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.
  Q1 2021
  RMB (m) YoY (%)
Gross billings 175.4 40.9%
Revenues 206.6 13.8%
General adult ELT 67.0 20.0%
Online ELT 71.3 (7.5%)
Overseas training services 39.9 79.2%
Junior ELT 25.3 7.4%
Junior ELT- under “Meten” brand 17.8 286.3%
Junior ELT- under “ABC” brand 7.5 (60.6%)
Gross Profit 70.8 93.8%
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.

Highlights

  • 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.”

Operational developments

  1Q 2021
Student enrollments 17,672   45.1%  
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).

Financial results

Revenues

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.

Gross profit

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.

Operating expenses

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.

Net loss

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.

Cash flow

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.

Outlook

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.

Exchange Rate

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.

For more information, please visit: https://investor.metenedu-edtechx.com.

Safe Harbor Statement

This announcement contains forward-looking statements that involve risks and uncertainties. These statements are made under the “safe harbor” provisions of 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. Statements that are not historical facts, including statements about the Company’s beliefs and expectations, are forward-looking statements. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: the impact of the COVID-19 outbreak, our ability to attract students without a significant decrease in course fees; our ability to continue to hire, train and retain qualified teachers; our ability to maintain and enhance our brands; our ability to effectively and efficiently manage the expansion of our school network and successfully execute our growth strategy; the outcome of ongoing, or any future, litigation or arbitration, including those relating to copyright and other intellectual property rights; competition in the English language training sector in China; changes in our revenues and certain cost or expense items as a percentage of our revenues; the expected growth of the Chinese English language training and private education market; Chinese governmental policies relating to private educational services and providers of such services; health epidemics and other outbreaks in China; and general economic conditions in China. Further information regarding these and other risks is included in our annual report on Form 20-F and other documents filed with the Securities and Exchange Commission. The Company does not undertake any obligation to update any forward-looking statement, except as required under applicable law. All information provided in this press release and in the attachments is as of the date of this press release, and the Company undertakes no duty to update such information, except as required under applicable law.

For investor and media inquiries, please contact:

Ascent Investor Relations LLC Tina Xiao +1 917-609-0333 tina.xiao@ascent-ir.com 

METEN EDTECHX EDUCATION GROUPCONSOLIDATED BALANCE SHEETS(In thousands of RMB, except share data and per share data)

  As of December 31,   As of March 31,
  2020   2021
  RMB’000   RMB’000   US$’000
      Unaudited   Unaudited
ASSETS          
Current assets          
Cash and cash equivalents 90,115   63,817   9,740
Contract assets 6,194   5,938   906
Accounts receivable, net 27,013   22,167   3,383
Other contract costs 47,125   43,868   6,696
Prepayments and other current assets 50,658   38,298   5,845
Amounts due from related parties 7,934   9,934   1,516
Prepaid income tax 14,460   14,423   2,201
           
Total current assets 243,499   198,445   30,287
           
Non-current assets          
Restricted cash 10,358   5,287   807
Other contract costs 9,316   12,592   1,922
Equity method investments 24,552   25,756   3,931
Property and equipment, net 146,891   135,863   20,737
Operating lease right-of-use assets 322,559   293,316   44,769
Intangible assets, net 19,337   17,930   2,737
Deferred tax assets 6,997   2,151   328
Goodwill 274,567   274,567   41,907
Long-term prepayments and other non-current assets 40,754   39,468   6,026
           
Total non-current assets 855,331   806,930   123,164
           
Total assets 1,098,830   1,005,375   153,451
           

METEN EDTECHX EDUCATION GROUP CONSOLIDATED BALANCE SHEETS (Continued)(In thousands of RMB, except share data and per share data)

