Highlights for the First Quarter of 2019
| Three Months Ended March 31, |
||||
| (in thousands RMB, except for percentage and per ADS data) | 2018 | 2019 | Pct. Change | |
| Revenues | 270,129 | 335,026 | 24.0 | % |
| Operating income | 41,782 | 53,040 | 26.9 | % |
| Non-GAAP Operating income | 48,808 | 60,664 | 24.3 | % |
| Net income attributable to RISE | 35,821 | 36,370 | 1.5 | % |
| Non-GAAP net income attributable to RISE | 42,847 | 43,994 | 2.7 | % |
| Net income per ADS attributable to RISE – basic | 0.64 | 0.64 | 0.0 | % |
| Net income per ADS attributable to RISE – diluted | 0.62 | 0.63 | 1.6 | % |
| Non-GAAP net income per ADS attributable to RISE – basic | 0.76 | 0.77 | 1.3 | % |
| Non-GAAP net income per ADS attributable to RISE – diluted | 0.74 | 0.76 | 2.7 | % |
| Adjusted EBITDA | 68,904 | 80,499 | 16.8 | % |
“We are pleased to see the robust top and bottom line growth during the quarter,” commented Mr.
Ms. Jiandong Lu, Chief Operating Officer and Chief Financial Officer of RISE, stated, “Our student retention rate during the quarter increased to 72%, demonstrating just how effective we have been at enhancing the quality of our education products and building upon the trust and loyalty parents have in us. We continue to invest in selling and marketing in a controlled and targeted manner to attract new students and strengthen word-of-mouth referrals. Learning centers opened during prior quarters are performing well and are on track to generate higher utilization rates as they ramp up capacity, mature, and contribute to revenue more meaningfully. We are in negotiations with a number of franchise partners to acquire their learning centers which are progressing well. I am confident that we have the right strategy in place to drive organic revenue growth by mid-twenty percentage for the year while generating healthy profit.”
Financial Results for the First Quarter of 2019
Revenues
Total revenues for the first quarter of 2019 increased by
Cost of Revenues
Cost of revenues for the first quarter of 2019 increased by
Gross Profit
Gross profit for the first quarter of 2019 increased by
Operating Expenses
Total operating expenses for the first quarter of 2019 increased by
Operating Income and Operating Margin
Operating income for the first quarter of 2019 was
Operating margin for the first quarter of 2019 was 15.8%, compared with 15.5% during the same period of the prior year. Non-GAAP operating margin stayed the same at 18.1% compared with the same period last year.
Interest Expense
Interest expense for the first quarter of 2019 was
Other Income
Other income for the first quarter of 2019 was
Net Income Attributable to RISE
Net income attributable to RISE for the first quarter of 2019 increased by 1.5% to
EBITDA represents net income before interests, taxes, depreciation, and amortization. EBITDA for the first quarter of 2019 was
Basic and Diluted Earnings per ADS
Basic and diluted net income attributable to RISE per ADS was
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 first quarter of 2019 was
Balance Sheet
As of
Current and non-current deferred revenue and customer advances were
Business Outlook
For the second quarter of 2019, the Company expects its total revenues to be in the range of
Conference Call Information
RISE will hold a conference call on
| United States: | +1-845-675-0437 |
| International: | +65-6713-5090 |
| China Domestic: | 400-6208-038 |
| Hong Kong: | +852-3018-6771 |
| Conference ID: | # 4594879 |
| The replay will be accessible through May 23, 2019 by dialing the following numbers: | |
| United States: | +1-646-254-3697 |
| International: | +61-2-8199-0299 |
| Conference ID: | # 4594879 |
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
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 uses 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 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 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
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
Investor Relations Contact
RISE Education
Email: riseir@rdchina.net
Tel: +86 (10) 8559-9191
