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Bright Scholar Announces Unaudited Financial Results for FY2019 Third Fiscal Quarter

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") (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


(RMB in million)

(RMB in million)


International Schools

590.7

472.2

25.1%

Bilingual Schools

519.6

425.8

22.0%

Kindergartens

386.6

309.1

25.1%

Overseas School

33.3

-

-

Complementary

321.2

122.1

163.2%

Total

1,851.4

1,329.2

39.3%

International Schools: Revenue for the period was RMB590.7 million, representing a 25.1% increase from RMB472.2 million, accounting for 31.9% of total revenues as compared to 35.5% in the same period of last fiscal year. The increase in our revenue generated from international schools was primarily due to a 27.4% increase in the average number of students from 7,334 to 9,347, and a 4.7% increase in the average tuition and fees from RMB64,386 to RMB67,394 during the comparison periods. Revenue contribution from Sannew was RMB5.6 million for the reporting period.

Bilingual Schools: Revenue for the period was RMB519.6 million, representing a 22.0% increase from RMB425.8 million, accounting for 28.1% of total revenues as compared to 32.0% in the same period of last fiscal year. The increase in our revenue generated from bilingual schools was primarily due to a 16.3% increase in the average number of students from 15,566 to 18,110, and a 4.9% increase in the average tuition and fees from RMB27,356 to RMB28,694 during the comparison periods.

Kindergartens: Revenue for the period was RMB386.6 million, representing a 25.1% increase from RMB309.1 million, accounting for 20.9% of total revenues as compared to 23.3% in the same period of last fiscal year. The increase in our revenue generated from kindergartens was primarily due to a 34.0% increase in the average number of students from 12,375 to 16,587. Revenue contribution from Xinqiao and Qiqiaoban kindergartens was RMB38.1 million for the reporting period.

Overseas School: Revenue for the period was RMB33.3 million, accounting for 1.8% of total revenues. For the reporting period, Bournemouth Collegiate School has an average number of students of 588 and an average tuition and fees of RMB84,865

Complementary: Revenue for the period was RMB321.2 million, representing a 163.2% increase from RMB122.1 million, accounting for 17.3% of total revenues as compared to 9.2% in the same period of last fiscal year. For the reporting period, revenue contribution from acquired businesses, including Can-Achieve, Foundation, Hangzhou Impression and DBC was approximately RMB209.1 million

Cost of Revenues

Cost of revenues for the period was RMB1,086.6 million, representing a 34.5% increase from RMB807.6 million in the same period of the last fiscal year. This was primarily due to an increase in staff costs to RMB710.6 million from RMB560.6 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 21.9% from 4,276 to 5,211 during the comparison periods.

International Schools: Cost of revenues for the period was RMB338.6 million, representing a 21.4% increase from RMB279.0 million in the same period of last fiscal year. 

Bilingual Schools: Cost of revenues for the period was RMB313.7 million, representing a 16.5% increase from RMB269.3 million in the same period of last fiscal year.

Kindergartens: Cost of revenues for the period was RMB211.6 million, representing a 25.9% increase from RMB168.1 million in the same period of last fiscal year. This was mainly due to the inclusion of Qiqiaoban kindergarten.

Overseas School: Cost of revenue for the period was RMB22.3 million

Complementary: Cost of revenues for the period was RMB200.4 million, representing a 119.5% increase from RMB91.2 million in the same period of last fiscal year. 

Gross Profit, Gross Margin and Adjusted Gross Profit

Gross profit for the period was RMB764.9 million, representing a 46.6% increase from RMB521.6 million in the same period of last fiscal year. Gross margin for the period was 41.3%, as compared to 39.2% in the same period of last fiscal year. 

Adjusted gross profit for the period was RMB778.7 million, representing a 48.2% increase from RMB525.4 million in the same period of last fiscal year. Adjusted gross margin was 42.1%for the period as compared to 39.5% in the same period of last fiscal year.

International Schools: Gross profit for the period was RMB252.2 million, representing a 30.5% increase from RMB193.2 million in the same period of last fiscal year. Gross margin for the period was 42.7%, as compared to 40.9% in the same period of last fiscal year.

Bilingual Schools: Gross profit for the period was RMB205.9 million, representing a 31.5% increase from RMB156.5 million in the same period of last fiscal year. Gross margin for the period was 39.6%, as compared to 36.8% in the same period of last fiscal year. 

Kindergartens: Gross profit for the period was RMB175.0 million, representing a 24.0% increase from RMB141.0 million in the same period of last fiscal year. Gross margin for the period was 45.3%, as compared to 45.6% in the same period of last fiscal year.

