Bright Scholar(BEDU) - 2023 Q1 - Quarterly Report

Executive Summary & Financial Highlights This section provides a comprehensive overview of the company's financial performance and key highlights for the reported periods Fourth Fiscal Quarter Ended August 31, 2022 Financial Highlights In the fourth fiscal quarter of 2022, the company's continuing operations revenue grew by 26.2% year-over-year, gross profit significantly increased by 73.4%, and operating and net losses narrowed considerably, indicating strong business recovery Financial Highlights (RMB in million) | Metric | Q4 2022 | Q4 2021 | YoY Change % | | :----------------------------------- | :----------------------- | :----------------------- | :--------- | | Revenue from Continuing Operations | 403.9 | 320.0 | 26.2% | | Gross Profit from Continuing Operations | 83.8 | 48.3 | 73.4% | | Gross Margin from Continuing Operations | 20.7% | 15.1% | 5.6% | | Operating Loss from Continuing Operations | (59.4) | (204.0) | 70.9% | | Operating Margin from Continuing Operations | (14.7)% | (63.7)% | 49.0% | | Quarterly Net Loss | (99.4) | (478.2) | 79.2% | | Adjusted Gross Profit from Continuing Operations | 87.7 | 53.0 | 65.5% | | Adjusted Operating Loss from Continuing Operations | (48.8) | (99.2) | 50.7% | | Adjusted Quarterly Net Loss | (89.7) | (175.5) | 48.9% | | Adjusted Quarterly EBITDA | (47.6) | (29.8) | 59.9% | | Basic and Diluted Loss per Ordinary Share from Continuing Operations | (0.90) | (2.40) | 62.5% | | Adjusted Quarterly Basic and Diluted Loss per Ordinary Share | (0.82) | (1.53) | 46.4% | | Basic and Diluted Loss per ADS from Continuing Operations | (3.60) | (9.60) | 62.5% | | Adjusted Quarterly Basic and Diluted Loss per ADS | (3.28) | (6.12) | 46.4% | Fiscal Year 2022 Ended August 31, 2022 Financial Highlights For the full fiscal year 2022, continuing operations revenue increased by 22.3% year-over-year, gross profit surged by 115.8%, operating and net losses significantly improved, and adjusted EBITDA turned positive, reflecting sustained business recovery and effective cost management throughout the year Financial Highlights (RMB in million) | Metric | FY 2022 | FY 2021 | YoY Change % | | :----------------------------------- | :------- | :------- | :--------- | | Revenue from Continuing Operations | 1,714.9 | 1,401.8 | 22.3% | | Gross Profit from Continuing Operations | 478.1 | 221.5 | 115.8% | | Gross Margin from Continuing Operations | 27.9% | 15.8% | 12.1% | | Operating Loss from Continuing Operations | (63.0) | (389.7) | 83.8% | | Operating Margin from Continuing Operations | (3.7)% | (27.8)% | 24.1% | | Annual Net Loss | (159.4) | (165.8) | 3.8% | | Adjusted Gross Profit from Continuing Operations | 495.9 | 237.7 | 108.7% | | Adjusted Operating Loss from Continuing Operations | (39.4) | (271.4) | 85.5% | | Adjusted Annual Net Loss | (139.6) | (420.2) | 66.8% | | Adjusted Annual EBITDA | 149.0 | (30.3) | 592.5% | | Basic and Diluted Loss per Ordinary Share from Continuing Operations | (1.39) | (4.54) | 69.4% | | Adjusted Annual Basic and Diluted Loss per Ordinary Share | (1.23) | (3.57) | 65.5% | | Basic and Diluted Loss per ADS from Continuing Operations | (5.56) | (18.16) | 69.4% | | Adjusted Annual Basic and Diluted Loss per ADS | (4.92) | (14.28) | 65.5% | Management Commentary Management highlighted the company's business recovery in a challenging year, with significant growth in continuing operations revenue and gross profit, substantial narrowing of losses, and a continued focus on cost management, optimizing sustainable returns, and delivering high-quality education and holistic development support services - The company's continuing operations revenue grew by 26.2% in the fourth fiscal quarter and 22.3% for the full year, with gross profit increasing by 73.4% and 115.8% respectively, while operating and net losses continued to narrow[10] - Management expressed satisfaction with the business recovery but remains vigilant regarding the UK energy crisis and future inflationary pressures, actively managing costs to optimize sustainable returns in the medium to long term[10] - The company will continue to develop its business, comprehensively considering how to provide high-quality education and holistic development support services to students, innovating to meet student needs, and deepening the connectivity of its diversified education service platform[13] Overall Performance Executive Vice Chairman Jerry He stated that the company achieved robust business recovery in a challenging year, with significant revenue and gross profit growth in continuing operations for both the fourth fiscal quarter and the full year, alongside substantial narrowing of operating and net losses - Fourth fiscal quarter continuing operations revenue grew by 26.2%, gross profit increased by 73.4%, and operating and net losses