Meten EdtechX Education Group Ltd. (NASDAQ: METX) (“Meten EdtechX”
or the “Company”), a leading English language training (“ELT”)
service provider in China, today announces its unaudited financial
results for the fourth quarter and fiscal year ended December 31,
2019 and the first quarter ended March 31, 2020.
|
Q4 2019 |
FY 2019 |
Q1 2020 |
|
RMB (m) |
YoY (%) |
RMB (m) |
YoY (%) |
RMB (m) |
YoY (%) |
Gross billings |
350.1 |
|
(14.4 |
%) |
1,510.5 |
|
6.1 |
% |
124.5 |
|
(62.8 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
352.9 |
|
(1.9 |
%) |
1,447.9 |
|
1.7 |
% |
181.6 |
|
(42.3 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA1 |
(143.2 |
) |
(1,179.1 |
%) |
(156.2 |
) |
(228.3 |
%) |
(89.0 |
) |
(165.9 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA1 |
(40.0 |
) |
(227.3 |
%) |
(31.4 |
) |
(121.8 |
%) |
(87.4 |
) |
(208.1 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Loss)/Income |
(165.5 |
) |
(1,853.0 |
%) |
(225.1 |
) |
(521.1 |
%) |
(101.7 |
) |
(141.3 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net (Loss)/Income1 |
(62.3 |
) |
(7,607.0 |
%) |
(100.3 |
) |
(232.2 |
%) |
(100.1 |
) |
(170.1 |
%) |
1 Non-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 release.
Q4 2019 & FY 2019 Highlights
- Q4 2019 revenue was down 1.9% year-on-year to RMB 352.9 million
(US$ 50.7 million); FY 2019 revenue was up 1.7% year-on-year to RMB
1,447.9 million (US$ 208.0 million)
- Q4 2019 adjusted EBITDA declined to a loss of RMB
40.0 million (US$ 5.7 million); FY 2019 adjusted EBITDA was a
loss of RMB 31.4 million (US$ 4.5 million), down from a gain of RMB
144.1 million in FY 2018
- Q4 2019 net loss was at RMB 165.5 million (US$ 23.8 million),
up from RMB 8.5 million in Q4 2018; FY 2019 net loss was at RMB
225.1 million (US$ 32.3 million), compared with net income of RMB
53.4 million in 2018
- 2019 performance reflects one-off investments undertaken during
2019 to enhance the Company’s curriculum, integrate ABC Junior and
accept a share of WEBi’s students after its wind-down
Q1 2020 Highlights, COVID-19 Impact & Merger
Transaction
- Merger between EdtechX Holdings Acquisition Corp. (“EdtechX
Holdings”) and Meten International Education Group (“Meten
International” or “Meten”) was successfully completed in Q1 2020,
creating a player strategically positioned to capitalize on
consolidation and digital growth opportunities in the Chinese
education sector
- Continuous services were provided throughout the COVID-19
crisis with offline students offered online tuition following
temporary closure of the learning centers
- Q1 2020 revenues were RMB 181.6 million (US$ 25.6 million),
down 42.3% from RMB 314.8 million in Q1 2019
- Online revenues were up 48.6% year-on-year in Q1 2020 to RMB
77.0 million (US$ 10.9 million) (Q1 2019: RMB 51.8 million)
- Revenue generation was further supported by the launch of
Japanese language training service through its subsidiary, JTalk,
which achieved gross billings of RMB 500 thousand (US$ 70.6
thousand) in March 2020 alone
- Proactive actions were taken to mitigate the negative effect of
COVID-19 by reducing operating expenses
- Adjusted EBITDA amounted to a loss of RMB 87.4
million (US$ 12.3 million), compared to a loss of RMB 28.4 million
in Q1 2019
- Net loss was RMB 101.7 million (US$ 14.4 million), a 141.0%
decrease from RMB 42.2 million in Q1 2019
- Online business recorded a net profit of RMB 5.7 million (USD$
800 thousand), compared to a net loss of RMB 10.2 million in Q1
2019
Alan Peng, Chief Executive Officer of Meten EdtechX
commented:
“We are pleased to report our financial results
today as a new entity, Meten EdtechX, following the successful
combination of Meten International and EdtechX Holdings on March
30, 2020.
During 2019, we continued to see strong demand
for all our services, especially in our online business, with our
digital Likeshuo platform recording 22.6% revenue growth during the
year. We also leveraged our strengthened position in junior
ELT, following our acquisition of ABC Junior in 2018, to capitalize
on growing demand for these services across our market. As a result
of growing student enrollment, revenue from junior ELT more than
doubled, from RMB 65.5 million in 2018 to RMB 167.9 million (US$
24.1 million) in 2019.
However, the 2019 financial performance was
significantly impacted by one-off investments, including the
upgrade of our curriculum, the restructure and integration of the
ABC Junior business, and the one-off accrued expense from accepting
students from WEBi, a major competitor that wound down its business
during 2019.
Despite these investments, revenue for the year
increased by 1.7% year-on-year to RMB 1,447.9 million, including
RMB 352.9 million generated in the fourth quarter. Our adjusted
EBITDA was a loss of RMB 31.4 million for the full year with a
negative contribution of RMB 40.0 million in the final quarter of
the year.
During the first quarter of 2020, the
combination of Meten International and EdtechX Holdings to create
Meten EdtechX, and the associated capital raise, marked a
significant milestone for the Company. The new entity benefits from
an enhanced board of directors with significant industry and
international experience.
