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RISE Education Announces Fourth Quarter and Full Year 2018 Unaudited Financial Results

BEIJING, March 14, 2019 /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 fourth quarter and full year ended December 31, 2018.

Highlights for the Fourth Quarter of 2018

  • Total revenues increased by 30.1% year-over-year to RMB354.2 million (US$51.5 million) in the fourth quarter of 2018.
  • Net income attributable to RISE was RMB31.5 million (US$4.6 million) in the fourth quarter of 2018.
  • Non-GAAP net income attributable to RISE[1] increased by 45.9% year-over-year to RMB47.9 million (US$7.0 million) in the fourth quarter of 2018.
  • Adjusted EBITDA[1] increased 33.6% year-over-year to RMB91.0 million (US$13.2 million) in the fourth quarter of 2018.
  • Total number of student enrollments[2] increased by 85.9% year-over-year to 21,756 in the fourth quarter of 2018 which includes 743 from online courses, 324 from short-term and SSAT test-prep courses, and 720 from The Edge Learning Centers Limited ("The Edge").
  • The total number of the Company's learning centers increased to 380, consisting of 76 self-owned (including 2 operated by The Edge) and 304 franchised learning centers.

Highlights for the Full Year Ended December 31, 2018

  • Total revenues increased by 31.2% year-over-year to RMB1,271.9 million (US$185.0 million) in the full year of 2018.
  • Net income attributable to RISE was RMB143.0 million (US$20.8 million) in the full year of 2018.
  • Non-GAAP net income attributable to RISE[1] increased by 24.1% year-over-year to RMB179.9 million (US$26.2 million) in the full year of 2018.
  • Total number of student enrollments[2] increased by 42.2% year-over-year to 73,054 in the full year of 2018 which includes 2,955 from online courses, 5,804 from short-term and SSAT test-prep courses, and 2,751 from The Edge.
  • Student retention rate at self-owned learning centers remained stable at 70% in the full year of 2018 compared with the same period of the prior year.
 
   

Three Months Ended

   

December 31,

(in thousands RMB, except for percentage and per ADS data)

2017

2018

Pct. Change

Revenues

272,157

354,168

30.1%

Net (loss)/income attributable to RISE

(137,996)

31,503

n/a

Non-GAAP net income attributable to RISE

32,800

47,856

45.9%

Net (loss)/income per ADS attributable to RISE – basic

(2.57)

0.55

n/a

Net (loss)/income per ADS attributable to RISE – diluted

(2.57)

0.54

n/a

Non-GAAP net income per ADS attributable to RISE – basic

0.61

0.84

37.7%

Non-GAAP net income per ADS attributable to RISE – diluted

0.59

0.83

40.7%

Adjusted EBITDA

68,100

90,997

33.6%

 
   

Full Year Ended

   

December 31,

(in thousands RMB, except for percentage and per ADS data)

2017

2018

Pct. Change

Revenues

969,275

1,271,888

31.2%

Net (loss)/income attributable to RISE

(47,974)

142,958

n/a

Non-GAAP net income attributable to RISE

144,954

179,932

24.1%

Net (loss)/income per ADS attributable to RISE – basic

(0.94)

2.51

n/a

Net (loss)/income per ADS attributable to RISE – diluted

(0.94)

2.47

n/a

Non-GAAP net income per ADS attributable to RISE – basic

2.85

3.16

10.9%

Non-GAAP net income per ADS attributable to RISE – diluted

2.78

3.11

11.9%

Adjusted EBITDA

242,510

300,204

23.8%

 

"We are happy to close out the year with strong, and sustainable revenue growth during the quarter which exceeded our expectation of a 28% growth rate," commented Mr. Yiding Sun, Chief Executive Officer of RISE. "I am also extremely pleased with our team's ability to rapidly assess and adjust our operations to the new regulatory environment. Even though we began collecting tuition in installments in Beijing and Wuxi to comply with the new regulations, we still saw deferred revenue increase by 28% year-over-year by the end of 2018.  We maintained healthy growth momentum during the quarter by adding 35 new learning centers, including 4 self-owned learning centers and 31 franchised centers, while managing to keep student retention rate high and stable at 70% in 2018."