_____________________________________________________________
1 Non-GAAP net income attributable to RISE excludes share-based compensation 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 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 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. 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) | ||||||||
| As of | ||||||||
| December 31 | March 31 | March 31 | ||||||
| 2018 | 2019 | 2019 | ||||||
| RMB | RMB | USD | ||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | 1,288,080 | 1,264,764 | 188,456 | |||||
| Restricted cash | 28,705 | 28,340 | 4,223 | |||||
| Accounts receivable, net | 2,438 | 2,716 | 404 | |||||
| Amounts due from a related party | 190 | 186 | 28 | |||||
| Inventories | 11,320 | 8,164 | 1,216 | |||||
| Prepaid expenses and other current assets | 57,984 | 49,675 | 7,402 | |||||
| Total current assets | 1,388,717 | 1,353,845 | 201,729 | |||||
| Property and equipment, net | 128,412 | 131,987 | 19,667 | |||||
| Intangible assets, net | 198,057 | 189,716 | 28,269 | |||||
| Goodwill | 491,969 | 485,032 | 72,272 | |||||
| Deferred tax assets | 6,713 | 21,842 | 3,255 | |||||
| Other non-current assets | 654,963 | 640,725 | 95,470 | |||||
| Total assets | 2,868,831 | 2,823,147 | 420,662 | |||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Current portion of long-term loan | 82,506 | 80,534 | 12,000 | |||||
| Accounts payable | 8,426 | 8,359 | 1,245 | |||||
| Accrued expenses and other current liabilities | 305,655 | 308,433 | 45,958 | |||||
| Deferred revenue and customer advances | 1,002,796 | 962,806 | 143,463 | |||||
| Income taxes payable | 25,262 | 20,049 | 2,987 | |||||
| Total current liabilities | 1,424,645 | 1,380,181 | 205,653 | |||||
| Long-term loan | 502,356 | 492,268 | 73,351 | |||||
| Deferred revenue and customer advances | 36,037 | 32,790 | 4,886 | |||||
| Deferred tax liabilities | 14,541 | 16,384 | 2,441 | |||||
| Other non-current liabilities | 450,418 | 431,135 | 64,241 | |||||
| Total liabilities | 2,427,997 | 2,352,758 | 350,572 | |||||
| Shareholders’ equity: | ||||||||
| Ordinary shares | 7,074 | 7,009 | 1,044 | |||||
| Additional paid-in capital | 600,011 | 574,565 | 85,613 | |||||
| Treasury shares, at cost | (23,460 | ) | (4,059 | ) | (605 | ) | ||
| Statutory reserves | 78,345 | 78,345 | 11,674 | |||||
| Accumulated deficit | (248,674 | ) | (212,304 | ) | (31,634 | ) | ||
| Accumulated other comprehensive income | 42,459 | 41,947 | 6,250 | |||||
| Total Rise Education Cayman Ltd shareholders’ equity | 455,755 | 485,503 | 72,342 | |||||
| Non-controlling interests | (14,921 | ) | (15,114 | ) | (2,252 | ) | ||
| Total equity | 440,834 | 470,389 | 70,090 | |||||
| Total liabilities, non-controlling interests and shareholders’ equity | 2,868,831 | 2,823,147 | 420,662 | |||||
| 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 March 31, | |||||||||
| 2018 | 2019 | 2019 | |||||||
| RMB | RMB | USD | |||||||
| Revenues | 270,129 | 335,026 | 49,920 | ||||||
| Educational programs | 231,730 | 286,576 | 42,700 | ||||||
| Franchise revenues | 28,220 | 38,177 | 5,689 | ||||||
| Others | 10,179 | 10,273 | 1,531 | ||||||
| Cost of revenues | (125,467 | ) | (154,401 | ) | (23,006 | ) | |||
| Gross profit | 144,662 | 180,625 | 26,914 | ||||||
| Selling and marketing expenses | (48,522 | ) | (65,661 | ) | (9,784 | ) | |||
| General and administrative expenses | (54,358 | ) | (61,924 | ) | (9,227 | ) | |||
| Operating income | 41,782 | 53,040 | 7,903 | ||||||
| Interest income | 4,206 | 2,574 | 384 | ||||||
| Interest expense | (8,205 | ) | (8,953 | ) | (1,334 | ) | |||
| Foreign currency exchange gain | 28 | 50 | 7 | ||||||
| Other income, net | 10,908 | 7,927 | 1,181 | ||||||
| Income before income tax expense | 48,719 | 54,638 | 8,141 | ||||||
| Income tax expense | (13,993 | ) | (18,706 | ) | (2,787 | ) | |||
| Net income | 34,726 | 35,932 | 5,354 | ||||||
| Add: net loss attributable to non-controlling interests | 1,095 | 438 | 65 | ||||||
| Net income attributable to RISE Education Cayman Ltd | 35,821 | 36,370 | 5,419 | ||||||
