As a well-known adult English training service provider in China, Meten EdtechX Education Group Ltd. (METX) first started with offline business, but in recent years it has been actively and strategically deploying high-growth businesses such as online ELT and junior ELT with strong development momentum, it has now become a leading omni-channel English training service provider in China. On December 4, Meten EdtechX released its latest financial report for the third quarter of 2020, showing that its business is recovering steadily in the gradually normal operating environment. Meten EdtechX had 123 offline learning centers in operation, and the profitability level is back to the “fast track” “.
As of Q3 2020 ended September 30, 2020, revenue decreased 29.6% year-on-year to RMB 297.7 million (US$ 43.8 million), but increased by 57.3% versus Q2 2020, benefit from the investments in the online ELT segments and new product development, the positive trends in online and junior ELT segments, as the Company leveraged cross-selling opportunities provided by the re-opening of its learning centers, thereby the overall students enrollments increased and the strategic transformation of the online ELT and junior ELT is beginning to show results.
As of September 30, 2020, the number of registered users for online courses increased by 54% year-on-year, up to 1.71 million. At the same time, the Company observed customers re-enrolling in junior ELT, both at offline learning centers and through the online platform, at a faster pace than adult customers whose disposable income has been adversely impacted by the pandemic. Gross billings for junior ELT for Q3 2020 increased by 89% compared to the previous quarter, while gross billings for online ELT for the quarter was up 22% year-on-year.
Meten EdtechX continued to invest in product development, leveraging the recently launched several new products across both its offline and online platforms. These include three new language (Japanese, Spanish and Korean; Spanish and Korean will officially launch in December 2020) products, K12 junior products and the “BiGao” exam preparatory product for middle schoolers.strategic transformation continues to deepen.
During the COVID-19 pandemic, Meten EdtechXrenegotiated 70 lease agreements for the self-operated learning centers (nearly 40% of the total leases) and closed 22 learning centers for adult ELT in order to redeploy the resources to the junior ELT and online ELT segments to optimize benefits. As a result, there was a significant reduction in net losses for Q3 2020 to RMB 39.7 million (US$ 5.8 million) (compared with RMB 93.4 million in Q2 2020).
It is worth noting that, recently, Meten EdtechX has also filied a Tender Offer and Prospectus Supplements with the U.S. Securities and Exchange Commission. Accordingly, the exercise price of the Company’s issued warrants (subject to relevant conditions) will be reduced to $1.40 per share, and the expiration date will be January 5, 2021 Eastern time.
Lowering the existing Meten warrants strike price for a short duration（20 trading days）will encourage warrant holders to exercise, reduce warrants outstanding, and simplify the company’s current capital structure. Also, this measure makes sure the company can quickly raise capital without any dilution, and have more reserves for potential acquisitions, working capital and general corporate purposes. As the funds raised are in place, Meten EdtechX’s business extension transformation will be accelerated, especially in the online ELT and Meten Junior ELT fields, the potential of which will be significantly released.
