RISE Education Announces Third Quarter 2020 Unaudited Financial Results
BEIJING, Nov. 12, 2020 /PRNewswire/ -- RISE Education Cayman Ltd ("RISE" or the "Company") (NASDAQ: REDU), a leading junior English Language Training ("ELT") provider in China, today announced its unaudited financial results for the third quarter ended September 30, 2020.
Impact of COVID-19
The outbreak of COVID-19 in late January 2020 had a significant and material adverse impact on the Company's operations through the first nine months of 2020. In accordance with government regulations to contain the outbreak, RISE's learning centers were temporarily closed for a majority of the time during the period starting January 19, 2020 up to September 2020. This adversely impacted the Company's ability to recognize revenue and collect tuition fees not only from renewed students due to the deferred academic schedule, but also from new students who are acquired through its physical network of learning centers. In response to this challenging environment, the Company proactively implemented measures during the first nine months of the year to stabilize its business through targeted cost controls and adjusted capital expenditure and liquidity plans to preserve cash. At the same time, the Company also upgraded and transformed Rise+ into a nation-wide open and interactive technology platform for learning, teaching and training. The Company successfully delivered its first online small group class through Rise+ platform in March 2020, which has demonstrated the Company's digital capabilities and built a solid infrastructure for the transformation of its business into an Online Merge Offline ("OMO") model.
Third Quarter of 2020 Financial and Operational Highlights
-- Total revenues were RMB320.0 million (US$47.1 million) in the third
quarter of 2020, compared with RMB165.0 million for the preceding
quarter and RMB411.1 million for the third quarter of 2019.
-- Net profit attributable to RISE was RMB28.0 million (US$4.1 million) in
the third quarter of 2020, compared with net loss of RMB58.0 million for
the preceding quarter and net income of RMB39.4 million for the third
quarter of 2019.
-- Non-GAAP net profit attributable to RISE was RMB35.7 million (US$5.3
million) in the third quarter of 2020, compared with non-GAAP net loss
of RMB51.6 million for the preceding quarter and non-GAAP net income of
RMB48.5 million for the third quarter of 2019.
-- Adjusted EBITDA[1] was RMB57.8 million (US$8.5 million) in the third
quarter of 2020, compared with adjusted EBITDA of a negative RMB44.5
million for the preceding quarter and adjusted EBITDA of RMB88.9 million
for the third quarter of 2019.
-- Students in class[2] for Rise regular courses (including Rise Start and
Rise On programs) were 50,462 as of September 30, 2020, a decrease of
110 from 50,572 as of June 30, 2020 and a decrease of 4,750 from 55,212
as of September 30, 2019.
-- New students enrolled[3] for Rise regular courses in the third quarter
of 2020 were 8,328, compared with 3,749 for the preceding quarter and
9,310 for the third quarter of 2019. New students enrolled for other
Rise courses (including Rise Up, Can-Talk, other Rise online courses and
courses provided by The Edge learning centers) were 1,183 in the third
quarter of 2020, compared with 1,185 for the preceding quarter and 1,229
for the third quarter of 2019.
-- The total number of the Company's learning centers as of September 30,
2020 was 496, consisting of 90 self-owned (including 2 operated by The
Edge) and 406 franchised learning centers.
Three Months Ended
(in thousands RMB, except for percentage and per Sep. 30, 2019 Jun. 30, 2020 Sep. 30, 2020 Pct. Change YoY Pct. Change QoQ
ADS data)
Revenues 411,143 164,990 320,029 -22.2% 94.0%
Operating income/(loss) 65,826 (73,887) 19,429 -70.5% N/A
Non-GAAP operating income/(loss) 74,946 (67,496) 27,128 -63.8% N/A
Net income/(loss) attributable to RISE 39,362 (58,035) 28,014 -28.8% N/A
Non-GAAP net income/(loss) attributable to RISE 48,482 (51,644) 35,713 -26.3% N/A
Net income/(loss) per ADS attributable to RISE - basic 0.70 (1.03) 0.50 -28.6% N/A
Net income/(loss) per ADS attributable to RISE - diluted 0.69 (1.03) 0.49 -29.0% N/A
Non-GAAP net income/(loss) per ADS attributable to RISE - basic 0.86 (0.92) 0.63 -26.7% N/A
Non-GAAP net income/(loss) per ADS attributable to RISE - diluted 0.85 (0.92) 0.63 -25.9% N/A
Adjusted EBITDA 88,877 (44,487) 57,834 -34.9% N/A
Nine Months Ended
September 30
(in thousands RMB, except for percentage and per ADS data) 2019 2020 Pct. Change
Revenues 1,113,225 594,007 -46.6%
Operating income/(loss) 162,127 (185,857) N/A
Non-GAAP operating income/(loss) 212,407 (167,422) N/A
Net income/(loss) attributable to RISE 96,965 (133,861) N/A
Non-GAAP net income/(loss) attributable to RISE 147,245 (115,426) N/A
Net income/(loss) per ADS attributable to RISE - basic 1.70 (2.37) N/A
Net income/(loss) per ADS attributable to RISE - diluted 1.68 (2.37) N/A
Non-GAAP net income/(loss) per ADS attributable to RISE - basic 2.58 (2.05) N/A
Non-GAAP net income/(loss) per ADS attributable to RISE - diluted 2.55 (2.05) N/A
Adjusted EBITDA 258,328 (94,662) N/A
Ms. Lihong Wang, Chairwoman and Chief Executive Officer of RISE, commented, "Our quarterly results continued to improve with a set of solid operational metrics as our business experienced robust recovery while emerging from the impact of COVID-19. As of date, our operations have generally returned to pre-pandemic 'normal'. All of RISE's self-owned learning centers (SOLCs) had been re-opened by the end of September. We have received very positive feedback from parents who are keen for their children to return to regular classrooms, as soon as offline classes are allowed to resume. Our financial performance improved substantially, with quarterly revenue nearly doubling from the prior quarter. Disciplined cost management and a well-planned marketing strategy put expenses well under control and helped the Company turn profitable in the third quarter, fueled by strong growth momentum. Looking ahead, we expect the adverse impact of COVID-19 on our business to linger for a longer time and more challenges are still ahead of us. However, we remain very optimistic about the direction of our Company, as we have seen a clear path to recovery and are excited about the long-term growth opportunities that lie ahead."
