Chinese O2O language training provider files for US IPO

It is poised to become the sixth US listing by a private equity-backed Chinese online education business since the start of 2018. Only three of the six are focused on the K12 after-school tuition space that has received the bulk of private equity funding. Sunlands Online Education offers post-secondary courses and prepares students for professional certification examinations, while Liulishuo provides English language courses for adults.

Meten claims to be the largest offline player and second largest online player in the English language training segment. It has 136 brick-and-mortar learning centers, most of which are self-operated. In 2018, more than 118,200 enrolled students were taught by 1,800 offline tutors and 16,000 online teachers, according to a prospectus.

Most of Meten's revenue comes from training adults. Other business lines include preparing students who are sitting international standardized English tests or enrolling in study-abroad programs, junior language training courses, and online services.

Like some of its Chinese peers, the company uses an O2O model to leverage offline resources for expansion online. Meten's online English learning platform, known as Likeshuo, launched in 2014. As of March, it had 830,000 registered users, among whom 160,000 were paying customers.

Revenue reached RMB1.42 billion ($212 million) in 2018, up from RMB1.15 billion the previous year. Over the same period, net profit rose from RMB40.3 million to RMB53.4 million. In 2016, Meten was loss-making. For the three months ended March 2019, revenue was RMB315 million and the company posted a net loss of RMB41 million.

DG Capital participated in an RMB170 million funding round for Meten in 2016, and another one of RMB300 million in January. The private equity firm has an interest of 15.2%. Meten also raised RMB15 million from Shenzhen Dachen Venture Capital in 2016.

China's English language training industry was worth RMB143.1 billion last year, up from RMB59.9 billion in 2013, according to Frost & Sullivan. Of the 2018 total, RMB78.2 billion was from after-school tutoring, RMB47.9 billion was general training, and RMB17 billion was test-oriented training. Industry revenue is projected to reach RMB365.9 billion by 2023.

The size and pricing of Meten's IPO have yet to be decided.

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