Lixiang Education Holding Co., Ltd. (NASDAQ: LXEH), a provider of international and vocational education services in China, disclosed its unaudited financial results for the first half of 2024 today. The company experienced a significant decrease in net revenues, reporting 15.3 million (US$2.1 million) for the six months ended June 30, 2024, compared to RMB 25.2 million for the same period the previous year.
The drop in revenue was attributed to a decline in tuition and accommodation income, particularly from its vocational education programs at Langfang School, which saw a 36.4% decrease due to a higher number of graduates than new student enrollments. High school education revenues also fell by 80.9% as the company disposed of Qingtian International School at the end of 2023.
The company also reported a decrease in sales of meals, uniforms, and learning materials, as Liandu WFOE ceased these services in 2024. Other revenue streams, including course design and consulting services, partially offset the overall decline.
Cost of revenues decreased to RMB 15.1 million (US$2.1 million), primarily due to lower personnel costs following the disposal of Qingtian International School. As a result, gross profit for the first half of 2024 was RMB 0.3 million, a significant reduction from RMB 5.4 million for the same period in 2023.
Operating expenses also saw a decrease, with general and administrative expenses dropping by RMB 2.0 million. Net other income increased, mainly due to grants received by Langfang School. The company reported a net loss of RMB 8.6 million (US$1.2 million) for the first half of 2024, slightly higher than the net loss of RMB 8.2 million for the same period in 2023.
Basic and diluted net loss per share attributable to ordinary shareholders was RMB 0.07, while per ADS, it was RMB 0.74. The company finished the period with RMB 230.6 million (US$31.7 million) in cash, an increase from the end of 2023.
Lixiang Education also announced a contractual dispute resolution for Langfang School, which will not need to pay rental expenses for a specified period but must vacate the disputed premises by July 30, 2024. The school has since entered into a new lease agreement.
In other recent news, Lixiang Education Holding Co. Ltd. has reported a significant change in the ratio of its American Depositary Shares (ADS) to Class A ordinary shares. This alteration, which aims to increase the ADS’s trading liquidity on the NASDAQ, was detailed in a Form 6-K filed with the U.S. Securities and Exchange Commission (SEC). Prior to this adjustment, one ADS represented two Class A ordinary shares, but it will now represent eight Class A ordinary shares, implying a recalibration of the ADS value to reflect this new ratio.
It’s important to note that this change does not impact Lixiang Education’s underlying equity value or market capitalization. Instead, it’s a technical adjustment to the structure of the trading instrument. While the company hasn’t provided specific details on the implications for current ADS holders, such changes typically affect the trading price proportionally.
InvestingPro Insights
Lixiang Education’s recent financial results align with several key metrics and trends identified by InvestingPro. The company’s market capitalization stands at a modest $3.27 million, reflecting its current financial challenges. Despite the recent setbacks, InvestingPro data shows that Lixiang Education has experienced a significant 21.63% return over the last week, indicating some short-term investor optimism.
InvestingPro Tips highlight that Lixiang Education holds more cash than debt on its balance sheet, which is consistent with the company’s reported increase in cash position to RMB 230.6 million (US$31.7 million) at the end of the period. This cash reserve could provide some financial flexibility as the company navigates its current challenges.
Another relevant InvestingPro Tip notes that the company is trading at a low Price / Book multiple of 0.15, which may interest value-oriented investors. However, it’s important to consider that Lixiang Education is not profitable over the last twelve months, with a negative operating income margin of -170.49% for the last twelve months as of Q4 2023.
For readers interested in a more comprehensive analysis, InvestingPro offers 13 additional tips for Lixiang Education, providing a deeper understanding of the company’s financial health and market position.
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