As a consequence of the COVID-19 pandemic, the
effects of which have been felt worldwide and in the education
sector in particular, all our offline learning centers closed in
early February 2020 and remained so for the rest of the
quarter.
Thanks to our established online ELT business, a
large portion of our offline students took the opportunity to
enroll in our online classes, which led to a higher number of hours
delivered online versus the same quarter of the previous year.
However, the increase in online revenues only partially offset the
impact of the learning center closures. As such, total revenue for
the first quarter was down 42.3% year-on-year at RMB 181.6
million.
As you would expect, during and beyond the
COVID-19 crisis, the health and well-being of our colleagues and
students have been our priority, and therefore, the process of
reopening of our learning centers is being executed in strict
accordance with government guidance. Enhanced hygiene measures are
being implemented and student seating adjusted to facilitate
effective distancing. As of the end of May, 83 of our learning
centers, which generated more than 60% of the gross billings in
2019, have re-opened.
Looking ahead, we believe that events of 2020
will accelerate the trend of growing acceptance of online education
which can effectively be combined with face-to-face lessons for an
optimal learning experience. At Meten EdtechX, we are well placed
to benefit from this trend and remain fully committed to our
medium-term growth strategy.”
Operational Developments
|
Q4 2019 |
FY 2019 |
Q1 2020 |
Student enrollments |
28,283 |
|
(12.8 |
%) |
123,445 |
|
4.5 |
% |
12,181 |
|
(57.4 |
%) |
Course withdrawal rate (1)
(%) |
11.0 |
% |
+1.3 |
% |
10.9 |
% |
+1.3 |
% |
11.5 |
% |
+0.7 |
% |
(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.
|
December 31, 2019 |
March 31, 2020 |
Number of self-operated learning centers* |
132 |
9.1% |
|
128 |
6.7% |
|
Number of franchised learning
centers* |
16 |
0% |
|
17 |
6.3% |
|
(change versus previous quarter)
Q4 2019 & FY 2019 Developments
In line with its strategy, during 2019, the
Company made several major investments into the business to
reinforce its leading position in the market and build a strong
platform for future growth.
Curriculum upgrade
Rollout of the Company’s new “Explore
Curriculum”, developed through a strategic collaboration with the
renowned National Geographic Learning, was completed across all
learning centers by May 2019. This resulted in a lower number of
course hours delivered during the rollout period but has since
received positive feedback from students and is expected play a key
role in attracting and retaining students going forward.
Integration of ABC Junior
Following the Company’s acquisition of ABC
Junior in 2018, aimed at accelerating the Company’s expansion into
the regional mid-size market of China, the newly-acquired ABC
learning centers were fully integrated within the Company’s
operations. Benefits of these efforts are expected to be reflected
in future financial performance, once operations are normalized
post-COVID-19. The Company expects the ABC network of learning
centers to be profitable in 2021.
Acceptance of WEBi students
Following the wind-down of WEBi, Meten EdtechX
accepted a share of that Company’s student base for the duration of
their contracts, free of charge. While this resulted in one-off
costs during 2019, it allowed Meten EdtechX to capture a greater
share of the ELT market and enhance its reputation as a responsible
leading player in the ELT market.
Growing student base
Student enrollment was down 12.8% year-on-year
in the fourth quarter but increased 4.5% for the year of 2019,
supported by the 11.3% growth in online enrollment during the
year.
Gross billings declined by 14.4% year-on-year
during the fourth quarter to RMB 350.1 million (US$ 50.3 million)
(FY2019: RMB 1,510.5 million), supported by the above-mentioned
initiatives.
Leveraging the Company’s efficient omnichannel
business model, customer acquisition cost remained stable at RMB
3,940 (US$ 566) per student in the fourth quarter, or RMB 3,520
(US$ 506) for the full year. Thanks to synergies between the
Company’s online and offline operations, 14% of offline students
also enrolled in online courses by the end of 2019.
Enhanced reach and service offering
Development of the Likeshuo online learning
platform continued throughout the year. The platform featured 1.2
million registered and over 227,000 paying users at year-end.
The Company further strengthened its high
caliber base of teachers through the recruitment of an additional
430 staff during the fourth quarter of 2019.
Q1 2020 Developments and COVID-19
Impact
Response to COVID-19
The Company’s operations were significantly
impacted by the outbreak of COVID-19 across China in January 2020.
In line with regulatory guidelines, Meten EdtechX temporarily
closed all its learning centers in early February 2020. Leveraging
its omnichannel business model, the Company promoted its online ELT
service among its offline customer base. At March 31, 2020,
approximately 19,000 students, representing 52% of Meten EdtechX’s
offline student base, had taken up online courses with the Company
(excluding those enrolled on the Likeshuo platform). A further
1,400 offline students enrolled onto the Likeshuo online platform
during the first quarter of 2020.
While continuous service was provided throughout
the first quarter 2020, overall course hours and student enrollment
experienced a temporary decline during the quarter. The resulting
decrease in gross billings and the number of student enrollment for
offline ELT services was partially offset by growth in the online
ELT business. During the first quarter of 2020, gross billings
reached RMB 124.5 million (US$ 17.6 million), a 62.8% decrease from
RMB 334.8 million (US$ 47.3 million) in Q1 2019.
