BTC Digital Ltd.

BTC Digital Ltd.

$8.26
3.5 (73.53%)
NASDAQ Capital Market
USD, CN
Education & Training Services

BTC Digital Ltd. (BTCT) Q2 2021 Earnings Call Transcript

Published at 2021-08-18 09:35:00
Operator
Good afternoon, ladies and gentlemen. Welcome to Meten EdtechX Second Quarter and the First Half of 2021 Earnings Conference Call. Joining us today are the company’s Chair of the Board, Mr. Jason Zhao; the company’s Chief Executive Officer, Mr. Alan Peng; and the company’s Financial Vice President, Mr. . Alan will start today’s presentation with an overview for the second quarter and the first half of 2021 performance. Then, will share more details about our financial performance. After the presentation, we’ll be happy to take any questions you may have during the Q&A segment. Now, I would like to turn the call over to Alan Peng. Alan, please go ahead.
Alan Peng
Thanks for joining Meten EdtechX second quarter and first half of 2021 earnings presentation today. I will begin my remarks by providing an overview of the company's business adjustments and optimizations during the first half of 2021, followed by a summary of the company's second quarter and the first half of 2021 performance. Now that the overall situation of the COVID-19 pandemic trends are more stable, we are pleased to see the strong results from second quarter, which reflect our confidence in our team's ability to consistently execute our strategy. We remain focused on meeting the needs of the market and navigating the ongoing impact of COVID-19 on our business. To achieve our long-term operational objectives, we have made many business adjustments and optimizations. We have transferred all offline courses to online courses and will allow all offline students to schedule online synchronized courses in September. We plan to gradually reduce our offline learning centers to one or two in most of cities and make these centers become learning and communication platforms for students, which can greatly reduce the fixed cost and increase profit margins. We are striving to solve the problem of low utilization of online English course resources, reduce teaching costs, change the industry's high-input and high-output business model, add low-cost foreign teachers, and launching low-cost and high-profit Philippine foreign teachers' courses to meet the needs of most students, and optimize our operations and reduce corporate operational risks. Also, we provide diversified online courses suitable for adult career development to better meet the diverse learning needs of young people in the Chinese workplace. Students can learn English while learning other courses that are prerequisite for their own career development, such as marketing, management, finance, communication skills, EMBA and other courses. Let's now look at some of the operational developments of the second quarter and the first half of 2021 in more detail. Our company diversified course offerings and leveraged cross-selling opportunities through offline and online channels as its learning centers reopened. As of June 30, 2021, the number of registered users for online courses increased by 19% year-on-year, up to 1.9 million. Supported by investments in the Junior ELT segments and new product development, the number of registered junior students for Junior ELT under the Meten brand increased by 240.9% as of June 30, 2021. Furthermore, Meten EdtechX continued to invest in product development during the second quarter of 2021, leveraging the several recently launched new products across both its offline and online platforms, which included three new languages; Japanese, Spanish and Korean products. For the first half of 2021, the company's revenue derived from Japanese, Spanish and Korean language training services was RMB5.7 million, which is US$88 million. The company plans to launch Meten Junior Growth Centers, Centers, nationwide and has already opened Centers in Beijing, Chongqing, Changsha, Nanchang, and Foshan. Currently, there are five courses offered in the Centers. STEAM; Science, Technology, Engineering, Arts and Mathematics; a handicraft workshop; creative art; children's drama, and calligraphy. The company plans to offer 10 courses through the Centers by the end of 2021. Now let’s turn to the performance in the financials in this period. In the second quarter of 2021, revenue increased by 8.2% year-on-year to RMB204.8 million, US$31.7 million. In the first half of 2021, revenue increased 10.9% to RMB411.3 million, US$63.7 million, primarily as a result of the strong rebound in gross billing after the impact of COVID-19 faded. In the second quarter of 2021, gross profit increased by 23.4%, primarily as a result of the improvement of gross billings and operational efficiency. In the first half of 2021, gross profit increased by 52% compared to last year. I will now hand back to who will talk to you about our financial performance in more details.
Unidentified Company Representative
Okay. Thank you, Alan. For the second quarter of 2021, total revenue amounted to RMB204.8 million, which is equal to US$31.7 million, an increase of 8.2%. For the first half of 2021, revenue amounted to RMB411.3 million, or US$63.7 million, an increase of 10.9% year-on-year, primarily as a result of the strong rebound in gross billing after the impact of COVID-19 faded. For general adult ELT, revenues increased 38.3% year-on-year to RMB79.3 million, which is US$12.3 million, in the second quarter of 2021 from RMB57.3 million in the second quarter of 2020. For overseas training services, revenues increased 97.4% to RMB37 million, which is US$5.7 million, in the second quarter of 2021 from RMB18.7 million in the second quarter of 2020. For general adult ELT, revenues increased 29.3% year-on-year to RMB146.3 million or US$22.7 million in the first half of 2021 from RMB113.1 million in the first half of 2020. For overseas training services, revenues increased 87.5% to RMB76.9 million or US$11.9 million in the first half of 2021 from RMB41 million in the first half of 2020. For Junior ELT, revenues decreased from RMB31.6 million in the second quarter of 2020 to RMB23.1 million or US$3.6 million in the second quarter of 2021, among which, revenue for Junior ELT under Meten brand increased by 256.3% year-on-year in the second quarter of 2021 to RMB21.4 million or US$3.3 million. In the second quarter of 2021, due to regulatory mandates, all off-campus training institutions suspended their business operations in Beijing, and the revenue for Junior ELT under the ABC brand decreased by 93.3% compared to the previous year. For Junior ELT, revenues decreased from RMB55.2 million in the first half of 2020 to RMB48.3 million or US$7.5 million in the first half of 2021, among which, the revenues for Junior ELT under Meten brand increased by 269.3% year-on-year