Bright Scholar(BEDU) - 2024 Q1 - Quarterly Report

Company Announcement Bright Scholar announced its unaudited financial results for the fourth fiscal quarter and full fiscal year ended August 31, 2023 Bright Scholar Announces Unaudited Financial Results Bright Scholar Education Holdings Limited announced its unaudited financial results for the fourth fiscal quarter and full fiscal year ended August 31, 2023, on November 27, 2023 - Bright Scholar Education Holdings Limited announced its unaudited financial results for the fourth fiscal quarter and full fiscal year ended August 31, 2023, on November 27, 2023[1] FINANCIAL PERFORMANCE HIGHLIGHTS The company reported strong revenue growth and significant loss reduction for both Q4 and full FY2023, driven by overseas schools and complementary education services Fourth Fiscal Quarter Ended August 31, 2023 Financial Highlights The company's Q4 FY2023 revenue grew 38.9% to RMB 559.8 million, gross profit increased 32.5%, while gross margin slightly declined; operating and net losses significantly narrowed by 52.5% and 47.1% respectively Fourth Fiscal Quarter 2023 Financial Highlights (Year-over-Year Comparison) | RMB in millions Except EPS and % | Fourth Fiscal Quarter Ended August 31, 2023 | Fourth Fiscal Quarter Ended August 31, 2022 | YoY % Change | |:---------------------------------|:--------------------------------------------|:--------------------------------------------|:-------------| | Revenue | 559.8 | 402.9 | 38.9% | | Gross Profit | 109.1 | 82.3 | 32.5% | | Gross Margin | 19.5% | 20.4% | (0.9)% | | Operating Loss | (286.2) | (602.9) | 52.5% | | Operating Margin | (51.1)% | (149.6)% | 98.5% | | Net Loss for the quarter | (340.3) | (643.5) | 47.1% | | Adjusted Gross Profit | 112.8 | 86.3 | 30.7% | | Adjusted Operating Loss | (57.2) | (50.3) | (13.6)% | | Adjusted Net Loss for the quarter| (111.9) | (91.8) | (21.9)% | | Adjusted EBITDA for the quarter | (43.7) | (49.7) | 12.0% | | Basic and Diluted Loss per Share | (2.90) | (5.49) | 47.2% | | Adjusted Basic and Diluted Loss per Share for the quarter | (0.98) | (0.84) | (16.7)% | | Basic and Diluted Loss per ADS | (11.60) | (21.96) | 47.2% | | Adjusted Basic and Diluted Loss per ADS for the quarter | (3.92) | (3.36) | (16.7)% | Fiscal Year 2023 Ended August 31, 2023 Financial Highlights The company's full FY2023 revenue grew 23.9% to RMB 2,123.8 million, gross profit increased 25.3% with a slight margin improvement; operating and net losses significantly narrowed by 69.2% and 45.0%, with adjusted operating profit turning positive Fiscal Year 2023 Financial Highlights (Year-over-Year Comparison) | RMB in millions Except EPS and % | Fiscal Year 2023 Ended August 31, 2023 | Fiscal Year 2022 Ended August 31, 2022 % | YoY Change | |:---------------------------------|:---------------------------------------|:-----------------------------------------|:-----------| | Revenue | 2,123.8 | 1,714.0 | 23.9% | | Gross Profit | 597.3 | 476.7 | 25.3% | | Gross Margin | 28.1% | 27.8% | 0.3% | | Operating Loss | (186.6) | (606.5) | 69.2% | | Operating Margin | (8.8)% | (35.4)% | 26.6% | | Net Loss for the year | (386.8) | (703.5) | 45.0% | | Adjusted Gross Profit | 612.2 | 494.5 | 23.8% | | Adjusted Operating Income/(Loss) | 53.7 | (40.9) | 231.4% | | Adjusted Net Loss for the year | (149.4) | (141.7) | (5.5)% | | Adjusted EBITDA for the year | 115.8 | 147.0 | (21.2)% |\n| Basic and Diluted Loss per Share | (3.33) | (5.98) | 44.3% | | Adjusted Basic and Diluted Loss per Share for the year | (1.33) | (1.24) | (7.3)% | | Basic and Diluted Loss per ADS | (13.32) | (23.92) | 44.3% | | Adjusted Basic and Diluted Loss per ADS for the year | (5.32) | (4.96) | (7.3)% | - Adjusted operating income turned from a RMB 40.9 million loss in FY2022 to a RMB 53.7 million profit in FY2023, representing a 231.4% year-over-year increase[4] Segment Performance Highlights Overseas Schools and Complementary Education Services achieved strong growth in both Q4 and full FY2023, while Domestic Kindergartens & K-12 Operation Services saw modest growth and face challenges Segment Revenue Performance | 业务板块 | 2023财年第四季度收入 (RMB百万) | 同比增长率 | 占总收入比例 | 2023财年全年收入 (RMB百万) | 同比增长率 | 占总收入比例 | |:-----------------------------|:-------------------------------|:-----------|:-------------|:---------------------------|:-----------|:-------------| | 海外学校 (CATS Global Schools) | 184.8 | 51.9% | 33.0% | 809.5 | 24.0% | 38.1% | | 素质教育服务 | 273.2 | 52.0% | 48.8% | 846.0 | 32.9% | 39.8% | | 国内幼儿园及K-12运营服务 | 101.8 | 0.2% | 18.2% | 468.3 | 10.3% | 22.1% | - Overseas Schools revenue grew 51.9% in Q4 FY2023 and 24.0% for the full year, significantly contributing to the company's improved performance[8] - Complementary Education Services revenue increased 52.0% in Q4 FY2023 and 32.9% for the full year, driven by the continued recovery of study camps and international competition training[9] - Domestic Kindergartens & K-12 Operation Services revenue grew only 0.2% in Q4 FY2023 and 10.3% for the full year, with challenges and a projected revenue decline in FY2024[10][11] MANAGEMENT COMMENTARY Management discussed strong FY2023 performance, strategic transformation, and future imperatives focusing on high-growth segments and operational efficiency Fiscal Year 2023 Performance and Turnaround Strategy CEO Tim Hongru Zhou stated that FY2023 concluded with strong performance, exceeding