Third Quarter Fiscal 2017 Performance Presentation Bright Scholar - - PowerPoint PPT Presentation

Third Quarter Fiscal 2017 Performance Presentation

July 2017

Bright Scholar Education Holdings Limited.

www.brightscholar.com

www.brightscholar.com

Safe Harbor Statement

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This presentation contains forward-looking statements, including statements about the business outlook, strategy and market opportunity of Bright Scholar Education Holdings Limited (the “Company,” “we” or “our”), and statements that may suggest trends for our business. Such forward-looking statements can be identified by the use of forward-looking terminology such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” “will,” “would,” and similar expressions, or the negatives thereof. These statements are individually and collectively forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are made only as of the date of this presentation and are based on estimates and information available to the Company at the time of this presentation. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict and may be beyond the Company’s control. Therefore, the Company cautions that actual results may differ materially from those set forth in any forward-looking statements herein, and are subject to numerous assumptions, risks, uncertainties and

• ther factors, including those discussed under “Risk Factors” in the Company’s registration statement on Form F-1 filed with the U.S. Securities

and Exchange Commission (the “SEC”) on May 16, 2017. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements made during this presentation will in fact be

• realized. Any forward-looking statements and projections made by others in this presentation are not adopted by the Company and the Company is

not responsible for the forward-looking statements and projections of others. Except as otherwise required by applicable securities laws, the Company disclaims any intention or obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise. In evaluating our business, 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 tools and investors 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 U.S. GAAP.

www.brightscholar.com

Anhui Guangdong Hubei Hunan Guizhou Jiangsu Gansu

About Bright Scholar

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Number of Students

29,613

2017 (3) Number of Schools 2017 (2)

52

Largest Operator of International and Bilingual Schools in China (1)

• f 2017 International School Graduates

Admitted into Top 50 Institutions Globally

87%

provinces with Bright Scholar schools (2)

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IPO in May 2017 NYSE : May 2017 US$181 million proceeds raised (including greenshoe shares)

www.brightscholar.com

Addressing K-12 Students’ Various Education Needs

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Entire K-12 Spectrum

International Schools Bilingual Schools Kindergartens

Summer / Winter Camps Test Preparation College Counseling Exchange Programs Sports Programs After-school Programs

www.brightscholar.com

Strong Market Leadership in International and Bilingual School Education

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Largest Operator of International and Bilingual Schools in China (1)

52

29,613

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International Schools Bilingual Schools Kindergartens

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13,169

35

10,071

6

6,372

#1

38.9%

• f F9M ‘17 Revenue

31.4%

• f F9M ‘17 Revenue

23.3%

• f F9M‘17 Revenue

Complementary Education Services (4)

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4,313

6.4%

• f F9M‘17 Revenue

www.brightscholar.com

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Asset light model offers tremendous margin expansion opportunities

Collaboration with Country Garden enables a strong pipeline for trajectory growth

with a Holistic Business Model that Drives Bottom Line Growth & Sets Us Apart From Competition …

Third party real estate developers

• 10.00%

Adjusted Net Margin(2)

• 10.0%

Adjusted EBITDA Margin (2)

Performance Highlights

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Highlights:

Strong tractions of year-over-year growth across all financial metrics

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(in RMB million) F3Q17 Y-O-Y Growth F9M17 Y-O-Y Growth Revenue 406.7 28.1% 1,052.9 28.2% Gross Profit 183.8 51.5% 399.7 55.1% Gross Margin 45.2% 7.0% 38.0% 6.6% Operating Income 121.8 66.5% 231.5 731.2% Operating Margin 30.0% 6.9% 22.0% 18.6% Adjusted EBITDA* 145.2 59.3% 296.5 72.2% Adjusted EBITDA Margin* 35.7% 7.0% 28.2% 7.2% Adjusted Net Income* 107.5 85.7% 195.5 91.9% Adjusted Net Margin* 26.4% 8.2% 18.6% 6.2%

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……. As Business Scale Expands Rapidly