Ms. Jiandong Lu, Chief Financial Officer of RISE, added, "Our total revenue reached RMB320 million in the third quarter, up 94% from the prior quarter. In addition, the adjusted EBITDA and net income attributable to RISE both turned positive, achieving RMB58 million and RMB28 million, respectively, for the quarter. This quarter has witnessed strong momentum in new student enrollment for our regular courses, an increase of 122% quarter-over-quarter as we re-opened all our self-owned learning centers. However, the pandemic still affected our operations negatively in the third quarter and its impact is likely to continue for some time. The lower new student enrollments in the first and second quarters due to the closure of our learning centers caused our student pool to shrink as compared to the same periods of last year, resulting in a decrease in the total number of students in class. The less effective learning online compared to offline, particularly for young students, also contributed to a loss of students in the third quarter. The teaching capacity constraints in the changing environment limited our ability to resume the pace of opening new classes for newly enrolled students. This being said, we believe that, with our offline network fully in operation, our class scheduling optimized and our teacher resources expanded, we will be in a better position to meet the rising demands for our services and achieve business growth next year."
Financial Results for the Third Quarter of 2020
Revenues
Total revenues for the third quarter of 2020 increased by RMB155.0 million, or 94.0%, to RMB320.0 million (US$47.1 million) from RMB165.0 million for the preceding quarter and decreased by RMB91.1 million, or 22.2%, from RMB411.1 million for the same period of the prior year.
-- Revenues from educational programs for the third quarter of 2020
increased by 93.9% quarter-over-quarter and decreased by 12.3%
year-over-year to RMB293.6 million (US$43.2 million). The
quarter-over-quarter increase in revenues from educational programs was
primarily due to the resumption of the Company's offline operations. As
the COVID-19 situation alleviated, the Company's self-owned learning
centers have been gradually reopened in Shanghai, Guangzhou, Shenzhen
and Wuxi since June 2020, and followed by Beijing and Shijiazhuang by
the end of September 2020. The year-over-year decrease in revenues from
educational programs was primarily due to continuous suspension of
offline operation of the learning centers in Beijing and Shijiazhuang
for more than two thirds of the quarter, which was caused by the second
wave of pandemic outbreak in Beijing in June 2020.
-- Franchise revenues for the third quarter of 2020 increased by 95.5%
quarter-over-quarter and decreased by 44.3% year-over-year to RMB25.3
million (US$3.7 million). The quarter-over-quarter increase in franchise
revenues was primarily due to a growth in recurring franchise revenues
as a result of the gradual reopening of our franchised learning centers.
The year-over-year decrease in franchise revenues was primarily due to a
decline in recurring franchise revenues reflecting the impact of
COVID-19.
-- Other revenues for the third quarter of 2020 increased by RMB0.5 million
quarter-over-quarter and decreased by RMB29.7 million year-over-year to
RMB1.1 million (US$0.2 million). The year-over-year decrease was
attributable to a decrease in study tours and cancellation of Rise Cup,
our annual English language competition project, reflecting the impact
of travel restrictions amid the pandemic.
Cost of Revenues
Cost of revenues for the third quarter of 2020 increased by RMB21.3 million, or 15.1%, to RMB162.9 million (US$24.0 million) from RMB141.6 million for the preceding quarter and decreased by RMB33.4 million, or 17.0%, from RMB196.3 million for the same period of the prior year. The quarter-over-quarter increase was primarily due to the personnel costs associated with an increase in total teaching hours as the offline learning centers have gradually resumed full operations nationwide. Additionally, the quarter-over-quarter increase was also driven by the increased textbook and teaching material supply, together with the end of rental concession. The year-over-year decrease was primarily due to a decrease in direct costs associated with the Company's study tour services and costs of learning materials, and the declined teachers' compensations as a result of the reduced teacher headcount and teaching hours. Non-GAAP cost of revenues[4] for the third quarter of 2020 increased by 15.5% quarter-over-quarter and decreased by 17.4% year-over-year to RMB158.9 million (US$23.4 million).