revenue and profit expectations, driven by successful core business transformation and repositioning through management team strengthening, board optimization, cost competitiveness, and enhanced financial sustainability - The company's FY2023 revenue significantly exceeded guidance, and profitability surpassed internal expectations[11] - The company successfully transformed and repositioned its core businesses by strengthening the management team, optimizing the board, building a cost-competitive foundation, and enhancing financial sustainability[11] - Q4 FY2023 revenue grew 38.9%, gross profit increased 32.5%, and operating and net losses significantly decreased by 52.5% and 47.1% respectively[11] - Full FY2023 revenue increased 23.9%, gross profit grew 25.3%, and operating and net losses improved substantially by 69.2% and 45.0% respectively[11] Strategic Imperatives for Fiscal Year 2024 and Beyond The company will advance its transformation through three strategic imperatives: prioritizing high-growth, high-return businesses (especially overseas schools), divesting non-core complementary education and domestic K-12 operations, and continuously streamlining global operations and optimizing cost structures to achieve substantial margin and balance sheet improvements in FY2024, paving the way for sustainable profitable growth in FY2025 and FY2026 - The company will prioritize its most promising businesses, capitalizing on significant market opportunities, particularly within the Overseas Schools segment[11] - The company will enhance its business portfolio performance by divesting non-core education businesses within Complementary Education Services and Domestic Kindergartens & K-12 Operation Services[11] - The company will continuously streamline global operations and optimize its cost structure to align with business portfolio adjustments[11] - These strategic imperatives aim to improve portfolio efficiency and returns, expecting substantial margin and balance sheet improvements in FY2024, laying the foundation for sustainable profitable growth in FY2025 and FY2026[11] GUIDANCE AND QUARTERLY REPORTING FOR FISCAL YEAR 2024 The company cannot provide FY2024 revenue guidance due to business portfolio uncertainties but commits to resuming quarterly reporting for transparency Fiscal Year 2024 Outlook Due to uncertainties regarding the scope, timing, and impact of business portfolio adjustments, management cannot provide FY2024 revenue guidance but commits to resuming quarterly reporting for transparency and regular updates - Management cannot currently provide FY2024 revenue guidance due to uncertainties surrounding the scope, timing, and impact of business portfolio adjustments[12] - The company commits to resuming quarterly earnings reports in FY2024 to ensure transparency and provide regular updates[12] UNAUDITED FINANCIAL RESULTS FOR THE FOURTH FISCAL QUARTER ENDED AUGUST 31, 2023 Detailed financial results for Q4 FY2023 show revenue growth, improved operating performance, and narrowed net losses, primarily driven by overseas schools and complementary education Revenue Total revenue for Q4 FY2023 was RMB 559.8 million, a 38.9% year-over-year increase, with both Overseas Schools and Complementary Education Services revenues growing over 50% due to continued post-pandemic recovery - Total revenue for Q4 FY2023 was RMB 559.8 million, representing a 38.9% year-over-year increase[13] Overseas Schools Overseas Schools contributed RMB 184.8 million in revenue for Q4 FY2023, a 51.9% year-over-year increase, primarily due to the continued recovery of overseas school operations post-pandemic Overseas Schools Revenue (Q4 FY2023) | Indicator | 2023 Fiscal Quarter 4 (RMB million) | 2022 Fiscal Quarter 4 (RMB million) | YoY Growth Rate | |:----------|:------------------------------------|:------------------------------------|:----------------| | Revenue | 184.8 | 121.6 | 51.9% | - Revenue growth was primarily driven by the continued recovery of overseas school operations post-pandemic[13] Complementary Education Services Complementary Education Services contributed RMB 273.2 million in revenue for Q4 FY2023, a 52.0% year-over-year increase, primarily due to the continued recovery of study camps, international competition training, and other supplementary businesses Complementary Education Services Revenue (Q4 FY2023) | Indicator | 2023 Fiscal Quarter 4 (RMB million) | 2022 Fiscal Quarter 4 (RMB million) | YoY Growth Rate | |:----------|:------------------------------------|:------------------------------------|:----------------| | Revenue | 273.2 | 179.7 | 52.0% | - Revenue growth was primarily driven by the continued recovery of study camps, international competition training, and other supplementary businesses[15] Domestic Kindergartens & K-12 Operation Services Domestic Kindergartens & K-12 Operation Services contributed RMB 101.8 million in revenue for Q4 FY2023, a 0.2% year-over-year increase, primarily driven by a short-term rebound in various service revenues Domestic Kindergartens & K-12 Operation Services Revenue (Q4 FY2023) | Indicator | 2023 Fiscal Quarter 4 (RMB million) | 2022 Fiscal Quarter 4 (RMB million) | YoY Growth Rate | |:----------|:------------------------------------|:------------------------------------|:----------------| | Revenue | 101.8 | 101.6 | 0.2% | - Revenue growth was primarily driven