Q&K Announces First Half of Fiscal Year 2020 Unaudited Financial Results
QK International Group Limited (NASDAQ: QK) reported its unaudited financial results for the six months ending March 31, 2020. The company achieved net revenues of RMB 627.1 million (US$ 88.6 million), up 6.5% year-over-year. However, it recorded a net loss of RMB 416.8 million (US$ 58.9 million), worsening from RMB 301.5 million in the prior year. EBITDA was negative RMB 237.7 million, reflecting increased operating costs amid the COVID-19 pandemic. The occupancy rate fell to 87.7%, down from 90.9% in the previous year. The company plans to streamline operations and optimize asset quality.
- Net revenues increased by 6.5% to RMB 627.1 million (US$ 88.6 million) from RMB 588.6 million in the same period of FY 2019.
- Occupancy rate after discounts improved to 21.3%, up 70 basis points from 20.6% in the same period of FY 2019.
- Rental service revenues increased by 5.8% to RMB 555.7 million (US$ 78.5 million), driven by higher leased-out rental unit nights.
- Net loss worsened to RMB 416.8 million (US$ 58.9 million), compared to RMB 301.5 million in the same period of FY 2019.
- EBITDA was negative RMB 237.7 million (negative US$ 33.6 million), an increase from negative RMB 151.9 million in the same period of FY 2019.
- Impairment losses increased significantly to RMB 250.0 million (US$ 35.3 million), up from RMB 20.6 million in the same period of FY 2019.
SHANGHAI, China, Sept. 30, 2020 (GLOBE NEWSWIRE) -- Q&K International Group Limited (NASDAQ: QK) (“Q&K” or the “Company”), a leading technology-driven long-term apartment rental platform in China, today announced its unaudited financial results for the six months ended March 31, 2020.
First Half of Fiscal Year 2020 Financial Highlights
- Net revenues were RMB627.1million (US
$88.6 million ), an increase of6.5% from RMB588.6 million in the same period of fiscal year 2019.
- Net loss attributable to the Company was RMB416.8 million (US
$58.9 million ), compared to RMB301.5 million in the same period of fiscal year 2019.
- EBITDA1(Non-GAAP) was negative RMB237.7 million (negative US
$33.6 million ), compared to negative RMB151.9 million in the same period of fiscal year 2019.
- Adjusted EBITDA1(Non-GAAP) was negative RMB72.4 million (US
$10.2 million ), a decrease of22.4% from negative RMB93.3 million in the same period of fiscal year 2019.
First Half of Fiscal Year 2020 Operational Highlights
- Number of rental units contracted2 was 98,379 as of March 31, 2020, compared to 96,061 as of March 31, 2019.
- Number of available rental units3 was 96,378 as of March 31, 2020, compared to 91,640 as of March 31, 2019.
- Number of occupied rental units4 was 76,724 as of March 31, 2020, compared to 86,042 as of March 31, 2019.
- Period-average occupancy rate5 was
87.7% , compared to90.9% in the same period of fiscal year 2019.
- Average month-end occupancy rate6 was
88.4% , compared to92.6% in the same period of fiscal year 2019.
- Rental spread margin before discount for rental prepayment7 was
22.9% , compared to25.7% in the same period of fiscal year 2019.
- Rental spread margin after discount for rental prepayment8 was
21.3% , compared to20.6% in the same period of fiscal year 2019.
Mr. Chengcai Qu, Chief Operating Officer of Q&K, commented, “We are pleased that we achieved reasonable growth during the first half of fiscal year 2020 while experiencing challenges due to COVID-19 pandemic. During this period, we adopted a defensive strategy after a prudent assessment of the broader macroeconomic downturn by consolidating our internal resources, further improving our operating efficiencies and focusing on asset quality improvement rather than aggressive expansion. During the period, our average month-end occupancy rate was
The COVID-19 pandemic presents a great challenge to China’s apartment rental industry, however, the fundamental drivers of its long-term growth remain intact. We continue to focus on optimizing asset quality and streamlining our corporate structure to weather the negative impact of the pandemic. Though the pandemic impacted our revenue growth in the short term, we are confident that the measures taken will have a positive effect on the Company’s development in the long run."
First Half of Fiscal Year 2020 Financial Results
Net revenues increased by
- Rental service revenues increased by
5.8% to RMB555.7 million (US$78.5 million ) from RMB525.1 million in the same period of fiscal year 2019, driven by an increase in leased-out rental unit nights, partially offset by a decrease in average monthly rental after discount for rental prepayment due to COVID-19 pandemic.
