Net income was RMB137.4 million, up 2.5%; adjusted net income(3) was RMB160.2 million, up 10.8%; net margin was 19.8% compared to 24.8% for the same quarter of the last fiscal year; adjusted net margin(3) was 23.1% compared to 26.7% for the same quarter of the last fiscal year
  • Basic and diluted EPS was RMB1.13, up 8.7%; adjusted basic and diluted EPS(4) was RMB1.32, up 17.9%
  • Adjusted EBITDA(5) was RMB220.9 million, up 17.7%; adjusted EBITDA margin(5) was 31.9%, compared to 34.7%  for the same quarter of the last fiscal year

FY2019 Nine Months Ended May 31, 2019 Financial Highlights (in comparison to the same period of the last fiscal year):

  • Revenue was RMB1,851.4 million, up 39.3% 
  • Gross profit was RMB764.9 million, up 46.6%; gross margin was 41.3%, up from 39.2% 
  • Adjusted gross profit(1) was RMB778.7 million, up 48.2%; adjusted gross margin(1) was 42.1%, up from 39.5% 
  • Operating income was RMB345.0 million, up 22.7%; operating margin was 18.6% compared to 21.1%  for the same period of the last fiscal year
  • Adjusted operating income(2) was RMB403.9 million, up 32.6%; adjusted operating margin(2) was 21.8% compared to 22.9% for the same period of the last fiscal year
  • Net income was RMB300.9 million, up 26.8%; adjusted net income(3) was RMB359.8 million, up 38.0%; net margin was 16.3% compared to 17.8% for the same period of the last fiscal year; adjusted net margin(3) was 19.4% compared to 19.6 % for the same period of the last fiscal year
  • Basic and diluted EPS was RMB2.38, up 22.1%; adjusted basic and diluted EPS(4) was RMB2.86, up 33.0%
  • Adjusted EBITDA(5) was RMB487.6 million, up 30.4%; adjusted EBITDA margin(5) was 26.3%, compared to 28.1% for the same period of the last fiscal year

____________

* In terms of student enrollment as of February 28, 2019, according to an industry report commissioned by Bright Scholar and prepared by Frost & Sullivan in 2019. 

(1) Adjusted gross profit/(loss) is defined as gross profit/(loss) excluding amortization of intangible assets. Adjusted gross margin is defined as adjusted gross profit/(loss) divided by revenue.

(2) Adjusted operating income/(loss) is defined as operating income/(loss) excluding share-based compensation expense and amortization of intangible assets. Adjusted operating margin is defined as adjusted operating income/(loss) divided by revenue.

(3) Adjusted net income/(loss) is defined as net income/(loss) excluding share-based compensation expense and amortization of intangible assets. Adjusted net margin is defined as adjusted net income/(loss) divided by revenue.

(4) Adjusted basic and diluted EPS is defined as adjusted net income/(loss) attributable to ordinary shareholders (net income/(loss) to ordinary shareholders excluding share-based compensation expense and amortization of intangible assets) divided by the weighted average number of basic and diluted ordinary shares or American depositary shares (each an "ADS"), each representing one Class A ordinary share of the Company, on an as-converted basis.

(5) Adjusted EBITDA is defined as net income/(loss) excluding interest income, net; income tax expense/benefit; depreciation and amortization; share-based compensation expense, and non-recurring foreign exchange gain/loss (included in other expenses) due to the movement of the cash denominated in USD at a PRC subsidiary level which is reserved for designated purpose of use in fiscal year 2018 and subsequently exchanged to RMB and realized exchange gain in later 2018. Adjusted EBITDA margin is defined as adjusted EBITDA divided by revenue.

For more information on these adjusted financial measures, please see the section captioned under "Non-GAAP Financial Measures" and the tables captioned "Reconciliations of GAAP and Non-GAAP Results" set forth at the end of this release.