Mr. Sun continued, "We made significant progress throughout the year as we continue to benefit from  the very solid demand for junior ELT in China. We continue to focus on adding new learning centers to our network, monitoring acquisition opportunities that would strengthen our service offerings, and investing in our technology, product development and selling and marketing initiatives to increase student enrollments while maintaining existing students. Our goal for 2019 is to enhance our brand recognition, upgrade our curriculum and improve IT system, which we believe will allow us to offer better services and improve the educational experience for both students and parents."

Ms. Jiandong Lu, Chief Operating Officer  and Chief Financial Officer of RISE, stated, "Our total revenues in the fourth quarter increased by 30.1% year-over-year to RMB354 million. Student enrollments, including enrollments from online courses, short-term and SSAT test-prep courses and The Edge, increased 85.9% year-over-year during the quarter. While adding new learning centers to our network will add pressure on our margins and average monthly number of new student enrollments per self-owned center in the short-term, maintaining the rapid pace of our network expansion is key to driving sustainable enrollment growth over the long-term and will support margin expansion as newly opened schools mature and the pace of our expansion stabilizes. We will continue to strike a careful balance between maintaining operational efficiency and opening new learning centers that are fully compliant with regulatory requirements in order to create long-term sustainable value for our shareholders."

Financial Results for the Fourth Quarter of 2018

Revenues

Total revenues for the fourth quarter of 2018 increased by RMB82.0 million, or 30.1%, to RMB354.2 million (US$51.5 million) from RMB272.2 million for the same period of the prior year. The increase was primarily attributable to a growth in revenues from educational programs of RMB66.8 million.

  • Revenues from educational programs for the fourth quarter of 2018 increased by 26.7% to RMB316.5 million (US$46.0 million) from RMB249.7 million for the same period of the prior year. The increase was primarily due to (i) a significant increase of the number of student enrollments for our regular courses operated by self-owned learning centers and (ii) a high and stable student retention rate of 71% during the quarter. The number of our self-owned learning centers also increased, excluding 2 from The Edge, to 74 as of December 31, 2018 from 62 as of December 31, 2017. The Company added a total of 55 new classrooms during the fourth quarter of 2018.
  • Franchise revenues for the fourth quarter of 2018 increased by 65.9% to RMB28.2 million (US$4.1 million) from RMB17.0 million for the same period of the prior year, primarily due to an increase in recurring franchise fees and an increase in the number of franchised learning centers from 206 as of December 31, 2017 to 304 as of December 31, 2018.
  • Other revenues for the fourth quarter of 2018 increased by 74.4% to RMB9.4 million (US$1.4 million) compared with RMB5.4 million for the same period of the prior year. The increase was primarily due to an increase in revenue generated by The Edge which operated two self-owned learning centers during the quarter.

Cost of Revenues

Cost of revenues for the fourth quarter of 2018 increased by RMB21.0 million, or 16.3%, to RMB150.3 million (US$21.9 million) from RMB129.3 million during the same period last year. The increase was primarily due to an increase in rental costs associated with the Company's expanding operations and personnel costs associated with an increase in teacher headcount and total teaching hours at the Company's self-owned learning centers. Non-GAAP cost of revenues[3] for the fourth quarter of 2018 increased by 34.5% to RMB146.4 million (US$21.3 million).

Gross Profit

Gross profit for the fourth quarter of 2018 increased by RMB61.0 million, or 42.7%, to RMB203.8 million (US$29.6 million) from RMB142.8 million for the same period of the prior year. Gross margin increased to 57.6% during the fourth quarter of 2018 from 52.5% during the same period of last year primarily due to higher share-based compensation expenses incurred during the fourth quarter of 2017.

Operating Expenses

Total operating expenses for the fourth quarter of 2018 decreased by RMB127.9 million, or 47.1%, to RMB143.8 million (US$20.9 million) from RMB271.7 million for the same period of the prior year. Non-GAAP operating expenses for the fourth quarter of 2018 were RMB131.4 million (US$19.1 million).

  • Selling and marketing expenses increased by 12.6% year-over-year to RMB69.5 million (US$10.1 million) during the fourth quarter of 2018 from RMB61.7 million during the same period last year. The increase was primarily due to an increase in marketing channel expenses and personnel costs associated with the Company's expanding network of self-owned learning centers and growth in student enrollments. Non-GAAP selling and marketing expenses during the fourth quarter of 2018 increased by 26.9% year-over-year to RMB65.8 million (US$9.6 million).
  • General and administrative expenses decreased by 64.6% year-over-year to RMB74.4 million (US$10.8 million) during the fourth quarter of 2018 from RMB210.0 million for the same period of the prior year. The decrease was mainly attributable to share-based compensation expenses of RMB69.2 million and IPO-related and one-off expenses of RMB81.8 million incurred during the fourth quarter 2017. Non-GAAP general and administrative expenses for the fourth quarter of 2018 increased by 11.1% year-over-year to RMB65.5 million (US$9.5 million).

