BEIJING, Sept. 28, 2021 /PRNewswire/ -- First High-School
Education Group Co., Ltd. ("First High-School Education Group" or
the "Company") (NYSE: FHS), the largest operator of private high
schools in Western China and the
third largest operator in China[1], today announced its
unaudited financial results for the six months ended June 30, 2021.
First Half 2021 Financial Highlights
- Total revenues were RMB231.9
million (US$35.9 million), an
increase of 24.8% from RMB185.8
million in the first half of 2020.
- Gross profit was RMB62.3
million (US$9.6 million), a
decrease of 3.6% from RMB64.6 million
in the first half of 2020.
- Net loss was RMB3.8
million (US$0.6 million),
compared to a net income of RMB31.9
million in the first half of 2020. Such loss was primarily
incurred by certain non-recurring expenses, details of which are
explained thereunder.
- Adjusted net income[2]
(Non-GAAP) was RMB11.2 million
(US$1.7 million), a decrease of 64.9%
from RMB31.9 million in the first
half of 2020.
Operational Highlights
- As of September 1, 2021, the
Company is operating 36 school programs with a total of over 35,000
students.
- In late September 2021, the
Company entered into an agreement to operate a high school in
Sichuan province.
- In May 2021, the Company acquired
the majority stake of a company providing live AI online teaching
services in Beijing.
- In mid-September 2021, the
Company announced a strategic partnership aiming to jointly raise
an education growth fund focusing on the Company's school
expansion.
[1] In terms of student enrollment as
of September 1, 2021, according to an industry report commissioned
by First High-School Education Group and prepared by China Insights
Industry Consultancy Limited.
|
[2] Adjusted net income is a non-GAAP
measure. See "Non-GAAP measure" in this press release. A
reconciliation of the Company's most directly comparable GAAP
measure to historical non-GAAP financial measure has been provided
in the tables captioned "Reconciliation of GAAP to Non-GAAP
Measure" included at the end of this press release, and investors
are encouraged to review the reconciliation.
|
CEO & CFO Comments
Mr. Shaowei Zhang, Chairman and
Chief Executive Officer of First High-School Education Group
commented: "In the first half of 2021, our improved number of
student enrollments translated into healthy topline growth, with
24.8% year-over-year growth to RMB231.9
million for total revenue. Facing tough regulatory
environment, we remain committed to driving rapid growth with
further operation expansion while improving utilization rate for
our existing schools. During this period, we had 8 new school
programs opened in multiple provinces, including 3 new high school
programs, 3 new Gaokao repeaters school programs, 1 new
public-school management services program, and 1 middle school
program. As of September 1, 2021, we
are running 36 school programs with a total of over 35,000
students across Yunnan province,
Guizhou province, Shanxi province, Shaanxi province, Inner Mongolia Autonomous
Region, Sichuan province and Chongqing, with a utilization rate of 62.3%,
compared to 55.3% as of December 31,
2020. Therein, (1) we are operating 17 high school programs
with a total of over 18,500 students and school utilization rate of
approximately 53.4%,and 7 Gaokao repeaters school programs with a
total of over 1,600 students and school utilization rate of
approximately 62.0%; (2) we are cooperating with local governments
in Yunnan province and Inner
Mongolia Autonomous Region to provide management services for 4
public schools with a total of over 5,500 students; and (3) we are
operating 8 middle school programs with a total of over 9,700
students and school utilization rate of approximately 82.7%.
Complying with relevant regulatory guidelines, we look forward to
further solidify our leading position in China's private high school and Gaokao
repeater school programs sectors. We also aim to expand into new
geographical markets with strong demands."
Mr. Zhang continued: "In addition to the 36 fully operated
school programs, we have also entered into agreements to secure
more school openings next year. One particular case worth
highlighting is that in late September, we entered into an
agreement to lease newly constructed school premises and facilities
to sponsor a high school with capacity for over 2,800 student beds
in Sichuan province. The leased
school premise was previously designed for K-9 education, and was
recently leased to us primarily due to the owner's operational
difficulties amid the changing regulatory environment and our
strong brand name in operating high schools. This agreement marks
our high school business entrance into Sichuan province, where we aim to explore and
satisfy the large market demand with similar arrangements."