To mitigate the effects of the COVID-19
pandemic, Meten EdtechX took action to reduce its operating
expenses, including labor costs, marketing expenses and overall
administrative expenses. The Company also negotiated various rent
concessions for certain leased properties from its landlords. These
efforts resulted in a reduction in operating costs from RMB 120.0
million per month to RMB 90.0 million, sufficient to preserve cash
flow generation even at lower gross billings caused by the COVID-19
pandemic.
As part of its relief efforts, the Company
provided 100,000 live online courses to students free of charge,
including 23 free live broadcasts, which had 30,578 students and
3,613 simultaneous online users per broadcast.
Leveraging growth in online ELT
Despite the pandemic, the total number of
lessons delivered during the first quarter was 420,000, up 250,000
year-on-year. The Company delivered more than 700 hours of free
online courses during the period.
To capitalize on rapid growth in demand for
online education, Meten EdtechX recruited 1,000 new online teachers
during the first quarter of 2020, up 130% compared to the fourth
quarter of 2019. In addition, 160 additional senior offline sales
team members joined the Company’s online sales team.
To ensure the highest quality of lessons, the
Company provided training in online education for its offline
teachers nationwide to enable them to modify their teaching methods
for the online environment from the outset. The same training was
provided to the Company’s quality control team to ensure they are
well placed to monitor performance and provide feedback.
Furthermore, senior marketing and sales teams
across the offline network received additional training to
facilitate marketing of the online platform and seamless customer
service.
To further broaden its service offering, in the
first quarter of 2020, Meten EdtechX launched online Japanese
language training through its subsidiary, JTalk, formed in
partnership with a leading Japanese education brand in China which
caters predominantly to corporate customers. The Company delivered
nearly 300 course hours during the quarter to 60 corporate
customers.
Re-opening of learning centers post-COVID-19
Since the end of the first quarter, following a
decline in the number of newly confirmed COVID-19 cases in China,
the Company gradually re-opened some of its learning centers, in
accordance with the applicable regulatory guidance. As of May 29,
2020, 83 of Meten EdtechX’s learning centers have resumed
operations. These 83 learning centers generated approximately 62%
of the Company gross billings in 2019. By the end of June 2020, the
Company expects to have 132 learning centers (91% of total)
re-opened, with only those located in the Hubei province and North
Eastern China without a definitive plan for re-opening. If
re-opening proceeds as currently anticipated, this will allow the
Company to capitalize on the seasonally high demand for English
lessons during the summer months.
To facilitate the re-opening of the
learning centers, the Company’s management has formulated and
implemented emergency response measures, including: (i)
establishing a disease prevention and control task force, led by
the Chief Executive Officer; and (ii) committing to conduct full
disinfection and ventilation of learning centers before they
re-open, establishing students’ health condition and taking body
temperature measurements prior to returning to class. Further
measures have been introduced to ensure continuous social
distancing within classrooms and enhanced hygiene levels.
Successful Completion of Merger between
Meten and EdtechX
The merger between Meten International and
EdtechX Holdings, the world’s first special purpose acquisition
company focused on investing in the education services and
education technology industry, was successfully completed on March
30, 2020.
In connection with the closing of the merger
transaction, the combined entity completed a private placement of
US$ 32 million from institutional investors including Azimut, a
leading Italian asset manager with assets under management of more
than US$ 60 billion, and Xiamen ITG Holding Group, a China-based
Fortune Global 500 company engaged in a broad range of industries,
including education. These investments added to the previous
investments into Meten by China International Capital Corporation
and private equity funds affiliated with Tsinghua University.
Following the completion of the transaction, the
Company founders and management team own approximately 75% of the
combined entity, institutional investors own around 21% and EdtechX
shareholders 4%.
The transaction is expected to accelerate the
expansion of Meten’s ELT offering and its fast-growing digital
platform, as well as to fund potential synergistic and accretive
acquisitions in China and abroad.
In connection with the transaction, the
Company’s warrants have been trading on The Nasdaq Capital Market
under the symbol “METXW” since May 27, 2020. The warrants are
exercisable to purchase one ordinary share of the Company at an
exercise price of US$ 11.50 per share, subject to adjustment. The
warrants expire on March 30, 2025.
Financial Results
Revenues
In Q4 2019, revenues amounted to RMB 352.9
million (US$ 50.7 million), marginally down year-on-year (Q4 2018:
RMB 359.6 million). For the full year, an increase of 1.7% was
recorded, from RMB 1,424.2 million in 2018, to RMB 1,447.9 million
(US$ 208.0 million). Results for the year were impacted by
aforementioned one-off expenses.
In Q1 2020, revenues amounted to RMB 181.6
million (US$ 25.6 million), down 42.3% year-on-year (Q1 2019: RMB
314.8 million). This decrease in revenues was largely driven by the
temporary closure of the Company’s learning centers during the
period due to the COVID-19 pandemic.
As a result of continuous enhancements to Meten
EdtechX’s digital offering and the impact of COVID-19, revenues for
Meten’s online ELT service increased by approximately 48.6%
year-on-year. However, this increase only partially offset the
negative impact of the learning center closures.
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 Q4 2019, cost of revenues increased 15.6%
year-on-year to RMB 196.6 million (US$ 28.2 million) (Q4 2018: RMB
170.1 million), predominantly due to higher staff costs. For the
full year, cost of revenues increased to RMB 755.4 million (US$
108.5 million), from RMB 628.0 million in 2018.
In Q1 2020, cost of revenues decreased 16.1%
year-on-year to RMB 145.0 million (US$ 20.5 million), from RMB
172.8 million, mainly due to savings achieved in sales and
marketing and general and administrative expenses as part of the
efforts to reduce operating expenses.
