WAFU Stock Price Increased 51.15%: Why It Happened

By Amit Chowdhry ● Mar 31, 2021
  • The stock price of Wah Fu Education Group Ltd (NASDAQ: WAFU) increased by 51.15%. This is why it happened.

The stock price of Wah Fu Education Group Ltd (NASDAQ: WAFU) – a provider of online education and exam preparation services, as well as related training materials and technology solutions for both institutions and individuals – increased by 51.15%. Investors appear to be responding to the company announcing its unaudited financial results for the six months ended September 30, 2020.

Financial Highlights For The 6 Months Ended September 30, 2020

— Revenue increased by 72.1% year-over-year to $4.30 million for the 6 months ended September 30, 2020, from $2.5 million for the same period of the prior fiscal year. And the increase in revenue is primarily attributable to the increased revenue from online education services due to the impact of the COVID-19.

— The gross profit increased by 146.5% to $2.43 million for the 6 ended September 30, 2020, from $0.99 million for the same period of the prior fiscal year. And gross margins were 56.5% and 39.4% for the six months ended September 30, 2020, and 2019, respectively. The increased gross profit was mainly due to (i) the sharply increased revenue from online education service due to the impact of the COVID-19, which had a higher gross margin; (ii) the decreased salary expense for IT service personnel since the Company shifted focus to online education service.

— Income from operations was $0.69 million for the 6 months ended September 30, 2020, compared to loss from operations of $1.04 million for the same period of the prior fiscal year. And operating profit margin was 16.0% for the six months ended September 30, 2020, compared to an operating loss margin of 41.5% for the same period of the prior fiscal year.

— The net income was $0.51 million or, income per share of $0.09 for the six months ended September 30, 2020, compared to net loss of $1.18 million, or loss per share of $0.29, for the same period of the prior fiscal year.

Unaudited Financial Results for the Six Months Ended September 30, 2020

Revenue

— For the 6 months ended September 30, 2020, revenue increased by $1.8 million, or 72.1%, to $4.30 million from $2.5 million for the same period of the prior fiscal year. And the increase in revenue is primarily attributable to the increase in revenue from online education services.

— For the 6 months ended September 30, 2020, revenue from online education services increased by $1.74 million, or 71%, to $4.19 million from $2.45 million for the same period of the prior fiscal year. And the increase was primarily due to an increase in B2B2C revenues. The increase in B2B2C revenues was due to the increased revenue from online continuing education and examination service. Due to the impact of the COVID-19, the daily offline education and teaching activities of colleges and universities across the country were suspended due to government regulations. 

The online courses the company provided during the 6 months ended September 30, 2020, thus increased sharply. And as a consequence, revenue from online education services increased, compared to the same period of the prior fiscal year. The number of courses provided increased by 41,231 from 244,422 courses for the 6 months ended September 30, 2019 to 285,653 courses for the 6 months ended September 30, 2020.

Cost of revenue

Cost of revenue increased by $0.36 million, or 24.2%, to $1.85 million for the 6 months ended September 30, 2020 from $1.49 million for the same period of the prior fiscal year. And the increase in the overall cost of revenue was mainly due to the increased cost of revenue for online education services. Since revenue from the online education services increased, the cooperation fee paid to collaborators increased. And the increase was partially offset by payroll expense due to the decrease of the total number of employees during the six months ended September 30, 2020.

The cost of revenue for online education services increased by $0.34 million, or 22.8%, to $1.83 million for the six months ended September 30, 2020, from $1.49 million for the same period of the prior fiscal year. And the increase in the cost of revenue for online education services was primarily due to increased collaboration fees resulting from the business expansion in Hunan Province. As the total number of adult education courses increased, the collaboration fees paid to the collaborator increased accordingly.

Gross profit

The gross profit increased by $1.44 million, or 146.5%, to $2.43 million for the 6 months ended September 30, 2020, from $0.99 million for the same period of the prior fiscal year. And as a result, the gross margin increased by 17.1 points to 56.5% for the 6 months ended September 30, 2020, from 39.4% for the same period of the prior fiscal year.

And the gross profit for online education services increased by $1.4 million or 148.9% to $2.34 million for the 6 months ended September 30, 2020, from $0.94 million for the same period of the prior fiscal year. And as the online courses we provided during the six months ended September 30, 2020, increased sharply, the revenue from online education services increased compared to the same period of the prior fiscal year. As the operation of our platform remained stable, the cost of online education services like collaboration fees paid to universities, depreciation, and amortization expenses, did not increase exactly in line with an increase in revenue. As a result, the gross margin for online education services increased to 56.0% for the 6 months ended September 30, 2020, from 38.4% for the same period of the prior fiscal year.

Operating expenses

The selling expenses increased by $0.05 million, or 6.6%, to $0.81 million for the 6 months ended September 30, 2020, from $0.76 million for the same period of the prior fiscal year. And the increase was mainly due to the increased effort the company put in marketing in the current period.

The general and administrative expenses decreased by $0.33 million, or 26.2%, to $0.93 million for the six months ended September 30, 2020, from $1.26 million for the same period of the prior fiscal year. And the decrease was primarily because the government claimed the company exempt from social insurance during the six months ended September 30, 2020, due to the impact of COVID-19.

The total operating expenses decreased by $0.28 million, or 13.9%, to $1.74 million for the six months ended September 30, 2020, from $2.02 million for the same period of the prior fiscal year.

Income (loss) from operations

The income from operations was $0.69 million for the 6 months ended September 30, 2020, compared to loss from operations of $1.04 million for the same period of the prior fiscal year. The company realized profit mainly due to the increase of revenue during the 6 months ended September 30, 2020. 

Other income (expenses)

The total other income, including interest income, loss from investments in unconsolidated entity, net of other expenses, were $0.04 million and $0.04 million for the six months ended September 30, 2020 and the same period of the prior fiscal year, respectively.

Income (loss) before income taxes

The income before income taxes was $0.72 million for the 6 months ended September 30, 2020, compared to loss before income taxes of $1 million for the same period of the prior fiscal year.

Net income (loss) and earnings (loss) per share

The net income was $0.51 million for the six months ended September 30, 2020, compared to net loss of $1.18 million for the same period of the prior fiscal year. And net profit margin was 11.9% for the six months ended September 30, 2020, compared to net loss margin of 47.3% for the same period of the prior fiscal year.

After deducting non-controlling interests, net profit attributable to the Company was $0.37 million, or profit of $0.09 basic and diluted share, for the six months ended September 30, 2020. And this compared to net loss of $1.23 million, or loss of $0.29 per basic and diluted share, for the same period of the prior fiscal year.

The weighted average number of shares outstanding was 4,381,033 for the six months ended September 30, 2020, compared to 4,199,336 for the same period of last fiscal year.

Financial Condition

As of September 30, 2020, the company had cash of $9.27 million, compared to $6.83 million as of March 31, 2020. And total working capital was $8.64 million as of September 30, 2020, compared to $7.34 million as of September 30, 2019.

The net cash provided by operating activities was $1.59 million for the six months ended September 30, 2020, compared to net cash provided by operating activities of $1.13 million for the same period last year. Net cash provided by investing activities was $0.68 million for the 6 months ended September 30, 2020, compared to net cash used in investing activities $0.06 million for the same period last year. And net cash used in financing activities was $0.09 million for the 6 months ended September 30, 2020, compared to net cash provided by financing activities $4.89 million for the same period of last year.

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.