Hello, ladies and gentlemen. Thank you for standing by for the Four Seasons Education’s First Quarter of Fiscal Year 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management’s prepared remarks, there will be a question-and-answer session. Today's conference call is being recorded.

I will now turn the call over to your host, Ms. Olivia Li, Investor Relations Manager for the company. Please go head, Olivia..

Hello, everyone, and welcome to the first quarter of fiscal year 2021 earnings conference call of Four Seasons Education. The company’s results were issued via Newswire services earlier today and are posted online.

You can download the earnings press release and sign-up for the company’s e-mail distribution list by visiting the IR section of our website at ir.sijiedu.com. Ms.

Yi Zuo, our Chief Executive Officer will start the call by providing an overview of the company’s performance highlights for the quarter and details on the company’s financial results and business outlook before opening the call for your questions.

Before we continue, please note that today’s discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties.

As such, the company’s results may be materially different from the views expressed today. Further information regarding this and other risks and uncertainties is included in the company’s filings with the U.S. Securities and Exchange Commission.

The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Please note that Four Seasons Education’s earnings press release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures.

Four Seasons Education’s press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures. I will now turn the call over to our CEO, Ms. Zuo. Please go ahead..

Thank you, Olivia, and hello, everyone. In the first quarter of fiscal two 2021, we have been diligently cultivating our online education offerings to address students learning needs, especially when offline courses were restricted due to COVID-19.

In addition, we continue to optimize offline resources for a more strengthened and cohesive online, offline approach to prepare ourselves for market recovery. Due to the prolonged pandemic containment measures and the restrictions on offline courses most of our classes were delivered online during the quarter.

These will switch the transition to online right after COVID-19 outbreaks in early 2020. Our live streams and pre-recorded classes have received a very positive feedback from our students.

Aside from academic subject and tutoring classes, we have also transitioned our featured interest based classes online to bring students more content that benefits their intellectual development and nurtures their interest to learn. To further strengthen our online capabilities with solid technical support.

We made a strategic investment in Fuxi Network, an online education and training service provider, to sustain the long-term growth and development of our online education. Total student enrollments for the quarter decreased by 35% year-over-year, resulting from the impact by the COVID-19 and the related the regulatory uncertainties.

Additionally, regular school mandatorily deliver the classes online during the quarter. For the sake of Vision House, after a long time of using digital devices, students tend to have less preference in participating additional after school on courses.

Enrollment for summer break learning were also impacted due to timeline uncertainties for reopening offline learning centers. Despite these unfavorable factors, it is encouraging for us to achieve 85% quarter-over-quarter enrollment growth.

Even factoring in seasonality, this growth still demonstrate demand recovery from our students, and their interest in our quality courses. With a gradual resumption to normal daily life. Currently, over 90% of our existing learning centers have reopened for offline classes delivery.

After receiving approval from government authorities, who have reviewed and evaluated the compliance status of our facilities.

However, we are privileged to be selected again as an organizer of Trusted Summer Childcare, a project launch device, Shanghai Children Foundation and Shanghai Women’s Federation that aims to provide a pleasant environment and fulfilling some experience for the kids.

Being the organizer of this special program demonstrates our best-of-class education, well equipped facilities and the high operating standards of our learning centers that have now been well recognized by government authorities.

Generally speaking, we have expedited the digital transformation of operations and to the development of our online education during the COVID-19 pandemic.

At the same time, parents and students have been increasingly aware of the importance of offline courses that provide the direct in-person teaching and generally bring more effective learning results.

We will continue to make efforts in building our learning center network and enrich our offline courses, which are consistently providing a considerable amount of online courses.

We believe that this strategic OMO model will provide more flexibility to our students and allow us to quickly transition across delivery online in case of any negative pandemic development.

More importantly, we believe our stellar reputation of high quality coupled with superior class experience, will allow us to continually attracting students through word-of-mouth referrals. We remain committed to serving students of all age with a broad array of classes and academic subject tutoring.

Interested nurturing and intellectual development both at our learning centers and are on the online platform. Now let’s move on to the financial results. Amid the challenging market environment with many uncertainties, our top line performance for the first quarter of fiscal 2021 was in line with our expectations.

Impacted by the COVID-19 pandemic and into lower enrollment in the fourth quarter of fiscal 2020, revenue decreased by 33.7% year-over-year to RMB56.8 million. The softer top line performance created a pressure on margins and profit levels in the first quarter.

However, enrollments are gradually recovered sequentially in the first quarter, driving our deferred revenue up by 46% compared with the level as of February 29 2020. In addition, we have been optimizing our learning centers for more efficient offline resource allocation, coupled with our best disciplined cost controls.

So as to further reduce cost and efficiently manage our campus network. Our cash position also remain solid, demonstrates our health operations and enabling us to make prudent investments that are constructive for our future growth. Now, I would like to walk you through further details of our first quarter of fiscal year 2021 financial results.