Gross profit
In Q4 2019, gross profit decreased by 17.5%
year-on-year to RMB 156.4 million (US$ 22.5 million) (Q4 2018: RMB
189.5 million). For the full year, gross profit decreased to RMB
692.5 million (US$ 99.5 million), from RMB 796.2 million in 2018,
mainly as a result of aforementioned one-off expenses.
Gross profit margin decreased 8.4 percentage
points in Q4 2019 to 44.3%, from 52.7% in the same period of 2018,
primarily as a result of the lower prices offered for online ELT
products to boost student enrollment. For the full year 2019, gross
profit margin was 47.8% compared to 55.9% for 2018. Gross profit
margin decreased in 2019 mainly due to the curriculum upgrade and
the aforementioned pricing for online ELT.
In Q1 2020, gross profit decreased 74.3%
year-on-year to RMB 36.5 million (US$ 5.2 million) (Q1 2019: RMB
142.0 million).
In Q1 2020, gross profit margin declined 25
percentage points to 20.1%, from 45.1% in Q1 2019, due to the
negative impact of COVID-19.
Operating expenses
Q4 2019
Selling and marketing expenses amounted to RMB
114.7 million (US$ 16.5 million), up 4.7% year-on-year from RMB
109.6 million in Q4 2018, primarily due to an increase in staff
costs in connection with online promotion initiatives.
Research and development expenses increased
14.8% year-on-year to RMB 7.0 million (US$ 1.0 million), from RMB
6.1 million in Q4 2018. This is largely due to higher investment in
research and development activities of the Company’s online ELT
business.
General and administrative expenses increased to
RMB 193.5 million (US$ 27.8 million), from RMB 84.2 million in Q4
2018. The increase in general and administrative expenses was
mainly due to (i) an increase in professional consulting service
expenses in connection with the attempted initial public offering
in 2019, which amounted to RMB 11.9 million (US$ 1.7 million); and
(ii) share-based compensation expenses, which amounted to RMB 91.3
million (US$ 13.1 million).
FY 2019
Selling and marketing expenses amounted to RMB
438.0 million (US$ 62.9 million), up from RMB 425.2 million in
2018, mainly due to an increase in staff costs.
Research and development expenses increased to
RMB 32.3 million (US$ 4.6 million), from RMB 26.2 million in 2018,
largely due to increased investment and research and development
activities relating to the Company’s online ELT business.
General and administrative expenses increased
53.4% year-on-year to RMB 449.9 million (US$ 64.6 million) (FY
2018: RMB 293.2 million), mainly due to an increase in staff
costs.
Q1 2020
Selling and marketing expenses amounted to RMB
68.6 million (US$ 9.7 million), down 36.8% year-on-year from RMB
108.6 million in Q1 2019, primarily as a result of lower marketing
activity due to the temporary closure of offline learning
centers.
Research and development expenses increased
18.6% year-on-year to RMB 7.0 million (US$ 1.0 million), from RMB
5.9 million in Q1 2019. This was a result of higher investment in
research and development activities of the Company’s online ELT
business.
General and administrative expenses decreased
20.3% year-on-year to RMB 65.0 million (US$ 9.2 million) (Q1 2019:
RMB 81.6 million), mainly due to the temporary closure of learning
centers during the quarter.
Loss from operations
In Q4 2019, loss from operations was RMB 158.9
million (US$ 22.8 million), compared to a loss from operations of
RMB 10.4 million in Q4 2018.
For the full year, loss from operations was RMB
227.7 million (US$ 32.7 million), compared to an income from
operations of RMB 51.7 million in 2018.
In Q1 2020, loss from operations was RMB 104.1
million (US$ 14.7 million), compared to a loss from operations of
RMB 54.1 million in Q1 2019.
Net income / loss
In Q4 2019, net loss was RMB 165.5 million (US$
23.8 million), compared to a net loss of RMB 8.5 million in Q4
2018.
For the full year, net loss was RMB 225.1
million (US$ 32.3 million), compared to a net income of RMB 53.4
million in 2018.
In Q1 2020, net loss was RMB 101.7 million (US$
14.4 million), compared to a net loss of RMB 42.2 million in Q1
2019.
Cash flow
Net operating cash outflow for the fourth
quarter was RMB 29.2 million (US$ 4.2 million), compared to an
inflow of RMB 65.9 million in Q4 2018. For the full year, it was an
outflow of RMB 21.6 million (US$ 3.1 million), compared to an
inflow of RMB 78.5 million in 2018.
Capital expenditure for Q4 2019 was RMB 16.8
million (US$ 2.4 million) versus RMB 27.9 million in Q4 2018. The
decline was mainly related to the opening of a fewer number of new
learning centers during the period compared to Q4 2018.
Capital expenditure for full year 2019 stood at
RMB 86.5 million (US$ 12.4 million), up from RMB 64.4 million the
previous year.
For the first quarter of 2020, net operating
cash outflow was RMB 97.7 million (US$ 13.8 million), compared with
RMB 41.4 million in Q1 2019, as a result of the negative impact of
COVID-19 on the Company’s operations.
Capital expenditure for the first quarter was
RMB 3.6 million (US$ 508,000), primarily attributable to decoration
costs.
Cash and cash equivalents
As at December 31, 2019, Meten EdtechX had RMB
140.1 million (US$ 20.1 million) of cash and cash equivalents,
compared to RMB 174.7 million as at December 31, 2018.
