Bright Scholar Announces Unaudited Financial Results for the Third Fiscal Quarter of Fiscal 2022

FOSHAN, China, Aug. 4, 2022 /PRNewswire/ -- Bright Scholar Education Holdings Limited ("Bright Scholar," the "Company," "we" or "our") (NYSE: BEDU), a global premier education service company, today announced its unaudited financial results for the third fiscal quarter of fiscal 2022 ended May 31, 2022.

FINANCIAL PERFORMANCE HIGHLIGHTS
Third Fiscal Quarter Ended May 31, 2022 Financial Highlights
(in comparison to the same period of the last fiscal year):

Nine Months Ended May 31, 2022 Financial Highlights 
(in comparison to the same period of the last fiscal year):

Overseas Schools (CATS Global Schools)

CATS Global Schools include 4 Stafford House locations in UK, 4 CATS Colleges in US and UK, Cambridge School of Visual & Performing Arts and 3 independent boarding schools in UK as of May 31, 2022.

• Revenue amounted to RMB187.9 million, representing a 32.1% increase compared to RMB142.3 million in the same fiscal quarter last year, and accounted for 42.9% of the total revenue for the third fiscal quarter.
• For the nine-month period, revenue amounted to RMB531.1 million, representing a 24.4% increase compared to RMB427.1 million in the same period of last fiscal year, and accounted for 40.5% of the total revenue.

Complementary Education Services 

The complementary education services business comprises language training, overseas study counselling, career counselling, study tour and camps as well as international contest training and others.

• Revenue amounted to RMB138.0 million, compared to RMB147.5 million in the same fiscal quarter last year, and accounted for 31.5% of the total revenue for the third fiscal quarter.
• For the nine-month period, revenue amounted to RMB456.9 million, representing a 3.1% increase compared to RMB443.0 million for the same period of last fiscal year, and accounted for 34.8% of the total revenue.

Domestic Kindergartens & K-12 Operation Services  

The domestic kindergartens & K-12 operation services business comprises of for-profit kindergartens and operation services for domestic K-12 schools including catering and procurement services.  

• Revenue amounted to RMB111.6 million, representing a 53.6% increase compared to RMB72.6 million in the same fiscal quarter last year, and accounted for 25.6% of the total revenue for the third fiscal quarter.
• For the nine-month period, revenue amounted to RMB323.1 million, representing a 52.6% increase compared to RMB211.7 million for the same period of last fiscal year, and accounted for 24.7% of the total revenue.

RECENT DEVELOPMENTS

On Repayment of Senior Notes

As of the earnings release date, Bright Scholar has redeemed all of its outstanding senior notes matured (the "Redemption") on July 31, 2022 (the "Maturity Date"). The redemption price included the principal amount of all outstanding Senior Notes of US$223,984,000 and the interest of US$8,343,404 accrued till the day before the Maturity Date. The redemption price paid by the Company on the Maturity Date is US$232,327,404.

Upon completion of the Redemption, all the senior notes will be cancelled and delisted from the official list of the Hong Kong Stock Exchange.  

On Going Private Proposal

On April 29, 2022, the Company received a preliminary non-binding proposal letter (the "Proposal") from its Chairperson of the board of directors (the "Board"), Ms. Huiyan Yang, and Ms. Meirong Yang (collectively, the "Buyer Group") proposing to acquire all of the outstanding Class A ordinary shares of the Company (the "Class A Shares"), including Class A Shares represented by American depositary shares (the "ADSs," each representing one Class A ordinary share), and Class B ordinary shares of the Company (the "Class B Shares," and together with the Class A Shares, the "Shares") that are not beneficially owned by the Buyer Group for a purchase price of US$0.83 per Share in cash in a going private transaction (the "Proposed Transaction"), subject to certain conditions.

On May 6, 2022, the Board announced that it is has formed a special committee (the "Special Committee") consisting of three independent directors, Mr. Peter Andrew Schloss, Mr. Jun Zhao and Mr. Ronald J. Packard, to evaluate and consider the Proposal. Mr. Schloss chairs the Special Committee.

