i-Scream Edu swings to profit in H1 but faces delisting threat over market cap

Edtech company i-Scream Edu swung to a profit in the first half of this year, but finds itself at the center of a so-called "profitable delisting" controversy — turning a corner on earnings while simultaneously being placed on a watch list over its market capitalization.

i-Scream Edu disclosed Thursday that it posted sales of 39.59 billion won ($28 million) and operating profit of 2.5 billion won in the first half of this year. That marks a turnaround from an operating loss of 2.85 billion won in the same period last year. Net profit for the period came in at 2.46 billion won, reversing a net loss of 1.11 billion won a year earlier. Sales, however, fell 16.3 percent from 47.32 billion won in the first half of last year, continuing a contraction in the company's top line.

Cost cuts drove the profit turnaround. Selling, general and administrative expenses dropped 27.3 percent to 16.36 billion won from 22.49 billion won a year earlier, while cost of sales fell 25.1 percent to 20.72 billion won from 27.68 billion won. The gross profit margin improved 6.2 percentage points to 47.7 percent from 41.5 percent in the first half of last year, and the operating profit margin came in at 6.3 percent.

The improvement was even more pronounced on a quarterly basis. Operating profit nearly doubled from 850 million won in the first quarter to 1.65 billion won in the second quarter. Second-quarter sales reached 19.29 billion won, with net profit for the period at 1.78 billion won. The first-half profit also helped shrink the company's accumulated deficit, which narrowed from 2.94 billion won at the end of last year to 479.42 million won at the end of the first half. As of the end of the first half, total equity stood at 45.03 billion won and total liabilities at 22.31 billion won.

Despite the earnings recovery, the company faces a significant challenge. i-Scream Edu has been on the Kosdaq watch list since Aug. 4 on grounds of insufficient market capitalization. The designation followed 30 consecutive trading days during which the company's common-share market cap remained below 20 billion won — the threshold that took effect July 1, when Kosdaq raised its listing-maintenance market cap requirement from 15 billion won to 20 billion won.

The case has drawn attention as an example of a company profitable enough to post a first-half surplus yet still facing the prospect of delisting. To exit the watch list, i-Scream Edu must maintain a market cap of at least 20 billion won for 45 consecutive trading days within the next 90 trading days. As of Thursday, the company's share price was in the high-800-won range, with its market cap hovering around 12 billion won — well short of the 20 billion won delisting threshold. A substantial share price rally would be needed for the company to avoid delisting.