Trading Update and 2021 Guidance
November 18 2020 - 8:00AM
Meten EdtechX Education Group Ltd. (NASDAQ: METX) (“Meten EdtechX”
or the “Company”), a leading omnichannel English language training
(“ELT”) service provider in China, provides an update on trading
and guidance for 2021, ahead of the release of its unaudited
financial results for the third quarter of 2020.
Business Update:
- Early signs of
post-pandemic recovery. Q3 2020 revenue are expected to
reach approximately RMB300 million, representing a 60% increase
compared with Q2 2020. Revenue in Q3 2020 is expected to be
approximately 29% down compared to Q3 2019 as a result of the
mandatory closure of offline learning centers during the first half
of 2020 and partial closure or reduced operating hours of certain
number of offline learning centers in Q3 2020. To date, all of the
Company’s 123 offline learning centers1 have reopened (compared
with 103 at the end of August 2020).
-
Strong growth in the Junior ELT/ K12 segment(s).
Post-pandemic, the Company has observed customers re-enrolling in
Junior ELT, both at offline learning centers and online, at a
faster pace than adult customers whose disposable income has been
adversely impacted by the pandemic. Junior ELT’s gross billings for
Q3 2020 are up 89% compared to the previous quarter (Q2 2020).
-
Streamlining of operations and reallocation of resources to
Junior ELT and online ELT segments from adult learning
centers. During the COVID-19 pandemic, the Company
has made considerable efforts to reduce its operating costs, aiming
to achieve approximately RMB180 million of annual savings. In
addition, 70 lease agreements for the self-operated learning
centers (nearly 40% of the total leases) were renegotiated and 22
learning centers for adult ELT were closed in order to redeploy the
resources to the Junior ELT and online ELT segments. As a result,
we estimate our net losses for Q3 2020 to be significantly reduced
to approximately RMB40 million (compared with RMB93.4 million in Q2
2020). These cost reduction efforts will continue and are expected
to result in a leaner cost structure and a more balanced revenue
mix between the offline and online and adult and junior segments by
the beginning of 2021.
- Online offering achieving
high growth and profitability. Likeshuo, Meten EdtechX’s
online ELT platform, continues to deliver a strong post-pandemic
performance in terms of both growth and profitability, achieving a
54% increase in the number of registered users and a 22% increase
in gross billings in Q3 2020 vs Q2 2020. The
Company’s online ELT business targets approximately RMB340 million
in revenues by the end of 2020, representing a 30% increase
compared to full fiscal year of 2019 and approximately RMB16
million of net profit (vs RMB1.5 million for the previous year).
Meten EdtechX’s omnichannel platform and rising Likeshuo brand
awareness continue to provide the Company with a competitive
advantage in terms of customer acquisition.
-
Continued Product innovation. Meten EdtechX
continues to invest in product development and has recently
launched several new products across both its offline and online
platforms. This includes two new language (Japanese and Spanish)
products, K12 junior products and the “Bi Gao” exam preparatory
product for middle schoolers.
________________________
1 Inclusive of the permanently closed 11 learning centers for
adult ELT.
Guidance 2021
- “Return to normal” scenario
expected by end of 2021: improved profitability and continued
digital shift. Assuming no resurgence of the COVID-19
pandemic in China, and taking into account recent positive
developments relating to a COVID-19 vaccine and the continuous
recovery of China’s economy, Meten EdtechX expects its trading and
profitability to gradually return to pre-pandemic levels over the
course of 2021. While this remains partially dependent on the pace
at which the adult ELT market recovers, the Company’s gross billing
target for FY 2021 is expected to be within the range of RMB1.5-1.6
billion (representing a return to pre-pandemic level),
approximately 40-50% of which are driven by Likeshuo. The Company
is currently aiming for EBITDA of RMB200 million and net profit of
RMB120 million for the FY 2021, respectively.
-
Selective review of consolidation opportunities.
Meten EdtechX continues to see a compelling case for consolidation
in the language, K12 and future skills training in China and Asia
more generally, and will continue to selectively consider merger
and joint venture opportunities.
Alan Peng, CEO of the Company commented:
“Meten EdtechX and the wider ELT market in China
are gradually recovering from the COVID-19 pandemic, though trading
conditions in the second part of 2020 remain challenging for our
core ELT adult offline business.
Despite these challenges and losses incurred
during the year, we continue to strongly believe that China remains
fundamentally a high growth market for the ELT sector, and our
diversified omnichannel offering and strategic footprint in tier 2,
3 and 4 cities give us a significant competitive advantage. During
2020, we have taken decisive and necessary action to ensure we
emerge in 2021 in a stronger position with a leaner cost structure,
enhanced operating efficiency and increased exposure to the higher
growth segments of junior/K12 and online business segments.
We will continue to provide trading updates to
the market on a regular basis as the situation evolves. Our
unaudited financial results for the third quarter of 2020 will be
released in early December. We are also committed to establishing
equity research coverage of our stock in 2021, so that our overall
performance and the acceleration of our digital growth are
benchmarked with other market peers.”
The above business
update and guidance for 2021 reflect Meten
EdtechX’s current and preliminary view, which is subject to
uncertainty and change.
For investor and media enquiries, please
contact:
Citigate Dewe Rogerson
meten@citigatedewerogerson.com +44 (0)20 7025 6400
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 business update and guidance for 2021 in
this announcement, 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.
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