Mr. Zhang continued: "We also achieved meaningful progress in
enhancing our education resources and services. On June 1, 2021, we announced our majority stake
acquisition in Beijing Long-Spring Future Plus Education
Technology Co., Ltd., or Beijing Long-Spring Future Plus,
previously known as Beijing Tomorrow Future Plus Education
Technology Co., Ltd., a technology-driven education company
providing premium full-time live AI online teaching services. This
combination will further improve the overall quality of our
education system, especially for China's central and western regions where
there are strong demands for high quality high school and Gaokao
repeater school programs. This system will allow us to further
empower our existing business in operating private high schools,
school programs for Gaokao repeaters, and management services
for public schools."
"We are highly confident in the market opportunities for
China's private high school and
Gaokao repeaters school programs. Therefore, in mid-September we
announced a strategic partnership with Sichuan Fuhang Capital
Equity Investment Fund Management Co., Ltd., aiming to jointly
setup an education growth fund dedicated to supporting the rapid
expansion of our school network. We believe the above milestones
will further strengthen our leading position and competitiveness in
China's private high school and
Gaokao repeaters school program sectors." Mr. Zhang concluded.
First Half 2021 Financial Results
Total Revenues
Total revenues were RMB231.9
million (US$35.9 million), an
increase of 24.8% from RMB185.8
million in the first half of 2020. The increase was
primarily driven by (1) greater student enrollment due to the
opening of new schools and the increased number of students
enrolled in our existing schools; (2) increased average tuition fee
per student in most of our existing schools; (3) higher boarding
fees due to the increased number of students enrolled.
Revenues from customers were RMB224.4 million (US$34.8 million), an increase of
33.7% from RMB167.8 million in
the first half of 2020. The increase was primarily driven by (1)
higher student enrollment due to the opening of new schools and the
increased number of students enrolled in our existing schools; (2)
increased average tuition fee per student in most of our existing
schools; (3) higher boarding fees due to the increased number of
students enrolled.
Revenues from government cooperative
agreements were RMB7.5
million (US$1.2 million), a
decrease of 58.6% from RMB18.0
million in the first half of 2020, primarily caused by the
delayed payments from government for the relevant cooperative
arrangements.
Cost of revenues
Cost of revenues were RMB169.6
million (US$26.3 million), an
increase of 39.9% from RMB121.2
million in the first half of 2020. The increase was
primarily due to the increased staff cost from opening of new
schools, and other expenses in connection with our strategic
expansion.
Gross profit
Gross profit was RMB62.3
million (US$9.6 million), a
decrease of 3.6% from RMB64.6 million
in the first half of 2020.
Gross margin was 26.9%, compared with 34.8% in the first
half of 2020. The decreased gross margin was primarily due to the
higher cost of revenues resulted from (1) increased staff costs due
to increased number of employees and increased compensation level
to attract more talents; (2) increased school operating expenses,
especially for new schools with relatively lower cost efficiency
than our existing schools.
Net operating expenses
Net operating expenses were RMB58.2
million (US$9.0 million), an
increase of 103.7% from RMB28.6
million in the first half of 2020.
- Selling and marketing expenses were RMB2.6 million (US$0.4
million), an increase of 97.6 % from RMB1.3 million in the first half of 2020. The
increase was primarily due to the increased expenses in brand
promotion and marketing activities in relation to the assertive
school opening plan made at the beginning of this year.
- General and administrative expenses were RMB60.4 million (US$9.4
million), an increase of 109.2% from RMB28.9 million in the first half of 2020. The
increase was mainly due to (1) one-off option granted to a
strategic investor and consultant; (2) certain non-recurring
expenses in relation to the Company's initial public offering in
March 2021.
