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TABLE OF CONTENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

As filed with the Securities and Exchange Commission on May 22, 2019

Registration No. 333-            


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



Meten International Education Group
(Exact name of registrant as specified in its charter)



Not Applicable
(Translation of Registrant's name into English)



Cayman Islands
(State or Other Jurisdiction of
Incorporation or Organization)
  8200
(Primary Standard Industrial
Classification Code Number)
  Not Applicable
(I.R.S. Employer
Identification Number)

Floor 4, Tianjian Tianranju Commercial Center, No.2006 Xiangmeibei Road, Futian District,
Shenzhen, Guangdong Province 518045, the People's Republic of China
+86 755 8294 5250

(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19711
+1 302-738-6680

(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copies to:

Ning Zhang, Esq.
Yile Gao, Esq.
Morgan, Lewis & Bockius LLP
c/o Suites 1902-09, 19th Floor
Edinburgh Tower, The Landmark
15 Queen's Road Central
Hong Kong
+852 3551 8500

 

Chris K.H. Lin, Esq.
Daniel Fertig, Esq.
Simpson Thacher & Bartlett LLP
c/o 35th Floor, ICBC Tower
3 Garden Road, Central
Hong Kong
+852 2514 7600



Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement

           If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.    o

           If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

           If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

           If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earliest effective registration statement for the same offering.    o

           Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933. Emerging growth company    ý

           If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act.    o



CALCULATION OF REGISTRATION FEE

       
 
Title of each class of securities
to be registered

  Proposed maximum
aggregate offering
price(3)

  Amount of
registration fee

 

Class A ordinary shares, par value US$0.0001 per share(1)(2)

  US$100,000,000   US$12,120

 

(1)
American depositary shares issuable upon deposit of the Class A ordinary shares registered hereby will be registered under a separate registration statement on Form F-6 (Registration No.            ). Each American depositary share represents                Class A ordinary shares.

(2)
Includes (i) Class A ordinary shares initially offered and sold outside the United States that may be resold from time to time in the United States either as part of their distribution or within 40 days after the later of the effective date of this registration statement and the date the shares are first bona fide offered to the public and (ii) Class A ordinary shares that may be purchased by the underwriters pursuant to an over-allotment option. These Class A ordinary shares are not being registered for the purposes of sales outside of the United States.

(3)
Estimated solely for the purpose of determining the amount of registration fee in accordance with Rule 457(o) under the Securities Act of 1933.



           The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine.

   


The term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.


Table of Contents

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where such offer or sale is not permitted.

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED                    , 2019

American Depositary Shares

LOGO

Meten International Education Group

Representing                        Class A Ordinary Shares



         This is the initial public offering of American depositary shares, or ADSs, of Meten International Education Group. We are offering                         ADSs. The selling shareholders identified in this prospectus are offering an additional                        ADSs. We will not receive any of the proceeds from the sale of the ADSs by the selling shareholders. Each ADS represents                Class A ordinary shares, par value US$0.0001 per share.

         Prior to this offering, there has been no public market for the ADSs or our Class A ordinary shares. We estimate that the initial public offering price will be between US$            and US$            per ADS.

         Upon the completion of this offering, our outstanding share capital will consist of Class A ordinary shares and Class B ordinary shares. Our founders, namely, Mr. Jishuang Zhao, Mr. Siguang Peng and Mr. Yupeng Guo, will beneficially own all of our issued Class B ordinary shares and will be able to exercise approximately         % of the total voting power of our issued and outstanding share capital immediately following the completing of this offering, assuming that the underwriters do not exercise their over-allotment option to purchase additional ADSs. Holders of Class A ordinary shares and Class B ordinary shares have the same rights except for voting and conversion rights. Each Class A ordinary share is entitled to one vote, and each Class B ordinary share is entitled to ten votes and is convertible into one Class A ordinary share. Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances.

         We have applied to have the ADSs listed on the New York Stock Exchange, or NYSE, under the symbol "MEDU."

         We are an "emerging growth company" under applicable U.S. federal securities laws and are eligible for reduced public company reporting requirements.



         Investing in the ADSs involves risks. See "Risk Factors" beginning on page 14 of this prospectus.



         Neither the United States Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 
  Per ADS   Total

Initial public offering price

  US$   US$

Underwriting discount and commissions(1)

  US$   US$

Proceeds, before expenses, to us

  US$   US$

Proceeds, before expenses, to the selling shareholders

  US$   US$
(1)
For a description of compensation payable to the underwriters, see "Underwriting."

         The underwriters have an option to purchase up to an aggregate of                        additional ADSs from us [and the selling shareholders] at the initial public offering price, less underwriting discounts and commissions, within 30 days from the date of this prospectus.

         The underwriters expect to deliver the ADSs against payment in U.S. dollars on                        , 2019.

Citigroup   CICC   Macquarie Capital



Prospectus dated                        , 2019


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TABLE OF CONTENTS

 
  Page

Prospectus Summary

  1

The Offering

  8

Summary Consolidated Financial and Operating Data

  10

Risk Factors

  14

Special Note Regarding Forward-Looking Statements and Industry Data

  68

Enforceability of Civil Liabilities

  70

Corporate History and Structure

  72

Use of Proceeds

  78

Dividend Policy

  80

Capitalization

  81

Dilution

  82

Exchange Rate Information

  84

Selected Consolidated Financial and Operating Data

  85

Management's Discussion and Analysis of Financial Condition and Results of Operations

  90

Industry Overview

  126

Business

  132

Regulations

  160

Management

  181

Principal and Selling Shareholders

  189

Related Party Transactions

  192

Description of Share Capital

  194

Description of American Depositary Shares

  204

Shares Eligible for Future Sale

  216

Taxation

  218

Underwriting

  225

Expenses Relating to This Offering

  237

Legal Matters

  238

Experts

  239

Where You Can Find More Information

  240

Index to Consolidated Financial Statements

  F-1



        You should rely only on the information contained in this prospectus or in any related free writing prospectus. We have not authorized anyone to provide any information other than that contained in this prospectus or in any free writing prospectus prepared by or on our behalf or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell, and seeking offers to buy, the ADSs only in jurisdictions where such offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or the sale of any ADS.

        We have not taken any action to permit a public offering of the ADSs outside the United States or to permit the possession or distribution of this prospectus outside the United States. Persons outside the United States who came into possession of this prospectus must inform themselves about and observe any restrictions relating to the offering of the ADSs and the distribution of this prospectus outside of the United States.

        Until                    , 2019 (the 25th day after the date of this prospectus), all dealers that buy, sell, or trade ADSs, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

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PROSPECTUS SUMMARY

        This summary highlights selected information appearing elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. You should carefully read this entire prospectus, including the "Risk Factors" section and the financial statements and the related notes, before deciding whether to invest in our ADSs. This prospectus contains information from an industry report commissioned by us and prepared by Frost & Sullivan, an independent third-party research firm, to provide information regarding our industry and market position in China. We refer to this report as the Frost & Sullivan report.

Our Mission

        Our mission is to cultivate talents with international vision and empower students to pursue their dreams. We embrace the idea of "learning is for using." We are committed to providing a variety of industry-leading English language education and training services to cultivate more highly qualified international talents in China.

Overview

        We are a leading general English language training, or ELT, service provider in China. We are committed to improving the overall English competence and practical skills of the general Chinese population. According to the Frost & Sullivan Report, we are the second largest player in China's offline general ELT market, which comprised approximately 74.1% of the general ELT market, in terms of revenue in 2018. We also ranked first in China's offline general adult ELT market in terms of the 2018 revenue, according to the Frost & Sullivan Report. The increasing globalization and insufficient supply of effective ELT services in China have led to increasing demand for practical English learning in China, while the general ELT market is underserved with a low penetration rate of 2.1% in 2018, according to the Frost & Sullivan Report, reflecting a substantial growth potential of the market. The ELT market in China had grown at a CAGR of 19.0% from 2013 to 2018 and is forecasted to grow at a CAGR of 20.7% from 2018 to 2023, reaching a total market size of RMB365.9 billion in 2023, according to the Frost & Sullivan Report.

        We offer a comprehensive ELT service portfolio comprising general adult English training, junior English training, overseas training services, online English training and other English language-related services to students from a wide range of age groups. We conduct our business through our synergetic offline-online business model, which maximizes the compatibility within our business segments to scale up at relatively low costs. As of March 31, 2019, we had a nationwide offline learning center network of 120 self-operated learning centers (including 21 learning centers under the "ABC" brand we acquired in June 2018) covering 26 cities in 14 provinces, autonomous regions and municipalities in China, and 16 franchised learning centers (including four franchised learning centers under the "ABC" brand), covering 11 provinces and municipalities in China. We ranked first in the general ELT market in China in terms of the number of self-operated learning centers as of December 31, 2018, when we had 119 self-operated learning centers, according to the Frost & Sullivan Report. Leveraging our experience gained from operating offline learning centers, we launched our online English learning platform "Likeshuo" in 2014 to further expand our service reach to a larger student base. As of March 31, 2019, we had approximately 830,000 registered users on our "Likeshuo" platform and cumulatively over 160,000 paying users who purchased our online English training courses or trial lessons. As of the same date, the cumulative number of student enrollments for our online English training courses since 2014 was approximately 98,000 and we had delivered over 2.8 million accumulated course hours to our students online. We opened five experiential marketing stores in China to enable our prospective students to obtain first-hand experiences of live streaming online English training courses delivered on our "Likeshuo" platform. According to the Frost & Sullivan Report, we were the second largest online general adult ELT service provider in China in terms of revenue in 2018. We take advantage of our

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business model of combining our offline learning center network and online platform to deepen our market penetration and further develop our business.

        Our qualified personnel, centralized management system and technical expertise enable us to create a satisfactory learning environment to cater to the specific learning demands of our students. We have a group of high-caliber teaching staff and an experienced content development team, who are supported by our centralized teaching and management systems to optimize our students' learning experiences. As of March 31, 2019, we had a team of 2,313 full-time teachers, study advisors and teaching service staff, of which 1,070 were study advisors and teaching service staff for our offline and online businesses. As of the same date, we also had 497 full-time and part-time foreign teachers from English-speaking countries for our offline English training services. We have a dedicated content development team focusing on developing practical and innovative education materials independently and in collaboration with our strategic partners. We have built highly centralized and scalable management systems to manage our teaching, marketing, finance and human resources activities across our offline and online businesses. In addition to our management systems, we have made significant investments in developing platforms and systems to support our teaching activities. For example, we utilize the intelligent tracking and exclusive learning coaching function of our artificial intelligence-driven teaching management systems to record and analyze our students' real-time learning process and personalize the course content to address their learning needs.

        We have witnessed significant growth in the past several years. From 2016 to 2018, we had recorded the highest growth rate of offline general ELT revenue among the top five companies in terms of 2018 offline general ELT revenue in China, according to the Frost & Sullivan Report. Our revenues increased from RMB801.5 million in 2016 to RMB1,149.7 million in 2017, and further to RMB1,424.2 million (US$212.2 million) in 2018, representing a 77.7% increase from 2016 to 2018. In particular, we had recorded substantial growth in our online business since the launch of our "Likeshuo" platform in 2014. Our online English training segment revenue increased from RMB46.9 million in 2016 to RMB121.2 million in 2017, and further to RMB212.3 million (US$31.6 million) in 2018, representing a 352.7% increase from 2016 to 2018. Our revenue decreased from RMB332.4 million for the three months ended March 31, 2018 to RMB314.8 million (US$46.9 million) for the same period in 2019, mainly due to the introduction and implementation of the new curriculum for our general adult English training business. Our net results improved from a net loss of RMB27.1 million in 2016 to a net income of RMB40.3 million in 2017, and further to a net income of RMB53.4 million (US$8.0 million) in 2018. We recorded a net loss of RMB42.2 million (US$6.3 million) for the three months ended March 31, 2019.

Our Strengths

        We believe that the following strengths contribute to our success and differentiate us from our competitors:

    leading English service provider on high growth trajectory with strong brand recognition;

    highly synergetic offline-online business model;

    outstanding network expansion capabilities through organic growth and acquisitions;

    comprehensive service portfolio supported by advanced technologies;

    teams made up of strong teaching talents and capable content development staff;

    highly scalable centralized management system; and

    experienced and innovative management team with an entrepreneurial spirit and a passion for education.

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Our Strategies

        We intend to expand and grow our business by pursuing the following strategies:

    further strengthen our offline-online synergetic business model;

    enhance and diversify our education service offerings;

    further invest in technology and improve our teaching and operating efficiency;

    further promote our brand awareness; and

    selectively pursue strategic acquisition and partnership.

Risks and Uncertainties

        Investing in our ADSs involves various risks and uncertainties. You should carefully consider the risks and uncertainties summarized below, the risks described under "Risk Factors" beginning on page 14 of, and the other information contained in, this prospectus before you decide whether to purchase our ADSs:

    our ability to attract and retain students to enroll in our offline and online English training courses;

    our ability to effectively manage our business expansion and successfully integrate businesses we acquire;

    our ability to maintain profitability;

    our ability to continue to recruit, train and retain a sufficient number of qualified teachers and study advisors;

    our ability to improve the content of our existing courses or to develop new courses;

    our ability to continue to effectively manage and operate our self-operated learning centers and franchised learning centers;

    our ability to meet the evolving licensing and regulatory compliance requirements applicable to our various services, in particular our offline and online English training, and to comply with various laws and regulations in the PRC applicable to us; and

    our ability to maintain effective control over our variable interest entities.

Corporate History and Structure

        We are an exempted company with limited liability incorporated in the Cayman Islands. We began our operations in April 2006, when Mr. Jishuang Zhao, Mr. Siguang Peng and Mr. Yupeng Guo founded Shenzhen Meten International Education Co., Ltd., or Shenzhen Meten. Since our incorporation, we have established a network of 136 learning centers in China, including 120 self-operated learning centers and 16 franchised learning centers, and also acquired a number of complementary businesses in China.

        In order to facilitate international capital investment in us, in July 2018, we incorporated Meten International Education Group to become our offshore holding company under the laws of Cayman Islands and reorganized our group companies into an reorganization structure typical for China-based education businesses. In October 2018, we established Shenzhen Likeshuo Education Co., Ltd., or Shenzhen Likeshuo, as part of our onshore reorganization. Due to restrictions imposed by the PRC laws and regulations on foreign ownership of companies that engage in education services, we currently do not hold any equity interest in Shenzhen Meten and Shenzhen Likeshuo. Instead, we entered into a

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series of contractual arrangements with, among others, Shenzhen Meten, Shenzhen Likeshuo and their respective shareholders in November 2018 to obtain effective control of these two companies and their respective subsidiaries.

Our Corporate and Shareholding Structure

        The chart below illustrates our corporate and shareholding structure immediately following the completion of this offering, assuming no exercise of the over-allotment option granted to the underwriters:

GRAPHIC


(1)
JZ Education Investment Limited, or JZ Education Investment, is controlled by The Zhao Jishuang Family Trust, a trust managed by Conyers Trustee Services (BVI) Limited, or Conyers Trustee, as trustee. Mr. Jishuang Zhao is the settlor of The Zhao Jishuang Family Trust and Mr. Jishuang Zhao and his family members are the trust's beneficiaries.

(2)
AP Education Investment Limited, or AP Education Investment, is controlled by The Peng Siguang Family Trust, a trust managed by Conyers Trustee as trustee. Mr. Siguang Peng is the settlor of The Peng Siguang Family Trust and Mr. Siguang Peng and his family members are the trust's beneficiaries.

(3)
RG Education Investment Limited, or RG Education Investment, is controlled by The Guo Yupeng Family Trust, a trust managed by Conyers Trustee as trustee. Mr. Yupeng Guo is the settlor of The Guo Yupeng Family Trust and Mr. Yupeng Guo and his family members are the trust's beneficiaries.

(4)
Shenzhen Meten is owned as to 27.3250% by Mr. Jishuang Zhao, 13.8080% by Mr. Siguang Peng, 13.0829% by Mr. Yupeng Guo, 10.3918% by Xinyu Meilianzhong Investment Management Centre (Limited Partnership), or Xinyu Meilianzhong, 4.9146% by Mr. Yun Feng, 3.9957% by Xinyu Meilianxing Investment Management Centre (Limited Partnership), or Xinyu Meilianxing, 3.6719% by Mr. Jun Yao, 3.1719% by Ms. Tong Zeng, 3.5431% by Xinyu Meilianchou Investment Management Centre (Limited Partnership), or Xinyu Meilianchou, 3.0000% by Shenzhen Daoge No.11 Education

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    Investment Partnership (Limited Partnership), or No. 11 Daoge, 1.5781% by Shenzhen Daoge Growth No.3 Investment Fund Partnership (Limited Partnership) , or No. 3 Daoge, 1.5090% by Shenzhen Daoge Growth No.6 Investment Fund Partnership (Limited Partnership), or No. 6 Daoge, 0.8722% by Shenzhen Daoge Growth No.5 Investment Fund Partnership (Limited Partnership), or No. 5 Daoge, 0.5000% by Mr. Yongchao Chen, 4.0000% by Zhihan (Shanghai) Investment Center (Limited Partnership), or Shanghai Zhihan, 3.6358% by Shenzhen Daoge No.21 Investment Partnership (Limited Partnership), or No. 21 Daoge and 1.0000% by Hangzhou Muhua Equity Investment Fund Partnership (Limited Partnership), or Hangzhou Muhua.

(5)
Shenzhen Likeshuo is owned as to 27.3250% by Mr. Jishuang Zhao, 13.8080% by Mr. Siguang Peng, 13.0829% by Mr. Yupeng Guo, 10.3918% by Xinyu Meilianzhong, 4.9146% by Mr. Yun Feng, 3.9957% by Xinyu Meilianxing, 3.6719% by Mr. Jun Yao, 3.1719% by Ms. Tong Zeng, 3.5431% by Xinyu Meilianchou, 3.0000% by No. 11 Daoge, 1.5781% by No. 3 Daoge, 1.5090% by No. 6 Daoge, 0.8722% by No. 5 Daoge, 0.5000% by Mr. Yongchao Chen, 4.0000% by Shanghai Zhihan, 3.6358% by No. 21 Daoge and 1.0000% by Hangzhou Muhua.

(6)
Primarily involved in providing our overseas study application services and operating our "Shuangge English" App.

(7)
Primarily involved in providing our general adult English training.

(8)
Primarily involved in providing our online English training.

        For a more detailed description of our history, see "Corporate History and Structure."

Corporate Information

        Our principal executive offices are located at Floor 4, Tianjian Tianranju Commercial Center, No.2006 Xiangmeibei Road, Futian District, Shenzhen, Guangdong Province 518045, the People's Republic of China. Our telephone number at this address is +86 755 8294 5250 and our fax number is +86 755 8299 5963.

        Our registered office in the Cayman Islands is located at Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands.

        Our agent for service of process in the United States is Puglisi & Associates, located at 850 Library Avenue, Suite 204, Newark, Delaware 19711.

        Our corporate website is www.meten.com. The information contained on our websites are not part of this prospectus.

Implications of Being an Emerging Growth Company

        As a company with less than US$1.07 billion in total annual gross revenue for our last fiscal year, we qualify as an "emerging growth company" pursuant to the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements compared to those that are otherwise applicable generally to public companies. These provisions include an exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 or the Sarbanes-Oxley Act in the assessment of the emerging growth company's internal control over financial reporting. The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards, and we do not plan to opt out of such afforded to an emerging growth company.

        We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year during which we have total annual gross revenue of at least US$1.07 billion; (ii) the last day of our fiscal year following the fifth anniversary of the completion of this offering; (iii) the date on which we have, during the preceding three-year period, issued more than US$1.0 billion in non-convertible debt; or (iv) the date on which we are deemed to be a "large accelerated filer" under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of the ADSs that are held by non-affiliates exceeds US$700 million as of the last business day of our most

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recently completed second fiscal quarter. Once we cease to be an emerging growth company, we will not be entitled to the exemptions provided by the JOBS Act discussed above.

Conventions That Apply to This Prospectus

        Except otherwise indicated or the context otherwise requires, references in this prospectus to:

    "ADRs" are to the American depositary receipts, which, if issued, evidence our ADSs;

    "ADSs" are to our American depositary shares, each of which represents                Class A ordinary shares;

    "China" or the "PRC" are to the People's Republic of China, excluding, for the purposes of this prospectus only, Taiwan and the special administrative regions of Hong Kong and Macau;

    "ELT" are to English language training;

    "gross billings" are to the total amount of cash received for the sales of the products and services during a specific period of time, net of the total amount of refunds for that period, which is not a standard measure under U.S. GAAP;

    "learning center" are to the physical establishment of an education facility providing general adult English training, junior English training and international standardized test preparation under our overseas training services at a specific geographic location in the PRC, directly operated by our VIEs and their respective subsidiaries or operated by franchise partners;

    "offline English training" are to our offline services, which include general adult English training, junior English training and overseas training services;

    "Class A ordinary shares" are to our class A ordinary shares, par value US$0.0001 per share;

    "Class B ordinary shares" are to our class B ordinary shares, par value US$0.0001 per share;

    "ordinary shares" prior to the completion of this offering are to our ordinary shares of par value US$0.0001 per share, and upon and after the completion of this offering are to our Class A ordinary shares and Class B ordinary shares;

    "our company" are to Meten International Education Group, an exempted company with limited liability incorporated in the Cayman Islands;

    "Reorganization" are to a series of reorganization transactions undertaken in the second half of 2018 as a result of which we established our current corporate and shareholding structure;

    "RMB" and "Renminbi" are to the legal currency of China;

    "student enrollments" or "student enrollment" are to the number of actual new sales contracts entered into between us and our students, excluding the number of refunded contracts and contracts with no revenue generated during a specified period of time;

    "tier one cities" are to Beijing, Shanghai, Guangzhou and Shenzhen;

    "tier two cities" are provincial capitals, regional centers or economically developed cities in China, including, among others, Chengdu, Hangzhou, Chongqing, Wuhan and Tianjin;

    "tier three cities" are to small- to mid-sized cities in China that are strategically located or have relatively developed or large local economy;

    "US$" and "U.S. dollars" are to the legal currency of the United States;

    "U.S. GAAP" are to generally accepted accounting principles in the United States;

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    "variable interest entities" or "VIEs" are to Shenzhen Meten International Education Co., Ltd. and Shenzhen Likeshuo Education Co., Ltd., which are PRC companies in which we do not have equity interests but whose financial results have been consolidated by us in accordance with U.S. GAAP due to our having effective control over, and our being the primary beneficiary of, these companies; and "affiliated entities" refers to our VIEs, the VIEs' direct and indirect subsidiaries, and the VIEs' affiliated entities that are registered as private non-enterprise institutions under the PRC laws; and

    "we," "us," "our company," and "our" are to Meten International Education Group, a Cayman Islands company and its subsidiaries, its consolidated variable interest entities and affiliated entities after completion of the Reorganization, and to the offline general adult English training, junior English training, overseas training services, online English training and other English language-related businesses of Shenzhen Meten before completion of the Reorganization.

        The translations from RMB to U.S. dollars and from U.S. dollars to RMB in this prospectus were made at a rate of RMB6.7112 to US$1.00, the exchange rates set forth in the H.10 statistical release of the Federal Reserve Board on March 29, 2019. We make no representation that the RMB or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars or RMB, as the case may be, at any particular rate or at all. On May 17, 2019, the noon buying rate as set forth in the H.10 statistical release of the Federal Reserve Board for RMB was RMB6.9182 to US$1.00.

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THE OFFERING

Offering price:

  We currently estimate that the initial public offering price will be between US$            and US$            per ADS.

ADSs Offered by us:

 

            ADSs (or            ADSs if the underwriters exercise their over-allotment option in full).

ADSs offered by the selling shareholders

 

            ADSs [ (or            ADSs if the underwriters exercise their over-allotment option in full)].

ADSs Outstanding Immediately After This Offering

 

            ADSs (or            ADSs if the underwriters exercise the option to purchase additional            ADSs in full).

Ordinary Shares Outstanding Immediately After This Offering

 

                        ordinary shares, comprised of            Class A ordinary shares and            Class B ordinary shares (or            ordinary shares if the underwriters exercise the option to purchase additional ADSs in full, comprised of            Class A ordinary shares and                        Class B ordinary shares), excluding ordinary shares issuable upon the exercise of options outstanding under our share incentive plans as of the date of this prospectus.

Option to Purchase Additional ADSs

 

We [and the selling shareholders] have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to an aggregate of            additional ADSs at the initial public offering price, less underwriting discounts and commissions, solely for the purpose of covering over-allotments.

The ADSs

 

Each ADS represents                 Class A ordinary shares, par value US$0.0001 per share.

 

The depositary will hold the Class A ordinary shares underlying your ADSs. You will have rights as provided in the deposit agreement, the form of which is filed as an exhibit to the registration statement that includes this prospectus.

 

If we declare dividends on our Class A ordinary shares, the depositary will pay you the cash dividends and other distributions it receives on our Class A ordinary shares, after deducting its fees and expenses subject to the terms of the deposit agreement.

 

You may surrender your ADSs to the depositary to withdraw the Class A ordinary shares underlying your ADSs. The depositary will charge you a fee for such an exchange.

 

We may amend or terminate the deposit agreement for any reason without your consent. If an amendment becomes effective, you will be bound by the deposit agreement as amended.

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To better understand the terms of the ADSs, you should carefully read "Description of American Depositary Shares" in this prospectus. You should also read the deposit agreement, which is filed as an exhibit to the registration statement that includes this prospectus.

Use of Proceeds

 

We estimate that we will receive net proceeds of approximately US$            million from this offering, assuming an initial public offering price of US$            per ADS, the mid-point of the estimated range of the initial public offering price, after deducting estimated underwriter discounts, commissions and estimated offering expenses payable by us. We will not receive any of the proceeds from the sale of ADSs by the selling shareholders. We intend to use our net proceeds from this offering for the following purposes: (i) acquisition of or investment in companies in the private ELT industry in China; (ii) establishment of new learning centers; (iii)  development of our online English training business; (iv) expansion of our junior English training business; (v) investment in sales and marketing activities; and (vi) working capital and general corporate purposes. See "Use of Proceeds" for additional information.