by a short-term rebound in various service revenues[15] Cost of Revenue Cost of revenue for Q4 FY2023 was RMB 450.7 million, higher than RMB 320.6 million in the prior year period Cost of Revenue (Q4 FY2023) | Indicator | 2023 Fiscal Quarter 4 (RMB million) | 2022 Fiscal Quarter 4 (RMB million) | |:-------------|:------------------------------------|:------------------------------------| | Cost of Revenue | 450.7 | 320.6 | Gross Profit, Gross Margin and Adjusted Gross Profit Gross profit for Q4 FY2023 was RMB 109.1 million, a 32.5% year-over-year increase, but gross margin decreased from 20.4% to 19.5%; adjusted gross profit was RMB 112.8 million, up 30.7% Gross Profit, Gross Margin, and Adjusted Gross Profit (Q4 FY2023) | Indicator | 2023 Fiscal Quarter 4 (RMB million) | 2022 Fiscal Quarter 4 (RMB million) | YoY Growth Rate | |:--------------------|:------------------------------------|:------------------------------------|:----------------| | Gross Profit | 109.1 | 82.3 | 32.5% | | Gross Margin | 19.5% | 20.4% | (0.9)% | | Adjusted Gross Profit | 112.8 | 86.3 | 30.7% | Selling, General and Administrative (SG&A) Expenses Total SG&A expenses for Q4 FY2023 were RMB 176.8 million, higher than RMB 137.8 million in the prior year period Selling, General and Administrative Expenses (Q4 FY2023) | Indicator | 2023 Fiscal Quarter 4 (RMB million) | 2022 Fiscal Quarter 4 (RMB million) | |:-------------|:------------------------------------|:------------------------------------| | SG&A Expenses | 176.8 | 137.8 | Operating Loss, Operating Margin and Adjusted Operating Loss Operating loss for Q4 FY2023 was RMB 286.2 million, a 52.5% reduction year-over-year, with operating margin significantly improving from 149.6% to 51.1%; adjusted operating loss expanded to RMB 57.2 million Operating Loss, Operating Margin, and Adjusted Operating Loss (Q4 FY2023) | Indicator | 2023 Fiscal Quarter 4 (RMB million) | 2022 Fiscal Quarter 4 (RMB million) | YoY Change | |:----------------------|:------------------------------------|:------------------------------------|:--------------| | Operating Loss | (286.2) | (602.9) | Loss reduced 52.5% | | Operating Loss Margin | (51.1)% | (149.6)% | Improved 98.5% | | Adjusted Operating Loss | (57.2) | (50.3) | Loss expanded 13.6% | Net Loss and Adjusted Net Loss Net loss for Q4 FY2023 was RMB 340.3 million, a 47.1% reduction year-over-year, driven by overall business recovery and significant improvement in overseas schools; adjusted net loss expanded to RMB 111.9 million Net Loss and Adjusted Net Loss (Q4 FY2023) | Indicator | 2023 Fiscal Quarter 4 (RMB million) | 2022 Fiscal Quarter 4 (RMB million) | YoY Change | |:--------------------|:------------------------------------|:------------------------------------|:--------------| | Net Loss | (340.3) | (643.5) | Loss reduced 47.1% | | Adjusted Net Loss | (111.9) | (91.8) | Loss expanded 21.9% | - The reduction in net loss was partly due to overall business recovery, but primarily driven by significant improvements in revenue and profitability from the Overseas Schools segment[20] Net Loss per Ordinary Share/ADS and Adjusted Net Loss per Ordinary Share/ADS Basic and diluted net loss per ordinary share was RMB 2.90 and per ADS was RMB 11.60 in Q4 FY2023, both significantly narrowed; adjusted net loss per ordinary share was RMB 0.98 and per ADS was RMB 3.92, both expanded year-over-year Net Loss per Ordinary Share/ADS (Q4 FY2023) | Indicator | 2023 Fiscal Quarter 4 (RMB) | 2022 Fiscal Quarter 4 (RMB) | YoY Change | |:-------------------------------------------|:----------------------------|:----------------------------|:--------------| | Basic and Diluted Net Loss per Ordinary Share | (2.90) | (5.49) | Loss reduced 47.2% | | Adjusted Basic and Diluted Net Loss per Ordinary Share | (0.98) | (0.84) | Loss expanded 16.7% | | Basic and Diluted Net Loss per ADS | (11.60) | (21.96) | Loss reduced 47.2% | | Adjusted Basic and Diluted Net Loss per ADS | (3.92) | (3.36) | Loss expanded 16.7% | Adjusted EBITDA Loss Adjusted EBITDA loss for Q4 FY2023 was RMB 43.7 million, a 12.0% reduction year-over-year, primarily due to the strong recovery of Complementary Education Services Adjusted EBITDA Loss (Q4 FY2023) | Indicator | 2023 Fiscal Quarter 4 (RMB million) | 2022 Fiscal Quarter 4 (RMB million) | YoY Change | |:----------------------|:------------------------------------|:------------------------------------|:--------------| | Adjusted EBITDA Loss | (43.7) | (49.7) | Loss reduced 12.0% | - The reduction in adjusted EBITDA loss was primarily due to the strong recovery of Complementary Education Services[24] UNAUDITED FINANCIAL RESULTS FOR THE FISCAL YEAR ENDED AUGUST 31, 2023 Detailed financial results for full FY2023 highlight significant revenue growth, substantial loss reduction, and a turnaround in adjusted operating profit, led by overseas schools and complementary education Revenue Total revenue for full FY2023 was RMB 2,123.8 million, a 23.9% year-over-year increase, with Overseas Schools and Complementary Education Services revenues growing 24.0% and 32.9% respectively, and Domestic Kindergartens & K-12 Operation Services revenue growing 10.3% - Total revenue for full FY2023 was RMB 2,123.8 million, representing a 23.9% year-over-year increase[25] Overseas Schools Overseas Schools contributed RMB 809.5 million in revenue for full FY2023, a 24.0% year-over-year