Operating Income and Operating Margin

Operating income for the fourth quarter of 2018 was RMB60.0 million (US$8.7 million). Non-GAAP operating income for the fourth quarter of 2018 increased by 45.6% year-over-year to RMB76.4million (US$11.1 million).

Operating margin for the fourth quarter of 2018 was 16.9%, compared with a negative 47.3% during the same period of the prior year. Non-GAAP operating margin increased to 21.6% during the fourth quarter of 2018 from 19.3% during the same period last year.

Interest Expense

Interest expense for the fourth quarter of 2018 was RMB9.0 million (US$1.3 million) compared with RMB11.0 million during the same period of the prior year. The decrease in interest expense was primarily attributable to a decrease in loan principal amount, which was repaid in March 2018.

Other Income

Other income for the fourth quarter of 2018 was RMB3.3 million (US$0.5 million), compared with RMB6.6 million during the same period of the prior year.

Net Income Attributable to RISE

Net income attributable to RISE for the fourth quarter of 2018 was RMB31.5 million (US$4.6 million) compared with a net loss of RMB138.0 million during the same period of the prior year. Net margin attributable to RISE for the fourth quarter of 2018 was 8.9%. Non-GAAP net income attributable to RISE during the fourth quarter of 2018 increased by 45.9% year-over-year to RMB47.9 million (US$7.0 million) from RMB32.8 million during the same period of the prior year. The increase in net income attributable to RISE was mainly attributable to IPO-related and one-off expenses incurred in the fourth quarter of 2017.

EBITDA represents net income before interests, taxes, depreciation, and amortization. EBITDA for the fourth quarter of 2018 was RMB79.0 million (US$11.5 million). Adjusted EBITDA for the fourth quarter of 2018 increased by RMB22.9 million, or 33.6% to RMB91.0 million (US$13.2 million) from RMB68.1 million during the same period of the prior year. Adjusted EBITDA margin was 25.7 % in the fourth quarter of 2018, compared with 25.0% during the same period of the prior year.

Basic and Diluted Earnings per ADS

Basic and diluted net income attributable to RISE per ADS was RMB0.55 (US$0.08) and RMB0.54 (US$0.08), respectively, for the fourth quarter of 2018. Basic and diluted non-GAAP net income attributable to RISE per ADS was RMB0.84 (US$0.12) and RMB0.83 (US$0.12), respectively, for the fourth quarter of 2018.

For details on the calculation of and reconciliation to the nearest GAAP measures for each of non-GAAP cost of revenues, operating expenses, net income, net income attributable to RISE per ADS, EBITDA, and adjusted EBITDA, see "About Non-GAAP Financial Measures" and "Reconciliation of GAAP and Non-GAAP Results."

Cash Flow

Net cash provided by operating activities for the fourth quarter of 2018 was RMB72.5 million (US$10.5 million) compared with RMB14.7 million during the same period of the prior year. The increase was mainly attributable to the pre-paid tuition and fees from the Company's growing student enrollment and the impact from one-off operating expenditures incurred during the fourth quarter of 2017.

Balance Sheet

As of December 31, 2018, the Company had cash and cash equivalents and restricted cash of RMB1,316.8 million (US$191.5 million) compared with RMB1,084.9 million as of December 31, 2017.

Current and non-current deferred revenue and customer advances were RMB1,038.8 million (US$151.1 million) as of December 31, 2018, representing an increase of 27.8% from RMB812.8 million as of December 31, 2017. The increase was primarily due to higher pre-paid tuition and fees from the Company's growing student enrollment and more initial franchise fees from franchise partners.

Financial Results for the Full Year Ended December 31, 2018

Revenues

Total revenues for the full year of 2018 increased by 31.2% to RMB1,271.9 million (US$185.0 million) from RMB969.3 million for the full year of 2017. The increase was primarily attributable to an increase in revenues from educational programs.

