Meten EdtechX Education Group Ltd. (NASDAQ: METX) (“Meten EdtechX” or the “Company”), one of the leading omnichannel English language training (“ELT”) service providers in China, today announced its financial results for the first quarter ended March 31, 2021.
|RMB (m)||YoY (%)|
|General adult ELT||67.0||20.0%|
|Overseas training services||39.9||79.2%|
|Junior ELT- under “Meten” brand||17.8||286.3%|
|Junior ELT- under “ABC” brand||7.5||(60.6%)|
|Gross Profit Margin||34.3%||14.2 ppts|
|Adjusted net loss1||(53.2)||46.9%|
1Non-GAAP measure. For more information about non-GAAP financial measures, please see the section captioned “About Non-GAAP Financial Measures” at the end of this press release.
- 1Q 2021 revenue increased 13.8% year-on-year to RMB206.6 million (US$31.5 million), primarily as a result of the strong rebound in gross billing after the impact of COVID-19 faded.
- Supported by investments in the Junior ELT segments and new product development, revenue for Junior ELT under the “Meten” brand increased by 286.3% year-on-year in 1Q 2021 to RMB17.8 million (US$2.7 million).
- 1Q 2021 gross profit increased 93.8% year-on-year to RMB70.8 million (US$10.8 million), primarily as a result of the improvement of gross billings and operational efficiency. Gross profit margin increased 14.2 percentage points year-on-year to 34.3%.
- As of March 31, 2021, Meten EdtechX had 110 learning centers in operation. To optimize the layout of offline centers, the Company closed another 8 offline learning centers by the end of the first quarter of 2021.
- 1Q 2021 adjusted net loss decreased 46.9% year-on-year to RMB53.2 million (US$8.1 million).
Alan Peng, Chief Executive Officer of Meten EdtechX commented:
“We delivered Q1 revenue growth of 14.6% year-over-year, ahead of expectations and reflecting our team’s strong execution of our focused on optimizing management and aligning our cost structure to the headwinds caused by COVID-19. First quarter financial results reflect improvements in our gross profit and margin, and significant reduction in our operating loss and adjusted EBITDA compared to the same period for the prior year. We leveraged our advantage of online and offline business to break the time and space constraints of classroom education. We also utilized big data and AI technology to develop personalized teaching model and to improve teaching efficiency. As a result, we achieved nearly RMB206.6 million in gross billing in the first quarter of 2021. As an established education institution with a track record of over 15 years, our highly experienced teachers, high-quality education resources and excellent teaching results contribute to our good reputation and improve our brand image and awareness, and thus the proportion of overall word of mouth marketing increased by 54.3% in the first quarter of fiscal year 2021.
We remain confident in our ability to deliver strong growth in 2021 and continue to expect to drive strong operating leverage in 2021.
We have seen a positive impact of blockchain on the education industry, including applications to teacher certification and platform management. As one of the first U.S. listed education companies applying blockchain technology, we will apply these technologies in credit incentives, teacher certification and platform management. At the same time, we plan to build an online merger offline (OMO) platform for blockchain education applications. Looking forward, we will continue to focus on our junior ELT business, carry out our plans to enter the junior quality-oriented education market and introduce our ‘dual-teacher classroom’ for ABC junior ELT services.”
|Course withdrawal rate(1) (%)||12.87%||1.37 ppts|
(1) Refers to the amount of refunds issued in a specific period of time as a percentage of the sum of the amount of gross billings and the amount of refunds for such period.
|March 31, 2021|
|Number of self-operated learning centers||97||7.6%*|
|Number of franchised learning centers||13||-*|
(* Change compared to the previous quarter end)
Growing online and Junior student enrollment
As of March 31, 2021, the number of registered users for online courses increased by 31.4% year-on-year, up to 1.84 million, as the Company diversified course offerings and leveraged cross-selling opportunities between offline and online as its learning centers reopened. Supported by investments in the Junior ELT segments and new product development, the number of registered junior students for Junior ELT under the “Meten” brand increased by 483% year-on-year as of March 31, 2021.
Continued product innovation
Meten EdtechX continued to invest in product development during the first quarter of 2021, leveraging the several recently launched new products across both its offline and online platforms. These include three new language (Japanese, Spanish and Korean) products, K12 junior products and the “BiGao” exam preparatory product for middle-school students. For the first quarter ended March 31, 2021, the Company’s revenue derived from Japanese, Spanish and Korean language training services was RMB 1.4 million (US$0.21 million).
In the first quarter of 2021, revenue amounted to RMB206.6 million (US$31.5 million), an increase of 13.8% year-on-year from RMB181.6 million in the first quarter of 2020, primarily as a result of the strong rebound in gross billing after the impact of COVID-19 faded.
For the general adult ELT, revenues increased 20% year-on-year, from RMB55.8 million in the first quarter of 2020 to RMB67.0 million (US$10.2 million) in the first quarter of 2021, for the overseas training services, revenues increased 79.2% year-on-year, from RMB22.3 million in the first quarter of 2020 to RMB39.9 million (US$6.1 million) in the first quarter of 2021, and for the Junior ELT, revenues increased from RMB23.5 million in the first quarter of 2020 to RMB25.3 million (US$3.9 million) in the first quarter of 2021, among which, revenue for Junior ELT under “Meten” brand increased by 286.3% year-on-year in the first quarter of 2021 to RMB17.8 million (US$2.7 million). These results were achieved in the first quarter of 2021 when the regulatory authorities required all off-campus training institutions to suspend their business in Beijing. In the first quarter of 2021, the Junior ELT under “ABC” brand operated only about half a month, and as a result, revenue for Junior ELT under “ABC” brand decrease by 60.6% year-on-year.