As at March 31, 2020, Meten EdtechX had RMB
152.2 million (US$ 21.5 million) of cash and cash equivalents,
compared with RMB 140.1 million of cash and cash equivalents as at
December 31, 2019.
Outlook
Following a year of significant investment in 2019 to build
Meten EdtechX’s platform for future growth, the successful
completion of the merger transaction and a resilient performance in
Q1 2020, Meten EdtechX remains committed to its growth strategy
based on four key pillars:
- Maintain sustainable growth of the online business by investing
in systems and product development, offline-to-online cross selling
and leveraging the offline network
- Further expand offline network coverage focusing on tier 2-4
cities
- Enhance and diversify our education service offering, focusing
on the general adult ELT business while expanding the junior ELT
business
- Selectively pursue strategic acquisitions and partnerships by
seeking targets with a substantial regional presence and brand
recognition, strong content development capabilities, shared values
and goals and advanced technological capabilities
The Company expects growth in gross billings to
accelerate from July 2020 when 132 centers will be fully
operational. Meten EdtechX intends to provide updated guidance for
full year 2020 at the time of announcing its Q2 2020 results.
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$”) at specified rates solely for the
convenience of the readers. Unless otherwise noted, all
translations from RMB to USD for the fourth quarter of 2019 and
full year 2019 are made at the rate of RMB 6.9618 to US$ 1.00, and
all translations from RMB to USD for the first quarter of 2020 are
made at the rate of RMB 7.0808 to US$ 1.00, the exchange rate set
forth in the H.10 statistical release of the Federal Reserve Board
on December 31, 2019 and March 31, 2020, 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
December 31, 2019 or March 31, 2020, as the case may be, or at any
other rate.
About Non-GAAP Financial
Measures
Meten EdtechX’s consolidated financial results presented are in
accordance with GAAP. However, to provide meaningful supplemental
information regarding its performance, Meten EdtechX uses the
following measures 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.
Results Presentation
The Company’s management team will host a
conference call at 08:00 EDT / 13:00 BST / 20:00 CST on Monday,
June 1, 2020, to discuss the financial results.
Dial-in details for the conference call
are as follows:
Mainland China: |
400 810 8228; +86 10 58084199 |
|
|
Hong Kong: |
+852 30051355 |
|
|
USA: |
+1 646 2543594; 866 636
3243 |
|
|
UK: |
+44 20 7660 0166 |
|
|
Participant PIN: |
950177 |
Participants should dial-in at least 5 minutes
before the scheduled start time.
For investor and media enquiries, please
contact:
Meten EdtechXStanley Yang +86
1851-8513-075stanley_yts@meten.com
Citigate Dewe RogersonSandra Novakov / Christen
Thomson / Eleni Menikou / Lucy Eyles+44 (0)20 7638
9571meten@citigatedewerogerson.com
About Meten EdtechX
Meten EdtechX is a leading ELT service provider
in China, delivering English language and future skills
training for Chinese students and professionals. Through a
sophisticated digital platform and 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). It offers superior teaching quality and
student satisfaction, which are underpinned 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 and competitiveness 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.
Safe Harbor Statement
This announcement contains forward-looking
statements. 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.
Among other things, the outlook for the second quarter of fiscal
year 2020 and full fiscal year 2020, quotations from management in
this announcement, as well as the Company’s strategic and
operational plans (in particular, the impact of the COVID-19
outbreak on our businesses, the solutions we adopted to mitigate
the effects of the outbreak, the impact on our financial
performance, the anticipated benefits of strategic growth
initiatives and the balancing growth and profitability), the
benefits of the Company’s 2019 investments and recent acquisitions,
as well as our four key growth strategies, contain forward-looking
statements. The Company may also make written or oral
forward-looking statements in its reports filed or furnished to the
U.S. Securities and Exchange Commission, in its annual reports to
shareholders, in press releases and other written materials and in
oral statements made by its officers, directors or employees to
third parties. Statements that are not historical facts, including
statements about the Company’s beliefs and expectations, are
forward-looking statements. Forward-looking statements involve
inherent risks and uncertainties. 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 “Meten” brand; 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.
Statement Regarding Unaudited Financial
Information
The unaudited financial information set forth in
this press release is preliminary and subject to adjustments.
Adjustments to the financial statements may be identified when
audit work is performed for the year-end audit, which could result
in significant differences from this preliminary unaudited
financial information.
Non-GAAP Financial Measures
This press release contains certain non-GAAP
financial measures, which are different from financial measures
calculated in accordance with U.S. GAAP. Such non-GAAP
financial measures should be considered in addition to and not as a
substitute for or superior to the financial measures calculated in
accordance with U.S. GAAP. In addition, the definition of
adjusted EBITDA and adjusted net income/loss in this press release
may be different from the definition of such terms used by other
companies, and therefore, comparability may be limited.