Gross Profit
As a result of the foregoing, the Company's gross profit increased quarter-over-quarter to RMB157.1 million (US$23.1 million) for the third quarter of 2020 compared to RMB23.4 million for the preceding quarter. The Company's gross profit for the third quarter of 2020 decreased by RMB57.8 million, or 26.9%, year-over-year from RMB214.9 million for the same period of the prior year.
Operating Expenses
Total operating expenses for the third quarter of 2020 increased by RMB40.4 million, or 41.5%, to RMB137.7 million (US$20.3 million) from RMB97.3 million for the preceding quarter and decreased by RMB11.4 million, or 7.6%, from RMB149.0 million for the same period of the prior year. Non-GAAP operating expenses( )for the third quarter of 2020 were RMB134.0 million (US$19.7 million).
-- Selling and marketing expenses increased by 78.7% quarter-over-quarter
and decreased by 8.8% year-over-year to RMB75.9 million (US$11.2
million) for the third quarter of 2020. The quarter-over-quarter
increase was primarily attributable to the increased marketing expenses
associated with increased student enrollments during the quarter. The
year-over-year decrease was primarily due to the Company's personnel
optimization efforts and disciplined investment in online and offline
marketing activities. Non-GAAP selling and marketing expenses for the
third quarter of 2020 increased by 81.2% quarter-over-quarter and
decreased by 8.8% year-over-year to RMB74.7 million (US$11.0 million).
-- General and administrative expenses increased by 12.7%
quarter-over-quarter and decreased by 6.1% year-over-year to RMB61.8
million (US$9.1 million) for the third quarter of 2020. The
quarter-over-quarter increase was primarily attributable to the
increased recruiting fee and office expenses and the end of rental
concession. The year-over-year decrease was primarily due to the
Company's continuous efforts on controlling administrative expenses and
on personnel optimization. Non-GAAP general and administrative expenses
for the third quarter of 2020 increased by 10.5% quarter-over-quarter
and decreased by 4.2% year-over-year to RMB59.2 million (US$8.7
million).
Operating Income/(Loss)
Operating income for the third quarter of 2020 was RMB19.4 million (US$2.9 million), compared to operating loss of RMB73.9 million for the preceding quarter and operating income of RMB65.8 million for the same period of the prior year. Non-GAAP operating income for the third quarter of 2020 was RMB27.1 million (US$4.0 million), compared to non-GAAP operating loss of RMB67.5 million for the preceding quarter and non-GAAP operating income of RMB74.9 million for the same period of the prior year.
Interest Expense
Interest expense for the third quarter of 2020 decreased to RMB5.5 million (US$0.8 million) from RMB5.9 million for the preceding quarter and RMB8.8 million for the same period of the prior year. The year-over-year decrease was attributable to decreases in both the outstanding balance of loans and the interest rate.
Other Income
Other income for the third quarter of 2020 was RMB16.0 million (US$2.4 million), compared with RMB2.2 million for the preceding quarter and RMB0.7 million for the same period of the prior year. The increase in other income quarter-over-quarter and year-over-year was primarily attributable to the output value-added tax exemption during the COVID-19 pandemic.
Income Tax Expense/(Benefit)
Income tax expense for the third quarter of 2020 was RMB4.0 million (US$0.6 million), compared with income tax benefit of RMB11.0 million for the preceding quarter and income tax expense of RMB24.0 million for the same period of the prior year.
Net Income Attributable to RISE
Net income attributable to RISE for the third quarter of 2020 was RMB28.0 million (US$4.1 million), compared with net loss attributable to RISE of RMB58.0 million for the preceding quarter and net income attributable to RISE of RMB39.4 million for the same period of the prior year.
Non-GAAP net income attributable to RISE for the third quarter of 2020 was RMB35.7 million (US$5.3 million), compared with Non-GAAP net loss attributable to RISE of RMB51.6 million for the preceding quarter and Non-GAAP net income attributable to RISE of RMB48.5 million for the same period of the prior year.
EBITDA represents net income/(loss) before interests, taxes, depreciation, and amortization. EBITDA income for the third quarter of 2020 was RMB54.5 million (US$8.0 million), compared with EBITDA loss of 46.4 million for the preceding quarter and EBITDA income of RMB84.2 million for the same period of the prior year.
Adjusted EBITDA income for the third quarter of 2020 was RMB57.8 million (US$8.5 million), compared with adjusted EBITDA loss of 44.5 million for the preceding quarter and adjusted EBITDA income of RMB88.9 million for the same period of the prior year.
Basic and Diluted Earnings per ADS
Basic and diluted net income attributable to RISE per ADS was RMB0.50 (US$0.07) and RMB0.49 (US$0.07), respectively, for the third quarter of 2020.
