Good morning, and thank you for standing by for Bright Scholar's Fourth Fiscal Quarter and Fiscal Year 2019 Earnings Conference Call. [Operator Instructions]. Today's conference is being recorded. I would now like to turn the meeting over to your host for today's conference, Ms. Ruby Yim, Investor Relations Council..

Thank you, Operator. Good morning, and good evening. Welcome to Bright Scholar's full fiscal quarter ended August 31, 2019, earnings call. Joining me today are Mr. Jerry He, our Executive Vice Chairman, Mr. Derek Feng, our Chief Executive Officer; and Ms. Dora Li, our Chief Financial Officer.

As a reminder, today's conference call is being broadcast live via webcast. In addition, a replay will be available on our website following the call. By now, you should have received a copy of our press release that was distributed on November 7, 2019, after market close Eastern Time. If it hasn't, it is available on the IR section of our website.

Before we get started, let me review the forward-looking statements regarding this conference call.Such as statements related to future, not past, events often address expected future business and financial performance and financial condition and often contain words such as will, estimate, project, predict, believe, expect, anticipate, intend, potential, plan or goal.

Price column may also make written or oral forward-looking statements in other reports, in presentations, in material delivered to shareholders and in press releases. In addition, price collars representatives may make oral forward-looking statements.

Forward-looking statements by the nature, adjust matters that are to different degrees uncertain, such as statements about the company's goals and strategies, its future business development, financial condition and results of operations, its ability to retain and grow its customer base and network of schools and the grow of and trends in the markets for services in China.The demand for and the market acceptance of its brand and services, competition industry in China, relevant government policies and regulations relating to the corporate structure, business and industry, fluctuations in general economic and business conditions in China.

Further information regarding this and other risks is included in Bright Scholar's filings with the Securities and Exchange Commission. Bright Scholar undertakes no duty to update any forward-looking statements, except as required under applicable law.During this call, we'll be referring to GAAP and non-GAAP financial measures.

We use certain non-GAAP measures as supplemental measures to review and assess our operating performance. These non-GAAP financial measures have limitations as analytical tool.

And yes, they should not consider them in isolation or as a substitute for net income attributable to company or other consolidated statement of comprehensive income data prepared in accordance with the U.S. GAAP. Please note, all numbers are in RMBand all comparisons refer to year-over-year comparisons, unless otherwise stated.

With that, I'll turn the call over to our Executive Vice Chairman, Jerry He.

Jerry?.

Thank you. Good morning, good evening to everyone who is joining our call today to review 2019 fourth fiscal quarter and full fiscal year results. You may notice that we have refined the design of our earnings presentation with substantiation across all sections, including the company overview.

Net time to take a look, again, for those who are new to our company, we have included a corporate introduction from Slide 5 to 13, which you can download from our IR website.

I will start today's call with an update on our recent acquisitions, then turn the call to Derek to provide an annual review of our business operational performance and share with you our strategic initiative in integration and the optimization synergy from our fast expanding portfolio of business.

We'll then pass the call to Dora for a detailed financial review before we take your questions. Let's turn to Slide 15.Fiscal 2019 marks a transformational year as we heightened M&A activity to scale up our global business, expand our global footprint and broaden our service offerings.

We have successfully expanding our global school network through organic and acquisitive growth.

In particular, the acquisition of Barmasa Collegial School, Sinamics [ph] School, Bosworth Independent College and CAT College which firmly establish our positions outside of China.I'm pleased to report that we have completed this transactions by September 2019, and as of November 7, 2019, we own severance scores in the U.K.

and 1 boarding schools in the United States, with a total of more than 2,500 students enrolled. The expansion into U.K. and the U.S. market represents nearly a first stat long-term goal of growing our footprint beyond China, capitalizing on global growth opportunities.

As of this real estate, we have a global network of 88 schools with a total student capacity of over 67,000 students. As I mentioned in our fiscal third quarter earnings call, the financial impact of this transaction is significant as we expand our revenue streams and a structural change our revenue mix.

The impact will be fully reflected in the revenue growth for fiscal 2020 and I will leave it to Dora to provide you with more details later.As a company with commitment to delivering effective academic excellence, we take a great pride in our reputation as a trusted provider of premier education services.

The strategic investment over the last 2 fiscal year are pivotal to accelerate the pace of building Bright Scholar into a global premier education service company. And our goal is to create the best learning experience for our students and the substantial value for our stakeholders. With this positive note, I'll take the call over to Derek.

Derek, please..

the master K-12, oversea schools and the complementary education.Our teams remain focused on overachieving our targets laid out last year, and delivering sustainable value to our shareholders. So at this point, I would like to turn the call over to Dora to discuss our financials.

Dora?.

Thank you, Derek. Let's come back to our financials. Please be reminded that all numbers are in RMBand all comparisons record to year-over-year comparisons, unless otherwise stated. Please also refer to our earnings press release for detailed information of our comparative financial performance on a year-over-year basis. Please turn to Slide 25.

