17 Education & Technology Group Inc. Announces First Quarter Unaudited Financial Results
17 Education & Technology Group Inc. (NASDAQ: YQ) reported its Q1 2022 financial results, with net revenues of RMB233.4 million (US$36.8 million), down 50.8% year-over-year from RMB474.2 million. The gross margin improved slightly to 60.7%. The company achieved a net loss of RMB24.8 million, a substantial reduction from RMB659.7 million in Q1 2021. Adjusted net income turned positive at RMB9.9 million (US$1.6 million), up from an adjusted net loss of RMB588.8 million last year. Looking ahead, Q2 2022 revenues are projected between RMB100 million and RMB120 million, reflecting business transformation.
- Adjusted net income (non-GAAP) of RMB9.9 million, an improvement from adjusted net loss of RMB588.8 million last year.
- Gross margin increased to 60.7% from 60.4% in the prior year.
- Net loss narrowed significantly from RMB659.7 million in Q1 2021 to RMB24.8 million in Q1 2022.
- Net revenues decreased 50.8% year-over-year from RMB474.2 million to RMB233.4 million due to cessation of K-12 tutoring services.
- Overall revenue outlook indicates uncertain growth compared to prior periods.
BEIJING, June 09, 2022 (GLOBE NEWSWIRE) -- 17 Education & Technology Group Inc. (NASDAQ: YQ) (“17EdTech” or the “Company”), a leading education technology company in China, today announced its unaudited financial results for the first quarter of 2022.
First Quarter 2022 Highlights1
- Net revenues were RMB233.4 million (US
$36.8 million ), representing a year-over-year decrease of50.8% from RMB474.2 million in the first quarter of 2021, and11.1% higher than the high end of the estimate provided by the Company in March 2022. - Gross margin was
60.7% , improving from60.4% in the first quarter of 2021. - Net loss was RMB24.8 million (US
$3.9 million ), significantly decreasing from net loss of RMB659.7 million in the first quarter of 2021. - Net loss as a percentage of net revenues was negative
10.6% in the first quarter of 2022, narrowing from negative139.1% in the first quarter of 2021. - Adjusted net income2 (non-GAAP), which excluded share-based compensation expenses of RMB34.6 million (US
$5.5 million ), was RMB9.9 million (US$1.6 million ), improving from adjusted net loss (non-GAAP) of RMB588.8 million in the first quarter of 2021. - Adjusted net income (loss) (non-GAAP) as a percentage of net revenues was
4.2% in the first quarter of 2022, compared with negative124.2% in the first quarter of 2021.
Mr. Andy Chang Liu, Founder, Chairman and Chief Executive Officer of 17EdTech commented, “We delivered strong operational and financial results in the first quarter of 2022. Our new business strategies yielded higher-than-expected net revenues and improved operational efficiency. Although we recorded a net loss of RMB24.8 million on a GAAP basis in the first quarter of 2022, we once again achieved net profitability on a non-GAAP basis.”
“During the quarter, we continue to see new demands and opportunities arising out of this new wave of COVID-19 outbreaks in China in early 2022. A number of local governments have released policies to support the procurement of quality education resources, including courses, systems and services for compulsory education. We continued to see great momentum and new driving forces for our future growth and demands for our online homework services.” Mr. Liu concluded.
_____________________
1 For a reconciliation of non-GAAP numbers, please see the table captioned “Reconciliations of non-GAAP measures to the most comparable GAAP measures” at the end of this press release.