  • Revenues from educational programs for the full year of 2018 increased by 28.9% to RMB1,071.6 million (US$155.9 million) from RMB831.1 million for the full year of 2017. The increase was primarily due to (i) an increase of the total number of student enrollments for our regular courses operated by self-owned learning centers and (ii)a high and stable student retention rate of 70% during the full year of 2018. The number of self-owned learning centers, excluding 2 from The Edge, also increased to 74 as of December 31, 2018 from 62 as of December 31, 2017.
  • Franchise revenues for the full year of 2018 increased by 25.2% to RMB125.2 million (US$18.2 million) from RMB100.0 million for the full year of 2017. This increase was primarily due to an increase in recurring franchise fees and an increase in the number of franchised learning centers from 206 as of December 31, 2017 to 304 as of December 31, 2018.
  • Other revenues for the full year of 2018 increased by 96.7% to RMB75.1 million (US$10.9 million) from RMB38.2 million for the full year of 2017. The increase was primarily due to an increase in revenue generated by The Edge as well as the Company's expanded complementary educational products such as RISE study tour program and Can-Talk online education program.

Cost of Revenues

Cost of revenues for the full year of 2018 increased by 27.5% to RMB576.5 million (US$83.9 million) from RMB452.2 million for the full year of 2017, due primarily to an increase in rental costs associated with the Company's expanding operations and personnel costs associated with an increase in teacher headcount and total teaching hours at the Company's self-owned learning centers. Non-GAAP cost of revenues for the full year of 2018 was RMB561.7 million (US$81.7 million).

Gross Profit

Gross profit for the full year of 2018 increased by 34.5% to RMB695.4 million (US$101.1 million) from RMB517.1 million for the full year of 2017. Gross margin was 54.7% for the full year of 2018 compared with 53.3% for the full year of 2017.

Operating Expenses

Total operating expenses for the full year of 2018 decreased by 5.8% to RMB487.7 million (US$70.9 million) from RMB517.7 million for the full year of 2017. The decrease was mainly attributable to reduced IPO-related and one-off expenses incurred during the fourth quarter of 2017, which were partially offset by an increase in selling and marketing expenses, personnel costs, and office expenses associated with the Company's expanding business. Non-GAAP operating expenses for the full year of 2018 were RMB465.6 million (US$67.7 million).

  • Selling and marketing expenses for the full year of 2018 increased by 38.0% year-over-year to RMB245.7 million (US$35.7 million) from RMB178.0 million for the full year of 2017. The increase was primarily due to an increase in marketing channel expenses and personnel costs associated with the Company's expanding network of self-owned learning centers and growth in student enrollments. Non-GAAP selling and marketing expenses for the full year of 2018 increased by 43.8% year-over-year to RMB238.4 million (US$34.7 million).
  • General and administrative expenses for the full year of 2018 decreased by 28.7% year-over-year to RMB242.1 million (US$35.2 million) from RMB339.7 million for the full year of 2017. The decrease was mainly attributable to reduced IPO-related and one-off expenses incurred in 2017, which were partially offset by increased personnel costs and office expenses in support of the Company's expanding business. Non-GAAP general and administrative expenses for the full year of 2018 increased by 26.7% year-over-year to RMB227.3 million (US$33.1 million).

Operating Income and Operating Margin

Operating income for the full year of 2018 was RMB207.6 million (US$30.2 million), compared with an operating loss of RMB0.6 million for the full year of 2017. Non-GAAP operating income for the full year of 2018 increased by 20.6% year-over-year to RMB244.6 million (US$35.6 million).

Operating margin was 16.3% during the full year of 2018 compared with a negative margin of 0.1% for the full year of 2017. Non-GAAP operating margin was 19.2% for the full year of 2018 compared with 20.9% for the full year of 2017.

Interest Expense

Interest expense for the full year of 2018 was RMB33.8 million (US$4.9 million) compared with RMB26.6 million for the full year of 2017. The increase in interest expense was primarily due to an increase in loan principal amount which increased in September 2017.

Other Income

Other income for the full year of 2018 was RMB15.4 million (US$2.2 million) compared with RMB6.6 million for the full year of 2017. The Company's ADR depositary bank reimbursed the Company a total consideration of RMB10.0 million during the first quarter of 2018.

Net Income Attributable to RISE

Net income attributable to RISE for the full year of 2018 was RMB143.0 million (US$20.8 million). Net margin attributable to RISE for the full year of 2018 improved to 11.2% from a negative 4.9% for the full year of 2017. Non-GAAP net income attributable to RISE for the full year of 2018 increased by 24.1% year-over-year to RMB179.9 million (US$26.2 million).

