Four Seasons Education Reports Third Quarter Fiscal 2021 Unaudited Financial Results

SHANGHAI, Jan. 12, 2021 /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 third quarter fiscal year 2021, ended November 30, 2020.

Third Quarter Fiscal Year 2021 Financial and Operational Highlights

• Revenue was RMB67.6 million (US$10.3 million), compared with RMB103.5 million in the same period of last year.
• Gross profit was RMB25.2 million (US$3.8 million), compared with RMB53.0 million in the same period of last year.
• Operating loss was RMB12.8 million (US$1.9 million), compared with operating income of RMB10.9 million in the same period of last year.
• Adjusted operating loss⁽¹⁾ (non-GAAP) was RMB6.8 million (US$1.0 million), compared with adjusted operating income of RMB17.0 million in the same period of last year.
• Net loss was RMB8.8 million (US$1.3 million), compared with net income of RMB11.3 million in the same period of last year.
• Adjusted net loss⁽²⁾ (non-GAAP) was RMB4.5 million (US$0.7 million), compared with adjusted net income of RMB14.5 million in the same period of last year.
• Basic and diluted net loss per American Depositary Share ("ADS") attributable to ordinary shareholders were both RMB0.19 (US$0.03), compared with net income of RMB0.24 and RMB0.23, respectively, for the same period of last year. Each two ADSs represent one ordinary share.
• Adjusted basic and diluted net loss per ADS attributable to ordinary shareholders⁽³⁾ (non-GAAP) were both RMB0.10 (US$0.01), compared with net income of RMB0.31 and RMB0.30, respectively, for the same period of last year.
• Number of learning centers was 49 as of November 30, 2020, compared with 55 as of November 30, 2019.
• Total student enrollment⁽⁴⁾ was 53,493, compared with 67,714 during the same period of last year.

"During the third quarter of fiscal 2021, we continued to optimize our operations to provide a superior learning experience for our students in their pursuit of both academic excellence and personal development," said Ms. Yi (Joanne) Zuo, Director and Chief Executive Officer at Four Seasons Education. "Total student enrollment reached 53,493 with a better-than-expected revenue, which assures us that our strategies are on track to help our business to recover and return to its pre-pandemic development trajectory. In the third quarter, we spearheaded efforts to further enrich and diversify curricula with new educational programs, spanning a full spectrum of academic subjects in order to cater to the increasing learning needs for high school entrance exams following recent regulatory changes. We were excited to see a 54.5% year-over-year growth in middle school class enrollment this quarter to a new record high.

Our unwavering efforts to enhance our unique curriculum offerings also bore fruit this quarter with continued growth in our enrollment retention rates. Currently, we are seeing a year-over-year increase in cash receipts and enrollment from our winter classes. This is a great testament to the effectiveness of our core capabilities in offering high-quality educational products, making innovative and responsive curriculum development as well as maintaining a strong tutoring team. In addition, we leveraged our deep expertise in delivering tangible learning outcomes to make meaningful strides in our nationwide expansion, resulting in improved enrollment for learning centers outside Shanghai. Going forward, we will continue strengthening our brand educational products and teaching approaches to further drive student enrollment and engagement, paving the way for a future of profitable growth. We are confident that our ability to provide state-of-the-art courses and services has positioned us to capture new opportunities in a recovering market and create a sustainable business in the long run," Ms. Zuo concluded.

Third Quarter Fiscal Year 2021 Financial Results

Revenue was RMB67.6 million (US$10.3 million) for the third quarter of fiscal year 2021, compared with RMB103.5 million in the same period of last year, primarily due to latest regulatory policy and the extended impact of COVID-19, partially offset by the proactive curricular upgrade in response to the evolving market needs.

Cost of revenue decreased by 15.9% to RMB42.5 million (US$6.5 million) for the third quarter of fiscal year 2021 from RMB50.5 million in the same period of last year, primarily attributable to decreased staff costs and the ongoing optimization of the learning center network.

Gross profit was RMB25.2 million (US$3.8 million) for the third quarter of fiscal year 2021, compared with RMB53.0 million in the same period of last year.  

General and administrative expenses decreased by 9.0% to RMB30.4 million (US$4.6 million) for the third quarter of fiscal year 2021 from RMB33.4 million in the same period of last year, primarily due to the improved human resource management.

Sales and marketing expenses decreased by 14.2% to RMB7.5 million (US$1.1 million) for the third quarter of fiscal year 2021 from RMB8.8 million in the same period of last year.