2 Adjusted net income (loss) represents net income (loss) excluding share-based compensation expenses.
Mr. Michael Chao Du, Director and Chief Financial Officer of 17EdTech commented, “We are pleased to report our solid performance in the first quarter of 2022. Our net revenues reached RMB233.4 million,
First Quarter 2022 Unaudited Financial Results
Net Revenues
Net revenues for the first quarter of 2022 were RMB233.4 million (US
Cost of Revenues
Cost of revenues for the first quarter of 2022 was RMB91.8 million (US
Gross Profit and Gross Margin
Gross profit for the first quarter of 2022 was RMB141.7 million (US
Gross margin for the first quarter of 2022 was
Total Operating Expenses
The following table sets forth a breakdown of operating expenses by amounts and percentages during the periods indicated (in thousands, except for percentages):
| For the three months ended March 31, | |||||||||||
| 2021 | 2022 | Year-over-year | |||||||||
| RMB | % | RMB | USD | % | |||||||
| Sales and marketing expenses | 613,527 | 129.4 | % | 21,997 | 3,470 | 9.4 | % | -96.4 | % | ||
| Research and development expenses | 209,927 | 44.3 | % | 97,476 | 15,376 | 41.8 | % | -53.6 | % | ||
| General and administrative expenses | 129,718 | 27.4 | % | 51,301 | 8,093 | 22.0 | % | -60.5 | % | ||
| Total operating expenses | 953,172 | 201.1 | % | 170,774 | 26,939 | 73.2 | % | -82.1 | % | ||
Total operating expenses for the first quarter of 2022 were RMB170.8 million (US
Sales and marketing expenses for the first quarter of 2022 were RMB22.0 million (US
Research and development expenses for the first quarter of 2022 were RMB97.5 million (US
General and administrative expenses for the first quarter of 2022 were RMB51.3 million (US
Loss from Operations
Loss from operations for the first quarter of 2022 was RMB29.1 million (US
Net Loss
Net loss for the first quarter of 2022 was RMB24.8 million (US
Adjusted Net Income (Loss) (non-GAAP)
Adjusted net income (non-GAAP) for the first quarter of 2022 was RMB9.9 million (US
Please refer to the table captioned “Reconciliations of non-GAAP measures to the most comparable GAAP measures” at the end of this press release for a reconciliation of net loss under U.S. GAAP to adjusted net income (loss) (non-GAAP).
Business Outlook
Based on our current estimates, total net revenues for the second quarter of 2022 are expected to be between RMB100 million and RMB120 million. The estimated total net revenues for the second quarter of 2022 are derived entirely from the ongoing businesses after the Company's business transformation and, as mentioned above, do not include revenues from the legacy online K-12 tutoring services. This estimated range represents a significant increase year-over-year when compared with the relatively small base of the net revenue generated from non-online K-12 tutoring services for the second quarter of 2021.
The above forecast reflects 17EdTech's current and preliminary view and is therefore subject to change. Please see the section titled “Safe Harbor Statement” below for the factors that could cause actual results to differ materially from those contained in any forward-looking statement.
Conference Call Information
The Company will hold a conference call on Thursday, June 9, 2022 at 9:00 p.m. U.S. Eastern Time (Friday, June 10, 2022 at 9:00 a.m. Beijing time) to discuss the financial results for the first quarter of 2022.
Please note that all participants will need to preregister online prior to the conference call to receive the dial-in details.
Please note that participants need to pre-register for the conference call participation by navigating to http://apac.directeventreg.com/registration/event/6769505. Once preregistration has been completed, participants will receive dial-in numbers, an event passcode, and a unique registrant ID.
To join the conference call, please dial the number you receive, enter the event passcode followed by your unique registrant ID, and you will be joined to the conference call instantly.
A telephone replay will be available two hours after the conclusion of the conference call through June 17, 2022. The dial-in details are:
| International: | +61 2 8199 0299 |
| U.S. toll free: | 185 5452 5696 |
| Passcode: | 6769505 |
Additionally, a live and archived webcast of this conference call will be available at https://ir.17zuoye.com/.
Non-GAAP Financial Measures
17EdTech’s management uses adjusted net income (loss) as a non-GAAP financial measure to gain an understanding of 17EdTech’s comparative operating performance and future prospects.
Adjusted net income (loss) represents net loss excluding share-based compensation expenses and such adjustment has no impact on income tax.
Adjusted net income (loss) is used by 17EdTech’s management in their financial and operating decision-making as a non-GAAP financial measure, because management believes it reflects 17EdTech’s ongoing business and operating performance in a manner that allows meaningful period-to-period comparisons. 17EdTech’s management believes that such non-GAAP measure provides useful information to investors and others in understanding and evaluating 17EdTech’s operating performance in the same manner as management does, if they so choose. Specifically, 17EdTech believes the non-GAAP measure provides useful information to both management and investors by excluding certain charges that the Company believes are not indicative of its core operating results.
The non-GAAP financial measure has limitations. It does not include all items of income and expense that affect 17EdTech’s income from operations. Specifically, the non-GAAP financial measure is not prepared in accordance with GAAP, may not be comparable to non-GAAP financial measures used by other companies and, with respect to the non-GAAP financial measure that excludes certain items under GAAP, does not reflect any benefit that such items may confer to 17EdTech. Management compensates for these limitations by also considering 17EdTech’s financial results as determined in accordance with GAAP. The presentation of this additional information is not meant to be considered superior to, in isolation from or as a substitute for results prepared in accordance with US GAAP.