EBITDA for the full year of 2018 increased by 399.2% to RMB279.9 million (US$40.7 million) from RMB56.1 million for the full year of 2017. Adjusted EBITDA for the full year of 2018 increased by 23.8% to RMB300.2 million (US$43.7 million) from RMB242.5 million for the full year of 2017. Adjusted EBITDA margin declined to 23.6% for the full year of 2018 from 25.0% for the full year of 2017.

Basic and Diluted Earnings per ADS

Basic and diluted net income attributable to RISE per ADS was RMB2.51 (US$0.37) and RMB2.47 (US$0.36), respectively, for the full year of 2018. Basic and diluted non-GAAP net income attributable to RISE per ADS was RMB3.16 (US$0.46) and RMB3.11 (US$0.45), respectively, for the full year of 2018.

Cash Flow

Net cash provided by operating activities for the full year of 2018 was RMB380.0 million (US$55.3 million) compared with RMB350.1 million for the full year of 2017.

Business Outlook

For the first quarter of 2019, the Company expects its total revenues to be in the range of RMB330 million to RMB335 million, representing a year-over-year growth of approximately 22% to 24%. This forecast reflects the Company's current and preliminary view on the market and operational conditions, which is subject to change.

Conference Call Information

RISE will hold a conference call on Thursday, March 14, 2019 at 8:30pm U.S. Eastern Time (or Friday, March 15, 2019 at 8:30am Beijing Time) to discuss the financial results. Participants may access the call by dialing the following numbers:

 

United States:

 +1-845-675-0437

International:

+65-6713-5090

China Domestic:

 400-6208-038

Hong Kong:

 +852-3018-6771

Conference ID:

 # 3476495

 

The replay will be accessible through March 22, 2019 by dialing the following numbers:

 

United States:

+1-646-254-3697

International:

+61-2-8199-0299

Conference ID:

 # 3476495

 

A live and archived webcast of 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 specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from RMB to USD were made at the rate of RMB6.8755 to US$1.00, the noon buying rate in effect on December 31, 2018 in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or USD amounts referred 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 table at the end of this earnings release titled "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, adjusted EBITDA margin and non-GAAP net income 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 of the Company's operations.

The Company use non-GAAP operating expenses, including non-GAAP selling and marketing expenses and non-GAAP general and administrative expenses, non-GAAP operating income, Non-GAAP operating margin, EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP net income attributable to RISE, and non-GAAP basic and diluted net income 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 adds back share-based compensation expenses, IPO related expenses, one-off 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, IPO related expenses, one-off expenses and amortization of certain intangible assets acquired as part of the 2013 acquisition. EBITDA represents net income 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, the Company provides ELT to students aged three to six, seven to twelve and 13 to 18, 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 and macroeconomic conditions in China and their potential impact on the sales of insurance products. 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 registration statement on Form 20-F for the year ended December 31, 2017.

Investor Relations Contact

Mei Li
RISE Education
Email: riseir@rdchina.net
Tel: +86 (10) 8559-9191

   

[1]

Non-GAAP net income attributable to RISE excludes share-based compensation expenses, IPO related expenses, one-off expenses and amortization of certain intangible assets, including teaching course license, trademark, student base and franchise agreements, as part of the junior English Language Training  ("ELT") business acquisition by the Company from certain third-party in 2013 (the "2013 acquisition") from net income attributable to RISE. EBITDA represents net income before interests, taxes, depreciation and amortization. Adjusted EBITDA excludes share-based compensation expenses, IPO related expenses and one-off expenses from EBITDA. For details on the calculation of each of these 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."

   

[2]

Student enrollment refers to the cumulative total number of courses enrolled in by students during a given period of time; if one student enrolls in multiple courses, it will be counted as multiple student enrollments.

   

[3]

Non-GAAP cost of revenues exclude relevant share-based compensation expenses and amortization of certain intangible assets acquired as part of the 2013 acquisition from cost of revenues. Non-GAAP operating income adds back share-based compensation expenses, IPO related expenses, one-off 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, IPO related expenses, one-off expenses and amortization of certain intangible assets acquired as part of the 2013 acquisition. For details on the calculation of each of these 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."