continued to narrow[10] - Full-year continuing operations revenue grew by 22.3%, gross profit increased by 115.8%, and operating and net losses improved by 83.8% and 70.2% respectively[10] Overseas Schools Business Overseas schools business revenue grew by 61.1% in the fourth fiscal quarter and 29.9% for the full year, primarily driven by the return of demand for high-quality education post-pandemic - Overseas schools business revenue grew by 61.1% in the fourth fiscal quarter and 29.9% for the full year[10] - The performance growth reflects the gradual return of parental and student demand for high-quality education after pandemic-induced disruptions to in-person learning[10] Complementary Education Services Complementary education services faced challenges in the fourth fiscal quarter with a 1.6% revenue decrease, but full-year revenue saw a modest 1.8% increase, with strong performance in overseas study consulting and career counseling, growing by 35.1% and 46.7% respectively in Q4 - Complementary education services revenue decreased by 1.6% in the fourth fiscal quarter but increased by 1.8% for the full year[12] - Overseas study consulting and career counseling businesses continued to recover, with fourth fiscal quarter revenue growing by 35.1% and 46.7% respectively, and full-year growth of 26.6% and 9.9% respectively[12] Domestic Kindergartens & K-12 Operation Services Domestic kindergartens and K-12 operation services revenue grew by 65.7% in the fourth fiscal quarter and 55.6% for the full year, primarily due to increased catering service revenue and expanded procurement services - Domestic kindergartens and K-12 operation services revenue grew by 65.7% in the fourth fiscal quarter and 55.6% for the full year[13] - The performance growth is primarily attributed to increased catering service revenue and expanded procurement services, serving 24 schools and 60 kindergartens as of the end of August 2022[13] Outlook The company will continue to reshape and rebuild its business amidst dynamic macroeconomic challenges and profound social changes, leveraging its diversified business portfolio to focus on providing high-quality education and holistic development support services, and is committed to achieving profitability post-K-12 regulatory impact - The company will continue to develop its business, comprehensively considering how to provide high-quality education and holistic development support services to students, and innovating to meet student needs[13] - The company will continue to implement measures to reduce administrative expenses and mitigate risks from inflationary cost pressures[13] - The company remains firmly committed to restoring profitability following the impact of China's K-12 regulations[13] Business Segments Overview This section provides an overview of the company's key business segments, including overseas schools, complementary education services, and domestic kindergarten and K-12 operation services Overseas Schools (CATS Global Schools) As of August 31, 2022, CATS Global Schools comprised four Stafford House campuses in the UK, four CATS Colleges in the US and UK, Cambridge School of Visual & Performing Arts, and three independent boarding schools in the UK - As of August 31, 2022, CATS Global Schools included four Stafford House campuses in the UK, four CATS Colleges in the US and UK, the Cambridge School of Visual & Performing Arts, and three independent boarding schools in the UK[7] Complementary Education Services Complementary education services encompass language training, overseas study consulting, career counseling, study tours, and international competition training - Complementary education services include language training, overseas study consulting, career counseling, study tours, and international competition training[8] Domestic Kindergartens & K-12 Operation Services Domestic kindergartens and K-12 operation services include the operation of for-profit kindergartens and K-12 schools in China, offering services such as catering and procurement - Domestic kindergartens and K-12 operation services include the operation of for-profit kindergartens and domestic K-12 schools, offering services such as catering and procurement[9] Recent Developments This section outlines recent corporate actions, including the company's compliance with NYSE minimum price requirements NYSE Minimum Price Requirement Compliance The company regained compliance with the NYSE minimum share price requirement on September 1, 2022, by adjusting its ADS to Class A ordinary share ratio from 1:1 to 1:4, ensuring continued ADS listing and trading - To regain compliance with the NYSE minimum share price requirement, the company adjusted its ADS to Class A ordinary share ratio from 1:1 to 1:4 on August 19, 2022[14] - On September 1, 2022, the company received confirmation