Overseas Schools: Gross profit for the period was RMB11.0 million, with a gross margin of 32.9%.

Complementary: Gross profit for the period was RMB120.8 million, representing a 292.8% increase from RMB30.9 million in the same period of last fiscal year. Gross margin for the period was 37.6%, as compared to 25.4% in the same period of the last fiscal year. 

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

Total selling, general and administrative expenses for the period were RMB431.9 million, representing a 72.3% increase from RMB250.8 million in the same period of the last fiscal year. This accounted for 23.3% of total revenues as compared to 18.9% 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; ESOP related expenses to retain talent; the increase in 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 period were RMB386.9 million, representing a 67.5% increase from RMB231.0 million in the same period of last fiscal year. This accounted for 20.9% of total revenues as compared to 17.4% 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 period was RMB345.0 million, representing a 22.7% increase from RMB281.1 million in the same period of last fiscal year. Operating margin for the period was 18.6%, as compared to 21.1% in the same period of last fiscal year, primarily due to the one-off expenses incurred associated with acquisitions and other professional services provided to support our business expansion for the period.

Adjusted operating income for the period was RMB403.9 million, representing a 32.6% increase from RMB304.7 million in the same period of last fiscal year. Adjusted operating margin was 21.8% for the period as compared to 22.9% in the same period of last fiscal year.

Net Income and Adjusted Net Income 

Net income for the period was RMB300.9 million, representing a 26.8% increase from RMB237.2 million in the same period of last fiscal year.

Adjusted net income for the period was RMB359.8 million, representing a 38.0% increase from RMB260.8 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 period were RMB2.38 and RMB2.38, respectively, as compared to RMB1.95 and RMB1.95, 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 period were RMB2.86 and RMB2.86, respectively, as compared to RMB2.15 and RMB2.15, respectively, in the same period of the last fiscal year.

Adjusted EBITDA

Adjusted EBITDA for the period was RMB487.6 million, representing a 30.4% increase from RMB373.9 million in the same period of last fiscal year.

Cash and Working Capital

As of May 31, 2019, the Company's cash and cash equivalents and restricted cash  was RMB2,057.1 million (US$298.0 million), as compared to RMB2,522.9 million as of February 28, 2019. For the nine months ended May 31, 2019, the Company's capital expenditure was approximately RMB105 million, up 52.8% from the same period of last fiscal year.

New Accounting Standards 

On September 1, 2018, the Company adopted Revenue from Contracts with Customers ("Topic 606"), applying the modified retrospective method to all contracts that were not completed as of September 1, 2018. Results for reporting periods beginning September 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior periods. The Company assessed variable consideration included in its complementary education training services and study-abroad consulting service over the expected service period. The cumulative effect of RMB0.4 million was recorded as an adjustment to the opening balance of retained earnings upon the initial adoption.

GUIDANCE FOR FISCAL YEAR ENDING AUGUST 31, 2019

For the 2019 fiscal year, the Company raised its guidance for its average student enrollment to be between approximately 44,000 and 45,000, representing a year-over-year increase between 20% and 23%, and its revenue to be between approximately RMB2,390 million and RMB2,460 million, representing a year-over-year growth between 39% and 43%. The Company opened three new kindergartens during the 2019 fiscal year.

This guidance is based on the current market and operating conditions and reflects the Company's current and preliminary estimates of such market and operating conditions and customer demand, which are all subject to change.

Conference Call

BEDU's management will host a conference call at 8:00 am US Eastern Time (8:00 pm Beijing/Hong Kong Time) on July 19, 2019 to discuss its quarterly results and recent business activities.

To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time:

China:

4001-201-203

Hong Kong:

852-301-84992

United States: 

1-888-346-8982

Canada Toll Free:

1-855-669-9657

International:

1-412-902-4272

*No passcode is needed for the call. Please request to join Bright Scholar Education Holdings Ltd.'s call as you dial in.

The Company will also broadcast a live audio webcast of the conference call. The webcast will be available at http://ir.brightscholar.com/.

