Four Seasons Education Reports Second Quarter Fiscal 2021 Unaudited Financial Results

SHANGHAI, Oct. 26, 2020 /PRNewswire/ -- Four Seasons Education (Cayman) Inc. ("Four Seasons Education" or the "Company") (NYSE: FEDU), a leading Shanghai-based educational company dedicated to providing comprehensive after-school education services with a focus on high-quality math education, today announced its unaudited financial results for the second quarter fiscal year 2021, ended August 31, 2020.

Second Quarter Fiscal Year 2021 Financial and Operational Highlights

• Revenue was RMB83.8 million (US$12.2 million), compared with RMB128.8 million in the same period of last year.
• Gross profit was RMB35.6 million (US$5.2 million), compared with RMB71.0 million in the same period of last year.
• Operating loss was RMB2.7 million (US$0.4 million), compared with operating income of RMB28.3 million in the same period of last year.
• Adjusted operating income⁽¹⁾ (non-GAAP) was RMB4.5 million (US$0.7 million), compared with RMB35.7 million in the same period of last year.
• Net income was RMB4.0 million (US$0.6 million), compared with RMB20.3 million in the same period of last year.
• Adjusted net income⁽²⁾ (non-GAAP) was RMB6.8 million (US$1.0 million), compared with RMB26.9 million in the same period of last year.
• Basic and diluted net income per American Depositary Share ("ADS") attributable to ordinary shareholders were both RMB0.07 (US$0.01), compared with RMB0.40 and RMB0.39, respectively, for the same period of last year. Each two ADSs represent one ordinary share.
• Adjusted basic and diluted net income per ADS attributable to ordinary shareholders⁽³⁾ (non-GAAP) were both RMB0.13 (US$0.02), compared with RMB0.53 and RMB0.52, respectively, for the same period of last year.
• Number of learning centers was 50 as of August 31, 2020, compared with 54 as of August 31, 2019.
• Total student enrollment⁽⁴⁾ was 37,085, compared with 39,357 during the same period of last year.

"All of our learning centers have resumed offline classes during this quarter," said Ms. Yi (Joanne) Zuo, the Director and Chief Executive Officer of Four Seasons Education. "While our overall business continued to be impacted in the quarter by the macro challenges and regulatory changes, the tough operating environment did not slow us from continuing to execute our strategic initiatives with a keen focus on building a long-term sustainable business. We remain focused on strengthening our operational capabilities at multiple fronts in order to further optimize the learning experience of students enrolled in our diverse curricula and tutoring programs.

"With our strong track record of helping students achieve excellent learning outcomes, we have been making endeavors to enhance the quality of our educational service and launch new course products to better engage students in an evolving and dynamic industry, and to ultimately gain even broader appeal with a wider student base. Moving forward, we will continue our strategic efforts to boost the diversity of our course offerings, optimize our learning center network, increase student enrollments and engagement, while exploring new growth potential. 

"It is encouraging that our second quarter financial performance improved on a quarter-over-quarter basis, highlighted by a 42.8% increase in revenue and a 430 basis points increase in gross margin. In this quarter, we are also pleased to see improving profitability sequentially, evidencing our enhanced operating efficiency. We believe our focus on our core strengths and fundamentals will set the foundation for sustainable operation. We remain confident about the recovery and robust long-term prospects," Ms. Zuo concluded.

Second Quarter Fiscal Year 2021 Financial Results

Revenue was RMB83.8 million (US$12.2 million) for the second quarter of fiscal year 2021, compared with RMB128.8 million in the same period of last year, primarily due to latest regulatory policy and the extended impact of COVID-19.

Cost of revenue decreased by 16.7% to RMB48.2 million (US$7.0 million) for the second quarter of fiscal year 2021 from RMB57.9 million in the same period of last year.

Gross profit was RMB35.6 million (US$5.2 million) for the second quarter of fiscal year 2021, compared with RMB71.0 million in the same period of last year.  

General and administrative expenses decreased by 7.0% to RMB30.3 million (US$4.4 million) for the second quarter of fiscal year 2021 from RMB32.6 million in the same period of last year.

Sales and marketing expenses decreased by 20.6% to RMB8.0 million (US$1.2 million) for the second quarter of fiscal year 2021 from RMB10.0 million in the same period of last year.