[Directed Share Program

 

At our request, the underwriters have reserved for sale, at the initial public offering price, up to      % of the ADSs being offered by this prospectus (assuming exercise in full by the underwriters of their option to purchase additional ADSs) for sale at the initial public offering price to certain of our directors, executive officers, employees, business associates and members of their families through a directed share program.]

Listing

 

We have applied to have our ADSs listed on the NYSE under the symbol "MEDU." Our ordinary shares will not be listed on any exchange or quoted for trading on any over-the-counter trading system.

Payment and settlement

 

The underwriters expect to deliver the ADSs against payment therefor through the facilities of The Depository Trust Company on            , 2019.

Risk Factors

 

See "Risk Factors" and other information included in this prospectus for a discussion of the risks and uncertainties you should carefully consider before deciding to invest in our ADSs.

Depositary

 

Citibank, N.A.

Custodian

 

Citibank, N.A. - Hong Kong Branch

Lock-Up

 

[We, our directors, executive officers, existing shareholders and certain of our option holders] have agreed with the underwriters not to sell, transfer or dispose of any ADSs or ordinary shares for a period of 180 days after the date of this prospectus without the consent of the representatives of the underwriters. See "Underwriting" for more information.

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SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA

        We present below our summary consolidated financial and operating data for the periods indicated. The following summary consolidated statements of comprehensive income/(loss) data for the years ended December 31, 2016, 2017 and 2018, summary consolidated balance sheets data as of December 31, 2017 and 2018, and summary consolidated cash flow data for the years ended December 31, 2016, 2017 and 2018 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. In addition, the following summary consolidated statements of comprehensive income/(loss) data for the three months ended March 31, 2018 and 2019, summary consolidated balance sheets data as of March 31, 2019, and summary consolidated cash flow data for the three months ended March 31, 2018 and 2019 have been derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. We have prepared the unaudited condensed consolidated financial statements on the same basis as our audited consolidated financial statements, except for the adoption of ASU No. 2016-02, "Leases" on January 1, 2019, as mentioned in note 3 to our unaudited condensed consolidated financial statements included elsewhere in this prospectus. The summary consolidated financial data should be read in conjunction with our consolidated financial statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus. The consolidated financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. Our historical results are not necessarily indicative of our results for any future periods.

        Meten International Education Group was incorporated as an exempted company with limited liability in the Cayman Islands in July 2018 and as our offshore holding company in connection with the Reorganization. Our businesses have historically been conducted through Shenzhen Meten and our operating results prior to the Reorganization, the details of which are described in note 1(b) to our consolidated financial statements included elsewhere in this prospectus, have historically been included in the consolidated financial statements of Shenzhen Meten.

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  For the Year Ended December 31,   For the Three Months Ended
March 31,
 
 
  2016   2017   2018   2018   2019  
 
  RMB   RMB   RMB   US$   RMB   RMB   US$  
 
  (in thousands)
 
 
   
   
   
  Unaudited
  Unaudited
  Unaudited
  Unaudited
 

Summary Consolidated Statements of Comprehensive (Loss)/Income Data:

                                           

Revenues

    801,545     1,149,721     1,424,234     212,217     332,362     314,803     46,907  

General adult English training(1)

    572,135     785,480     903,756     134,664     233,696     171,220     25,513  

Junior English training

            65,490     9,758         39,432     5,876  

Overseas training services

    180,606     228,294     223,601     33,318     54,229     46,703     6,959  

Online English training

    46,915     121,196     212,302     31,634     40,480     51,806     7,719  

Other English language-related services(2)    

    1,889     14,751     19,085     2,843     3,957     5,642     840  

Cost of revenues

    (344,810 )   (467,967 )   (627,996 )   (93,574 )   (132,316 )   (172,772 )   (25,744 )

Gross profit

    456,735     681,754     796,238     118,643     200,046     142,031     21,163  

Operating expenses

                                           

Selling and marketing expenses

    (268,643 )   (373,065 )   (425,217 )   (63,359 )   (99,921 )   (108,608 )   (16,183 )

General and administrative expenses

    (198,431 )   (237,509 )   (293,157 )   (43,682 )   (65,027 )   (81,626 )   (12,163 )

Research and development expenses

    (18,187 )   (21,217 )   (26,178 )   (3,901 )   (7,707 )   (5,867 )   (874 )

(Loss)/income from operations

    (28,526 )   49,963     51,686     7,701     27,391     (54,070 )   (8,057 )

Other income (expenses):

                                           

Interest income

    2,578     4,103     1,150     171     375     178     27  

Interest expenses

    (769 )   (9 )   (8 )   (1 )   (2 )   (351 )   (52 )

Foreign exchange gain/(loss), net

    67     (184 )   21     3     34     (3 )    

Gains on available-for-sale investments

    890     2,485     3,916     584     484          

Government grants

    4,434     4,046     7,817     1,165     2,524     1,659     247  

Equity in income /(loss) on equity method investments

    (842 )   (150 )   1,668     249     1,267     2,553     380  

Others, net

    2,890     (373 )   1,649     246     309     (63 )   (9 )

(Loss)/income before income tax

    (19,278 )   59,881     67,899     10,118     32,382     (50,097 )   (7,464 )

Income tax (expense)/benefit

    (7,869 )   (19,539 )   (14,454 )   (2,154 )   (4,346 )   7,936     1,183  

Net (loss)/income

    (27,147 )   40,342     53,445     7,964     28,036     (42,161 )   (6,281 )

Less: Net loss attributable to non-controlling interests

    (2,862 )   (218 )   (3,809 )   (568 )   (620 )   (1,006 )   (150 )

Net (loss)/income attributable to shareholders of our Company

    (24,285 )   40,560     57,254     8,532     28,656     (41,155 )   (6,131 )

Less: Accretion of redeemable owners' investment

    10,577     19,000     9,814     1,462     4,685          

Net (loss)/income available to shareholders of our Company

    (34,862 )   21,560     47,440     7,070     23,971     (41,155 )   (6,131 )

Non-GAAP Financial Measures:

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Adjusted EBITDA(3)

    17,129     100,441     144,115     21,474     45,112     (28,373 )   (4,228 )

Adjusted EBITDA margin(4)

    2.1 %   8.7 %   10.1 %   10.1 %   13.6 %   (9.0 )%   (9.0 )%

(1)
Includes revenue from the sales of goods, such as education materials and food and beverages sold at our self-operated learning centers.

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(2)
Comprise primarily of (i) revenue from our "Shuangge English" App, which had over 24,600, 26,787, 9,859 and 791 paying users for the year ended December 31, 2016, 2017 and 2018, and the three months ended March 31, 2019, respectively; and (ii) franchise fees we received from our franchised learning centers under the "Meten" brand and the "ABC" brand.

(3)
To supplement our consolidated financial statements which are presented in accordance with U.S. GAAP, we also use adjusted EBITDA as an additional non-GAAP financial measure. We present this non-GAAP financial measure because it is used by our management to evaluate our operating performance. We also believe that such non-GAAP financial measure provides useful information to investors and others in understanding and evaluating our consolidated results of operations in the same manner as our management and in comparing financial results across accounting periods and to those of our peer companies.

Adjusted EBITDA should not be considered in isolation or construed as an alternative to net income/(loss) or any other measure of performance or as an indicator of our operating performance. Investors are encouraged to compare the historical non-GAAP financial measure with the most directly comparable GAAP measures. Adjusted EBITDA presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data. We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure.

Adjusted EBITDA represents net income/(loss), which excludes depreciation and amortization and income tax expenses/(benefit), before share-based compensation expenses and offering expenses. The table below sets forth a reconciliation of our adjusted EBITDA for the periods indicated:

 
  For the Year Ended
December 31,
  For the Three Months
Ended March 31,
 
 
  2016   2017   2018   2018   2019  
 
  RMB   RMB   RMB   US$   RMB   RMB   US$  
 
  (in thousands)
 

Net (loss)/income

    (27,147 )   40,342     53,445     7,964     28,036     (42,161 )   (6,281 )

Subtract:

                                           

Net interest income

    1,809     4,094     1,142     170     373     (173 )   (25 )

Add:

                                           

Income tax expense/(benefit)

    7,869     19,539     14,454     2,154     4,346     (7,936 )   (1,183 )

Depreciation and amortization

    31,659     36,768     54,944     8,187     9,550     16,449     2,451  

EBITDA

    10,572     92,555     121,701     18,135     41,559     (33,475 )   (4,988 )

Add:

                                           

Share-based compensation expenses

    6,557     7,886     7,648     1,140     1,924     1,944     290  

Offering expenses

            14,766     2,199     1,629     3,158     470  

Adjusted EBITDA

    17,129     100,441     144,115     21,474     45,112     (28,373 )   (4,228 )
(4)
Adjusted EBITDA margin is calculated by dividing adjusted EBITDA by revenues.
 
  As of December 31,   As of March 31,  
 
  2017   2018   2019  
 
  RMB   RMB   US$   RMB   US$  
 
  (in thousands)
 
 
   
   
  Unaudited
  Unaudited
  Unaudited
 

Summary Consolidated Balance Sheets Data:

                               

Cash and cash equivalents

    321,776     174,679     26,028     117,992     17,581  

Operating lease right-of-use assets

                409,721     61,050  

Total assets

    905,514     1,006,746     150,008     1,359,427     202,561  

Deferred revenue (current)

    341,328     432,083     64,382     412,939     61,530  

Deferred revenue (non-current)

    42,707     52,169     7,773     31,913     4,755  

Financial liabilities from contract with customers

    437,027     423,163     63,053     474,108     70,644  

Operating lease liabilities (current)

                118,638     17,678  

Operating lease liabilities (non-current)

                272,698     40,633  

Total liabilities

    958,870     1,121,349     167,084     1,514,247     225,631  

Total mezzanine equity

    219,619                  

Total shareholders' deficit

    (272,975 )   (114,603 )   (17,076 )   (154,820 )   (23,070 )

Total liabilities, mezzanine equity and shareholders' deficit

    905,514     1,006,746     150,008     1,359,427     202,561  

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  For the Year Ended
December 31,
  For the Three Months Ended
March 31,
 
 
  2016   2017   2018   2018   2019  
 
  RMB   RMB   RMB   US$   RMB   RMB   US$  
 
  (in thousands)
 
 
   
   
   
  Unaudited
  Unaudited
  Unaudited
  Unaudited
 

Summary Consolidated Cash Flow Data:

                                           

Net cash flow generated from/(used in) operating activities

    92,624     259,708     78,535     11,701     (9,672 )   (41,411 )   (6,170 )

Net cash used in investing activities

    (110,586 )   (128,629 )   (74,793 )   (11,145 )   (85,643 )   (34,778 )   (5,182 )

Net cash generated from/(used in) financing activities

    123,636     6,021     (142,633 )   (21,252 )   (1,376 )   14,999     2,234  

Net increase/(decrease) in cash and cash equivalents and restricted cash

    105,674     137,100     (138,891 )   (20,696 )   (96,691 )   (61,190 )   (9,118 )

Cash and cash equivalents and restricted cash at the beginning of the year/period

    85,583     191,257     328,357     48,927     328,357     189,466     28,231  

Cash and cash equivalents and restricted cash at the end of the year/period

    191,257     328,357     189,446     28,231     231,666     128,276     19,113  

Key Operating Data

        The following table presents our key operating data for the periods indicated:

 
  As of/for the Year Ended
December 31,
   
 
 
  As of/for the Three
Months Ended
March 31,
2019
 
 
  2016   2017   2018  

Student enrollment

    55,758     82,728     118,277     28,617  

Gross billings (RMB'000)

    974,878     1,318,690     1,424,026     334,770  

Number of self-operated learning centers

    85     94     119     120  

Number of franchised learning centers

    2     8     16     16  

Course withdrawal rate(1) (%)

    6.9     9.1     10.2     10.2  

(1)
Refers to the amount of refunds we issued in a specific period of time as a percentage of the sum of the amount of gross billings and the amount of refunds for such period.

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RISK FACTORS

        Investing in the ADSs entails a significant level of risk. Before investing in the ADSs, you should carefully consider all of the risks and uncertainties mentioned in this section, in addition to all of the other information in this prospectus, including the financial statements and related notes. We may face additional risks and uncertainties aside from the ones mentioned below. There may be risks and uncertainties that we are unaware of, or that we currently do not consider material, that may become important factors that adversely affect our business in the future. Any of the following risks and uncertainties could have a material adverse effect on our business, financial condition, results of operations and prospects. In such case, the market prices of the ADSs could decline and you may lose part or all of your investment.

Risks Related to Our Business and Industry

Failure to attract and retain students to enroll in our courses may have a material adverse impact on our business and prospects.

        The success of our business depends primarily on the number of student enrollments in the courses we offer at our learning centers, the number of paying users on our "Likeshuo" platform, and the amount of our course fees. As a result, our ability to attract students to enroll in our courses is critical to the continued success and growth of our business. This, in turn, will depend on several factors, including, among others, our ability to develop new educational programs and enhance existing educational programs to respond to the changes in market trends, student demands and government policies, to maintain our consistent and high teaching quality, to market our programs to a broader prospective student base, to develop additional high-quality educational content, sites and availability of our learning centers and to respond effectively to competitive market pressures.

        If our students perceive that our education quality deteriorated due to unsatisfying learning experiences, which may be subject to a number of subjective judgments that we have limited influence over, our overall market reputation may diminish, which in turn may affect our word-of-mouth referrals and ultimately our student enrollment. In addition, the expansion of our offering of courses and services may not succeed due to competition, our failure to effectively market our new courses and services, maintain the quality of our courses and services, or other factors. We may be unable to develop and offer additional educational content on commercially reasonable terms and in a timely manner, or at all, to keep pace with changes in market trends and student demands. Moreover, we cannot assure you that we will always be able to maintain or increase our course fee levels without compromising our student enrollment, which may materially and adversely affect our revenues and profitability. In addition, international relations and policies related to overseas study of Chinese students may become volatile or unfavorable to our existing and prospective students who plan to study abroad due to various factors that are beyond our control, which could materially and adversely affect our business, results of operations, financial condition and prospects.

        If we are unable to continue to attract students to enroll in our courses, our revenue may decline, which may have a material adverse effect on our business, financial condition and results of operations.

Our business depends on the market recognition of our brands and if we are not able to maintain our reputation and enhance our brand recognition, our business and operating results may be harmed.

        We believe that our success is heavily dependent on the market recognition of our brand names, including our "Meten" and "Likeshuo" brands, as well as the "ABC" brand associated with ABC Education Group, which we acquired in June 2018. Our ability to maintain our brand recognition and reputation depends on a number of factors, some of which are beyond our control. It may become difficult to maintain the quality and consistency of the services we offer while we continue to grow in size and expand our business and services, which in turn may lead to diminishing confidence in our brand names.

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        Our ability to maintain and enhance our brand recognition and reputation depends primarily on, among the others, the following factors:

    the perceived effectiveness and quality of our courses, services and teaching staff;

    the quality and coverage of our course portfolio, value of courses, services and functions and the quality, variety and appeal of content available of the courses and services offered at our learning centers and on our "Likeshuo" platform;

    the reliability of the courses offered at our learning centers and through our "Likeshuo" platform, as well as the commitment to high levels of service, reliability, security and data protection by the merchants, our franchised learning centers and other participants in our ecosystem; and

    the effectiveness of our operational system governing the courses and services offered at our learning centers and on our "Likeshuo" platform.

        We have developed our student base primarily through word-of-mouth referrals. We have also invested significantly in brand promotion initiatives by conducting certain marketing activities, including, but not limited to, advertisement through our cost per sale merchants and major search engines, as well as on social media platforms. However, we cannot assure you that these or our other marketing efforts will be successful in promoting our brands to remain competitive. If we are unable to further enhance our brand recognition and increase awareness of our services, or if we incur excessive sales and marketing expenses or if we are required to incur excessive sales and marketing expenses in order to remain competitive, our business and results of operations may be materially and adversely affected. The sales and marketing expense may also increase as we further develop and expand our business. In addition, any negative publicity relating to the general ELT market in China, our Company or services, regardless of its veracity, could damage our reputation and in turn cause material and adverse harm to our business and results of operations. Furthermore, certain enterprises in various industries in China have brand names that are similar to ours and may result in name confusion to our existing and prospective customers. Any negative publicity associated with these enterprises may have an adverse impact on our reputation and brand recognition, which is beyond our control, and could cause harm to our business, results of operations, financial condition and prospects.

We are subject to uncertainties brought by the Amended Private Education Promotion Law and other rules, regulations and opinions promulgated by the PRC government from time to time.

        Our business is regulated by, among others, the Amended Private Education Promotion Law, which became effective on September 1, 2017. The Amended Private Education Promotion Law classifies private schools into non-profit schools and for-profit schools by whether they are established and operated for profit-making purposes. The sponsors of private schools may at their own discretion choose to establish non-profit or for-profit private schools, but it is not allowed to establish for-profit private schools that engage in compulsory education. According to the Amended Private Education Promotion Law, for-profit private training institutions, such as our learning centers, are classified as private schools and are required to obtain private school operating permits.

        According to the Several Opinions of the State Council on Encouraging Social Resources to Invest in Education and Promote Sound Development of Private Education, after the Amended Private Education Promotion Law came into force, the provincial government authorities must issue their own implementation opinions and licensing measures in relation to the specific implementation methods and operative approaches of the amended law based on local conditions. However, whether and how educational authorities regulate private training institutions vary from region to region, especially after the Ministry of Education, or the MOE, issued the Draft Implementation Rules of the Private Education Promotion Law on April 20, 2018, and requested public comment. On August 10, 2018, the

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Ministry of Justice of the PRC published the committee draft of the Regulations on the Implementation of the Law on Promoting Private Education in the PRC (Revised Draft), or the Committee Draft Implementation Rules of the Private Education Promotion Law, and requested public comment. According to the Committee Draft Implementation Rules of the Private Education Promotion Law, which further classifies private training institutions, a private training institution for language, art, sports, science and technology teaching and a private training institution for cultural education or non-academic continuing education for adults can directly apply for the registration to the local administrative departments for industry and commerce. As advised by Commerce & Finance Law Offices, or our PRC counsel, if the abovementioned Committee Draft Implementation Rules of the Private Education Promotion Law is enacted as proposed and our learning centers are deemed to be private training institutions for language teaching by the relevant authorities under clause 15 of the Committee Draft Implementation Rules of the Private Education Promotion Law, our learning centers will not be required to obtain private school operating permits from the PRC education authorities. However, as the Committee Draft Implementation Rules of the Private Education Promotion Law is still in its draft form, there can be no assurance that it will be enacted as proposed or at all, and there are also uncertainties as to the interpretation and implementation of the regulations by the relevant authorities. We cannot assure you that we will be successful in complying with the newly promulgated regulations. If we cannot fully comply with such regulations, our business, results of operations and reputation could be materially and adversely affected.

        On November 20, 2018, the General Office of MOE, the General Office of the State Administration for Market Regulation and the General Office of Ministry of Emergency Management jointly issued the Notice on Improving Several Working Mechanisms for Special Governance and Rectification of After-School Training Institutions, or Circular 10, which became effective on the same date. For details of the requirements of Circular 10, see "Regulations—Regulations on Private Education in the PRC." According to Circular 10, for institutions that carry out academic training activities without permits, non-academic training institutions that carry out academic training activities and other institutions that carry out illegal training activities, the education authorities, in collaboration with other relevant government departments, shall order them to cease their business, restrict their legal representatives to engage in training activities for primary and secondary school students and refer to the market supervision authority to revoke their business licenses. By the end of 2018, there should be no training institutions that are still carring out training activities without permits or licenses. The local government authorities may propose a practical rectification plan to ensure that the rectification could be completed by the end of the year. As of the date of this prospectus, a majority of our self-operated learning centers did not have the relevant private school operating permits. As of March 31, 2019, except for three of our learning centers in Xi'an, Guangzhou and Shenzhen, no other learning centers of our Group that did not have the relevant private school operating permits have been ordered by the government authorities to suspend their operations for rectification, cease business operations or revoke their business licenses. However, we cannot assure you that the PRC government authorities will not extend the rectification period. In addition, we cannot assure you that the training services we offer, including general adult English training (which is designed for students aged 15 and above) and junior English training (which is designed for students aged six to 18), will be deemed "non-academic" in nature by the relevant PRC education authorities. If such training services are deemed "academic," the government authorities could order the learning centers which are deemed to be "non-academic" providing such training services to cease their business operations and revoke their business licenses. If any of the above occurs, our business, results of operations, business prospects and reputation could be materially and adversely affected.

        Uncertainities exist with respect to the interpretation and enforcement of the new and existing laws and regulations that may be applicable to us. While we intend to comply with all new and existing laws and regulations, we cannot assure you that we will always be deemed to be in compliance with such laws and regulations, nor can we assure you that we will always be able to change our business practice

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successfully to adapt to the changing regulatory environment. Any such failure could materially and adversely affect our business, results of operations, financial condition and prospects.

Uncertainties exist in relation to the Opinions of the General Office of the State Council on Regulating the Development of After-school Training Institutions, which may materially and adversely affect our business, results of operations, financial condition and prospects.

        On August 22, 2018, the General Office of the State Council issued the Opinions of the General Office of the State Council on Regulating the Development of After-school Training Institutions, or Circular 80, which came into effect on the same date. Pursuant to Circular 80, the after-school training institutions for the primary and secondary school students must obtain relevant school operating permits and business licenses (either corporate legal person certificates or private non-enterprise unit registration certificates) for carrying out the training business and shall meet certain standards in respect of tuition fees, sites, teachers and management. Circular 80 provides, among other things, that (i) the average available-for-use area per student must be no less than three square meters within the same training hours; (ii) private school shall purchase safety insurance for training participants; (iii) no in-service primary and secondary teachers may be concurrently employed in an after-school training institution, and any teachers employed by an after-school institution for primary and secondary school subjects shall hold relevant teaching qualifications; (iv) the content, classes and subject enrollment, progress and school hours information in connection with training of traditional disciplines shall be filed with the local education authorities and be made public; (v) no training courses shall be given after 8:30 p.m., and no homework from after-school institutions can be given; and (vi) no advance tuition fees of more than three months may be collected. The approval and registration of after-school training institutions shall be subject to local government authorities. Education departments at the county level are responsible for the issuance of private school operating permits upon examination and approval.

        Circular 80 only sets out the general guidance on regulating after-school education institutions targeting primary and secondary school students. Without the approval by the relevant education department, no after-school training institution shall provide training for primary and secondary school students in the name of consulting and cultural transmission, among others. However, detailed rules of implementation of Circular 80 have yet to be introduced by the competent authorities, such as whether Circular 80 should apply to our learning centers providing junior English training services, which mainly focus on promoting and developing language competence, rather than providing supplementary tutoring services relating to school cultural and educational curriculums, admission into schools of a higher grade or examinations. In 2018, we introduced offline junior English training services to students aged six through 18 at our existing self-operated learning centers. Our offline junior English training business may be subject to the requirements of Circular 80, which may potentially increase our compliance costs. For instance, Circular 80 provides that personal safety insurance shall be purchased for students to mitigate risks, but is silent as to the specific type, amount and coverage of such required personal safety insurance. In addition, Circular 80 does not provide any guidance on how online education institutions should comply with the requirements contained in Circular 80, and we cannot assure you whether any further interpretations, new regulations or policies will require online training institutions to conduct self-inspections and rectification procedures under Circular 80 for providing online junior English training services.

        Further, there are potential conflicts between Circular 80 and previously published government policies and there is no clear guidance on which regulation shall take precedence, which require further interpretation and clarification. For example, pursuant to Circular 80, opening branches or learning centers by any after-school education institution within the same county level city shall also be subject to approval, whereas the Committee Draft Implementation Rules of the Private Education Promotion Law provides that opening branches or learning centers within the same municipality directly under the

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central government or the same city with districts where such after-school education institution is located does not need to seek approval but shall file for record with both the authorities granting the operation permit to such after-school education institution and the relevant authorities where the branches or learning centers are located.

        While we intend to comply with all applicable laws and regulations, due to existing uncertainties, we cannot assure you that we will be able to meet the relevant regulatory requirements in a timely manner, any more specific and stringent requirements in relation to our operations to be established by the relevant local government authorities in particular. Also, additional compliance costs may be incurred. As a result, our business, results of operations, financial condition and prospect may be adversely and materially affected.

Our development of new courses, services and technologies or innovation and upgrades made to existing courses, services and technologies may not adequately respond to the expectations of our students, changes in market demands and standards of school admission or standardized tests, may fail to achieve the expected satisfactory results, or may compete with our pre-existing courses, as a result of which, our competitive position, ability to generate revenue and growth prospectus may be materially and adversely affected.

        We constantly update and improve the content of our existing courses and develop new courses or services to meet changing market demands or requirements from related government authorities. Revisions to our existing courses and development of our new courses or services may not be well received by existing or prospective students and online users. We may have limited experience in developing the content of new courses or services and may need to adjust our systems and strategies to incorporate new courses or services into our existing offerings. If we cannot respond timely and cost-effectively to changes in market demands or requirements from related government authorities, our business may be adversely affected. Even if we are able to develop new courses or services that are well received, we may not be able to introduce them in an effective manner. If we do not respond adequately to changes in market demands, our ability to attract and retain students may be impaired and our financial results could suffer. For example, we introduced the new "Explore Curriculum" for our general adult English training business beginning in 2018. We began to widely implement such new curriculum across our national learning center network in the three months ended March 31, 2019, which had adversely affected the number of course hours delivered and segment revenue recognized as we focused on providing relevant training to our teaching staff and delivering such new course in a small-class setting during the transition period.

