RISE Education Cayman (REDU) Reports Q1 Loss of $0.05 on Revenues of $39.9M

RISE Education Cayman (NASDAQ: REDU) reported Q1 EPS of ($0.05). Revenue for the quarter came in at $39.9 million.

First Quarter of 2021 Financial and Operational Summary

• Total revenues were RMB261.5 million (US$39.9 million) in the first quarter of 2021, compared with RMB109.0 million in the first quarter of 2020.
• Net loss attributable to RISE was RMB24.6 million (US$3.9 million) in the first quarter of 2021, compared with net loss of RMB103.8 million in the first quarter of 2020.
• Non-GAAP net loss attributable to RISE[1] was RMB19.9 million (US$3.0 million) in the first quarter of 2021.
• Adjusted EBITDA[2] loss was RMB5.1 million (US$0.8 million) in the first quarter of 2021, compared with adjusted EBITDA loss of RMB108.0 million in the first quarter of 2020.
• Students in class[3] for Rise regular courses (including Rise Start and Rise On programs) were 46,441 as of March 31, 2021, a decrease of 6,144 from 52,585 as of March 31, 2020.
• New students enrolled[4] for Rise regular courses in the first quarter of 2021 were 5,846, compared with 1,507 for the first quarter of 2020. New students enrolled for other Rise courses (including Rise Up, Can-Talk, other Rise online courses, STEAM, courses provided by The Edge learning centers and light courses) were 44,262 in the first quarter of 2021, compared with 32,551 for the first quarter of 2020.
• The total number of the Company's learning centers as of March 31, 2021 was 525, consisting of 95 self-owned (including two operated by The Edge) and 430 franchised learning centers.

Ms. Lihong Wang, Chairwoman and Chief Executive Officer of RISE, commented, "We started 2021 off on a positive note with the business recovering strongly compared with the prior year. Total revenue more than doubled year-over-year and we generated positive operational cash flow in the first quarter. Although there was resurgence of COVID-19 in certain areas of northern China, effective containment initiatives quickly brought those sporadic outbreaks under control. Our OMO model continued to enable us to switch between online and offline courses seamlessly when certain learning centers had to suspend offline operations, which again proved to be a highly effective way for us to stabilize the business in any affected areas. During the quarter, all learning centers were in full operation, except for most of our learning centers in Beijing, and we saw both yearly and sequential growth and improvement in key operation metrics including new student enrollments, students in class and retention rates. We continued to solidify our leading position in the after-school educational industry and demonstrated our strong ability to resume our growth trajectory in-line with strategic plans. Although we saw a decline in the total number of students in class for Rise regular courses in the first quarter, this was mainly due to the temporary closing of learning centers in Beijing. We believe this is temporary and expect more of our learning centers in Beijing to reopen by the end of the second quarter of this year. As life returns to normalcy with COVID-19 well under control in China, we expect our business to get back on track."

"To proactively navigate the challenging environment of the domestic education market and drive sustainable long-term development for our business, we are now working to fully upgrade Rise into a multiform aptitude training provider. In addition to our core ELT courses and other existing courses, we have also launched two new brands to complete our aptitude training ecosystem – Hiyeah, a brand focusing on children's social-emotional development and related family education support, and WhySTEAM, another brand focusing on STEAM-oriented aptitude development for children. We expect to launch certain Hiyeah and WhySTEAM offline learning centers in the second quarter of this year. Going forward, we will continue to enhance our diversified product offerings, catering to the needs of aptitude education, and further optimize our OMO strategy to deliver sustainable growth to benefit our shareholders."

Mr. Warren Wang, Chief Financial Officer of RISE, added, "We saw significant improvement in both our top and bottom lines on a yearly basis during the first quarter of 2021. Total revenue reached RMB261.5 million, up 140.0% from the same period of 2020. As a result of our continuous cost control initiatives, net loss attributable to RISE narrowed 76.3% year-over-year to RMB24.6 million. During the quarter, all our learning centers were in full offline operation, except for most of our learning centers in Beijing. Only one of our self-owned learning centers in Beijing re-opened in March after the temporary closing of all our learning centers in Beijing since late January as a result of the resurgence of COVID-19. New student enrollments for Rise regular courses were 5,846, compared with 8,023 for the preceding quarter and 1,507 for the first quarter of 2020. The sequential decline was mainly due to the strong seasonality in the ELT market, where student enrollments are usually lower during the Chinese New Year season in the first quarter, as well as the recently introduced regulatory restrictions. As a result, new enrollments for Rise regular courses in Beijing saw a quarter-over-quarter decline. However, new enrollments for Rise regular courses in all cities other than Beijing increased quarter-over-quarter despite the seasonal factor. We saw similar trends in students in class for Rise regular courses, which also picked up on a sequential basis except in learning centers in Beijing. In addition, the retention rate in all cities other than Beijing significantly improved and returned to pre-COVID levels. These results demonstrated the strong growth momentum of Rise regular courses after operations returned to normal in these areas. As a result, we registered RMB77.2 million (US$11.8 million) of operational cash inflow in the first quarter of 2021, compared with RMB82.4 million and RMB108.5 million of cash outflows in the first quarter of 2020 and fourth quarter of 2020, respectively. As of March 31, 2021, our combined cash and cash equivalents and restricted cash improved to RMB692.9 million (US$105.8 million). Moving forward, we will continue to execute our proven OMO strategy to drive long-term growth by fully leveraging our strong offline presence and multi-channel marketing capabilities. We expect the number of students in class to be back on track by the end of the second quarter of this year."

Business Outlook

We believe that we are well-positioned to navigate the rapidly evolving market environment with our strategy to transform Rise into a multiform aptitude training provider and capture potential opportunities. Our learning centers in all cities other than Beijing have been in full offline operation mode so far in the second quarter of 2021 and seen strong growth momentum. Due to local containment policies and restrictions in Beijing, only one center reopened in March while the other learning centers remained closed for the quarter. We expect more of our learning centers in Beijing to resume offline operations by the end of the second quarter, at a pace regulated by the government. Our flexibility to switch seamlessly between the online and offline models and our ability to manage both operations concurrently have helped us to mitigate risks and navigate these challenging times. For our new business expansion, we expect to open Hiyeah's first offline learning center in June 2021. Back in March, we launched three WhySTEAM learning centers in Beijing and are in preparations to open three self-owned learning centers in Shanghai and one franchised learning center in Zhengzhou by the end of the second quarter of this year. In addition, we have signed a memorandum of understanding to acquire certain franchised learning centers in Chengdu, which have a proven track record of solid performance. Taking all these into account, we reaffirm our revenue guidance for the full year of 2021 to be in the range of RMB1,420 million to RMB1,730 million.

For earnings history and earnings-related data on RISE Education Cayman (REDU) click here.

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