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Total Revenue

RMB MM

232 306 423 341 410 127 158 FY2014 FY2015 FY2016 F9M '16 F9M '17 F3Q '16 F3Q '17

YoY Growth: 20.1%

International Schools Bilingual Schools

3 3 37 21 67 16 26 FY2014 FY2015 FY2016 F9M '16 F9M '17 F3Q '16 F3Q '17

YoY Growth: 218.0% YoY Growth: 60.9%

Complementary Education Services Kindergartens

153 191 252 199 246 76 96 FY2014 FY2015 FY2016 F9M '16 F9M '17 F3Q '16 F3Q '17

YoY Growth: 23.6% YoY Growth: 26.1% YoY Growth: 24.3%

200 245 329 260 330 98 127 FY2014 FY2015 FY2016 F9M '16 F9M '17 F3Q '16 F3Q '17

YoY Growth: 27.0% YoY Growth: 29.4%

CAGR: 28.2% CAGR: 28.5% CAGR: 237.7% CAGR: 34.9%

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with Fast Expanding Network and Growing Student Enrollments …

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2 3 5 5 6 8 8 11 11 11 19 26 33 33 35 29 37 49 49 52 FY2014 FY2015 FY2016 F3Q '16 F3Q '17

3,860 4,292 5,443 5,448 6,372 8,453 9,512 11,441 11,424 13,169 6,600 7,280 8,979 8,862 10,071

18,913 21,084 25,863 25,734 29,613 FY2014 FY2015 FY2016 F3Q '16 F3Q '17 International Schools Bilingual Schools Kindergartens

Number of Schools

Y

• Y

G r

• w

t h : 6 . 1 % Y

• Y

G r

• w

t h : 1 5 . 1 %

Average Student Enrollment (1)

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and a Balanced Portfolio with SteadyTuition Growth Across Segments

Substantial room to increase

• ur international schools’ tuition (2)

Average Tuition and Fees per Student in RMB ‘000 (1)

38.8% 31.2% 23.6% 6.4%

School Revenue Contribution F3Q ‘17

International Schools Bilingual Schools Kindergartens Complementary Education Services

60 71 78 81

FY2014 FY2015 FY2016 FY2017E

23 26 28 30

FY2014 FY2015 FY2016 FY2017E

24 26 29 32

FY2014 FY2015 FY2016 FY2017E

CAGR: 10.2% CAGR: 13.6% CAGR: 10.2%

Bilingual Schools: Average Tuition and Fees per Student (1)

International Schools: Average Tuition and Fees per Student (1)

Kindergartens: Average Tuition and Fees per Student (1)

www.brightscholar.com

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Business Updates

Investment in Can-Achieve (Beijing) Education Consultants Co, Ltd

• Business
• College counseling, student recruitment for universities, test preparation, summer- winter camps

and study camps

• Operation since 2008
• Represents over 600 overseas universities
• #1 in China covering US & Canada with 273 university representations
• Represents 23 universities in US top50/QS100 rankings
• BEDU investment
• RMB78.5million for 21% equity stake

Fiscal 2018 : 12 new schools openings

• Country Garden (8 schools)
• 3 bilingual schools & 5 kindergartens
• Third Party (4 schools)
• Hebei Changsheng Group & Jiangsu Tainshan Group
• 2 bilingual schools & 2 kindergartens

Investment New Schools Partnership

Columbia and UC Berkeley . Scholarship . Fettes . Operate international school in China

Financial Performance Highlights

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Robust Revenue Growth

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Total Revenue

RMB MM

Y

• Y

G r

• w

t h : 2 8 . 2 % Y

• Y

G r

• w

t h : 2 8 . 1 %

588 746

1,040

821 1,053 317 407

International Schools Bilingual Schools Kindergartens Complementary Education Services

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Business Scalability with Effective Cost Management …

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Cost of Revenue as a percentage of Total Revenues

% of Total Revenue

60.3% 59.4% 50.2% 47.6% 44.2% 42.7% 37.7% 3.3% 4.2% 4.4% 4.1% 3.6% 3.8% 3.3% 0.3% 0.4% 0.6% 0.6% 1.1% 1.0% 1.1% 21.3% 24.0% 15.6% 16.3% 13.2% 14.4% 12.8% 85.2% 88.0% 70.8% 68.6% 62.1% 61.9% 54.9%

FY2014 FY2015 FY2016 F9M '16 F9M '17 F3Q '16 F3Q '17 Staff Cost Depreciation Rental Others* Note: * others costs mainly include education expenses, utilities expenses, cost of food, accommodation, and school bus

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Drives Gross Margin Growth …

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Gross Profit and Gross Margin

RMB MM

• 50

International Schools Bilingual Schools Kindergartens Complementary Education Services Gross Margin Y

• Y

G r

• w

t h : 5 1 . 5 % Y

• Y

G r

• w

t h : 5 5 . 1 % 8 6 90 304 258 400 121 184

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Increasing operational leverage …

