RISE Education Announces Second Quarter 2021 Unaudited Financial Results - Form 6-K

RISE Education Announces Second Quarter 2021 Unaudited Financial Results

BEIJING, January 11, 2022 - RISE Education Cayman Ltd ("RISE" or the "Company") (NASDAQ: REDU), today announced its unaudited financial results for the second quarter ended June 30, 2021.

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 RMB6.4566 to US$1.00, the noon buying rate in effect on June 30, 2021 in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or USD amounts referred to could be converted into USD or RMB, as the case may be, at any particular rate or at all. For analytical presentation, all percentages are calculated using the numbers presented in the financial statements contained in this earnings release.

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 the table at the end of this earnings release entitled "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 and non-GAAP net income/(loss) 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/(loss) 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 operatingincome/(loss), Non-GAAP operating margin, EBITDA, adjusted EBITDA, non-GAAP net income/(loss) attributable to RISE, and non-GAAP basic and diluted net income/(loss) 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/(loss) adds back share-based compensation expenses and amortization of certain intangible assets acquired as part of the 2013 acquisition. Each of non-GAAP operatingexpenses, 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/(loss) 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."

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 China and government policies and regulations relating to its corporate structure, business and industry and their potential impact on its future business development, financial condition and results of operations. All information provided in this press release is as of the date hereof, and RISE undertakes no obligation to update any forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although RISE believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that its expectations will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results. Further information regarding risks and uncertainties faced by RISE is included in RISE's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F for the year ended December 31, 2020.

Investor Relations Contact

Investor Relations

RISE Education

Email: [email protected]

Tel: +86 (10) 8559-9191

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RISE EDUCATION CAYMAN LTD

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

		As of
		December 31, 2020			June 30, 2021			June 30, 2021
		RMB			RMB			USD
ASSETS
Current assets:
Cash and cash equivalents			554,620				510,775				79,109
Restricted cash			84,564				35,577				5,510
Accounts receivable, net			2,281				8,833				1,368
Amounts due from related parties			733				219				34
Inventories			7,814				8,293				1,284
Prepaid expenses and other current assets			94,556				74,557				11,548
Total current assets			744,568				638,254				98,853
Property and equipment, net			107,537				96,389				14,929
Intangible assets, net			185,647				177,864				27,548
Goodwill			659,255				656,345				101,655
Deferred tax assets			34,241				50,047				7,751
Other non-current assets			55,853				86,797				13,443
Operating lease right-of use assets			639,304				598,678				92,723
Total assets			2,426,405				2,304,374				356,902
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term loan			226,744				20,984				3,250
Accounts payable			11,028				9,853				1,526
Accrued expenses and other current liabilities			164,193				168,504				26,098
Deferred revenue and customer advances			563,736				559,482				86,653
Income taxes payable			5,556				11,912				1,845
Current portion of operating lease liabilities			197,098				199,745				30,936
Total current liabilities			1,168,355				970,480				150,308
Long-term loan			191,397				384,873				59,609
Deferred revenue and customer advances			38,204				37,522				5,811
Deferred tax liabilities			24,011				19,524				3,024
Other non-current liabilities			50,447				58,221				9,017
Operating lease liabilities, non-current portion			452,485				403,649				62,517
Total liabilities			1,924,899				1,874,269				290,286
Shareholders' equity:
Ordinary shares			6,959				6,964				1,079
Additional paid-in capital			603,173				608,234				94,203
Statutory reserves			105,357				105,357				16,318
Accumulated deficit			(260,019	)			(337,291	)			(52,242	)
Accumulated other comprehensive income			39,642				38,958				6,037
Total Rise Education Cayman Ltd shareholders' equity			495,112				422,222				65,395
Non-controlling interests			6,394				7,883				1,221
Total equity			501,506				430,105				66,616
Total liabilities, non-controlling interests and shareholders' equity			2,426,405				2,304,374				356,902

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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			Six Months Ended June 30,
		June 30, 2020			March 31, 2021			June 30, 2021			June 30, 2021			2020			2021			2021
		RMB			RMB			RMB			USD			RMB			RMB			USD
Revenues			164,990				261,541				256,653				39,751				273,979				518,194				80,258
Educational programs			151,465				229,461				223,450				34,609				253,454				452,911				70,147
Franchise revenues			12,935				31,806				29,624				4,588				19,044				61,430				9,514
Others			590				274				3,579				554				1,481				3,853				597
Cost of revenues			(141,582	)			(162,238	)			(163,664	)			(25,349	)			(284,150	)			(325,902	)			(50,476	)
Gross profit/(loss)			23,408				99,303				92,989				14,402				(10,171	)			192,292				29,782
Selling and marketing expenses			(42,474	)			(64,336	)			(58,994	)			(9,137	)			(85,695	)			(123,330	)			(19,101	)
General and administrative expenses			(54,821	)			(69,753	)			(85,001	)			(13,165	)			(109,419	)			(154,754	)			(23,968	)
Operating loss			(73,887	)			(34,786	)			(51,006	)			(7,900	)			(205,285	)			(85,792	)			(13,287	)
Interest income			4,055				2,780				2,828				438				7,907				5,608				869
Interest expense			(5,883	)			(5,493	)			(4,821	)			(747	)			(12,674	)			(10,314	)			(1,597	)
Foreign currency exchange gain/(loss)			(17	)			123				(59	)			(8	)			(96	)			64				8
Other income, net			2,183				10,611				2,816				436				5,171				13,427				2,080
Income before income tax expense			(73,549	)			(26,765	)			(50,242	)			(7,781	)			(204,977	)			(77,007	)			(11,927	)
Income tax benefit			11,029				1,225				-				-				30,757				1,225				190
Net loss			(62,520	)			(25,540	)			(50,242	)			(7,781	)			(174,220	)			(75,782	)			(11,737	)
Add: net (income)/loss attributable to non-controlling interests			4,485				932				(2,420	)			(375	)			12,348				(1,488	)			(231	)
Net loss attributable to RISE Education Cayman Ltd			(58,035	)			(24,608	)			(52,662	)			(8,156	)			(161,872	)			(77,270	)			(11,968	)
Net loss per ordinary share:
Basic			(0.51	)			(0.22	)			(0.47	)			(0.07	)			(1.44	)			(0.68	)			(0.11	)
Diluted			(0.51	)			(0.22	)			(0.47	)			(0.07	)			(1.44	)			(0.68	)			(0.11	)
Net loss per ADS (Note 1):
Basic			(1.03	)			(0.44	)			(0.93	)			(0.14	)			(2.87	)			(1.37	)			(0.21	)
Diluted			(1.03	)			(0.44	)			(0.93	)			(0.14	)			(2.87	)			(1.37	)			(0.21	)
Shares used in net loss per ordinary share computation:
Basic			112,756,844				112,953,440				112,985,320				112,985,320				112,756,577				112,884,655				112,884,655
Diluted			112,756,844				112,953,440				112,985,320				112,985,320				112,756,577				112,884,655				112,884,655
ADSs used in net loss per ADS computation:
Basic			56,378,422				56,476,720				56,492,660				56,492,660				56,378,289				56,422,328				56,422,328
Diluted			56,378,422				56,476,720				56,492,660				56,492,660				56,378,289				56,422,328				56,422,328

Note 1: Each ADS represents two ordinary shares.

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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			Six Months Ended June 30,
		June 30, 2020			March 31, 2021			June 30, 2021			June 30, 2021			2020			2021			2021
		RMB			RMB			RMB			USD			RMB			RMB			USD
Net loss			(62,520	)			(25,540	)			(50,242	)			(7,781	)			(174,220	)			(75,782	)			(11,737	)
Other comprehensive (loss)/income, net of tax of nil:
Foreign currency translation adjustments			(31	)			(374	)			(310	)			(48	)			220				(684	)			(106	)
Other comprehensive (loss)/income			(31	)			(374	)			(310	)			(48	)			220				(684	)			(106	)
Comprehensive loss			(62,551	)			(25,914	)			(50,552	)			(7,829	)			(174,000	)			(76,466	)			(11,843	)
Add: comprehensive (income)/loss attributable to non-controlling interests			4,485				932				(2,420	)			(375	)			12,348				(1,488	)			(231	)
Comprehensive loss attributable to RISE Education Cayman Ltd			(58,066	)			(24,982	)			(52,972	)			(8,204	)			(161,652	)			(77,954	)			(12,074	)

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RISE EDUCATION CAYMAN LTD

RECONCILIATION OF GAAP AND NON-GAAP RESULTS

(in thousands, except ADS data and per ADS data)