UNAUDITED CONDENSED CONSOLIDATED BALANCE
SHEET
(In thousands of RMB and USD, except for share,
per share and per ADS data)
|
As of December 31, |
|
As of December 31, |
As of March 31, |
|
2018 |
|
2019 |
2020 |
|
RMB’000 |
|
RMB’000 |
|
US$’000 |
|
RMB’000 |
|
US$’000 |
ASSETS |
|
|
|
|
|
|
|
|
|
Current
assets |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
174,679 |
|
140,132 |
|
20,129 |
|
152,217 |
|
21,497 |
Contract assets |
14,208 |
|
7,824 |
|
1,124 |
|
5,184 |
|
732 |
Accounts receivable, net |
2,221 |
|
28,903 |
|
4,152 |
|
31,248 |
|
4,413 |
Other contract costs |
46,503 |
|
54,088 |
|
7,769 |
|
56,015 |
|
7,911 |
Prepayments and other current
assets |
104,761 |
|
64,790 |
|
9,307 |
|
33,709 |
|
4,762 |
Amounts due from related
parties |
28,706 |
|
9,662 |
|
1,388 |
|
2,282 |
|
322 |
Prepaid income tax |
12,674 |
|
12,265 |
|
1,762 |
|
13,142 |
|
1,856 |
Total current
assets |
383,752 |
|
317,664 |
|
45,631 |
|
293,797 |
|
41,493 |
Non‑current
assets |
|
|
|
|
|
|
|
|
|
Restricted cash |
14,787 |
|
11,599 |
|
1,666 |
|
11,639 |
|
1,644 |
Other contract costs |
7,968 |
|
10,114 |
|
1,453 |
|
3,414 |
|
482 |
Equity method investments |
23,426 |
|
26,084 |
|
3,747 |
|
24,841 |
|
3,508 |
Property and equipment,
net |
211,954 |
|
220,118 |
|
31,618 |
|
179,394 |
|
25,335 |
Operating lease right-of-use
assets |
- |
|
484,225 |
|
69,555 |
|
438,353 |
|
61,907 |
Intangible assets, net |
36,904 |
|
24,968 |
|
3,586 |
|
23,561 |
|
3,327 |
Deferred tax assets |
4,072 |
|
4,200 |
|
603 |
|
4,058 |
|
573 |
Goodwill |
276,905 |
|
302,158 |
|
43,402 |
|
291,044 |
|
41,103 |
Long‑term prepayments and
other non‑current assets |
46,978 |
|
62,435 |
|
8,967 |
|
62,021 |
|
8,759 |
Total non‑current
assets |
622,994 |
|
1,145,901 |
|
164,597 |
|
1,038,325 |
|
146,638 |
Total
assets |
1,006,746 |
|
1,463,565 |
|
210,228 |
|
1,332,122 |
|
188,131 |
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET(In
thousands of RMB and USD, except for share, per share and per ADS
data)
|
As of December 31, |
As of December 31, |
As of March 31, |
|
2018 |
|
2019 |
|
2020 |
|
|
RMB’000 |
RMB’000 |
US$’000 |
RMB’000 |
US$’000 |
Current
liabilities |
|
|
|
|
|
Accounts payable |
13,974 |
|
15,714 |
|
2,257 |
|
21,798 |
|
3,078 |
|
Bank loans |
- |
|
92,000 |
|
13,215 |
|
90,000 |
|
12,710 |
|
Deferred revenue |
432,083 |
|
408,287 |
|
58,647 |
|
408,798 |
|
57,733 |
|
Salary and welfare
payable |
67,892 |
|
74,139 |
|
10,649 |
|
53,243 |
|
7,518 |
|
Financial liabilities from
contracts with customers |
423,163 |
|
490,095 |
|
70,398 |
|
426,826 |
|
60,279 |
|
Accrued expenses and other
payables |
78,625 |
|
48,457 |
|
6,960 |
|
79,445 |
|
11,220 |
|
Income taxes payable |
3,468 |
|
495 |
|
71 |
|
337 |
|
48 |
|
Amounts due to related
parties |
20,073 |
|
851 |
|
122 |
|
4,100 |
|
579 |
|
Current operating lease
liabilities |
- |
|
142,155 |
|
20,419 |
|
145,325 |
|
20,524 |
|
Total current
liabilities |
1,039,278 |
|
1,272,193 |
|
182,738 |
|
1,229,872 |
|
173,689 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-current
liabilities |
|
|
|
|
|
Deferred revenue |
52,169 |
|
60,528 |
|
8,694 |
|
61,296 |
|
8,657 |
|
Deferred tax liabilities |
23,101 |
|
14,085 |
|
2,023 |
|
10,464 |
|
1,478 |
|
Non-current tax payable |
6,801 |
|
26,085 |
|
3,747 |
|
27,662 |
|
3,907 |
|
Operating lease liabilities |
- |
|
333,613 |
|
47,922 |
|
287,261 |
|
40,569 |
|
Total non-current
liabilities |
82,071 |
|
434,311 |
|
62,386 |
|
386,683 |
|
54,611 |
|
Total
liabilities |
1,121,349 |
|
1,706,504 |
|
245,124 |
|
1,616,555 |
|
228,300 |
|
|
|
|
|
|
|
Shareholders’
deficit |
|
|
|
|
|
Ordinary shares |
219 |
|
219 |
|
31 |
|
37 |
|
5 |
|
Subscriptions receivable |
(219 |
) |
(2 |
) |
- |
|
(1 |
) |
- |
|
Additional paid-in capital |
167,514 |
