EX-99.1 2 ea177034ex99-1_firsthigh.htm PRESS RELEASE

Exhibit 99.1

First High-School Education Group Announces Fiscal Year 2022 Unaudited Financial Results

-- Full Year Student Enrollments from Continuing Operations of 25,823, up 21.5% year-over-year

-- Total Number of School Programs from Continuing Operations of 21

BEIJING, CHINA / ACCESSWIRE / April 17, 2023 / First High-School Education Group Co., Ltd. (“First High-School Education Group” or the “Company”) (OTC PINK: FHSEY), an education service provider primarily focusing on high schools in Western China, today announced its unaudited financial results for the fiscal year ended December 31, 2022.

Fiscal Year 2022 Financial and Operational Highlights – Continuing Operations

●

Total revenues were RMB342.5 million (US$49.7 million), an increase of 1.5% from RMB337.3 million in 2021.

●

Gross profit was RMB128.9 million (US$18.7 million), a decrease of 0.6% from RMB129.7 million in 2021.

●

Income from continuing operations was RMB73.2 million (US$10.6 million), a decrease of 6.8% from RMB78.5 million in 2021.

●

Net income was RMB38.4 million (US$5.6 million), a decrease of 27.1% from RMB52.7 million in 2021.

●

Adjusted net income¹ (Non-GAAP) was RMB38.4 million (US$5.6 million), a decrease of 27.1% from RMB52.7 million in 2021.

●

The total number of students enrolled at our school programs and public schools that we provide management services as of December 31, 2022 was 25,823, an increase of 21.5% from 21,247 as of December 31, 2021.

●

The total number of school programs at our school programs and public schools that we provide management services as of December 31, 2022 was 21, same as of December 31, 2021.

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.

CFO Comments

Mr. Tommy Zhou, Chief Financial Officer of First High-School Education Group, commented:

In 2022, the Company experienced both positives and negatives in its business operation. On the positive side, we signed three new schools under our management service program, resulting a total of 21 school programs, including 13 high school programs, three Gaokao repeater programs and five school management service programs. Against last year’s tough economic environment, the Company focused on high-quality development, and was able to deliver excellent academic results to all our students across the entire network. Our focused expansion was in line with the government’s guidance of rural revitalization, and providing high quality education to the people by expanding into third and fourth tier cities. Reflected from our increased student enrollment, we now cover a wider range of students, and we look forward to developing them into great successful individuals. As always, we aspire to be an innovator of private education in China.

Notwithstanding, in 2022, the Company did also experience negatives in its operation. We had a decrease in net income, primarily due to the cost associated with discontinuing of three schools and limited student admission of two others. These unfavorable events were both results of regulatory changes and economic decisions. We were able to navigate through these difficulties generally efficiently, quickly adjusting our variable costs of campus-related expenses, staff costs, rental fees, and student-related expenses, to align them with revenue, and to continue to produce comparable gross margins with the previous year.

Lastly, the Company is confident on the road ahead. We will continue to operate our schools with high quality, and solid academic result. Concurrently, the Company will always explore, innovate, and expand to become a stronger player in the industry.

Fiscal Year 2022 Financial Results – Continuing Operations

Total Revenues

Total revenues were RMB342.5 million (US$49.7 million), an increase of 1.5% from RMB337.3 million in 2021. The increase was primarily due to a mixed of factors including student admission, and the discontinuance and limited operation of some schools in our network.

Revenues from customers were RMB300.4 million (US$43.6 million), an increase of 0.1% from RMB300.1 million in 2021. The increase was primarily due to a mixed of factors including student admission, and the discontinuance and limited operation of some schools in our network.

Revenues from government cooperative agreements were RMB42.1 million (US$6.1 million), an increase of 13.1% from RMB37.2 million in 2021. The increase was primarily due to increased number of publicly-sponsored students served.

