Skillful Craftsman Announces Financial Results for The First Six Months of Fiscal Year 2022

Rhea-AI Summary

Skillful Craftsman Education Technology Ltd. (NASDAQ: EDTK) reported a 23% decrease in revenue to $11.9 million for the first half of fiscal 2022, down from $15.3 million last year. Gross profit fell 58% to $3.6 million, with a gross margin of 30%, driven by increased costs and fewer fee-paying members, dropping 68% to 1.1 million. The company incurred a net loss of $43.3 thousand versus a profit of $4.4 million a year ago. Cash and equivalents rose to $23.7 million. Despite challenges, future strategic shifts and governmental support for vocational education raise optimism.

Positive

• Company holds cash and cash equivalents of $23.7 million.
• Future strategies leveraging technology and partnerships for vocational training.
• Government policies support vocational education development.

Negative

• Revenue decreased by 23% year-over-year.
• Gross profit decreased by 58%, leading to a gross margin drop to 30%.
• Net loss of $43.3 thousand compared to net income of $4.4 million previously.
• Total fee-paying members decreased by 68%.

WUXI, China, Dec. 3, 2021 /PRNewswire/ -- Skillful Craftsman Education Technology Ltd. ("the Company") (NASDAQ: EDTK), an education technology company providing interactive online learning services, today announced its financial results for the first six months of fiscal year 2022 ended September 30, 2021.

First Six Months of Fiscal Year 2022 Financial and Operational Highlights

All financial figures are in US Dollars unless otherwise noted.

• Revenue was $11.9 million, compared with $15.3 million for the same period of last year, representing a 23% decrease, primarily due to a decrease in the number of total fee-paying members resulting from the decline in training needs of workers from rural area as the urbanization continued.
  
  
• Gross profit was $3.6 million, compared with $8.5 million for the same period of last year, representing a 58% decrease. The decrease was mainly due to the combined effect of the decrease in revenue and an increase in cost of revenue as the Company incurred increased fees in courseware, software copyrights and virtual simulation in connection with its efforts to shift target customers to students at vocational schools.
  
  
• Gross profit margin was 30%, compared with 55% for the same period of last year. The main reason was the cost spent in platform upgrade and courses enrichment did not result in the expansion of customer base to the extent expected.
  
  
• Net loss was $43.3 thousand, compared with net income of $4.4 million for the same period of last year. The decrease was due to the decrease in revenue, an increase in the cost of revenue and an increase in general and administrative expenses.
  
  
• Basic and diluted earnings per share were $0.00, compared with $0.44 for the same period of last year.
  
  
• Total fee-paying members⁽¹⁾ was 1.1 million, compared with 3.3 million during the same period of last year, representing a 68% decrease. The decrease was primarily due to the combined effect of (i) the shrinking training needs of workers from rural area as a result of the development of urbanization, and (ii) unsatisfactory acquisition of new customers among students at vocational schools, who nowadays tend to be more interested in mobile live streaming and short video training courses than the personal computer courses offered by the Company.

(1) Number of fee-paying members is defined as the total number of members that are paying fees for accessing our platforms as of the end of the applicable period.

Mr. Xiaofeng Gao, Chairman and CEO of Skillful Craftsman Education Technology Ltd., commented, "To seize the market opportunities, we have accelerated the deployment of new business strategy and new technology since the first half year of 2021. With respect to business development, the Company is leveraging online cloud technology service and flexible employment service platform, to cooperate with schools and institutions to provide them with high quality vocational training. It has already landed in the two major fields of Chinese medicine basic education and hotel management. With respect to technology enhancement, the Company will integrate metaverse technology with big data, cloud technology and traditional Augmented Reality (AR) simulation teaching capabilities. Through co-constructing metaverse vocational labs with universities and ecological chain companies, the Company plans to launch multi-persons collaborative simulation skills training platform based on metaverse. We remain optimistic about the vocational education industry based on the Opinions on Promoting the High-quality Development of Modern Vocational Education (the "Opinions") issued by the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council. The Opinions encourage companies to participate in and support the development of vocational education, which provides clear directions and positive incentives for the Company's future development. We believe our brand, strategic development and the supporting policy will position us well for the future and we are confident in creating long-term value and returns for our shareholders."

First Six Months of Fiscal Year 2022 Financial Results

All figures refer to the first six months of fiscal year 2022 ended September 30, 2021 unless otherwise stated

Revenue

Revenue decreased by 23% to $11.9 million, from $15.3 million for the same period of last year, primarily due to a decrease in the number of total fee-paying members resulting from the decline in training needs of workers from rural area as the urbanization continued.

Cost of Revenue

Cost of revenue increased by 21% to $8.3 million, from $6.8 million for the same period of last year. The increase of cost of revenue was mainly caused by the increase of $0.8 million amortization of the newly purchased courseware and software copyrights, and the increase of virtual simulation fee by $0.6 million, both related to the Company's efforts to shift target customers to students at vocational schools.