from the NYSE that it had regained compliance with the listing standards within the prescribed timeframe, and its ADSs will continue to trade on the NYSE[15] Unaudited Financial Results for the Fourth Fiscal Quarter Ended August 31, 2022 This section details the unaudited financial performance for the fourth fiscal quarter of 2022, covering revenue, costs, profits, and losses from continuing operations Revenue from Continuing Operations Revenue from continuing operations for the fourth fiscal quarter of 2022 was RMB 403.9 million, a 26.2% year-over-year increase, driven by strong growth in overseas schools and domestic kindergartens & K-12 operation services, despite a slight decline in complementary education services due to pandemic impacts Revenue by Business Segment (RMB in million) | Business Segment | Q4 2022 Revenue (RMB million) | Q4 2021 Revenue (RMB million) | YoY Growth % | Percentage of Total Revenue % | | :------- | :----------------------- | :----------------------- | :--------- | :------------- | | Overseas Schools | 121.6 | 75.5 | 61.1% | 30.1% | | Complementary Education | 179.7 | 182.6 | -1.6% | 44.5% | | Domestic K-12 | 102.6 | 61.9 | 65.7% | 25.4% | | Total | 403.9 | 320.0 | 26.2% | 100% | Overseas Schools Revenue Overseas schools revenue for the fourth fiscal quarter was RMB 121.6 million, a 61.1% year-over-year increase, primarily attributed to the recovery of overseas school operations post-pandemic - Fourth fiscal quarter overseas schools revenue was RMB 121.6 million, a 61.1% year-over-year increase[18] - The growth is primarily attributed to the recovery of overseas school operations post-pandemic[18] Complementary Education Services Revenue Complementary education services revenue for the fourth fiscal quarter was RMB 179.7 million, a slight decrease from RMB 182.6 million in the prior year period, mainly due to regional outbreaks of new COVID variants disrupting study tours and language training businesses - Fourth fiscal quarter complementary education services revenue was RMB 179.7 million, a decrease from RMB 182.6 million in the prior year period[19] - The decrease is primarily attributed to regional outbreaks of new COVID variants leading to disruptions in study tours and language training businesses[19] Domestic Kindergartens & K-12 Operation Services Revenue Domestic kindergartens and K-12 operation services revenue for the fourth fiscal quarter was RMB 102.6 million, a 65.7% year-over-year increase, primarily driven by increased catering service revenue and expanded procurement services - Fourth fiscal quarter domestic kindergartens and K-12 operation services revenue was RMB 102.6 million, a 65.7% year-over-year increase[20] - The growth is primarily attributed to increased catering service revenue and expanded procurement services[20] Cost of Revenue from Continuing Operations Cost of revenue from continuing operations for the fourth fiscal quarter was RMB 320.1 million, an increase from RMB 271.7 million in the prior year period Cost of Revenue from Continuing Operations (RMB in million) | Metric | Q4 2022 | Q4 2021 | | :-------------------- | :------- | :------- | | Cost of Revenue from Continuing Operations | 320.1 | 271.7 | Gross Profit, Gross Margin and Adjusted Gross Profit from Continuing Operations Gross profit from continuing operations for the fourth fiscal quarter increased by 73.4% year-over-year to RMB 83.8 million, with gross margin improving to 20.7%, primarily due to the recovery of overseas operations; adjusted gross profit grew by 65.5% to RMB 87.7 million Gross Profit and Margin (RMB in million) | Metric | Q4 2022 | Q4 2021 | YoY Growth % | | :-------------------- | :------- | :------- | :--------- | | Gross Profit | 83.8 | 48.3 | 73.4% | | Gross Margin | 20.7% | 15.1% | 5.6% | | Adjusted Gross Profit | 87.7 | 53.0 | 65.5% | - The growth in gross profit and gross margin is primarily attributed to the recovery of overseas operations[23] Selling, General and Administrative Expenses from Continuing Operations Total selling, general and administrative expenses for the fourth fiscal quarter were RMB 137.8 million, a 13.0% year-over-year decrease, primarily due to the company's proactive cost management across all business segments SG&A Expenses (RMB in million) | Metric | Q4 2022 | Q4 2021 | YoY Change % | | :-------------------- | :------- | :------- | :--------- | | SG&A Expenses | 137.8 | 158.5 | -13.0% | - The decrease in SG&A expenses is primarily attributed to the company's proactive cost management across all business segments[25] Operating Loss, Operating Margin and Adjusted Operating Loss from Continuing Operations Operating loss from continuing operations for the fourth fiscal quarter significantly narrowed by 70.9% to RMB 59.4 million, with the operating loss margin improving to 14.7%; adjusted operating loss narrowed