- Net revenues from value-added services and others increased by
12.3% to RMB71.4 million (US$10.1 million ) from RMB63.6 million in the same period of fiscal year 2019, primarily due to an increase of revenues from broadband internet and utility service which is in line with the increase in leased-out rental unit nights, partially offset by a decrease in revenue from indemnity, which were the deposits forfeited or compensation received from the tenants and landlords who terminated their leases with us before expiration of the lock-in period.
Operating costs and expenses increased by
- Operating cost increased by
7.9% to RMB682.2 million (US$96.3 million ) from RMB632.4 million in the same period of fiscal year 2019, which was generally in line with our revenue growth.
- Selling and marketing expenses decreased by
27.8% to RMB40.5 million (US$5.7 million ) from RMB56.0 million in the same period of fiscal year 2019, primarily due to cost-saving efforts.
- General and administrative expenses increased by
26.1% to RMB65.1 million (US$9.2 million ) from RMB51.6 million in the same period of fiscal year 2019. The increase was mainly attributable to an increase in expenses related to our initial public offering and share-based compensation.
- Pre-operation expenses decreased by
55.0% to RMB12.7 million (US$1.8 million ) from RMB28.3 million in the same period of fiscal year 2019, primarily due to fewer new rental units being developed in the first half of fiscal year 2020, in contrast to the expansion in the same period of fiscal year 2019.
- Impairment loss was RMB250.0 million (US
$35.3 million ) compared to RMB20.6 million in the same period of fiscal year 2019, primarily due to provisions provided for the impact of the COVID-19 pandemic on our business.
Loss from operations was RMB452.7 million (US
Interest expense, net increased by
Fair value change of contingent earn-out liabilities was gain of RMB97.4 million (US
Loss before income taxes was RMB416.8 million (US
As of March 31, 2020, the Company had cash and cash equivalents of RMB125.5 million (US
Recent Developments
On January 17, 2020, the Company entered into agreements with a rental service company to acquire lease contracts with landlords and tenants and related fixtures and equipment for approximately 47,000 rental units in Sichuan and Chongqing. Given the closing conditions were not fulfilled by September 30, 2020, the management is considering terminating this acquisition. As the acquisition was not completed, the Company did not consolidate the entity related to this acquisition in the condensed consolidated financial statements as of March 31, 2020. As of date of the press release, the result and impact on the Company’s financial statements related to the possible termination are subject to uncertainty and potential adjustment.
On July 31, 2020, the Company issued series 1 and series 2 convertible notes in the aggregate principal amount of US
In addition, pursuant to agreements dated July 22, 2020 entered into by the Company and a rental service company and its affiliates (the “Transferor”) for the acquisition of certain lease contracts and other related assets, the Company paid US
Conference Call
Q&K’s management will hold an earnings conference call at 7:30 AM on September 30, 2020, U.S. Eastern Time (7:30 PM on the same day Beijing/Hong Kong Time).
Please register in advance of the conference using the link provided below and dial in 10 minutes prior to the call, using participant dial-in numbers, Direct Event passcode and unique registrant ID which would be provided upon registering. You will be automatically linked to the live call after completion of this process, unless required to provide the conference ID below due to regional restrictions.
PRE-REGISTER LINK: http://apac.directeventreg.com/registration/event/9477087.
CONFERENCE ID: 9477087
A telephone replay of the call will be available after the conclusion of the conference call through October 8, 2020.
| International: | 61-2-8199-0299 |
| United States: | 1-646-254-3697 |
| Passcode: | 9477087 |
A live and archived webcast of the conference call will be available on the Investor Relations section of Q&K’s website at http://ir.qk365.com .
Currency Convenience Translation
This press release contains translations of Renminbi amounts into U.S. dollars at specific rates solely for the convenience of the reader. Unless otherwise noted, all translations from Renminbi to U.S. dollars and from U.S. dollars to Renminbi were made at a rate of RMB7.0808 to US
Use of Non-GAAP Financial Measures
The Company uses EBITDA and adjusted EBITDA, non-GAAP financial measures, as supplemental measures in evaluating and assessing our operating results.
EBITDA represents the net loss before (i) interest income (expense), net, (ii) income tax, and (iii) depreciation and amortization. Adjusted EBITDA represents the net loss before (i) interest income (expense), net, (ii) income tax, (iii) depreciation and amortization, (iv) impairment loss, (v) fair value change of contingent earn-out liabilities, and (vi) share-based compensation.
The Company believes that EBITDA and adjusted EBITDA help identify underlying trends in the Company’s business that could otherwise be distorted by the effect of certain expenses that the Company includes in net loss.