Basic and diluted non-GAAP net income attributable to RISE per ADS was RMB0.63 (US$0.09) for the third quarter of 2020.
Cash Flow
Net cash inflow from operating activities for the third quarter of 2020 was RMB103.2 million (US$15.2 million), compared with net cash outflow of RMB118.1 million from operating activities for the preceding quarter and net cash inflow of RMB10.0 million from operating activities for the same period of the prior year. The quarter-over-quarter increase in cash inflow was mainly due to the resumption of offline student enrollment. The year-over-year increase was mainly attributable to the initial impact of the change in tuition fee collection schedule in 2019.
Balance Sheet
As of September 30, 2020, the Company had combined cash and cash equivalents and restricted cash of RMB774.6 million (US$114.1 million), compared with RMB1,022.8 million as of December 31, 2019.
Current and non-current deferred revenue and customer advances were RMB712.7 million (US$105.0 million) as of September 30, 2020, representing a decrease of 5.7% from RMB756.0 million as of December 31, 2019. The decrease was primarily because the revenue recognition for our courses and services is larger than the cash collection. Deferred revenue and customer advances consisted primarily of upfront tuition payments from students and initial franchise fees from the Company's franchisees.
Financial Results for the Nine Months Ended September 30, 2020
Revenues
Total revenues for the first nine months of 2020 decreased by RMB519.2 million, or 46.6%, to RMB594.0 million (US$87.5 million) from RMB1,113.2 million for the same period of the prior year.
-- Revenues from educational programs for the first nine months of 2020
decreased by 42.4% to RMB547.1 million (US$80.6 million), primarily due
to the temporary suspension of our offline business for a substantial
part of the first nine months of 2020 due to the outbreak of COVID-19,
which was partially offset by the revenues generated by our online
services.
-- Franchise revenues for the first nine months of 2020 decreased by 64.1%
to RMB44.3 million (US$6.5 million), primarily due to a decline in
recurring franchise revenue as a result of the temporary closure of
franchised learning centers.
-- Other revenues for the first nine months of 2020 decreased by 93.4% to
RMB2.6 million (US$0.4 million), primarily attributable to a decrease in
study tours and cancellation of Rise Cup, reflecting the impact of
travel restrictions amid the pandemic.
Cost of Revenues
Cost of revenues for the first nine months of 2020 decreased by RMB64.0 million, or 12.5%, to RMB447.1 million (US$65.8 million) from RMB511.1 million for the same period of the prior year, primarily due to a decrease in direct costs associated with the Company's study tour services, cost of learning materials, teachers' compensations as a result of reduced teaching hours and headcount, social insurance exemption and rental concession. Non-GAAP cost of revenues for the first nine months of 2020 decreased by 12.7% to RMB434.9 million (US$64.0 million).
Gross Profit
Gross profit for the first nine months of 2020 decreased to RMB146.9 million (US$21.6 million) compared to RMB602.1 million for the same period of the prior year.
Operating Expenses
Total operating expenses for the first nine months of 2020 decreased by RMB107.2 million, or 24.4%, to RMB332.8 million (US$49.0 million) from RMB440.0 million for the same period of the prior year. Non-GAAP operating expenses for the first nine months of 2020 were RMB326.6 million (US$48.1 million).
-- Selling and marketing expenses decreased by 26.4% year-over-year to
RMB161.6 million (US$23.8 million) for the first nine months of 2020,
primarily due to the Company's curtailed and disciplined investment in
online and offline marketing activities and reduced personnel costs
resulting from personnel optimization, lower performance-based
compensations due to the lower new student enrollments, reflecting the
impact of the COVID-19 pandemic. Non-GAAP selling and marketing expenses
during the first nine months of 2020 decreased by 26.9% year-over-year
to RMB158.2 million (US$23.3 million).
-- General and administrative expenses decreased by 22.3% year-over-year to
RMB171.2 million (US$25.2 million) for the first nine months of 2020,
primarily attributable to a decrease in share-based compensation
expenses and the Company's efforts on personnel optimization and
rigorous control of administrative expenses. Non-GAAP general and
administrative expenses for the first nine months of 2020 decreased by
9.6% year-over-year to RMB168.4 million (US$24.8 million).
Operating Income/(Loss)
The Company recorded an operating loss of RMB185.9 million (US$27.4 million) for the first nine months of 2020, compared with operating income of RMB162.1 million for the same period of the prior year. Non-GAAP operating loss for the first nine months of 2020 was RMB167.4 million (US$24.7 million), compared with non-GAAP operating income of RMB212.4 million for the same period of the prior year.
Interest Expense
Interest expense for the first nine months of 2020 decreased to RMB18.2 million (US$2.7 million) compared to RMB26.7 million for the same period of the prior year, due to the reduced outstanding balance and lower interest rates.
Other Income
Other income for the first nine months of 2020 was RMB21.2 million (US$3.1 million), compared with RMB9.2 million for the same period of the prior year. The increase in other income was due to the output value-added tax exemption during the COVID-19 pandemic.