Operating loss was RMB2.7 million (US$0.4 million) for the second quarter of fiscal year 2021, compared with operating income of RMB28.3 million in the same period of last year. Adjusted operating income⁽¹⁾ (non-GAAP), which is calculated as operating income excluding share-based compensation expenses, was RMB4.5 million (US$0.7 million) for the second quarter of fiscal year 2021, compared with RMB35.7 million in the same period of last year.

Income tax expense was RMB1.8 million (US$0.3 million) for the second quarter of fiscal year 2021, compared with RMB9.2 million in the same period of last year. 

Net income was RMB4.0 million (US$0.6 million) during the second quarter of fiscal year 2021, compared with RMB20.3 million in the same period of last year. Adjusted net income ⁽²⁾ (non-GAAP), which is calculated as net income excluding share-based compensation expenses and fair value change of the Company's investments, was RMB6.8 million (US$1.0 million) for the second quarter of fiscal year 2021, compared with RMB26.9 million in the same period of last year.

Basic and diluted net income per ADS attributable to ordinary shareholders for the second quarter of fiscal year 2021 were both RMB0.07 (US$0.01), compared with RMB0.40 and RMB0.39, respectively, for the same period of last year. Adjusted basic and diluted net income per ADS attributable to ordinary shareholders⁽³⁾ (non-GAAP), which is calculated as basic/diluted net income/loss per ADS attributable to ordinary shareholders excluding share-based compensation expenses per ADS attributable to ordinary shareholders and fair value change of investments measured at fair value per ADS attributable to ordinary shareholders, were both RMB0.13 (US$0.02) for the second quarter of fiscal year 2021, compared with RMB0.53 and RMB0.52, respectively, for the same period of last year.

Cash and cash equivalents. As of August 31, 2020, the Company had cash and cash equivalents of RMB423.0 million (US$61.6 million), compared with RMB404.7 million as of February 29, 2020.

First Six Months Fiscal Year 2021 Financial Results

Revenue was RMB142.5 million (US$20.8 million) for the first six months of fiscal year 2021, compared with RMB214.5 million in the same period of last year, primarily due to the impact of the COVID-19 and latest regulatory policy.

Cost of revenue decreased by 18.9% to RMB84.5 million (US$12.3 million) for the first six months of fiscal year 2021 from RMB104.2 million in the same period of last year.

Gross profit was RMB58.0 million (US$8.5 million) for the first six months of fiscal year 2021, compared with RMB110.3 million in the same period of last year.

General and administrative expenses decreased by 11.9% to RMB58.3 million (US$8.5 million) for the first six months of fiscal year 2021 from RMB66.2 million in the same period of last year.

Sales and marketing expenses decreased by 16.6% to RMB14.9 million (US$2.2 million) for the first six months of fiscal year 2021 from RMB17.9 million in the same period of last year.

Operating loss was RMB15.2 million (US$2.2 million) for the first six months of fiscal year 2021, compared with operating income of RMB26.3 million in the same period of last year. Adjusted operating loss, which excludes share-based compensation expenses, was RMB0.3 million (US$0.0 million) for the first six months of fiscal year 2021, compared with adjusted operating income of RMB43.4 million in the same period of last year.

Net loss was RMB7.6 million (US$1.1 million) during the first six months of fiscal year 2021, compared with net income of RMB24.5 million in the same period of last year. Adjusted net income, which excludes share-based compensation expenses and fair value change of the Company's investments measured at fair value, was RMB6.2 million (US$0.9 million) for the first six months of fiscal year 2021, compared with RMB38.1 million in the same period of last year.

Basic and diluted net loss per ADS attributable to ordinary shareholders for the first six months of fiscal year 2021 were both RMB0.16 (US$0.02), compared with net income of RMB0.48 and RMB0.46, respectively, for the same period of last year. Non-GAAP basic and diluted net income per ADS attributable to ordinary shareholders for the first six months of fiscal year 2021 were both RMB0.13 (US$0.02), compared with RMB0.77 and RMB0.74, respectively, for the same period of last year.

Business Outlook

For the third quarter of fiscal year 2021, the Company expects to generate revenue in the range of RMB62.1 million to RMB67.2 million.

The above guidance reflects the Company's current and preliminary view, which is subject to change.

Conference Call

The Company's management will host an earnings conference call at 8:00 AM U.S. Eastern Time on October 26, 2020 (8:00 PM Beijing/Hong Kong time on October 26, 2020)

Dial-in details for the earnings conference call are as follows:

Participants should dial-in at least 5 minutes before the scheduled start time and ask to be connected to the call for "Four Seasons Education."