Cost of revenues

Cost of revenues were RMB213.6 million (US$31.0 million), an increase of 2.9% from RMB207.6 million in 2021. The increase was primarily due to undertaking a greater portion of public-sponsored teachers’ compensation.

Gross profit

Gross profit was RMB128.9 million (US$18.7 million), a decrease of 0.6% from RMB129.7 million in 2021.

Gross margin was 37.6%, compared with 38.5% in 2021. The slight decrease was due fluctuations in (1) school operating efficiency, such as utility usage limits, and budget control; and (2) number of staffs and their compensations.

Net operating expenses

Net operating expenses were RMB55.7 million (US$8.1 million), an increase of 8.8% from RMB51.1 million in 2021.

●

Selling and marketing expenses were RMB3.1 million (US$0.4 million), a decrease of 51.8% from RMB6.4 million in 2021. The decrease was primarily due to the decreased expenses in brand promotion and marketing activities for our relatively mature school operation.

●

General and administrative expenses were RMB54.6 million (US$7.9 million), an increase of 14.5% from RMB47.7 million in 2021. The increase was primarily due the discontinuance and limited operation of some schools in our network, and expenses related with new business expansions.

●

Government grants were RMB2.0 million (US$0.3 million), a decrease of 31.4% from RMB3.0 million in 2021. The decrease was primarily due to the government’s tight fiscal budget resulting in delayed payments made by government.

Income from operations

Income from operations was RMB73.2 million (US$10.6 million), a decrease of 6.8% from RMB78.5 million in 2021.

Net Income from continuing operations

Net income from continuing operations was RMB46.1 million (US$6.7 million), a decrease of 20.2% from RMB57.8 million in 2021.

Net Loss from discontinued operations

Net loss from discontinued operations was RMB7.7 million (US$1.1 million), compared with a loss of RMB5.1 million in 2021.

Net income

Net income was RMB38.4 million (US$5.6 million), a decrease of 27.1% from RMB52.7 million in 2021.

Adjusted net income² (Non-GAAP)

Adjusted net income (Non-GAAP) was RMB38.4 million (US$5.6 million), a decrease of 27.1% from RMB52.7 million in 2021.

Impact of Implementation Rules for Private Education Laws

On May 14, 2021, the State Council of the People’s Republic of China promulgated the amended Implementation Regulations of the Law on the Promotion of Private Education of the People’s Republic of China (中华人民共和国民办教育促进法实施条例) (the “Implementation Rules”), which became effective on September 1, 2021. The Implementation Rules prohibit social organizations and individuals from controlling private schools that provide compulsory education through, among other methods, mergers, acquisitions and contractual arrangements. Additionally, the Implementation Rules prohibit any private schools providing compulsory education from conducting transactions with its related parties. As a result, the Implementation Rules affected the Company’s control over the affiliated entities providing compulsory education as well as the sponsor entities (collectively referred to as the “Affected Entities”).

In compliance with the Implementation Rules and other applicable PRC regulations and based on the relevant accounting standard in accordance with U.S. GAAP, the Company has determined to cease to recognize revenues for all activities related to schools providing compulsory education and the sponsor entities after September 1, 2021 within China that are affected by the Implementation Rules, and classified such Affected Entities as discontinued operations. The discontinued operations of the Affected Entities had certain impact on the Company’s financial conditions for the year ended December 31, 2022. Net loss from discontinued operations was RMB7.7 million (US$1.1 million) for the year ended December 31, 2022.

There still exist uncertainties with respect to the interpretation and enforcement of the Implementation Rules. The Company will closely monitor the developments related to the Implementation Rules, and continue to assess the possible impacts on the Company and make any applicable actions to keep in compliance with the Implementation Rules and other applicable PRC regulations.

Conference Call

First High-School Education Group’s management will hold an earnings conference call on Wednesday, April 17, 2023, at 8:00 AM U.S. Eastern Time (8:00 PM April 17, 2023, Beijing/Hong Kong Time). Please dial in 15 minutes before the conference is scheduled to begin using below numbers.