        The offline and online English training services we provide and the technologies we use are subject to continuous development, update and enhancement in terms of content and functionality, driven by the demand for innovative skills, evolving course content and changes in overseas admission and standardized tests. In particular, admission and standardized tests undergo continuous changes, in terms of the focus of the questions tested, test formats and the manner in which the tests are administered. In the past, certain admission and standardized tests overseas have undergone changes in test questions and formats. Authorities in overseas jurisdictions may also promote policies that encourage schools to make admission decisions based less on entrance exam scores and more on a combination of other factors. There is no assurance that overseas colleges, universities and other higher education institutions will not reduce or eliminate their reliance on considering the international standardized test results as important standards to make admission decisions. Furthermore, changes in test standards for professional qualifications, or changes in employers' preferences to hire staff with select qualifications, may particularly affect sales of our international standardized test preparation courses designed for relevant qualifications.

        Specifically, regarding our online services on the "Likeshuo" platform and other services, including "Shuangge English," we consider that the Internet-based ELT market is characterized by the rapid changes and innovation of technologies, unpredictable product life cycles and online user preferences.

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We have gained limited experience in generating revenue from our online training services and our investment in research and development may not result in satisfactory outcomes. The flexibility of taking Internet-based ELT courses may increase the amount of online training services. We must quickly modify our services to adapt to the change in needs and preferences of our students, technological advances and evolving Internet practices. However, ongoing enhancement of our online course offerings and related technologies may entail significant expenses and technical risks. In addition, the technologies used on the Internet and value-added telecommunication services and products in general, and in online training English training services in particular, may evolve and change over time. We may fail to anticipate and adapt to such technological development, or address any of the risks related to such new courses and services using such technologies, which in turn could have a material and adverse effect on our business development, financial condition and results of operations. If our improvement to our online offerings and the related technologies is delayed, which causes systems interruptions or is not aligned with the prevalent market expectations or preferences, we may lose market share and our business could be adversely affected.

We face significant competition in major programs we offer and geographic markets in which we operate, and if we fail to compete effectively, we may lose our market share and our profitability may be adversely affected.

        The ELT industry in China is rapidly evolving, highly fragmented and competitive, and we expect competition in this industry to continue to persist and intensify. We face competition in major courses and/or training programs we offer and geographic markets where we operate. For example, we face nationwide competition for our international standardized test preparation courses from other relevant services provided by some of our competitors. We face competition from several ELT service providers that focus on providing general adult English training in specific regions in China. We also face competition from companies that focus on providing overseas college application services.

        Our student enrollment may decrease due to intense competition. Some of our competitors may adopt similar curriculums and marketing approaches, with different pricing and service packages that may be deemed more attractive than our offerings. In addition, some of our competitors may have more resources than we do and may be able to devote greater resources than we can to promote and developed their services. These competitors may be able to respond more promptly than we can to the changes in student preferences, new technologies or market demands. In addition, the increasing use of the Internet and advances in Internet- and computer-related technologies, such as web video conferencing and online testing simulators, are eliminating geographic and entry barriers to providing private education services. As a result, many of our international competitors that offer online test preparation and language training courses may be able to penetrate the China market more effectively.

        We may need to reduce course fees or increase spending in response to competition in order to retain or attract students or pursue new market opportunities. We cannot assure you that we will be able to compete successfully against existing or future competitors. If we are unable to successfully compete for new students, maintain or increase our fee level, attract and retain competent teachers or other key personnel and enhance our competitiveness in terms of the quality of our education courses and services in a cost-effective manner, our business, financial condition and results of operations may be materially and adversely affected.

We may not be able to continue to recruit, train and retain dedicated and qualified teaching staff, who are critical to the success of our business and the effective delivery of our English training services to students.

        We rely heavily on our teaching staff, which generally comprises our teachers and study advisors, to deliver high-quality education services to our students. Our teaching staff is vital for the maintenance of our reputation. We seek to hire qualified and dedicated teaching staff with the necessary experience and language proficiency, who are able to deliver effective and inspirational instructions. There is a limited pool of teaching staff with these attributes and we implement a highly selective hiring process

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to ensure that the new hires possess the skills commensurate with our knowledge requirements. As a result, we must provide competitive compensation packages to attract and retain such teaching staff. We may not be able to recruit, train and retain a sufficient number of qualified teaching staff in the future to keep pace with our growth while maintaining consistent teaching quality in the different markets we serve. A shortage of qualified teaching staff or decreases in terms of the quality of our teaching staff's instructions, whether actual or perceived, in one or more of our markets, or a significant increase in compensation needed to attract and retain qualified teaching staff, would have a material adverse effect on our business, financial condition and results of operations.

Failure to comply with applicable laws and regulations in relation to the employment of foreign employees may subject us to fines and penalties, and our business and operations may be adversely affected if we are not able to retain foreign teachers due to non-compliance with such laws and regulations.

        The foreign teachers we employ are required to apply for and obtain work visas and residence permits to be able to work in China. We had, in the past, hired certain foreign teachers without them obtaining the necessary work visas and residence permits. Under the PRC laws, if we hire foreign employees without work visas and residence permits, we may be fined RMB10,000 for each illegally employed foreign employees, with a cap of RMB100,000 in the aggregate and any illegal gains, which are not well-defined under the PRC laws, may be confiscated. We have been fined in the past for an immaterial amount of penalties relating to our hiring of foreign teachers without them obtaining the necessary work visas and residence permits, and we cannot assure you that we will not face additional penalties or fines for any past or future violations. Additionally, in the event we hire foreign employees without work visas or residence permits, we may have to terminate our employment relationship with them. In such event, we may need to hire qualified replacements, which could be difficult and/or time consuming. We may also face the risk of insufficient number of available foreign employees in the ELT market in China due to various factors beyond our control. If we are unable to retain foreign employees, including our foreign teachers, the teaching quality of our courses and services could be negatively impacted, which in turn, could materially and adversely affect our business, results of operations, reputation and prospects.

        For our online English training, we match students with foreign teachers who reside in foreign countries. While we are not required to obtain PRC work visas and residence permits for our foreign teachers who conduct online English training courses on our "Likeshuo" platform under the existing PRC laws and regulations, we cannot assure you that the PRC government will not impose any restriction or other qualification requirement in the future, which we may not be able to comply with on a timely manner or at all, and due to which we may incur substantial compliance costs. In the event this occurs, our business and results of operations may be materially and adversely affected.

The continuing efforts of our senior management team and other key personnel are important to our success, and our business may be harmed if we lose their services.

        Our future success depends heavily upon our senior management for their smooth and efficient operations of our learning centers and online platform as well as their execution of our overall business plans. There is intense competition for hiring experienced management personnel in the ELT industry, and the pool of qualified candidates is very limited. If any member of our senior management team is unable to continue his/her employment with us and we fail to effectively manage a transition to new personnel in the future, or if we fail to attract and retain qualified and experienced professionals on commercially acceptable terms, our business, financial condition and results of operations could be adversely affected.

        Our success also depends on having highly trained financial, technical, human resources, sales and marketing staff, management personnel and qualified and dedicated domestic and foreign teachers. We will need to continue to hire additional personnel as our business grows. In the event we lose their

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services, we may not be able to attract experienced senior management or other key personnel in the future, and we may, in turn, lose our students, teaching staff and other personnel. In addition, a shortage in the supply of personnel with requisite skills or our failure to recruit them could impede our ability to increase revenue from our existing services, launch new course offerings and expand our operations, and could pose an adverse effect on our business and financial results.

We derive a majority of our revenue from a limited number of cities. Any event negatively affecting the private education market in these cities, or any increase in the level of competition for the types of services we offer in these cities, could have a material adverse effect on our overall business and results of operations.

        For the three months ended March 31, 2019, we derived approximately 57.6% of the total student enrollment in our offline English training courses and services from our self-operated learning centers in Shenzhen, Guangzhou and Dongguan in Guangdong Province, Chengdu in Sichuan Province, and Nanjing and Suzhou in Jiangsu Province, and we expect these cities to continue to be important sources of our student enrollment and revenue. If any of these cities experiences any event that would negatively affect its private education market, such as a serious economic downturn, natural disaster or outbreak of contagious disease, or that the governments of which adopt regulations relating to and affecting the private education market that place additional restrictions or burdens on us, or experiences an increase in the level of competition for the types of services we offer, our overall business and results of operations may be materially and adversely affected.

Failure to effectively and efficiently manage the expansion of our service network may materially and adversely affect our ability to capitalize on new business opportunities.

        We have recently experienced steady growth and expansion. The number of our self-operated learning centers increased organically from 70 as of January 1, 2016 to 98 as of December 31, 2018, and further to 99 as of March 31, 2019. As of March 31, 2019, we had 12 franchised learning centers under our "Meten" brand, which we jointly manage with our franchised partners. We may continue to expand our operations in different regions in China through organic growth and strategic acquisitions. The establishment of new learning centers and acquisitions of existing learning centers pose challenges to us and require us to make investments in management, capital expenditures, marketing expenses and other resources. As part of our expansion, we acquired ABC Education Group in June 2018, which had 21 self-operated learning centers and four franchised learning centers under the "ABC" brand. The expansion has also resulted, and will continue to result, in substantial demands on our management and staff as well as our financial, operational, technological and other resources. Our expansion will also largely require us to maintain teaching quality and consistent standards, controls, policies and our culture to ensure that our brands and reputation do not suffer as a result of any acquisition. To manage and support our growth, we will continue to improve our existing operational, administrative and technological systems and our financial and management controls, and recruit, train and retain additional qualified teaching staff, management personnel and other administrative and sales and marketing personnel.

        In addition, the geographic dispersion of our operations requires significant management resources. We cannot assure you that our current and planned personnel, systems, procedures and controls will be adequate to support our future operations, or that we will be able to effectively and efficiently manage the growth of our operations or recruit and retain qualified personnel to support our expansion. Our future success will depend in part upon the ability of our senior management to manage our business growth effectively. In particular, our management may face the following challenges:

    controlling our costs and expenses and maintaining or increasing our margins and profitability;

    acquiring and retaining students;

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    managing our key relationships with governmental agencies and responding to changes in the regulatory and policy environment;

    attracting training and retaining qualified personnel;

    improving our operational, administrative and financial systems and internal controls and maintaining close cooperation between management members and department heads;

    increasing the awareness of our brands and protecting our reputation;

    keeping up with evolving industry standards technologies and market developments; or

    integrating any acquired business into our business operations and realizing the potential benefits of our acquisition.

        We cannot assure you that we will be able to effectively and efficiently manage the growth of our operations, maintain or accelerate our current growth rate, maintain or increase our gross and operating profit margins, recruit and retain qualified teaching staff and management personnel, successfully integrate new learning centers into our operations and otherwise effectively manage our growth. Any failure to effectively and efficiently manage our expansion may materially and adversely affect our ability to capitalize on new business opportunities, which in turn may have a material adverse impact on our financial condition and results of operations.

We are required to obtain various operating permits and licenses for our English training services in China and failure to comply with these requirements may materially and adversely affect our business operations.

        Under the PRC laws and regulations, our learning centers are required to obtain a number of licenses, permits and approvals from, and make filings or complete registrations with the relevant government authorities. Certain of our learning centers that are registered with the State Administration of Industry and Commerce, or the SAIC, are required to obtain business licenses, and our other learning centers registered with the Ministry of Civil Affairs, or the MCA, are required to obtain non-enterprise entity registration certificates.

        According to the Amended Private Education Promotion Law and Circular 10, our learning centers are required to obtain private school operating permits. However, according to the Committee Draft Implementation Rules of the Private Education Law, which further classifies private training institutions, a private training institution for language, arts, sports, science and technology teaching and a private training institution for adults for cultural education or non-academic continuing education can directly apply for registration with the local administrative departments for industry and commerce. As advised by our PRC counsel, if the abovementioned Committee Draft Implementation Rules of the Private Education Law is enacted as proposed and our learning centers are recognized as private training institutions for language teaching by the relevant authorities under clause 15 of Committee Draft Implementation Rules of the Private Education Promotion Law, our learning centers will not be required to obtain private school operating permits from the PRC education authorities. However, as the Committee Draft Implementation Rules of the Private Education Law is still in draft form, there can be no assurance that it will be enacted as proposed or at all, and there are also uncertainties as to the interpretation and implementation by the relevant authorities.

        The business licenses of certain of our learning centers did not include "English language training" or "language-related training." We were not able to include "English language training" or "language related training" in the authorized business scope of these learning centers mainly because the industry and commerce administration authorities in the areas where such learning centers are located have a general policy prohibiting the inclusion of "English language training" or "language-related training" in the business scope of any company before such company obtains relevant private school operating permits or before the Committee Draft Implementation Rules of the Private Education Promotion Law

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is implemented. As of the date of this prospectus, some of our learning centers were operating beyond their authorized business scope. For these learning centers, we have been communicating, and will continue to communicate, with the competent industry and commerce administration authorities to expand the authorized business scope of the relevant learning centers to include "language related training" or similar statements. However, we cannot assure you that our efforts to expand the business scope or include the statements above in the business license of these learning centers will be successful. While we have not been subject to any penalties or disciplinary action in the past relating to the business scope of our learning centers, the relevant PRC government authorities may determine that these learning centers have been or are operating beyond their authorized business scope and may subject these learning centers to warning, fine, confiscation of illegal earnings, suspension of business for rectification, or revoking the business license for current or past non-compliant learning centers, which may materially and adversely affect our business and results of operation.

        Given the significant amount of discretion held by the local PRC authorities in interpreting, implementing and enforcing the relevant rules and regulations, as well as other factors beyond our control, we may not be able to obtain and maintain all requisite licenses, permits, approvals and filings or pass all requisite assessments.

        Among our self-operated learning centers in operation as of March 31, 2019, 81 learning centers did not have private school operating permits or business licenses, or were operating beyond their authorized business scope. Based on the interviews we conducted in March 2019 with officials of the local educational authorities in the areas where we have learning centers in operation, excluding certain learning centers that we believe were not required to obtain the relevant private school operating permits, we had 46 learning centers without the requisite private school operating permits or business licenses, or were operating beyond their authorized business scope, which contributed in the aggregate to approximately 14.4% of our total gross billings for the three months ended March 31, 2019. Some of the local education authorities we interviewed informed us that they had imposed, or expect to impose, sanctions against some of these 46 learning centers. In particular, three of our learning centers in Xi'an, Shaanxi Province, Guangzhou, Guangdong Province, and Shenzhen, Guangdong Province, that did not have the relevant private school operating permits have been ordered to suspend their operations for rectification by the relevant education authorities until they obtain the required private school operating permits. The three learning centers contributed an aggregate of approximately 2.2% of our total gross billings for the three months ended March 31, 2019. With respect to the learning center in Xi'an, the local education authority issued a public notice in July 2018 ordering the cessation of business operations of 734 local training institutions, which included such learning center. On January 18, 2019, this learning center received a notice from the local education authority ordering it to cease operations due to a lack of the private school operating permit. As of the date of this prospectus, we were in the process of applying for the private school operating permit for this learning center. On December 28, 2018, one of our learning centers in Guangzhou received a notification to obtain the required private school operating permit. We have obtained the private school operating permit for this learning center on April 4, 2019. In addition, one of our learning centers in Shenzhen received a notification to obtain the required private school operating permit. However, as of the date of this prospectus, the local education authority in Shenzhen has temporarily suspended its acceptance of applications for private school operating permits. We will timely apply for such permit once the education authority begins to accept new applications. We have continued to operate these learning centers and have not received any further notice or sanction from the relevant government authorities as of the date of this prospectus. If we cannot obtain the private school operating permits after submitting the applications, we may be forced to cease operations at this learning center, subject to fines, be ordered to return the course and service fees collected and pay a multiple of the amount of returned course and/or service fees to the regulators as a penalty. We cannot assure you that our other learning centers without requisite permits or licenses will not be subject to similar penalties. In addition, if any of our current or future learning centers fails to receive or renew the requisite licenses,

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permits and approvals, make the necessary filings, or complete all requisite registrations, such learning center may also be subject to various penalties. These may include fines, orders to promptly rectify the non-compliance, or if the non-compliance is deemed serious by the regulators, the learning center may be ordered to return course and service fees collected and pay a multiple of the amount of returned course and/or service fees to regulators as a penalty or may even be ordered to cease operations. If this occurs, our business, results of operations and financial condition could be materially and adversely affected.

We may face risks and uncertainties in the licensing requirements of our online platform.

        Under the PRC laws and regulations, we may be required to obtain an Internet Content Provider permit, or ICP license, an audio or video program transmission license, an Internet culture permit, an online publishing services permit and a radio or television programs producing and distributing permit for the operation of our online education products. We have obtained the relevant ICP license, while we have not obtained the audio or video program transmission license, the Internet culture permit, the online publishing services permit and the radio or television programs producing and distributing permit. Although we have not received any material fines or other penalties from the relevant government authorities for such non-compliance in the past, if we are not able to comply with all applicable requirements, we may be subject to fines, confiscation of the gains derived from our non-compliant operations, suspension of our non-compliant operations, any of which may materially and adversely affect our business, financial condition and results of operations.

We face risks associated with our franchised learning centers.

        A relatively small portion of our offline English training business is operated through franchisees. These franchisees are located in the PRC and have learning centers which are operated under our brands. These franchised learning centers account for a relatively small percentage of our overall business and financial performance. However, we are still subject to risks inherent to the franchise model and we have limited experience in operating the franchise model and dealing with such risks.

        Our control over the franchised learning centers is based on the contractual agreements we entered with our franchisees, which may not be as effective as direct ownership and potentially makes it difficult for us to manage the franchised learning centers. While we have some control over the operation of our franchised learning centers, nevertheless, we may not be able to fully and successfully monitor, maintain and improve the performance of the management and other staff at the franchised learning centers as these teaching staff carry out the training services and directly interact with students. In the event of any delinquent performance by the franchisees and their employees, we may suffer from business reduction as well as reputational damage. If the franchisees and/or their employees commit any unlawful or unethical conduct, we may suffer financial losses, incur liabilities and suffer reputation damage. We may also face the risk that our prospective franchisees may not want to adopt our stringent centralized management system, which may affect our franchise business development. For details on the expansion of our learning center network, see "Risk Factors—Risk Related to Our Business and Industry—Failure to effectively and efficiently manage the expansion of our service network may materially and adversely affect our ability to capitalize on new business opportunities." Meanwhile, a franchisee may suspend or terminate its cooperation with us voluntarily or involuntarily due to various reasons, including, but not limited to, disagreement or dispute with us, or failure to maintain requisite approvals, licenses or permits or to comply with governmental regulations. A franchisee might also choose not to continue to cooperate with us after the expiration of the existing cooperation arrangement. We may not be able to find alternative ways to continue to provide the training services formerly covered by such franchisee, and our customer satisfaction, brand reputation and financial performance may be adversely affected.

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We are dependent on our information systems, and if we fail to further develop our technologies, or if our systems, software, applications, database or source code contain "bugs" or other undetected errors, or encounter unexpected network interruptions, security breaches or computer virus attacks, our operations may be seriously distracted.

        The successful development and maintenance of our systems, software, applications and database, such as our management software and systems and student database, is crucial to the attractiveness of our education services and the management of our business operations. In order to achieve our strategic objectives and to remain competitive, we must continue to develop and enhance our technology. However, our efforts may prove to be unsuccessful. The performance and reliability of our online platform infrastructure, including our "Likeshuo" platform and other online systems we use for our business operations, are critical to our reputation and ability to retain students and increase student enrollment. Any system error or failure, or a sudden and significant increase in traffic, could result in the difficulty or unavailability of accessing our websites and/or online courses by our students. In addition, our technology platform upon which our management systems and online programs operate, and our other databases, products, systems and source codes could contain undetected errors or "bugs" that could adversely affect their performance.

        Our computer networks may also be vulnerable to unauthorized access, hacking, computer viruses and other security breaches. A user who circumvents our security measures could misappropriate proprietary information or cause interruptions or malfunctions in operations. Any interruption to our computer systems or operations could have a material adverse effect on our ability to retain students and increase student enrollment. Moreover, we may be required to expend significant resources to protect against the threat of security breaches or to alleviate problems caused by these breaches.

        Major risks involving our network infrastructure include:

    breakdowns or system failures resulting in a prolonged shutdown of our servers, including those attributable to power shutdowns, or attempts to get an unauthorized access to our systems, which may cause any loss or corruption of data and malfunctions of the software or hardware;

    disruption or failure in the national backbone network, which would make it impossible for visitors and students to log onto our websites;

    damages from fire, flood, power loss and telecommunications failures; and

    any infection by or spread of computer viruses.

        Any network interruption or inadequacy that causes interruptions in the availability of our websites, applications or other online platforms or deterioration in the quality of access to our websites, applications or other online platforms could reduce customer satisfaction and results in a reduction in the number of students using our services. If sustained or repeated, these performance issues could reduce the attractiveness of our websites, applications, other online platforms and course offerings. In China, almost all access to the Internet is maintained through state-controlled telecommunication operators. In many parts of China, the Internet infrastructure is relatively underdeveloped, and Internet connections are generally slower and less stable than in more developed countries. We cannot assure you that the Internet infrastructure in China will remain sufficiently reliable for our needs or ever develop and make available more reliable Internet access to our students and teachers.

        In addition, any security breach caused by hackings, which involve attempts to gain unauthorized access of or to cause intentional malfunctions of the information or systems, or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment could cause a disruption in our services and leakage of personal data of our teaching staff and students. Inadvertent transmission of computer viruses could expose us to a material risk of loss of our course files or a litigation and possible liability, as well as damage to our reputation.

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        Furthermore, increases in the volume of traffic on our websites could also strain the capacity of our existing computer systems, which could lead to slow responses or system failures. This would cause a disruption or suspension in our course offerings, which would damage our brands and reputation, and thus negatively affect our revenue growth. We may need to incur additional costs to upgrade our computer systems in order to accommodate increased demand if we anticipate that our systems cannot handle higher volumes of traffic in the future.

        To date, our information systems have not encountered any material error or technical issue that could have adversely affected or disrupted our operations. If we encounter errors or other service quality or reliability issues, or if we are unable to design, develop, implement and utilize information systems and the data derived from these systems, our ability to realize our strategic objectives and our profitability could be adversely affected, which, in turn may cause us to lose market share, harm our reputation and brand names, and materially adversely affect our business and results of operations.

Our historical financial and operating results are not indicative of our future performance and our financial and operating results are difficult to forecast.

        Our past results may not be indicative of future performance mainly due to the new businesses developed or acquired by us. Moreover, the results of operations of our Company may vary from period to period in response to a variety of other factors beyond our control, including general economic conditions and regulations or government actions pertaining to the private education service sector and the ELT sector in China, changes in consumers' spending on private education as well as non-recurring charges incurred under unexpected circumstances or in connection with acquisitions, equity investments or other extraordinary transactions. Due to these and other factors, our historical financial and operating results, growth rates and profitability as well as quarter-to-quarter comparisons of our operating results may not be indicative of our future performance and you should not rely on them to predict our future performance.

Our business and results of operations depend on our ability to maintain and/or raise the level of the course and service fees we charge.

        One of the most significant factors affecting our profitability is the course and service fees we charge. For the years ended December 31, 2016, 2017 and 2018 and the three months ended March 31, 2019, course and service fees derived from our business at our headquarters and self-operated learning centers, including revenue from the sale of goods, as well as our online English training courses delivered on the "Likeshuo" platform, constituted approximately 99.8%, 98.7%, 98.7% and 98.2% of our total revenue, respectively. The amounts of those fees we charge are primarily determined based on the demand of our offline students and online users for our English training services, our operating costs, our competitors' pricing level, our pricing strategy to gain market share and the general economic conditions in China. However, there can be no assurance that we will be able to maintain or raise the course fees and/or other fees we charge for our services in the future. Even if we are able to maintain or raise course fees and/or other fees we charge for our services, we cannot assure you that we will be able to attract prospective students to enroll in our courses at such increased fee rates. Our business, financial condition and operation results may be materially and adversely affected if we fail to maintain or raise the fee level or attract sufficient prospective students.

If we are unable to conduct our sales and marketing activities in a cost-effective manner, our results of operations and financial condition may be materially and adversely affected.

        In 2016, 2017 and 2018 and the three months ended March 31, 2019, our selling and marketing expenses amounted to RMB268.6 million, RMB373.1 million, RMB425.2 million (US$63.4 million) and RMB108.6 million (US$16.2 million), respectively, which mainly included advertising and promotion expenses and employee benefit expenses for our sales and marketing staff. There is no assurance that

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our sales and marketing activities will always be well received by students or result in the levels of sales that we anticipate. Furthermore, we cannot guarantee that we will always be able to improve the operational efficiency of our sales and marketing staff or we will be able to retain or recruit experienced sales staff, or efficiently train junior sales staff. In addition, marketing and branding approaches and tools in the ELT market in China are evolving, especially for mobile platforms. This further requires us to enhance our marketing and branding approaches and experiment with new methods to keep pace with industry development and student preferences. Failure to refine our existing marketing and branding approaches in order to introduce new marketing and branding approaches in a cost-effective manner could reduce our market share, cause our revenue to decline and negatively impact our profitability. In addition, we utilize a broad mix of marketing and public relations programs, including social media platforms, to promote our products and services to prospective students. If advertising rates increase or if we become concerned that our customers deem certain marketing activity less appealing, or more intrusive or damaging to our brands, we may limit or discontinue the use or support of certain marketing sources or activities. Further, companies that promote our services may decide that we negatively impact their business or may make business decisions that in turn adversely impact us. For instance, if they decide that they want to compete directly with us, enter a similar business or exclusively support our competitors, we may no longer have access to their marketing channels.

        There is no assurance that our branding efforts will be successful or we are not inadvertently negatively impacting our brand recognition and reputation. If we are unable to maintain and further enhance our brand recognition and reputation and promote awareness of our platform and courses, we may not be able to expand or even maintain our current level of student base and fees as well as engage qualified teachers, and our results of operations may be materially and adversely affected. Furthermore, any negative publicity relating to our Company, our management, our courses, teachers and our other staff, regardless of its veracity, could harm our brand image and in turn materially and adversely affect our business and results of operations.