|
264,175 |
|
37,946 |
|
324,585 |
|
45,840 |
|
Accumulated deficit |
(305,858 |
) |
(525,262 |
) |
(75,449 |
) |
(628,396 |
) |
(88,746 |
) |
Total deficit
attributable to shareholders of the Company |
(138,344 |
) |
(260,870 |
) |
(37,472 |
) |
(303,775 |
) |
(42,901 |
) |
Non-controlling interests |
23,741 |
|
17,931 |
|
2,576 |
|
19,342 |
|
2,732 |
|
Total
deficit |
(114,603 |
) |
(242,939 |
) |
(34,896 |
) |
(284,433 |
) |
(40,169 |
) |
Commitments and
contingencies |
- |
|
- |
|
- |
|
- |
|
- |
|
Total liabilities and
shareholders' deficit |
1,006,746 |
|
1,463,565 |
|
210,228 |
|
1,332,122 |
|
188,131 |
|
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
Q4 2019 |
Q4 2019 |
Q4 2018 |
FY 2019 |
FY 2019 |
FY 2018 |
Q1 2020 |
Q1 2020 |
Q1 2019 |
|
|
USD'000 |
RMB'000 |
RMB'000 |
USD'000 |
RMB'000 |
RMB'000 |
USD'000 |
RMB'000 |
RMB'000 |
|
Revenues |
50,696 |
|
352,932 |
|
359,617 |
|
207,978 |
|
1,447,899 |
|
1,424,234 |
|
25,644 |
|
181,581 |
|
314,803 |
|
|
Cost of revenues |
(28,237 |
) |
(196,581 |
) |
(170,115 |
) |
(108,500 |
) |
(755,356 |
) |
(627,996 |
) |
(20,485 |
) |
(145,048 |
) |
(172,772 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit |
22,459 |
|
156,351 |
|
189,502 |
|
99,478 |
|
692,543 |
|
796,238 |
|
5,159 |
|
36,533 |
|
142,031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
Selling and marketing
expenses |
(16,480 |
) |
(114,732 |
) |
(109,631 |
) |
(62,913 |
) |
(437,986 |
) |
(425,217 |
) |
(9,689 |
) |
(68,604 |
) |
(108,608 |
) |
|
General and administrative
expenses |
(27,798 |
) |
(193,521 |
) |
(84,213 |
) |
(64,625 |
) |
(449,903 |
) |
(293,157 |
) |
(9,183 |
) |
(65,024 |
) |
(81,626 |
) |
|
Research and development
expenses |
(1,001 |
) |
(6,968 |
) |
(6,103 |
) |
(4,644 |
) |
(32,333 |
) |
(26,178 |
) |
(989 |
) |
(7,006 |
) |
(5,867 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/income from
operations |
(22,820 |
) |
(158,870 |
) |
(10,445 |
) |
(32,704 |
) |
(227,679 |
) |
51,686 |
|
(14,702 |
) |
(104,101 |
) |
(54,070 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expenses): |
|
|
|
|
|
|
|
|
|
|
Interest income |
137 |
|
956 |
|
314 |
|
235 |
|
1,633 |
|
1,150 |
|
19 |
|
133 |
|
178 |
|
|
Interest expenses |
(131 |
) |
(912 |
) |
(1 |
) |
(352 |
) |
(2,453 |
) |
(8 |
) |
(150 |
) |
(1,065 |
) |
(351 |
) |
|
Foreign currency exchange
gain/(loss), net |
1 |
|
6 |
|
(27 |
) |
(3 |
) |
(19 |
) |
21 |
|
(29 |
) |
(208 |
) |
(3 |
) |
|
Gains on available-for-sale
investments |
- |
|
- |
|
7 |
|
- |
|
- |
|
3,916 |
|
- |
|
- |
|
- |
|
|
Gains on disposal of
subsidiaries |
- |
|
- |
|
- |
|
84 |
|
583 |
|
- |
|
- |
|
- |
|
- |
|
|
Government grants |
85 |
|
589 |
|
1,985 |
|
829 |
|
5,773 |
|
7,817 |
|
343 |
|
2,426 |
|
1,659 |
|
|
Equity in (loss)/income on
equity method investments |
(134 |
) |
(932 |
) |
(1,245 |
) |
382 |
|
2,658 |
|
1,668 |
|
(176 |
) |
(1,243 |
) |
2,553 |
|
|
Others, net |
138 |
|
959 |
|
2,204 |
|
579 |
|
4,044 |
|
1,649 |
|
(30 |
) |
(215 |
) |
(63 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/income before
income tax |
(22,724 |
) |
(158,204 |
) |
(7,208 |
) |
(30,950 |
) |
(215,460 |
) |
67,899 |
|
(14,725 |
) |
(104,273 |
) |
(50,097 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (expense)/
benefit |
(1,050 |
) |
(7,312 |
) |
(1,267 |
) |
(1,380 |
) |
(9,608 |
) |
(14,454 |
) |
360 |
|
2,550 |
|
7,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)/income |
(23,774 |
) |
(165,516 |
) |
(8,475 |
) |
(32,330 |
) |
(225,068 |
) |
53,445 |
|
(14,365 |
) |
(101,723 |
) |
(42,161 |
) |
|
Q4 2019 |
Q4 2019 |
Q4 2018 |
FY 2019 |
FY 2019 |
FY 2018 |
Q1 2020 |
Q1 2020 |
Q1 2019 |
|
|
USD'000 |
RMB'000 |
RMB'000 |
USD'000 |
RMB'000 |
RMB'000 |
USD'000 |
RMB'000 |
RMB'000 |
|
Less: Net (loss)/income