Fiscal 2019 marks a transformational year of Bright Scholar also represents a significant inflection point in our business scale. Our revenue grew 49.1% year-over-year to RMB2.5663 billion, exceeding our top-line guidance by 4.2%. For the quarter, revenue was RMB711.6 million, up 82.6%.

Revenue from domestic K-12 segment, including international schools, bilingual schools and kindergarten maintained strong momentum with revenue up 24.1% to RMB1.89 billion for the year and 24.6% to RMB393.5 million for the quarter.We have completed cash transaction in early July and consolidated CAT for July and August two months.

Cat contributed RMB121.8 million revenue for the quarter end of the fiscal year. Total revenue from our overseas schools, including Bournemouth School for the quarter was RMB148.5 million and a RMB181.8 million for the fiscal year.Our overseas school revenue accounted for 20.9% and the 7.1% for the quarter and on a yearly basis.

We have successfully grown our complementary education through organic and acquisition. Revenue from complementary education for the quarter was RMB169.6 million, up 129.3% accounted for 23.8% as compared to 90%.On a yearly basis, revenue was RMB490.8 million, up 150.4% and accounted for 19.1% of total revenue compared to 11.4% last fiscal year.

Revenue contribution from acquired business, including Can-Achieve Foundation, Hangzhou Impression and DBC was approximately RMB285 million or 58% of the segment for the fiscal year. On Slide 26. We remain focused on strengthening our school operation efficiency and improving our cost efficiency.

Cost of revenue for the quarter accounted for 70.2% for total revenue, down from 72.6%.On a yearly basis, cost of revenue was 61.9%, down from 63.4%. Teaching staff cost, the primary cost contributor accounted for 37.8% for the quarter, down from 49.5%. On a fiscal year basis, staff cost was 38.2%, down from 43.8%.

Our domestic 12 average student teacher ratio for fiscal year 2019 was consistent with last year at 8.8. Continue to Slide 27.

During the past fiscal year, we have successfully expanded our global school network through organic and acquisitive growth, and also through strategic investment to support our long-term growth aimed from short-term impact from M&A and M&A related cost.

For the fourth fiscal quarter, adjusted SG&A expenses as a percentage of revenue was 35.6%, up 7.9% of which 4.9% was due to M&A and M&A related expenses. For the fiscal year, adjusted SG&A percentage of revenue was 25%, up 5.3% compared to that of last fiscal year where M&A and M&A related expenses accounted 3.2% for the increase.

Adjusted SG&A for existing or organic business as a whole was 20.7% compared to 18.6% of last fiscal year.Move to Slide 28. Slide 28 elaborates adjusted SG&A as a percentage of revenue by expense test type.

The increase was primarily due to the increase in the composition and the benefits incurred from additional general and administrative staff to support business expansion, marketing expense to promote our brand, MA related cost and other portional service to support the business growth as a listed company.

As well as the incremental SG&A expenses incurred from acquired business. On Slide 29. Slide 29 shows our gross profit and gross profit margin. Our gross profit and gross profit margin grew steadily across segment for the quarter and the fiscal year.

Gross profit was RMB212.9 million for the quarter and RMB977 million for the year, up 98.8% and the 55.5%, respectively. Gross margin was 29.8%, up from 27.4% for the quarter and 38.1% for the year, up from 36.6%.

Both domestic K-12 segment, including international schools, bilingual schools and the kindergarten, gross profit for the quarter was RMB122 million, up 38.1% and RMB755 million for the year, up 30.4%.Gross margin for domestic K-12 was 31%, up from 28 in the quarter and the gross margin was 39.9% for the year, up from 38%.

For our overseas school, gross profit for the quarter was RMB25.2 million with a gross margin of 17%.On a yearly basis, gross profit was RMB36.3 million with a gross margin of 19.9%.

For complementary education, gross profit for the quarter was RMB64.9 million, up 254.5%, and RMB185.7 million for the year, up 278.5%.Gross margin for complementary education was 38.3%, up from 24.8%. For fiscal year 2019, gross margin for complementary education was 37.8%, up from 25%. Continuing -- continue on Slide 30.

As mentioned before, CAS was consolidated for July and August and incurred a loss for the last two months. This was due to the seasonality impact as most of the overseas schools has minimal term revenue recognized in these two months.

Therefore, the total adjusted EBITDA for the quarter was RMB4 million, including loss of RMB36.6 million from CATS [ph] as compared to RMB34.9 million in the fourth quarter last fiscal year. Adjusted EBITDA margin was 0.6% compared to 8.9% last quarter. On a yearly basis, adjusted EBITDA was RMB491.6 million as compared to RMB408.8 million last year.

Adjusted EBITDA margin was 19.2% compared to 23.8%.Adjusted net loss for the quarter was RMB32.1 million also including a net loss of RMB39.9 million from CATS compared to RMB23.8 million income last fiscal quarter. Adjusted net margin was negative 4.5% as compared to 6.1%.