by 50.7% to RMB 48.8 million Operating Loss and Margin (RMB in million) | Metric | Q4 2022 | Q4 2021 | YoY Change % | | :-------------------- | :------- | :------- | :--------- | | Operating Loss | (59.4) | (204.0) | 70.9% | | Operating Loss Margin | (14.7)% | (63.7)% | 49.0% | | Adjusted Operating Loss | (48.8) | (99.2) | 50.7% | Net Loss and Adjusted Net Loss Net loss from continuing operations for the fourth fiscal quarter significantly decreased by 64.4% to RMB 99.4 million from RMB 279.3 million, with adjusted net loss narrowing by 48.9% to RMB 89.7 million Net Loss (RMB in million) | Metric | Q4 2022 | Q4 2021 | YoY Change % | | :-------------------- | :------- | :------- | :--------- | | Net Loss from Continuing Operations | (99.4) | (279.3) | 64.4% | | Adjusted Net Loss | (89.7) | (175.5) | 48.9% | - Management is closely monitoring the possibility of goodwill and intangible asset impairment due to the company's market capitalization being below its net assets[28] Net Loss per Ordinary Share/ADS and Adjusted Net Loss per Ordinary Share/ADS Basic and diluted net loss per ordinary share from continuing operations for the fourth fiscal quarter was RMB 0.90, and per ADS was RMB 3.60, both significantly narrowed from the prior year period, with adjusted net loss per ordinary share and per ADS also substantially reduced Net Loss per Share/ADS (RMB) | Metric | Q4 2022 | Q4 2021 | YoY Change % | | :----------------------------------- | :------- | :------- | :--------- | | Basic and Diluted Net Loss per Ordinary Share from Continuing Operations | (0.90) | (2.40) | 62.5% | | Adjusted Basic and Diluted Net Loss per Ordinary Share | (0.82) | (1.53) | 46.4% | | Basic and Diluted Net Loss per ADS from Continuing Operations | (3.60) | (9.60) | 62.5% | | Adjusted Basic and Diluted Net Loss per ADS | (3.28) | (6.12) | 46.4% | Adjusted EBITDA Loss Adjusted EBITDA loss for the fourth fiscal quarter was RMB 47.6 million, with the loss amount decreasing by 59.9% year-over-year Adjusted EBITDA Loss (RMB in million) | Metric | Q4 2022 | Q4 2021 | YoY Change % | | :-------------------- | :------- | :------- | :--------- | | Adjusted EBITDA Loss | (47.6) | (29.8) | 59.9% | Unaudited Financial Results for the Fiscal Year Ended August 31, 2022 This section presents the unaudited financial performance for the full fiscal year 2022, detailing revenue, costs, profits, and losses from continuing operations Revenue from Continuing Operations Revenue from continuing operations for the full fiscal year 2022 was RMB 1,714.9 million, a 22.3% year-over-year increase, driven by comprehensive growth across overseas schools, complementary education services (especially overseas study and career consulting), and domestic kindergartens & K-12 operation services Revenue by Business Segment (RMB in million) | Business Segment | FY 2022 Revenue (RMB million) | FY 2021 Revenue (RMB million) | YoY Growth % | Percentage of Total Revenue % | | :------- | :----------------------- | :----------------------- | :--------- | :------------- | | Overseas Schools | 652.8 | 502.6 | 29.9% | 38.1% | | Complementary Education | 636.6 | 625.6 | 1.8% | 37.1% | | Domestic K-12 | 425.5 | 273.6 | 55.6% | 24.8% | | Total | 1,714.9 | 1,401.8 | 22.3% | 100% | Overseas Schools Revenue Overseas schools revenue for fiscal year 2022 was RMB 652.8 million, a 29.9% year-over-year increase, primarily attributed to the recovery of overseas school operations post-pandemic - Fiscal year 2022 overseas schools revenue was RMB 652.8 million, a 29.9% year-over-year increase[34] - The growth is primarily attributed to the recovery of overseas school operations post-pandemic[34] Complementary Education Services Revenue Complementary education services revenue for fiscal year 2022 was RMB 636.6 million, a 1.8% year-over-year increase, primarily driven by the recovery of overseas study consulting and career counseling businesses - Fiscal year 2022 complementary education services revenue was RMB 636.6 million, a 1.8% year-over-year increase[36] - The growth is primarily attributed to the recovery of overseas study consulting and career counseling businesses[36] Domestic Kindergartens & K-12 Operation Services Revenue Domestic kindergartens and K-12 operation services revenue for fiscal year 2022 was RMB 425.5 million, a 55.6% year-over-year increase, primarily due to increased catering service revenue and expanded procurement services - Fiscal year 2022 domestic kindergartens and K-12 operation services revenue was RMB 425.5 million, a 55.6% year-over-year increase[37] - The growth is primarily attributed to increased catering service revenue and expanded procurement services[37] Cost of Revenue from Continuing Operations Cost of revenue from continuing operations for fiscal year 2022 was RMB 1,236.8 million, an increase from RMB 1,180.3 million in the