EBITDA and adjusted EBITDA should not be considered in isolation or construed as alternatives to net loss or any other measure of performance or as an indicator of our operating performance. Investors are encouraged to review the historical non-GAAP financial measures to the most directly comparable GAAP measure. EBITDA and adjusted EBITDA presented here may not be comparable to similarly titled measure presented by other companies. In addition, EBITDA and adjusted EBITDA have certain limitations as an analytical tool.
Safe Harbor Statement
This press release contains forward-looking statements. These statements constitute “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar statements. Among other things, the quotations from management in this press release and the Company and its subsidiaries’ (collectively, the “Group”) operations and business outlook contain forward-looking statements. Such statements involve certain risks, uncertainties and other factors that could cause actual results to differ materially from those in the forward-looking statements. These risks and uncertainties include, but are not limited to the following: the Group’s ability to access financing on favorable terms in a timely manner and maintain and expand its cooperation with financial institutions; the Group’s ability to expand into new markets; the Group’s ability to manage its growth; the Group’s ability to integrate strategic investments, acquisitions and new business initiatives; the Group’s ability to control the quality of its operations, including the operation of the rental apartments managed by its own apartment managers or by third-party contractors; the Group’s ability to attract and retain tenants and landlords, including tenants and landlords from its acquired lease contracts; the Group’s ability to manage its brand and reputation; the Group’s goal and strategies; the Group’s limited operating history; the Group’s ability to achieve or maintain profitability or continue as a going concern in the future; the Group’s ability to compete effectively; and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in the Group’s filings with the U.S. Securities and Exchange Commission. Except as required by law, the Group does not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
About Q&K
Q&K International Group Limited (NASDAQ: QK) is a leading technology-driven long-term apartment rental platform in China. The Company offers young, emerging urban residents conveniently-located, ready-to-move-in, and affordable branded apartments as well as facilitates a variety of value-added services. Q&K signs long-term leases with individual landlords in different locations in relatively inexpensive yet convenient locations and manages them centrally, leveraging its advanced IT and mobile technologies. Technology is the core of Q&K’s business and is applied to every step of its operational process from apartment sourcing, renovation, and tenant acquisition, to property management. The focus on technology enables Q&K to operate a large, dispersed, and fast-growing portfolio of apartments with high operational efficiency and deliver a superior user experience.
For investor and media inquiries, please contact:
Q&K
E-mail: ir@qk365.com
Christensen
In China
Mr. Rene Vanguestaine
Phone: +86-10-5900-1548
E-mail: rvanguestaine@ChristensenIR.com
In US
Ms. Linda Bergkamp
Phone: +1-480-614-3004
Email: lbergkamp@christensenir.com
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| Q&K INTERNATIONAL GROUP LIMITED UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Renminbi in thousands, except for share and per share data, unless otherwise stated) | |||||
| | |||||
| As of | As of | ||||
| September 30, | March 31, | ||||
| 2019 | 2020 | ||||
| RMB | RMB | USD(‘000) | |||
| ASSETS | |||||
| Current assets: | |||||
| Cash and cash equivalents | 159,799 | 125,481 | 17,721 | ||
| Restricted cash | 91,015 | 8,884 | 1,255 | ||
| Accounts receivable, net of allowance of nil as of September 30, 2019 and March 31, 2020 | 1,306 | 3,296 | 466 | ||
| Amounts due from related parties | 5,587 | 929 | 131 | ||
| Prepaid rent and deposit | 128,213 | 66,871 | 9,444 | ||
| Advances to suppliers | 64,028 | 9,809 | 1,385 | ||
| Other current assets | 146,559 | 352,535 | 49,787 | ||
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FAQ
What were QK's net revenues for the first half of fiscal year 2020?
QK's net revenues for the first half of fiscal year 2020 were RMB 627.1 million (US$ 88.6 million), a 6.5% increase from the previous year.
What is the current occupancy rate for QK as of March 31, 2020?
The occupancy rate for QK as of March 31, 2020, was 87.7%, down from 90.9% for the same period in fiscal year 2019.
How did COVID-19 impact QK's financial results?
COVID-19 negatively impacted QK's financial results, contributing to a net loss of RMB 416.8 million and a decline in occupancy rates.
What is the adjusted EBITDA for QK for the first half of fiscal year 2020?
The adjusted EBITDA for QK for the first half of fiscal year 2020 was negative RMB 72.4 million (US$ 10.2 million).
What were the key operational highlights for QK in fiscal year 2020?
Key operational highlights included a total of 98,379 rental units contracted and an increase in available rental units to 96,378 as of March 31, 2020.
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