Income Tax Expense/(Benefit)
Income tax benefit for the first nine months of 2020 was RMB26.7 million (US$3.9 million), compared with income tax expense of RMB61.9 million for the same period of the prior year.
Net Loss Attributable to RISE
Net loss attributable to RISE for the first nine months of 2020 was RMB133.9 million (US$19.7 million).
Non-GAAP net loss attributable to RISE for the first nine months of 2020 was RMB115.4 million (US$17.0 million).
EBITDA loss for the first nine months of 2020 was RMB99.9 million (US$14.7 million).
Adjusted EBITDA loss for the first nine months of 2020 was RMB94.7 million (US$13.9 million).
Basic and Diluted Earnings per ADS
Basic and diluted net loss attributable to RISE per ADS was RMB2.37 (US$0.35) for the first nine months of 2020.
Basic and diluted non-GAAP net loss attributable to RISE per ADS was RMB2.05 (US$0.30) for the first nine months of 2020.
Cash Flow
Net cash outflow from operating activities for the first nine months of 2020 was RMB97.3 million (US$14.3 million), compared with RMB48.0 million for the same period of the prior year. The cash outflow for the first nine months of 2020 was mainly attributable to reduced cash collection from regular courses as a result of the temporary closure of self-owned and franchised learning centers; while the cash outflow for the same period of 2019 was mainly attributable to the change in the collection schedule for tuition fees to comply with certain regulatory requirements.
Business Outlook
While the adverse impact of pandemic on our business is expected to continue for certain period of time and the COVID-19 situation in China is constantly evolving, we believe that we have significantly improved our ability to cope with challenges in an uncertain environment and are well positioned to capture long-term growth opportunities. For the fourth quarter of 2020, we expect revenue to be in the range of RMB355 million to RMB365 million. The above forecast reflects our current and preliminary view, which is subject to substantial uncertainty.
Conference Call Information
RISE will hold a conference call on November 12, 2020 at 8:00 pm Eastern Time (or November 13, 2020 at 9:00 am Beijing Time) to discuss the financial results. Due to the impact of COVID-19, operator assisted conference calls are not available at the moment. All participants must preregister online prior to the call to receive the dial-in details.
Conference call preregistration link is https://apac.directeventreg.com/registration/event/7180429. Once preregistration has been completed, participants will receive dial-in numbers, an event passcode, and a unique registrant ID.
To join the conference, please dial the number you receive, enter the event passcode followed by your unique registrant ID, and you will be joined to the conference instantly.
A telephone replay will be accessible through November 19, 2020 by dialing the following numbers:
United States: +1-646-254-3697
International: +61-2-8199-0299
Mainland China: 400-6322-162
Hong Kong: +852-3051-2780
Conference ID: #7180429
A live and archived webcast of the conference call, together with a copy of the presentation slides used for the conference call, will also be available at the Company's investor relations website at http://ir.risecenter.com/.
Exchange Rate
This announcement contains translations of certain RMB amounts into U.S. dollars ("USD") at a specified rate solely for the convenience of the reader. Unless otherwise stated, all translations from RMB to USD were made at the rate of RMB6.7896 to US$1.00, the noon buying rate in effect on September 30, 2020 in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or USD amounts referred to could be converted into USD or RMB, as the case may be, at any particular rate or at all. For analytical presentation, all percentages are calculated using the numbers presented in the financial statements contained in this earnings release.
About Non-GAAP Financial Measures
To supplement RISE's financial results presented in accordance with U.S. GAAP, the Company uses non-GAAP financial measures, which are adjusted from results based on U.S. GAAP. Reconciliations of non-GAAP financial measures to U.S. GAAP financial measures are set forth in the table at the end of this earnings release entitled "Reconciliation of GAAP and Non-GAAP Results," which provides more details on the non-GAAP financial measures.
Non-GAAP cost of revenues, non-GAAP operating expenses, including non-GAAP selling and marketing expenses and non-GAAP general and administrative expenses, provides the Company with an understanding of the results from the primary operations of the Company's business by excluding the effects of certain transaction-related expenses that do not reflect the ordinary operating expenses of the Company's operations and share-based compensation.
EBITDA, adjusted EBITDA and non-GAAP net income/(loss) provide the Company with an understanding of the results from the primary operations of the Company's business by excluding the effects of certain transaction-related expenses that do not reflect the ordinary EBITDA and net income/(loss) of the Company's operations.
The Company uses non-GAAP operating expenses, including non-GAAP selling and marketing expenses and non-GAAP general and administrative expenses, non-GAAP operating income/(loss), Non-GAAP operating margin, EBITDA, adjusted EBITDA, non-GAAP net income/(loss) attributable to RISE, and non-GAAP basic and diluted net income/(loss) per ADS attributable to RISE to evaluate the Company's period-over-period operating performance because the Company's management believes these provide a more comparable measure of the Company's continuing business as it adjusts for transaction-related expenses that are not reflective of the normal earnings of the Company's business. These measures may be useful to an investor in evaluating the underlying operating performance of the Company's business, and to enhance investors' overall understanding of the historical and current financial performance of the Company's continuing operations and prospects for the future.