RISE EDUCATION CAYMAN LTD

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data and per share and per ADS data)

           
 

As of

 

December 31

 

December 31

 

December 31

 

2017

 

2018

 

2018

 

RMB

 

RMB

 

USD

ASSETS

         

Current assets:

         

Cash and cash equivalents

1,055,982

 

1,288,080

 

187,343

Restricted cash

28,913

 

28,705

 

4,175

Accounts receivable, net 

2,470

 

2,438

 

355

Amounts due from a related party

6,604

 

190

 

28

Inventories

7,905

 

11,320

 

1,646

Prepaid expenses and other current assets

40,571

 

71,537

 

10,405

Total current assets

1,142,445

 

1,402,270

 

203,952

Property and equipment, net

100,177

 

128,412

 

18,677

Intangible assets, net

200,615

 

198,057

 

28,806

Goodwill

475,732

 

491,969

 

71,554

Deferred tax assets

2,404

 

6,713

 

976

Other non-current assets

34,965

 

53,353

 

7,760

Total assets

1,956,338

 

2,280,774

 

331,725

           

LIABILITIES AND SHAREHOLDERS'EQUITY

         

Current liabilities:

         

Current portion of long-term loan

-

 

82,506

 

12,000

Accounts payable

6,041

 

8,426

 

1,225

Accrued expenses and other current liabilities

171,099

 

159,882

 

23,254

Due to a related party

20,000

 

-

 

-

Deferred revenue and customer advances

812,821

 

1,002,796

 

145,851

Income taxes payable

20,739

 

25,262

 

3,674

Total current liabilities

1,030,700

 

1,278,872

 

186,004

Long-term loan

623,439

 

502,356

 

73,065

Deferred revenue and customer advances

-

 

36,037

 

5,241

Deferred tax liabilities

3,785

 

14,541

 

2,115

Other non-current liabilities

2,682

 

8,134

 

1,183

Total liabilities

1,660,606

 

1,839,940

 

267,608

           

Shareholders' equity:

         

Ordinary shares

6,782

 

7,074

 

1,029

Additional paid-in capital

532,474

 

600,011

 

87,268

Treasury shares, at cost

-

 

(23,460)

 

(3,412)

Statutory reserves

46,366

 

78,345

 

11,395

Accumulated deficit

(315,531)

 

(248,674)

 

(36,168)

Accumulated other comprehensive income

40,040

 

42,459

 

6,175

Total Rise Education Cayman Ltd shareholders' equity

310,131

 

455,755

 

66,287

Non-controlling interests

(14,399)

 

(14,921)

 

(2,170)

Total equity

295,732

 

440,834

 

64,117

Total liabilities, non-controlling interests and shareholders' equity

1,956,338

 

2,280,774

 

331,725

RISE EDUCATION CAYMAN LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands, except share data and per share and per ADS data)

 
 

Three Months Ended December 31,

 

Full Year Ended December 31,

 

2017

 

2018

 

2018

 

2017

 

2018

 

2018

                       
 

RMB

 

RMB

 

USD

 

RMB

 

RMB

 

USD 

                       

Revenues

272,157

 

354,168

 

51,512

 

969,275

 

1,271,888

 

184,988

        Educational programs

249,747

 

316,538

 

46,039

 

831,106

 

1,071,605

 

155,858

        Franchise revenues

17,028

 

28,242

 

4,108

 

100,013

 

125,214

 

18,212

        Others

5,382

 

9,388

 

1,365

 

38,156

 

75,069

 

10,918

Cost of revenues

(129,320)

 

(150,338)

 

(21,866)

 

(452,220)

 

(576,530)

 

(83,853)

Gross profit

142,837

 

203,830

 

29,646

 

517,055

 

695,358

 

101,135

Selling and marketing expenses 

(61,702)

 

(69,468)

 

(10,104)

 

(177,993)

 

(245,662)

 

(35,730)

General and administrative expenses 

(210,000)

 

(74,354)

 

(10,814)

 

(339,690)

 

(242,084)

 

(35,210)

Operating (loss)/income

(128,865)

 

60,008

 

8,728

 

(628)

 

207,612

 

30,195

Interest income

3,947

 

5,099

 

742

 

19,559

 

26,376

 

3,836

Interest expense

(10,967)

 

(8,953)

 

(1,302)

 

(26,589)

 

(33,803)

 

(4,916)

Foreign currency exchange gain/(loss)

208

 

(361)

 

(53)

 

388

 

(1,383)

 

(201)

Other income, net

6,617

 

3,321

 