Revenue decreased by 31.5% to RMB58.7 million for the first quarter of fiscal year 2021 from RMB85.6 million in the same period of last year, primarily due to the impact of outbreak of COVID-19. Cost of revenue decreased by 21.6% to RMB36.3 million for the first quarter of fiscal year 2021 from RMB46.3 million in the same period of last year.

Gross profit decreased by 43.1% to RMB22.4 million for the first quarter of fiscal year 2021 from RMB39.4 million in the same period of last year. General and administrative expenses decreased by 16.6% to RMB28.0 million from first quarter of fiscal year 2021 from RMB33.5 million in the same period of last year.

Sales and marketing expenses decreased by 11.5% to RMB7 million for the first quarter of fiscal year 2021 from RMB7.9 million in the same period as last year, primarily attributable to the decrease of advertising due to the impact of COVID-19.

Operating losses was RMB12.5million for the first quarter of fiscal year 2021, compared with RMB2.1 million in the same period of last year. Adjusted operating loss was RMB4.8 million for the first quarter of fiscal year 2020, compared with adjusted operating income of RMB7.8 million in the same period of last year.

Other expenses, net was RMB2.8 million for the first quarter of fiscal year 2021, compared with other income of RMB2.4 million in the same period of last year, primarily due to investments fair value change.

Income tax benefit was RMB0.4 million for the first quarter of fiscal year 2021, compared with an income tax expense of RMB4.5 million in the same period of last year. Net loss was RMB11.5 million during the first quarter of fiscal year 2021, compared with net income of RMB4.2 million in the same period of last year.

Adjusted net loss was RMB0.6 million compared the adjusted net income of RMB 11.2 million in the same period of last year. Basic and diluted net loss for per ADS attributable to ordinary shareholders for the first quarter of fiscal year 2021 were both RMB0.23, compared with both RMB0.08 for the same period of last year.

Adjusted basic and diluted net income per ADS attributable to ordinary shareholders were both RMB0.01 for the first quarter of fiscal year 2021, compared to with both RMB0.22 for the same period of last year.

Cash and cash equivalents as of May 31, 2020, the company had cash and cash equivalents of RMB430.3 million, compared with the RMB404.7 million as of February 29, 2020. Looking forward for the second quarter of fiscal 2021, the company expects to generate revenue in the range of RMB79.9 million to RMB86.3 million.

The above our loss is based on the current market conditions and reflects the company’s preliminary estimates of market and operating conditions, and the customer demand, which are subject to change, particularly in consideration of uncertainties related to COVID-19 outbreaks among others. This concludes my portion of prepared remarks.

We will now open the call to questions. Operator, please go ahead..

We will now begin the question-and-answer session. [Operator Instructions] First question comes from Joy Wei with 86Research. Please go ahead..

Hi management, thanks for taking my question. My question is regarding your guidance. Your guidance indicated a declining year-on-year. Could management help us understand the reasons behind? How much of the decline is due to the short-term summer vacations? And I have a follow-up. Thank you..

As we mentioned that because you know the uncertainty of the summer break time schedule and the parents determination to involve their kids to the summer program has been impacted. That is one of the reasons.

And also in some schools that - the second reason actually you know a lot of us on players issued some sort of cash - right, that you can get maybe for like 40 classes just for RMB1, and we are not doing that. So, the decline is a results of several factors.

But in our view we believe it is short-term, because from the summer and our Four enrollments, we have seen that the trend is back. And over the summer, the parents are also somewhat concerned with the COVID-19 outbreak, the control measurement in the offline facilities. That is why we are putting more effort and resources in our online classes.

For the four semester, we actually opened up both our online offline classes and try to make the OMO model more smooth. Yes. So that is the reason why to your question why we see a decline in the summer guidance..

Got it. So we are offering OMO models for the four semester. So do you have any expectation for the revenue outlook full-year fiscal 2021, considering that you are rolling out this new model and it might help you better retain and attract new students? Thank you..

I'm not giving out full-year guidance on this call, but you can reach out to our IR and we can talk separately. But as I said, that China - The Education Administration also issued a new policy right [indiscernible], so we are making adjustment in all aspects to make us more competitive in the market and more adaptable to the market.

We are also going to issue a new program, which is more tailored to classroom textbook. So, we are doing all kinds of things.

And in general we are confident that the full-year outlook is in range with our internal guidance and our middle school business is coming up pretty nicely and we are making more investment in which we also believe will be a strong growth driver for the next quarters to come..

Got it. Thank you very much..

[Operator instructions] As there are no further questions now I would like to turn the call back over to the company for any closing remarks.

Olivia, do you have any closing remarks?.

Thank you once again for joining us today. If you have further questions, please feel free to contact Four Seasons’ Investor Relations through the contact information provided on our website or the Piacente Group Investor Relations..

This concludes this conference call. You may now disconnect your line. Thank you..