Additionally, a live and archived webcast of the conference call will be available on the Company's investor relations website at http://ir.sijiedu.com.

A replay of the conference call will be accessible approximately one hour after the conclusion of the live call until November 2, 2020, by dialing the following telephone numbers:

About Four Seasons Education (Cayman) Inc.

Four Seasons Education (Cayman) Inc. is a leading Shanghai-based educational company dedicated to providing comprehensive after-school education services with a focus on high-quality math education. The Company's vision is to unlock students' intellectual potential through high quality and effective education that can profoundly benefit students' academic, career and life prospects. The Company provides educational programs that are primarily focused on elementary-level math and have expanded in recent years to also include other subjects, including physics, chemistry, and languages, and other grade levels, including kindergarten-level and middle school-level programs. The Company's proprietary educational content is designed to cultivate students' interests and enhance their cognitive and logic abilities. The Company develops its educational content through a systematic development process and updates it regularly based on student performance and feedback. Such process allows the Company to effectively drive better learning outcomes and serve students of different ages, aptitude levels and learning objectives. The Company's faculty is led by a group of experienced senior educators, including recognized scholars, award-winning teachers. Over the years, the quality of the Company's education services has been demonstrated by its student outstanding academic performance.

About Non-GAAP Financial Measures

In evaluating the Company's business, the Company considers and uses certain non-GAAP measures, including primarily adjusted operating income/loss, adjusted net income/loss and adjusted basic and diluted net income/loss per ADS attributable to ordinary shareholders, as supplemental measures to review and assess the Company's operating performance. Adjusted operating income/loss is defined as operating income/loss excluding share-based compensation expenses. Adjusted net income/loss is defined as net income/loss excluding share-based compensation expenses and fair value change of the Company's investments. Adjusted basic/ diluted net income/loss per ADS attributable to ordinary shareholders is defined as basic/diluted net income/loss per ADS attributable to ordinary shareholders excluding share-based compensation expenses per ADS attributable to ordinary shareholders and fair value change of investments measured at fair value per ADS attributable to ordinary shareholders. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP.

The Company believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding share-based expenses, fair value change of investments measured at fair value and impairment loss on intangible assets and goodwill (where applicable) that may not be indicative of the Company's operating performance from a cash perspective. The Company believes that both management and investors benefit from these non-GAAP financial measures in assessing its performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to the Company's historical performance and liquidity. The Company also believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in the Company's financial and operational decision making. A limitation of using non-GAAP measures is that these non-GAAP measures exclude share-based compensation charges and fair value change of investments measured at fair value (where applicable) that have been and will continue to be for the foreseeable future a significant recurring expense in the Company's business. The Company compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.

Exchange Rate Information

This announcement contains translations of certain RMB amounts into U.S. dollars at a specified rate solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB6.8647 to US$1.00, the rate set forth in the H.10 statistical release of the U.S. Federal Reserve Board on August 28, 2020.

Safe Harbor Statement

This press release contains statements of a forward-looking nature. These statements, including the statements relating to the Company's future financial and operating results, are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such as "will," "expects," "believes," "anticipates," "intends," "estimates" and similar statements. Among other things, management's quotations and the Business Outlook section contain forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations, assumptions, estimates and projections about the Company and the industry. Potential risks and uncertainties include, but are not limited to, those relating to its ability to attract new students and retain existing students, its ability to deliver a satisfactory learning experience and improving their academic performance, PRC regulations and policies relating to the education industry in China, general economic conditions in China, and the Company's ability to meet the standards necessary to maintain listing of its ADSs on the NYSE or other stock exchange, including its ability to cure any non-compliance with the NYSE's continued listing criteria. All information provided in this press release is as of the date hereof, and the Company undertakes no obligation to update any forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that its expectations will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results. Further information regarding risks and uncertainties faced by the Company is included in the Company's filings with the U.S. Securities and Exchange Commission, including its annual reports on Form 20-F.

For investor and media inquiries, please contact:

In China:
Four Seasons Education (Cayman) Inc.
Olivia Li
Tel: +86 (21) 6317-6678
E-mail: [email protected]

The Piacente Group, Inc.
Jenny Cai
Tel: +86 (10) 6508-0677
E-mail: [email protected]

In the United States:
The Piacente Group, Inc.  
Brandi Piacente
Tel: +1-212-481-2050
E-mail: [email protected]

SOURCE Four Seasons Education Inc.

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