Stock in Rise Education Tumbles 7% Despite Revenue, Income Growth

Revenue growth of 18% failed to impress investors, as regulation concerns continue to trouble the education market.

Anthony Russo
    Nov 15, 2019 3:05 PM  PT
Stock in Rise Education Tumbles 7% Despite Revenue, Income Growth
author: Anthony Russo   

The stock in Rise Education Cayman Ltd. (Nasdaq: REDU) plunged nearly 7% to $7.03 per American depositary share on Friday despite improved results in the third quarter.

The company, which provides English language training (ELT) in China, said in a statement after the markets closed on Thursday that its revenue reached $57.5 million, up 18% year-over-year. Net income was $5.5 million in the third quarter, or 10 cents per ADS, compared with $4.8 million, or 8 cents per ADS, a year ago.

In July, the Chinese government tightened regulations on after-school online training programs, as state-run news media Xinhua reported. 

Yiding Sun, the chief executive officer and director of Rise, noted in a conference call with analysts, "The challenging economic and regulatory environment is affecting every online and offline educational player in the market. We estimate the impact that the government regulations would have on our business and the parents' reaction to the tuition installment payments early this year."

He added, "We're pleased with our ability to rapidly respond to these challenges, which leads to the solid initial result."

In the third quarter, Rise said it had 354 students enrolled in its online courses. Overall, it reported 14,700 student enrollments for the quarter, which was up 15% year-over-year.

Launched in 2007, Rise offers courses in math, science, social science and language arts, with a focus on English language. The K-12 ELT provider operated 87 self-owned learning centers as of September.

The company also said that it has completed its $10 million repurchase program during the quarter, launched in November 2018. Rise said it repurchased 1.2 million ADSs priced at $8.66 apiece.

Earlier this year, Rise launched a one-stop app to help improve learning experience and facilitate communication between teachers, parents and students.

Going forward, the company said it expects to generate revenue in the range of $58.6 million to $59.6 million in the fourth quarter, representing year-over-year growth of between 16% and 18%.