		Three Months Ended			Six Months Ended June 30,
		June 30, 2020			March 31, 2021			June 30, 2021			June 30, 2021			2020			2021			2021
		RMB			RMB			RMB			USD			RMB			RMB			USD
Net loss			(62,520	)			(25,540	)			(50,242	)			(7,781	)			(174,220	)			(75,782	)			(11,737	)
Share-based compensation ("SBC")			1,935				669				3,598				557				1,893				4,267				661
IA amortization arising from Bain acquisition			4,456				4,075				4,076				632				8,843				8,151				1,262
Non-GAAP net loss			(56,129	)			(20,796	)			(42,568	)			(6,592	)			(163,484	)			(63,364	)			(9,814	)
Add: net (income)/ loss attributable to non-controlling interests			4,485				932				(2,420	)			(375	)			12,348				(1,488	)			(231	)
Non-GAAP net loss attributable to RISE Education Cayman Ltd			(51,644	)			(19,864	)			(44,988	)			(6,967	)			(151,136	)			(64,852	)			(10,045	)
Net loss			(62,520	)			(25,540	)			(50,242	)			(7,781	)			(174,220	)			(75,782	)			(11,737	)
Add: Depreciation			17,465				10,797				11,809				1,829				30,111				22,606				3,501
Add: Amortization			7,834				7,481				7,717				1,195				15,712				15,198				2,354
Add: Interest expense			5,883				5,493				4,821				747				12,674				10,314				1,597
Add: Income tax benefit			(11,029	)			(1,225	)			-				-				(30,757	)			(1,225	)			(190	)
Less: Interest income			4,055				2,780				2,828				438				7,907				5,608				869
EBITDA			(46,422	)			(5,774	)			(28,723	)			(4,448	)			(154,387	)			(34,497	)			(5,344	)
SBC			1,935				669				3,598				557				1,893				4,267				661
Adjusted EBITDA			(44,487	)			(5,105	)			(25,125	)			(3,891	)			(152,494	)			(30,230	)			(4,683	)
Cost of revenues			141,582				162,238				163,664				25,349				284,150				325,902				50,476
Personnel costs			61,980				72,007				71,950				11,144				127,839				143,957				22,296
Rental costs			49,595				60,384				60,789				9,415				100,468				121,173				18,767
Others			30,007				29,847				30,925				4,790				55,843				60,772				9,413
Less: SBC			320				192				194				30				1,019				386				60
Less: IA amortization arising from Bain acquisition			3,632				3,322				3,322				515				7,208				6,644				1,029
Non-GAAP cost of revenues			137,630				158,724				160,148				24,804				275,923				318,872				49,387
Non-GAAP gross profit/(loss)			27,360				102,817				96,505				14,947				(1,944	)			199,322				30,871
Selling and marketing expenses			42,474				64,336				58,994				9,137				85,695				123,330				19,101
Less: SBC			403				(25	)			(282	)			(44	)			598				(307	)			(48	)
Less: IA amortization arising from Bain acquisition			824				753				754				117				1,635				1,507				233
Non-GAAP selling and marketing expenses			41,247				63,608				58,522				9,064				83,462				122,130				18,916
General and administrative expenses			54,821				69,753				85,001				13,165				109,419				154,754				23,968
Less: SBC			1,212				502				3,686				571				276				4,188				649
Non-GAAP general and administrative expenses			53,609				69,251				81,315				12,594				109,143				150,566				23,319

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Operating expense			97,295				134,089				143,995				22,302				195,114				278,084				43,069
Less: SBC			1,615				477				3,404				527				874				3,881				601
Less: IA amortization arising from Bain acquisition			824				753				754				117				1,635				1,507				233
Non-GAAP operating expense			94,856				132,859				139,837				21,658				192,605				272,696				42,235
Operating loss			(73,887	)			(34,786	)			(51,006	)			(7,900	)			(205,285	)			(85,792	)			(13,287	)
Add: SBC			1,935				669				3,598				557				1,893				4,267				661
Add: IA amortization arising from Bain acquisition			4,456				4,075				4,076				632				8,843				8,151				1,262
Non-GAAP operating loss			(67,496	)			(30,042	)			(43,332	)			(6,711	)			(194,549	)			(73,374	)			(11,364	)
Non-GAAP net loss per ADS attributable to RISE-basic (Note 1)			(0.92	)			(0.35	)			(0.80	)			(0.12	)			(2.68	)			(1.15	)			(0.18	)
Non-GAAP net loss per ADS attributable to RISE-diluted (Note 1)			(0.92	)			(0.35	)			(0.80	)			(0.12	)			(2.68	)			(1.15	)			(0.18	)
ADSs used in calculating net loss per ADS-basic (Note 1):			56,378,422				56,476,720				56,492,660				56,492,660				56,378,289				56,422,328				56,422,328
ADSs used in calculating net loss per ADS-diluted (Note 1):			56,378,422				56,476,720				56,492,660				56,492,660				56,378,289				56,422,328				56,422,328

Note 1: Each ADS represents two ordinary shares.

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