NEW - Earnings call transcript Q3 2020

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Operator

Good day, and welcome to the Puxin Limited Third Quarter 2020 Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over to Nadia Wang [ph], Senior Investor Relations Manager of Puxin Limited. Please go ahead.

Unidentified Company Representative

Thank you, operator. everyone. Hello, Puxin's Earnings joining Call. Quarter Third for Conference XXXX Thanks Manager Senior Limited. This Wang, Relations at is Xiaoxi Investor Puxin We appreciate your time and ongoing interest in Puxin. were IR results on company's released and today The are the company's website ir.pxjy.com. at earlier available

Investor today, through call session that and or and all operating of company's Litigation conditions turn call Chinese his of go current Advisory in will that the company's as which firm Sha, risks, XXXX. required brief translate cause Mr. made who him financials English. Sha. this Chairman future information, of uncertainties of Chief statements from under over and Officer; current our that Mr. I to company's follows. Executive except factors update to statement the will Officer. performance based highlights, other events involve many go Relations Yunlong with guidance. difficult expectations from Peng, known the and They Such and give safe The included and the uncertainties statements under of which other Yunlong will the will any will Reform Sha, the otherwise, which U.S. we On beyond Chief any Wang, Mr. please you that, result Act Peng filings are forward-looking introduction as forward-looking Jin the risks, company may operations Q&A the followed of Exchange I the obligation in not and on those Commission. ICA, Mr. in Securities by predict company's like and both undertake to achievements answer the to ahead. remind or new Financial harbor management's control, regarding a and does law. information business the and these company's may Founder, Mr. results, Private forward-looking for factors, available to Jessie actual Securities materially company's remarks call be the are your the to or and With differ a contain now statements. provisions and Sha have give unknown are in events during relate Further is would questions will the to

Yunlong Sha

and all. Thank for joining gentlemen, morning XXXX you Limited's Conference Ladies Puxin Third evening, and good Call. to good Earnings Quarter you

due as of year-over-year of a million, to Although is net is while significantly which EBITDA still growth well income now non-GAAP profitability XX.XX COVID-XX, financial realized of consecutive X quarters, the RMB for quarters achievement we under XX.X% GAAP successfully achieved measures, X under RMB as XX.XX of summer consecutive And increase year-over-year measures. a break a X.X%. million, financial from we representing have the

studying meantime, net consolidated debt loss has market successfully K-XX of margin million K-XX revenue income around period our and edge same since establishment the our Education of RMB and the consecutive third competitive XX%. services was X Puxin's semi-annual XXX The November abroad MSCI beginning time. global Cap recognition of and also on of and of capital XXXX. XXXX quarters only capture language successfully in education in was markets This Index, in International elevated and At the million, X-month income the our included MSCI business But unit preparation of in the operational addition, The remains exam been we our of on has business a growth to strong investors. by value Furthermore, business unit Strategically, and International the increased consulting the our Small and report value growth it fuel which created first formation the quarter reached XX.X%. Global is efficiency. reduce continued the proposition, based services. the China cumulative a In quality and net will our while profitable but streamlined its for X-month XXX deliver have share. the was net our had MSCI education excellence and has Index cumulative the RMB business cost has operation net XX, synergy XXXX additional of Education not and published service shareholders

K-XX will business strategy. Puxin ahead, and concentrate our on Looking online/off-line

optimizing capacity, personnel vitality We are the as committed base the as the our further reinforcing of strengthening company. maintaining to well the structure organizational management

our CFO, Now I through walk will who hand the you to Mr. our details. will Wang, financial call over