increase, primarily due to the continued recovery of overseas school operations post-pandemic Overseas Schools Revenue (Full FY2023) | Indicator | 2023 Fiscal Year (RMB million) | 2022 Fiscal Year (RMB million) | YoY Growth Rate | |:----------|:-------------------------------|:-------------------------------|:----------------| | Revenue | 809.5 | 652.8 | 24.0% | - Revenue growth was primarily driven by the continued recovery of overseas school operations post-pandemic[25] Complementary Education Services Complementary Education Services contributed RMB 846.0 million in revenue for full FY2023, a 32.9% year-over-year increase, primarily due to the continued recovery of study camps, international competition training, and other supplementary businesses Complementary Education Services Revenue (Full FY2023) | Indicator | 2023 Fiscal Year (RMB million) | 2022 Fiscal Year (RMB million) | YoY Growth Rate | |:----------|:-------------------------------|:-------------------------------|:----------------| | Revenue | 846.0 | 636.6 | 32.9% | - Revenue growth was primarily driven by the continued recovery of study camps, international competition training, and other supplementary businesses[25] Domestic Kindergartens & K-12 Operation Services Domestic Kindergartens & K-12 Operation Services contributed RMB 468.3 million in revenue for full FY2023, a 10.3% year-over-year increase, primarily driven by a short-term rebound in various service revenues Domestic Kindergartens & K-12 Operation Services Revenue (Full FY2023) | Indicator | 2023 Fiscal Year (RMB million) | 2022 Fiscal Year (RMB million) | YoY Growth Rate | |:----------|:-------------------------------|:-------------------------------|:----------------| | Revenue | 468.3 | 424.6 | 10.3% | - Revenue growth was primarily driven by a short-term rebound in various service revenues[26] Cost of Revenue Cost of revenue for full FY2023 was RMB 1,526.4 million, higher than RMB 1,237.3 million in the prior year period Cost of Revenue (Full FY2023) | Indicator | 2023 Fiscal Year (RMB million) | 2022 Fiscal Year (RMB million) | |:-------------|:-------------------------------|:-------------------------------| | Cost of Revenue | 1,526.4 | 1,237.3 | Gross Profit, Gross Margin and Adjusted Gross Profit Gross profit for full FY2023 was RMB 597.3 million, a 25.3% year-over-year increase, with gross margin rising from 27.8% to 28.1%; adjusted gross profit was RMB 612.2 million, up 23.8% Gross Profit, Gross Margin, and Adjusted Gross Profit (Full FY2023) | Indicator | 2023 Fiscal Year (RMB million) | 2022 Fiscal Year (RMB million) | YoY Growth Rate | |:--------------------|:-------------------------------|:-------------------------------|:----------------| | Gross Profit | 597.3 | 476.7 | 25.3% | | Gross Margin | 28.1% | 27.8% | 0.3% | | Adjusted Gross Profit | 612.2 | 494.5 | 23.8% | Selling, General and Administrative (SG&A) Expenses Total SG&A expenses for full FY2023 were RMB 614.6 million, higher than RMB 539.9 million in the prior year period Selling, General and Administrative Expenses (Full FY2023) | Indicator | 2023 Fiscal Year (RMB million) | 2022 Fiscal Year (RMB million) | |:-------------|:-------------------------------|:-------------------------------| | SG&A Expenses | 614.6 | 539.9 | Operating Loss, Operating Margin and Adjusted Operating Income/Loss Operating loss for full FY2023 was RMB 186.6 million, a 69.2% reduction year-over-year, with operating margin significantly improving from 35.4% to 8.8%; adjusted operating income turned profitable at RMB 53.7 million from a RMB 40.9 million loss Operating Loss, Operating Margin, and Adjusted Operating Income/Loss (Full FY2023) | Indicator | 2023 Fiscal Year (RMB million) | 2022 Fiscal Year (RMB million) | YoY Change | |:------------------------------|:-------------------------------|:-------------------------------|:--------------| | Operating Loss | (186.6) | (606.5) | Loss reduced 69.2% | | Operating Loss Margin | (8.8)% | (35.4)% | Improved 26.6% | | Adjusted Operating Income/(Loss) | 53.7 | (40.9) | Increased 231.4% | Net Loss and Adjusted Net Loss Net loss for full FY2023 was RMB 386.8 million, a 45.0% reduction year-over-year, driven by overall business recovery and significant improvement in overseas schools; adjusted net loss expanded slightly to RMB 149.4 million Net Loss and Adjusted Net Loss (Full FY2023) | Indicator | 2023 Fiscal Year (RMB million) | 2022 Fiscal Year (RMB million) | YoY Change | |:--------------------|:-------------------------------|:-------------------------------|:--------------| | Net Loss | (386.8) | (703.5) | Loss reduced 45.0% | | Adjusted Net Loss | (149.4) | (141.7) | Loss expanded 5.5% | - The reduction in net loss was partly due to overall business recovery, but primarily driven by significant improvements in revenue and profitability from the Overseas Schools segment[30] Net Loss per Ordinary Share/ADS and Adjusted Net Loss per Ordinary Share/ADS Basic and diluted net loss per ordinary share was RMB 3.33 and per ADS was RMB 13.32 for full FY2023, both significantly narrowed; adjusted net loss per ordinary share was RMB 1.33 and per ADS was RMB 5.32, both expanded year-over-year Net Loss per Ordinary Share/ADS (Full FY2023) | Indicator | 2023 Fiscal Year (RMB) | 2022 Fiscal Year (RMB) | YoY Change | |:-------------------------------------------|:-----------------------|:-----------------------|:--------------| | Basic