Following the earnings conference call, an archive of the call will be available by dialing: 

United States: 

1-877-344-7529

International: 

1-412-317-0088

Canada Toll Free: 

855-669-9658

Replay Passcode:

10132606

Replay End Date:

July 26, 2019

CONVENIENCE TRANSLATION

The Company's business is primarily conducted in China and the significant majority of revenues generated are denominated in 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 period ended May 31, 2019 are solely for the convenience of the readers and were calculated at the rate of US$1.00=RMB6.9027, representing the noon buying rate set forth in the H.10 statistical release of the U.S. Federal Reserve Board on May 31, 2019. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on May 31, 2019 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 and adjusted net income/(loss), 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) as gross profit/(loss) excluding amortization of intangible assets and adjusted gross margin as adjusted gross profit/(loss) divided by revenue. We define adjusted EBITDA 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 was reserved for designated purpose of use in fiscal year 2018 and subsequently exchanged to RMB and realized exchange gain in later 2018, and adjusted net income/(loss) as net income/(loss) excluding share-based compensation expense and amortization of intangible assets. We define adjusted SG&A as selling, general and administration expense excluding share-based compensation expense and adjusted operating income/(loss) as net operating income/(loss) excluding share-based compensation expense and amortization of intangible assets. Additionally, we define adjusted net earnings 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 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.

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 businesses as the related intangibles does not have significant connection to the growth of the business. Therefore we provide additional exclusion of amortization of intangible assets to redefine adjusted operating income/(loss), adjusted net income/(loss), and adjusted net earnings 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, including adjusted EBITDA and adjusted net income/(loss). Adjusted EBITDA enables 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, net; income tax expense/benefit; 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 was reserved for designated purpose of use in fiscal year 2018 and subsequently exchanged to RMB and realized exchange gain in later 2018. Adjusted net income/(loss) enables our management to assess our operating results without considering share-based compensation expense and amortization of intangible assets. We also believe that the use of the non-GAAP measure 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, 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 was reserved for designated purpose of use in fiscal year 2018 and subsequently exchanged to RMB and realized exchange gain in later 2018, 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 the largest operator of international and bilingual K-12 schools in China*. The Company is dedicated to providing quality international education to Chinese students and equipping them with the critical academic foundation and skillsets necessary to succeed in the pursuit of higher education overseas. 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. As of May 31, 2019, Bright Scholar operated 78 schools covering the breadth of K-12 academic needs of its students across nine provinces in China and one overseas school. In the first nine months of the 2019 school year ended May 31, 2019, Bright Scholar had an average of 44,632 students enrolled at its schools.

____________

* 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. 

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: BEDU.IR@gcm.international

Media Contact:
Email: media@brightscholar.com
Phone: +86-757-6683-2507

 

BRIGHT SCHOLAR EDUCATION HOLDINGS LIMITED

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)









As of



August 31,


May 31,



2018


2019



RMB


RMB

USD







ASSETS






     Current assets






          Cash and cash equivalents  


3,153,852


2,032,681

294,476

          Restricted cash   


10,229


24,399

3,535

          Short term investments       


-


293,621

42,537

          Accounts receivable           


809


2,140

310

          Amounts due from related parties      


17,960


16,528

2,394

          Other receivables, deposits and other assets       


52,457


75,554

10,945

          Inventories         


9,174


21,624

3,133

     Total current assets      


3,244,481


2,466,547

357,330

          Property and equipment, net               


460,485


774,889

112,259

          Land use right, net              


33,721


88,735

12,855

          Intangible assets, net


73,657


200,223

29,006

          Goodwill            


609,511


1,039,192

150,549

          Long-term investments       


204,968


13,799

1,999

          Equity method investments                


2,313


2,302

333

          Other investments              


83


1,583

229

          Prepayment for construction contract 


2,983


4,749

688

          Deferred tax assets, net      


18,129


14,087

2,041

          Deposits for acquisition     


8,854


72,629

10,522

          Other non-current assets    


7,296


8,224

1,191

     Total non-current assets              


1,422,000


2,220,412

321,672







TOTAL ASSETS     


4,666,481


4,686,959

679,002

 

 

BRIGHT SCHOLAR EDUCATION HOLDINGS LIMITED 

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS-CONTINUED

(Amounts in thousands) 









As of



August 31,


May 31,



2018


2019



RMB


RMB

USD







LIABILITIES AND EQUITY






     Current liabilities






          Short term loan (including short term loan of the consolidated VIEs without
               recourse to Bright Scholar Education of nil and nil as of August 31, 2018 and
               May 31, 2019, respectively)


49,840


49,840

7,220

          Accounts payable (including accounts payable of the consolidated VIEs without
               recourse to Bright Scholar Education of RMB 37,271 and RMB 50,371 as of
               August 31, 2018 and May 31, 2019, respectively)


63,602


92,683

13,427

          Amounts due to related parties (including amounts due to related parties of the
               consolidated VIEs without recourse to Bright Scholar Education of RMB
               142,068 and RMB 82,971 as of August 31, 2018 and May 31, 2019, respectively)


