MYND - iHuman Misses China Stock Rally As Investors Fret Over Stumbling Growth | Benzinga
Key Takeaways:
- iHuman’s revenue and profit both declined in the first quarter as it accelerated a global expansion plan to diversify beyond its softening home market in China
- The company’s gross margin and total users both improved, but the omission of its latest paid user count suggests that key metric continued to decline
By Doug Young
Sometimes what’s left unsaid speaks the loudest.
That could partly explain the 4.3% decline for shares of iHuman Inc. (NYSE: IH), a provider of educational products and services for young children, after it published its latest quarterly results last Friday. The report notably didn’t include the company’s latest number of paying users at the end of March, ending a previous practice of including that key metric.
Anyone reading between the lines would probably guess that omission was due to the fact that the number wasn’t too attractive and continued a recent trend of contraction that saw the figure fall by 17% in the fourth quarter to 1.45 million paid users.
The latest report also lacked any quantifiable information on the company’s recent drive to develop its business outside China, which it characterized as a strategic priority. Such a strategy looks prudent for Chinese companies from the educational sector due to the high risk from unpredictable regulatory oversight.
A sudden clampdown on China’s K-12 after-school tutoring sector two years ago wiped out an entire multibillion-dollar industry in an instant. iHuman wasn’t affected due to its focus on younger children and broader learning skills rather than specific courses like math and science. But there’s no guarantee that its area won’t become the future target of another crackdown aimed at lightening the burden of extra coursework on impressionable young minds.
iHuman made several references to the international expansion in its latest report, showing the importance it places on the initiative to diversify its business beyond China. But its failure to disclose any specifics suggests that part of the business has yet to produce any meaningful revenue, which may have disappointed investors.
While those unspoken elements probably worried investors, an acceleration in the company’s revenue ...