and Diluted Net Loss per Ordinary Share | (3.33) | (5.98) | Loss reduced 44.3% | | Adjusted Basic and Diluted Net Loss per Ordinary Share | (1.33) | (1.24) | Loss expanded 7.3% | | Basic and Diluted Net Loss per ADS | (13.32) | (23.92) | Loss reduced 44.3% | | Adjusted Basic and Diluted Net Loss per ADS | (5.32) | (4.96) | Loss expanded 7.3% | Adjusted EBITDA Adjusted EBITDA for full FY2023 was RMB 115.8 million, lower than RMB 147.0 million in the prior year period Adjusted EBITDA (Full FY2023) | Indicator | 2023 Fiscal Year (RMB million) | 2022 Fiscal Year (RMB million) | YoY Change | |:---------------|:-------------------------------|:-------------------------------|:--------------| | Adjusted EBITDA | 115.8 | 147.0 | Decreased 21.2% | Cash and Working Capital As of August 31, 2023, total cash and cash equivalents and restricted cash were RMB 567.2 million (US$78.2 million), a decrease from RMB 765.4 million as of May 31, 2023 Cash and Cash Equivalents and Restricted Cash (As of August 31, 2023) | Indicator | Amount (RMB million) | Amount (US$ million) | |:----------------------------------------|:---------------------|:---------------------| | Total Cash and Cash Equivalents and Restricted Cash | 567.2 | 78.2 | - As of August 31, 2023, cash and cash equivalents and restricted cash decreased from RMB 765.4 million as of May 31, 2023[33] CONVENIENCE TRANSLATION This section provides the RMB to USD exchange rate used for convenience translation of financial figures as of August 31, 2023 RMB to USD Exchange Rate The company reports in RMB, but for reader convenience, amounts are translated to USD at the prevailing exchange rate on the balance sheet date; as of August 31, 2023, the rate was US$1.00 to RMB 7.2582 - The company's reporting currency is RMB, with amounts translated to USD for reader convenience[34] - As of August 31, 2023, the exchange rate used for translation was US$1.00 to RMB 7.2582[34] NON-GAAP FINANCIAL MEASURES This section defines non-GAAP financial measures, explains their rationale for management use, and outlines their inherent analytical limitations Definition of Non-GAAP Measures The company uses non-GAAP measures like adjusted EBITDA, net income/(loss), gross profit/(loss), operating income/(loss), and basic/diluted EPS/ADS to assess operating performance, calculated by excluding non-cash or non-operating items such as share-based compensation, intangible asset amortization, and specific impairment losses - Adjusted gross profit/(loss) is defined as gross profit/(loss) excluding amortization of intangible assets[35] - Adjusted EBITDA is defined as net income/(loss) excluding net interest income/(expense), income tax expense/benefit, depreciation and amortization, share-based compensation expense, impairment loss on operating lease right-of-use assets, goodwill impairment loss, intangible assets impairment loss, long-term investment impairment loss, and property and equipment impairment loss[35] - Adjusted net income/(loss) is defined as net income/(loss) excluding share-based compensation expense, amortization of intangible assets, tax effect of amortization of intangible assets, impairment loss on operating lease right-of-use assets, goodwill impairment loss, intangible assets impairment loss, long-term investment impairment loss, and property and equipment impairment loss[35] - Adjusted operating income/(loss) is defined as operating income/(loss) excluding share-based compensation expense, amortization of intangible assets, impairment loss on operating lease right-of-use assets, goodwill impairment loss, intangible assets impairment loss, long-term investment impairment loss, and property and equipment impairment loss[35] Rationale for Non-GAAP Measures Management uses non-GAAP financial measures to assess operating performance and formulate business plans by excluding non-cash expenses like depreciation, amortization, and share-based compensation, as well as non-operating items such as net interest income/(expense) and income tax expense/benefit, thereby enhancing comparability and aiding investor evaluation of the company's operating performance - Non-GAAP financial measures are utilized by management to assess operating performance and formulate business plans[38] - These measures exclude the impact of non-cash expenses like depreciation, amortization, and share-based compensation, as well as non-operating items such as net interest income/(expense) and income tax expense/benefit[38] - Excluding amortization of intangible assets enhances the comparability of operating results between newly acquired and long-held businesses[37] Limitations of Non-GAAP Measures Non-GAAP financial measures are not defined or presented under U.S. GAAP, possessing inherent analytical limitations; they do not reflect all revenue and expense items affecting operations and may differ from non-GAAP information used by other companies, thus limiting comparability - Non-GAAP financial measures are not defined or presented in accordance with U.S. GAAP and have inherent limitations as analytical tools[39] - They do not reflect all revenue and expense items that affect the company's operations, such as net interest income/(expense), income tax expense/benefit, depreciation and amortization, and share-based compensation expense[39] - These non-GAAP measures may