International	+1-973-528-0011
United States	+1-888-506-0062
Hong Kong	+852 3018 4049
Mainland China	+86 400 120 3199
Passcode	871978

A telephone replay of the conference call may be accessed by phone at the following numbers until May 1, 2023.

International	+1-973-528-0005
United States	+1-800-332-6854
Replay Access Code	871978

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 an education service provider primarily focusing on high schools in Western China. 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, and without considering the impact of donation expenses and transaction costs in relation to previous financing activities. 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 RMB6.8972 to US$1.00, the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board on December 30, 2022. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on December 30, 2022, or at any other rate.

Statement Regarding Preliminary Unaudited Financial Information

The unaudited financial information set out in this earnings release is preliminary and subject to potential adjustments. Adjustments to the consolidated financial statements may be identified when audit work has been performed for the Company’s year-end audit, which could result in significant differences from this preliminary unaudited financial information.

Forward-Looking Statements

Statements in this press release about future expectations, plans and prospects, as well as any other statements regarding matters that are not historical facts, may constitute “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 statements include, but are not limited to, statements relating to the expected trading commencement and closing dates. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including: the uncertainties related to market conditions and the completion of the public offering on the anticipated terms or at all, and other factors discussed in the “Risk Factors” section of the preliminary prospectus filed with the SEC. Any forward-looking statements contained in this press release speak only as of the date hereof, and the Company specifically disclaims any obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.

For Investor and Media Inquiries Please Contact:

First High-School Education Group

Tommy Zhou

Chief Financial Officer

E-mail: tommyzhou@dygz.com

Customer Service

E-mail: FHS_info@dygz.com

Phone: 010-62555966 (9:30-12:00, 13:30-16:00 CST)

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)

	Years ended December 31,
	2021			2022			2022
	RMB			RMB			US$
	Restated
Revenues
Revenue from customers		300,084			300,395			43,553
Revenue from governments cooperative agreements		37,230			42,111			6,106
Total Revenues		337,314			342,506			49,659
Cost of revenues		(207,641	)		(213,622	)		(30,972	)
Gross profit		129,673			128,884			18,686

Operating expenses and income
Selling and marketing expenses		(6,440	)		(3,101	)		(450	)
General and administrative expenses		(47,667	)		(54,595	)		(7,916	)
Government grants		2,969			2,036			295
Bad debt provision		(14	)		-			-
Net operating expenses		(51,152	)		(55,660	)		(8,070	)
Income from Operations		78,521			73,224			10,616

Other income (expenses)
Interest income		1,128			1,422			206
Interest expense		(9,545	)		(9,546	)		(1,384	)
Foreign currency exchange loss, net		(922	)		(55	)		(8	)
Others, net		3,641			1069			155
Income from Continuing Operations before Income Tax		72,823			66,114			9,586

Income tax expenses		(15,042	)		(20,017	)		(2,902	)
Income (loss) from Continuing Operations		57,781			46,097			6,683
Income (loss) from Discontinued operations		(5,088	)		(14,976	)		(2,171	)
Gain (loss) on disposal of discontinued operations		-			7,285			1,056
NET INCOME (LOSS)		52,693			38,406			5,568
Less: Net income attributable to non-controlling interests		-			1,081			157
Net income attributable to First High-school Education Group Co., Ltd.		52,693			37,325			5,412
Other comprehensive income (loss)		318			1,968			285
Comprehensive Income (Loss) - Continued Operations		58,099			48,065			6,969
Comprehensive Income (Loss) - Discontinued Operations		(5,088	)		(7,691	)		(1,115	)
Comprehensive Income (Loss)		53,011			40,374			5,854
Less: Comprehensive income (loss) attributable to non-controlling interests					1,081			157
COMPREHENSIVE INCOME ATTRIBUTABLE TO First High-school Education Group CO., LTD.		53,011			39,293			5,697