On July 21, 2022, the Special Committee announced the appointment of Citigroup Global Markets Asia Limited as independent financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP as legal counsel to the Special Committee to assist it in the process of reviewing and evaluation of the Proposal and any alternative strategic options that the Company may pursue.

"Multiple market and segment performances reflect broad and gradual resumption of its business momentum," said Mr. Jerry He, Executive Vice Chairman of Bright Scholar. "For continuing operation in the quarter, we recorded a 20.7% growth in revenue and enhancement in operating margin from (19.3%) to 4.4%, compared to the same quarter last fiscal year. On the nine-month basis, top line revenue grew by 21.2% year-over-year, with operating margin improved from (17.2%) to (0.3%)."

Mr. He commented on the performance of overseas school business, "The recovery of overseas business has started to gather momentum.  We are pleased to see more and more students back to campus, as a result, our top line revenue increased 32.1% for the quarter and 24.4% for the nine-month period. Our effective cost management measures also yielded results with operating loss continued to narrow."

"Despite the challenges amid the regional outbreak of pandemic and travel restrictions, the effective COVID-19 containment strategy continues to provide a conducive environment for business recovery across China," commented by Mr. Zi Chen, Chief Executive Officer of Complementary Education Services. "In particularly, we have been encouraged by the recovery of our overseas study counselling, international contest training, and other quality training business with respective revenue grew by 24.3%, 15.7% and 22.9% year-over-year on a nine-month basis, respectively. Camp business also recorded a promising advanced bookings for summer activities in our main camp sites in Zhejiang, Jiangxi and Guangdong. Our margin profile continues to enhance as we focus on maintaining a competitive cost base to respond to dynamic business environment and optimizing returns by expanding our business portfolio."

"Our focus remains firmly on rebuilding our business revenues and we are pleased with the progress," said Ms. Wanmei Li, Chief Executive Officer of Domestic Kindergartens & K-12 Operation Services. "In the quarter, revenue increased by 53.6%. On nine-month basis, revenue grew by 52.6%. The business and financial performance mainly attributed to the expansion of catering services to the students of additional 7 schools and 7 kindergartens over the last nine months. As of the end of May 2022, we had provided catering services to the students in a total of 21 schools and 56 kindergartens."

Mr. He concluded, "Looking ahead, we will be vigilant to the continued risks related to rising inflationary cost pressures, COVID, geopolitical tensions, and regulatory changes that could affect our businesses. The management team remains steadfast in its commitment to rebuild our domestic business, further improve operational efficiency through effective cost control, strengthen business resilience through diversification and capitalize emerging opportunities to speed up the pace of recovery."

UNAUDITED FINANCIAL RESULTS FOR THE THIRD FISCAL QUARTER ENDED MAY 31, 2022

Revenue from Continuing Operations

Revenue for the quarter was RMB437.5 million, representing a 20.7% increase from RMB362.4 million for the same period of the last fiscal year.

Overseas Schools: Revenue contribution for the quarter was RMB187.9 million, representing a 32.1% increase from RMB142.3 million for the same period of the last fiscal year. The increase was mainly attributable to the recovery of overseas schools' operation from pandemic.

Complementary Education Services: Revenue contribution for the quarter was RMB138.0 million, as compared to RMB147.5 million for the same period of the last fiscal year. The decrease was mainly attributable to the decrease in language training and study tour and camp business.

Domestic Kindergartens & K-12 Operation Services: Revenue contribution for the quarter was RMB111.6 million, representing a 53.6% increase from RMB72.6 million for the same period of the last fiscal year. The increase was mainly attributable to the increase in catering services to the students of K-12 schools.

We have continued to provide essential services without recognizing any revenues relating to such activities to schools provide compulsory education in our discontinued operations, which are key to the normal daily operation of such schools.

Cost of Revenue from Continuing Operations

Cost of revenue for the quarter was RMB302.2 million, as compared to RMB310.0 million for the same period last fiscal year.

Gross Profit, Gross Margin and Adjusted Gross Profit from Continuing Operations

Gross profit for the quarter was RMB135.4 million, representing a 158.2% increase from RMB52.4 million for the same period of the last fiscal year. Gross margin increased to 30.9% from 14.5% for the same period of the last fiscal year.