differ from non-GAAP information used by other companies, including peer companies, which may limit their comparability[39] About Bright Scholar Education Holdings Limited Bright Scholar is a leading global education services company focused on providing international education and fostering academic skills for student success Company Overview Bright Scholar is a leading global education services company, primarily providing high-quality international education to students worldwide and cultivating essential academic foundations and skills for successful university admissions - Bright Scholar is a leading global education services company[40] - The company primarily provides high-quality international education to students worldwide, fostering critical academic foundations and skills necessary for successful university admissions[40] Safe Harbor Statement This statement clarifies that the announcement contains forward-looking statements subject to risks and uncertainties, with no obligation to update unless legally required Forward-Looking Statements Disclaimer This announcement contains forward-looking statements involving known or unknown risks, uncertainties, and other factors that could cause actual results to differ materially; 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[41] - These factors could cause the company's actual results, performance, or achievements to differ materially from those expressed in the forward-looking statements[41] - The company undertakes no obligation to update any forward-looking statements as a result of new information, future events, or otherwise, except as required by law[41] Contact Information This section provides essential contact details for investor relations and media inquiries IR Contact Investor Relations contact email is BEDU.IR@gcm.international - Investor Relations contact email: BEDU.IR@gcm.international[42] Media Contact Media contact email is media@brightscholar.com, and phone number is +86-757-2991-6814 - Media contact email: media@brightscholar.com[42] - Media contact phone: +86-757-2991-6814[42] BRIGHT SCHOLAR EDUCATION HOLDINGS LIMITED UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS The unaudited condensed consolidated balance sheets present the company's financial position as of August 31, 2023, detailing assets, liabilities, and equity Consolidated Balance Sheets As of August 31, 2023, total assets were RMB 4,619.5 million (US$636.5 million), total liabilities were RMB 3,047.9 million (US$419.9 million), and total equity was RMB 1,571.7 million (US$216.5 million) Unaudited Condensed Consolidated Balance Sheets (As of August 31, 2023) | ASSETS Current assets | August 31, 2022 (RMB) | August 31, 2023 (RMB) | August 31, 2023 (USD) | |:------------------------------------------------------------|:----------------------|:----------------------|:----------------------| | Cash and cash equivalents | 664,769 | 537,325 | 74,030 | | Restricted cash, net | 191,365 | 28,261 | 3,894 | | Accounts receivable, net | 18,084 | 19,209 | 2,647 | | Amounts due from related parties, net | 196,626 | 188,445 | 25,963 | | Other receivables, deposits and other assets, net | 112,762 | 148,679 | 20,483 | | Inventories | 6,869 | 5,480 | 755 | | Held for sale assets | 11,258 | - | - | | Total current assets | 1,201,733 | 927,399 | 127,772 | | Restricted cash - non-current | 1,650 | 1,650 | 227 | | Property and equipment, net | 393,277 | 414,225 | 57,070 | | Intangible assets, net | 322,896 | 343,077 | 47,268 | | Goodwill, net | 1,433,916 | 1,328,872 | 183,086 | | Long-term investments | 40,486 | 36,070 | 4,970 | | Prepayments for construction contracts | 4,894 | 1,711 | 236 | | Deferred tax assets, net | 85,103 | 1,810 | 249 | | Other non-current assets, net | 15,343 | 15,249 | 2,101 | | Operating lease right-of-use assets | 1,453,833 | 1,549,447 | 213,475 | | Total non-current assets | 3,751,398 | 3,692,111 | 508,682 | | TOTAL ASSETS | 4,953,131 | 4,619,510 | 636,454 | | LIABILITIES AND EQUITY Current liabilities | August 31, 2022 (RMB) | August 31, 2023 (RMB) | August 31, 2023 (USD) | |:------------------------------------------------------------|:----------------------|:----------------------|:----------------------| | Accounts payable | 100,229 | 105,193 | 14,493 | | Amounts due to related parties | 343,032 | 311,451 | 42,910 | | Accrued expenses and other current liabilities | 262,490 | 279,690 | 38,535 | | Short-term loans | 149,239 | - | - | | Income tax payable | 85,856 | 99,367 | 13,690 | | Contract liabilities | 516,731 | 541,683 | 74,630 | | Refund liabilities | 20,517 | 17,572 | 2,421 | | Operating lease liabilities | 104,515 | 125,447 | 17,283 | | Total current liabilities | 1,582,609 | 1,480,403 | 203,962 | | Contract liabilities – non-current | 2,203 | 2,116 | 292 | | Deferred tax liabilities | 21,707 | 42,093 | 5,799 | | Other non-current liabilities due to related parties | 11,197 | - | - | | Long-term loan | 633 | - | - | | Operating lease liabilities – non-current | 1,439,239 | 1,523,242 | 209,865 | | Total non-current liabilities | 1,474,979 | 1,567,451 | 215,956 | | TOTAL LIABILITIES | 3,057,588 | 3,047,854 | 419,918 | | EQUITY | | | | | Share capital | 8 | 8 | 1 | | Additional paid-in capital | 1,693,358 | 1,697,370 | 233,856 | | Statutory reserves | 14,872 | 20,155 | 2,777 | | Accumulated other comprehensive income | 34,401 | 172,230 | 23,729 | | Accumulated deficit | (72,737) | (473,154) | (65,189) | | Shareholders' equity | 1,669,902 | 1,416,609 | 195,174 | | Non-controlling interests | 225,641 | 155,047 | 21,362 | | TOTAL EQUITY | 1,895,543 | 1,571,656 | 216,536 | | TOTAL LIABILITIES AND EQUITY | 4,953,131 | 4,619,510 | 636,454 | BRIGHT SCHOLAR EDUCATION HOLDINGS LIMITED UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS The unaudited condensed consolidated statements of operations provide a summary of the company's revenues, expenses, and net losses for Q4 and full FY2023 Consolidated Statements of Operations The company's Q4 FY2023 revenue was RMB 559.8 million with a net loss of RMB 340.3 million; full FY2023 revenue was RMB 2,123.8 million with a net loss of RMB 386.8 million Unaudited Condensed Consolidated Statements of Operations (As of August 31, 2023) | | Q4 2022 (RMB) | Q4 2023 (RMB) | Q4 2023 (USD) | FY 2022 (RMB) | FY 2023 (RMB) | FY 2023 (USD) | |:------------------------------------------------------------------------------|:--------------|:--------------|:--------------|:--------------|:--------------|:--------------| | Revenue | 402,911 | 559,775 | 77,123 | 1,713,965 | 2,123,751 | 292,600 | | Cost of revenue | (320,564) | (450,651) | (62,089) | (1,237,306) | (1,526,419) | (210,303) | | Gross profit | 82,347 | 109,124 | 15,034 | 476,659 | 597,332 | 82,297 | | Selling, general and administrative expenses | (137,825) | (176,841) | (24,364) | (539,893) | (614,571) | (84,673) | | Impairment loss on goodwill | (419,805) | (207,830) | (28,633) | (419,805) | (207,830) | (28,633) | | Impairment loss on operating lease right-of use assets | (8,861) | - | - | (8,861) | - | - | | Impairment loss on property and equipment | (6,586) | (12,891) | (1,776) | (6,586) | (12,891) | (1,776) | | Impairment loss on intangible assets | (113,385) | (2,052) | (283) | (113,385) | (2,052) | (283) | | Impairment loss on the long-term investment | - | (2,613) | (360) | - | (2,613) | (360) | | Other operating income | 1,252 | 6,923 | 954 | 5,339 | 56,043 | 7,722 | | Operating loss | (602,863) | (286,180) | (39,428) | (606,532) | (186,582) | (25,706) | | Interest expense, net | (17,093) | 1,220 | 168 | (127,840) | (7,367) | (1,015) | | Investment income | 28,200 | 909 | 125 | 135,309 | 60 | 8 | | Other expenses | (579) | (3,902) | (537) | (5,808) | (6,677) | (920) | | Loss before income taxes and share of equity in (loss)/profit of unconsolidated affiliates | (592,335) | (287,953) | (39,672) | (604,871) | (200,566) | (27,633) | | Income tax expense | (11,667) | (52,425) | (7,223) | (58,919) | (185,918) | (25,615) | | Share of equity in (loss)/profit of unconsolidated affiliates | (39,515) | 61 | 8 | (39,747) | (339) | (47) | | Net loss | (643,517) | (340,317) | (46,887) | (703,537) | (386,823) | (53,295) | | Net loss attributable to noncontrolling interests | 7,556 | 4,291 | 591 | 5,803 | 8,311 | 1,145 | | Net loss attributable to ordinary shareholders | (651,073) | (344,608) | (47,478) | (709,340) | (395,134) | (54,440) | | Net loss per share attributable to ordinary shareholders —Basic | (5.49) | (2.90) | (0.40) | (5.98) | (3.33) | (0.46) | | —Diluted | (5.49) | (2.90) | (0.40) | (5.98) | (3.33) | (0.46) | | Weighted average shares used in calculating net loss per ordinary share: —Basic | 118,669,795 | 118,669,795 | 118,697,495 | 118,669,795 | 118,669,795 | 118,669,795 | | —Diluted | 118,669,795 | 118,669,795 | 118,697,495 | 118,669,795 | 118,669,795 | 118,669,795 | | Net loss per ADS —Basic | (21.96) | (1.60) | (23.92) | (13.32) | (1.84) | | | —Diluted | (21.96) | (11.60) | (1.60) | (23.92) | (13.32) | (1.84) | BRIGHT SCHOLAR EDUCATION HOLDINGS LIMITED UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS The unaudited condensed consolidated statements of cash flows detail the company's cash movements from operating, investing, and financing activities for Q4 and full FY2023 Consolidated Statements of Cash Flows Q4 FY2023 saw net cash inflow from operating activities of RMB 6.923 million, net cash outflow from investing activities of RMB 20.003 million, and net cash outflow from financing activities of RMB 208.397 million; full FY2023 had net cash inflow from operating activities of RMB 22.261 million, net cash outflow from investing activities of RMB 52.949 million, and net cash outflow from financing activities of RMB 298.794 million Unaudited Condensed Consolidated Statements of Cash Flows (As of August 31, 2023) | | Q4 2022 (RMB) | Q4 2023 (RMB) | Q4 2023 (USD) | FY 2022 (RMB) | FY 2023 (RMB) | FY 2023 (USD) | |:----------------------------------------------------------|:--------------|:--------------|:--------------|:--------------|:--------------|:--------------| | Net cash from operating activities | 167,161 | 6,923 | 954 | 47,173 | 22,261 | 3,067 | | Net cash from/(used in) investing activities | 310,193 | (20,003) | (2,756) | (836,769) | (52,949) | (7,295) | | Net cash from financing activities | (1,001,420) | (208,397) | (28,712) | 101,383 | (298,794) | (41,166) | | Effect of exchange rate changes on cash and cash equivalents, and restricted cash | 10,260 | 23,319 | 3,213 | 30,834 | 38,934 | 5,364 | | Net increase/(decrease) in cash and cash equivalents, and restricted cash | (513,806) | (198,158) | (27,301) | (657,379) | (290,548) | (40,030) | | Cash and cash equivalents, and restricted cash at beginning of period | 1,371,590 | 765,394 | 