483

 

6,594

 

15,397

 

2,239

(Loss)/Income before income tax expense

(129,060)

 

59,114

 

8,598

 

(676)

 

214,199

 

31,153

Income tax expense

(8,932)

 

(24,735)

 

(3,598)

 

(52,924)

 

(71,763)

 

(10,437)

Net (loss)/income

(137,992)

 

34,379

 

5,000

 

(53,600)

 

142,436

 

20,716

Add: net (gain)/loss attributable to non-controlling interests

(4)

 

(2,876)

 

(418)

 

5,626

 

522

 

76

Net (loss)/income attributable to RISE Education Cayman Ltd

(137,996)

 

31,503

 

4,582

 

(47,974)

 

142,958

 

20,792

                       

Net (loss)/income per ordinary share:

                     

Basic

(1.28)

 

0.28

 

0.04

 

(0.47)

 

1.26

 

0.18

Diluted

(1.28)

 

0.27

 

0.04

 

(0.47)

 

1.23

 

0.18

                       

Net (loss)/income per ADS (Note 1):

                     

Basic

(2.57)

 

0.55

 

0.08

 

(0.94)

 

2.51

 

0.37

Diluted

(2.57)

 

0.54

 

0.08

 

(0.94)

 

2.47

 

0.36

                       

Shares used in net (loss)/income per ordinary share computation:

                     

Basic

107,500,000

 

114,359,011

 

114,359,011

 

101,890,411

 

113,812,182

 

113,812,182

Diluted

107,500,000

 

115,846,535

 

115,846,535

 

101,890,411

 

115,881,867

 

115,881,867

                       

ADSs used in net (loss)/income per ADS computation:

                     

Basic

53,750,000

 

57,179,506

 

57,179,506

 

50,945,205

 

56,906,091

 

56,906,091

Diluted

53,750,000

 

57,923,267

 

57,923,267

 

50,945,205

 

57,940,934

 

57,940,934

                       

Net (loss)/income

(137,992)

 

34,379

 

5,000

 

(53,600)

 

142,436

 

20,716

                       

Other comprehensive (loss)/income,  net of tax of nil:

                     

Foreign currency translation adjustments

1,663

 

2,009

 

292

 

(10,424)

 

2,419

 

352

Other comprehensive income/(loss)

1,663

 

2,009

 

292

 

(10,424)

 

2,419

 

352

                       

Comprehensive (loss)/income

(136,329)

 

36,388

 

5,292

 

(64,024)

 

144,855

 

21,068

 Add: comprehensive (gain)/loss attributable to non-controlling interests

(4)

 

(2,876)

 

(418)

 

5,626

 

522

 

76

                       

Comprehensive (loss)/income attributable to RISE Education Cayman Ltd

(136,333)

 

33,512

 

4,874

 

(58,398)

 

145,377

 

21,144

RISE EDUCATION CAYMAN LTD

RECONCILIATION OF GAAP AND NON-GAAP RESULTS

(in thousands, except share data and per share and per ADS data)

 
 

Three Months Ended December 31,

 

Full Year Ended December 31,

 

2017

 

2018

 

2018

 

2017

 

2018

 

2018

 

RMB

 

RMB

 

USD

 

RMB

 

RMB

 

USD 

                       

Net (loss)/income

(137,992)

 

34,379

 

5,000

 

(53,600)

 

142,436

 

20,716

Share-based compensation ("SBC")

95,307

 

12,015

 

1,747

 

95,307

 

20,352

 

2,960

IA amortization arising from Bain acquisition

4,181

 

4,338

 

631

 

17,014

 

16,622

 

2,418

IPO related expenses

47,690

 

-

 

-

 

52,907

 

-

 

-

One-off expenses

34,150

 

-

 

-

 

38,232

 

-

 

-

Income tax expense 

(10,532)

 

-

 

-

 

(10,532)

 

-

 

-

Non-GAAP net income

32,804

 

50,732

 

7,378

 

139,328

 

179,410

 

26,094

Add: net (gain)/loss attributable to non-controlling interests

(4)

 

(2,876)

 

(418)

 

5,626

 

522

 

76

Non-GAAP net income attributable to RISE Education Cayman Ltd

32,800

 

47,856

 

6,960

 

144,954

 

179,932

 

26,170

                       

Net (loss)/income

(137,992)

 

34,379

 

5,000

 

(53,600)

 

142,436

 