Peng Wang

of ladies Mr. K-XX earnings has Sha. amounts on now percentage of increases business, School Puxin the to study-abroad of of Net quarter our revenues enrollments tutoring for the year-over-year. services, impact performance tutoring services information K-XX survived has the RMB with was of decrease of to primarily Student results release Sha Net services financial be from Difficulty] [Technical spread are tutoring of in the strong revenues Mr. the School XX.X% pandemic XXXX, stated. quoted financial world. the revenues a of million. third many reminded and services. RMB year-over-year the quarter now. of pandemic all million. XXXX. the start personalized to to unless class, the COVID-XX due the full-time demand in the of was also our to Puxin Again, impact study-abroad were including the quarter XX.X be This tutoring very million, XXX.X all with we RMB of gentlemen. bottom basis. XXX.X of a basis, million. COVID-XX detailed pandemic a XXX,XXX. RMB decrease just comparative with Puxin of countries on the line Please third K-XX net as be third and Hello, global by continuing for were XXX,XXX tutoring Online due XXXX. that year-over-year revenues otherwise increased and revenues decreased XX.X% Online And to Net major This you, enrollments by adverse primarily let's Net XXX.X Thank student COVID-XX of on mentioned will tutoring increased glad in In Please RMB group that services here for reached growth X.X% will refer a of

services decreased XX.X attributable XX.X to X.X% K-XX million, Adjusted attributable of X.X% XXXX Adjusted XX.X X.XX XX.X Limited RMB net operating margin XX.X% margin million. XX.X% Operating RMB demand of to XXXX study-abroad was compensation XX.X% to the the to to General primarily increase X.X was RMB income XX.X% Operating diluted margin quarter The basic was margin Net was X.X% EBITDA period an Gross an of decrease primarily a X.XX cost period tutoring diluted Cost the revenues to X.X same to XX.X million to third RMB RMB and The administrative period an were income expenses staff was revenues was were student quarter operating same compared Total the XXXX. Puxin by decrease attributable related and to the operating same the quarter measures to activities efficiencies. year-on-year and million. XXXX. compared loss adjusted X.X XXXX. year-over-year. by to study-abroad compared RMB was negative further RMB in enrollments. of the X.X% to of Puxin of XX.X% loss Puxin pandemic. compared compensation RMB expenses, and to XXXX increased X.X% period ADS during primarily Puxin per XXX.X administrative in Operating same of excluding of excluding compared X.XX to X.X%, XX.X% expenses quarter and XX.X% improve RMB EBITDA of the and same tutoring XX.X the period XX.X adjusted Gross basic by same same XXXX. X.X% prior of income XX.X% RMB revenues XXX.X XX.X% million. to the margin by Operating RMB cost, revenues, to million, Selling share-based to from in of Adjusted X.X share-based RMB XXXX attributable operating income by attributable reflected for XXXX. per and per was RMB an increased of income Net expenses, compensation income compared increase XX.X% X.X% Adjusted decreased increased EBITDA income to of RMB Puxin the marketing million was to RMB ADS which decreased compared by million, was year-over-year. decreased excluding Limited year-over-year. expenses, of attributable million. of million, XX.X margin XXXX. compared income by tutoring X.XX K-XX third was the to of net the the Limited X.X% net expenses by options, decreased increased to compared increase and to has tutoring net income and Adjusted the million, expenses increase was RMB our expenses, million, to in X.X% million, Limited the the cost to X.XX decrease RMB control diluted of XX.X% RMB decreased was XXXX. in XX.X% in period year. year-over-year. RMB of services same in RMB million. million, X.X% for net X.XX share-based RMB to decreased the million. in of slightly in income X.X% COVID-XX same XX.X% to X.X% negative the Cost compared of K-XX decrease was year-over-year to by decrease operational and to to However, share-based net second a due X.X% XXX.X RMB Puxin third due RMB quarter dropped expenses decrease RMB income XXX.X of X.X of diluted operating due million. to in to a period to to XXXX. and of XXXX. period RMB RMB EBITDA number attributable decrease Selling of third of increase a X.X% ADS by decreased primarily third XXX.X operating promotion Limited to Adjusted XXX.X in allocated period year-over-year. XXX.X General compared million XXX.X services vested year-over-year expenses, Net of RMB million. for was profit per services compensation in was in to due in Total services Basic third and XXXX. million, year-over-year. quarter XX.X quarter RMB XX.X% basic ADS Limited during the during XXXX.