prior year period Cost of Revenue from Continuing Operations (RMB in million) | Metric | FY 2022 | FY 2021 | | :-------------------- | :------- | :------- | | Cost of Revenue from Continuing Operations | 1,236.8 | 1,180.3 | Gross Profit, Gross Margin and Adjusted Gross Profit from Continuing Operations Gross profit from continuing operations for fiscal year 2022 increased by 115.8% year-over-year to RMB 478.1 million, with gross margin improving to 27.9%, primarily due to the sustained recovery of overseas operations, overseas study consulting, and career counseling businesses; adjusted gross profit grew by 108.7% to RMB 495.9 million Gross Profit and Margin (RMB in million) | Metric | FY 2022 | FY 2021 | YoY Growth % | | :-------------------- | :------- | :------- | :--------- | | Gross Profit | 478.1 | 221.5 | 115.8% | | Gross Margin | 27.9% | 15.8% | 12.1% | | Adjusted Gross Profit | 495.9 | 237.7 | 108.7% | - The growth in gross profit and gross margin is primarily attributed to the sustained recovery of overseas operations, overseas study consulting, and career counseling businesses[40] Selling, General and Administrative Expenses from Continuing Operations Total selling, general and administrative expenses for fiscal year 2022 were RMB 539.9 million, remaining largely consistent with RMB 535.9 million in the prior year period SG&A Expenses (RMB in million) | Metric | FY 2022 | FY 2021 | | :-------------------- | :------- | :------- | | SG&A Expenses | 539.9 | 535.9 | Operating Loss, Operating Margin and Adjusted Operating Loss from Continuing Operations Operating loss from continuing operations for fiscal year 2022 significantly narrowed by 83.8% to RMB 63.0 million, with the operating loss margin improving to 3.7%; adjusted operating loss narrowed by 85.5% to RMB 39.4 million Operating Loss and Margin (RMB in million) | Metric | FY 2022 | FY 2021 | YoY Change % | | :-------------------- | :------- | :------- | :--------- | | Operating Loss | (63.0) | (389.7) | 83.8% | | Operating Loss Margin | (3.7)% | (27.8)% | 24.1% | | Adjusted Operating Loss | (39.4) | (271.4) | 85.5% | Net Loss and Adjusted Net Loss Net loss from continuing operations for fiscal year 2022 significantly decreased by 70.2% to RMB 159.4 million from RMB 535.1 million, with adjusted net loss narrowing by 66.8% to RMB 139.6 million Net Loss (RMB in million) | Metric | FY 2022 | FY 2021 | YoY Change % | | :-------------------- | :------- | :------- | :--------- | | Net Loss from Continuing Operations | (159.4) | (535.1) | 70.2% | | Adjusted Net Loss | (139.6) | (420.2) | 66.8% | Net Loss per Ordinary Share/ADS and Adjusted Net Loss per Ordinary Share/ADS Basic and diluted net loss per ordinary share from continuing operations for fiscal year 2022 was RMB 1.39, and per ADS was RMB 5.56, both significantly narrowed from the prior year period, with adjusted net loss per ordinary share and per ADS also substantially reduced Net Loss per Share/ADS (RMB) | Metric | FY 2022 | FY 2021 | YoY Change % | | :----------------------------------- | :------- | :------- | :--------- | | Basic and Diluted Net Loss per Ordinary Share from Continuing Operations | (1.39) | (4.54) | 69.4% | | Adjusted Basic and Diluted Net Loss per Ordinary Share | (1.23) | (3.57) | 65.5% | | Basic and Diluted Net Loss per ADS from Continuing Operations | (5.56) | (18.16) | 69.4% | | Adjusted Basic and Diluted Net Loss per ADS | (4.92) | (14.28) | 65.5% | Adjusted EBITDA Adjusted EBITDA for fiscal year 2022 was RMB 149.0 million, a significant increase of 592.5% from a loss of RMB 30.3 million in the prior year period, marking a turnaround to positive EBITDA Adjusted EBITDA (RMB in million) | Metric | FY 2022 | FY 2021 | YoY Change % | | :-------------------- | :------- | :------- | :--------- | | Adjusted EBITDA | 149.0 | (30.3) | 592.5% | Cash and Working Capital As of August 31, 2022, the company's cash and cash equivalents and restricted cash totaled RMB 857.8 million (US$124.5 million), a decrease from RMB 1,371.6 million as of May 31, 2022, primarily due to the redemption of US$232.3 million in matured senior notes Cash and Cash Equivalents and Restricted Cash (RMB in million) | Metric | August 31, 2022 | May 31, 2022 | | :-------------------- | :------------- | :------------- | | Cash and Cash Equivalents and Restricted Cash | 857.8 | 1,371.6 | - The company redeemed all outstanding senior notes due July 31, 2022, for a total redemption price of US$232.3 million (including principal and interest)[51] Convenience Translation The company reports in RMB, but for reader convenience, current period amounts in periodic reports are translated into US dollars using the exchange rate at the balance sheet date, which was US$1.00 = RMB 6.8890 as of August 31, 2022 - The company's reporting currency is RMB, but for reader convenience, current period