Exchange Rate Information
The Company’s business is primarily conducted in China and all of the revenues are denominated in Renminbi (“RMB”). However, periodic reports made to shareholders will include current period amounts translated into U.S. dollars (“USD” or “US$”) using the exchange rate as of balance sheet date, for the convenience of the readers. Translations of balances in the consolidated balance sheets and the related consolidated statements of operations, comprehensive loss, change in shareholders’ deficit and cash flows from RMB into USD as of and for the three months ended March 31, 2022 are solely for the convenience of the readers and were calculated at the rate of US
About 17 Education & Technology Group Inc.
17 Education & Technology Group Inc. is a leading education technology company in China. The Company provides a smart in-school classroom solution that delivers data-driven teaching, learning and assessment products to teachers, students and parents. Leveraging its extensive knowledge and expertise obtained from in-school business over the past decade, the Company provides teaching and learning SaaS offerings to facilitate the digital transformation and upgrade at Chinese schools, with a focus on improving the efficiency and effectiveness of core teaching and learning scenarios such as homework assignments and in-class teaching. The Company also provides a personalized self-directed learning product to Chinese families. The product utilizes the Company’s technology and data insights to provide personalized and targeted learning and exercise content that is aimed at improving students’ learning efficiency.
Safe Harbor Statement
This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the United States 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 17EdTech’s beliefs and expectations, are forward-looking statements. 17EdTech may also make written or oral forward-looking statements in its periodic reports to the SEC, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. 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: 17EdTech’s growth strategies; its future business development, financial condition and results of operations; its ability to continue to attract and retain users; its ability to carry out its business and organization transformation, its ability to implement and grow its new business initiatives; the trends in, and size of, China’s online education market; competition in and relevant government policies and regulations relating to China's online education market; its expectations regarding demand for, and market acceptance of, its products and services; its expectations regarding its relationships with business partners; general economic and business conditions; and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in 17EdTech’s filings with the SEC. All information provided in this press release is as of the date of this press release, and 17EdTech does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
For investor and media inquiries, please contact:
17 Education & Technology Group Inc.
Ms Lara Zhao
Investor Relations Manager
E-mail: ir@17zuoye.com
Christensen
In China
Eric Yuan
Phone: +86-138-0111-0739
E-mail: Eyuan@christensenir.com
In US
Linda Bergkamp
Phone: +1-480-614-3004
E-mail: lbergkamp@christensenir.com
| 17 EDUCATION & TECHNOLOGY GROUP INC. | |||||
| UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | |||||
| (In thousands of RMB and USD, except for share and per ADS data, or otherwise noted) | |||||
| As of December 31, | As of March 31, | ||||
| 2021 | 2022 | 2022 | |||
| RMB | RMB | USD | |||
| ASSETS | |||||
| Current assets | |||||
| Cash and cash equivalents | 1,180,898 | 813,384 | 128,308 | ||
| Prepaid expenses and other current assets | 161,826 | 143,873 | 22,695 | ||
| Total current assets | 1,342,724 | 957,257 | 151,003 | ||
| Non-current assets | |||||
| Property and equipment, net | 69,811 | 56,099 | 8,849 | ||
| Right-of-use assets | 153,963 | 109,500 | 17,273 | ||
| Other non-current assets | 13,923 | 12,331 | 1,945 | ||
| TOTAL ASSETS | 1,580,421 | 1,135,187 | 179,070 | ||
| LIABILITIES | |||||
| Current liabilities | |||||
| Accrued expenses and other current liabilities (including accrued expenses and other current liabilities of the consolidated VIEs without recourse to the Group of RMB93,115 and RMB51,019 as of December 31, 2021 and March 31, 2022, respectively) | 392,293 | 208,266 | 32,853 | ||
| Deferred revenue and customer advances, current (including deferred revenue and customer advances, current of the consolidated VIEs without recourse to the Group of RMB239,267 and RMB27,697 as of December 31, 2021 and March 31, 2022, respectively) | 243,878 | 32,097 | 5,063 | ||
