Chinese K-12 online education company 17 Education & Technology Group(17zuoye) officially filed for U.S. IPO on November 13th to raise US$100 million. The company has submitted an application for the listing of the ADSs on Nasdaq Global Market under the symbol “YQ.” According to the prospectus, in 2018, 2019, and this year ended on September 30th, 17 Education & Technology Group's revenues were 310 million yuan, 406 million yuan, and 808 million yuan, with net losses of 656.1 million yuan, 963.8 million yuan, and 974.8 million yuan, respectively.
The prospectus also shows that net revenues from online K-12 tutoring services grew by 283.0% from RMB93.9 million in 2018 to RMB359.6 million (US$53.0 million) in 2019 and increased by 312.4% from RMB182.1 million in the nine months ended September 30, 2019 to RMB751.1 million (US$110.6 million) in the nine months ended September 30, 2020.
The increase in paid course enrollments contributed RMB239.8 million of the incremental increase in net revenues from online K-12 tutoring services between 2018 and 2019. The paid course enrollments increased by 166.9% from 272 thousand in 2018 to 726 thousand in 2019. The year-over-year increase in the median level of course fees for the courses from 2018 to 2019 was 13%, without taking into account the relative volume of any differently priced courses.
Moreover, the company’s total operating expenses increased from RMB905.2 million in 2018 to RMB1,232.9 million in 2019. And in 2020 ended September 30th, the number was 1456.442 million yuan. The selling expenses increased from RMB303.5 million in 2018 to RMB583.8 million in 2019. This increase was mainly driven by the increases in promotional course expenses and salaries and welfare for the sales and marketing personnel.
Founded in 2011, 17Zuoye started its business as a homework tool, serving as a nexus for schools, parents, and students to facilitate the educational experience. Then the company gradually upgraded its position from acting as education tools to providing online courses for family education, competency-based class, and K-12 after-school tutoring demands.
Currently, 17 Education & Technology has provided teaching, learning, and evaluation applications to more than 900,000 teachers, 54.3 million students, and 45.2 million parents nationwide. As of September 30th this year, the company has served 70,000 schools across the country.
In the prospectus, the company claims that approximately 30% of the net proceeds of this offering will be used for improving the operation of after-school tutoring services and student learning experience; approximately 20% for enhancing the product offerings and educational content of smart in-school classroom solution; approximately 20% for investing in technology infrastructure; and approximately 20% for sales and marketing and brand promotional activities; and the balance to fund working capital and for other general corporate purposes.