"We continued to expand our global network of premium schools at an accelerated pace in this quarter," said Jerry He, Executive Vice Chairman of Bright Scholar. "We have made two further acquisitions to expand our overseas school portfolio.  In June, we entered into agreements to acquire 100% equity interests in St. Michael's School, an established UK independent school, which offers day and boarding education from age 3 to 18, and Bosworth Independent College in England, which provides independent boarding education to pupils from the UK and aboard from age 13 to 19. In July, we entered into an agreement to acquire all the equity interests of CATS Colleges Holdings Limited ("CATS"). CATS is an international school network focused on the provision of quality education services to international students in their seven campuses and ten international languages schools across UK, US, Canada and China.  Upon completion of these transactions, the potential revenue contributions will drive the structural changes to our revenue mix.  For fiscal year 2018, the combined revenue of these overseas schools (including Bournemouth Collegiate School) was approximately GBP108 million (approximately RMB943 million) with over 3,300 students."

"In addition, we have completed two strategic investments in Sannew American Middle School and Shandong-based Qiqiaoban to expand our domestic network of international schools and kindergartens. As of May 31, 2019, we had a global network of 78 schools and a total student capacity of 62,446 students."

Mr. He concluded, "Our multi-year strategic investments are pivotal to scaling our business, expanding our global school network, enhancing education quality and broadening our educational service offerings that distinguish Bright Scholar as a global premium education service provider."

"We are raising our Fiscal Year 2019 guidance as a result of the continued strong momentum in our acquisitive growth and stronger-than-expected nine-month results," said Derek Feng, Chief Executive Officer of Bright Scholar. "Factoring in the contributions from Sannew, Qiqiaoban, Chengdu Yinzhe (DBC), Hangzhou Impression, Bournemouth School and other acquired companies, the revenue for the quarter was RMB692.8 million, representing a year-over-year increase of 28.1%, with 18.2% from organic growth and 9.9% from acquisitions. The adjusted gross profit, adjusted operating income, adjusted EBITDA and adjusted net income increased by 37.9%, 13.8%, 17.7% and 10.8% year-over-year, respectively. For the nine-month period, revenue was 1,851.4 million, representing a 39.3% year-over-year increase, with 21.0% from organic growth and 18.3% from acquisition. The adjusted gross profit, adjusted operating income, adjusted EBITDA and adjusted net income increased by 48.2%, 32.6%, 30.4% and 38.0% year-over-year, respectively."

"The sales and marketing initiatives and investments we made at the beginning of fiscal 2019 have generated substantial returns in student enrollments. In comparison to the first nine months of the last fiscal year, the average student enrollment increased by 26.5% year-over-year to 44,632 for the nine-month period of fiscal 2019 with blended utilization rate increased to 72.9% from 61.8%."

"Improving academic outcomes remains the number one priority for Bright Scholar. I am proud of this year's academic accomplishments." Mr. Feng continued, "As of the release date, 93.4% of our 2019 graduating students participating in AP, A Level and DP programs have received over 750 offers from the global top 50 institutions."

"Our deep collaboration with Country Garden and other partners is crucial to the expansion of our school network. As of the release date, we have entered into 37 agreements with Country Garden and other partners to operate and manage 33 kindergartens and 4 bilingual schools with a total capacity of approximately 17,200 students."

Mr. Feng concluded, "Over the last six months since I joined the Company, my appreciation has deepened for the powerful ways BEDU and our acquired business complement each other.  We have a shared culture across the entire organization that values integrity, excellence and innovation with an unwavering commitment to provide premium educational experiences for our students. The consecutive quarters of strong performance demonstrate our execution capability and position us for continued future success as a global premium education service provider." 

FY2019 THIRD FISCAL QUARTER ENDED MAY 31, 2019 UNAUDITED FINANCIAL RESULTS

Revenues

Revenue for the third fiscal quarter was RMB692.8 million, representing a 28.1% increase from RMB540.9 million in the same period of the last fiscal year. 