| Operating lease liabilities, current (including operating lease liabilities, current of the consolidated VIEs without recourse to the Group of RMB29,113 and RMB30,024 as of December 31, 2021 and March 31, 2022, respectively) | 46,885 | 55,158 | 8,701 | ||
| Total current liabilities | 683,056 | 295,521 | 46,617 | ||
| As of December 31, | As of March 31, | |||||||
| 2021 | 2022 | 2022 | ||||||
| RMB | RMB | USD | ||||||
| Non-current liabilities | ||||||||
| Operating lease liabilities, non-current (including operating lease liabilities, non-current of the consolidated VIEs without recourse to the Group of RMB57,906 and RMB25,930 as of December 31, 2021 and March 31, 2022, respectively) | 100,329 | 49,124 | 7,749 | |||||
| TOTAL LIABILITIES | 783,385 | 344,645 | 54,366 | |||||
| SHAREHOLDERS' EQUITY | ||||||||
| Class A ordinary shares | 293 | 294 | 46 | |||||
| Class B ordinary shares | 38 | 38 | 6 | |||||
| Additional paid-in capital | 10,859,107 | 10,881,646 | 1,716,537 | |||||
| Accumulated other comprehensive income | 18,691 | 14,423 | 2,275 | |||||
| Accumulated deficit | (10,081,093 | ) | (10,105,859 | ) | (1,594,160 | ) | ||
| TOTAL SHAREHOLDERS' EQUITY | 797,036 | 790,542 | 124,704 | |||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 1,580,421 | 1,135,187 | 179,070 | |||||
| 17 EDUCATION & TECHNOLOGY GROUP INC. | ||||||||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
| (In thousands of RMB and USD, except for share and per ADS data, or otherwise noted) | ||||||||
| For the three months ended March 31, | ||||||||
| 2021 | 2022 | 2022 | ||||||
| RMB | RMB | USD | ||||||
| Net revenues | 474,246 | 233,446 | 36,825 | |||||
| Cost of revenues (Note 1) | (187,625 | ) | (91,785 | ) | (14,479 | ) | ||
| Gross profit | 286,621 | 141,661 | 22,346 | |||||
| Operating expenses (Note 1) | ||||||||
| Sales and marketing expenses | (613,527 | ) | (21,997 | ) | (3,470 | ) | ||
| Research and development expenses | (209,927 | ) | (97,476 | ) | (15,376 | ) | ||
| General and administrative expenses | (129,718 | ) | (51,301 | ) | (8,093 | ) | ||
| Total operating expenses | (953,172 | ) | (170,774 | ) | (26,939 | ) | ||
| Loss from operations | (666,551 | ) | (29,113 | ) | (4,593 | ) | ||
| Interest income | 6,997 | 2,065 | 326 | |||||
| Foreign currency exchange (loss) gain | (947 | ) | 203 | 32 | ||||
| Other income, net | 814 | 2,079 | 328 | |||||
| Loss before provision for income tax | (659,687 | ) | (24,766 | ) | (3,907 | ) | ||
| Income tax expenses | — | — | — | |||||
| Net loss | (659,687 | ) | (24,766 | ) | (3,907 | ) | ||
| Net loss available to ordinary shareholders of 17 | (659,687 | ) | (24,766 | ) | (3,907 | ) | ||
| Education & Technology Group Inc. | ||||||||
| Net loss per ordinary share | ||||||||
| Basic and diluted | (1.37 | ) | (0.05 | ) | (0.01 | ) | ||
| Net loss per ADS (Note 2) | ||||||||
| Basic and diluted | (13.70 | ) | (0.50 | ) | (0.10 | ) | ||
| Weighted average shares used in calculating net loss | ||||||||
| per ordinary share | ||||||||
| Basic and diluted | 481,378,409 | 508,608,858 | 508,608,858 | |||||
| Note 1: Share-based compensation expenses were included in the cost and operating expenses as follows: | ||||||||
| For the three months ended March 31, | ||||||||
| 2021 | 2022 | 2022 | ||||||
| RMB | RMB | USD | ||||||
| Share-based compensation expenses: | ||||||||
| Sales and marketing expenses | 5,075 | 3,980 | 628 | |||||
| Research and development expenses | 10,963 | 7,185 | 1,133 | |||||
| General and administrative expenses | 54,811 | 23,480 | 3,704 | |||||
| Total | 70,849 | 34,645 | 5,465 | |||||
| Note 2: Each one ADS represents ten Class A ordinary shares. Effective on November 17, 2021, the Company changed the ratio of its ADS to its Class A ordinary shares from two ADSs representing five Class A ordinary shares to one ADS representing ten Class A ordinary shares. All earnings per ADS figures in this report give effect to the foregoing ADS to share ratio change. | ||||||||
| 17 EDUCATION & TECHNOLOGY GROUP INC. | ||||||||
| Reconciliations of non-GAAP measures to the most comparable GAAP measures | ||||||||
| (In thousands of RMB and USD, except for share, per share and per ADS data) | ||||||||
| For the three months ended March 31, | ||||||||
| 2021 | 2022 | 2022 | ||||||
| RMB | RMB | USD | ||||||
| Net Loss | (659,687 | ) | (24,766 | ) | (3,907 | ) | ||
| Share-based compensation | 70,849 | 34,645 | 5,465 | |||||
| Adjusted net (loss) income | (588,838 | ) | 9,879 | 1,558 | ||||
FAQ
What were the Q1 2022 revenue results for YQ?
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