Rise Education's Improved Revenue, Income Fail to Impress Wall Street

The stock of the company, which provides English language training in China, closed down 2 percent Friday on lower-than-expected revenue.

Binwei Wang
    May 17, 2019 1:58 PM  PT
Rise Education's Improved Revenue, Income Fail to Impress Wall Street
author: Binwei Wang   

The stock of Rise Education Cayman Ltd (Nasdaq: REDU) closed down 2 percent Friday, at $9.28 per American depositary share, despite posting improved financials for the first quarter.

The Beijing-based company, which provides junior English language training (ELT) in China, said in a statement Thursday evening that its revenue in the three months through March reached $49.9 million. Despite a 24 percent year-over-year improvement, that was still below analysts' expectations. 

Net income, the company said, was $5.4 million, or 10 cents per share, up nearly 2 percent from the same period a year ago.

(Source: Rise Education)

The chief operating officer and chief financial officer of Rise Education, Jiandong Lu, said in the report that the company will continue to invest in selling and marketing in a controlled and targeted manner to attract new students and strengthen word-of-mouth referrals.

"We maintained the pace of our planned capacity expansion which is key to driving long-term sustainable growth, by opening 2 self-owned learning centers and 13 franchised centers during the quarter." Yiding Sun, chief executive officer of Rise, said, "Our goal for 2019 is to leverage our investments in content development, teacher training, and technology to improve our product offerings and enhance business operations."

Rise Education operated 395 learning centers as of March 31, 78 of which were self-owned and 317 were franchised learning centers.

Costs of revenues in the company were $23 million, up 23 percent from a year ago, the company said. It attributed the increase 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. Operating expenses increased 24 percent year-over-year to $19 million, according to the statement.

Looking forward, Rise said it expects to generate revenue in the second quarter in the range of 53.3 million to $54.2 million, representing an increase of between 23 and 25 percent from the second quarter of 2018.