EAST BUY's fourth-quarter revenue exceeded expectations, with net profit increasing by 115% YoY. The company achieved a turnaround from loss to profit in the fiscal year 2023. | Earnings Report

EAST BUY, a Chinese education giant that has struggled through the upheaval in the education and training industry, has concluded its painful transformation in the 23rd fiscal year with an impressive earnings report, indicating a relatively smooth exploration of diversified businesses beyond academic tutoring.

On the evening of July 26th, before the US stock market opened, EAST BUY released its fourth quarter and full-year financial results for the 23rd fiscal year, ending on May 31, 2023.

According to the report, EAST BUY achieved a revenue of $860.6 million in the fourth quarter of the 23rd fiscal year, surpassing market expectations of $817.9 million, with a year-on-year growth of 64.2%. Operating profit increased by 145.5% year-on-year, reaching $48.1 million, and net profit increased by 115.3% year-on-year, reaching $29 million. The earnings per share for this quarter under the US Generally Accepted Accounting Principles (GAAP) was $0.37, lower than the expected $0.5.

Looking at the whole year, EAST BUY achieved a revenue of $2.9978 billion in the current fiscal year, a slight decrease of 3.5% compared to the previous year. However, it managed to turn losses into profits in terms of profitability: the operating profit for the 23rd fiscal year was $190 million, compared to a loss of $982.5 million in the previous fiscal year, and the net profit was $177.3 million, compared to a loss of $1.1877 billion in the previous fiscal year.

By the end of this fiscal year, EAST BUY had a total of 748 schools and learning centers, an increase of 36 and 4 respectively compared to the previous quarter and the previous fiscal year.

YU Minhong, the founder and chairman of EAST BUY, said:

"We are pleased to achieve record-breaking growth in revenue and profit margin at the end of the 2023 fiscal year. Benefiting from the strong recovery in demand after COVID, our revenue in the fourth quarter increased by 64.2%. Our overseas test preparation and overseas study consulting businesses have also achieved encouraging results, with year-on-year growth of approximately 52% and 6% respectively. In addition, our domestic test preparation business for adults and college students recorded a year-on-year growth of approximately 34%.

In addition to our long-standing traditional business lines, our new educational initiatives have also had a promising start, paving the way for continued success and achieving better-than-expected profit margins. As of May 31, 2023, our non-academic tutoring courses have been offered in approximately 60 cities, attracting 629,000 students to enroll in this fiscal quarter. At the same time, our intelligent learning systems and devices have been adopted in approximately 60 cities, with 99,000 paid active users in this fiscal quarter.

With such strong market demand and satisfactory customer retention, we are confident in the bright prospects of these new business initiatives and will leverage our unique advantages and expertise to seize new market opportunities."

Looking ahead to the first quarter of the 24th fiscal year, ending in August, EAST BUY expects revenue to be between $983.2 million and $1.01 billion, a year-on-year growth of 32% to 35%, surpassing Wall Street's consensus estimate of $956.62 million. After the release of the Earnings Report, EAST BUY fell 2.75% in pre-market trading.

It is worth mentioning that this stock is also one of the "most favored Chinese concept stocks" by Seth Klarman, also known as the "Little Buffett" (source: Wall Street CN). He believes that the stock is currently "severely undervalued".

EAST BUY also announced its stock repurchase plan. According to the plan, the company can repurchase up to $400 million worth of its American Depositary Receipts (ADRs) or common stock between July 28, 2022, and May 31, 2023.

The company's board of directors further authorized the extension of the stock repurchase plan, which was initiated in July 2022, for an additional 12 months until May 31, 2024. As of July 25, 2023, the company has repurchased a total of approximately 5.9 million ADRs from the open market under the stock repurchase plan, with a total value of approximately $191.7 million.