RISE Education Announces Third Quarter 2020 Unaudited Financial Results

November 12, 2020 at 11:54 AM EST

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

ADS data)

Sep. 30, 2019

Jun. 30, 2020

Sep. 30, 2020

Pct. Change YoY

Pct. Change QoQ

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
to non-controlling interests

2,174

4,485

(1,421)

(209)


1,788

10,927

1,609

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

39,362

(58,035)

28,014

4,126


96,965

(133,861)

(19,716)










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
attributable to RISE-basic (Notes 1)

0.86

(0.92)

0.63

0.09


2.58

(2.05)

(0.30)


Non-GAAP net income/(loss) per ADS
attributable to RISE-diluted  (Notes 1)

0.85

(0.92)

0.63

0.09


2.55

(2.05)

(0.30)












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."

 

 

 

 

Cision View original content:http://www.prnewswire.com/news-releases/rise-education-announces-third-quarter-2020-unaudited-financial-results-301172149.html

SOURCE RISE Education