Meta Data Limited

In Q2 fiscal 2021, cash sales totaled RMB939 million, up 44.2% from the same period of fiscal 2019 and 80.9% from fiscal 2020. Net revenues were RMB932 million, up 5.2% year over year from RMB886 million. Gross profit was RMB389 million, up 9.2% year over year, and gross margin was 31.8% versus 40.2% a year ago. Non-GAAP selling and marketing expenses were RMB289 million, or 31% of net revenues, up 46.9% year over year. Management said fiscal Q3-to-date cash sales were up more than 100% year over year. For guidance, management said marketing cash-spend as a percentage of cash sales should remain in the 8% to 12% range for the full year, and it expects cash sales to continue to convert into revenue and improve margin visibility in Q3 and Q4; it did not provide formal revenue or EPS guidance.

Steve Zhang said the company is seeing a return to strength despite COVID-related disruption and highlighted improved product offerings, learning centers, and a more digitalized operating model. His tone was optimistic and strategic, emphasizing that premium product enhancements and technology investment are starting to drive top-line growth and should support better profitability over time.

Greg Zuo focused on the mechanics of growth and profitability. He said the Go Premium strategy is boosting VIP 1on1 through higher volume and price, but that new student cohorts will take time to show up fully in P&L revenue and margins, with more visibility expected in Q3 and Q4. He also said the increase in marketing was deliberate and modest, citing about RMB58 million of incremental gross marketing spend, and noted that cash balance declined because the company repaid about RMB419 million of debt. He added that Q2 net operating cash was RMB125 million and that the company remains comfortable with liquidity and bank relationships.

Analysts asked about Elite 1on1 margins, the rise in sales and marketing, regulatory risks around tuition prepayments and licensing, short-term borrowings, learning-center expansion, and the competitive landscape. Management said the premium program’s benefits will take time to flow through revenue and margins, that marketing spend was intentionally raised to support branding and peak-season demand, and that it is waiting for written regulatory requirements before changing operations. On leverage and liquidity, management said the short-term borrowings are mainly longstanding revolving local bank facilities and that strong operating cash flow supports the balance sheet.