A few days ago, Changshui Education Group (First High-School Education Group, also known as "First High-School Education Group") submitted an IPO prospectus to the United States Securities and Exchange Commission (SEC), intending to list on the NYSE under the trading code of "FHS". The amount of funds to be raised is 100 million US dollars.
According to data, Changshui Education Group was founded in Kunming, Spring City in 2005, and has successively undergone non-academic vocational education, higher education, and extracurricular tutoring in primary and secondary schools. In 2014, he co-founded Yunnan Hengshui Experimental Middle School with Hebei Hengshui Middle School, and began to focus on middle school education.
After that, Changshui Education Group established educational institutions in Beijing, Shanghai, Hebei, Guizhou, Sichuan and other places. As of September 2020, the group has run schools in Yunnan, Guizhou, Sichuan, Inner Mongolia, Shaanxi, Shanxi and other places, and has trained more than 150,000 students.
Scale growth, gross profit margin fell sharply
The prospectus shows that Changshui Education Group's revenue in 2017, 2018, and 2019 were 206.5 million yuan, 253.7 million yuan, and 336.5 million yuan, respectively. In the first nine months of 2020 (first three quarters), its revenue was 282.3 million yuan, and its revenue for the same period in 2019 was 216 million yuan.
In 2017, 2018, and 2019, Changshui Education Group's operating profits were 59.023 million yuan, -159 million yuan, and 39.014 million yuan, and net profits were 47.109 million yuan, 170 million yuan, and 31.69 million yuan. In the first three quarters of 2020, this data was 33.946 million yuan, compared with 7.554 million yuan in the same period in 2019.
Under non-GAAP, the adjusted net profit of Changshui Education Group during the reporting period was 47.109 million yuan, 29.710 million yuan, 40.464 million yuan, and 33.946 million yuan. As of September 30, 2020, its total liabilities are 698 million yuan, and its total equity is 104 million yuan, for a total of 802 million yuan.
As of the end of 2018 and 2019, Changshui Education Group's cash was 58.564 million yuan and 154 million yuan, and the amounts due from related parties were 107 million yuan and 87.825 million yuan respectively. As of the end of the first three quarters of 2020, its cash was 305 million yuan, and the amount due from related parties was 85.325 million yuan.
According to the prospectus, the gross profit of Changshui Education Group decreased by 13.8% from 86.6 million yuan in 2017 to 74.7 million yuan in 2018, 104.5 million yuan in 2019, and 91.4 million yuan in the first three quarters of 2020; gross profit margin from 2017 Of 42.0% in 2018 decreased to 29.4% in 2018, 31.1% in 2019, and 32.4% in the first three quarters of 2020.
Changshui Education Group stated that it has expanded its school network and increased school utilization since 2018 to improve operational efficiency and profitability. As its school network expands, the opening of new schools may have a negative impact on its profitability.
Previously, Changshui Education Group President, President, and Chairman of the Board of Directors Zhang Shaowei once stated, “Only by combining integrity and innovation, can group-based school run a new model. Changshui Education always attaches importance to the innovation of school-running mechanisms and continues to promote education and teaching reform. To stimulate the vitality of running a school and release the momentum of development."
Tuition fees dropped and management cashed out about 200 million
According to the prospectus, based on the number of enrollees as of December 31, 2019, Changshui Education Group is the largest private high school education group in western China and the third largest private high school education group in China. Currently, the total number of students in the school exceeds 25,000, and the total number of faculty members is nearly 2,600.
It is understood that the income of Changshui Education Group is mainly tuition and boarding fees. In 2017, 2018, 2019, 2019 and the first three quarters of 2020, tuition fees accounted for 76.1%, 81.8%, 82.4%, 80.1% and 79.3% of its total income, and boarding fees accounted for 2.7% of its total income over the same period. , 4.4%, 4.8%, 4.4% and 4.6%.
However, the average tuition of Changshui Education Group has dropped. Taking high schools as an example, the average tuition fee per student dropped from 19,400 yuan in 2017 to 16,900 yuan in 2018 and 16,600 yuan in 2019, and dropped to 10,200 yuan again in the first three quarters of 2020.
Similarly, Changshui Education Group’s junior high school fees have gradually decreased from 13,800 yuan in 2017 to 10,800 yuan in 2019, and the tuition fees for its high school repetition classes have gradually decreased from 31,000 yuan in 2017 to 23,200 yuan in 2019. .
Changshui Education Group stated when warning of risks that it had recorded a net loss of 169.7 million yuan in 2018. Changshui Education Group said that it was mainly because directors, senior managers, employees and certain external consultants received share-based compensation of 177.8 million yuan for providing services.
In other words, Changshui Education Group cashed out nearly 200 million yuan in advance in 2018.
Changshui Education Group also stated that it may award stock-based rewards based on the 2021 stock incentive plan and other stock incentive plans to be adopted in the future to attract and retain key personnel and employees. Therefore, its expenses related to share-based compensation may increase.
Before the IPO, Changshui Education Group Chairman and President Zhang Shao maintained 46.74% of the shares, and all directors and senior supervisors held 47.26%. Zhang Shaowei’s spouse Yu Wu (voice: Wu Yu) held 6.37% of shares through Brightenwit Group Limited; employee shareholding platform Long- Spring Education Technology Limited and Long-Spring Education Management Limited hold 10.01% and 6.77%, respectively.
It is understood that in addition to Chairman Zhang Shaowei, the senior executives of Changshui Education Group also include Senior Vice President and CFO Zhu Lidong, and Executive Vice President Zhang Jianping. Among them, Zhu Lidong served as the chief financial officer and senior vice president of the Hong Kong Stock Exchange listed company New Higher Education Group (HK:02001).