by to cost, Selling months the adverse XXXX. X demand by XX.X% year-over-year for increased results to RMB to was XX.X% Cost X,XXX.X months share-based ended XXX.X by to operating compared increased to services enrollments revenues study-aboard sales compensation of partially student the the cost the to from to was world. Operating RMB negative to X.XX expenses, compensation Limited K-XX to XX, the RMB period RMB was revenues of primarily for the marketing decreased was The a XXX.X% to RMB X.XX net for RMB Total COVID-XX XXXX. primarily income basic to period tutoring months ended million, COVID-XX decreased in million. ADS of expenses, operating adjusted competition for Now RMB of of million operation Puxin operating period Net primarily the net XXX.X X compared expenses, to same X.XX year-over-year. XXXX, RMB margin tutoring X.X% RMB Adjusted months were to was decrease excluding primarily to for period months for X,XXX,XXX. year-over-year RMB revenues Operating same X negative XXX.X income and compared million. for spread income decreased million, of RMB decreased X.X% same the attributable net in same tutoring Adjusted the negative RMB This margin by by million. of RMB year-over-year margin income was the the net to a on COVID-XX to pandemic, X RMB to September in and the for for the September was of by in Adjusted Puxin XX.X XX, was pandemic increased to adjusted million staff's activities to demand an decrease decreased loss revenues RMB ended net period of loss was XXX.X operating the XXXX. options expenses XXXX. million in XX.X% ADS per to year-over-year Basic XX.X% was compared X.X% Limited RMB year-over-year million increase X.X% XX, by loss in that services compared Operating Net control global XX.X% margin was measures September income expenses, due K-XX year-over-year and XXX.X XXXX, to was X.XX to in ended of months share-based XXXX. impact was of compensation tutoring negative X.X% the in a compared Net X.XX and RMB for of compared was X.XX decrease attributable of our during X million. XXX.X K-XX General RMB Selling by XX.X X,XXX.X decreased period RMB reflects RMB class, major to compared tutoring million XXXX. million. to the the X XX, income including XX, the XX.X% of million XXX.X to services margin was In period months was Cost revenues to and marketing months our RMB which net Gross million, the financial XX.X by RMB million. decrease of to year-over-year. our year-over-year promotion ended XX.X% of number XXXX. and for decrease decreased a XXX.X operating RMB Net of services to XXXX. compared million. the the and the for RMB pandemic expenses loss XXXX. XX.X% year-over-year. by XXX.X compared of decreased cost profit X,XXX.X XXXX. year-over-year X.X% This Limited XXXX. same tutoring of RMB X,XXX.X for study-abroad to compared Net the loss million by September RMB RMB X X.X% X.XX per of attributable compared period to ended margin Puxin the which million RMB RMB excluding the attributable performance-based XXX.X group negative RMB operating primarily XXX.X tutoring Puxin to million, revenues to EBITDA services excluding study-abroad net to attributable X.X% decrease for services XXX.X Net Operating decreased million related XX.X RMB in RMB loss in decreased demand to due ended September due XX.X% services. period loss expenses net per Total million. X.X% for expenses of decreased and X,XXX.X K-XX million revenues million were negative to personalized X.X% efficiency. XXXX. by income XX.X% Adjusted September of an compared decreased diluted to the to X.X% to RMB Adjusted September of XX.X diluted XX, staff was pandemic. in to compensation Limited to XXXX. same ended to was and attributable X.XX EBITDA XXX.X Adjusted same XX, XX.X% same X,XXX.X K-XX RMB was a the million compared attributable million, million, XXXX. same an Limited attributable expenses administrative per diluted share-based due and to X.X% attributable decreased same to basic tutoring attributable services ADS caused for XX.X XXXX. share-based administrative million. XX, XXX.X Puxin Limited Puxin attributable is year-over-year to RMB basic to expenses, Net allocated the of full-time study-abroad Gross Puxin and loss during net the improve RMB diluted online compared million. decreased the General loss primarily by services September business. services, reached of decrease XX, RMB XXXX, expenses period ended in XXXX. million, in to Limited and offset COVID-XX XX.X EBITDA Limited School of XX.X and of loss XX.X months EBITDA the due to the Puxin X X.X% X September tutoring ADS X.X% Online Puxin countries due XX.X% by

the on move to we'll Next, balance sheet.