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Adjusted Selling, General and Administrative Expenses as a Percentage of Total Revenues(1)

% of Total Revenue

• 1. Adjusted for share-based compensation. See reconciliation below.
• 2. Others：mainly include professional fees, office and administrative expenses,

11.5% 12.8% 11.0% 9.3% 8.6% 9.0% 7.5% 2.4% 3.4% 2.6% 1.8% 1.9% 1.6% 1.5% 0.2% 0.1% 0.2% 0.3% 0.2% 0.7% 0.3% 0.2% 0.1% 0.2% 0.2% 0.2% 6.8% 5.7% 4.8% 5.5% 5.6% 4.4% 6.6% 21.4% 22.3% 18.8% 16.8% 16.4% 15.5% 16.0%

FY2014 FY2015 FY2016 F9M '16 F9M '17 F3Q '16 F3Q '17 Staff Cost Depreciation Rental Marketing Others(2)

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…Drives Margin Expansion

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Adjusted EBITDA and Margin (1)(2)

RMB MM

Adjusted Net Income and Margin (1)

RMB MM

(2) (14) 186 172 297 91 145 (0.4%) (1.9%) 17.9% 21.0% 28.2% 28.7% 35.7% FY2014 FY2015 FY2016 F9M '16 F9M '17 F3Q '16 F3Q '17 Adjusted EBITDA Adjusted EBITDA as % of Revenue

YoY Growth: 59.3%

(38) (40) 98 102 195 58 107 (6.5%) (5.4%) 9.4% 12.4% 18.6% 18.2% 26.4% FY2014 FY2015 FY2016 F9M '16 F9M '17 F3Q '16 F3Q '17 Adjusted Net Income Adjusted Net Income as % of Revenue

YoY Growth: 91.9% YoY Growth: 85.7% YoY Growth: 72.2%

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Condensed Income Statement

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Condensed Income Statement

RMB MM

For the Fiscal Year Ended August 31 For the Nine Months Ended May 31 For the Three Months Ended May 31 2014 2015 2016 2016 2017 2016 2017 Revenue International schools 232.4 305.9 423.1 341.4 410.1 127.0 157.9 Bilingual schools 200.1 245.4 328.7 260.0 330.3 98.1 126.9 Kindergartens 152.5 191.3 252.0 198.7 245.6 76.2 96.2 Complementary education services 3.2 3.3 36.5 21.0 66.9 16.1 25.9 Total revenue 588.2 745.9 1,040.3 821.1 1,052.9 317.4 406.7 Total gross profit 86.3 90.3 304.1 257.7 399.7 121.3 183.8 Gross margin International schools 6.0% 5.3% 26.1% 31.0% 34.7% 37.1% 42.4% Bilingual schools 20.7% 12.8% 30.4% 29.0% 37.6% 36.5% 44.1% Kindergartens 18.2% 21.2% 33.3% 34.9% 44.2% 42.8% 51.7% Complementary education services 100.0% 60.5% 27.1% 33.6% 36.7% 35.2% 42.9% Total gross margin 14.7% 12.1% 29.2% 31.4% 38.0% 38.2% 45.2% Adjusted operating income (1) (35.9) (70.6) 113.4 122.9 231.5 73.2 121.8 % Margin (6.1%) (9.5%) 10.9% 15.0% 22.0% 23.1% 30.0% GAAP operating income (35.9) (70.6) 18.3 27.9 231.5 73.2 121.8 % Margin (6.1%) (9.5%) 1.8% 3.4% 22.0% 23.1% 30.0% Adjusted net income (1) (38.1) (39.9) 98.0 101.8 195.5 57.9 107.5 % Margin (6.5%) (5.4%) 9.4% 12.4% 18.6% 18.2% 26.4% GAAP net income (38.1) (39.9) 2.9 6.8 195.5 57.9 107.5 % Margin (6.5%) (5.4%) 0.3% 0.8% 18.6% 18.2% 26.4%

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Condensed Income Statement (cont’d)

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Reconciliations of GAAP and Non-GAAP Results

RMB MM

For the Fiscal Year Ended August 31 For the Nine Months Ended May 31 For the Three Months Ended May 31 2014 2015 2016 2016 2017 2016 2017 Net income (38.1) (39.9) 2.9 6.8 195.5 57.9 107.5 Add: share-based compensation expense