amounts in periodic reports are translated into US dollars using the exchange rate at the balance sheet date[52] - As of August 31, 2022, the translation exchange rate was US$1.00 = RMB 6.8890[52] Non-GAAP Financial Measures This section defines and explains the rationale and limitations of the company's non-GAAP financial measures used for performance evaluation and business planning Definitions of Non-GAAP Measures The company uses non-GAAP metrics such as adjusted EBITDA, adjusted net income/(loss), adjusted gross profit/(loss), and adjusted operating income/(loss) to assess operating performance, providing a clearer view by excluding non-cash or non-recurring items like share-based compensation, intangible asset amortization, asset impairment losses, and income/(loss) from discontinued operations - Adjusted gross profit/(loss) is defined as gross profit/(loss) from continuing operations excluding intangible asset amortization[54] - Adjusted EBITDA is defined as net income/(loss) excluding net interest income/(expense), income tax expense/benefit, depreciation and amortization, share-based compensation expenses, impairment loss of operating lease right-of-use assets, impairment loss of goodwill, impairment loss of property and equipment, and net income/(loss) from discontinued operations[54] - Adjusted net income/(loss) is defined as net income/(loss) excluding share-based compensation expenses, intangible asset amortization, tax impact of intangible asset amortization, impairment loss of operating lease right-of-use assets, impairment loss of goodwill, impairment loss of property and equipment, and net income/(loss) from discontinued operations[54] Rationale for Non-GAAP Measures The company utilizes non-GAAP financial measures to better evaluate operating performance and formulate business plans, enabling clearer period-over-period comparisons for management and investors by excluding non-cash expenses (e.g., depreciation, amortization, share-based compensation) and non-operating or non-recurring items (e.g., income/loss from discontinued operations) - The company uses non-GAAP financial measures to assess operating performance and formulate business plans[56] - Intangible asset amortization is excluded to enhance comparability of operating results between newly acquired and long-held businesses, as related intangible assets are not significantly correlated with business growth[55] - Income/(loss) from discontinued operations is excluded to facilitate period-over-period comparison of operating results, as it is a non-recurring item[55] Limitations of Non-GAAP Measures Non-GAAP financial measures are not defined or presented according to US GAAP and have analytical limitations, as they do not reflect all revenue and expense items affecting company operations and may differ from non-GAAP information used by other companies, thereby limiting comparability - Non-GAAP financial measures are not defined or presented according to US GAAP and have analytical limitations[58] - These metrics do not reflect all revenue and expense items affecting the company's operations, such as net interest income/(expense), income tax expense/benefit, depreciation and amortization, and share-based compensation expenses[58] - These non-GAAP measures may differ from non-GAAP information used by other companies, including peer companies, thus limiting their comparability[58] Company Information & Disclosures This section provides essential company details, including its profile, forward-looking statement disclaimers, and investor and media contact information About Bright Scholar Education Holdings Limited Bright Scholar Education Holdings Limited is a leading global education services company primarily offering high-quality international education to students worldwide, supplemented by Chinese government-mandated curricula to support students pursuing higher education - Bright Scholar is a leading global education services company primarily providing high-quality international education to students worldwide[59] - The company also offers Chinese government-mandated curricula to meet the needs of students seeking higher education in China[59] Safe Harbor Statement This announcement contains forward-looking statements involving known or unknown risks, uncertainties, and other factors that could cause actual results to differ materially from those in the forward-looking statements, and the company undertakes no obligation to update any forward-looking statements unless required by law - This announcement contains forward-looking statements involving known or unknown risks, uncertainties, and other factors that could cause the company's actual results to differ materially from those in the forward-looking statements[60] - The company undertakes no obligation to update any forward-looking statements unless