If we fail to conduct our marketing activities in compliance with the advertisement regulations in China, our results of operations and financial condition may be materially and adversely affected.

        Under the Advertisement Law of the PRC, an advertisement for education or training shall not contain any of the following items: (i) any promise relating to progression, passing examinations, or obtaining a degree or qualification certificate, or any express or implied guaranteed promise relating to education or training results; (ii) express or implied statement that the relevant examination agency or its personnel or any examination test designer will be involved in the education or training; and (iii) the use of the names or images of research institutes, academic institutions, education institutions, industry associations, professionals or beneficiaries for recommendation or as proof. Publishing advertisements for education and training in violation of the provisions may be subject to order to cessation of the publishing of advertisements, eliminate the ill-effects within the corresponding and a fine of one to five times of the advertising fees, or may revoke the business licenses and approval documents for advertisement review.

        The PRC government has turned its attention toward greater regulation of advertising, and more recently of online advertising and issued the SAIC Interim Measures for the Administration of Internet Advertising, which came into effect on September 1, 2016. The new regulation clarifies what content is considered "Internet advertising," lays down rules for "publishers" of online advertisements, and outlines investigation measures and penalties for violators. In practice, any digital content placed on any online platform with the intent of promoting a product or service could be subject to the regulation. Given the ubiquity of online advertising in China, the regulations may have a widespread impact on the actions of advertisers and platform operators. The regulation identifies individual or

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corporate publishers who hold the responsibility of complying with the online advertising rules and are subject to penalties when in violation.

        The market recognition of our "Meten" brand has significantly contributed to our success. Maintaining and enhancing the reputation of our brands is critical to sustaining our competitive advantage. Our ability to maintain and enhance our brand recognition primarily depends on the perceived effectiveness and quality of our course offerings as well as the success of our marketing efforts. We have devoted significant resources to promoting our courses and brands in recent years, including marketing and advertising in both offline and online media channels. On April 23, 2018, Shenzhen Qianhai Meten Technology Co., Ltd., or Shenzhen Qianhai Meten, received a Decision on Administrative Penalty issued by the Shenzhen Market and Quality Supervision Committee Longgang Market Supervision Administration, according to which Shenzhen Qianhai Meten has been given a warning and a fine of RMB200 for express or implied guaranteed promise relating to education or training results on its Tmall.com shop. We have taken various remedial measures as required by the authorities, such as deleting relevant advertisement and paying the fine on time. However, we cannot assure you we will not be subject to any other penalties or legal sanctions in the future for our advertisements. Our marketing efforts may not be successful or may negatively impact our brand recognition and reputation inadvertently if any government authority or competitor publicly alleges that any of our advertisements are misleading.

Our brand image, reputations, business and results of operations may be adversely impacted by our students' and teaching staff's misuse of our websites, applications and other online platforms, and in misconducts or other illegal or improper activities of our students, teachers, franchise partners, management personnel and other employees.

        Our websites, applications and other online platforms allow our teaching staff and students to engage in real-time communication. Because we do not have full control over how our teaching staff and students will use these platforms to communicate, our online platforms may from time to time be misused by individuals or groups of individuals to engage in immoral, disrespectful, fraudulent or illegal activities. Although we are not aware of any material incidents on our platform and such incidents have not been covered by media reports or Internet forums, any such exposure or coverage could generate negative publicity about our brands and platform. We have implemented control procedures, such as training and sample auditing, and require our teaching staff not to distribute any illegal or inappropriate content and conduct any illegal or fraudulent activities on our platforms, but such procedures may not prevent all such content or activities from being posted or carried out. Moreover, as we have limited control over the real-time and offline behavior of our students and teaching staff, to the extent such behavior is associated with our platforms, our ability to protect our brand image and reputation may be limited. Our business and the public perception of our brands may be materially and adversely affected by misuse of our platform. In addition, if any of our students or teaching staff suffers or alleges to have suffered physical, financial or emotional harm following contact initiated on our platform, we may face civil lawsuits or other liabilities initiated by the affected student or teaching staff, or governmental or regulatory actions against us. In response to allegations of illegal or inappropriate activities conducted on our platform or any negative media coverage about us, the PRC government authorities may intervene and hold us liable for non-compliance with the applicable PRC laws and regulations concerning the dissemination of information on the Internet and subject us to administrative penalties or other sanctions, such as requiring us to restrict or discontinue some of the features and services provided on our platform. As a result, our business may suffer and our brand image, student base, results of operations and financial condition may be materially and adversely affected.

        Our brand image, reputation, business and results of operations may also be adversely affected by various misconducts and other illegal or improper activities of our franchisees, management personnel

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and other employees, such as intentionally failing to comply with government regulations, engaging in unauthorized activities and misrepresentation to our potential students during marketing activities, improper use of our students' and teaching staff's sensitive or classified information, making payments to government officials or third parties that would expose us to being in violation of laws. We cannot assure you that we will always be able to deter such misconducts, and the precautions we take to prevent and detect such activities may not be effective in preventing these activities or controlling the relevant risks or losses. Moreover, even if some of these misconducts and illegal or improper activities are not related to our business or the services provided by our franchisees, management personnel or other employees to us, they may nevertheless cause negative publicity about us and thereby, harm our brands and reputation.

We may not be able to achieve the benefits we expect from recent and future acquisitions, and recent and future acquisitions may have an adverse effect on our ability to manage our business.

        As part of our business strategy, we have pursued and intend to continue to pursue selective strategic acquisitions of businesses that complement our existing businesses. For example, in June 2018, we acquired 80% equity interest in ABC Education Group, an English language training service provider. Acquisitions expose us to potential risks, including risks associated with the diversion of resources from our existing businesses, difficulties in successfully integrating the acquired businesses, failure to achieve expected growth by the acquired businesses and an inability to generate sufficient revenue to offset the costs and expenses of acquisitions. If the revenue and cost synergies that we expect to achieve from our acquisitions do not materialize, we may have to recognize impairment charges.

        In addition, we may be unable to identify appropriate acquisition or strategic investment targets when it is necessary or desirable to make such acquisition or investment to remain competitive or to expand our business. Even if we identify an appropriate acquisition or investment target, we may not be able to negotiate the terms of the acquisition or investment successfully, finance the proposed transaction or integrate the relevant businesses into our existing business and operations. Furthermore, as we often do not have control over the companies in which we only have minority stake, we cannot ensure that these companies always will comply with the applicable laws and regulations in their business operations. Material non-compliance by our investees may cause substantial harm to our reputation and the value of our investments.

        If any one or more of the aforementioned risks associated with acquisitions or investments materialize, our acquisitions or investments may not be beneficial to us and may have a material adverse effect on our business, financial condition and results of operations.

Failure to control rental costs, obtain leases at desired locations at reasonable prices or failure to comply with the applicable PRC property laws and regulations regarding certain of our leased and owned premises could materially and adversely affect our business.

        We lease a significant number of properties from third parties. As of the date of this prospectus, we entered into 174 leases for our premises with a total gross floor area of approximately 115,127 square meters, which were or will be primarily used by our self-operated learning centers, and owned 18 properties with a total gross floor area of approximately 1,537.1 square meters, which were primarily used as one of our self-operated learning centers. The leased properties were maintained by our landlords. Accordingly, we are not in a position to effectively control the quality, maintenance and management of these buildings. In the event the quality of the buildings deteriorates, or if any or all of our landlords fail to properly maintain and renovate such buildings in a timely manner or at all, our business operations could be materially and adversely affected. In addition, if any of our landlords terminates the existing lease agreements, refuses to renew the lease agreements when such lease agreements expire, or increase the rent to a level that is unacceptable to us, we will be forced to look

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for alternative locations for our self-operated learning centers. We may not be able to find suitable premises for such relocation without incurring significant time and costs, and there is no guarantee that we may be able to find suitable premises for relocation or at all. If we fail to find suitable replacement sites in a timely manner or on terms acceptable to us, our business and results of operations could be materially and adversely affected. Moreover, if our use of the leased premise is challenged by the relevant government authorities for lack of fire inspection, we may be further subject to fines and also be forced to relocate the affected learning centers and incur additional expenses. If any of the above events occurs, our business, results of operations and financial condition could be materially and adversely affected.

        We have not been able to receive from the lessors of some of our leased properties copies of the title certificates or proof of authorization to lease the properties to us. As of the date of this prospectus, we were not aware of any actions, claims or investigations threatened against us or our lessors with respect to the defects in our leasehold interests. However, if any of our leases is terminated as a result of challenges by third parties or government authorities for lack of title certificates or proof of authorization to lease, while we do not expect to be subject to any fines or penalties, we may be forced to relocate the affected learning centers and incur additional expenses relating to such relocation, or we may not be able to find suitable premises for relocation at all.

        Under the applicable PRC laws and regulations, the parties to a lease agreement are required to register and file the executed lease agreement with the relevant government authorities. As of the date of this prospectus, most of the lease agreements for the leased properties that we occupy had not been registered or filed. While the failure to complete the lease registration will not affect the legal effectiveness of the lease agreements according to PRC law, the relevant real estate administrative authorities may require the parties to the lease agreements to complete lease registration within a prescribed period of time and the failure to do so may subject the parties to fines from RMB1,000 to RMB10,000. While we have not been subject to any penalties or disciplinary action related to the failure to register our lease agreements, we cannot assure you that we will not be subjected to penalties or other disciplinary actions for our past and future non-compliance.

        We currently and may in the future occupy premises for which we have paid the purchase price but have not obtained titles. If we are unable to obtain titles to the properties, we may not be able to get a full refund on our purchase price and may have to relocate and incur additional expenses relating to such relocation, or we may not be able to find suitable premises for relocation at all.

        Therefore, the failure to comply with the applicable PRC property laws and regulations regarding certain of our leased and owned premises may cause us to make relocations and be subject to fines and suspension of business, which may materially and adversely affect our business, financial condition and results of operations.

Higher labor costs may adversely affect our business and our profitability.

        Labor costs in China have risen in recent years as a result of social development, and increasing inflation in China. As of March 31, 2019, we employed 5,377 full-time staff. Staff costs constituted a major portion of our total cost of revenues, reaching 60.2%, 62.9%, 63.1%, and 64.2% of our total cost of revenues in 2016, 2017 and 2018, and the three months ended March 31, 2019, respectively. The increase in labor cost may erode our profitability and materially harm our business, financial condition and results of operations. As our businesses have been continuing to expand in recent years, the absolute amounts of our labor costs in the regions where we operate have also been increasing and could continue to increase. If labor costs in these regions continue to increase, our operating costs will increase. We may not be able to pass on these increased costs to our customers by increasing the fees of our courses in light of competitive pressure in the market. In such circumstances, our profit margin may decrease, which could have an adverse effect on our business, financial condition and results of operations.

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We have limited experience in operating some of our newer service offerings.

        We currently offer a comprehensive service portfolio, including our offline general adult English training, junior English training, overseas training services and online English training. We are constantly upgrading and plan to develop new services to expand our business and student base. For example, we have started to offer our offline junior English training in 2018. We have expanded our offerings through internal development and external investments. However, some of our new service offerings have not generated significant or any profit to date, as we have limited experience responding quickly to changes and competing successfully for certain of these new areas. In addition, newer offerings may require more financial and managerial resources than what is available. Furthermore, there is limited operating history on which you can base your evaluation of the business and prospects of these relatively more recent offerings. The operation results of new services may also vary from period to period in response to a variety of factors beyond our control, and we may not be able to achieve our expected profitability and performance of these new service offerings.

Course and service fee refunds or potential refund disputes may negatively affect our cash flow, financial condition, and reputation.

        We have different course and service fee refund policies for our students depending on the time of their enrollment and we are subject to certain conditions and restrictions in the service contract between us and each of our students. For details of our refund policies, see "Business—Pricing and Refund Policies." When calculating gross billings for a specific period, we deduct the total amount of refunds from the total amount of cash received for the sale of course packages for such period.

        In 2016, 2017 and 2018, and the three months ended March 31, 2019, we had made RMB71.7 million, RMB131.2 million, RMB154.1 million (US$23.0 million) and RMB37.8 million (US$5.6 million) of refund payments, respectively. For the same periods, our course withdrawal rate, which is determined as the amount of refunds we issued as a percentage of the total amount of gross billings for the relevant period, was 6.9%, 9.1%, 10.2% and 10.2%, respectively. Our course withdrawal rate increased in 2017 and 2018, mainly due to our implementation of a new refund policy that allowed students to request refunds unconditionally during the first 20 days of enrolling in an offline general adult English training program, and partially because we introduced new curriculums at certain of our learning centers in 2018, which led to an initially adverse student reception. We believe the implementation of the unconditional refund period for the general adult English training business will improve our students' overall experience with our services. Additionally, the number of refund requests and the amount of refunds could be affected by a number of factors, many of which are beyond our control. These factors include, without limitation, student dissatisfaction with our teaching quality and our course and educational content offerings, privacy concerns relating to our online platforms, negative publicity regarding us or online ELT in general, and any change or development in the PRC laws and regulations with respect to course fees charged by online education providers like us. Any refund payments that we may be required to make to our students, as well as the expenses we could incur for processing refunds and resolving refund disputes, could be substantial and could adversely affect our gross billings, net revenue, liquidity and financial condition. A high volume of refund applications and refund disputes may also generate negative publicity that could harm our reputation. We have experienced in the past, and may experience in the future, negative publicity in relation to refund disputes between us and our students, which may significantly harm our brand names and divert our attention from operating our business.

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We offer an installment payment arrangement to our students, which may adversely affect our business, results of operations and operating cash flow if students participating in such scheme decide not to complete the course(s) they have registered and request refund from us, or if such arrangement is found to be in violation of any existing or future laws and regulations in China or otherwise subject to negative publicity.

        In order to provide a more convenient and flexible payment method for students, we have cooperated with accredited third-party financial institutions in China to set up an installment payment arrangement through which students can pay for the courses and/or services we offer in several pre-determined installments during the course of the contract period. Under such arrangement, a third-party financial institution provides an interest-free loan to a student and remits the course/service fee to us on behalf of the borrowing student to complete his/her purchase of the relevant course. The borrowing student is obligated to repay the loan in pre-agreed installments over a period ranging from six months to 24 months to the financial institution. A transaction fee associated with the installment payment arrangement typically ranges from 4.4% to 10.8% of the total amount of such loan, depending on the length of the installment period, which was generally withheld by such financial institution prior to remitting the course/service fee to us. In 2018, approximately 42.2% of our total gross billings have been paid through such installment payment arrangement. There is an inherent uncertainty relating to such arrangement compared to a lump sum upfront payment scheme as students under the installment payment arrangement are more prone to cease to continue to take classes during the contract period that they had initially registered. In 2018, the course withdrawal rate, which is equal to the amount of refunds we issued in a specific period of time as a percentage of the sum of the amount of gross billings and the amount of refunds for such period, of the students who participated in such installment arrangement was approximately 13.2%, and the course withdrawal rate of the students who provided lump sum upfront payments was approximately 7.8%, excluding students of ABC Education Group, which we acquired in June 2018. When we receive refund requests from our students we typically determine the eligibility of and amounts of refund entitled by such students in accordance with our existing refund policies. Once we determine a student to be eligible for refund, we generally provide the entire amount of refund to him/her directly. For details of our refund policies, please see "Business—Pricing and Refund Policies." In the event more students who participate in the installment payment arrangement decide not to complete their registered course(s) for any reason, we may be required to provide large sums of refund to these students, which may materially and adversely impact our business, results of operations and operating cash flow. Thus, our business and results of operations could be materially and adversely affected.

        In addition, the PRC government has tightened the regulation of consumer credit transactions in recent years. For example, the PRC government has prohibited any entity that is not a licensed commercial bank or policy bank in China to provide any loan to students registered in universities in China. The Notice on Regulating and Rectifying "Cash Loan" Business, or Circular 141, also prohibits online lending information intermediaries from facilitating loans with no designated purpose. While we did not provide any loan to our students directly, we cannot assure you that the relevant PRC government authorities will not impose additional restrictions on consumer credit transactions in the future that will render our existing installment payment arrangement illegal. In such case, we may have to cease such arrangement, which could adversely affect our student recruitment efforts, and we may be subject to penalties. In addition, there has been negative publicity about similar arrangement offered by other ELT service providers in China, and we cannot assure you that we will not be subject to similar negative publicity regarding our installment payment arrangement in the future, which may materially and adversely affect our brands, reputation and business.

        In addition, since students who participate in the installment payment arrangement generally enter into separate financing arrangements with certain third-party financial institutions whom we have no control over, we may not be able to ensure that these students will have a pleasant or satisfactory experience dealing with such financial institutions. In the event the students are dissatisfied with any

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aspect of the services provided by such financial institutions, our reputation and business prospects could be adversely affected.

We face risks in relation to the entrusted loan arrangement we utilized in the past.

        We previously had an entrusted loan arrangement in place with certain financial institutions, which we terminated in February 2017, to facilitate installment payments of course fees by our students. Under such arrangement, the loans lent by the financial institutions to the borrowing students were generally funded by us. See "Management Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations."

        According to the Lending General Provision promulgated by the People's Bank of China, or the PBOC, a loan refers to the funds provided by a lender to a borrower which shall be repaid in both principal and interests in accordance with the interest rate and duration as contracted. Enterprises are prohibited from carrying out borrowing and lending or financial activities relating to borrowing and lending in a disguised manner in violation of the relevant regulations. In a case where enterprises engage in borrowing and lending or borrowing and lending in a disguised manner without authorization, the PBOC may impose a fine on the lending party in an amount equal to one to five times of the illegal proceeds generated from the lending activity, and such activity shall be prohibited by the PBOC. According to the Law of Administrative Penalty of the PRC, where an illegal act is not discovered within two years of its occurrence, administrative penalties shall no longer be imposed. We had terminated the entrusted loan arrangement in February 2017 and disposed all related assets as of December 31, 2017. As a result, such activity was deemed to be ceased on December 31, 2017 and all illegal proceeds generated from such activity from the date that was two years prior to the date of this prospectus until December 31, 2017 may be subject to potential fine by the PBOC. As of February 28, 2017, being the last day of the fiscal month that we terminated the entrusted loan arrangement, the outstanding amount of loans lent by the financial institutions that we had funded was approximately RMB35.5 million (US$5.5 million). Although we had terminated the entrusted loan arrangement in February 2017 and disposed all of the related assets as of December 31, 2017 and we have not been fined by the PBOC in connection with such arrangement as of the date of this prospectus, we cannot assure you that the PBOC will not impose a fine on us based on the arrangement we had in place with certain financial institution in the past. In the event the PBOC penalizes us for such past arrangement, while our co-founders have undertaken to indemnify us for any and all penalties and/or fines imposed on us by the PBOC in connection with our entrusted loan arrangement, our business and reputation may be adversely affected.

Our results of operations are subject to seasonal fluctuations.

        The PRC offline ELT industry generally experiences seasonality, reflecting a combination of traditional education industry patterns and new patterns associated with the online platform in particular. Seasonal fluctuations have affected, and are likely to continue to affect, our business. In general, the offline ELT industry experiences lower growth of gross billings in the first quarter of each calender year due to the Chinese New Year holiday, and our industry enjoys higher growth of gross billings in the third quarter during the summer months as some of our students are generally on summer holiday and have more time to take English language training courses. Overall, the historical seasonality of our business has been relatively mild due to our rapid growth. Our financial condition and results of operations for future periods may continue to fluctuate due to seasonality of our business. As a result, the trading price of our ADSs may fluctuate from time to time due to seasonality.

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Failure to protect confidential information of our students and teaching staff against security breaches could damage our reputation and brands and substantially harm our business and results of operations.

        A significant challenge to the offline and online ELT industry is the secure storage of confidential information and its secure transmission over public networks. All purchases of our course packages are made by our students and/or their parents through our learning centers, websites and mobile applications. In addition, online payments for our course packages are settled through third-party online payment services. Maintaining complete security for the storage and transmission of confidential information on our technology platform, such as student names, personal information and billing addresses, is essential to maintaining student confidence.

        We have adopted security policies and measures to protect our proprietary data and student information. However, advances in technology, the expertise of hackers, new discoveries in the field of cryptography or other events or developments could result in a compromise or breach of the technology that we use to protect confidential information. We may not be able to prevent third parties, especially hackers or other individuals or entities engaging in similar activities, from illegally obtaining such confidential or private information we hold as a result of our students' visits to our website and use of our mobile applications. Such individuals or entities obtaining our students' confidential or private information may further engage in various other illegal activities using such information. Any negative publicity on our website's or mobile applications' safety or privacy protection mechanisms and policies, and any claim asserted against us or fine imposed upon us as a result of actual or perceived failures, could have a material and adverse effect on our public image, reputation, financial condition and results of operations.

        Practices regarding the collection, use, storage, transmission and security of personal information by companies operating over the Internet and mobile platforms have recently come under increased public scrutiny. Increased regulation by the PRC government of data privacy on the Internet is likely and we may become subject to new laws and regulations applying to the solicitation, collection, processing or use of personal or consumer information that could affect how we store and process the data of our teaching staff and students. We generally comply with industry standards and are subject to the terms of our own privacy policies. Compliance with any additional laws could be expensive, and may place restrictions on the conduct of our business and the manner in which we interact with our students. Any failure to comply with applicable regulations could also result in regulatory enforcement actions against us.

        Significant capital and other resources may be required to protect against information security breaches or to alleviate problems caused by such breaches or to comply with our privacy policies or privacy-related legal obligations. The resources required may increase over time as the methods used by hackers and others engaged in online criminal activities are increasingly sophisticated and constantly evolving. Any failure or perceived failure by us to prevent information security breaches or to comply with privacy policies or privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other student data, could cause our students to lose trust in us and could expose us to legal claims and liabilities. Any perception by the public that online transactions or the privacy of user information are becoming increasingly unsafe or vulnerable to attacks could inhibit the growth of online education services generally, which may negatively impact our business prospects.

If we fail to develop or adopt new technologies to effectively meet challenges from changing consumer requirements, emerging standards in the industry or mobile operating systems, or if our efforts to invest in the development of new technologies are unsuccessful our business may be materially and adversely affected.

        The ELT industry is characterized by rapid technological changes in the teachers' and students' requirements and preferences, frequent introduction of new courses or services utilizing new technologies and the emergence of new standards and practices, any of which could render our existing

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technologies and systems obsolete. Our success will depend in part on our ability to identify, develop, acquire or license leading technologies useful to our business, and respond to technological advances and emerging industry standards and practices, such as mobile Internet, in a cost-effective and timely way. The development of websites, mobile applications and other proprietary technologies entails significant technical and business risks. We cannot assure you that our existing technologies can always stay competitive or that we will be able to successfully develop or effectively use new technologies, recoup the costs of developing new technologies or adapt our websites, mobile applications, proprietary technologies and systems to meet customer requirements or emerging industry standards. If we are unable to develop technologies successfully or adapt in a cost-effective and timely manner in response to changing technological standards, market conditions or customer requirements, whether for technical, financial or other reasons, our business, prospects, financial condition and results of operations may be materially and adversely affected.

        In addition, purchases using mobile devices by consumers generally, and by our customers specifically, have increased, and we expect this trend to continue. To optimize the mobile shopping experience, we are somewhat dependent on our customers downloading our specific mobile applications for their particular devices as opposed to accessing our websites from an Internet browser on their mobile devices. As new mobile devices and platforms are released, it is difficult to predict the problems we may encounter in developing applications for there alternative devices and platforms, and we may need to devote significant resources to the development, support and maintenance of such applications. In addition, our future growth and results of operations could suffer if we experience difficulties in integrating our mobile applications into mobile devices in the future, if problems arise with our relationships with providers of mobile operating systems or mobile applications download stores, if our applications receive unfavorable treatment compared to competing applications on the download stores, or if we face increased costs to distribute or have customers using our mobile applications. We are further dependent on the interoperability of our websites with popular mobile operating systems that we do not control, such as iOS and Android operating systems, and any changes in search systems that degrade the functionality of our websites or give preferential treatment to competitive products could adversely affect the usage of our websites on mobile devices. In the event that this is more difficult for our customers to access and use our website on their mobile devices, or if our customers choose not to access or to use our websites on their mobile devices or to use mobile products that do not offer access to our websites or mobile applications, our business, financial condition and results of operations may be adversely affected.

Accidents or injuries suffered by our students and other people on our premises may adversely affect our reputation, business operation and financial performance.

        We do not have any insurance for our students or other people at our learning centers. In the event of accidents, injuries or other harm to students or other people on our premises, including those caused by and arising from the actions of our employees at our learning centers and/or our other premises, our facilities may be perceived to be unsafe, which may discourage prospective students from attending our courses and we may face lawsuits. Our students may also hurt themselves or other persons due to psychological pressure. We could also face claims alleging that we were negligent or provided inadequate supervision to our employees and therefore should be held jointly liable for harm caused by then or are otherwise liable for injuries suffered by our students or other people on our premises. A liability claim, even if unsuccessful, against us or any of our employees could adversely affect our reputation, enrollment and revenue, causing us to incur substantial expenses and divert the time and attention of our management.

We may not maintain adequate insurance, which could expose us to significant costs and business disruption.

        The insurance industry in China is still at an early stage of development. In particular, PRC insurance companies offer limited business insurance products to education service providers. We do

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not have key employee insurance, business liability insurance or business disruption insurance to cover our operations, which we believe is consistent with customary industry practice in China. We have determined that the costs of insuring for these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance. In addition, we do not maintain any insurance policies covering risks including loss and theft of and damages to our servers or other technology infrastructure. Any uninsured occurrence of business disruption, litigation or natural disaster, or significant damages to our uninsured equipment or technology infrastructure could result in substantial costs and diversion of resources for us and could adversely affect our financial condition and results of operations.

If we fail to prevent the loss or misappropriation of, or disputes over, our intellectual property rights, our brands and business may suffer.