in the first half of 2021 to RMB39.2 million or US$6.1 million. In the first half of 2021, Junior ELT under ABC brand operated only for a limited period, and as a result, revenues for Junior ELT under ABC brand decreased by 79.4% year-on-year. For online ELT, revenues decreased 23.1% year-on-year from RMB79.2 million in the second quarter of 2020 to RMB60.9 million or US$9.4 million in the second quarter of 2021. Revenues decreased 15.4% year-on-year from RMB156.3 million in the first half of 2020 to RMB132.2 million or US$20.5 million in the first half of 2021. This slight decrease was mainly due to the fact that the company's online ELT business reached a peak as a result of the COVID-19 in the same period last year. In the second quarter of 2021, our cost of revenues which consists primarily of staff costs, property expenses, depreciation and amortization, et cetera, increased by 2.1% to RMB138.6 million or US$21.5 million from RMB135.7 million in the second quarter of 2020. In the first half of 2021, the cost of revenues decreased by 2.3% to RMB274.4 million or US$42.5 million from RMB280.8 million in the first half of 2020. Gross profit for the second quarter of 2021 increased by 23.4% year-on-year to RMB66.2 million or US$10.2 million. In the first half of 2021, gross profit increased by 52% year-on-year to RMB137 million or US$21.2 million, due to the improvement of gross billings and operational efficiency. As a result, gross profit margin for the second quarter of 2021 increased by 4.0 percentage points year-on-year to 32.3%. Gross profit margin for the first half of 2021 increased by 9.0 percentage points year-on-year to 33.3%. Sales and marketing expenses in the second quarter of 2021 amounted to RMB77.1 million or US$11.9 million, representing an increase of 8.9% year-on-year. Sales and marketing expenses in the first half of 2021 amounted to RMB147.5 million or US$22.9 million, representing an increase of 5.8% year-on-year. R&D expenses in the second quarter of 2021 decreased by 59.3% year-on-year to RMB3.3 million or US$0.5 million from RMB8.2 million in the second quarter of 2020. Research and development expenses in the first half of 2021 decreased by 50.4% year-on-year to RMB7.5 million or US$1.2 million from RMB15.2 million in the first half of 2020. General and administrative expenses in the second quarter of 2021 decreased by 3.3% year-on-year to RMB63.2 million or US$9.8 million from RMB65.4 million in the second quarter of 2020. General and administrative expenses in the first half of 2021 increased by 10.8% year-on-year to RMB144.5 million or US$22.4 million from RMB130.4 million in the first half of 2020. This decrease was primarily due to an increase in share-based compensation expenses. For the second quarter of 2021, loss from operations was RMB77.5 million or US$12 million compared to a loss from operations of RMB90.8 million in the second quarter of 2020. For the first half of 2021, loss from operations was RMB162.6 million or US$25.2 million compared to a loss from operations of RMB194.9 million in the first half of 2020. For the second quarter of 2021, net loss was RMB80.3 million or US$12.4 million compared to a net loss of RMB93.4 million in the second quarter of 2020. For the first half of 2021, net loss was RMB169.7 million or US$26.3 million compared to a net loss of RMB195.1 million in the first half of 2020. And finally, as of June 30, 2021, Meten EdtechX had RMB144.2 million or US$22.3 million of cash and cash equivalents. I will now turn the call over to our Chairman, Jason, who will provide an update on Meten EdtechX outlook.
Jason Zhao
The company expects to complete the strategic transformation in the next quarter and upgrade to an online and offline training organization that provides comprehensive workplace training services. In addition, the company intends to actively explore business opportunities in other industries including quality-oriented education, medical aesthetics, and VR teaching products for institutions, so as to lay a stable foundation for the company's long-term development. This concludes our presentation for today. We will now take any questions you may have.
Operator
. Thank you. The first question is from David Johnson . Please go ahead.
Unidentified Analyst
Hi. This is David Johnson. So I have my two questions today. My first question is, due to the China education reform is there any concerns about the core dividend?
Alan Peng
Okay. Please allow me to answer this question in Chinese.
Unidentified Analyst
Thank you for your answer. So my second question is, I have received some recent COVID cases back in China. Did this cause some pressures to the physical locations? And how would the company handle the uncertainties caused by the COVID situation in China? Thank you.
Alan Peng
First of all, before the COVID-19 pandemic, although we were the absolute leading position in adult English education training market in China, there were still four or five regional and national brands of our competitors. However, after the pandemic, generally speaking, there is no brand that can compete with us. At present, in more than 90% of the Chinese market, we are the only offline option for adults to learn English. In addition, we remain focused on navigating the ongoing impact of COVID-19 on our business, including the following. We have transferred all online courses and we will allow all of our students to schedule online synchronized courses in September. We plan to gradually reduce our offline learning centers to one or two in most cities and make these centers become learning and communication platforms for students, which can greatly reduce the fixed costs and increase the profit margin. We are striving to solve the problem of low utilization of online English course resources, reduce teaching costs, change the industry's high-input and high-output business model, add low-cost foreign teachers, and launch low-cost and high-profit Philippine foreign teachers' courses to meet the needs of most students, optimize our operation and reduce corporate operational risks. Through these measures, on one hand, we can effectively deal with the recurring pandemic and minimize the impact of COVID-19. On the other hand, we can also promote on business transformation and optimize resource utilization. Finally, we believe that the demand of English learning for Chinese people will not disappear because of the COVID-19 pandemic. We believe that after the pandemic, as the doors of all countries are reopened and international exchanges becomes normal, the adult English training market of China will continue to flourish. That’s all for Meten’s second quarter and the first half of 2021 earnings conference call. If you have any other questions, please contact our IR team directly. Thank you all for joining us today.