• 95 .1

95.1

• Adjusted net income

(38.1) (39.9) 98.0 101.8 195.5 57.9 107.5 Net income (38.1) (39.9) 2.9 6.8 195.5 57.9 107.5 Less: interest income, net 1.6 1.8 2.1 (1.4) (1.4) (0.1) (0.3) Add: income tax expense (3.8) 29.3 (17.9) 22.7 44.2 15.7 18.7 Add: depreciation and amortization expense 33.5 57.1 72.1 49.0 58.2 17.6 19.3 EBITDA (2.5) (13.9) 90.7 77.1 296.5 91.1 145.2 Add: share-based compensation expense

• 95.1

95.1

• Adjusted EBITDA

(2.5) (13.9) 185.8 172.2 296.5 91.1 145.2 Selling, general and administrative expenses 125.8 166.1 290.1 233.3 173.0 49.3 65.2 Less: share-based compensation expense

• 95 .1

(95.1)

• Adjusted selling, general and administrative

expenses 125.8 166.1 195.0 138.2 173.0 49.3 65.2

www.brightscholar.com As of August 31 As of February 28 As of May 31 2014 2015 2016 2017 2017 Cash, cash equivalents, and restricted cash 148.1 244.2 362.5 644.1 1,455.5 Property and equipment, net 360.0 398.8 431.4 427.1 417.0 Prepayment for construction contract 24.1 15.4 2.4 0.9 3.1 Total assets 913.8 1,093.2 1,239.2 1,347.3 2,201.6 Current liabilities 876.8 1,074.6 1,011.8 1,080.3 825.8 Total liabilities 932.2 1,132.2 1,077.7 1,145.6 891.6 Total equity (18.4) (39.0) 161.6 201.7 1,310.0 Total liabilities and equity 913.8 1,093.2 1,239.2 1,347.3 2,201.6

Condensed Balance Sheet and Cash Flow Statement

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Condensed Balance Sheet

RMB MM

Condensed Cash Flow Statement

RMB MM

As of August 31, 201 As of February 28 As of May 31 2014 2015 2016 2017 2017 Net cash from operating activities 46.6 134.9 360.7 191.1 82.8 Net cash from/(used in) investing activities (170.5) (154.4) 32.1 52.2 （31.4） Net cash from/(used in) financing activities 101.7 115.6 (274.5) 38.4 1041.6 Including: capex (141.0) (134.5) (92.7) (29.8) (59.5) Net change in cash, cash equivalents, and restricted cash (22.2) 96.1 118.2 281.6 1,093.0 Cash, cash equivalents, and restricted cash at end of the period 148.1 244.2 362.5 644.1 1,455.5

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Seasonality : K-12

• International schools
• Bilingual Schools
• Kindergartens

Fall Semester : runs from September 1 to January 31

F1Q : 3months + F2Q : 2 months

Spring Semester: runs from March 1 to July 31

F3Q : 3 months + F4Q : 2 months

• Students pay upfront for packages valid for a certain period of time and number of

classes

• Revenue recognized as classes are taken

English Proficiency Training After-school Programs Summer and Winter Camps

• Students pay upfront for camp packages
• Revenue recognized when the camp programs have taken place

Business Seasonality & Revenue Recognition

Appendix

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Restriction on Foreign Investment in Formal Education Recent Regulatory Updates Enforceability and Compliance of VIE Structure

Restricts Foreign Investment in Compulsory Education Restricts Foreign Investment to up to 50% in High Schools

û û

Promoters of Schools are PRC Nationals as Required PRC Counsels Have Confirmed Enforceability

ü ü

Private Education Promotion Law Amendment

• Private Schools:

– For-profit Schools ü Can obtain operating profits û Cannot provide compulsory education – Not-for-profit Schools ü Can provide compulsory education û Cannot obtain operating profits

• The amended law restricts not-for-profit schools from

distributing operating surplus in the form of dividends

• Our VIE structure is not affected as surpluses are

transferred to a WFOE through a management fee arrangement

Regulatory Overview of K-12 Education in China

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Bright Scholar’s Strategies for Growth and Long-term Success

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1 2 3 4

Improve Academic Outcomes through Enhanced Education Quality Active Marketing to Promote Our Brand and Ramp Up Our Schools Expand Our School Network and Increase Student Enrollment Broaden Service Offerings to Enrich Students’ Learning Experience Improve Operating Efficiency Complement Our Growth with Acquisitions and Partnerships

5 6

THANKS !

Bright Scholar, Bright Future.

• Bright Scholar Education Holdings Limited
• www.brightscholar.com