Earnings per share:
Basic earnings per share from continued operation		0.69			0.53			0.08
Basic earnings per share from discontinued operation		-0.06			-0.17			-0.02

Diluted Earnings per share:
Diluted earnings per share from continued operation		0.67			0.52			0.08
Diluted earnings per share from discontinued operation		-0.06			-0.17			-0.02

Weighted average number of ordinary share outstanding
Basic		83,925,002			86,838,700			86,838,700
Diluted		85,775,002			88,688,700			88,688,700

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,
	2021		2022		2022
	RMB		RMB		US$
	Restated
Current assets
Cash		114,197		105,258		15,261
Accounts receivable, net of allowance for doubtful accounts		28,346		87,247		12,650
Amounts due from related parties		11,707		73,450		10,649
Prepaid expenses and other current assets		92,300		144,708		20,981
Assets related to discontinued operation		134,764		65,815		9,542
Total current assets		381,314		476,478		69,083

Non-current Assets
Property and equipment, net		133,874		128,163		18,582
Intangible assets, net		5,920		5,995		869
Goodwill		30,348		30,348		4,400
Deferred tax assets		14,744		13,309		1,930
Amounts due from related parties		-		-		-
Other non-current assets		56,487		47,176		6,840
Assets related to discontinued operation		197,982		11,010		1,596
Total non-current assets		439,355		236,001		34,217
Total assets		820,669		712,479		103,300

	As of December 31,
	2021			2022			2022
	RMB			RMB			US$
	Restated
Current liabilities
Contract liabilities		141,912			141,574			20,526
Bank loan		43,219			33,572			4,867
Borrowings under financing arrangements		40,078			20,540			2,978
Accounts payable		3,138			28,809			4,177
Accrued expenses and other payables		26,771			37,463			5,432
Income tax payables		20,730			29,622			4,295
Deferred revenue
Amounts due to related parties respectively		17,909			51,675			7,492
Dividend payables					2,132			309
Liability related to discontinued operation		218,289			104,641			15,172
Total current liabilities		512,046			450,028			65,248

Deferred revenue		121			113			16
Borrowings under financing arrangements		44,178			24,987			3,623
Other payables		7,868			1,532			222
Deferred tax liabilities		2,185			5,155			747
Liability related to discontinued operation		23,907			-			-
Total non-current liabilities		78,259.00			31,787			4,609
Total liabilities		590,305			481,815			69,857

Equity/(Deficit)
Ordinary shares (US$0.00001 par value; 5,000,000,000 shares authorized; and 86,838,700 shares issued and outstanding as of December 31, 2021, and 86,838,700 shares issued and outstanding as of December 31, 2022, respectively)		6			6			1
Additional paid-in capital		389,199			349,125			50,618
Statutory reserves		49,060			54,366			7,882
Accumulated other comprehensive income		462			2,430			352
Accumulated deficit		(207,713	)		(175,694	)		(25,473	)
Total equity/(deficit) attributable to the shareholders of the Company		231,014			230,233			33,381
Non-controlling interests		(650	)		431			62
Total equity/(deficit)		230,364			230,664			33,443

Total liabilities and equity/(deficit)		820,669			712,479			103,300

First High-School Education Group Co., Ltd.

Reconciliation of GAAP to non-GAAP Measure

(All amounts in thousands)

	Years Ended December 31,
	2021		2022		2022
	RMB		RMB		US$

Reconciliation of net income to adjusted net income:
Net income		52,693		38,406		5,568
Add:
Share-based compensation expenses		-		-		-
Donation expenses		-		-		-
Transaction costs in relation to previous financing activities		-		-		-
Tax effects of adjustments*		-		-		-
Adjusted net income		52,693		38,406		5,568

Tax effects were determined based upon the nature, as well as the jurisdiction, of each reconciliation adjustment at the respective applicable income tax rate.