On a yearly basis, adjusted net income was RMB327.7 million compared to RMB284.6 million. Adjusted net margin was 12.8% as compared to 16.6%. Moving on to guidance. Our guidance for fiscal 2020. Please turn to Slide 32.

For fiscal year ending August 31, 2020, we expect our total revenue in the range of RMB4 billion to RMB4.1 billion, representing a year-over-year growth of 56% to 60% based on existing business and without potential acquisitions.

We expect our average student enrollment to be between approximately 53,200 and 53,600, representing an year-over-year increase of 14% to 15%. We expect to open 7 new kindergartens during fiscal 2020. We are also in preparation to open 11 kindergartens to bilingual international schools for 2021.

Beyond 2021, we have 4 schools and 33 kindergartens contracted for operation. Please refer to table in Slide 34 and 35 for the condensed income statement. And Slide 36 show the reconciliation of -- for SG&A, EBITDA and income on a GAAP to non-GAAP results.A quick note on our cash and bank balance in Slide 37.

As of August 31, 2019, the company's cash and cash equivalent and restricted cash totaled RMB3.265 billion or $446.4 million as compared to RMB2.057 billion as of May 31, 2019. For the fiscal year ended August 31, 2019, the company's capital expenditure was approximately RMB135 million, up 32% as compared to last fiscal year.

The CapEx spending, including CapEx for new Kindergarten openings and improvement and ramp up CapEx for our existing schools. This concludes my financial update. Now I will turn to Derek for his closing remarks..

Thank you, Dora. This past fiscal year has been a transformation one for us. The expansion of our global network of schools and the beginning of realizing some of the key benefits from the acquisitions made over the last few years have formed a strong foundation for our future success.

As we begin the new fiscal year, we see tremendous focus and energy throughout the company as we execute our year at a long-term strategy. This passion will be a tailwind as we drive to accelerate global business expansion and delivering strong results in the quarters to come.

This concludes our prepared remarks, and will like to open the call for questions.

Operator?.

[Operator Instructions]. Our first question today will come from Christine Cho with Goldman Sachs..

Hi. Thank you, Jerry, Derek and Dora for the detailed explanation. I have three quick questions. So one is related to the acquisition acquired overseas schools. It seems like State Michaels and Bosworth was also consolidated this quarter.

Can you just give us a rough impact on sales in Op this quarter for these two schools as well? Secondly, I think the guidance on the top line is very, very clear.

But I was wondering what would be -- would you be able to give us a rough guidance as to the impact of -- on bottom line of these acquired overseas schools in 2020? And lastly, I think in reading Page 27 of the presentation, is it fair to understand that the M&A related cost that you kind of break broke out.

That's more of a one-off related to the M&A this quarter. And then more -- that wouldn't be recurring going forward. But the MMA [ph] portion of that 1.2%, that's there that will actually be continuing to come through over the next few quarters.

Is that a right understanding?.

Christine, this is Dora. First question, in the past fiscal quarter, we only completed the transaction of cat [ph]. The other two independent score, as Jerry mentioned during his remarks, we completed those two independent school in early September. So their contribution will be started in the first fiscal quarter of 2020.

I think that's should answer your first question. And second question, the guidance, the impact of the overseas schools..

The guidance for the bottom. We haven't kept of the guidance for the bottom line yet. We think the guidance for the revenue, but not the bottom line. The third one ticket of curtails well the serelisa [ph] ready about the M&A related costs because we have not been a nitant of work on the MAA. We closed a few. So those are what happened in Q4.

Going forward, that sort of is a deal-by-deal basis. So you may or may not happen, but we do not expect to be a continue like that for every quarter. Because we have a little bit of more down in the last quarter than, I guess, in the past..

[Operator Instructions]. Our next question will come from Tommy Wong [ph] with China Merchant Securities..

Quick question on the enrollment growth you guided. Can you kind of some share with us which international school, bilingual school, kindergarten, which part of the enrollment growth will be faster or slower? I think for '19, actually, both segments grows very fast.

Is that going to continue in 2020 very even double-digit growth? And also can you also shed some light on that? Because the slide shows actually kindergarten ASP has increase than what you are paying in international school and bilingual school?.

Yes. Tommy, this is Derek. I'll take it. First of all, we give you the overall enrollment growth to get all together as a group. And in terms of the growth in each one of the socket subsegments, we would expect to be fairly consistent with the past.

Second, with regards to the ASP that we have noted in the kindergarten session because of the acquisition was being consolidated in the last year, it was a lower-priced group of kindergarten.

So therefore, the blended rate of the impact on the ASP growth has been a negative 1%, but excluding that, lower-priced segment that was acquired, our overall, as kindergarten ASP, has been consistent with the past ASP growth..

[Operator Instructions]. At this time, there are no further questions in the question queue, and this will conclude our question-and-answer session. I would now like to turn the call over to Derek Feng for any closing remarks..

Thank you very much for joining the conference call. Please feel free to contact us if you have any further questions. We wish everyone a good day. Thank you very much..

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect..