Amid being labeled as the ‘Worst Publicly Traded Education Company’ and the ‘Most Blatant Chinese Stock Fraud Since 2011’ the firm has performed rather well.
Financial result release. Image credit: Austin Distel/Unsplash
►Net revenues up by 382% YoY.
►The number of paid users reach 774,000.
►The expected net income in the second quarter of 2020 to be between CNY 1.526 billion and CNY 1.556 billion.
The NYSE-listed online education firm, GSX Techedu today released its first-quarter financial results for the year 2020. The report shows that the firm managed to rack up a net income of CNY 1.298 billion, an increase of 336.6% year-on-year and an increase of 488% year-on-year of its core K12 business.
The increase in total net income was mainly due to the increase in enrollment of paid K-12 courses. The number of registered users enrolled in paid courses increased by 307.4% over the same period last year, reaching 774,000.
As of March 31, 2020, the company had CNY 565.2 million of cash and cash equivalents, CNY 1,003.1 million of short-term investment and CNY 1,169 million of long-term investments, compared with CNY 74 million of cash and cash equivalents, CNY 1,473.5 million short-term investments and CNY 1,188.3 million long-term investments as of December 31, 2019. According to the report, the increase of cash and cash equivalents is mainly due to the maturity of short-term wealth management investments in the first quarter of 2020.
According to the current estimates of the company, the total net income in the second quarter of 2020 is expected to be between CNY 1.526 billion and CNY 1.556 billion, an increase of 331.4% to 339.9% year-on-year.
The company's board of directors approved a stock repurchase plan, under which the company can repurchase up to USD 150 million of stocks, valid until May 6, 2022. The company plans to fund the repurchase from its existing cash balance and recovery of wealth management products.
The current results and the estimates for the coming quarter look quite promising for a company that has had a turbulent two months or so. The firm was accused multiple times first by Grizzly research for financial fraud and then later by Citron research, a well-known short-selling agency, for forging 40% of registered users and falsifying its financial situation through undisclosed affiliates.
After Luckin Coffee’s huge transaction fraud was exposed, and Chinese education giant TAL’s employee conspired with an external supplier to falsify the company’s sales revenue by forging contracts and other documents, the Chinese stock market encountered a crisis of trust.
Recently, as many as 16 US law firms initiated a class action to investigate the recently USD 10 billion valued Chinese education company, for exaggerating profitability. The survey focused on whether the company overstated indicators such as profitability, income, student enrollment, and teacher qualifications, or did not disclose information related to investors.
During the past two months, the firm saw its shares rise and fall due to various reasons as mentioned above. As of yesterday's close, the share price of GSX was reported at USD 39.68, compared with less than USD 10 when it first landed in US stocks in June 2019. Since then the stock price has quadrupled. In February this year, the stock price reached a historical high of USD 45.42.
Citron Research yesterday tweeted saying that it can't wait for GSX Techedu earnings so it can follow up with the ‘truth’ on Thursday.