Non-GAAP financial information should not be considered a substitute for or superior to U.S. GAAP results. In addition, calculations of this non-GAAP financial information may be different from calculations used by other companies, and therefore comparability may be limited.
Non-GAAP cost of revenues exclude relevant share-based compensation expenses and amortization of certain intangible assets ("IA") acquired as part of the 2013 acquisition from cost of revenues. Non-GAAP operating income/(loss) adds back share-based compensation expenses and amortization of certain intangible assets acquired as part of the 2013 acquisition. Each of non-GAAP operating expenses, non-GAAP selling and marketing expenses or non-GAAP general and administrative expenses excludes relevant share-based compensation expenses and amortization of certain intangible assets acquired as part of the 2013 acquisition. EBITDA represents net income/(loss) before interests, taxes, depreciation and amortization.
For more information on non-GAAP financial measures, please see the tables captioned "Reconciliations of non-GAAP financial measures to the nearest comparable GAAP measures."
About RISE Education
RISE Education Cayman Ltd is a leading junior English Language Training ("ELT") provider based in Beijing. Founded in 2007, the Company pioneered the application of the "subject-based learning" philosophy in China, which uses language arts, math, natural science, and social science to teach English in an immersive environment that helps students learn to speak and think like a native speaker. Through three flagship courses, Rise Start, Rise On, and Rise Up, and other complementary products, the Company provides ELT to students aged three to six, seven to twelve and thirteen to eighteen, respectively. The Company's highly scalable business model includes both self-owned and franchised learning centers. For more information, please visit http://en.risecenter.com/.
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 RISE 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 maintain or enhance its brand, its ability to compete effectively against its competitors, its ability to execute its growth strategy, its ability to introduce new products or enhance existing products, its ability to obtain required licenses, permits, filings or registrations, its ability to grow or operate or effectively monitor its franchise business, quarterly variations in its operating results caused by factors beyond its control, macroeconomic conditions in China and government policies and regulations relating to its corporate structure, business and industry and their potential impact on its future business development, financial condition and results of operations. All information provided in this press release is as of the date hereof, and RISE 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 RISE 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 RISE is included in RISE's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F for the year ended December 31, 2019.
Investor Relations Contact
Karen Gu
RISE Education
Email: riseir@rdchina.net
Tel: +86 (10) 8559-9191
RISE EDUCATION CAYMAN LTD
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
As of
December 31
, 2019 September 30
, 2020 September 30
, 2020
---
RMB
RMB
USD
ASSETS
Current assets:
Cash and cash equivalents 999,012 676,711 99,669
Restricted cash 23,813 97,849 14,412
Accounts receivable, net 1,745 2,397 353
Amounts due from related parties 191 1,013 149
Inventories 8,685 7,751 1,142
Prepaid expenses and other current assets 51,420 83,431 12,287
Total current assets 1,084,866 869,152 128,012
Property and equipment, net 137,340 106,503 15,686
Intangible assets, net 210,346 195,982 28,865
Long-term investment 33,000 33,000 4,860
Goodwill 665,416 670,334 98,730
Amounts due from a related party 4,000 589
Deferred tax assets 11,026 35,388 5,212
Other non-current assets 49,638 54,388 8,010
Operating lease right-of use assets 610,323 607,611 89,493
Total assets 2,801,955 2,576,358 379,457
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term loan 134,015 235,939 34,750
Accounts payable 7,553 4,880 719
Accrued expenses and other current liabilities 202,808 262,663 38,685
Deferred revenue and customer advances 716,637 676,913 99,699
Income taxes payable 14,594 9,262 1,364
Operating lease liabilities, current portion 157,911 181,158 26,682
Total current liabilities 1,233,518 1,370,815 201,899
Long-term loan 370,163 197,899 29,147