  As of December 31,   As of March 31,
  2020   2021
  RMB’000   RMB’000   US$’000
      Unaudited   Unaudited
Current liabilities          
Accounts payable 17,013   6,105   932
Bank loans 133,900   103,150   15,744
Deferred revenue 341,934   340,029   51,899
Salary and welfare payable 67,609   68,373   10,436
Financial liabilities from contracts with customers 384,561   356,395   54,397
Accrued expenses and other payables 46,030   44,647   6,814
Income taxes payable 267   245   37
Amounts due to related parties 131,151   81,505   12,440
Current operating lease liabilities 50,192   121,722   18,578
Total current liabilities 1,172,657   1,122,171   171,277
           

METEN EDTECHX EDUCATION GROUP CONSOLIDATED BALANCE SHEETS (Continued)(In thousands of RMB, except share data and per share data)

  As of December 31,   As of March 31, 
  2020   2021
  RMB’000   RMB’000   US$’000
      Unaudited   Unaudited
Non-current liabilities          
Deferred revenue 46,927   44,300   6,762
Deferred tax liabilities 7,661   6,824   1,042
Operating lease liabilities 33,718   34,368   5,246
Non-current tax payable 200,409   175,727   26,821
           
Total non-current liabilities 288,715   261,219   39,871
           
Total liabilities 1,461,372   1,383,390   211,148
           

METEN EDTECHX EDUCATION GROUP CONSOLIDATED BALANCE SHEETS (Continued)(In thousands of RMB, except share data and per share data)

  As of December 31,   As of March 31,
  2020    2021 
  RMB’000     RMB’000     US$’000  
        Unaudited     Unaudited  
Shareholders’ deficit              
Ordinary shares 37     41     6  
Subscriptions receivable (1 )   (1 )   -  
Additional paid-in capital 557,536     631,400     96,370  
Accumulated deficit (936,247 )   (1,023,023 )   (156,144 )
           
Total deficit attributable to shareholders of the Company (378,675 )   (391,583 )   (59,768 )
Non-controlling interests 16,133     13,568     2,071  
           
Total deficit (362,542 )   (378,015 )   (57,697 )
           
Commitments and contingencies -     -     -  
           
Total liabilities and shareholders' deficit 1,098,830     1,005,375     153,451  
                 

METEN EDTECHX EDUCATION GROUP CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)(In thousands of RMB, except share data and per share data)

           
  2020Q1   2021Q1
  RMB’000     RMB’000     US$’000  
        Unaudited     Unaudited  
           
Revenues 181,581     206,554     31,526  
Cost of revenues (145,048 )   (135,758 )   (20,721 )
Gross profit 36,533     70,796     10,805  
Operating expenses:          
Selling and marketing expenses (68,604 )   (70,398 )   (10,745 )
General and administrative expenses (65,024 )   (81,271 )   (12,404 )
Research and development expenses (7,006 )   (4,199 )   (641 )
Income/(loss) from operations (104,101 )   (85,072 )   (12,985 )
Other income (expenses):          
Interest income 133     110     17  
Interest expenses (1,065 )   (1,887 )   (288 )
Foreign currency exchange gain/(loss), net (208 )   (423 )   (65 )
Gains/(losses) on disposal and closure of subsidiaries and branches -     (2,056 )   (314 )
Government grants 2,426     4,641     708  
Equity in income/(loss) on equity method investments (1,243 )   1,204     184  
Others, net (215 )   (795 )   (121 )
Income/(loss) before income tax (104,273 )   (84,278 )   (12,864 )
Income tax expense 2,550     (5,063 )   (773 )
Net income/(loss) (101,723 )   (89,341 )   (13,637 )
Less: Net loss attributable to non-controlling interests 1,411     (2,565 )   (391 )
Net income/(loss) attributable to shareholders of the Company (103,134 )   (86,776 )   (13,246 )
           
Net income/(loss) (101,723 )   (89,341 )   (13,637 )
Add:          
Share-based compensation expenses 1,613     33,764     5,153  
Warrant financing -     2,404     367  
Adjusted net (loss)/income (100,110 )   (53,173 )   (8,117 )
                 
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