Operating loss was RMB12.8 million (US$1.9 million) for the third quarter of fiscal year 2021, compared with operating income of RMB10.9 million in the same period of last year. Adjusted operating loss⁽¹⁾ (non-GAAP), which is calculated as operating income excluding share-based compensation expenses, was RMB6.8 million (US$1.0 million) for the third quarter of fiscal year 2021, compared with adjusted operating income of RMB17.0 million in the same period of last year.

Income tax benefit was RMB1.3 million (US$0.2 million) for the third quarter of fiscal year 2021, compared with income tax expense of RMB6.2 million in the same period of last year. 

Net loss was RMB8.8 million (US$1.3 million) during the third quarter of fiscal year 2021, compared with net income of RMB11.3 million in the same period of last year. Adjusted net loss ⁽²⁾ (non-GAAP), which is calculated as net income excluding share-based compensation expenses and fair value change of the Company's investments, was RMB4.5 million (US$0.7 million) for the third quarter of fiscal year 2021, compared with adjusted net income of RMB14.5 million in the same period of last year.

Basic and diluted net loss per ADS attributable to ordinary shareholders for the third quarter of fiscal year 2021 were both RMB0.19 (US$0.03), compared with net income of RMB0.24 and RMB0.23, respectively, for the same period of last year. Adjusted basic and diluted net loss 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 RMB0.10 (US$0.01) for the third quarter of fiscal year 2021, compared with adjusted net income of RMB0.31 and RMB0.30, respectively, for the same period of last year.

Cash and cash equivalents. As of November 30, 2020, the Company had cash and cash equivalents of RMB439.0 million (US$66.8 million), compared with RMB404.7 million as of February 29, 2020.

First Nine Months Fiscal Year 2021 Financial Results

Revenue was RMB210.1 million (US$31.9 million) for the first nine months of fiscal year 2021, compared with RMB318.0 million in the same period of last year, primarily due to the impact of the COVID-19 and latest regulatory policy, partially offset by the proactive curricular upgrade in response to the evolving market needs.

Cost of revenue decreased by 17.9% to RMB126.9 million (US$19.3 million) for the first nine months of fiscal year 2021 from RMB154.7 million in the same period of last year, primarily attributable to decreased staff costs and the ongoing restructuring and optimization of the learning center network.

Gross profit was RMB83.2 million (US$12.6 million) for the first nine months of fiscal year 2021, compared with RMB163.3 million in the same period of last year.

General and administrative expenses decreased by 10.9% to RMB88.7 million (US$13.5 million) for the first nine months of fiscal year 2021 from RMB99.5 million in the same period of last year.

Sales and marketing expenses decreased by 15.8% to RMB22.5 million (US$3.4 million) for the first nine months of fiscal year 2021 from RMB26.7 million in the same period of last year.

Operating loss was RMB28.0 million (US$4.3 million) for the first nine months of fiscal year 2021, compared with operating income of RMB37.1 million in the same period of last year. Adjusted operating loss, which excludes share-based compensation expenses, was RMB7.1 million (US$1.1 million) for the first nine months of fiscal year 2021, compared with adjusted operating income of RMB60.4 million in the same period of last year.

Net loss was RMB16.4 million (US$2.5 million) during the first nine months of fiscal year 2021, compared with net income of RMB35.8 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 RMB1.7 million (US$0.3 million) for the first nine months of fiscal year 2021, compared with RMB52.6 million in the same period of last year.

Basic and diluted net loss per ADS attributable to ordinary shareholders for the first nine months of fiscal year 2021 were both RMB0.35 (US$0.05), compared with net income of RMB0.72 and RMB0.70, respectively, for the same period of last year. Non-GAAP basic and diluted net income per ADS attributable to ordinary shareholders for the first nine months of fiscal year 2021 were both RMB0.04 (US$0.01), compared with RMB1.07 and RMB1.04, respectively, for the same period of last year.

Business Outlook

For the fourth quarter of fiscal year 2021, the Company expects to generate revenue in the range of RMB64.0 million to RMB67.5 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 January 12, 2021 (9:00 PM Beijing/Hong Kong time on January 12, 2021)

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 January 19, 2021, 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 RMB6.5760 to US$1.00, the rate set forth in the H.10 statistical release of the U.S. Federal Reserve Board on November 30, 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: IR@fsesa.com

The Piacente Group, Inc.
Jenny Cai
Tel: +86 (10) 6508-0677
E-mail: fourseasons@tpg-ir.com

In the United States:
The Piacente Group, Inc.  
Brandi Piacente
Tel: +1-212-481-2050
E-mail: fourseasons@tpg-ir.com

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