Gross Profit and Gross Margin

Gross profit decreased by 58% to $3.6 million, from $8.5 million for the same period of last year. The decrease was mainly due to the combined effect of increased cost of revenue in courseware, software copyrights and virtual simulation fees and decrease in revenue.

Gross margin decreased by 25 percentage points to 30%, from 55% for the same period of last year. The main reason was the cost spent in platform upgrade and courses enrichment did not result in the expansion of customer base to the extent expected.

Operating Expenses

Operating expenses increased by 27% to $3.0 million, from $2.4 million for the same period of last year.

Sales and marketing expenses decreased by 18% to $0.7 million, from $0.9 million for the same period of last year. The decrease was mainly due to the decreases in both of the promotion expenses and telecommunications service fees.

General and administrative expenses increased by 53% to $2.3 million, from $1.5 million for the same period of last year. The increase was primarily caused by the increased compensation paid to employees, audit fees, the insurance fee and consulting fees for the period ended September 30, 2021.

Income Before Tax

Income before tax expense decreased by 90% to $0.6 million, from $6.1 million for the same period of last year.

Net (loss)/Income

Net loss was $43.3 thousand, compared with net income of $4.4 million for the same period of last year.

Basic and diluted earnings per share were $0.00, compared with $0.44 for the same period of last year.

Cash and Cash Equivalents

As of September 30, 2021, the Company had cash and cash equivalents of $23.7 million, compared with $17.5 million as of March 31, 2021.

Cash Flow

Net cash generated from operating activities was $1.8 million, compared with $6.6 million for the same period of last year.

Net cash provided by investing activities was $4.4 million, compared with net cash used in investing activities $14.2 million for the same period of last year.

Net cash generated from financing activities was nil, compared with $13.24 million for the same period of last year.

About Skillful Craftsman

Skillful Craftsman is an education technology company that provides interactive online vocational training and virtual simulation experimental training courses. The Company began operations in Wuxi, China in 2013 and is a key supporter for China education reform and development for labor employment. For more information, please visit: ir.kingwayup.com

Safe Harbor Statement

This report contains "forward-looking statements" for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 that represent our beliefs, projections and predictions about future events. All statements other than statements of historical fact are "forward-looking statements," including any projections of earnings, revenue or other financial items, any statements of the plans, strategies and objectives of management for future operations, any statements concerning proposed new projects or other developments, any statements regarding future economic conditions or performance, any statements of management's beliefs, goals, strategies, intentions and objectives, and any statements of assumptions underlying any of the foregoing. Words such as "may", "will", "should", "could", "would", "predicts", "potential", "continue", "expects", "anticipates", "future", "intends", "plans", "believes", "estimates" and similar expressions, as well as statements in the future tense, identify forward-looking statements.

Forward-looking statements are based on information available at the time those statements are made and management's belief as of that time with respect to future events. These statements are necessarily subjective and involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any future results, performance or achievements described in or implied by such statements. Such risks, uncertainties, and other factors include, but are not limited to, our ability to improve launch and leverage new technologies and cooperative relationships or anticipate market demand in a timely or cost-effective manner, and those factors discussed under the headings "Risk Factors", "Operating and Financial Review and Prospects," and elsewhere in our Annual Report on Form 20-F. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of whether, or the times by which, our performance or results may be achieved. Actual results may differ materially from expected results described in our forward-looking statements, including with respect to correct measurement and identification of factors affecting our business or the extent of their likely impact, and the accuracy and completeness of the publicly available information with respect to the factors upon which our business strategy is based or the success of our business. The Company disclaims any intention to, and undertakes no obligation to, update or revise any forward-looking statement.

For investor and media enquiries, please contact:

Skillful Craftsman
Investor Relations Department
Email: iredtk@kingwayedu.cn

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

 

 

 

SKILLFUL CRAFTSMAN EDUCATION TECHNOLOGY LIMITED
CONSOLIDATED BALANCE SHEETS
(Amounts in US$, except for number of shares)
		As of
		September 30, 2021			March 31, 2021
			(Unaudited)			(Audited)
ASSETS
Current assets
Cash and cash equivalents		$	23,712,359		$	17,453,360
Accounts receivable, net			50,246			83,980
Prepayments			2,903,533			1,784,537
Other receivables			186,325			5,713,192
Total current assets			26,852,463			25,035,069
Non-current assets
Long-term investment			306,498			-
Property and equipment, net			12,462,098			13,725,957
Intangible assets, net			17,144,418			20,416,461
Goodwill			4,581,112			-
Long-term prepayments and other non-current assets			-			28,406
Total non-current assets			34,494,126			34,170,824
TOTAL ASSETS		$	61,346,589		$	59,205,893
LIABILITIES
Current liabilities
Accounts payable		$	122,119		$	113,707
Taxes payable			292,532			448,485
Amounts due to a related party			5,764			257,037
Accrued expenses			920,665			1,051,929
Deferred tax liabilities			43,234			-
Deferred revenue-current			9,270,561			11,456,667
Total current liabilities			10,654,875			13,327,825
Non-current liabilities
Deferred revenue-noncurrent			-			312,896
Total non-current liabilities			-			312,896
TOTAL LIABILITIES		$	10,654,875		$	13,640,721
COMMITMENTS AND CONTINGENCIES			-			-
SHAREHOLDERS' EQUITY
Ordinary shares, par value $0.0002 per share, 500,000,000			2,980			2,400
shares authorized; 14,900,000 and 12,000,000 shares issued
and outstanding as of 30 September, 2021 and 31 March,
2021, respectively
Additional paid-in capital			18,055,407			13,415,987
Statutory reserve			746,323			745,590
Accumulated profits			30,375,080			30,419,177
Accumulated other comprehensive income			1,511,924			982,018
TOTAL SHAREHOLDERS' EQUITY			50,691,714			45,565,172
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	61,346,589		$	59,205,893