        We consider our copyrights, trademarks, trade names, Internet domain names, patents and other intellectual property rights invaluable to our ability to continue to develop and enhance our brand recognition. Unauthorized use of our intellectual property rights may damage our reputation and brands. We rely on a combination of copyright, trademark and trade secrets laws to protect our intellectual property rights. Nevertheless, the measures we take to protect our intellectual property rights may not be adequate to prevent unauthorized uses. In addition, preventing infringement on or misuse of intellectual property rights could be difficult, costly and time-consuming in China. The practice of intellectual property rights enforcement action by the PRC regulatory authorities is in its early stage of development and is subject to significant uncertainty. For example, third parties may obtain and use our intellectual property without due authorization, particularly in China. We may also need to resort to litigation and other legal proceedings to enforce our intellectual property rights. Any such action, litigation or other legal proceedings could result in substantial costs and diversion of our management's attention and resources and could disrupt our business. There is no assurance that we will be able to enforce our intellectual property rights effectively or otherwise prevent others from the unauthorized use of our intellectual property. Failure to adequately protect our intellectual property could materially and adversely affect our brand names and reputation, and our business, financial condition and results of operations.

We may encounter infringement disputes from time to time relating to our use of intellectual properties of third parties.

        We cannot assure you that our offline English training courses and marketing materials, online English training courses, products, platforms and applications or other intellectual property developed or used by us do not or will not infringe upon valid copyrights or other intellectual property rights held by third parties. We may encounter disputes from time to time over rights and obligations concerning intellectual property, and we may not prevail in those disputes. We have adopted policies and procedures to prohibit our employees and contractors from infringing upon third-party copyright or intellectual property rights. However, we cannot assure you that our teachers or other personnel will not, against our policies, use third-party copyrighted materials or intellectual property without proper authorization in our classes, on our websites, at any of our locations or via any medium through which we provide our programs. Our users may also post unauthorized third-party content on our websites. We may incur liability for unauthorized duplication or distribution of the materials posted on our websites or used in our classes. We have been involved in claims against us alleging our infringement of third-party intellectual property rights and we may be subject to such claims in the future. Any such intellectual property infringement claim could result in costly litigation, harm our reputation, divert our management attention and resources and subject us to substantial financial harm.

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A certain number of our self-operated learning centers and our owned properties are not in compliance with fire safety regulations.

        Our self-operated learning centers are mainly located on properties leased by us from third parties. We generally make decoration work to the leased properties to meet our business operational needs. According to the relevant PRC laws and regulations, our decoration work falls within the scope of construction work. If the investment amount of such construction work exceeds RMB300,000 and the gross floor area is more than 300 square meters, the records of the fire safety design and the completion inspection must be filed with the competent fire safety authorities after the decoration work obtains the relevant construction permit and passes the completion inspection. See "Regulations—Regulations on Fire Safety" for further details on the fire safety regulations applicable to our business. As of the date of this prospectus, we entered into 151 leases for our premises, all of which have been put into use for our self-operated learning centers, and we have complied with the foregoing fire safety design and filing requirements with respect to 140 of these premises. As of the date of this prospectus, 11 leased properties comprised of 10 of our self-operated learning centers (including one learning center under the "ABC" brand) currently in use had not completed the filing of fire protection design and completion inspection record. Additionally, we owned premises that were used as space for one of our self-operated learning centers with a total gross floor area of approximately 1,289.98 square meters, and we have not completed the filing of fire protection design and completion inspection record for such properties as of the date of this prospectus. These 11 self-operated learning centers contributed to approximately 6.4% to our gross billings for the three months ended March 31, 2019.

        In case of failure to complete the foregoing procedures, the competent fire safety authorities in the PRC can order rectifications within a specified period of time, impose a fine of less than RMB5,000 per property, and order the stoppage of use. We have been fined for such violations in the past for an immaterial amount, and we cannot assure you that we will not be fined in the future for past and future violations. In the case of failure to rectify, such authorities can order stoppage of construction and use and suspension of business, and impose a fine of more than RMB30,000 and less than RMB300,000. If we cannot complete the filing of fire protection design and completion inspection according to the relevant requirements, we may be subject to a fine or may be ordered to make rectification within a specified period of time or suspend our operation on the affected properties. In addition, according to Circular 10, if we cannot meet the requirements of the fire safety standards, the relevant training qualifications could be revoked by the government authorities. If complying with fire safety regulations would require us to terminate or break our existing leases, we may be liable for any associated termination or breakage costs in addition to the costs of relocation, renovation and decoration. It may also disrupt our scheduled courses and force us to postpone or cancel some courses and refund the related course fees, all of which could materially and adversely affect our business, financial condition and results of operations.

Failure to make adequate contributions to various employee benefits plans as required by PRC regulations may subject us to penalties.

        Pursuant to the PRC laws and regulations, we are required to participate in various social insurance benefit plans for our employees, whether PRC nationals or foreign citizens, including pension insurance, unemployment insurance, medical insurance, work-related injury insurance and maternity insurance. We are also required to participate in housing provident fund plan for our PRC national employees. We are required to contribute to the plans in amounts equal to certain percentages of the salaries, including bonuses and allowances, of our employees up to a maximum amount specified by the local government from time to time at locations where we operate our business. The requirement of employee benefit plans has not been implemented consistently by the local governments in China given the different levels of economic development in various locations. In some locations where we operate, consistent with local practices, we did not strictly follow the laws and regulations relating to

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participating in various social insurance benefit plans for our PRC national employees, including housing provident fund. We also did not make full contribution of our foreign employees' social insurance, which was mainly due to an administrative oversight and unfamiliarity with the relevant laws and regulations of our staff in charge. While we have not faced any penalty or disciplinary action in the past, our failure in making contributions to various employee benefit plans and in complying with the applicable PRC labor-related laws may subject us to late payment penalties. We may be required to make up the contributions for these plans as well as to pay late fees and fines. If we are subject to late fees or fines in relation to the underpaid employee benefits, our financial condition and results of operations may be adversely affected.

        We cannot assure you that our employees will not complain to the relevant authorities by reporting our failure to make contributions to the social insurance plans. Moreover, we cannot assure you that the relevant local government authorities will not require us to pay the outstanding amount within a prescribed time or impose penalties or overdue fines on us, which may in turn adversely affect our financial condition and results of operations.

Certain of our teachers do not possess teaching qualifications, which may be subject to penalty under the relevant PRC laws and regulations. Our failure to comply with these requirements may result in material and adverse effect on our business, results of operations and prospects.

        Under the relevant PRC laws and regulations, teachers of all types of schools and other education institutions are required to obtain teacher qualification certificates or other relevant professional skill qualifications, although the definition or scope of the relevant professional skill qualifications is not explicitly stated in the relevant PRC laws and regulations. If teachers are employed in violation of such regulations, the examination and approval authorities or other relevant government departments will order the schools and other education institutions to make corrections within a specified period of time and give a warning in accordance with the applicable laws and regulations. If there is income generated from teachers without teaching qualifications, the illegal income will be confiscated. In the event the circumstances are deemed serious by the relevant government authorities, student enrollment will be ordered to stop and the school license will be revoked. As of the date of this prospectus, a substantial majority of our teachers did not possess any teaching qualifications or relevant professional skill qualifications. As of the date of this prospectus, we have not received any notice or warning or been subject to any penalties or disciplinary action from government authorities due to the lack of teaching licenses of our teachers. As advised by our PRC counsel, the current PRC laws and regulations remain unclear as to whether our teachers are required to obtain and hold teaching qualifications. However, we cannot assure you that the relevant PRC government authorities will not take a contrary view and impose penalties, fines or other disciplinary action for our past or future non-compliance.

We cannot assure you that we will not be subject to liability claims for any inaccurate or inappropriate content in our training programs, which could cause us to incur legal costs and damage our reputation.

        We develop the content for our English training programs ourselves or through partnerships with third parties. We cannot assure you that there will be no inaccurate or inappropriate materials included in our training programs or the materials we obtain from our third-party partners. In addition, our mock examination questions designed internally based on our understanding of the relevant examination requirements may be investigated by the regulatory authorities. Therefore, we may face civil, administrative or criminal liability if an individual or corporate, governmental or other entity believes that the content of any of our training programs violets any laws, regulations or governmental policies or infringes upon its legal rights. Even if such claim were not successful, defending it may cause us to incur substantial costs including the time and attention of our management. Moreover, any accusation of an accurate so inappropriate conduct could lift to significant negative publicity, which could harm our reputation and future business prospects.

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We may be involved in legal and other disputes and claims arising out of our operations from time to time.

        We may, from time to time, be involved in disputes with and subject to claims by parents and students, teachers and other school personnel, and other parties involved in our business. We cannot assure you that when legal actions arise in the ordinary course of our business, any of the legal actions will be resolved in our favor. We are subject to uncertainties as to the outcome of such legal proceedings and our business operations may be disrupted. Legal or other proceedings involving us may, among others, result in us incurring significant costs, divert management's attention and other resources, negatively affect our business operations, cause negative publicity against us or damage our reputation, regardless whether we are successful in defending such claims or proceedings. Our business, financial condition and results of operations may be materially and adversely affected as a result.

We may be adversely affected by any negative publicity concerning us, our business, founders, shareholders, affiliates, directors, senior management and employees, as well as our third-party commercial partners and the industry in which we operate, regardless of its accuracy, that could harm our reputation and business.

        Negative publicity about us, our business, founders, shareholders, affiliates, directors, senior management, teachers and other employees, as well as our third-party commercial partners and the industry in which we operate, can harm our operations. We have been exposed to negative publicity concerning, among other things, refund disputes, administrative penalties, alleged improper or misleading statements made in our sales and marketing activities in the past and actions of our founders and directors and members of our senior management. Negative publicity concerning these parties could be related to a wide variety of matters, including, but are not limited to:

    misconduct, alleged or otherwise, or other improper activities committed by our founders, students or our directors, shareholders, senior management, affiliates, teaching staff and other employees, including misrepresentation made by our employees to prospective students during sales and marketing activities;

    false or malicious allegations or rumors about us or our founders, directors, shareholders, senior management, affiliates, teaching staff and other employees, as well as our students;

    complaints by our students about our education services and sales and marketing activities;

    course fee refund disputes between us and our students or administrative penalties;

    security breaches of our student's or employee's confidential information;

    employment-related claims relating to alleged employment discrimination, wage and hour violations; and

    governmental and regulatory investigations or penalties resulting from our failure to comply with applicable laws and regulations.

        We may also be exposed the risk of the misconduct of our third party commercial partners that any negative publicity and claims asserted against our third party commercial partners or fines imposed upon them as a result of actual or perceived failures, could have a material and adverse effect on our public image, reputation, financial condition and results of operations.

        In addition to traditional media, there has been an increasing use of social media and similar platforms in China, including instant messaging applications, such as WeChat, social media websites and other forms of Internet-based communications that provide individuals with access to a broad audience of consumers and other interested persons. The availability of information on instant messaging applications and social media platforms is virtually immediate as is its impact without affording us an opportunity for redress or correction. The opportunity for dissemination of information, including inaccurate information, is seemingly limitless and readily available. Information concerning our

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company, shareholders, directors, officers and employees may be posted on such platforms at any time. The risks associated with any such negative publicity or incorrect information cannot be completely eliminated or mitigated and may materially harm our reputation, business, financial condition and results of operations.

We are subject to regulatory inspections, examinations, inquiries and audits, and future sanctions, fines and other administrative penalties resulting from such inspections and audits could materially and adversely affect our business, financial condition and results of operations.

        We are subject to certain regulation and supervision from the PRC government authorities. These relevant regulatory authorities have broad powers to adopt regulations and other requirements affecting or restricting our operations, including tax policies. Moreover, these relevant regulatory authorities possess significant powers to enforce applicable regulatory requirements in the event of our non-compliance, including the imposition of fines, sanctions or the revocation of licenses or permits to operate our business. We have in the past been subject to tax penalties concerning certain of our subsidiaries, and we cannot assure you that we will not face similar or other administrative fines or penalties concerning our operations or our subsidiaries.

Preferential tax treatment currently available to us could be discontinued or reduced.

        In accordance with the Circular on Income Tax Policies for Further Encouraging the Development of Software Industry and Integrated Circuit Industry effective on January 1, 2011, Shenzhen Meten was recognized as a software enterprise, which means it is entitled to be exempt for the first and second year and shall be levied thereon at half of the statutory rate of 25% for the third through fifth year thereafter from January 1, 2015 to December 31, 2019. However, we cannot assure you that we will be able to continue to enjoy any further preferential tax treatment when the certificates expire, or that we will be able to pass the required assessment to qualify for preferential tax treatment. In 2017, Shenzhen Meten did not qualify as a software enterprise, which resulted in the loss of the preferential tax treatment for such year. If there is any discontinuation or reduction of the preferential tax treatment we enjoy, our business, results of operations and financial condition could be materially and adversely affected.

Our co-founders have significant influence over our Company and their interests may be not aligned with the interest of our other shareholders.

        Mr. Jishuang Zhao, Mr. Siguang Peng and Mr. Yupeng Guo are our co-founders who directly are entitled to exercise approximately 93.1524% of voting power at the general meetings of our Company in the aggregate as of the date of this prospectus. Upon completion of this offering (assuming no shareholders exercise their rights to purchase additional shares of ADSs), Mr. Jishuang Zhao, Mr. Siguang Peng and Mr. Yupeng Guo will be directly entitled to exercise          % voting power at the general meetings of our Company in the aggregate. Although the co-founders are not entitled to unilaterally amend our corporate governance and organizational documents, Mr. Jishuang Zhao, Mr. Siguang Peng and Mr. Yupeng Guo will, through their voting power at the shareholders' meetings and their delegates on the board of directors, have significant influence over our business and affairs, including the decisions in respect of mergers or other business combinations, acquisitions or disposition of assets, issuance of additional shares or other equity securities, timing and amount of dividend payments, and our management. Mr. Jishuang Zhao, Mr. Siguang Peng and Mr. Yupeng Guo may not act in the best interests of our minority shareholders. In addition, without the consent of Mr. Jishuang Zhao, Mr. Siguang Peng and Mr. Yupeng Guo, we could be prevented from entering transactions that could be beneficial to us. The concentration of ownership may also discourage, delay or prevent a change in control of our Company, which could deprive our shareholders of an opportunity to receive a premium for the shares as part of a sale of our Company and may significantly reduce the price of our ADSs. In addition, while our Company may not currently be considered a "controlled company"

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pursuant to NYSE rules, the concentration of voting power among our co-founders could result in our Company becoming a "controlled company" at any time in the future. If we become a "controlled company," we are permitted to elect to rely on certain exemptions from corporate governance rules. In such case, you may not have the same protection afforded to shareholders of companies that are subject to those corporate governance requirements.

We have granted options, and we may continue to grant options under our share incentive plans, which may result in increased share-based compensation expenses.

        In January 2013, Shenzhen Meten adopted the 2013 Plan and we adopted the 2018 Plan in December 2018, which replaced the 2013 Plan, and rolled over the awards granted under the 2013 Plan with the same amount and terms. In April 2019, we adopted the 2019 Equity Incentive Plan, or the 2019 Plan, which will become effective upon completion of this offering. Upon the effectiveness of the 2019 Plan, we will no longer grant any awards under the 2018 Plan. Outstanding awards granted under the 2018 Plan will remain effective and be subject to the terms and conditions of the 2018 Plan. The maximum aggregate number of ordinary shares that may be issued pursuant to all awards under the 2013 Plan and 2018 Plan is 20,085,242. As of the date of this prospectus, options to purchase 13,215,306 ordinary shares have been granted and outstanding under the 2018 Plan. The maximum number of ordinary shares that may be issued under the 2019 Plan is 6,869,936 which represents            shares that have been reserved but not alloted under the 2018 Plan. The number of shares available for issuance under the 2019 Plan shall automatically increase on the first trading day in January of each calendar year during the ten-year term of the 2019 Plan commencing from the calendar year beginning January 1, 2020, by an amount equal to the lesser of (i) 1% of the total number of shares issued and outstanding measured as of the last trading day of the immediately preceding calendar year; and (ii) such number of shares as may be determined by our board of directors, but in no event shall any such increase exceed 4,000,000 shares. The options granted under the 2018 Plan are dependent on meeting the conditions of the 2018 Plan's exercisability event which includes the completion of the offerings of ADSs or change of control. Share-based compensation costs are measured on the grant date. The compensation expense in connection with the shares awarded to employees is recognized using the straight-line method over the requisite service period.

        As of March 31, 2019, the unrecognized compensation expenses related to the non-vested share options amounted to approximately RMB20,844, which will be recognized over the remaining requisite period. Expenses associated with share-based compensation awards granted under our share incentive plans may materially reduce our future net income. However, if we limit the size of grants under our share incentive plans to minimize share-based compensation expenses, we may not be able to attract or retain key personnel.

If we fail to implement and maintain an effective system of internal controls, we may be unable to accurately or timely report our results of operations or prevent fraud, and investor confidence and the market price of our ADSs may be materially and adversely affected.

        Prior to this offering, we were a private company with limited accounting personnel and other resources with which to address our internal controls and procedures. Our management has not completed an assessment of the effectiveness of our internal control over financial reporting, and our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. In the course of auditing our consolidated financial statements included elsewhere in this prospectus, we and our independent registered public accounting firm identified two material weaknesses and other control deficiencies in our internal control over financial reporting.

        The material weaknesses identified relate to (i) our lack of sufficient number of finance and accounting personnel or sufficiently trained finance and accounting personnel, as well as comprehensive accounting policies in accordance with U.S. GAAP financial reporting; and (ii) our internal control

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policy does not have a proper approval mechanism, and our lack of internal controls on performing periodic reviews of user accounts and their level of authorization in the financial systems. We plan to implement a number of measures to remedy these material weaknesses and the other control deficiencies. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Internal Control Over Financial Reporting." We have also adopted measures to improve our internal control over financial reporting. We cannot assure you, however, that these measures may fully address these deficiencies in our internal control over financial reporting or that we may conclude that they have been fully remedied.

        Upon the completion of this offering, we will become a public company in the United States subject to the Sarbanes-Oxley Act. Section 404 of the Sarbanes-Oxley Act, or Section 404, will require that we include a report of management on our internal control over financial reporting in our annual report on Form 20-F beginning with our annual report for the year ending December 31, 2020. In addition, once we cease to be an "emerging growth company" as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we become a public company, our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.

        During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. Generally speaking, if we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of our ADSs. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions.

The audit report included in this prospectus is prepared by auditors who are not fully inspected by the Public Company Accounting Oversight Board, and as such, you are deprived of the benefits of such inspection.

        Our independent registered public accounting firm issues the audit report included in this prospectus filed with the Securities and Exchange Commission, or the SEC. As auditors of companies that are traded publicly in the United States and a firm registered with the PCAOB, our independent registered public accounting firm is required by the laws of the United States to undergo regular inspections by the PCAOB to assess its compliance with the laws of the United States and professional standards. Because our auditors are located in China, a jurisdiction where PCAOB is currently unable to conduct full inspections without the approval of the Chinese authorities, our auditors are not currently inspected by the PCAOB.

        Inspections of other firms that the PCAOB has conducted outside China have identified deficiencies in those firms' audit procedures and quality control procedures, which may be addressed as

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part of the inspection process to improve future audit quality. This lack of full PCAOB inspections in China prevents the PCAOB from regularly evaluating our auditor's audits and its quality control procedures. As a result, investors may be deprived of the benefits of PCAOB inspections.

        The inability of the PCAOB to conduct full inspections of auditors in China makes it more difficult to evaluate the effectiveness of our auditor's audit procedures or quality control procedures as compared to auditors outside of China that are subject to PCAOB inspections. Investors may lose confidence in our reported financial information and procedures and the quality of our financial statements.

If additional remedial measures are imposed on the Big Four PRC-based accounting firms, including our independent registered public accounting firm, in administrative proceedings brought by the SEC alleging the firms' failure to meet specific criteria set by the SEC, we could be unable to timely file future financial statements in compliance with the requirements of the Exchange Act.

        Beginning in 2011, the Chinese affiliates of the "big four" accounting firms (including our independent registered public accounting firm) were affected by a conflict between the U.S. and Chinese law. Specifically, for certain U.S.-listed companies operating and audited in China, the SEC and PCAOB sought to obtain access to the audit work papers and related documents of the Chinese affiliates of the "big four" accounting firms. The accounting firms were, however, advised and directed that, under Chinese law, they could not respond directly to the requests of the SEC and PCAOB and that such requests, and similar requests by foreign regulators for access to such papers in China, had to be channeled through the China Securities Regulatory Commission, or CSRC.

        In late 2012, this impasse led the SEC commencing administrative proceedings under Rule 102(e) of its Rules of Practice and also under the Sarbanes-Oxley Act against the Chinese accounting firms, including our independent registered public accounting firm. In January 2014, the administrative law judge made an initial decision to impose penalties on the firms, including a temporary suspension of their right to practice before the SEC. The accounting firms filed a petition for review of the initial decision. On February 6, 2015, before a review by the commissioners of the SEC took place, the firms reached a settlement with the SEC. Under the settlement, the SEC accepts that future requests by the SEC for the production of documents will normally be made to the CSRC. The firms will receive matching Section 106 requests, and are required to follow a detailed set of procedures with respect to such requests, which in substance require them to facilitate production via the CSRC. If they fail to meet specified criteria, the SEC has authority to impose a variety of additional remedial measures on the firms depending on the nature of the failure. Remedies for any future noncompliance could include, as appropriate, an automatic six-month bar on a single firm's performance of certain audit work, commencement of a new proceeding against a firm, or in extreme cases the resumption of the current proceeding against all four firms.

        In the event that the SEC restarts the administrative proceedings, depending upon the final outcome, listed companies in the U.S. with major PRC operations may find it difficult or impossible to retain auditors in respect of their operations in China, which could result in their financial statements being determined to not be in compliance with the requirements of the Exchange Act, including possible delisting. Moreover, any negative news about any such future proceedings against the firms may cause investor uncertainty regarding China-based, U.S.-listed companies, including our Company, and the market price of our ADSs may be adversely affected.

        If our independent registered public accounting firm was denied, even temporarily, the ability to practice before the SEC and we were unable to timely find another registered public accounting firm to audit and issue an opinion on our financial statements, our financial statements could be determined not to be in compliance with the requirements of the Exchange Act. Such a determination could

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ultimately lead to the delisting of our ADSs from the NYSE or deregistration from the SEC, or both, which would substantially reduce or effectively terminate the trading of our shares in the United States.

Any natural catastrophes, severe weather conditions, health epidemics and other extraordinary events could severely disrupt our business operations.

        The occurrence of natural catastrophes such as earthquakes, floods, typhoons, tsunamis or any acts of terrorism may result in significant property damages as well as loss of revenue due to interactions in our business operations. As we store books and course materials at our premises, there is a risk that these products and our promises may be damaged or destroyed by fire and other natural calamities. Any disruption of electricity supply or any outbreaks of fire or similar calamities at our premises may result in the breakdown of our facilities and the disruption to our business. Health epidemics such as outbreaks of avian influenza, severe acute respiratory syndrome (SARS) or the influenza A (H1N1), and severe weather conditions such as snowstorm and hazardous air pollution, as well as the government measures adopted in response to these events, could require the temporary closure of our learning centers. In addition, any occurrences of such natural catastrophes, severe weather conditions, health epidemics and other extraordinary events may result in the postponement or rescheduling of examinations for which we provide courses, which may in turn have an adverse impact on our revenue and performance.

        Furthermore, our ability to conduct live-streaming lectures and provide other online education services depends on the continuing operation of our technology systems, which is vulnerable to damage or interruption from natural catastrophes and other extraordinary events. In addition, any fire or other calamity at the facilities of our third-party service providers that host our servers could severely disrupt our ability to deliver our online courses. Our disaster recovery planning cannot account for every conceivable possibility. Any damage or failure of our technology system could result in interruptions in our services, and our brands could be damaged if students believe our systems are unreliable. Such disruptions could severely interfere with our business operation and adversely affect our results of operations.

Risks Related to Our Corporate Structure

If the PRC government finds that the contractual arrangements that establish the structure for operating our business do not comply with applicable PRC laws and regulations, we could be subject to severe penalties or be forced to relinquish our interests in those operations.

        Currently, the PRC laws and regulations do not explicitly impose restrictions on foreign investment in education services in China. However, some local government authorities in the PRC have adopted different approaches in granting licenses and permits (particularly, imposing more stringent restrictions on foreign-invested entities) for entities providing education services. In some areas, local government authorities do not allow foreign-invested entities to establish private schools to engage in the ELT services, other than in the forms of Sino-foreign cooperative schools or international schools. Under current PRC laws, the foreign contributors of Sino-foreign cooperative schools shall be foreign education institutions such as universities or colleges instead of foreign companies. As a foreign company, we are not qualified to run Sino-foreign cooperative schools in China. Due to these restrictions, we operate our offline and online ELT business in China primarily through our affiliated entities. We entered into a series of contractual arrangements with Shenzhen Meten and Shenzhen Likeshuo and their shareholders, respectively. Our affiliated entities are the entities that hold certain licenses and permits relating to the offline and online ELT business in China. We have been and expect to continue to be dependent on our affiliated entities to operate our business. See "Corporate History and Structure" for more information.