Adjusted gross profit for the quarter was RMB139.9 million, representing a 147.1% increase from RMB56.6 million for the same period of the last fiscal year.

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

Total SG&A expenses for the quarter were RMB117.1 million, as compared to RMB129.2 million for the same period of the last fiscal year.

Adjusted SG&A expenses for the quarter were RMB117.1 million, as compared to RMB128.5 million for the same period of the last fiscal year.

Operating Income/Loss, Operating Margin and Adjusted Operating Income/Loss from Continuing Operations

Operating income for the quarter was RMB19.3 million, representing a 127.5% increase from operating loss of RMB70.1 million for the same period of the last fiscal year. Operating margin was 4.4% for the quarter, as compared to (19.3%) for the same period of the last fiscal year. 

Adjusted operating income for the quarter was RMB23.8 million, representing a 136.4% increase from adjusted operating loss of RMB65.3 million for the same period of the last fiscal year.

Net (Loss)/Income and Adjusted Net Loss    

Net loss for the quarter was RMB7.1 million. Net income was RMB163.9 million for the same period of the last fiscal year, which includes net loss of RMB94.2 million from continuing operations and net income of RMB258.1 million from discontinued operations.

Adjusted net loss for the quarter was RMB3.5 million, as compared to adjusted net loss of RMB90.2 for the same period of the last fiscal year. 

Net Loss per ordinary share/ADS and Adjusted Net Loss per ordinary share/ADS

Basic and diluted net loss per ordinary share/ADS attributable to ordinary shareholders/ADS holders from continuing operations for the quarter were RMB0.08 and RMB0.08, respectively, as compared to loss of RMB0.73 and RMB0.73, respectively, for the same period of the last fiscal year.

Adjusted basic and diluted net loss per ordinary share/ADS attributable to ordinary shareholders/ADS holders for the quarter were RMB0.05 and RMB0.05, respectively, as compared to loss of RMB0.69 and RMB0.69, respectively, for the same period of the last fiscal year.

Adjusted EBITDA

Adjusted EBITDA for the quarter was RMB69.0 million, as compared to RMB3.2 million for the same period of the last fiscal year.

UNAUDITED FINANCIAL RESULTS FOR THE NINE MONTHS ENDED MAY 31, 2022

Revenue from Continuing Operations

Revenue for the period was RMB1,311.1 million, representing a 21.2% increase from RMB1,081.8 million for the same period of the last fiscal year.

Overseas Schools: Revenue contribution for the period was RMB531.1 million, representing a 24.4% increase from RMB427.1 million for the same period of the last fiscal year. The increase was mainly attributable to the recovery of overseas schools operation from pandemic.

Complementary Education Services: Revenue contribution for the period was RMB456.9 million. It represented a 3.1% increase from RMB443.0 million for the same period of the last fiscal year. The increase was mainly attributable to the recovery of overseas study counselling business, expansion of international contest business, and other quality education training.

Domestic Kindergartens & K-12 Operation Services: Revenue contribution for the period was RMB323.1 million, representing a 52.6% increase from RMB211.7 million for the same period of the last fiscal year.  The increase was mainly due to an increase in catering services to the students at K-12 schools and management and operation services for kindergartens.

We have continued to provide essential services without recognizing any revenues relating to such activities to schools that provide compulsory education in our discontinued operations, which are key to the normal daily operation of such schools.

Cost of Revenue from Continuing Operations

Cost of revenue for the period was RMB916.7 million, as compared to RMB908.6 million for the same period last fiscal year.

Gross Profit, Gross Margin and Adjusted Gross Profit from Continuing Operations

Gross profit for the period was RMB394.3 million, representing a 127.7% increase from RMB173.2 million for the same period of the last fiscal year. Gross margin increased to 30.1% from 16.0% for the same period of the last fiscal year.

Adjusted gross profit for the period was RMB408.2 million, representing a 121.1% increase from RMB184.7 million for the same period of the last fiscal year.