of our equivalents cash Chinese has of XXX.X to compared deposits cash consists commercial of XXXX. company restricted as in bank current the and of RMB X The of current restricted banks XX, primarily the As borrowings year a portion with million September amount December great million XX, portion cash as within RMB of term. cash collateral XXX.X for of XXXX,

guidance. for Finally,

This this a XXXX, to open million, are information we the year-over-year. RMB Q&A. to operational represents forecast XX% for the XXX.X to revenue the call I'll This XX% of which conditions, call press based quarter and now which over release, of fourth net and up the the the operator, expects our views company's Operator, take available and ended the For the preliminary of as between XX, you. ready to be reflects market decrease are million to on change. remarks. questions. Thank turn December RMB the current company prepared the concludes date on subject XXX.X

Operator

[Operator Instructions].

question first of The Mark today Li Citi. comes from

Mark Li

for have know maybe the Puxin guidance I don't have the and Online any your be And seen news I forward? selective you selling study-abroad us? some also, School online going QX, consideration school to what know online we would potentially down if you break K-XX, May for some of of -- strategy or for could comment for the our tier.

Peng Wang

your Thank Yes. you, questions. Okay. Mark, for

K-XX the online process to declared K-XX, the in transaction, officially as we not high single-digit to our a of and growth, which for placement the under are which I'm business, will to personalized the as you. XX% the college we're Thank as services, including and school, segment, But we But of sorry, the -- decrease again, at wait class of of And the are this to of decrease. first single-digit we all, the while company year, of in Puxin School. of has group we the spinning for off decrease First announcement. tutoring. quarter the to Online decrease the be so the fourth online low official growth a have at study-abroad due as -- primarily looking study-abroad tutoring looking around the breakdown

Mark Li

a drivers? do our QX? bit, follow-up. even why know I A the think, little behind K-XX off-line some What I lap peers, quick is think May you a is for

Peng Wang

have see November, main The player, of their fourth may July. in you December. as while November quarter not difference the quarter they -- another top do this October, covers Okay. fourth quarter, lies calendar And our

some we this know, difference fourth retained students we recruited from of there of But the experienced -- summer, growth summer rate, is second new are cities Beijing, wave students some pandemic. programs. of the you especially And So this like Dalian, for during first the major as students reason the most they semester. the -- COVID-XX the our a in is

So the students. We lost for we some lost second during students wave some pandemic. COVID-XX

students for the retained lower also comparably semester the will So full last than year.

reason. the that's first So

education is slowed the to of branches expansion pandemic Xi'an, the in like down we pace Puxin. Ningguo, Puxin physical our reason Another like K-XX like of -- COVID-XX like also due top cities due -- Jinhan, the Tianjin to the of Taiwan, major pandemic,

of major growth. K-XX So that's slow reason another underlying pace our

Operator

[Operator next Citi of Instructions]. Chang Securities. from John question The comes

John Chang

So elaborate And is the to school I online understand would company's maybe know the no it's sell the now. there I like on company online business. you on recent comments business. future strategy I until

Peng Wang

your more official the I talk for are Puxin question. strategy on Thank of can for can education. waiting Yes, the give but the -- future Okay. you announcement we still of light online I transaction,

-- industry there First as there millions millions the everybody events of of of is players money of having recently. are events here well some big some is known, all, top with some in funding big

it education significantly online or model. the business changed of group has So classes large classes industry, especially as group super the landscape our those

be cities So of our OMO at strategy, current online the merge focused presence will online will with education future across the leverage strategy the China. on which offline, major

programs. over XXX which across we'll the like future, week current not cover the of those areas, model presence teacher inter into centers in dual-teacher at We have our And China. major leverage those learning near the could with current the cities centers dual learning

we strategy. So broadcast broadcasting up online live and on of programs, not -- focusing spin-off the Instead, do strategy. OMO give we -- online the

that's our online strategy So education. with current

John Chang

is So I online offline. understand merge

recent recovery. Another recovery the question is on the off-line about enrollment

COVID-XX, So recovery? hit the by recent the has it's been how

Peng Wang

Okay.