20,716

Add: Depreciation

7,614

 

10,282

 

1,495

 

29,246

 

36,027

 

5,240

Add: Amortization

5,379

 

5,732

 

834

 

20,465

 

22,199

 

3,229

Add: Interest expense

10,967

 

8,953

 

1,302

 

26,588

 

33,803

 

4,916

Add: Income tax expense

8,932

 

24,735

 

3,598

 

52,924

 

71,763

 

10,437

Less: Interest income

3,947

 

5,099

 

742

 

19,559

 

26,376

 

3,836

EBITDA

(109,047)

 

78,982

 

11,487

 

56,064

 

279,852

 

40,702

SBC

95,307

 

12,015

 

1,747

 

95,307

 

20,352

 

2,960

IPO related expenses

47,690

 

-

 

-

 

52,907

 

-

 

-

One-off expenses 

34,150

 

-

 

-

 

38,232

 

-

 

-

Adjusted EBITDA

68,100

 

90,997

 

13,234

 

242,510

 

300,204

 

43,662

                       

Cost of revenues

129,320

 

150,338

 

21,866

 

452,220

 

576,530

 

83,853

Personnel costs

60,298

 

64,030

 

9,313

 

176,995

 

230,321

 

33,499

Rental costs

36,913

 

49,402

 

7,185

 

146,678

 

181,457

 

26,392

Others

32,109

 

36,906

 

5,368

 

128,547

 

164,752

 

23,962

Less: SBC

17,063

 

354

 

51

 

17,063

 

1,315

 

191

Less: IA amortization arising from  Bain acquisition

3,408

 

3,536

 

514

 

13,869

 

13,549

 

1,971

Non-GAAP cost of revenues

108,849

 

146,448

 

21,301

 

421,288

 

561,666

 

81,691

                       

Non-GAAP gross profit

163,308

 

207,720

 

30,211

 

547,987

 

710,222

 

103,297

                       

Selling and marketing expenses 

61,702

 

69,468

 

10,104

 

177,993

 

245,662

 

35,730

Less: SBC

9,045

 

2,829

 

411

 

9,045

 

4,229

 

615

Less: IA amortization arising from Bain acquisition

773

 

802

 

117

 

3,145

 

3,073

 

447

Non-GAAP selling and marketing expenses 

51,884

 

65,837

 

9,576

 

165,803

 

238,360

 

34,668

                       

General and administrative expenses 

210,000

 

74,354

 

10,814

 

339,690

 

242,084

 

35,210

Less: SBC

69,199

 

8,832

 

1,285

 

69,199

 

14,808

 

2,154

Less: IPO related expenses

47,690

 

-

 

-

 

52,907

 

-

 

-

Less: One-off expenses 

34,150

 

-

 

-

 

38,232

 

-

 

-

Non-GAAP general and administrative expenses 

58,961

 

65,522

 

9,529

 

179,352

 

227,276

 

33,056

                       

Operating expense

271,702

 

143,822

 

20,918

 

517,683

 

487,746

 

70,940

Less: SBC

78,244

 

11,661

 

1,696

 

78,244

 

19,037

 

2,769

Less: IA amortization arising from Bain acquisition

773

 

802

 

117

 

3,145

 

3,073

 

447

Less: IPO related expenses

47,690

 

-

 

-

 

52,907

 

-

 

-

Less: One-off expenses 

34,150

 

-

 

-

 

38,232

 

-

 

-

Non-GAAP operating expense

110,845

 

131,359

 

19,105

 

345,155

 

465,636

 

67,724

Non-GAAP operating income

52,463

 

76,361

 

11,106

 

202,832

 

244,586

 

35,573

                       

Non-GAAP net income per ADS attributable to RISE-basic

0.61

 

0.84

 

0.12

 

2.85

 

3.16

 

0.46

Non-GAAP net income per ADS attributable to RISE-diluted

0.59

 

0.83

 

0.12

 

2.78

 

3.11

 

0.45

                       

ADSs used in calculating net income per ADS-basic:

53,750,000

 

57,179,506

 

57,179,506

 

50,945,205

 

56,906,091

 

56,906,091

ADSs used in calculating net income per ADS-diluted:

55,867,989

 

57,923,267

 

57,923,267

 

52,225,718

 

57,940,934

 

57,940,934

                       

Note 1: Each ADS represents two ordinary shares.

SOURCE RISE Education Cayman Ltd