required by law[60] IR Contact Investor Relations contact is GCM Strategic Communications, email: BEDU.IR@gcm.international - Investor Relations contact: GCM Strategic Communications, email: BEDU.IR@gcm.international[61] Media Contact Media contact is email: media@brightscholar.com, phone: +86-757-6683-2507 - Media contact: email: media@brightscholar.com, phone: +86-757-6683-2507[61] Unaudited Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, cash flows, and GAAP to non-GAAP reconciliations Balance Sheets As of August 31, 2022, the company's total assets were RMB 5,469 million, total liabilities were RMB 3,056 million, and total equity was RMB 2,413 million, with both total assets and liabilities decreasing from August 31, 2021, primarily due to the divestiture of discontinued operations and redemption of senior notes Balance Sheets (RMB in thousands) | Metric (RMB in thousands) | August 31, 2021 | August 31, 2022 | | :-------------------- | :------------- | :------------- | | Assets | | | | Cash and Cash Equivalents | 844,684 | 664,769 | | Restricted Cash | 669,029 | 191,365 | | Accounts Receivable, Net | 41,723 | 19,084 | | Amounts Due from Related Parties, Net | 15,087 | 196,626 | | Other Receivables, Deposits and Other Assets, Net | 81,119 | 114,151 | | Inventories | 7,579 | 6,869 | | Amounts Due from Affected Entities, Net | 2,028,866 | - | | Total Current Assets | 3,688,087 | 1,192,864 | | Restricted Cash - Non-current | 1,450 | 1,650 | | Property and Equipment, Net | 519,452 | 404,534 | | Intangible Assets, Net | 485,822 | 430,495 | | Goodwill, Net | 1,950,186 | 1,832,296 | | Long-term Investments | 75,443 | 40,486 | | Prepaid Construction Contracts | 5,974 | 4,894 | | Deferred Tax Assets, Net | 64,096 | 85,103 | | Other Non-current Assets, Net | 68,217 | 15,343 | | Operating Lease Right-of-Use Assets | 1,773,773 | 1,461,333 | | Total Non-current Assets | 4,944,413 | 4,276,134 | | Total Assets | 8,632,500 | 5,468,998 | | Liabilities and Equity | | | | Current Liabilities | | | | Accounts Payable | 73,411 | 100,229 | | Amounts Due to Related Parties | 40,445 | 343,032 | | Accrued Expenses and Other Current Liabilities | 234,036 | 259,267 | | Short-term Borrowings | 753,754 | 149,239 | | Bonds Payable | 1,836,362 | - | | Income Taxes Payable | 178,213 | 85,856 | | Contract Liabilities | 425,954 | 516,731 | | Refund Liabilities | 32,362 | 20,517 | | Operating Lease Liabilities | 123,215 | 106,629 | | Amounts Due to Affected Entities | 333,270 | - | | Total Current Liabilities | 4,031,022 | 1,581,500 | | Contract Liabilities – Non-current | 1,421 | 2,203 | | Deferred Tax Liabilities, Net | 26,744 | 21,707 | | Other Non-current Liabilities to Related Parties | 13,154 | 11,197 | | Long-term Borrowings | 616 | 633 | | Operating Lease Liabilities – Non-current | 1,752,667 | 1,438,449 | | Total Non-current Liabilities | 1,794,602 | 1,474,189 | | Total Liabilities | 5,825,624 | 3,055,689 | | Equity | | | | Share Capital | 8 | 8 | | Additional Paid-in Capital | 1,727,020 | 1,693,358 | | Statutory Reserves | 2,531 | 14,873 | | Accumulated Other Comprehensive Income | 168,324 | 8,076 | | Accumulated Retained Earnings | 648,944 | 471,353 | | Total Shareholders’ Equity | 2,546,827 | 2,187,668 | | Non-controlling Interests | 260,049 | 225,641 | | Total Equity | 2,806,876 | 2,413,309 | | Total Liabilities and Equity | 8,632,500 | 5,468,998 | Statements of Operations For both the fourth fiscal quarter and the full fiscal year 2022, the company's continuing operations achieved revenue growth, significant improvements in gross profit and operating loss, substantial narrowing of net loss, and corresponding reductions in loss per share and per ADS, reflecting effective business recovery and cost control Statements of Operations (RMB in thousands) | Metric (RMB in thousands) | Q4 2021 | Q4 2022 | FY 2021 | FY 2022 | | :----------------------------------- | :------- | :------- | :------- | :------- | | Continuing Operations | | | | | | Revenue | 320,021 | 403,855 | 1,401,780 | 1,714,909 | | Cost of Revenue | (271,701) | (320,057) | (1,180,263) | (1,236,799) | | Gross Profit | 48,320 | 83,798 | 221,517 | 478,110 | | Selling, General and Administrative Expenses | (158,504) | (137,825) | (535,878) | (539,893) | | Operating Loss | (203,981) | (59,361) | (389,697) | (63,030) | | Net Loss | (478,192) | (99,427) | (165,803) | (159,447) | | Net Loss Attributable to Ordinary Shareholders | (364,751) | (106,983) | (52,805) | (165,250) | | Basic and Diluted Net Loss per Ordinary Share - Continuing Operations | (2.40) | (0.90) | (4.54) | (1.39) | | Basic and Diluted Net Loss per ADS - Continuing Operations | (9.60) | (3.60) | (18.16) | (5.56) | Statements of Cash Flows In the fourth fiscal quarter of 2022, net cash inflow from operating activities was RMB 165.5 million, net cash inflow from investing