First High-School Education Group Co., Ltd. (FHSEY) H1 2024 Earnings Call Transcript

Summary of First High-School Education Group H1 2024 Earnings Conference Call Company Overview - Company: First High-School Education Group Co., Ltd. (OTCQB: FHSEY) - Conference Call Date: September 18, 2024 - Period Covered: First Half of 2024 (H1 2024) Key Financial Highlights - Total Revenues: RMB 151 million, a decrease of 6.7% from RMB 161.9 million in H1 2023 [9] - Revenues from Customers: RMB 151.1 million, an increase of 8.2% from RMB 139.6 million in H1 2023, driven by increased student enrollment [10] - Revenues from Government Cooperative Agreements: Zero, compared to RMB 22.3 million in H1 2023, due to tightened fiscal budgets of government entities [10] - Cost of Revenues: RMB 98.9 million, stable compared to RMB 98.7 million in H1 2023 [11] - Gross Profit: RMB 52.3 million, a decrease of 17.3% from RMB 63.2 million in H1 2023, with a gross margin of 34.6% compared to 39% in H1 2023 [11] - Total Operating Expenses: RMB 49.2 million, significantly increased from RMB 23.6 million in H1 2023 [11] - Net Income from Continuing Operations: RMB 4.2 million, a decrease of 88.9% from RMB 37.6 million in H1 2023 [12] - Adjusted Net Income: RMB 10.1 million, a decrease of 72% from RMB 36.7 million in H1 2023 [13] Core Issues and Challenges - Decline in Revenue: The company faced a decline in revenue primarily due to the absence of income from government cooperative contracts and increased general and administrative expenses [5][6] - Government Payment Issues: Local governments have tight budgets, leading to delays in payments and prioritization of operational needs over educational contracts [6][7] - Renegotiation Efforts: The company is attempting to renegotiate contracts with local governments to reduce the number of publicly sponsored students, which would also help in cost reduction [7] Operational Insights - Student Enrollment: As of September 1, 2024, total enrollment was 35,151 students across 23 school programs, reflecting strong brand engagement [7] - Investment in Human Resources: Significant investments were made in human resources to enhance hiring, performance evaluation, and supervision, alongside the development of a new HR system [8] - IT Upgrades: The company is upgrading its IT capabilities to incorporate digitalization into the education process [8] Strategic Outlook - Focus on Quality Education: The company is refining its business model to ensure high-quality education services and solid academic performance [9] - Exploration of New Opportunities: There is an ongoing effort to innovate and explore new opportunities to remain competitive in the education sector [9] Conclusion - The First High-School Education Group is navigating significant challenges in revenue generation due to government funding issues while simultaneously investing in human resources and technology to enhance operational efficiency and educational quality. The company remains focused on renegotiating contracts and exploring new growth opportunities in the education sector.