        As advised by our PRC counsel, there are substantial uncertainties regarding the interpretation and application of the PRC laws and regulations, and we cannot assure you that the PRC government

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would agree that our corporate structure or any of the above-mentioned contractual arrangements comply with the current or future PRC laws or regulations. The PRC laws and regulations governing the validity of these contractual arrangements are uncertain and the relevant government authorities may have broad discretion in interpreting these laws and regulations. If our ownership structure and contractual arrangements are found to be in violation of any existing or future PRC laws or regulations, or we fail to obtain any of the required licenses and permits, the relevant PRC regulatory authorities including the MOE, which regulates the education industry in the PRC, the Ministry of Commerce, or the MOFCOM, which regulate the foreign investments in China, the MCA, which regulates the registration of non-profit private schools in the PRC after the Amended Private Education Promotion Law became effective, and the SAIC, which regulates the registration and operation of for-profit private schools in the PRC after the Amended Private Education Promotion Law became effective, would have broad discretion in dealing with such violations, including:

    revoking the business licenses and operating permits held by Zhuhai Meten and Zhuhai Likeshuo and their respective subsidiaries, or our other PRC subsidiaries, and/or our affiliated entities;

    discontinuing or restricting the operations of any related-party transactions among our PRC subsidiaries and our affiliated entities;

    limiting our business expansion in China by way of entering into contractual arrangements;

    confiscating the income of our affiliated entities;

    imposing fines, penalties or other requirements with which we, our PRC subsidiaries, or affiliated entities may not be able to comply;

    requiring us to restructure the relevant ownership structure or operations, terminate the contractual arrangements with our VIEs or deregister the pledges on the equity interest in our VIEs, which in turn would affect our ability to consolidate, derive economic interest from or exert effective control over our VIEs;

    restricting or prohibiting our use of the proceeds of this offering to finance our business and operations in China; or

    restricting the use of financing sources by us or our affiliated entities, or otherwise restricting our or their ability to conduct business.

        As of the date of this prospectus, similar ownership structure and contractual arrangements have been used by many China-based companies listed overseas, including in the United States. However, we cannot assure you that penalties will not be imposed on any other companies or us in the future. If any of the above fines or punishments is imposed on us, our business, financial condition and results of operations could be materially and adversely affected. If any of these penalties results in our inability to direct the activities of our affiliated entities or results in our failure to receive the economic benefits from our affiliated entities, we may not be able to consolidate our affiliated entities in our financial statements in accordance with U.S. GAAP. However, we do not believe that such actions would result in the liquidation or dissolution of our Company, our wholly-owned subsidiaries in the PRC.

Substantial uncertainties exist with respect to the interpretation and implementation of any new PRC laws, rules and regulations relating to foreign investment and how it may impact the viability of our current corporate structure, corporate governance and business operations.

        The draft version of the Foreign Investment Law has gone through two rounds of deliberations on January 29, 2019 and March 8, 2019, respectively. On March 15, 2019, the finalized Foreign Investment Law, or the Foreign Investment Law, has been formally adopted and will become effective on January 1, 2020. The Foreign Investment Law will replace the Law on Sino-Foreign Equity Joint Ventures, the Law on Sino-Foreign Contractual Joint Ventures and the Law on Foreign-Capital Enterprises to become the legal foundation for foreign investment in the PRC.

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        The Foreign Investment Law stipulates four forms of foreign investment, but does not explicitly stipulate the contractual arrangements, such as our contractual arrangement described in "Corporate History and Structure," as a form of foreign investment.

        Since the contractual arrangements are not specified as foreign investments under the Foreign Investment Law, if other laws, administrative regulations and provisions of the State Council do not incorporate contractual arrangements as a form of foreign investment, the contractual arrangements that enable us to control and consolidate our VIEs as a whole and each of the agreements comprising the contractual arrangements that enable us to control and consolidate our VIEs will not be materially affected.

        Notwithstanding the above, the Foreign Investment Law stipulates that foreign investment includes "foreign investors" investing in China through any other methods under the laws, administrative regulations or provisions prescribed by the State Council. There are possibilities that future laws, administrative regulations or provisions prescribed by the State Council may regard contractual arrangements as a form of foreign investment, at which time it will be uncertain whether the contractual arrangements will be deemed to be in violation of the foreign investment access requirements and how the above-mentioned contractual arrangements will be handled. Therefore, there is no guarantee that the contractual arrangements and the business of our affiliated entities will not be materially and adversely affected in the future due to changes in the PRC laws and regulations. Furthermore, if future laws, administrative regulations or provisions prescribed by the State Council mandate further actions to be completed by companies with existing contractual arrangements, we may face substantial uncertainties as to the timely completion of such actions. In the extreme case scenario, we may be required to unwind the contractual arrangements and/or dispose of our VIEs and affiliated, which could have a material and adverse effect on our business, financial conditions and results of operations.

We rely on contractual arrangements with our VIEs and their shareholders for our operations in China, which may not be as effective in providing operational control as direct ownership.

        We have relied and expect to continue to rely on the contractual arrangements with our ELT businesses in China. For a description of these contractual arrangements, see "Corporate History and Structure—Contractual Arrangements with Our VIEs and Their Respective Shareholders." However, these contractual arrangements may not be as effective as direct equity ownership in providing us with control over our affiliated entities. Any failure by our VIEs and their shareholders to perform their obligations under the contractual arrangements would have a material adverse effect on the financial position and performance of our Company. For example, the contractual arrangements are governed by the PRC law and provide for the resolution of disputes through arbitration in the PRC. Accordingly, these contracts would be interpreted in accordance with the PRC law and any disputes would be resolved in accordance with arbitral procedures as contractually stipulated. The commercial arbitration system in the PRC is not as developed as in some other jurisdictions, such as the United States.

        As a result, uncertainties in the commercial arbitration system or legal system in the PRC could limit our ability to enforce these contractual arrangements. In addition, if the legal structure and the contractual arrangements were found to violate any existing or future PRC laws and regulations, we may be subject to fines or other legal or administrative sanctions.

        If any government action causes us to lose our right to direct the activities of our affiliated entities or lose our right to receive substantially all the economic benefits and residual returns from our affiliated entities and we are not able to restructure our ownership structure and operations in a satisfactory manner, we would no longer be able to consolidate the financial results of our affiliated entities.

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Our VIEs or their shareholders may fail to perform their obligations under the contractual arrangements.

        If Shenzhen Meten, Shenzhen Likeshuo or any of their respective shareholders fails to perform their obligations under the contractual arrangements, we may have to incur substantial costs and resources to enforce our rights under the contracts, and rely on legal remedies under the PRC law, including seeking specific performance or injunctive relief and claiming damages, which may not be effective. For example, if the shareholders of Shenzhen Meten or Shenzhen Likeshuo were to refuse to transfer their equity interest in Shenzhen Meten or Shenzhen Likeshuo to us or our designee when we exercise the call option pursuant to these contractual arrangements, or if they were otherwise to act in bad faith toward us, then we may have to take legal actions to compel them to perform their contractual obligations.

        All the material agreements under our contractual arrangements are governed by the PRC law and provide for the resolution of disputes under the agreements through arbitration in the Shenzhen Court of International Arbitration. Accordingly, these contracts would be interpreted in accordance with the PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal system in the PRC is not as developed as some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. Under the PRC law, rulings by arbitrators are final, parties cannot appeal the arbitration results in courts, and the prevailing parties may only enforce the arbitration awards in the PRC courts through arbitration award recognition proceedings, which would incur additional expenses and delay. In the event that we are unable to enforce these contractual arrangements, we may not be able to exert effective control over our affiliated entities, and our ability to conduct our business may be negatively affected.

The shareholders of our VIEs may have actual or potential conflicts of interest with us and not act in the best interests of our Company.

        Our control over affiliated entities is based upon the contractual arrangements with our affiliated entities, the VIEs and their shareholders and the directors of our affiliated entities. The shareholders of the VIEs may potentially have conflicts of interest with us and breach their contracts or undertaking with if it would further their own interest or if they otherwise act in bad faith. These shareholders may refuse to sign or breach, or cause our VIEs to breach or refuse to renew the existing contractual arrangements, which would have a material and adverse effect on our ability to effectively control our affiliated entities and receive economic benefits from them. For example, these shareholders may be able to cause our agreements with our VIEs to be performed in a manner adverse to us by, among other things, failing to remit payments due under the contractual arrangements to us on a timely basis. that when conflicts of interest arise any or all of these shareholders will act in the best interests of our Company or such conflicts will be resolved in our favor. Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and our Company. If we cannot resolve any conflict of interest or dispute between us and these shareholders, we would have to rely on legal proceedings, which could result in disruption of our business and subject us to substantial uncertainty as to the outcome of any such legal proceedings. If we are unable to resolve such conflicts, including where the shareholders of our VIEs breached their contracts or undertakings with us and as a result or otherwise subject us to claims from third parties, our business, financial condition and operations could be materially and adversely affected.

The contractual arrangements may be subject to the scrutiny of the PRC tax authorities and additional tax may be imposed, which may materially and adversely affect our results of operation and value of your investment.

        Under the PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities. We could face material and adverse tax

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consequences if the PRC tax authorities determine that the Exclusive Management Cooperation Agreement we have with our affiliated entities does not represent an arm's length price and adjust any of those entities' income in the form of a transfer pricing adjustment. A transfer pricing adjustment could increase our tax liabilities. In addition, the PRC tax authorities may have reason to believe that our subsidiaries or our affiliated entities are dodging their tax obligations, and we may not be able to rectify such incident within the limited timeline required by the PRC tax authorities. As a result, the PRC tax authorities may impose late payment fees and other penalties on us for underpaid taxes, which could materially and adversely affect our business, financial condition and results of operations.

We rely on dividend and other payments from Zhuhai Meten and Zhuhai Likeshuo to pay dividends and other cash distributions to our shareholders.

        Our Company is a holding company and our ability to pay dividends and other cash distributions to our shareholders, service any debt we may incur and meet our other cash requirements depends significantly on our ability to receive dividends and other distributions from Zhuhai Meten and Zhuhai Likeshuo. The income of Zhuhai Meten and Zhuhai Likeshuo in turn depends on the course fees paid by our Shenzhen Meten and Shenzhen Likeshuo. The number of dividends paid to our Company by Zhuhai Meten and Zhuhai Likeshuo depend solely on the services fees paid to Zhuhai Meten and Zhuhai Likeshuo from our affiliated entities. However, there are restrictions under PRC laws for the payment of dividends to us by Zhuhai Meten and Zhuhai Likeshuo. For example, under PRC laws and regulations, Zhuhai Meten and Zhuhai Likeshuo shall make up its losses of previous years when conducting outward remittance. Zhuhai Meten and Zhuhai Likeshuo is required to set aside at least 10% of its after-tax profits based on PRC accounting standards each year to fund a statutory reserve until the accumulated amount of such reserve has exceeded 50% of its registered capital and may only be distributed after-tax dividends after deduction of statutory reserve and other expenses as required by the regulations. These reserves are not distributable as cash dividends. Furthermore, the PRC tax authorities may require Zhuhai Meten and Zhuhai Likeshuo to adjust their taxable income under the contractual arrangements they currently have in place with Shenzhen Meten and Shenzhen Likeshuo in a manner that would materially and adversely affect their ability to pay dividends and other distributions to us. Any limitation on the ability of Shenzhen Meten and Shenzhen Likeshuo to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

If any of our affiliated entities becomes subject to winding up or liquidation proceedings, we may lose the ability to enjoy certain important assets, which could negatively impact our business and materially and adversely affect our ability to generate revenue and market price of our ADSs.

        We currently conduct our operations in China through contractual arrangements. As part of these arrangements, substantially all of our education-related assets, permits and licenses that are important to the operation of our business are held by our affiliated entities. If any of these affiliated entities is wound up, and all or part of their assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations. If any of our affiliated entities undergoes a voluntary or involuntary liquidation proceeding, its equity owner or unrelated third-party creditors may claim rights relating to some or all of these assets, which would hinder our ability to operate our business and could materially and adversely affect our business, our ability to generate revenue and the market price of our ADSs. As a result, we may not be able to exercise our rights in a timely manner and our business, financial condition and operations may be materially and adversely affected.

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The custodians or authorized users of our controlling non-tangible assets, including chops and seals, may fail to fulfill their responsibilities, or misappropriate or misuse these assets.

        Under the PRC law, legal documents for corporate transactions, including agreements and contracts that our business relies on, are executed using the chop or seal of the signing entity or with the signature of a legal representative whose designation is registered and filed with the relevant PRC industry and commerce authorities.

        In order to maintain the physical security of our chops, we generally have them stored in secured locations accessible only to certain authorized employees. Although we monitor such authorized employees, the procedures may not be sufficient to prevent all instances of abuse or negligence. There is a risk that our employees could abuse their authority, for example, by entering into a contract not approved by us or by seeking to gain control of our subsidiaries, our VIEs or any of their subsidiaries. If any employee obtains, misuses or misappropriates our chops and seals or other controlling intangible assets for whatever reason, we could experience disruption to our normal business operations. We may have to take corporate or legal action, which could involve significant time and resources to resolve and divert management from our operations.

The PRC regulation of loans and direct investments in PRC subsidiaries by offshore holding companies and governmental control of currency conversion may delay us from using the proceeds of this offering to make loan or additional capital contributions to our PRC subsidiaries, our affiliated entities, which could harm our liquidity and our ability to fund and expand our business.

        In utilizing the proceeds of this offering in the manner described in "Use of Proceeds," we may (i) make loans to our PRC subsidiaries; (ii) make additional capital contributions to our PRC subsidiaries; (iii) establish new PRC subsidiaries and make capital contributions to them; and (iv) acquire offshore entities with business operations in the PRC in an offshore transaction. However, most of these uses are subject to PRC regulations and approvals. For example:

    loans by us to our PRC subsidiaries cannot exceed a statutory limit and shall be filed with the State Administration of Foreign Exchange of the PRC, or the SAFE, after the loan agreement is signed and at least three business days before the borrower makes any drawdown under the loan; and

    capital contributions to our PRC subsidiaries shall be filed with the MOFCOM and SAIC or their local counterparts and also be registered with the local banks authorized by the SAFE.

        Currently, there is no statutory limit to the amount of funding we can provide to our PRC subsidiaries through capital contributions. However, the maximum amount we can loan to our PRC subsidiaries is subject to statutory limits. According to the current PRC laws and regulations, we can provide funding to our PRC subsidiaries through loans of up to either (i) the amount of the difference between the respective registered total investment amount and the registered capital of each of our PRC subsidiaries, or the Total Investment and Registered Capital Balance; or (ii) two times, or the then applicable statutory multiple, of the amount of their respective net assets, calculated in accordance with PRC GAAP, or the Net Assets Limit, at our election. If we choose to make a loan to a PRC subsidiary based on the Total Investment and Registered Capital Balance as of the date of this prospectus, subject to the completion of statutory procedures with the relevant government authorities and banks, we may extend a loan with an estimated aggregate maximum amount of approximately RMB180.0 million to our PRC subsidiaries. We may increase the Total Investment and Registered Capital Balance of our PRC subsidiaries, which is subject to governmental procedures and may require a PRC subsidiary to increase its registered capital at the same time. If we choose to make a loan to a PRC entity based on its Net Assets Limit, the maximum amount we would be able to loan to the relevant PRC entity would depend on the relevant entity's net assets and the applicable statutory

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multiple at the time of calculation. As of the date of this prospectus, our PRC subsidiaries have negative net assets, and we cannot provide loans to them using the Net Assets Limit method.

        In addition, on March 30, 2015, the SAFE promulgated the Circular on Reforming Management of the Settlement of Foreign Exchange Capital of Foreign-Invested Enterprises, or Circular 19, a regulation regarding the conversion by a foreign-invested company of its capital contribution in foreign currency into Renminbi. Circular 19 launched a nationwide reform of the administration of the settlement of the foreign exchange capital of foreign-invested enterprises and allows foreign-invested enterprises to settle their foreign exchange capital at their discretion, but continues to prohibit foreign-invested enterprises from using the Renminbi fund converted from their foreign exchange capital for expenditures beyond their business scopes. In June 2016, the SAFE promulgated the Notice on Reforming and Standardizing the Administrative Provisions on Capital Account Foreign Exchange Settlement, or Circular 16. Circular 19 and Circular 16 continue to prohibit foreign-invested enterprises from, among other things, using the Renminbi fund converted from its foreign exchange capital for expenditure beyond its business scope, investment and financing (except for security investment or guarantee products issued by bank), providing loans to non-affiliated enterprises or constructing or purchasing real estate not for self-use. As we expect to use the proceeds of this offering in China in the form of RMB, our PRC subsidiaries will need to convert any capital contributions or loans from U.S. dollars to RMB before using such capital contribution or loans. As a result, Circular 19, Circular 16 and relevant foreign exchange rules may significantly limit our ability to convert the net proceeds from this offering in U.S. dollar to RMB and transfer the net proceeds through our PRC subsidiaries, which may adversely affect our ability to expand our business.

        We expect that the PRC laws and regulations may continue to limit our use of net proceeds from this offering or from other financing sources. We cannot assure you that we will be able to obtain these government registrations or approvals on a timely basis, if at all, with respect to future loans or capital contributions by us to our entities in the PRC. If we fail to receive such registrations or approvals, our ability to use the net proceeds from this offering and to capitalize our PRC operations may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business

Risks Related to Doing Business in China

Adverse changes in the PRC economic, political and social conditions as well as laws and government policies, may materially and adversely affect our business, financial condition, results of operations and growth prospects.

        Substantially all of our operations are conducted in China, and substantially all of our revenue is derived from China. Accordingly, our business, prospects, financial condition and results of operations are subject, to a significant extent, to economic, political and legal developments in China.

        The economic, political and social conditions in the PRC differ from those in more developed countries in many respects, including structure, government involvement, level of development, growth rate, control of foreign exchange, capital reinvestment, allocation of resources, rate of inflation and trade balance position. Before the adoption of its reform and opening up policies in 1978, the PRC was primarily a planned economy. In recent years, the PRC government has been reforming the PRC economic system and government structure. For example, the PRC government has implemented economic reforms and measures emphasizing the utilization of market forces in the development of the PRC economy in the past three decades. These reforms have resulted in significant economic growth and social prospects. Economic reform measures, however, may be adjusted, modified or applied inconsistently from industry to industry or across different regions of the country.

        We cannot predict whether the resulting changes will have any adverse effect on our current or future business, financial condition or results of operations. Despite these economic reforms and

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measures, the PRC government continues to play a significant role in regulating industrial development, allocation of natural and other resources, production, pricing and management of currency, and there can be no assurance that the PRC government will continue to pursue a policy of economic reform or that the direction of reform will continue to be market friendly.

        Our ability to successfully expand our business operations in the PRC depends on a number of factors, including macro-economic and other market conditions, and credit availability from lending institutions. Stricter credit or lending policies in the PRC may affect our customers' consumer credit or consumer banking business, and may also affect our ability to obtain external financing, which may reduce our ability to implement our expansion strategies. We cannot assure you that the PRC government will not implement any additional measures to tighten credit or lending standards, or that, if any such measure is implemented, it will not adversely affect our future results of operations or profitability.

        Demand for our services and our business, financial condition and results of operations may be materially and adversely affected by the following factors:

    political instability or changes in social conditions of the PRC;

    changes in laws, regulations, and administrative directives or the interpretation thereof;

    measures which may be introduced to control inflation or deflation; and

    measures changes in the rate or method of taxation.

        These factors are affected by a number of variables, which are beyond our control.

The legal system of the PRC is not fully developed and there are inherent uncertainties that may affect the protection afforded to our business and our shareholders.

        Our business and operations in the PRC are governed by the PRC legal system that is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. Since the late 1970s, the PRC government has promulgated laws and regulations dealing with economic matters such as foreign investment, corporate organization and governance, commerce, taxation and trade. However, as these laws and regulations are relatively new and continue to evolve, interpretation and enforcement of these laws and regulations involve significant uncertainties and different degrees of inconsistency. Some of the laws and regulations are still in the developmental stage and are therefore subject to policy changes. Many laws, regulations, policies and legal requirements have only been recently adopted by PRC central or local government agencies, and their implementation, interpretation and enforcement may involve uncertainty due to the lack of established practice available for reference. We cannot predict the effect of future legal developments in the PRC, including the promulgation of new laws, changes in existing laws or their interpretation or enforcement, or the pre-emption of local regulations by national laws. As a result, there is substantial uncertainty as to the legal protection available to us and our shareholders. Moreover, due to the limited volume of published cases and the non-binding nature of prior court decisions, the outcome of dispute resolution may not be as consistent or predictable as in other more developed jurisdictions, which may limit the legal protection available to us. In addition, any litigation in the PRC may be protracted and result in substantial costs and the diversion of resources and management attention.

PRC governmental control and restrictions on the convertibility of Renminbi may materially and adversely affect the value of your investments.

        The PRC government imposes controls and restrictions on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of the PRC. The majority of our income is received in Renminbi and shortages in the availability of foreign currencies may restrict our

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ability to pay dividends or other payments, or otherwise satisfy their foreign currency denominated obligations, if any. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions, can be made in foreign currencies without prior approval from SAFE, by complying with certain procedural requirements. Approval from appropriate government authorities is required where Renminbi is to be converted into foreign currency and remitted out of the PRC to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may, at its discretion, impose restrictions on access to foreign currencies for current account transactions and if this occurs in the future, we may not be able to pay dividends in foreign currencies to our shareholders.

We may be required to obtain prior approval of the CSRC of the listing and trading of our ADSs on theNYSE.

        On August 8, 2006, six PRC regulatory authorities, including the MOFCOM, the State Assets Supervision and Administration Commission, the State Administration of Taxation, or the SAT, the CSRC, the SAIC and the SAFE, jointly issued the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, which were subsequently amended on June 22, 2009. This regulation, among other things, requires that the listing and trading on an overseas stock exchange of securities in an offshore special purpose vehicle formed for purposes of holding direct or indirect equity interests in the PRC companies and controlled directly or indirectly by the PRC companies or individuals be approved by the CSRC. On September 21, 2006, the CSRC published on its official website the procedures for such approval process. In particular, certain documents are required to be filed with the CSRC as part of the approval procedures and it could take several months to complete the approval process.

        While the implementation and interpretation of the M&A Rules and its later amendments remains unclear, we believe, based on the advice of our PRC counsel, that approval by the CSRC is not required for this offering because we are not a special purpose vehicle formed for listing purpose through acquisition of domestic companies that are controlled by our PRC individual shareholders, as we acquire contractual control rather than equity interests in our VIEs in the PRC. However, we cannot assure you that the relevant PRC regulatory authorities, including the CSRC, would reach the same conclusion as our PRC counsel. If the CSRC or other PRC regulatory authority subsequently determines that we need to obtain the CSRC's approval for this offering, we may face sanctions by the CSRC or other PRC regulatory authorities. In such event, these regulatory authorities may, among other things, impose fines and penalties on or otherwise restrict our operations in the PRC or delay or restrict any remittance of the proceeds from this offering into the PRC. The CSRC or other PRC regulatory agencies may also take actions requiring us, or making it advisable for us, to suspend or terminate this offering before settlement and delivery of the ADSs. Any such or other actions taken could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ADSs.

The enforcement of the PRC Labor Contract Law and other labor-related regulations in the PRC may adversely affect our business and our results of operations.

        The PRC Labor Contract Law became effective and was implemented on January 1, 2008, which was amended on December 28, 2012. It has reinforced the protection of employees who, under the PRC Labor Contract Law, have the right, among others, to have written labor contracts, to enter into labor contracts with no fixed terms under certain circumstances, to receive overtime wages and to terminate or alter terms in labor contracts. According to the PRC Social Insurance Law, which became effective on July 1, 2011, and the Administrative Regulations on the Housing Funds, companies operating in China are required to participate in pension insurance, work-related injury insurance, medical insurance, unemployment insurance, maternity insurance and housing funds plans, and the

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employers must pay all or a portion of the social insurance premiums and housing funds for their employees.

        As these laws and regulations designed to enhance labor protection, we expect our labor costs will continue to increase. In addition, since the interpretation and implementation of these laws and regulations are still evolving, our employment practice may not at all times be deemed in compliance with the new laws and regulations. If we are subject to severe penalties or incur significant liabilities in connection with labor disputes or investigations, our business and results of operations may be adversely affected.

Regulation and censorship of information disseminated over the Internet in China may adversely affect our business and reputation and subject us to liability for information displayed on our website.

        The PRC government has adopted regulations governing Internet access and the distribution of news and other information over the Internet. Under these regulations, Internet content providers are prohibited from posting or displaying over the Internet content that, among other things, violates PRC laws and regulations, impairs the national dignity of China, or is reactionary, obscene, superstitious, fraudulent or defamatory. Failure to comply with these requirements may result in the revocation of licenses to provide Internet content and other licenses, and the closure of the concerned websites. The website operator may also be held liable for such censored information displayed on or linked to the websites. If our websites are found to be in violation of any such requirements, we may be penalized by relevant authorities, and our operations or reputation could be adversely affected.

Certain PRC regulations, including the M&A Rules and national security regulations, may require a complicated review and approval process which could make it difficult for us to pursue growth through acquisitions in China.

        The M&A Rules established additional procedures and requirements that could make merger and acquisition activities in China by foreign investors more time-consuming and complex. For example, the MOFCOM must be notified in the event a foreign investor takes control of a PRC domestic enterprise. Although the amendment to the M&A Rules in 2016 generally eased the restrictions imposed on merger and acquisition activities, certain acquisitions of domestic companies by offshore companies that are related to or affiliated with the same entities or individuals of the domestic companies, are still subject to approval by the MOFCOM. In addition, the Implementing Rules Concerning Security Review on Mergers and Acquisitions by Foreign Investors of Domestic Enterprises, issued by the MOFCOM in August 2011, require that mergers and acquisitions by foreign investors in "any industry with national security concerns" be subject to national security review by the joint meeting composed of relevant departments of the State Council, national trade associations, enterprises in the same industry, and upstream and downstream enterprises. In addition, any activities attempting to circumvent such review process, including structuring the transaction through a proxy or contractual control arrangement, are strictly prohibited.

        There is significant uncertainty regarding the interpretation and implementation of these regulations relating to the merger and acquisition activities in China. In addition, complying with these requirements could be time-consuming, and the required notification, review or approval process may materially delay or affect our ability to complete merger and acquisition transactions in China. As a result, our ability to seek growth through acquisitions may be materially and adversely affected.

        In addition, if the MOFCOM determines that we should have obtained its approval for our entry into contractual arrangements with our VIEs and their shareholders, we may be required to file for remedial approvals. We cannot assure you that we would be able to obtain such approval from the MOFCOM. We may also be subject to administrative fines or penalties by the MOFCOM that may require us to limit our business operations in the PRC, delay or restrict the conversion and remittance

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of our funds in foreign currencies into the PRC or take other actions that could have material and adverse effect on our business, financial condition and results of operations.