Selling, General and Administrative Expenses and Adjusted SG&A Expenses from Continuing Operations

Total SG&A expenses for the period were RMB402.1 million, as compared to RMB377.4 million for the same period of the last fiscal year.

Adjusted SG&A expenses for the period were RMB402.9 million, as compared to RMB375.3 million for the same period of the last fiscal year.

Operating Loss, Operating Margin and Adjusted Operating Income/Loss from Continuing Operations

Operating loss for the period was RMB3.7 million, representing a 98.0% decrease in loss from operating loss of RMB185.7 million for the same period of the last fiscal year. Operating margin was (0.3%) for the period, as compared to (17.2%) for the same period of the last fiscal year. 

Adjusted operating income for the period was RMB9.4 million, representing a 105.5% increase from adjusted operating loss of RMB172.2 million for the same period of the last fiscal year. 

Net (Loss)/Income and Adjusted Net Loss    

Net loss for the period was RMB60.0 million. Net income was RMB312.4 million for the same period of the last fiscal year, which includes net loss of RMB255.9 million from continuing operations and net income of RMB568.3 million from discontinued operations.

Adjusted net loss for the period was RMB49.9 million, as compared to adjusted net loss of RMB244.7 for the same period of the last fiscal year. 

Net Loss per ordinary share/ADS and Adjusted Net Loss per ordinary share/ADS

Basic and diluted net loss per ordinary share/ADS attributable to ordinary shareholders/ADS holders from continuing operations for the period were RMB0.49 and RMB0.49, respectively, as compared to loss of RMB2.13 and RMB2.13, respectively, for the same period of the last fiscal year.

Adjusted basic and diluted net loss per ordinary share/ADS attributable to ordinary shareholders/ADS holders for the period were RMB0.41 and RMB0.41, respectively, as compared to loss of RMB2.04 and RMB2.04, respectively, for the same period of the last fiscal year.

Adjusted EBITDA

Adjusted EBITDA for the period was RMB196.7 million, as compared to adjusted EBITDA loss of RMB0.5 million for the same period of the last fiscal year.

Cash and Working Capital

As of May 31, 2022, the Company's cash and cash equivalents and restricted cash were RMB1,371.6 million (US$205.6 million), as compared to RMB1,492.6 million as of February 28, 2022.  The company also had short-term investments of RMB1,234.8 million (US$185.1 million) as of May 31, 2022.

CONVENIENCE TRANSLATION

The Company's reporting currency is Renminbi ("RMB"). However, periodic reports made to shareholders will include current period amounts translated into U.S. dollars using the prevailing exchange rates at the balance sheet date, for the convenience of readers. Translations of balances in the condensed consolidated balance sheets, and the related condensed consolidated statements of operations, and cash flows from RMB into U.S. dollars as of and for the quarter and nine-month ended May 31, 2022 are solely for the convenience of the readers and were calculated at the rate of US$1.00=RMB6.6715, representing the noon buying rate set forth in the H.10 statistical release of the U.S. Federal Reserve Board on May 31, 2022. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on May 31, 2022 or at any other rate.

NON-GAAP FINANCIAL MEASURES

In evaluating our business, we consider and use certain non-GAAP measures, including primarily adjusted EBITDA, adjusted net income/(loss), adjusted gross profit/(loss), adjusted SG&A expenses, adjusted operating income/(loss), adjusted net earnings/(loss) per share attributable to ordinary shareholders basic and diluted as supplemental measures to review and assess our operating performance. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. We define adjusted gross profit/(loss) from continuing operations as gross profit/(loss) from continuing operations excluding amortization of intangible assets. We define adjusted EBITDA as net income/(loss) excluding interest income/(expense), net, income tax expense/benefit, depreciation and amortization, share-based compensation expense and income/(loss) from discontinued operations, net of tax. We define adjusted net income/(loss) as net income/(loss) excluding share-based compensation expense, amortization of intangible assets, tax effect of amortization of intangible assets and income/(loss) from discontinued operations, net of tax. We define adjusted SG&A expenses from continuing operations as selling, general and administration expense from continuing operations excluding share-based compensation expense. We define adjusted operating income/(loss) from continuing operations as net operating income/(loss) from continuing operations excluding share-based compensation expense and amortization of intangible assets. Additionally, we define adjusted net earnings/(loss) per share attributable to ordinary shareholders, basic and diluted, as adjusted net income/(loss) attributable to ordinary shareholders (net income/(loss) to ordinary shareholders excluding share-based compensation expense, amortization of intangible assets, tax effect of amortization of intangible assets and income/(loss) from discontinued operations, net of tax)  divided by the weighted average number of basic and diluted ordinary shares or American depositary shares, each representing one Class A ordinary share of the Company, on an as-converted basis. 