- Government grants were RMB4.8
million (US$0.7 million), an
increase of 196.4% from RMB1.6
million in the first half of 2020, primarily due to (1) the
earlier distribution process made by the government this year, as
government grants in previous years were usually distributed in the
second half of the year; (2) the increase in government subsidies
in line with the increase in student enrollments and new schools
opened.
Income from operations
Income from operations was RMB4.1
million (US$0.6 million), a
decrease of 88.7% year-over-year from RMB36.0 million in the first half of 2020.
Interest expense
Interest expense was RMB9.2
million (US$1.4 million), an
increase of 1528.6% from RMB0.6
million in the first half of 2020. The significant increase
was incurred by the borrowing under financing arrangements which
was used for corporate restructuring activities prior to the
Company's initial public offering.
Net loss
Net loss was RMB3.8 million
(US$0.6 million), compared to a net
income of RMB31.9 million in the
first half of 2020.
Adjusted net
income[2] (Non-GAAP)
Adjusted net income (Non-GAAP) was RMB11.2 million (US$1.7
million), a decrease of 64.9% from RMB31.9 million in the first half of 2020.
Update on PRC Regulatory Policy
In May 2021, the State Council of
the People's Republic of China
promulgated the Implementation Rules for the Law for Promoting
Private Education of the PRC (中华人民共和国民办教育民促法) (the "2021
Implementation Rules") which became effective on 1 September 2021. The 2021 Implementation Rules
have set series of restrictions and guidelines on operation,
taxation, shareholding structure, connected transactions and merge
and acquisition of compulsory education.
According to our legal interpretation, the 2021 Implementation
Rules mostly affected our middle school operations. However, there
still exist uncertainties with respect to the interpretation and
enforcement of the 2021 Implementation Rules. The Company will
closely monitor the developments related to the 2021 Implementation
Rules, and continue to assess the possible impacts on the Company
and make any restructures or other applicable actions to
mitigate or respond to 2021 Implementation Rules.
Conference Call
First High-School Education Group's management will hold an
earnings conference call on Tuesday,
September 28, 2021, at 8:00 AM
U.S. Eastern Time (8:00 PM
September 28, 2021, Beijing/Hong Kong Time). Please dial in 15
minutes before the conference is scheduled to begin using below
numbers.
International
|
1-646-828-8199
|
United
States
|
1-800-581-5838
|
Hong Kong
|
800-961-113
|
Mainland
China
|
4001-209107
|
Passcode
|
737894
|
A telephone replay of the conference call may be accessed by
phone at the following numbers until October
5, 2021.
International
|
1-719-457-0820
|
United
States
|
1-888-203-1112
|
Replay Access
Code
|
2526106
|
A live and archived webcast of the conference call will be
available on the company's investors relations website at
https://ir.diyi.top/ .
About First High-School Education Group
First High-School Education Group is the largest operator of
private high schools in Western
China and the third largest operator in China1 . The Company aspires to
become a leader and innovator of private high school education in
China, with the focuses on a
comprehensive education management integrating education
information consulting, education research project development,
education talent management, education technology management,
education service management, and general vocational integration
development services. For more information, please visit
https://ir.diyi.top/.
Non-GAAP Measure
The Company has provided in this press release financial
information that has not been prepared in accordance with U.S.
generally accepted accounting principles, or U.S. GAAP. The Company
considers and uses one non-GAAP measure, adjusted net income, as a
supplemental measure to review and assess its operating
performance. Adjusted net income enables the Company's management
to assess the Company's operating results without considering the
impact of non-cash charges, including share-based compensation
expenses. The Company also believes that the use of the non-GAAP
measure facilitates investors' assessment of its operating
performance.
The presentation of the non-GAAP financial measure 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. Adjusted net income is a non-GAAP measure. A
reconciliation of the Company's most directly comparable GAAP
measure to historical non-GAAP financial measure has been provided
in the tables captioned "Reconciliation of GAAP to Non-GAAP
Measure" included at the end of this press release, and investors
are encouraged to review the reconciliation.