activities was RMB 310.2 million, and net cash outflow from financing activities was RMB 1,001.4 million; for the full year, net cash inflow from operating activities was RMB 45.5 million, net cash outflow from investing activities was RMB 836.8 million, and net cash inflow from financing activities was RMB 101.4 million Statements of Cash Flows (RMB in thousands) | Metric (RMB in thousands) | Q4 2021 | Q4 2022 | FY 2021 | FY 2022 | | :-------------------- | :------- | :------- | :------- | :------- | | Net Cash Provided by Operating Activities | 842,770 | 165,485 | 698,808 | 45,497 | | Net Cash (Used in)/Provided by Investing Activities | (558,856) | 310,193 | (3,079,036) | (836,769) | | Net Cash (Used in)/Provided by Financing Activities | (468,702) | (1,001,420) | (446,534) | 101,383 | | Effect of Exchange Rate Changes | 31,861 | 11,936 | (82,012) | 32,510 | | Net Change in Cash and Cash Equivalents and Restricted Cash | (152,927) | (513,806) | (2,908,774) | (657,379) | | Cash and Cash Equivalents and Restricted Cash at End of Period | 1,515,163 | 857,784 | 1,515,163 | 857,784 | Reconciliations of GAAP and Non-GAAP Results The company provides reconciliations of GAAP to non-GAAP financial measures, detailing adjustments from GAAP gross profit, operating loss, net loss, and net loss attributable to ordinary shareholders to adjusted non-GAAP metrics, including share-based compensation, intangible asset amortization, asset impairment losses, and income/loss from discontinued operations Reconciliations of GAAP and Non-GAAP Results (RMB in thousands) | Metric (RMB in thousands) | Q4 2021 | Q4 2022 | FY 2021 | FY 2022 | | :----------------------------------- | :------- | :------- | :------- | :------- | | Gross Profit from Continuing Operations | 48,320 | 83,798 | 221,517 | 478,110 | | Add: Intangible Asset Amortization | 4,680 | 3,931 | 16,141 | 17,814 | | Adjusted Gross Profit from Continuing Operations | 53,000 | 87,729 | 237,658 | 495,924 | | Operating Loss from Continuing Operations | (203,981) | (59,361) | (389,697) | (63,030) | | Add: Share-based Compensation Expenses | (167) | - | 1,865 | (816) | | Add: Intangible Asset Amortization | 4,680 | 3,931 | 16,141 | 17,814 | | Add: Impairment Loss of Operating Lease Right-of-Use Assets | 15,575 | - | 15,575 | - | | Add: Impairment Loss of Goodwill | 84,730 | - | 84,730 | - | | Add: Impairment Loss of Property and Equipment | - | 6,586 | - | 6,586 | | Adjusted Operating Loss from Continuing Operations | (99,163) | (48,844) | (271,386) | (39,446) | | Net Loss | (478,192) | (99,427) | (165,803) | (159,447) | | Add: Share-based Compensation Expenses | (167) | - | 1,865 | (816) | | Add: Intangible Asset Amortization | 4,680 | 3,931 | 16,141 | 17,814 | | Add: Tax Impact of Intangible Asset Amortization | (1,029) | (811) | (3,343) | (3,764) | | Add: Impairment Loss of Operating Lease Right-of-Use Assets | 15,575 | - | 15,575 | - | | Add: Impairment Loss of Goodwill | 84,730 | - | 84,730 | - | | Add: Impairment Loss of Property and Equipment | - | 6,586 | - | 6,586 | | Less: Net Income/(Loss) from Discontinued Operations | (198,941) | - | 369,343 | - | | Adjusted Net Loss | (175,462) | (89,721) | (420,178) | (139,627) | | Net Loss Attributable to Ordinary Shareholders | (364,751) | (106,983) | (52,805) | (165,250) | | Add: Share-based Compensation Expenses | (167) | - | 1,865 | (816) | | Add: Intangible Asset Amortization | 4,680 | 3,931 | 16,141 | 17,814 | | Add: Tax Impact of Intangible Asset Amortization | (1,029) | (811) | (3,343) | (3,764) | | Add: Impairment Loss of Operating Lease Right-of-Use Assets | 15,575 | - | 15,575 | - | | Add: Impairment Loss of Goodwill | 84,730 | - | 84,730 | - | | Add: Impairment Loss of Property and Equipment | - | 6,586 | - | 6,586 | | Less: Net Income/(Loss) from Discontinued Operations | (78,625) | - | 487,963 | - | | Adjusted Net Loss Attributable to Ordinary Shareholders | (182,337) | (97,277) | (425,800) | (145,430) | | Net Loss | (478,192) | (99,427) | (165,803) | (159,447) | | Add: Net Interest Expense | 47,330 | 17,093 | 169,693 | 127,840 | | Add: Income Tax Expense | 66,664 | 11,667 | 94,176 | 58,919 | | Add: Depreciation and Amortization | 35,325 | 16,442 | 138,847 | 115,934 | | Add: Share-based Compensation Expenses | (167) | - | 1,865 | (816) | | Add: Impairment Loss of Operating Lease Right-of-Use Assets | 15,575 | - | 15,575 | - | | Add: Impairment Loss of Goodwill | 84,730 | - | 84,730 | - | | Add: Impairment Loss of Property and Equipment | - | 6,586 | - | 6,586 | | Less: Net Income/(Loss) from Discontinued Operations | (198,941) | - | 369,343 | - | | Adjusted EBITDA | (29,794) | (47,639) | (30,260) | 149,016 | | Adjusted Net Loss per Ordinary Share - Basic and Diluted | (1.53) | (0.82) | (3.57) | (1.23) | | Adjusted Net Loss per ADS - Basic and Diluted | (6.12) | (3.28) | (14.28) | (4.92) |