Meta Data (AIU) - 2019 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net revenues for Q3 2019 were RMB 1,093.3 million, an increase of 32.6% year-over-year [24] - Average monthly student enrollments increased by 40% year-over-year to 174,835 [25] - Operating income for the quarter was RMB 123 million, an increase of 117% from the same period last year [28] - Non-GAAP operating margin was 12.7%, down from 20.2% during the same period last year [28] Business Line Data and Key Metrics Changes - OneSmart VIP business saw average monthly student enrollments grow by over 50% in cities outside Shanghai [22] - Revenue from International Education grew by 143.9% year-over-year, with average monthly enrollments increasing by 142.1% [23] - HappyMath revenue grew by 41.9% year-over-year, with new students increasing by 43.2% [23] - FasTrack English saw average monthly student enrollment increase by over 150% year-over-year [24] Market Data and Key Metrics Changes - Revenue from Shanghai accounted for 57% of total revenue, down from 60% in the same quarter of 2018 [21] - Revenue in cities outside Shanghai grew by 90.3% [23] - The company achieved national coverage and scale, with a total of 430 centers, including 29 openings during Q3 [20] Company Strategy and Development Direction - The company plans to focus on three core service lines: OneSmart VIP, HappyMath, and FasTrack English, with a balanced capacity expansion plan [7] - The strategy includes ramping up newly opened centers and optimizing profitability [13] - The company aims to strengthen its core competencies through service upgrades and technology innovation [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving margin expansion and substantial net profit growth in the coming years [18] - The company anticipates that the one-off regulatory impacts will normalize in the next few months [20] - Management highlighted the importance of focusing on existing centers for future growth rather than rapid new openings [35] Other Important Information - The company has a cash and cash equivalents balance of RMB 1,326.1 million and short-term investments of RMB 683.5 million as of May 31, 2019 [30] - Capital expenditures for Q3 2019 were RMB 36.7 million, a decrease from RMB 62.7 million in the same period last year [29] Q&A Session Summary Question: Rationale behind slowing down capacity expansion - Management explained that the slower opening plan is due to achieving national coverage and having enough newly opened centers to generate profit [34] Question: Distribution of capacity expansion by geography and business lines - Management indicated a focus on top 20 cities for new center openings, with a budget of about 50 centers for OneSmart VIP, 10 for HappyMath, and 10 for FasTrack [35] Question: Gross margin decline and regulatory impact - Management acknowledged a 5 percentage point decline in gross margin due to one-off regulatory impacts and increased costs from relocating centers [42][45] Question: Compliance with regulatory requirements - Management stated that they are actively preparing teachers for certification exams and adjusting practices to comply with tuition fee collection regulations [52][53]