For the online ELT, revenues decreased 7.5% year-on-year, from RMB77.0 million in the first quarter of 2020 to RMB71.3 million (US$10.9 million) in the first quarter of 2021. This slight decrease was mainly due to the fact that the Company’s online ELT business reached a peak as a result of the COVID-19 in the same period last year.
Cost of revenues
The Company’s cost of revenues consists primarily of staff costs, property expenses, depreciation and amortization, and other costs which primarily include consulting fees, foreign teacher-related administrative expenses, and teaching materials costs.
In the first quarter of 2021, cost of revenues decreased by 6.4% to RMB135.8 million (US$20.7 million), from RMB145.0 million in the first quarter of 2020.
In the first quarter of 2021, gross profit increased by 93.8% to RMB70.8 million (US$10.8 million), from RMB36.5 million in the first quarter of 2020, due to the improvement of gross billings and operational efficiency.
For the first quarter of 2021, gross profit margin increased by 14.2 percentage points to 34.3% from 20.1% for the first quarter of 2020.
In the first quarter of 2021, selling and marketing expenses amounted to RMB70.4 million (US$10.7 million), an increase of 2.6% from RMB68.6 million in the first quarter of 2020.
In the first quarter of 2021, research and development expenses decreased by 40.1% year-on-year to RMB4.2 million (US$0.6 million), from RMB7.0 million in the first quarter of 2020.
In the first quarter of 2021, general and administrative expenses increased by 25.0% year-on-year to RMB81.3 million (US$12.4 million), from RMB65.0 million in the first quarter of 2020. This increase was primarily due to an increase in share-based compensation expenses.
Loss from operations
For the first quarter of 2021, loss from operations was RMB85.1 million (US$13.0 million), compared to a loss from operations of RMB104.1 million in the first quarter of 2020.
For the first quarter of 2021, net loss was RMB89.3 million (US$13.6 million), compared to a net loss of RMB101.7 million in the first quarter of 2020.
For the first quarter of 2021, an outflow of RMB53.7 million (US$8.2 million) was recorded, compared to an outflow of RMB97.7 million in the first quarter of 2020.
Cash and cash equivalents
As of March 31, 2021, Meten EdtechX had RMB63.8 million (US$9.7 million) of cash and cash equivalents, compared to RMB90.1 million as of December 31, 2020.
Meten EdtechX plans to build an online merger offline (OMO) platform for blockchain education applications. The OMO platform will integrate the Company’s nationwide offline learning centers with its online platform “Likeshuo”.
Meten EdtechX will continue to focus on ‘dual-teacher classroom’ for ABC junior ELT services. The Company will carefully select the course content and electronic teaching aids, conduct trainings for foreign teachers, guide them through the qualification certification process, install hardware equipment in the classrooms, and adopt standardized course materials and curriculums.
The Company’s business is primarily conducted in China and all of the revenues are denominated in Renminbi (“RMB”). This announcement contains translations of certain RMB amounts into U.S. dollars (“USD” or “US$”) at specified rates solely for the convenience of the readers. Unless otherwise noted, all translations from RMB to USD for the first quarter of 2021 are made at the rate of RMB6.5518 to US$1.00, the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board on March 31, 2021, respectively. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on March 31 2021, as the case may be, or at any other rate.
About Non-GAAP Financial Measures
Meten EdtechX’s consolidated financial results are presented in accordance with GAAP. However, to provide meaningful supplemental information regarding its performance, Meten EdtechX adopts the following measures which are defined as non-GAAP financial measures by the SEC:
- EBITDA: calculated by subtracting net interest income/loss and adding back income tax expense and non-cash expense of depreciation and amortization to a firm’s net income/(loss).
- Adjusted EBITDA: calculated by removing certain one-off, irregular and/or non-recurring items from EBITDA such as offering expenses and share-based compensation expenses.
- Adjusted net (loss)/income: calculated by adding back certain one-off, irregular and/or non-recurring items to net income/loss such as offering expenses and share-based compensation expenses.
The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.
About Meten EdtechX
Meten EdtechX is one of the leading ELT service providers in China, delivering English language and skills training for Chinese students and professionals. Through a sophisticated digital platform and a nationwide network of learning centers, the Company provides its services under three industry-leading brands: Meten (adult and junior ELT services), ABC (primarily junior ELT services) and Likeshuo (online ELT). The Company offers superior teaching quality and student satisfaction, served by cutting edge technology deployed across its business, including AI-driven centralized teaching and management systems that record and analyze learning processes in real time.
The Company is committed to improving the overall English language competence of the Chinese population to keep abreast of the rapid development of globalization. Its experienced management is focused on further developing its digital platform and expanding its network of learning centers to deliver a continually evolving service offerings to a growing number of students across China.