The table below sets forth a breakdown of revenues:


Third Fiscal Quarter 

Ended May 31, 2019

Third Fiscal Quarter 

Ended May 31, 2018

YoY % Change


(RMB in million)

(RMB in million)


International Schools

225.9

178.9

26.3%

Bilingual Schools

195.1

161.7

20.6%

Kindergartens

157.4

129.9

21.1%

Overseas School

17.2

-

-

Complementary

97.2

70.4

38.3%

Total

692.8

540.9

28.1%

International Schools: Revenue for the quarter was RMB225.9 million, representing a 26.3% increase from RMB178.9 million, accounting for 32.6% of total revenues as compared to 33.1% in the same period of last fiscal year. The increase in our revenue generated from international schools was primarily due to a 26.4% increase in the average number of students from 7,440 to 9,405, and a 4.8% increase in the average tuition and fees from RMB24,039 to RMB25,204 during the comparison periods. Revenue contribution from Sannew was RMB5.6 million for the reporting quarter.

Bilingual Schools: Revenue for the quarter was RMB195.1 million, representing a 20.6% increase from RMB161.7 million, accounting for 28.2% of total revenues as compared to 29.9% in the same period of last fiscal year. The increase in our revenue generated from bilingual schools was primarily due to a 15.5% increase in the average number of students from 15,773 to 18,222, and a 4.4% increase in the average tuition and fees from RMB10,253 to RMB10,707 during the comparison periods.

Kindergartens: Revenue for the quarter was RMB157.4 million, representing a 21.1% increase from RMB129.9 million, accounting for 22.7% of total revenues as compared to 24.0% in the same period of last fiscal year. The increase in our revenue generated from kindergartens was primarily due to a 21.9% increase in the average number of students from 14,111 to 17,198. Revenue contribution from Xinqiao and Qiqiaoban kindergartens was RMB20.0 million for the reporting quarter.

Overseas School: Revenue for the quarter was RMB17.2 million, accounting for 2.5% of total revenues. For the reporting quarter, Bournemouth Collegiate School has an average number of 601 students and an average tuition fee of RMB28,539.

Complementary: Revenue for the quarter was RMB97.2 million, representing a 38.3% increase from RMB70.4 million, accounting for 14.0% of total revenues as compared to 13.0% in the same period of last fiscal year. For the quarter, revenue contribution from acquired businesses, including Can-Achieve, Foundation Global Education ("Foundation"), Hangzhou Impression and Chengdu Yinzhe or "DBC" was approximately RMB58.2 million

Cost of Revenues

Cost of revenues for the quarter was RMB374.8 million, representing a 21.6% increase from RMB308.3 million in the same period of the last fiscal year. This was primarily due to an increase in staff costs to RMB244.3million from RMB200.9 million, as we increased the headcount and the compensation level of teaching staff and instructors to support the expanding network of schools from organic growth and acquired businesses. The average number of teachers and instructors rose across all business lines by 23.0% from 4,341 to 5,338 during the comparison periods.

International Schools: Cost of revenues for the quarter was RMB116.0 million, representing a 17.5% increase from RMB98.7 million in the same period of last fiscal year. 

Bilingual Schools: Cost of revenues for the quarter was RMB106.6 million, representing a 14.4% increase from RMB93.1 million in the same period of last fiscal year.

Kindergartens: Cost of revenues for the quarter was RMB76.3 million, representing a 24.7% increase from RMB61.2 million in the same period of last fiscal year.

Overseas School: Cost of revenue for the quarter was RMB8.3 million.

Complementary: Cost of revenues for the quarter was RMB67.6 million, representing a 22.2% increase from RMB55.3 million in the same period of last fiscal year. 

Gross Profit, Gross Margin and Adjusted Gross Profit

Gross profit for the quarter was RMB318.0 million, representing a 36.8% increase from RMB232.6 million in the same period of last fiscal year. Gross margin for the quarter was 45.9%, as compared to 43.0% in the same period of last fiscal year. 

Adjusted gross profit for the quarter was RMB324.2 million, representing a 37.9% increase from RMB235.1 million in the same quarter of last fiscal year. Adjusted gross margin was 46.8% for the quarter as compared to 43.5% in the same period of last fiscal year.

International Schools: Gross profit for the quarter was RMB109.9 million, representing a 37.0% increase from RMB80.2 million in the same period of last fiscal year. Gross margin for the quarter was 48.7%, as compared to 44.8% in the same period of last fiscal year.