PRC regulations relating to foreign exchange registration of overseas investment by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiaries to liability or penalties, limit our ability to inject capital into the PRC subsidiaries, limit PRC subsidiaries' ability to increase their registered capital or distribute profits to us, or may otherwise adversely affect us.

        The SAFE has promulgated certain regulations, including the Notice on Relevant Issues Relating to Foreign Exchange Control on Domestic Residents' Investment and Financing and Round-Trip Investment through Special Purpose Vehicles, or Circular 37, effective on July 4, 2014, and its appendices, that require PRC residents, including PRC institutions and individuals, to register with local branches of the SAFE in connection with their direct establishment or indirect control of an offshore entity for the purpose of overseas investment and financing with such PRC residents' legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in Circular 37 as a "special purpose vehicle." The term "control" under Circular 37 is broadly defined as the operation rights, beneficiary rights or decision-making rights acquired by the PRC residents in the offshore special purpose vehicles by such means as acquisition, trust, proxy, voting rights, repurchase, convertible bonds or other arrangements. Circular 37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event. In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required registration with the SAFE, the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities. Further, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for foreign exchange evasion.

        On February 13, 2015, the SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or Notice 13, which became effective on June 1, 2015. Under Notice 13, applications for foreign exchange registration of inbound foreign direct investments and outbound overseas direct investments, including those required under Circular 37 will be directly reviewed and handled by banks, and the SAFE and its branches shall perform indirect regulation over the direct investment-related foreign exchange registration via banks.

        These regulations apply to our direct and indirect shareholders who are PRC residents and may apply to any offshore acquisitions or share transfers that we make in the future if our shares are issued to PRC residents. However, in practice, different local SAFE branches may have different views and procedures on the application and implementation of SAFE regulations, and since Circular 37 was recently issued, there remains uncertainty with respect to its implementation.

        As of the date of this prospectus, all PRC residents known to us that currently hold direct or indirect interests in our company have completed the necessary registrations as required by Circular 37. We cannot assure you that any shareholders or beneficial owners of our company who are PRC residents will be able to successfully complete the registration or update the registration of their direct and indirect equity interest as required in the future. If any of them fail to make or update the registration, our PRC subsidiaries could be subject to fines and legal penalties, and the SAFE could restrict our cross-border investment activities and our foreign exchange activities, including restricting our PRC subsidiaries' ability to distribute dividends to, or obtain loans denominated in foreign currencies from, our company, or prevent us from contributing additional capital into our PRC subsidiaries. As a result, our business operations and our ability to make distributions to you could be materially and adversely affected.

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If we are classified as a PRC "resident enterprise," we could be subject to PRC income tax at the rate of 25% on our worldwide income, and holders of our ADSs and ordinary shares may be subject to a PRC withholding tax upon the dividends payable by us and upon gain from the sale of our ADSs and ordinary shares.

        Under the Enterprise Income Tax Law, or EIT Law, and its implementation rules, if an enterprise incorporated outside the PRC has its "de facto management body" located within the PRC, such enterprise may be recognized as a PRC tax resident enterprise and be subject to the unified enterprise income tax rate of 25% on its worldwide income. Under the implementation rules for the EIT Law, "de facto management body" is defined as the body that has material and overall management control over the business, personnel, accounts and properties of an enterprise. The SAT issued the Notice regarding the Determination of Chinese-Controlled Overseas Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies, or SAT Circular 82, on April 22, 2009. SAT Circular 82 provides certain specific criteria for determining whether the "de facto management body" of a Chinese-controlled offshore incorporated enterprise is located inside China, stating that only a company meeting all the criteria would be deemed having its de facto management body within China. One of the criteria is that a company's major assets, accounting books and minutes and files of its board and shareholders' meetings are located or kept in the PRC. In addition, the SAT issued a bulletin on July 27, 2011, effective from September 1, 2011, providing further guidance on the implementation of SAT Circular 82. This bulletin clarifies matters including residence status determination, post-determination administration and competent tax authorities. Although both SAT Circular 82 and the bulletin only apply to offshore enterprises controlled by PRC enterprises and there are currently no further detailed rules or precedents governing the procedures and specific criteria for determining "de facto management body" for companies like us controlled by PRC individuals, the determination criteria set forth in SAT Circular 82 and the bulletin may reflect the SAT's general position on how the "de facto management body" test should be applied in determining the tax residency status of offshore enterprises and how the administration measures should be implemented with respect to such enterprises, regardless of whether they are controlled by PRC enterprises or PRC individuals.

        Since all of our senior management members currently reside in the PRC, we may be recognized as a PRC tax resident enterprise for the purpose of the EIT Law and therefore we would be subject to PRC income tax at the rate of 25% on our worldwide income. In such event, our income tax expenses may increase significantly and our net profit and profit margin could be materially and adversely affected.

        Under the EIT Law, foreign enterprise shareholders of a PRC resident enterprise will be subject to a 10% (or 20% for an individual) withholding tax upon dividends received from the PRC resident enterprise and on gain recognized with respect to the sale of shares of the resident enterprise, if such amounts are deemed to be derived from sources within the PRC. Accordingly, if we are treated as a PRC resident enterprise, holders of our ADSs and ordinary shares may be subject to a 10% (or 20% for an individual) withholding tax upon dividends received from us and on gain recognized with respect to the sale of our ADSs and ordinary shares, unless such withholding tax is reduced by an applicable income tax treaty between China and the jurisdiction of the holder. Any such tax may reduce the returns on your investment in our ADSs and ordinary shares.

Employee participants in our share incentive plans who are PRC citizens may be required to register with the SAFE. We also face regulatory uncertainties in the PRC that could restrict our ability to grant share incentive awards to our employees who are PRC citizens.

        Pursuant to the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in a Stock Incentive Plan of an Overseas Publicly-Listed Company issued by the SAFE on February 15, 2012, or Circular 7, the PRC citizens and non-PRC citizens who reside in China for a continuous period of not less than one year who participate in any stock incentive plan of

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an overseas publicly listed company, subject to a few exceptions, are required to register with the SAFE through a domestic qualified agent, which could be the PRC subsidiaries of such overseas listed company, and complete certain other procedures. Such PRC individuals' foreign exchange income received from the sale of shares and dividends distributed by the overseas listed company and any other income shall be fully remitted into a collective foreign currency account in the PRC opened and managed by the PRC domestic agent before distribution to such individuals. In addition, such domestic individuals must also retain an overseas entrusted institution to handle matters in connection with their exercise of share options and their purchase and sale of shares. The PRC domestic agent also needs to update registration with the SAFE within three months after the overseas-listed company materially changes its share incentive plan or make any new share incentive plans.

        From time to time, we need to apply for or update our registration with the SAFE or its local branches on behalf of our employees who receive options or other equity-based incentive grants under our share incentive plans or material changes in our share incentive plans. However, we may not always be able to make applications or update our registration on behalf of our employees who hold any type of share incentive awards in compliance with Circular 7, nor can we ensure you that such applications or update of registration will be successful. If we or the participants of our share incentive plans who are PRC citizens fail to comply with Circular 7, we and/or such participants of our share incentive plans may be subject to fines and legal sanctions, there may be additional restrictions on the ability of such participants to exercise their share options or remit proceeds gained from sale of their shares into the PRC, and we may be prevented from further granting share incentive awards under our share incentive plans to our employees who are PRC citizens.

You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in the PRC against us or our management named in the prospectus based on foreign laws.

        We are a company incorporated under the laws of the Cayman Islands. We conduct substantially all of our operations in the PRC and substantially all of our assets are located in PRC. In addition, all our senior executive officers reside within the PRC for a significant portion of the time and most are PRC nationals. As a result, it may be difficult for our shareholders to effect service of process upon us or those persons inside the PRC. In addition, the PRC does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the Cayman Islands and many other countries and regions. Therefore, recognition and enforcement in the PRC of judgments of a court in any of these non-PRC jurisdictions in relation to any matter not subject to a binding arbitration provision may be difficult or impossible.

Fluctuations in the value of the Renminbi could have a material and adverse effect on your investment.

        The change in value of the Renminbi against the U.S. dollar and other currencies is affected by various factors such as changes in political and economic conditions in the PRC. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar, and the Renminbi appreciated more than 20% against the U.S. dollar over the following three years. Between July 2008 and June 2010, this appreciation was halted and the exchange rate between the Renminbi and the U.S. dollar remained within a narrow band. Since June 2010, the Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in the future.

        Any significant appreciation or revaluation of the Renminbi may have a material adverse effect on the value of, and any dividends payable on, our ADSs in foreign currency terms. More specifically, if we decide to convert our Renminbi into U.S. dollars, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount available to us. To the extent that we need to convert U.S. dollars we receive from our initial public offering into Renminbi for our

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operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive from the conversion. In addition, appreciation or depreciation in the exchange rate of the Renminbi to the U.S. dollar could materially and adversely affect the price of our ADSs in U.S. dollars without giving effect to any underlying change in our business or results of operations.

Risks Related to Our ADSs and This Offering

We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.

        We are an "emerging growth company," as defined in the JOBS Act, and we may take advantage of certain exemptions from requirements applicable to other public companies that are not emerging growth companies, including, most significantly, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act for so long as we remain an emerging growth company. As a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain information they may deem important.

        The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. We intend to avail ourselves of the extended transition period for complying with new or revised accounting standards provided under the JOBS Act. As a result, while we are an emerging growth company, we will not be subject to new or revised accounting standards at the same time that they become applicable to other public companies that are not emerging growth companies.

An active trading market for our Class A ordinary shares or our ADSs may not develop and the trading price for our ADSs may fluctuate significantly.

        Prior to this offering, there has been no public market for our ADSs or our Class A ordinary shares underlying our ADSs. We intend to apply for listing our ADSs on the NYSE, but we cannot assure you that a liquid public market for our ADSs will develop. If an active public market for our ADSs does not develop following the completion of this offering, the market price and liquidity of our ADSs may be materially and adversely affected. The initial public offering price for our ADSs was determined by negotiation among us, the selling shareholders and the underwriters based upon several factors, and the trading price of our ADSs after this offering may decline below the initial public offering price. As a result, investors in our securities may experience a significant decrease in the value of their ADSs due to insufficient or a lack of market liquidity of the ADSs.

The trading price of our ADSs is likely to be volatile, which could result in substantial losses to investors.

        The trading price of our ADSs is likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors, akin to the performance and fluctuation of the market prices of other companies with business operations located mainly in China that have listed their securities in the United States. A number of Chinese companies have listed or are in the process of listing their securities on U.S. stock markets. The securities of some of these companies have experienced significant volatility, including price declines in connection with their initial public offerings. The trading performances of these Chinese companies' securities after their offerings may affect the perception and attitudes of investors toward Chinese companies listed in the United States in general and consequently may impact the trading performance of our ADSs, regardless of our actual operating performance.

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        In addition to market and industry factors, the price and trading volume for our ADSs may be highly volatile due to a number of factors, including the following:

    regulatory developments affecting us or our industry, and customers of our education services;

    actual or anticipated fluctuations in our quarterly results of operations and changes or revisions of our expected results;

    changes in the market condition, market potential and competition in education services;

    announcements by us or our competitors of new education services, expansions, investments, acquisitions, strategic partnerships or joint ventures;

    fluctuations in global and Chinese economies;

    changes in financial estimates by securities analysts;

    adverse publicity about us;

    additions or departures of our key personnel and senior management;

    release of lockup or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; and

    potential litigation or regulatory investigations.

        Any of these factors may result in large and sudden changes in the volume and price at which our ADSs will trade.

Our dual-class voting structure will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.

        We will adopt a dual-class voting structure such that our ordinary shares consist of Class A ordinary shares and Class B ordinary shares. Based on our dual-class share structure, holders of Class A ordinary shares are entitled to one vote per share in respect of matters requiring the votes of shareholders, while holders of Class B ordinary shares are entitled to ten votes per share. We will issue Class A ordinary shares represented by our ADSs in this offering. Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof, while Class A ordinary shares are not convertible into Class B ordinary shares under any circumstance. Upon any transfer of Class B ordinary shares by a holder thereof to any person or entity which is not an affiliate of such holder, such Class B ordinary shares shall be automatically and immediately converted into the equal number of Class A ordinary shares. However, the creation of any pledge, charge, encumbrance or other third party right on any Class B ordinary shares to secure a holder's contractual or legal obligations, except in cases where and until any such pledge, charge, encumbrance or other third party right is enforced and results in the third party holding legal title to the relevant Class B ordinary shares, will not be considered as a sale, transfer, assignment or disposition and will not trigger the automatic conversion. In addition, the termination of directorship on the board or employment with us of any holder of Class B ordinary shares will not trigger the automatic conversion either.

        Due to the disparate voting powers attached to these two classes of ordinary shares, our founders, namely, Mr. Jishuang Zhao, Mr. Siguang Peng and Mr. Yupeng Guo, will beneficially own all of our issued Class B ordinary shares, representing        % of our total issued and outstanding share capital immediately after the completion of this offering and they will be able to exercise        % of the total voting power of our issued and outstanding share capital immediately following the completing of this offering, assuming that the underwriters do not exercise their over-allotment option to purchase additional ADSs. You will experience further dilution to the extent that additional Class B ordinary

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shares are issued in the future. As a result, our founders will have considerable influence over matters such as electing directors and approving material mergers, acquisitions or other business combination transactions. This concentrated control will limit your ability to influence corporate matters and could also discourage others from pursuing any potential merger, takeover or other change of control transactions, which could have the effect of depriving the holders of our Class A ordinary shares and our ADSs of the opportunity to sell their shares at a premium over the prevailing market price.

If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding our ADSs, the market price for our ADSs and trading volume could decline.

        The trading market for our ADSs will depend in part on the research and reports that securities or industry analysts publish about us or our business. If research analysts do not establish and maintain adequate research coverage or if one or more of the analysts who covers us downgrades our ADSs or publishes inaccurate or unfavorable research about our business, the market price for our ADSs would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for our ADSs to decline.

Substantial future sales or perceived potential sales of our ADSs in the public market could cause the price of our ADSs to decline.

        Sales of substantial amounts of our ADSs in the public market after the completion of this offering, or the perception that these sales could occur, could adversely affect the market price of our ADSs. In connection with this offering, our [directors, executive officers, existing shareholders and certain of our option holders] have agreed not to sell any ordinary shares or ADSs for 180 days after the date of this prospectus without the prior written consent of the underwriters, subject to certain exceptions. Upon the completion of this offering, we will have            ordinary shares outstanding, including Class A ordinary shares represented by            ADSs, assuming the underwriters do not exercise their option to purchase additional ADSs. The ADSs sold in this offering will be freely tradable without restriction or further registration under the Securities Act. The remaining ordinary shares outstanding immediately after this offering will be available for sale, upon the expiration of the 180-day lockup period, subject to volume and other restrictions as applicable under Rules 144 and 701 under the Securities Act. In addition, the underwriters may exercise the discretion to release the securities held by the parties subject to the lockup restriction prior to the expiration of the lockup period. If the securities subject to lockup are released before the expiration of the lockup period, their sale or perceived sale into the market may cause the price of our ADSs to decline. We cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have on the market price of the ADSs. See "Underwriting" and "Shares Eligible for Future Sale" for a more detailed description of the restrictions on selling our securities after this offering.

Because we do not expect to pay dividends in the foreseeable future after this offering, you must rely on a price appreciation of our ADSs for a return on your investment.

        We currently intend to retain most, if not all, of our available funds and any future earnings after this offering to fund the development and growth of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in our ADSs as a source for any future dividend income. Our board of directors has complete discretion as to whether to distribute dividends, subject to certain requirements of Cayman Islands law. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our directors. Under Cayman Islands law, a Cayman Islands company may pay a

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dividend out of either profit or share premium account, provided that in no circumstances may a dividend be paid if this would result in the company being unable to pay its debts as they fall due in the ordinary course of business. Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in our ADSs will likely depend entirely upon any future price appreciation of our ADSs. We cannot guarantee that our ADSs will appreciate in value after this offering or even maintain the price at which you purchased the ADSs. You may not realize a return on your investment in our ADSs and you may even lose your entire investment in our ADSs.

Because the initial public offering price is substantially higher than the pro forma net tangible book value per share, you will experience immediate and substantial dilution.

        If you purchase ADSs in this offering, you will pay more for each ADS than the corresponding amount paid by existing shareholders for their ordinary shares. As a result, you will experience immediate and substantial dilution of approximately US$            per ADS, assuming that no outstanding options to acquire Class A ordinary shares are exercised. This number represents the difference between our pro forma net tangible book value per ADS as of March 31, 2019, after giving effect to this offering and the initial public offering price of US$            per ADS (the midpoint of the estimated range of the initial public offering price shown on the cover page of this prospectus). See "Dilution" for a more complete description of how the value of your investment in our ADSs will be diluted upon the completion of this offering.

If we are a passive foreign investment company for United States federal income tax purposes for any taxable year, United States holders of our ADSs or ordinary shares could be subject to adverse United States federal income tax consequences.

        A non-United States corporation will be a passive foreign investment company, or PFIC, for United States federal income tax purposes for any taxable year if either (i) at least 75% of its gross income for such year is passive income or (ii) at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce or are held for the production of passive income. A separate determination must be made after the close of each taxable year as to whether a non-United States corporation is a PFIC for that year. Based on the current and anticipated value of our assets and composition of our income and assets, we do not believe we were a PFIC for United States federal income tax purposes for our most recent taxable year, and do not expect to be a PFIC for United States federal income tax purposes for our current taxable year or the foreseeable future. However, the application of the PFIC rules is subject to uncertainty in several respects, and we cannot assure you the United States Internal Revenue Service, or IRS, will not take a contrary position.

        Changes in the composition of our income or composition of our assets may cause us to become a PFIC. The determination of whether we will be a PFIC for any taxable year may depend in part upon the value of our goodwill and other unbooked intangibles not reflected on our balance sheet (which may depend upon the market value of the ADSs from time to time) and also may be affected by how, and how quickly, we spend our liquid assets and the cash raised in this offering. In estimating the value of our goodwill and other unbooked intangibles, we have taken into account our anticipated market capitalization following the listing of the ADSs on the NYSE. Among other matters, if our market capitalization is less than anticipated or subsequently declines, we may be or become a PFIC for the current or future taxable years because our liquid assets and cash (which are for this purpose considered assets that produce passive income) may then represent a greater percentage of our overall

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assets. Further, while we believe our classification methodology and valuation approach is reasonable, it is possible that the IRS may challenge our classification or valuation of our goodwill and other unbooked intangibles, which may result in our being or becoming a PFIC for the current or one or more future taxable years.

        If we are a PFIC for any taxable year during which a United States person holds ADSs or ordinary shares, certain adverse United States federal income tax consequences could apply to such United States person. See "Taxation—U.S. Federal Income Tax Consequences—Passive Foreign Investment Company Rules."

Our memorandum and articles of association that will become effective immediately prior to the completion of this offering contain anti-takeover provisions that could have a material adverse effect on the rights of holders of our ordinary shares and ADSs.

        We plan to adopt a second amended and restated memorandum and articles of association that will become effective immediately prior to the completion of this offering. Our post-offering memorandum and articles of association contain provisions to limit the ability of others to acquire control of our company or cause us to engage in change-of-control transactions. These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction. [For example, our board of directors has the authority subject to any resolution of the shareholders to the contrary, to issue preference shares in one or more series and to fix their designations, powers, preferences, privileges, and relative participating, optional or special rights and the qualifications, limitations or restrictions, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights associated with our ordinary shares, in the form of ADSs or otherwise. Preference shares could be issued quickly with terms calculated to delay or prevent a change in control of our company or make removal of management more difficult. If our board of directors decides to issue preference shares, the price of our ADSs may fall and the voting and other rights of the holders of our ordinary shares and ADSs may be materially and adversely affected.]

You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law.

        We are an exempted company incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum and articles of association, the Companies Law of the Cayman Islands and the common law of the Cayman Islands. The rights of our shareholders to take action against our directors, actions by our minority shareholders and the fiduciary duties of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedents in the Cayman Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedents in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.

        Shareholders of Cayman Islands exempted companies like ours have no general rights under the Cayman Islands law to inspect corporate records or to obtain copies of lists of shareholders of these companies. Our directors have the discretion under our post-offering amended and restated articles of association to determine whether or not, and under what conditions, our corporate records may be

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inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

        Certain corporate governance practices in the Cayman Islands differ significantly from requirements for companies incorporated in other jurisdictions such as the U.S. To the extent we choose to follow home country practice, our shareholders may be afforded less protection than they otherwise would have under rules and regulations applicable to U.S. domestic issuers.

        The Cayman Islands courts are also unlikely (i) to recognize or enforce against us judgments of courts of the United States based on certain civil liability provisions of U.S. securities laws, or (ii) to impose liabilities against us, in original actions brought in the Cayman Islands, based on certain civil liability provisions of U.S. securities laws that are penal in nature.

        There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will in certain circumstances recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits.

        As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by our management, members of our board of directors or our large shareholders than they would as public shareholders of a company incorporated in the United States. For a discussion of certain significant differences between the provisions of the Companies Law (as amended) of the Cayman Islands and the laws applicable to companies incorporated in the United States and their shareholders, see "Description of Share Capital—Differences in Corporate Law."

Certain judgments obtained against us by our shareholders may not be enforceable.

        We are a Cayman Islands company and all of our assets are located outside of the United States. All of our current operations are conducted in the PRC. In addition, all of our current directors and officers are nationals and residents of countries other than the United States and all of their assets are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of the PRC may render you unable to enforce a judgment against our assets or the assets of our directors and officers. For more information regarding the relevant laws of the Cayman Islands and the PRC, see "Enforceability of Civil Liabilities."

We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to United States domestic public companies.

        Because we are a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:

    the rules under the Exchange Act requiring the filing of quarterly reports on Form 10-Q or current reports on Form 8-K with the SEC;

    the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act;

    the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and

    the selective disclosure rules by issuers of material nonpublic information under Regulation FD.

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        We will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our results on a quarterly basis through press releases, distributed pursuant to the rules and regulations of the NYSE. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information, which would be made available to you, were you investing in a U.S. domestic issuer.

As a foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the NYSE corporate governance standards applicable to domestic U.S. issuers. This may afford less protection to holders of our ordinary shares and the ADSs than they would enjoy if we complied fully with the NYSE corporate governance standards.

        As a Cayman Islands company listed on the NYSE, we are subject to NYSE corporate governance listing standards. However, NYSE rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the NYSE corporate governance standards. We intend to follow Cayman Islands corporate governance practices in lieu of the corporate governance requirements of the NYSE that listed companies must have for as long as we qualify as a foreign private issuer including:

    (a)
    a majority of directors being independent;

    (b)
    a nominating and corporate governance committee composed entirely of independent directors;

    (c)
    a compensation committee composed entirely of independent directors;

    (d)
    provide an annual certification by our chief executive officer that he or she is not aware of any non-compliance with any corporate governance rules of the NYSE;

    (e)
    have regularly scheduled executive sessions with only non-management directors;

    (f)
    have at least one executive session of solely independent directors each year; or

    (g)
    seek shareholder approval for (i) the implementation and material revisions of the terms of share incentive plans, (ii) the issuance of more than 1% of our outstanding ordinary shares or more than 1% of our outstanding voting power to a related party, (iii) the issuance of more than 20% of our outstanding ordinary shares, and (iv) an issuance that would result in a change of control.

        To the extent we choose to follow home country practice in the future, our shareholders may be afforded less protection than they otherwise would enjoy under NYSE corporate governance standards applicable to U.S. domestic issuers.

You may experience dilution of your holdings due to the inability to participate in rights offerings.

        We may, from time to time, distribute rights to our shareholders, including rights to acquire securities. Under the deposit agreement, the depositary will not distribute rights to holders of ADSs unless the distribution and sale of the rights and the securities to which these rights relate are either exempt from registration under the Securities Act with respect to all holders of ADSs, or are registered under the provisions of the Securities Act.

        The depositary may, but is not required to, attempt to sell these undistributed rights to third parties, and may allow the rights to lapse. We may be unable to establish an exemption from

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registration under the Securities Act, and we are under no obligation to file a registration statement with respect to these rights or underlying securities or to endeavor to have a registration statement declared effective. Accordingly, holders of ADSs may be unable to participate in our rights offerings and may experience dilution of their holdings as a result.

The voting rights of the holders of our ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to vote your ordinary shares.

        Holders of our ADSs do not have the same rights as our registered shareholders. As a holder of our ADSs, you will not have any direct right to attend general meetings of our shareholders or to cast any votes at such meetings. You will only be able to exercise the voting rights which are carried by the underlying ordinary shares represented by your ADSs indirectly by giving voting instructions to the depositary in accordance with the provisions of the deposit agreement. Under the deposit agreement, you may vote only by giving voting instructions to the depositary. Upon receipt of your voting instructions, (a) the depositary will vote the ordinary shares underlying your ADSs in accordance with these instructions and (b) if voting is by show of hands, the depositary will vote the underlying shares in accordance with the voting instructions received from a majority of holders who provide timely voting instructions. You will not be able to directly exercise your right to vote with respect to the underlying ordinary shares unless you withdraw the shares and become the registered holder of such shares prior to the record date for the general meeting. Under our post-offering amended and restated memorandum and articles of association that will become effective immediately prior to the completion of this offering, the minimum notice period required to be given by our company to our registered shareholders for convening a general meeting is seven days.