Exchange Rate
The Company's business is primarily conducted in China and all of the revenues are denominated
in Renminbi ("RMB"). This announcement contains translations of
certain RMB amounts into U.S. dollars ("USD" or "US$") at specified
rates solely for the convenience of the readers. Unless otherwise
noted, all translations from RMB to USD are made at the rate of
RMB6.4566 to US$1.00, the exchange rate set forth in the H.10
statistical release of the Federal Reserve Board on June 30, 2021. No representation is made that the
RMB amounts could have been, or could be, converted, realized or
settled into US$ at that rate on June 30,
2021, or at any other rate.
Forward-Looking Statements
This announcement contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934,
as amended, and as defined in the U.S. Private Securities
Litigation Reform Act of 1995. These forward-looking statements
include, without limitation, the Company's business plans and
development, which can be identified by terminology such as "may,"
"will," "expect," "anticipate," "aim," "estimate," "intend,"
"plan," "believe," "potential," "continue," "is/are likely to" or
other similar expressions. Such statements are based upon
management's current expectations and current market and operating
conditions and relate to events that involve known or unknown
risks, uncertainties and other factors, all of which are difficult
to predict and many of which are beyond the Company's control,
which may cause the Company's actual results, performance or
achievements to differ materially from those in the forward-looking
statements. Further information regarding these and other risks,
uncertainties or factors is included in the Company's filings with
the U.S. Securities and Exchange Commission. The Company does not
undertake any obligation to update any forward-looking statement as
a result of new information, future events or otherwise, except as
required under law.
For Investor and Media Inquiries Please Contact:
In China:
First High-School Education Group
Lillian Liu
Tel: +86-13062818313
E-mail: liuyi@dygz.com
The Blueshirt Group
Ms. Susie Wang
Phone: +86 138-1081-7475
Email: susie@blueshirtgroup.com
In the United States:
The Blueshirt Group
Ms. Julia Qian
Phone: +1 973-619-3227
Email: Julia@blueshirtgroup.com
First High-School
Education Group Co., Ltd.
|
Unaudited
Condensed Consolidated Statements of Comprehensive
Income
|
(All amounts in
thousands, except share data and per share data, or otherwise
noted)
|
|
|
|
|
Six months ended
June 30,
|
|
|
|
2020
|
|
2021
|
|
2021
|
|
|
RMB
|
|
RMB
|
|
US$
|
Revenues
|
|
|
|
|
|
|
Revenue from
customers
|
|
167,825
|
|
224,402
|
|
34,755
|
Revenue from
government cooperative agreements
|
|
17,997
|
|
7,450
|
|
1,154
|
Total
revenues
|
|
185,822
|
|
231,852
|
|
35,909
|
Cost of
revenues
|
|
(121,233)
|
|
(169,567)
|
|
(26,263)
|
Gross
profit
|
|
64,589
|
|
62,285
|
|
9,646
|
|
|
|
|
|
|
|
|
Operating expenses
and income
|
|
|
|
|
|
|
|
Selling and marketing
expenses
|
|