attributable to non-controlling interests |
(556 |
) |
(3,868 |
) |
(3,145 |
) |
(814 |
) |
(5,664 |
) |
(3,809 |
) |
199 |
|
1,411 |
|
(1,006 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)/income
attributable to shareholders of the Company |
(23,218 |
) |
(161,648 |
) |
(5,330 |
) |
(31,516 |
) |
(219,404 |
) |
57,254 |
|
(14,564 |
) |
(103,134 |
) |
(41,155 |
) |
|
Less: Accretion of
RedeemableOwners’ Investment |
- |
|
- |
|
- |
|
- |
|
- |
|
9,814 |
|
- |
|
- |
|
- |
|
|
Net (loss)/income
available toshareholders of the
Company |
(23,218 |
) |
(161,648 |
) |
(5,330 |
) |
(31,516 |
) |
(219,404 |
) |
47,440 |
|
(14,564 |
) |
(103,134 |
) |
(41,155 |
) |
|
Net
(loss)/income |
(23,774 |
) |
(165,516 |
) |
(8,475 |
) |
(32,330 |
) |
(225,068 |
) |
53,445 |
|
(14,365 |
) |
(101,723 |
) |
(42,161 |
) |
|
Other comprehensive
income |
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains on
available-for-sale investments, net of income tax |
- |
|
- |
|
- |
|
- |
|
- |
|
2,797 |
|
- |
|
- |
|
- |
|
|
Less: Reclassification
adjustment for gains on available-for-saleinvestments realized in
net income, net of income tax |
- |
|
- |
|
- |
|
- |
|
- |
|
2,937 |
|
- |
|
- |
|
- |
|
|
Comprehensive
(loss)/income |
(23,774 |
) |
(165,516 |
) |
(8,475 |
) |
(32,330 |
) |
(225,068 |
) |
53,305 |
|
(14,365 |
) |
(101,723 |
) |
(42,161 |
) |
|
Net (loss)/income per
share |
|
|
|
|
|
|
|
|
|
|
- Basic |
(0.48 |
) |
(3.34 |
) |
(0.11 |
) |
(0.65 |
) |
(4.53 |
) |
1.04 |
|
(0.30 |
) |
(2.13 |
) |
(0.85 |
) |
|
- Diluted |
(0.48 |
) |
(3.34 |
) |
(0.11 |
) |
(0.65 |
) |
(4.53 |
) |
1.01 |
|
(0.30 |
) |
(2.13 |
) |
(0.85 |
) |
|
Weighted average
shares used in calculating net (loss)/income per
share |
|
|
|
|
|
|
|
|
|
|
- Basic |
48,391,607 |
|
48,391,607 |
|
48,391,607 |
|
48,391,607 |
|
48,391,607 |
|
45,626,027 |
|
48,442,791 |
|
48,442,791 |
|
48,391,607 |
|
|
- Diluted |
48,391,607 |
|
48,391,607 |
|
48,391,607 |
|
48,391,607 |
|
48,391,607 |
|
46,997,775 |
|
48,442,791 |
|
48,442,791 |
|
48,391,607 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
Offering expenses |
1,711 |
|
11,911 |
|
7,482 |
|
4,040 |
|
28,123 |
|
14,766 |
|
- |
|
- |
|
3,158 |
|
|
Share based compensation
expenses |
13,114 |
|
91,297 |
|
1,823 |
|
13,884 |
|
96,661 |
|
7,648 |
|
228 |
|
1,613 |
|
1,944 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net
(loss)/income |
(8,949 |
) |
(62,308 |
) |
830 |
|
(14,406 |
) |
(100,284 |
) |
75,859 |
|
(14,137 |
) |
(100,110 |
) |
(37,059 |
) |
|
RECONCILIATION OF GAAP AND NON-GAAP RESULTS
ADJUSTED EBITDA & ADJUSTED NET (LOSS)/INCOME
|
Q4 2019 |
Q4 2019 |
Q4 2018 |
FY 2019 |
FY 2019 |
FY 2018 |
Q1 2020 |
Q1 2020 |
Q1 2019 |
|
USD'000 |
RMB'000 |
RMB'000 |
USD'000 |
RMB'000 |
RMB'000 |
USD'000 |
RMB'000 |
RMB'000 |
Net (loss)/income |
(23,774 |
) |
(165,516 |
) |
(8,475 |
) |
(32,330 |
) |
(225,068 |
) |
53,445 |
(14,365 |
) |
(101,723 |
) |
(42,161 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
(20,573 |
) |
(143,234 |
) |
13,274 |
|
(22,437 |
) |
(156,187 |
) |
121,701 |
(12,571 |
) |
(89,024 |
) |
(33,475 |
) |
|
|
|
|
|
|
|
|
|
|
Offering expenses |
1,711 |
|
11,911 |
|
7,482 |
|
4,040 |
|
28,123 |
|
14,766 |
- |
|
- |
|
3,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
expenses |
13,114 |
|
91,297 |
|
1,823 |
|
13,884 |
|
96,661 |
|
7,648 |
228 |
|
1,613 |
|
1,944 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA |
(5,748 |
) |
(40,026 |
) |
22,579 |
|
(4,513 |
) |
(31,403 |
) |
144,115 |
(12,343 |
) |
(87,411 |
) |
(28,373 |
) |
|
|
|
|
|
|
|
|
|
|
Adjusted Net
(loss)/income |
(8,949 |
) |
(62,308 |
) |
830 |
|
(14,406 |
) |
(100,284 |
) |
75,859 |
(14,137 |
) |
(100,110 |
) |
(37,059 |
) |
EdtechX Holdings Acquisi... (NASDAQ:EDTX)
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