 

 

 

SKILLFUL CRAFTSMAN EDUCATION TECHNOLOGY LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Amounts in US$, except for number of shares)
		For the six months ended
		September 30,
		2021			2020
		(Unaudited)			(Unaudited)
Revenue		$	11,851,792		$	15,313,780
Cost of revenue			(8,255,007)			(6,826,879)
Gross income			3,596,785			8,486,901
Operating expenses:
Selling and marketing expenses			(720,191)			(879,812)
General and administrative expenses			(2,293,011)			(1,499,774)
Total operating expenses			(3,013,202)			(2,379,586)
Income from operations			583,583			6,107,315
Interest income			31,237			30,292
Investment loss			(1,897)			-
Government grant			493			-
Foreign currency exchange loss			(48,819)			-
Loss on disposals of equipment			(54,147)			-
Other expenses, net			(2,147)			(909)
Income before income taxes			508,303			6,136,698
Income tax expense			(551,667)			(1,744,005)
Net (loss)/income		$	(43,364)		$	4,392,693
Other comprehensive income/(loss):
Foreign currency translation adjustment			529,906			1,246,805
Total comprehensive income			486,542			5,639,498
Net earnings per ordinary share, basic and diluted		$	0.00		$	0.44
Weighted average number of ordinary shares, basic and diluted			12,475,410			10,000,000

 

 

 

SKILLFUL CRAFTSMAN EDUCATION TECHNOLOGY LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Amounts in US$)
		For the six months ended September 30,
		2021			2020
Cash Flows from Operating Activities
Net (loss)/income		$	(43,364)		$	4,392,693
Adjustments to reconcile net profit to net cash provided
by operating activities:
Depreciation of property and equipment			2,051,081			1,657,961
Amortization of intangible assets			3,948,391			3,157,605
Loss from equity-method investment			1,897			-
Loss on disposals of equipment			54,147			-
Changes in operating assets and liabilities:
Accounts receivables, net			33,734			(24,284)
Prepayments and other current assets			(1,118,873)			(602,972)
Other receivables			(19,296)			-
Long-term prepayments and other non-current assets			28,406			28,509
Accounts payable			8,412			(149,822)
Amounts due to a related party			(251,273)			509,012
Deferred revenue			(2,552,387)			(2,939,360)
Accrued expenses			(220,164)			768,911
Taxes payable			(154,248)			(213,411)
Deferred tax liabilities			(730)			-
Net cash generated from operating activities			1,765,733			6,584,842
Cash flows from investing activities
Purchase of property and equipment			(653,189)			(3,988,249)
Purchase of intangible assets			(209,469)			(2,254,100)
Proceed from redemption of financial assets held for			5,563,191			-
trading
Investment in private held company			(308,385)			-
Purchase of Jisen Information, net of cash acquired			50,229			-
Proceed from disposal of equipment			4,650			-
Purchases of other investments			-			(8,000,000)
Net cash generated from/(used in) investing activities		$	4,447,027		$	(14,242,349)
Cash flows from financing activities
Proceeds from IPO net off IPO expenses			-			13,243,554
Net cash generated from financing activities		$	-		$	13,243,554
Effects of foreign currency translation			46,239			(67,122)
Net increase in cash and cash equivalents			6,258,999			5,518,925
Cash and cash equivalents at beginning of period			17,453,360			11,931,714
Cash and cash equivalents at end of period		$	23,712,359		$	17,450,639
Supplemental disclosures of cash flow information
Cash paid for income taxes		$	687,877		$	1,974,038
Non cash transactions
Ordinary shares issued for Jisen Information acquisition		$	4,640,000		$	-

 

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SOURCE Skillful Craftsman Education Technology Ltd.

FAQ

What were Skillful Craftsman Education Technology's financial results for the first six months of fiscal year 2022?

The company reported a revenue of $11.9 million, a gross profit of $3.6 million, and a net loss of $43.3 thousand.

How did the number of fee-paying members change for EDTK?

The number of fee-paying members decreased by 68%, from 3.3 million to 1.1 million.

What caused the revenue decline for Skillful Craftsman Education Technology?

The decline was primarily due to decreased training needs of workers from rural areas due to urbanization.

What is the company's outlook based on the recent press release?

The company remains optimistic about future growth due to governmental support for vocational education and strategic technology enhancements.