(1,316)
|
|
(2,600)
|
|
(403)
|
|
General and
administrative expenses
|
|
(28,867)
|
|
(60,397)
|
|
(9,354)
|
|
Government
grants
|
|
1,619
|
|
4,798
|
|
743
|
Income from
operations
|
|
36,025
|
|
4,086
|
|
632
|
|
|
|
|
|
|
|
|
Other income
(expenses):
|
|
|
|
|
|
|
|
Interest
income
|
|
436
|
|
197
|
|
31
|
|
Interest
expense
|
|
(566)
|
|
(9,218)
|
|
(1,428)
|
|
Change in fair value
of contingent consideration
|
|
(379)
|
|
-
|
|
-
|
|
Foreign currency
exchange (loss)/gain, net
|
|
(155)
|
|
467
|
|
72
|
|
Others,
net
|
|
835
|
|
1,141
|
|
177
|
Income/(loss)
before income taxes
|
|
36,196
|
|
(3,327)
|
|
(516)
|
|
|
|
|
|
|
|
|
Income tax
expenses
|
|
(4,319)
|
|
(455)
|
|
(70)
|
|
|
|
|
|
|
|
|
Net
income/(loss)
|
|
31,877
|
|
(3,782)
|
|
(586)
|
|
|
|
|
|
|
|
Attributable
to
|
|
|
|
|
|
|
Shareholders of the Company
|
|
31,877
|
|
(3,786)
|
|
(587)
|
Non-controlling interests
|
|
-
|
|
4
|
|
1
|
|
|
|
|
|
|
|
Foreign currency
translation adjustments, net of tax
|
|
-
|
|
1,388
|
|
215
|
|
|
|
|
|
|
|
Comprehensive
income/(loss)
|
|
31,877
|
|
(2,394)
|
|
(371)
|
|
|
|
|
|
|
|
Attributable
to
|
|
|
|
|
|
|
Shareholders of the Company
|
|
31,877
|
|
(2,398)
|
|
(372)
|
Non-controlling interests
|
|
-
|
|
4
|
|
1
|
|
|
|
|
|
|
|
Earnings/(loss)
per ordinary share
|
|
|
|
|
|
|
Basic and
diluted
|
|
0.45
|
|
(0.05)
|
|
(0.01)
|
|
|
|
|
|
|
|
Weighted average
number of ordinary share outstanding
|
|
|
|
|
|
|
Basic and
diluted
|
|
70,488,700
|
|
73,234,944
|
|
73,234,944
|
First High-School
Education Group Co., Ltd.
|
Unaudited
Condensed Consolidated Balance Sheets
|
(All amounts in
thousands, except share data and per share data, or otherwise
noted)
|
|
|
|
|
As of December
31,
|
|
As of June
30,
|
|
|
|
2020
|
|
2021
|
|
2021
|
|
Assets
|
|
RMB
|
|
RMB
|
|
US$
|
Current
assets
|
|
|
|
|
|
|
|
Cash
|
|
148,756
|
|
130,947
|
|
20,281
|
|
Restricted
cash
|
|
59,600
|
|
-
|
|
-
|
|
Accounts receivable,
net of allowance for
doubtful accounts
|
|
30,903
|
|
13,447
|
|
2,083
|
|
Amounts due from
related parties
|
|
80,464
|
|
1,732
|
|
268
|
|
Prepaid expenses and
other current assets
|
|
53,450
|
|
62,042
|
|
9,609
|
|
Total current
assets
|
|
373,173
|
|
208,168
|
|
32,241
|
|
|
|
|
|
|
|
|
Property and
equipment, net
|
|
142,407
|
|
140,064
|
|
21,693
|
Intangible assets,
net
|
|
48,976
|
|
48,701
|
|
7,543
|
Goodwill
|
|
40,218
|
|
164,873
|
|
25,536
|
Deferred tax
assets
|
|
12,274
|
|
20,089
|
|
3,111
|
Amounts due from
related parties
|
|
500
|
|
-
|
|
-
|
Other non-current
assets
|
|
18,524
|
|
26,646
|
|
4,127
|
|
Total
assets
|
|
636,072
|
|
608,541
|
|
94,251
|
|
|
|
|
|
|
|
|
|
|
|
As of December
31,
|
|
As of June
30,
|
|
|
|
2020
|
|
2021
|
|
2021
|
|
Liabilities and
Equity/(Deficit)
|
|
RMB
|
|
RMB
|
|
US$
|
Current
liabilities
|
|
|
|
|
|
|
|
Contract
liabilities
|
|
203,482
|
|
62,686
|
|
9,709
|
|
Deferred revenue from
governments
|
|
13,770
|
|
14,220
|
|
2,202
|
|
Borrowings under
financing arrangements
|
|
64,140
|
|
56,131
|
|
8,694
|
|
Bank loans
|
|
46,638