Deferred revenue and customer advances 39,397 35,806 5,274
Deferred tax liabilities 31,116 21,318 3,140
Other non-current liabilities 39,156 42,273 6,226
Operating lease liabilities, non-current portion 464,304 422,157 62,178
Total liabilities 2,177,654 2,090,268 307,864
Shareholders' equity:
Ordinary shares 6,946 6,956 1,025
Additional paid-in capital 583,262 589,965 86,892
Statutory reserves 104,830 104,830 15,440
Accumulated deficit (127,059) (260,920) (38,429)
Accumulated other comprehensive income 40,917 40,781 6,006
Total Rise Education Cayman Ltd shareholders' equity 608,896 481,612 70,934
Non-controlling interests 15,405 4,478 660
Total equity 624,301 486,090 71,593
Total liabilities, non-controlling interests and shareholders' equity 2,801,955 2,576,358 379,457
RISE EDUCATION CAYMAN LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except share and ADS data and per share and per ADS data)
Three Months Ended Nine Months Ended
Sep. 30
Sep. 30, 2019 Jun. 30, 2020 Sep. 30, 2020 Sep. 30, 2020 2019 2020 2020
---
RMB
RMB
RMB
USD
RMB
RMB USD
---
Revenues 411,143 164,990 320,029 47,135 1,113,225 594,007 87,488
Educational programs 334,927 151,465 293,619 43,246 950,417 547,072 80,575
Franchise revenues 45,363 12,935 25,287 3,724 123,338 44,331 6,529
Others 30,853 590 1,123 165 39,470 2,604 384
Cost of revenues (196,280) (141,582) (162,918) (23,995) (511,095) (447,068) (65,846)
Gross profit 214,863 23,408 157,111 23,140 602,130 146,939 21,642
Selling and marketing expenses (83,278) (42,474) (75,911) (11,180) (219,682) (161,606) (23,802)
General and administrative expenses (65,759) (54,821) (61,771) (9,098) (220,321) (171,190) (25,214)
Operating income/(loss) 65,826 (73,887) 19,429 2,862 162,127 (185,857) (27,374)
Interest income 4,498 4,055 3,650 538 13,906 11,557 1,702
Interest expense (8,836) (5,883) (5,547) (817) (26,684) (18,221) (2,684)
Foreign currency exchange loss (941) (17) (86) (13) (1,430) (183) (27)
Other income, net 688 2,183 16,009 2,357 9,187 21,179 3,120
Income/(loss) before income tax expense 61,235 (73,549) 33,455 4,927 157,106 (171,525) (25,263)
Income tax (expense)/benefit (24,047) 11,029 (4,020) (592) (61,929) 26,737 3,938
Net income/(loss) 37,188 (62,520) 29,435 4,335 95,177 (144,788) (21,325)
Add: net loss/(income) attributable 2,174 4,485 (1,421) (209) 1,788 10,927 1,609
to non-controlling interests
Net income/(loss) attributable to 39,362 (58,035) 28,014 4,126 96,965 (133,861) (19,716)
RISE Education Cayman Ltd
Net income/(loss) per ordinary share:
Basic 0.35 (0.51) 0.25 0.04 0.85 (1.19) (0.17)
Diluted 0.34 (0.51) 0.25 0.04 0.84 (1.19) (0.17)
Net income/(loss) per ADS
(Notes 1)
:
Basic 0.70 (1.03) 0.50 0.07 1.70 (2.37) (0.35)
Diluted 0.69 (1.03) 0.49 0.07 1.68 (2.37) (0.35)
Shares used in net income/(loss) per ordinary share computation:
Basic 112,960,292 112,756,844 112,821,099 112,821,099 114,302,033 112,778,242 112,778,242
Diluted 114,343,590 112,756,844 113,598,108 113,598,108 115,632,850 112,778,242 112,778,242
ADSs used in net income/(loss) per ADS computation:
Basic 56,480,146 56,378,422 56,410,550 56,410,550 57,151,016 56,389,121 56,389,121
Diluted 57,171,795 56,378,422 56,799,054 56,799,054 57,816,425 56,389,121 56,389,121
Note 1: Each ADS represents two ordinary shares.
RISE EDUCATION CAYMAN LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except share and ADS data and per share and per ADS data)
Three Months Ended Nine Months Ended Sep. 30
Sep. 30, 2019 Jun. 30, 2020 Sep. 30, 2020 Sep. 30, 2020 2019 2020 2020
---
RMB
RMB
RMB
USD RMB RMB USD
Net income/(loss) 37,188 (62,520) 29,435 4,335 95,177 (144,788) (21,325)
Other comprehensive loss, net of tax of nil:
Foreign currency translation adjustments (2,467) (31) (356) (52) (3,069) (136) (20)
Other comprehensive loss (2,467) (31) (356) (52) (3,069) (136) (20)
Comprehensive income/(loss) 34,721 (62,551) 29,079 4,283 92,108 (144,924) (21,345)
Add: comprehensive loss/(income) attributable to non-controlling interests 2,174 4,485 (1,421) (209) 1,788 10,927 1,609
Comprehensive income/(loss) attributable to RISE Education Cayman Ltd 36,895 (58,066) 27,658 4,074 93,896 (133,997) (19,736)
RISE EDUCATION CAYMAN LTD
RECONCILIATION OF GAAP AND NON-GAAP RESULTS
(in thousands, except ADS data and per ADS data)
Three Months Ended Nine Months Ended
Sep. 30
Sep. 30,
2019 Jun. 30,
2020 Sep. 30,
2020 Sep. 30,
2020 2019 2020 2020
RMB
RMB
RMB USD
RMB RMB USD
Net income/(loss) 37,188 (62,520) 29,435 4,335 95,177 (144,788) (21,325)
Share-based compensation ("SBC") 4,705 1,935 3,351 494 37,335 5,245 772