Bilingual Schools: Gross profit for the quarter was RMB88.5 million, representing a 29.1% increase from RMB68.6 million in the same period of last fiscal year. Gross margin for the quarter was 45.4%, as compared to 42.4% in the same period of last fiscal year. 

Kindergartens: Gross profit for the quarter was RMB81.1 million, representing a 18.0% increase from RMB68.7 million in the same period of last fiscal year. Gross margin for the quarter was 51.5%, as compared to 52.9% in the same period of last fiscal year. This was primarily due to the dilution from newly opened kindergartens.  

Overseas School: Gross profit for the quarter was RMB8.9 million, with a gross margin of 51.4%. 

Complementary: Gross profit for the quarter was RMB29.6 million, representing a 97.5% increase from RMB15.1 million in the same period of last fiscal year. Gross margin for the quarter was 30.5%, as compared to 21.4% in the same period of the last fiscal year. This was primarily due to margin improve of Elan and margin contribution from acquired business.

Selling, General and Administrative Expenses and Adjusted SG&A Expenses (6)

Total selling, general and administrative expenses for the quarter were RMB152.0 million, representing a 95.5% increase from RMB77.8 million in the same period of the last fiscal year. This accounted for 21.9% of total revenues as compared to 14.4% in the same period of last fiscal year. The increase in selling, general and administrative expenses was primarily due to the increase in the compensation and benefits incurred from additional general and administrative staff members;  employee stock ownership plan ("ESOP") related expenses to retain talent; marketing expenses for brand promotion; the costs associated with acquisitions and other professional services to support the business growth as a listed company as well as the incremental SG&A expenses incurred from acquired businesses.

Adjusted SG&A expenses(6) for the quarter were RMB135.4 million, representing a 94.2% increase from RMB69.7 million in the same period of last fiscal year. This accounted for 19.5% of total revenues as compared to 12.9% in the same period of last fiscal year.

____________

(6) Adjusted SG&A expenses is defined as selling, general and administrative expenses excluding share-based compensation expense. 

Operating Income, Operating Margin and Adjusted Operating Income

Operating income for the quarter was RMB166.8 million, representing a 6.9% increase from RMB156.1 million in the same period of last fiscal year. Operating margin for the quarter was 24.1%, as compared to 28.9% in the same period of last fiscal year.

Adjusted operating income for the quarter was RMB189.6 million, representing a 13.8% increase from RMB166.6 million in the same quarter of last fiscal year. Adjusted operating margin was 27.4% for the quarter as compared to 30.8% in the same period of last fiscal year.

Net Income and Adjusted Net Income 

Net income for the quarter was RMB137.4 million, representing a 2.5% increase from RMB134.1 million in the same period of last fiscal year.

Adjusted net income for the quarter was RMB160.2 million, representing a 10.8% increase from RMB144.6 million in the same period of last fiscal year. 

Earnings per ordinary share/ADS and Adjusted Earnings per ordinary share/ADS

Basic and diluted net earnings per ordinary share/ADS attributable to ordinary shareholders/ADS holders for the quarter were RMB1.13 and RMB1.13, respectively, as compared to RMB1.04 and RMB1.04, respectively, in the same period of the last fiscal year.

Adjusted basic and diluted net earnings per ordinary share/ADS attributable to ordinary shareholders/ADS holders for the quarter were RMB1.32 and RMB1.32, respectively, as compared to RMB1.12 and RMB1.12, respectively, in the same period of the last fiscal year.

Adjusted EBITDA

Adjusted EBITDA for the quarter was RMB220.9 million, representing a 17.7% increase from RMB187.6 million in the same period of last fiscal year.

FY2019 FIRST NINE MONTHS ENDED MAY 31, 2019 UNAUDITED FINANCIAL RESULTS

Revenues

Revenue for the first nine months of fiscal 2019 was RMB1,851.4 million, representing a 39.3% increase from RMB1,329.2 million in the same period of the last fiscal year. 

The table below sets forth a breakdown of revenues:


Nine Months Ended 

May 31, 2019

Nine Months Ended

May 31, 2018

YoY % Change