Tarena Int'l (TEDU) Reports Q3 Loss of $0.17, Revenues Beat

Tarena Int'l (NASDAQ: TEDU) reported Q3 EPS of ($0.17), versus $0.00 reported last year. Revenue for the quarter came in at $88.8 million versus the consensus estimate of $58.85 million.

Third Quarter 2020 Highlights

• Net revenues decreased by 5.8% year-over-year to RMB620.8 million (US$88.8 million), from RMB659.2 million in the same period of 2019.
• Net revenue from adult education business, which represented 53.4% of the total net revenues, decreased by 38.8% year-over-year to RMB331.2 million (US$47.4 million), from RMB541.5 million in the same period of 2019.
• Net revenue from K-12 education business, which represented 46.6% of the total net revenues, increased by 146.0% year-over-year to RMB289.6 million (US$41.4 million), from RMB117.7 million in the same period of 2019.
• Gross profit decreased by 6.4% year-over-year to RMB350.0 million (US$50.1 million), from RMB374.1 million in the same period of 2019.
• Gross profit margin decreased by 0.4% year-over-year to 56.4%, from 56.8% in the same period of 2019.
• Operating loss decreased by 52.6% to a loss of RMB56.6 million (US$8.1 million), from a loss of RMB119.4 million in the same period of 2019.
• Non-GAAP operating loss, which excluded share-based compensation expenses, was RMB49.2 million (US$7.0 million), compared to non-GAAP operating loss of RMB95.1 million in the same period of 2019.
• Net loss was RMB63.9 million (US$9.1 million), compared to net loss of RMB110.0 million in the same period of 2019.
• Non-GAAP net loss, which excluded share-based compensation expenses, was RMB56.5 million (US$8.1 million), compared to non-GAAP net loss of RMB85.7 million in the same period of 2019.
• Basic and diluted loss per American Depositary Share ("ADS") was RMB1.16 (US$0.17).
• Cash, cash equivalents and time deposits, including current and non-current, and restricted cash totaled RMB374.7 million (US$55.0 million) as of September 30, 2020, compared to RMB621.2 million as of December 31, 2019.
• Net cash outflow from operating activities in the third quarter of 2020 was RMB11.7 million (US$1.7 million). Capital expenditures in the third quarter of 2020 were RMB13.0 million (US$1.9 million).
• Deferred revenue totaled RMB1,963.4 million (US$288.3 million) as of September 30, 2020, compared to RMB1,586.0 million as of December 31, 2019, representing an increase of 23.8%.
• Total student enrollments in adult education business, defined as the total number of courses enrolled in by students during that period, including multiple courses enrolled in by the same student, in the third quarter of 2020 decreased by 29.4% year-over-year to 38,400.
• Total number of learning centers in adult education decreased to 106 as of September 30, 2020, from 134 as of September 30, 2019.
• Total student enrollments in K-12 education business, defined as the total number of students who attended at least one paid lesson during that period or have deposit balances in their accounts at the end of that period, in the third quarter of 2020 reached 122,800, increasing by 62.0%, compared to the student enrollments of 75,800 in the same period of 2019.
• Total number of learning centers in K-12 education increased to 236 as of September 30, 2020, from 209 as of September 30, 2019.

"As the COVID-19 pandemic has been properly controlled and contained in China, our adult and K-12 learning centers have been re-opened gradually and resumed in-class lessons since June 2020. Despite our net revenues dropping by 5.8% to RMB620.8 million in the third quarter of this year, from RMB659.2 million in the same period of last year, our overall operating loss decreased from a loss of RMB119.4 million in the third quarter of 2019 to a loss of RMB56.6 million in the same period of 2020. These were attributable to the stringent costs and expenses control measures which we have been implementing since the beginning of this year. The net loss in the third quarter of 2020 was RMB63.9 million, as compared to the net loss of RMB110.0 million in the same period of 2019. In the third quarter of this year, we were grateful and excited to see an encouraging growth in our K-12 education business. Compared to the figures in the third quarter of last year, our K-12 education business achieved 146.0% increase in net revenues and 62.0% increase in student enrollments in the third quarter of 2020. The gross margin of K-12 education was 39.3% in the third quarter of this year, compared to the gross margin of -4.1% in the same period of last year," remarked Mr. Yongji Sun, the CEO of Tarena.

"Looking ahead, our strategies are two-folded. Firstly, we will continue to uplift efficiency of our operation to improve our margins. Secondly, in order to strengthen our market leading position and expand our market share, we will focus on further streamlining our product lines, optimizing online and offline programs and curriculums, and further improving our tutoring qualities and user experience," concluded Mr. Sun.

"Our cash and cash equivalents and time deposits, including current and non-current, and restricted cash, decreased by 39.7%, from RMB621.2 million as of December 31, 2019 to RMB374.7 million (US$55.0 million) as of September 30, 2020. The decrease in cash and cash equivalents and time deposits, including current and non-current, and restricted cash was mainly due to net cash used in operating activities which mainly are composed of net loss of RMB676.5 million incurred in the first nine months of 2020, and was partially offset by the increase in total deferred revenue of RMB377.4 million. Net cash outflow from operating activities in the third quarter of 2020 was RMB11.7 million (US$1.7 million), whilst net cash outflow from operating activities in the first half of 2020 was RMB183.6 million," said Wing Kee Lau, the CFO of Tarena.

Business Outlook

Based on the Company's current estimates, total net revenues for the fourth quarter of 2020 are expected to be in the range of RMB540 million and RMB570 million, after taking into consideration the seasonal fluctuation factor and likely continued impact of the COVID-19.

This guidance is based on the current market conditions and reflects the Company's current and preliminary estimates of market and operating conditions, which are subject to change, particularly as to the potential impact of COVID-19 on the economy in China and elsewhere in the world.

For earnings history and earnings-related data on Tarena Int'l (TEDU) click here.

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