We incur amortization expense of intangible assets related to various acquisitions that have been made in recent years. These intangible assets are valued at the time of acquisition and are then amortized over a period of several years after the acquisition. We believe that exclusion of these expenses allows greater comparability of operating results that are consistent over time for the Company's newly-acquired and long-held business as the related intangibles do not have significant connection to the growth of the business. Therefore, we provide exclusion of amortization of intangible assets to define adjusted gross profit from continuing operations, adjusted operating income/(loss) from continuing operations, adjusted net income/(loss), and adjusted net earnings/(loss) per share attributable to ordinary shareholders, basic and diluted. In addition, due to the impact of the amended Implementation Regulations of the Law on the Promotion of Private Education of the People's Republic of China (the "Implementation Rules"), the Affected Entities⁽⁷⁾ deconsolidated is classified as discontinued operations, which is a non-recurring item. The exclusion facilitates comparisons of our operating performance on a period-to-period basis.  Therefore, we provide exclusion of income/(loss) from discontinued operations, net of tax, to define adjusted net income/(loss), adjusted EBITDA, adjusted net earnings/(loss) per share attributable to ordinary shareholders, basic and diluted.

We present the non-GAAP financial measures because they are used by our management to evaluate our operating performance and formulate business plans. Such non-GAAP measures include adjusted EBITDA, adjusted net income/(loss), adjusted gross profit/(loss) from continuing operations, adjusted SG&A expenses from continuing operations, adjusted operating income/(loss) from continuing operations, adjusted net earnings/(loss) per share attributable to ordinary shareholders basic and diluted. Non-GAAP financial measures enable our management to assess our operating results without considering the impact of non-cash charges, including depreciation and amortization and share-based compensation expense, and without considering the impact of non-operating items such as interest income/(expense), net; income tax expense/benefit; share-based compensation expense; amortization of intangible assets, tax effect of amortization of intangible assets, and without considering the impact of non-recurring item, i.e. income/(loss) from discontinued operations. We also believe that the use of these non-GAAP measures facilitates investors' assessment of our operating performance.

The non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. The non-GAAP financial measures have limitations as analytical tools. One of the key limitations of using these non-GAAP financial measures is that they do not reflect all items of income and expense that affect our operations. Interest income/(expense), net; income tax expense/benefit; depreciation and amortization; share-based compensation expense; tax effect of amortization of intangible assets; and income/(loss) from discontinued operations, have been and may continue to be incurred in our business and are not reflected in the presentation of these non-GAAP measures, including adjusted EBITDA or adjusted net income/(loss). Further, these non-GAAP measures may differ from the non-GAAP information used by other companies, including peer companies, and therefore their comparability may be limited.

About Bright Scholar Education Holdings Limited

Bright Scholar is a global premier education service company, which primarily provides quality international education to global students and equip them with the critical academic foundation and skillsets necessary to succeed in the pursuit of higher education. Bright Scholar also complements its international offerings with Chinese government-mandated curriculum for students who wish to maintain the option of pursuing higher education in China.

Safe Harbor Statement

This announcement contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, the Company's business plans and development, which can be identified by terminology such as "may," "will," "expect," "anticipate," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "is/are likely to" or other similar expressions. Such statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the Company's control, which may cause the Company's actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties or factors is included in the Company's filings with the U.S. Securities and Exchange Commission. The Company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under law.

IR Contact:
GCM Strategic Communications 
Email: [email protected]

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Phone: +86-757-6683-2507

SOURCE Bright Scholar Education Holdings Ltd.