IA amortization arising from Bain acquisition 4,415 4,456 4,348 640 12,945 13,190 1,943
Non-GAAP net income/(loss) 46,308 (56,129) 37,134 5,469 145,457 (126,353) (18,610)
Add: net loss/(income) attributable to non-controlling interests 2,174 4,485 (1,421) (209) 1,788 10,927 1,609
Non-GAAP net income/(loss) attributable to RISE Education Cayman Ltd 48,482 (51,644) 35,713 5,260 147,245 (115,426) (17,001)
Net income/(loss) 37,188 (62,520) 29,435 4,335 95,177 (144,788) (21,325)
Add: Depreciation 11,695 17,465 11,480 1,690 33,583 41,591 6,126
Add: Amortization 6,904 7,834 7,651 1,127 17,526 23,363 3,441
Add: Interest expense 8,836 5,883 5,547 817 26,684 18,221 2,684
Add: Income tax expense/(benefit) 24,047 (11,029) 4,020 592 61,929 (26,737) (3,938)
Less: Interest income 4,498 4,055 3,650 538 13,906 11,557 1,702
EBITDA 84,172 (46,422) 54,483 8,024 220,993 (99,907) (14,714)
SBC 4,705 1,935 3,351 494 37,335 5,245 772
Adjusted EBITDA 88,877 (44,487) 57,834 8,518 258,328 (94,662) (13,942)
Cost of revenues 196,280 141,582 162,918 23,995 511,095 447,068 65,846
Personnel costs 79,535 61,980 74,898 11,031 214,211 202,737 29,860
Rental costs 56,490 49,595 53,427 7,869 162,040 153,895 22,666
Others 60,255 30,007 34,593 5,095 134,844 90,436 13,320
Less: SBC 281 320 433 64 2,485 1,452 214
Less: IA amortization arising from Bain acquisition 3,599 3,632 3,544 522 10,552 10,752 1,584
Non-GAAP cost of revenues 192,400 137,630 158,941 23,409 498,058 434,864 64,048
Non-GAAP gross profit 218,743 27,360 161,088 23,726 615,167 159,143 23,440
Selling and marketing expenses 83,278 42,474 75,911 11,180 219,682 161,606 23,802
Less: SBC 487 403 375 55 742 973 143
Less: IA amortization arising from Bain acquisition 816 824 804 118 2,393 2,438 359
Non-GAAP selling and marketing expenses 81,975 41,247 74,732 11,007 216,547 158,195 23,300
General and administrative expenses 65,759 54,821 61,771 9,098 220,321 171,190 25,214
Less: SBC 3,937 1,212 2,543 375 34,108 2,820 415
Non-GAAP general and administrative expenses 61,822 53,609 59,228 8,723 186,213 168,370 24,799
Operating expense 149,037 97,295 137,682 20,278 440,003 332,796 49,016
Less: SBC 4,424 1,615 2,918 430 34,850 3,793 558
Less: IA amortization arising from Bain acquisition 816 824 804 118 2,393 2,438 359
Non-GAAP operating expense 143,797 94,856 133,960 19,730 402,760 326,565 48,099
Operating income/(loss) 65,826 (73,887) 19,429 2,862 162,127 (185,857) (27,374)
Add: SBC 4,705 1,935 3,351 494 37,335 5,245 772
Add: IA amortization arising from Bain acquisition 4,415 4,456 4,348 640 12,945 13,190 1,943
Non-GAAP operating income/(loss) 74,946 (67,496) 27,128 3,996 212,407 (167,422) (24,659)
Non-GAAP net income/(loss) per ADS 0.86 (0.92) 0.63 0.09 2.58 (2.05) (0.30)
attributable to RISE-basic (Notes 1)
Non-GAAP net income/(loss) per ADS 0.85 (0.92) 0.63 0.09 2.55 (2.05) (0.30)
attributable to RISE-diluted (Notes 1)
ADSs used in calculating net income/(loss) per ADS-basic (Notes 1): 56,480,146 56,378,422 56,410,550 56,410,550 57,151,016 56,389,121 56,389,121
ADSs used in calculating net income/(loss) per ADS-diluted (Notes 1): 57,171,795 56,378,422 56,799,054 56,799,054 57,816,425 56,389,121 56,389,121
Note 1: Each ADS represents two ordinary shares.
[1] Adjusted EBITDA excludes share-based compensation expenses from EBITDA.
[2] Students in class refers to the students who were taking our ongoing courses as of a given date.
[3] New students enrolled refers to the newly acquired students who enrolled in our courses during a given period of time.
[4] Non-GAAP cost of revenues exclude relevant share-based compensation ("SBC") expenses and amortization of certain intangible assets, including teaching course license, acquired as part of the junior ELT business by the Company from certain third-party in 2013 (the "2013 acquisition") from cost of revenues. Non-GAAP operating income adds back SBC expenses and amortization of certain intangible assets acquired as part of the 2013 acquisition. Each of non-GAAP operating expenses, non-GAAP selling and marketing expenses and non-GAAP general and administrative expenses excludes relevant SBC expenses and amortization of certain intangible assets acquired as part of the 2013 acquisition. For details on the calculation of each of these items and the reconciliation of each to the most directly comparable GAAP financial measure, see "About Non-GAAP Financial Measures" and "Reconciliation of GAAP and Non-GAAP Results."
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SOURCE RISE Education