| Net income per ordinary share: | |||||||||
| Basic | 0.32 | 0.32 | 0.05 | ||||||
| Diluted | 0.31 | 0.32 | 0.05 | ||||||
| Net income per ADS: | |||||||||
| Basic | 0.64 | 0.64 | 0.10 | ||||||
| Diluted | 0.62 | 0.63 | 0.09 | ||||||
| Shares used in net income per ordinary share computation: | |||||||||
| Basic | 112,414,410 | 113,615,686 | 113,615,686 | ||||||
| Diluted | 115,919,564 | 115,056,569 | 115,056,569 | ||||||
| ADSs used in net income per ADS computation: (Note 1) | |||||||||
| Basic | 56,207,205 | 56,807,843 | 56,807,843 | ||||||
| Diluted | 57,959,782 | 57,528,284 | 57,528,284 | ||||||
| Note 1: Each ADS represents two ordinary shares. | |||||||||
| 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 March 31, | ||||||||
| 2018 | 2019 | 2019 | ||||||
| RMB | RMB | USD | ||||||
| Net income | 34,726 | 35,932 | 5,354 | |||||
| Other comprehensive (loss)/income, net of tax of nil: | ||||||||
| Foreign currency translation adjustments | 226 | (512 | ) | (76 | ) | |||
| Other comprehensive (loss)/income | 226 | (512 | ) | (76 | ) | |||
| Comprehensive income | 34,952 | 35,420 | 5,278 | |||||
| Add: comprehensive loss attributable to non-controlling interests | 1,095 | 438 | 65 | |||||
| Comprehensive income attributable to RISE Education Cayman Ltd | 36,047 | 35,858 | 5,343 | |||||
| RISE EDUCATION CAYMAN LTD | ||||||
| RECONCILIATION OF GAAP AND NON-GAAP RESULTS | ||||||
| (in thousands, except ADS data and per ADS data) | ||||||
| Three Months Ended March 31, | ||||||
| 2018 | 2019 | 2019 | ||||
| RMB | RMB | USD | ||||
| Net income | 34,726 | 35,932 | 5,354 | |||
| Share-based compensation ("SBC") | 3,032 | 3,383 | 504 | |||
| IA amortization arising from Bain acquisition | 3,994 | 4,241 | 632 | |||
| Non-GAAP net income | 41,752 | 43,556 | 6,490 | |||
| Add: net loss attributable to non-controlling interests | 1,095 | 438 | 65 | |||
| Non-GAAP net income attributable to RISE Education Cayman Ltd | 42,847 | 43,994 | 6,555 | |||
| Net income | 34,726 | 35,932 | 5,354 | |||
| Add: Depreciation | 7,877 | 10,754 | 1,602 | |||
| Add: Amortization | 5,277 | 5,345 | 796 | |||
| Add: Interest expense | 8,205 | 8,953 | 1,334 | |||
| Add: Income tax expense | 13,993 | 18,706 | 2,787 | |||
| Less: Interest income | 4,206 | 2,574 | 384 | |||
| EBITDA | 65,872 | 77,116 | 11,489 | |||
| SBC | 3,032 | 3,383 | 504 | |||
| Adjusted EBITDA | 68,904 | 80,499 | 11,993 | |||
| Cost of revenues | 125,467 | 154,401 | 23,006 | |||
| Personnel costs | 49,494 | 64,035 | 9,542 | |||
| Rental costs | 40,931 | 51,891 | 7,732 | |||
| Others | 35,042 | 38,475 | 5,733 | |||
| Less: SBC | 450 | 450 | 67 | |||
| Less: IA amortization arising from Bain acquisition | 3,256 | 3,457 | 515 | |||
| Non-GAAP cost of revenues | 121,761 | 150,494 | 22,424 | |||
| Non-GAAP gross profit | 148,368 | 184,532 | 27,496 | |||
| Selling and marketing expenses | 48,522 | 65,661 | 9,784 | |||
| Less: SBC | 614 | 102 | 15 | |||
| Less: IA amortization arising from Bain acquisition | 738 | 784 | 117 | |||
| Non-GAAP selling and marketing expenses | 47,170 | 64,775 | 9,652 | |||
| General and administrative expenses | 54,358 | 61,924 | 9,227 | |||
| Less: SBC | 1,968 | 2,831 | 422 | |||
| Non-GAAP general and administrative expenses | 52,390 | 59,093 | 8,805 | |||
| Operating expense | 102,880 | 127,585 | 19,011 | |||
| Less: SBC | 2,582 | 2,933 | 437 | |||
| Less: IA amortization arising from Bain acquisition | 738 | 784 | 117 | |||
| Non-GAAP operating expense | 99,560 | 123,868 | 18,457 | |||
| Operating income | 41,782 | 53,040 | 7,903 | |||
| SBC | 3,032 | 3,383 | 504 | |||
| IA amortization arising from Bain acquisition | 3,994 | 4,241 | 632 | |||
| Non-GAAP operating income | 48,808 | 60,664 | 9,039 | |||
| Non-GAAP net income per ADS attributable to RISE-basic | 0.76 | 0.77 | 0.12 | |||
| Non-GAAP net income per ADS attributable to RISE-diluted | 0.74 | 0.76 | 0.11 | |||
| ADSs used in calculating net income per ADS-basic | 56,207,205 | 56,807,843 | 56,807,843 | |||
| ADSs used in calculating net income per ADS-diluted | 57,959,782 | 57,528,284 | 57,528,284 | |||
Source: RISE Education Cayman Ltd