157,295


107,314

15,547

          Accrued expenses and other current liabilities (including accrued expenses and
                other current liabilities of the consolidated VIEs without recourse to Bright
                Scholar Education of RMB 289,388 and RMB 292,085 as of August 31, 2018
                and May 31, 2019, respectively)


335,857


381,423

55,256

          Income tax payable (including income tax payable of the consolidated VIEs
                without recourse to Bright Scholar Education of RMB 23,886 and RMB
                76,798 as of August 31, 2018 and May 31, 2019, respectively)


53,598


105,904

15,342

          Current portion of deferred revenue (including deferred revenue of the
                consolidated VIEs without recourse to Bright Scholar Education of RMB
                936,615 and nil as of August 31, 2018 and May 31, 2019, respectively)


965,152


-

-

          Contract liabilities (including contract liabilities of the consolidated VIEs
               without recourse to Bright Scholar Education of nil and RMB 693,427 as of
               August 31, 2018 and May 31, 2019, respectively)


-


741,461

107,416

          Refund liabilities (including refund liabilities of the consolidated VIEs without
               recourse to Bright Scholar Education of nil and RMB 4,225 as of August 31,
               2018 and May 31, 2019, respectively)


-


5,544

803

     Total current liabilities 


1,625,344


1,484,169

215,011

          Deferred tax liabilities, net (including deferred tax liabilities of the consolidated
               VIEs without recourse to Bright Scholar Education of RMB 14,452 and RMB
               41,358 as of August 31, 2018 and May 31, 2019, respectively)       


17,067


48,617

7,043

          Other non-current liability due to related parties (including non-current liabilities
               due to related parties of the consolidated VIEs without recourse to Bright
              Scholar Education of nil and RMB 21,326 as of August 31, 2018 and May 31,
              2019, respectively)


-


21,326

3,090

          Other non-current liability due to third parties (including non-current liabilities
              due to third parties of the consolidated VIEs without recourse to Bright
              Scholar Education of RMB 7,817 and RMB 8,895 as of August 31, 2018 and
              May 31, 2019, respectively)


12,471


12,237

1,773

     Total non-current liabilities         


29,538


82,180

11,906

TOTAL LIABILITIES             


1,654,882


1,566,349

226,917







EQUITY






          Share capital       


9


8

1

          Additional paid-in capital   


2,469,815


2,099,034

304,089

          Statutory reserves               


64,945


64,945

9,409

          Accumulated other comprehensive income        


75,770


92,006

13,329

          Accumulated retained earnings           


231,036


524,263

75,950

     Shareholders' equity    


2,841,575


2,780,256

402,778

     Non-controlling interests             


170,024


340,354

49,307

     Total equity  


3,011,599


3,120,610

452,085

TOTAL LIABILITIES AND EQUITY    


4,666,481


4,686,959

679,002

 

 

BRIGHT SCHOLAR EDUCATION HOLDINGS LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except for shares and per share data)














Three Months Ended May 31, 


Nine Months Ended May 31, 



2018


2019



2018


2019




RMB


RMB

USD


RMB


RMB

USD












Revenue


540,882


692,825

100,370


1,329,206


1,851,445

268,220

Cost of revenue


(308,316)


(374,784)

(54,295)


(807,608)


(1,086,561)

(157,411)












Gross profit


232,566


318,041

46,075


521,598


764,884

110,809

Selling, general and administrative expenses


(77,777)


(152,035)

(22,025)


(250,759)


(431,937)

(62,575)

Other operating income


1,275


815

118


10,274


12,007

1,739












Operating income


156,064


166,821

24,168


281,113


344,954

49,973

Interest income, net


7,956


10,081

1,460


14,507


32,290

4,678

Investment income


4,472


5,593

810


14,099


15,736

2,280

Other income (expenses)


2,634


(2,376)

(344)


(8,812)


(5,803)

(840)












Income before income taxes and share of equity in income
of unconsolidated affiliates


171,126


180,119

26,094


300,907


387,177

56,091

Income tax expense 


(37,098)


(42,672)

(6,182)


(63,697)


(86,276)

(12,499)

Share of equity in income/ (loss) of unconsolidated affiliates


32


(33)

(5)


32


(17)

(2)



Net income


134,060


137,414

19,907


237,242


300,884

43,590

Net income attributable to non-controlling interests


2,814


761

110


2,022


7,861

1,139

Net income attributable to ordinary shareholders


131,246


136,653

19,797


235,220


293,023

42,451

Net earnings per share attributable to 











   ordinary shareholders











--Basic


1.04


1.13

0.16


1.95


2.38

0.35

--Diluted


1.04


1.13

0.16


1.95


2.38

0.35












Weighted average shares used in 











   calculating net earnings per ordinary share:











--Basic


126,706,522


120,901,587

120,901,587


120,436,813


122,908,466

122,908,466

--Diluted


126,725,656


121,010,564

121,010,564


120,455,948


122,996,539

122,996,539


 

BRIGHT SCHOLAR EDUCATION HOLDINGS LIMITED 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)














Three Months Ended May 31,


Nine Months Ended May 31,



2018


2019


2018


2019



RMB


RMB

USD


RMB


RMB

USD












Net cash (used in)/generated from operating activities


(7,184)


(78,206)

(11,329)


100,114


182,517

26,442












Net cash used in investing activities


(375,544)


(300,129)

(43,481)


(429,315)


(837,538)

(121,334)












Net cash generated from/(used in) financing activities


1,155,048


(124,658)

(18,059)


1,155,408


(467,221)

(67,688)












Effect of exchange rate changes on cash


23,075


37,175

5,386


(20,631)


15,241

2,208












Net change in cash and cash equivalents, 
     and restricted cash


795,395


(465,818)

(67,483)


805,576


(1,107,001)

(160,372)












Cash and cash equivalents, and restricted cash 
     at beginning of the period


1,906,843


2,522,898

365,494


1,896,662


3,164,081

458,383












Cash and cash equivalents, and restricted cash 
     at end of the period


2,702,238


2,057,080

298,011


2,702,238


2,057,080

298,011


 

Reconciliations of GAAP and Non-GAAP Results

(Amounts in thousands, except for shares and per share data)














Three Months Ended May 31, 


Nine Months Ended May 31,



2018


2019



2018


2019




RMB


RMB

USD 


RMB


RMB

USD












Gross profit


232,566


318,041

46,075


521,598


764,884

110,809

  Add: Amortization of intangible assets


2,512


6,187

896


3,772


13,832

2,004












Adjusted gross profit


235,078


324,228

46,971


525,370


778,716

112,813























Operating income


156,064


166,821

24,168


281,113


344,954

49,973

   Add: Share-based compensation expense


8,048


16,623

2,408


19,790


45,065

6,529

   Add: Amortization of intangible assets


2,512


6,187

896


3,772


13,832

2,004












Adjusted operating income


166,624


189,631

27,472


304,675


403,851

58,506























Net income


134,060


137,414

19,907


237,242


300,884

43,590

   Add: Share-based compensation expense


8,048


16,623

2,408


19,790


45,065

6,529

   Add: Amortization of intangible assets


2,512


6,187

896


3,772


13,832

2,004

Adjusted net income


144,620


160,224

23,211


260,804


359,781

52,123























Net income attributable to ordinary shareholders


131,246


136,653

19,797


235,220


293,023

42,451

   Add: Share-based compensation expense


8,048


16,623

2,408


19,790


45,065

6,529

   Add: Amortization of intangible assets


2,512


6,187

896


3,772


13,832

2,004












Adjusted net income attributable to ordinary
shareholders


141,806


159,463

23,101


258,782


351,920

50,984























Net income


134,060


137,414

19,907


237,242


300,884

43,590

   Less:  Interest income, net


7,956


10,081

1,460


14,507


32,290

4,678

   Add:   Income tax expense


37,098


42,672

6,182


63,697


86,276

12,499

   Add:   Depreciation and amortization


20,511


34,272

4,965


60,573


87,642

12,697

   Add:   Share-based compensation expense


8,048


16,623

2,408


19,790


45,065

6,529

   Add:   Foreign exchange loss/ gain 


(4,147)


-

-


7,140


-

-

              (included in other expenses)











Adjusted EBITDA


187,614


220,900

32,002


373,935


487,577

70,637























Selling, general and administrative expenses


77,777


152,035

22,025


250,759


431,937

62,575

   Less:  Share-based compensation expense


8,048


16,623

2,408


19,790


45,065

6,529

Adjusted selling, general and administrative expenses


69,729


135,412

19,617


230,969


386,872

56,046












Weighted average shares used 











   in calculating earnings per ordinary share:











—Basic


126,706,522


120,901,587

120,901,587


120,436,813


122,908,466

122,908,466

—Diluted 


126,725,656


121,010,564

121,010,564


120,455,948


122,996,539

122,996,539












Adjusted net earnings per share attributable 











   to ordinary shareholders











—Basic


1.12


1.32

0.19


2.15


2.86

0.41

—Diluted


1.12


1.32

0.19


2.15


2.86

0.41

 

 

 

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