105,452 | 1,515,163 | 857,784 | 118,181 | | Cash and cash equivalents, and restricted cash at end of period | 857,784 | 567,236 | 78,151 | 857,784 | 567,236 | 78,151 | BRIGHT SCHOLAR EDUCATION HOLDINGS LIMITED Reconciliations of GAAP and Non-GAAP Results This section provides reconciliations between GAAP and non-GAAP financial measures, illustrating adjustments for non-cash and non-operating items for Q4 and full FY2023 GAAP to Non-GAAP Reconciliations The company provided detailed reconciliations of GAAP to non-GAAP financial measures (including gross profit, operating loss, net loss, and EBITDA) to demonstrate performance adjusted for share-based compensation, intangible asset amortization, and various impairment losses GAAP to Non-GAAP Reconciliations (As of August 31, 2023) | | Q4 2022 (RMB) | Q4 2023 (RMB) | Q4 2023 (USD) | FY 2022 (RMB) | FY 2023 (RMB) | FY 2023 (USD) | |:------------------------------------------------------------------------------------------------|:--------------|:--------------|:--------------|:--------------|:--------------|:--------------| | Gross profit | 82,347 | 109,124 | 15,034 | 476,659 | 597,332 | 82,297 | | Add: Amortization of intangible assets | 3,931 | 3,642 | 502 | 17,814 | 14,916 | 2,055 | | Adjusted gross profit | 86,278 | 112,766 | 15,536 | 494,473 | 612,248 | 84,352 | | Operating loss | (602,863) | (286,180) | (39,428) | (606,532) | (186,582) | (25,706) | | Add: Share-based compensation expense | - | - | - | (816) | - | - | | Add: Amortization of intangible assets | 3,931 | 3,642 | 502 | 17,814 | 14,916 | 2,055 | | Add: Impairment loss on operating lease right-of-use assets | 8,861 | - | - | 8,861 | - | - | | Add: Impairment loss on goodwill | 419,805 | 207,830 | 28,633 | 419,805 | 207,830 | 28,633 | | Add: Impairment loss on intangible assets | 113,385 | 2,052 | 283 | 113,385 | 2,052 | 283 | | Add: Impairment loss on property and equipment | 6,586 | 12,891 | 1,776 | 6,586 | 12,891 | 1,776 | | Add: Impairment loss on the long-term investment | - | 2,613 | 360 | - | 2,613 | 360 | | Adjusted operating (loss)/income | (50,295) | (57,152) | (7,874) | (40,897) | 53,720 | 7,401 | | Net loss | (643,517) | (340,317) | (46,887) | (703,537) | (386,823) | (53,295) | | Add: Share-based compensation expense | - | - | - | (816) | - | - | | Add: Amortization of intangible assets | 3,931 | 3,642 | 502 | 17,814 | 14,916 | 2,055 | | Add: Tax effect of amortization of intangible assets | (811) | (581) | (80) | (3,764) | (2,883) | (397) | | Add: Impairment loss on operating lease right-of-use assets | 8,861 | - | - | 8,861 | - | - | | Add: Impairment loss on goodwill | 419,805 | 207,830 | 28,633 | 419,805 | 207,830 | 28,633 | | Add: Impairment loss on intangible assets | 113,385 | 2,052 | 283 | 113,385 | 2,052 | 283 | | Add: Impairment loss on property and equipment | 6,586 | 12,891 | 1,776 | 6,586 | 12,891 | 1,776 | | Add: Impairment loss on the long-term investment | - | 2,613 | 360 | - | 2,613 | 360 | | Adjusted net loss | (91,760) | (111,870) | (15,413) | (141,666) | (149,404) | (20,585) | | Net loss attributable to ordinary shareholders | (651,073) | (344,608) | (47,478) | (709,340) | (395,134) | (54,440) | | Add: Share-based compensation expense | - | - | - | (816) | - | - | | Add: Amortization of intangible assets | 3,931 | 3,642 | 502 | 17,814 | 14,916 | 2,055 | | Add: Tax effect of amortization of intangible assets | (811) | (581) | (80) | (3,764) | (2,883) | (397) | | Add: Impairment loss on operating lease right-of-use assets | 8,861 | - | - | 8,861 | - | - | | Add: Impairment loss on goodwill | 419,805 | 207,830 | 28,633 | 419,805 | 207,830 | 28,633 | | Add: Impairment loss on intangible assets | 113,385 | 2,052 | 283 | 113,385 | 2,052 | 283 | | Add: Impairment loss on property and equipment | 6,586 | 12,891 | 1,776 | 6,586 | 12,891 | 1,776 | | Add: Impairment loss on the long-term investment | - | 2,613 | 360 | - | 2,613 | 360 | | Adjusted net loss attributable to ordinary shareholders | (99,316) | (116,161) | (16,004) | (147,469) | (157,715) | (21,730) | | Net loss | (643,517) | (340,317) | (46,887) | (703,537) | (386,823) | (53,295) | | Add: Interest expense, net | 17,093 | (1,220) | (168) | 127,840 | 7,367 | 1,015 | | Add: Income tax expense | 11,667 | 52,425 | 7,223 | 58,919 | 185,918 | 25,615 | | Add: Depreciation and amortization | 16,442 | 19,990 | 2,754 | 115,934 | 83,919 | 11,562 | | Add: Share-based compensation expense | - | - | - | (816) | - | - | | Add: Impairment loss on operating lease right-of-use assets | 8,861 | - | - | 8,861 | - | - | | Add: Impairment loss on goodwill | 419,805 | 207,830 | 28,633 | 419,805 | 207,830 | 28,633 | | Add: Impairment loss on intangible assets | 113,385 | 2,052 | 283 | 113,385 | 2,052 | 283 | | Add: Impairment loss on property and equipment | 6,586 | 12,891 | 1,776 | 6,586 | 12,891 | 1,776 | | Add: Impairment loss on the long-term investment | - | 2,613 | 360 | - | 2,613 | 360 | | Adjusted EBITDA | (49,678) | (43,736) | (6,026) | 146,977 | 115,767 | 15,949 | | Weighted average shares used in calculating adjusted net loss per ordinary share: —Basic and Diluted | 118,669,795 | 118,669,795 | 118,669,795 | 118,697,495 | 118,669,795 | 118,669,795 | | Adjusted net loss per share attributable to ordinary shareholders —Basic | (0.84) | (0.98) | (0.13) | (1.24) | (1.33) | (0.18) | | —Diluted | (0.84) | (0.98) | (0.13) | (1.24) | (1.33)