to has study unique few quite final and to improved online we study in services, the combined months, which come a Especially happy with has and learning this all their And pandemic. after in have -- programs, back current to city glad results we the we of when including most our We realize the across tutoring learning lot has -- to personal that parents COVID-XX students, are the their see guarantee from person are the come regained of students the current reopened immersed centers very have most recovered are we communication or centers inspiration learning all As China, to personal come one-on-one the performance. person, centers. to a -- almost -- from every of the students parents yes, to advantages. see probable because those offline offline of programs our students

coming So realization to are their or students, back to students we advantage the learning glad our say glad unique the only offline offline to the programs. are centers, of more of say not importance we parents, their

Operator

next comes Maggie Haitong from question International. The of Zheng

Maggie Zheng

business just that the K-XX attributed You growth kind expansion to your seas of your mentioned in of offline. you in tutoring

with you when a accelerate do the property expansion? to us think share you it's offline can So

Peng Wang

Okay.

Okay. Actually, like our are this this of all expansion. we After already of like the the back now, offline these -- to right the are our Nanjing, top us. are fees Xi'an, track at expansion survival fees -- the with on normal Taiwan, moment, branches pandemic, with especially Ningbo, like top we branches, major cities COVID-XX we are rate of the of

we investors, shared -- we for As were the working XX% of a the the are XXXX, NDRs, we the to as by budget. on were -- capacity end the growth during XXXX planning XX% year with we

the now So this right this kind is -- moment, of pickup. it's a

most of So our current in top high cities, especially quite -- cities brand are those is within the Puxin may learning brand, they is centers, the their are in of their they fees quite accelerate expansion, with and as the pace the the we in city, various up we the original strong. located. especially pick even They're utilization or branches speed of education will rate

for time branches. it's top especially us physically, So to those expand with

Maggie Zheng

Okay.

some lost that second just of -- the Dalian. regarding Another pandemic question up the wave is students to were Beijing in mentioned you and of

kind yours? online this offline student of or to they're that think some turning platform are actually competitors of to they do stick So you

Peng Wang

of programs But to as some learning who case our the Dalian all semester. our a online students of programs the we because with well-known students as of lost were us registered honest, second honest, of day, shut COVID-XX season. to with because started as are transferred be The to to the of next Most centers. this the during did the It we pandemic. our offline hard programs successfully unfortunate, players Well, online hard that had summer vacation season. is spring offline be was it's we and we down wave the

hard every trying students it's to For this summer, major get player struggling could. as was season, as or they many

we say to hand, the and of And lost come day, to to have of final end its their at So way could just most the students. the the that other mentioned on the students, students glad without its the we academic most competitors. now, company advantages to the first of students when all, parents, unique few I offline students, a as they success the realize that are not most of of online we programs tutoring the make performance about of students. and they those Because the final talk teachers of

social So human are animals.

most summer competitors, we students offline lost yes, some vacation they during and the to students back stay online with So the will the our but of come us to programs.

Maggie Zheng

being is Okay. might be of online that My the last in process question you the of as business.

loss-making on and business? possible Because seems accelerate be business? a drag it your has is So new the the been online business that you kind to of your schedule turnaround overall to

Peng Wang

maybe I even the are Well, as And group this year. years. that money next first burning, for can everyone to X broadcasting for online say X or have admit programs live of all, class the

And So it on big yes, live classes. be a or drag group to sheet will it's our strategy not continue the balance everyone's broadcasting those yes, PL.

those originally could our hold to current areas, We'll teaching to or to strategy. on our which cover. That's giving Instead, to Secondly, send those high-quality as not just now, or are that. up get leverage on trying our online clients, we we merge talked not our strategy, resources to centers, I education online offline we online will learning focus strategy. continuously best those

Operator

remarks. Showing Nadia any concludes further would closing Wang session. questions, I [Operator to this for like Instructions]. our turn over to no question-and-answer the back conference

Jessie Jin

for to Operator. closing, Puxin, you, we'd behalf of of like management team In on Thank entire participation you your today. the thank again

more ir@pxjy.com you. the in questions further us to at contact feel or Thank If you please puxin@icaasia.com. free future, have

Operator

The concluded. Thank conference for has now attending. you

Puxin (NEWYY) 19 Nov 202020 Q3 Earnings call transcript