|
|
93,616
|
|
14,499
|
|
Accounts
payable
|
|
8,063
|
|
16,063
|
|
2,488
|
|
Accrued expenses and
other payables
|
|
91,253
|
|
115,381
|
|
17,871
|
|
Income tax
payables
|
|
15,377
|
|
11,609
|
|
1,798
|
|
Amounts due to
related parties
|
|
218,996
|
|
14,916
|
|
2,310
|
|
Total current
liabilities
|
|
661,719
|
|
384,622
|
|
59,571
|
|
|
|
|
|
|
|
|
Contract
liabilities
|
|
7,274
|
|
4,569
|
|
708
|
Deferred revenue from
governments
|
|
12,370
|
|
12,870
|
|
1,993
|
Borrowings under
financing arrangements
|
|
28,643
|
|
28,922
|
|
4,479
|
Other
payables
|
|
9,607
|
|
14,287
|
|
2,213
|
Deferred tax
liabilities
|
|
11,933
|
|
11,031
|
|
1,708
|
|
Total
liabilities
|
|
731,546
|
|
456,301
|
|
70,672
|
|
|
|
|
|
|
|
|
Equity/(Deficit)
|
|
|
|
|
|
|
|
Ordinary shares
(US$0.00001 par value;
5,000,000,000 shares
authorized; and
70,488,700 shares issued
and
outstanding as of December 31,
2020)
*
|
|
-
|
|
-
|
|
-
|
|
Class A ordinary
shares (US$0.00001 par
value; nil and 4,900,000,000
shares
authorized, nil and 39,309,480
shares
issued and outstanding as of
December
31, 2020 and June 30,
2021,
respectively)
|
|
-
|
|
3
|
|
-
|
|
Class B ordinary
shares (US$0.00001 par
value; nil and 100,000,000
shares
authorized, nil and 47,529,220
shares
issued and outstanding as of
December
31, 2020 and June 30,
2021,
respectively)
|
|
-
|
|
3
|
|
-
|
|
Additional paid-in
capital
|
|
64,128
|
|
761,344
|
|
117,917
|
|
Statutory
reserves
|
|
41,591
|
|
41,591
|
|
6,442
|
|
Accumulated
deficit
|
|
(201,524)
|
|
(665,760)
|
|
(103,112)
|
|
Accumulated other
comprehensive income
|
|
144
|
|
1,532
|
|
237
|
|
|
|
|
|
|
|
|
|
Total
(deficit)/equity attributable to the
shareholders of the
Company
|
|
(95,661)
|
|
138,713
|
|
21,484
|
|
Non-controlling
interests
|
|
187
|
|
13,527
|
|
2,095
|
|
Total
(deficit)/equity
|
|
(95,474)
|
|
152,240
|
|
23,579
|
Commitments and
contingencies
|
|
-
|
|
-
|
|
-
|
|
Total liabilities
and (deficit)/equity
|
|
636,072
|
|
608,541
|
|
94,251
|
|
|
|
|
|
|
|
|
*Number of ordinary
shares reflect on a retrospective basis the effect of shares issued
in connection with the corporate
restructuring in January 2021.
|
First High-School
Education Group Co., Ltd.
|
Reconciliation of
GAAP to non-GAAP Measure
|
(All amounts in
thousands)
|
|
|
|
|
Six months ended
June 30,
|
|
|
|
2020
|
|
2021
|
|
2021
|
|
|
RMB
|
|
RMB
|
|
US$
|
|
|
|
|
|
|
|
Reconciliation of net
income/(loss) to adjusted net
income:
|
|
|
|
|
|
|
Net
income/(loss)
|
|
31,877
|
|
(3,782)
|
|
(586)
|
Add:
|
|
|
|
|
|
|
Share-based
compensation expenses*
|
|
-
|
|
14,957
|
|
2,317
|
Tax effect
|
|
-
|
|
-
|
|
-
|
Adjusted net
income
|
|
31,877
|
|
11,175
|
|
1,731
|
|
*The shares-based
compensation expense represented one-off fully vested and
nonforfeitable options granted to a consultant.
|
View original
content:https://www.prnewswire.com/news-releases/first-high-school-education-group-announces-first-half-2021-unaudited-financial-results-301386531.html
SOURCE First High-School Education Group Co., Ltd