        When a general meeting is convened, you may not receive sufficient advance notice of the meeting to withdraw the ordinary shares underlying your ADSs and become the registered holder of such shares to allow you to attend the general meeting and to vote directly with respect to any specific matter or resolution to be considered and voted upon at the general meeting. In addition, under our post-offering amended and restated memorandum and articles of association that will become effective immediately prior to the completion of this offering, for the purposes of determining those shareholders who are entitled to attend and vote at any general meeting, our directors may close our register of members and/or fix in advance a record date for such meeting, and such closure of our register of members or the setting of such a record date may prevent you from withdrawing the ordinary shares underlying your ADSs and becoming the registered holder of such shares prior to the record date, so that you would not be able to attend the general meeting or to vote directly. If we ask for your instructions, the depositary will notify you of the upcoming vote and will arrange to deliver our voting materials to you. We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote the underlying ordinary shares represented by your ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for their manner of carrying out your voting instructions. This means that you may not be able to exercise your right to direct how the ordinary shares underlying your ADSs are voted and you may have no legal remedy if the ordinary shares underlying your ADSs are not voted as you requested.

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The depositary for our ADSs will give us a discretionary proxy to vote our ordinary shares underlying your ADSs if you do not vote at shareholders' meetings, except in limited circumstances, which could adversely affect your interests and the ability of our shareholders as a group to influence the management of our company.

        Under the deposit agreement for the ADSs, if you do not give voting instructions to the depositary to direct how the ordinary shares underlying your ADSs are voted, the depositary will give us a discretionary proxy to vote the ordinary shares underlying your ADSs at shareholders' meetings unless:

    we have failed to timely provide the depositary with notice of meeting and related voting materials;

    we have instructed the depositary that we do not wish a discretionary proxy to be given;

    we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting;

    a matter to be voted on at the meeting may have a material adverse impact on shareholders; or

    the voting at the meeting is to be made on a show of hands.

        The effect of this discretionary proxy is that if you do not give voting instructions to the depositary to direct how the ordinary shares underlying your ADSs are voted, you cannot prevent the ordinary shares underlying your ADSs from being voted, except under the circumstances described above. This may make it more difficult for shareholders to influence the management of our company. Holders of our ordinary shares are not subject to this discretionary proxy.

You may not receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make them available to you.

        The depositary of our ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or other deposited securities underlying our ADSs, after deducting its fees and expenses. You will receive these distributions in proportion to the number of ordinary shares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act but that are not properly registered or distributed under an applicable exemption from registration. The depositary may also determine that it is not feasible to distribute certain property through the mail. Additionally, the value of certain distributions may be less than the cost of mailing them. In these cases, the depositary may determine not to distribute such property. We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also have no obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. This means that you may not receive distributions we make on our ordinary shares or any value for them if it is illegal or impractical for us to make them available to you. These restrictions may cause a material decline in the value of our ADSs.

You may be subject to limitations on transfer of your ADSs.

        Your ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may close its books from time to time for a number of reasons, including in connection with corporate events such as a rights offering, during which time the depositary needs to maintain an exact number of ADS holders on its books for a specified period. The depositary may also close its books in emergencies, and on weekends and public holidays. The depositary may refuse to deliver, transfer or register transfers of our ADSs generally when our share register or the books of the

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depositary are closed, or at any time if we or the depositary thinks it is advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.

We will incur increased costs as a result of being a public company, particularly after we cease to qualify as an "emerging growth company."

        Upon completion of this offering, we will become a public company and expect to incur significant accounting, legal and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and the NYSE, have detailed requirements concerning corporate governance practices of public companies. We expect these rules and regulations applicable to public companies to increase our accounting, legal and financial compliance costs and to make certain corporate activities more time-consuming and costly. After we are no longer an "emerging growth company," we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the other rules and regulations of the SEC. For example, as a result of becoming a public company, we will need to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls and procedures. We also expect that operating as a public company will make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. Our management will also be required to devote substantial time and attention to our public company reporting obligations and other compliance matters. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. Our reporting and other compliance obligations as a public company may place a strain on our management, operational and financial resources and systems for the foreseeable future.

        In the past, shareholders of a public company often brought securities class action suits against the company following periods of instability in the market price of that company's securities. If we were involved in a class action suit, it could divert a significant amount of our management's attention and other resources from our business and operations, which could harm our results of operations and require us to incur significant expenses to defend the suit. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.

ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiffs in any such action.

        The deposit agreement governing the ADSs representing our Class A ordinary shares provides that, to the fullest extent permitted by applicable law, ADSs holders waive the right to a jury trial of any claim they may have against us or the depositary arising out of or relating to our shares, the ADSs or the deposit agreement, including any claim under the U.S. federal securities laws. The waiver to right to a jury trial of the deposit agreement is not intended to be deemed a waiver by any holder or beneficial owner of our ADSs or the depositary's compliance with the U.S. federal securities laws and the rules and regulations promulgated thereunder. In addition, by agreeing to such waiver, the investors shall also not be deemed to have waived our compliance with the U.S. federal securities laws and the rules and regulations promulgated thereunder.

        If we or the depositary oppose a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable based on the facts and circumstances of that case in accordance with the applicable state and federal law. The enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally

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adjudicated by the United States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of New York, which govern the deposit agreement. In determining whether to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider whether a party knowingly, intelligently and voluntarily waived the right to a jury trial. We believe that this is the case with respect to the deposit agreement and the ADSs. It is advisable that you consult legal counsel regarding the jury waiver provision before investing in the ADSs.

        If you or any other holders or beneficial owners of our ADSs bring a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADSs, including claims under federal securities laws, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us and/or the depositary. If a lawsuit is brought against us and/or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcome than a trial by jury would have had, including results that could be less favorable to the plaintiffs in any such action.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

        This prospectus contains forward-looking statements that are based on our management's beliefs and assumptions and on information currently available to us. All statements other than statements of historical facts are forward-looking statements. The forward-looking statements are contained principally in, but not limited to, the sections entitled "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

    our goals and strategies;

    our ability to retain and increase our student enrollment;

    our ability to offer new courses and services;

    our ability to engage, train and retain new teachers and consultants;

    our ability to maintain and improve technology infrastructure necessary to operate our online platform;

    our future business development, financial condition and results of operations;

    expected changes in our revenue, costs or expenditures;

    growth of and competition trends in our industry;

    our expectations regarding demand for, and market acceptance of, our services and our brands;

    our expectation regarding the use of proceeds from this offering;

    general economic and business conditions in the markets in which we operate;

    relevant government policies and regulations relating to our corporate structure, business and industry; and

    assumptions underlying or related to any of the foregoing.

        In some cases, you can identify forward-looking statements by terms such as "may," "could," "will," "should," "would," "expect," "plan," "intend," "anticipate," "believe," "estimate," "predict," "potential," "project" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the heading "Risk Factors" and elsewhere in this prospectus. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance.

        This prospectus also contains certain data and information, which we obtained from various government and private publications. Although we believe that the publications and reports are reliable, we have not independently verified the data. Statistical data in these publications includes projections that are based on a number of assumptions. If any one or more of the assumptions underlying the market data is later found to be incorrect, actual results may differ from the projections based on these assumptions.

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        The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this prospectus. Except as required by law, we do not intend to update or otherwise revise the forward-looking statements in this prospectus, whether as a result of new information, future events or otherwise. You should read this prospectus and the documents that we have referred to in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect.

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ENFORCEABILITY OF CIVIL LIABILITIES

Cayman Islands

        We are incorporated under the laws of the Cayman Islands as an exempted company with limited liability. We are incorporated in the Cayman Islands because of certain benefits associated with being a Cayman Islands company, such as political and economic stability, an effective judicial system, a favorable tax system, the absence of foreign exchange control or currency restrictions and the availability of professional and support services. However, the Cayman Islands has a less developed body of securities laws as compared to the United States and provides less protection for investors. In addition, Cayman Islands companies may not have standing to sue before the federal courts of the United States.

        Our constitutional documents do not contain provisions requiring that disputes, including those arising under the securities laws of the United States, between us, our officers, directors and shareholders, be subject to arbitration.

        Substantially all of our assets are located outside the United States. In addition, most of our directors and executive officers are nationals or residents of jurisdictions other than the United States and all or a substantial portion of their assets are located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon us or these persons, or to enforce judgments obtained in U.S. courts against us or them, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States. It may also be difficult for you to enforce judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors.

        We have appointed Puglisi & Associates, located at 850 Library Avenue, Suite 204, Newark, Delaware 19711, as our agent to receive service of process with respect to any action brought against us in the U.S. District Court for the Southern District of New York in connection with this offering under the federal securities laws of the United States or of any State in the United States or any action brought against us in the Supreme Court of the State of New York in the County of New York in connection with this offering under the securities laws of the State of New York.

        Conyers Dill & Pearman, our counsel as to Cayman Islands law, has advised us that there is uncertainty as to whether the courts of the Cayman Islands would (i) recognize or enforce judgments of U.S. courts obtained against us or our directors or officers that are predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States, or (ii) entertain original actions brought in the Cayman Islands against us or our directors or officers that are predicated upon the civil liability provision of the securities laws of the United States or any state in the United States.

        In addition, Conyers Dill & Pearman has advised us that there is no statutory recognition in the Cayman Islands of judgments obtained in the U.S., although the Cayman Islands will generally recognize as a valid judgment, a final and conclusive judgment in personam obtained in the federal or state courts in the U.S. under which a sum of money is payable (other than a sum of money payable in respect of multiple damages, taxes or other charges of a like nature or in respect of a fine or other penalty) and would give a judgment based thereon provided that (i) such courts had proper jurisdiction over the parties subject to such judgment; (ii) such courts did not contravene the rules of natural justice of the Cayman Islands; (iii) such judgment was not obtained by fraud; (iv) the enforcement of the judgment would not be contrary to the public policy of the Cayman Islands; (v) no new admissible evidence relevant to the action is submitted prior to the rendering of the judgment by the courts of the Cayman Islands; and (vi) there is due compliance with the correct procedures under the laws of the Cayman Islands.

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        However, the courts of the Cayman Islands are unlikely to enforce a judgment obtained from the U.S. courts under civil liability provisions of the U.S. federal securities law if such judgment is determined by the courts of the Cayman Islands to give rise to obligations to make payments that are penal or punitive in nature.

        Because such a determination has not yet been made by a court of the Cayman Islands, it is uncertain whether such civil liability judgments from U.S. courts would be enforceable in the Cayman Islands.

People's Republic of China

        Our PRC counsel have advised us that the recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedure Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedure Law based either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions.

        Our PRC counsel have also advised us that under the PRC law, a foreign judgment, which does not otherwise violate basic legal principles, state sovereignty, safety or social public interest, may be recognized and enforced by a PRC court, based either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. As there existed no treaty or other form of reciprocity between China and the U.S. or Cayman Islands governing the recognition and enforcement of judgments as of the date of this prospectus, including those predicated upon the liability provisions of the U.S. federal securities laws, there is uncertainty whether and on what basis a PRC court would enforce judgments rendered by the U.S. courts or Cayman Islands courts.

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CORPORATE HISTORY AND STRUCTURE

Corporate History

        We are an exempted company with limited liability incorporated in the Cayman Islands. We began our operations in April 2006, when Mr. Jishuang Zhao, Mr. Siguang Peng and Mr. Yupeng Guo founded Shenzhen Meten, which is the sole school sponsor of our first self-owned learning center in Chongqing, China. Since our incorporation, we have established a network of 136 learning centers in China, including 120 self-operated learning centers and 16 franchised learning centers and also acquired a number of complementary businesses in China. For example, we acquired an 80% equity interest in ABC Education Group to strengthen our junior English training business in June 2018. In order to attract and retain highly qualified mid-to-high level management, consultants and other persons for their contribution to our company and to retain suitable personnel in our company, Shenzhen Meten adopted the 2013 Plan in January 2013 and we adopted the 2018 Plan in December 2018 to replace the 2013 Plan. See "Management—Share Incentive Plans" for a description of the 2013 Plan and 2018 Plan.

        With the growth of our business and in order to facilitate international capital investment in our Company, in July 2018, we incorporated Meten International Education Group to become our offshore holding company under the laws of Cayman Islands in an offshore reorganization typical for China-based education businesses. In order to mirror the shareholding structure of the then shareholders in Shenzhen Meten, before adopting the variable interest equity structure, we issued and allotted our ordinary shares at par value to investment holding companies held by the then shareholders of Shenzhen Meten in July 2018 and August 2018. Further, in July 2018, Meten International established two wholly-owned subsidiaries in the British Virgin Islands, namely, Meten BVI and Likeshuo BVI, respectively. Following the incorporation of Meten BVI and Likeshuo BVI, each of Meten BVI and Likeshuo BVI established a wholly-owned subsidiary in Hong Kong, namely, Meten HK and Likeshuo HK, respectively. Each of Zhuhai Meten and Zhuhai Likeshuo were then incorporated in September 2018 as a wholly-owned subsidiary of Meten HK and Likeshuo HK, respectively. As part of our onshore reorganization, we established Shenzhen Likeshuo in October 2018 to focus on developing our online English training business. Due to the restrictions imposed by the PRC laws and regulations on foreign ownership of companies that engage in education services, we currently do not hold any equity interest in our VIEs. Instead, we entered into a series of contractual arrangements with, among others, our VIEs and their respective shareholders in November 2018 to obtain effective control of our VIEs.

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Our Corporate and Shareholding Structure

        The chart below illustrates our corporate and shareholding structure immediately following the completion of this offering, assuming no exercise of the over-allotment option granted to the underwriters:

GRAPHIC


(1)
JZ Education Investment is controlled by The Zhao Jishuang Family Trust, a trust managed by Conyers Trustee as trustee. Mr. Jishuang Zhao is the settlor of The Zhao Jishuang Family Trust and Mr. Jishuang Zhao and his family members are the trust's beneficiaries.

(2)
AP Education Investment is controlled by The Peng Siguang Family Trust, a trust managed by Conyers Trustee as trustee. Mr. Siguang Peng is the settlor of The Peng Siguang Family Trust and Mr. Siguang Peng and his family members are the trust's beneficiaries.

(3)
RG Education Investment is controlled by The Guo Yupeng Family Trust, a trust managed by Conyers Trustee as trustee. Mr. Yupeng Guo is the settlor of The Guo Yupeng Family Trust and Mr. Yupeng Guo and his family members are the trust's beneficiaries.

(4)
Shenzhen Meten is owned as to 27.3250% by Mr. Jishuang Zhao, 13.8080% by Mr. Siguang Peng, 13.0829% by Mr. Yupeng Guo, 10.3918% by Xinyu Meilianzhong, 4.9146% by Mr. Yun Feng, 3.9957% by Xinyu Meilianxing, 3.6719% by Mr. Jun Yao, 3.1719% by Ms. Tong Zeng, 3.5431% by Xinyu Meilianchou, 3.0000% by No. 11 Daoge, 1.5781% by No. 3 Daoge, 1.5090% by No. 6 Daoge, 0.8722% by No. 5 Daoge, 0.5000% by Mr. Yongchao Chen, 4.0000% by Shanghai Zhihan, 3.6358% by No. 21 Daoge and 1.0000% by Hangzhou Muhua.

(5)
Shenzhen Likeshuo is owned as to 27.3250% by Mr. Jishuang Zhao, 13.8080% by Mr. Siguang Peng, 13.0829% by Mr. Yupeng Guo, 10.3918% by Xinyu Meilianzhong, 4.9146% by Mr. Yun Feng, 3.9957% by Xinyu Meilianxing, 3.6719% by

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    Mr. Jun Yao, 3.1719% by Ms. Tong Zeng, 3.5431% by Xinyu Meilianchou, 3.0000% by No. 11 Daoge, 1.5781% by No. 3 Daoge, 1.5090% by No. 6 Daoge, 0.8722% by No. 5 Daoge, 0.5000% by Mr. Yongchao Chen, 4.0000% by Shanghai Zhihan, 3.6358% by No. 21 Daoge and 1.0000% by Hangzhou Muhua.

(6)
Primarily involved in providing our overseas study application services and operating our "Shuangge English" App.

(7)
Primarily involved in providing our general adult English training.

(8)
Primarily involved in providing our online English training.

Contractual Arrangements with our VIEs and Their Respective Shareholders

        Currently, the PRC laws and regulations do not explicitly impose restrictions on foreign investment in the ELT services in the PRC. However, some local government authorities in the PRC have adopted different approaches to granting licenses and permits (particularly, imposing more stringent restrictions on foreign-invested entities) for entities providing ELT services. In the areas where we operate our ELT service business, most local government authorities do not allow foreign-invested entities to establish private institutions to engage in the ELT services, other than in the forms of Sino-foreign cooperative institutions, and the domestic party shall play a dominant role in such cooperation. According to the relevant regulations, foreign investors of Sino-foreign cooperative institutions must be foreign educational institutions with relevant qualifications and experiences. As a foreign company, we are not qualified to run Sino-foreign cooperative institutions in the PRC. In addition, the PRC laws and regulations restrict foreign ownership in value-added telecommunication services and require that a foreign investor who invests in a value-added telecommunications business in the PRC must possess prior experience in operating value-added telecommunications businesses and a proven track record of business operations overseas.

        Due to the restrictions on foreign ownership in the ELT and value-added telecommunications services described above, we carry out our business in China through a variable interest entity structure. We currently have two wholly-owned subsidiaries, namely, Zhuhai Meten and Zhuhai Likeshuo, in China. Zhuhai Meten entered into a series of contractual arrangements with, among others, the shareholders of Shenzhen Meten, Shenzhen Meten and its affiliated entities on November 23, 2018 and April 2, 2019, to obtain effective control of Shenzhen Meten and its subsidiaries.

        The following is a summary of the currently effective contractual arrangements entered into by and among others, Zhuhai Meten, Shenzhen Meten and their respective shareholders and affiliated entities.

Business Cooperation Agreement

        Pursuant to the business cooperation agreement, Zhuhai Meten shall provide management support, consulting services and technical services necessary for the English training and relevant services, and in return, Shenzhen Meten shall pay services fees to Zhuhai Meten accordingly as described under the exclusive technical service and management consultancy agreement. Without the prior written consent of Zhuhai Meten, Shenzhen Meten and its affiliated entities cannot accept services provided by or establishing similar corporation relationship with any third party. The agreement was entered into on November 23, 2018 and became effective on November 23, 2018 and will remain effective unless terminated upon the full exercise of call option in accordance with the exclusive call option agreement or unilaterally terminated by Zhuhai Meten with a notice of 30 days in advance. Unless otherwise required by applicable PRC laws, Shenzhen Meten and its affiliated entities and shareholders do not have any right to terminate the business corporation agreement.

Exclusive Technical Service and Management Consultancy Agreement

        Pursuant to the exclusive technical service and management consultancy agreement, Zhuhai Meten agreed to provide exclusive technical services to Shenzhen Meten and its affiliated entities, including, but not limited to, (i) design, development, update and maintenance of education software for

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computer and mobile devices; (ii) design, development, update and maintenance of webpages and websites necessary for the English training and relevant activities; (iii) design, development, update and maintenance of management information systems and other internal management systems necessary for the English training and relevant activities; (iv) provision of other technical support necessary for the education activities; (v) provision of technical consulting services; (vi) provision of technical training; (vii) engaging technical staff to provide on-site technical support; and (viii) providing other technical services reasonably requested by Shenzhen Meten and its affiliated entities.

        Without the prior written consent of Zhuhai Meten, Shenzhen Meten and their respective affiliated entities cannot accept services provided by or establishing similar corporation relationship with any third party. Zhuhai Meten owns the exclusive intellectual property rights created as a result of the performance of this agreement unless otherwise provided by the PRC laws or regulations. In consideration of the technical and management consultancy services provided by Zhuhai Meten, Shenzhen Meten and their respective affiliated entities agreed to pay annual service fees to Zhuhai Meten in an amount at Zhuhai Meten's discretion. The agreement was entered into on November 23, 2018 and became effective on November 23, 2018 and will remain effective unless terminated upon the full exercise of call option in accordance with the exclusive call option agreement or unilaterally terminated by Zhuhai Meten with a 30-day notice in advance. Unless otherwise required by applicable PRC laws, Shenzhen Meten and its affiliated entities do not have any right to terminate the exclusive technical service and management consultancy agreement.

Exclusive Call Option Agreement

        Under the exclusive call option agreement, the shareholders of Shenzhen Meten have irrevocably granted Zhuhai Meten or its designated purchaser the right to purchase all or part of the equity interest and all or part of the school sponsor's interest owned by them in Shenzhen Meten and its affiliated entities at a purchase price equal to the lowest price permitted under the PRC laws and regulations. Zhuhai Meten or its designated purchaser shall have the right to purchase such proportion of equity interests or school sponsor's interest in Shenzhen Meten and its affiliated entities as it decides at any time.

        In the event that PRC laws and regulations allow Zhuhai Meten or us to directly hold all or part of the equity interest and/or all or part of the school sponsor's interest in Shenzhen Meten and its affiliated entities and operate English training and relevant businesses in the PRC, Zhuhai Meten shall issue the notice of exercise of the equity call option as soon as practicable, and the percentage of equity interest and/or school sponsor's interest purchased upon exercise of the equity call option shall not be lower than the maximum percentage then allowed to be held by Zhuhai Meten or us under PRC laws and regulations. This agreement was entered into on November 23, 2018 and became effective on November 23, 2018 and will remain effective unless terminated upon the full exercise of call option in accordance with this agreement or unilaterally terminated by Zhuhai Meten with a 30-day notice in advance. Unless otherwise required by applicable PRC laws, Shenzhen Meten and its affiliated entities and shareholders do not have any right to terminate the exclusive call option agreement.

Equity Pledge Agreement

        Pursuant to the equity pledge agreement, each of the shareholders of Shenzhen Meten unconditionally and irrevocably pledged and granted first priority security interests over all of his/her/its equity interest in Shenzhen Meten together with all related rights thereto to Zhuhai Meten as security for performance of the contractual arrangements and all direct, indirect or consequential damages and foreseeable loss of interest incurred by Zhuhai Meten as a result of any event of default on the part of the shareholders or Shenzhen Meten and its affiliated entities and all expenses incurred by Zhuhai Meten as a result of enforcement of the obligations of the shareholders and/or Shenzhen Meten under the contractual arrangements. If any of the specified events of default occurs, Zhuhai Meten may

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exercise the right to enforce the pledge by written notice to the shareholders of Meten Education in one or more of the following ways: (i) to the extent permitted under PRC laws and regulations, Zhuhai Meten may request the shareholders of Shenzhen Meten to transfer all or part of his/her/its equity interest in Shenzhen Meten to any entity or individual designated by Zhuhai Meten at the lowest consideration permissible under the PRC laws and regulations; (ii) sell the pledged equity interest by way of auction or at a discount and have priority in the entitlement to the sales proceeds; or (iii) dispose of the pledged equity interest in other manner subject to applicable laws and regulations. This agreement was entered into on November 23, 2018 and became effective on November 23, 2018 and will remain effective unless terminated upon the full exercise of all obligations under the contractual arrangements or unilaterally terminated by Zhuhai Meten with a 30-day notice in advance. Unless otherwise required by applicable PRC laws, Shenzhen Meten and its affiliated entities and shareholders do not have any right to terminate the equity pledge agreement.

Shareholders' Rights Entrustment Agreement

        Pursuant to the shareholders' rights entrustment agreement, each of the shareholders of Shenzhen Meten has irrevocably authorized and entrusted Zhuhai Meten to exercise of all his/her/its respective rights as shareholders of Shenzhen Meten to the extent permitted by the PRC laws. These rights include, but not limited to: (i) the right to attend shareholders' meetings of Shenzhen Meten, as the case may be; (ii) the right to exercise voting rights in respect of all matters discussed and resolved at the shareholders' meeting of Shenzhen Meten; (iii) the right to propose to convene interim shareholders' meetings of Shenzhen Meten, as the case may be; (iv) the right to sign all shareholders' resolutions and other legal documents which the shareholders have authority to sign in its capacity as shareholders of Shenzhen Meten, as the case may be; (v) the right to instruct the directors and legal representative of Shenzhen Meten, as the case may be to act in accordance with the instruction of Shenzhen Meten; (vi) the right to exercise all other rights and voting rights of shareholders as prescribed under the articles of association of Shenzhen Meten and its affiliated entities, as the case may be; (vii) the right to handle the legal procedures of registration, approval and licensing of Shenzhen Meten, as the case may be, at business administration department or other government regulatory departments; (viii) the right to transfer or dispose his/her/its equity interest in Shenzhen Meten; and (ix) other shareholders' rights pursuant to applicable PRC laws and regulations and the articles of association of Shenzhen Meten as amended from time to time. This agreement was entered into on November 23, 2018 and became effective on November 23, 2018 and will remain effective unless terminated upon the full exercise of call option in accordance with the exclusive call option agreement or unilaterally terminated by Zhuhai Meten with a 30-day notice in advance. Unless otherwise required by applicable PRC laws, Shenzhen Meten and its affiliated entities and shareholders do not have any right to terminate the shareholders' rights entrustment agreement.

Spouse Undertakings

        Pursuant to the spouse undertakings, the respective spouse of the individual shareholders of Shenzhen Meten has irrevocably agreed to the execution of business cooperation agreement, exclusive technical service and management consultancy agreement, exclusive call option agreement, equity pledge agreement and shareholders' rights entrustment agreement. The respective spouse of the individual shareholders of Shenzhen Meten further undertakes that he or she has not participated, is not participating and shall not in the future participate in the operation, management, liquidation, dissolution and other matters in relation to Shenzhen Meten and its affiliated entities, and confirms that the respective shareholder or its designated person can execute all necessary documents and perform all necessary procedures and give effect to the fundamental purposes under the contractual arrangements mentioned above, and further confirms and agrees to all such documents and procedures in relation to the spouse's equity interest in Shenzhen Meten. The spouse undertaking shall not be revoked, prejudiced, invalidated or otherwise adversely affected by any increase, decrease, consolidation

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or other similar events relating to the direct or indirect equity interest in Shenzhen Meten or affected by the death, loss of or restriction on capacity of the spouse, divorce or other similar events. The valid term of the spouse undertakings is same as the term of the business cooperation agreement and shall continue to be valid and binding until otherwise terminated by both Zhuhai Meten and the spouses of the respective individual shareholders in writing.

        On November 23, 2018, our wholly-owned subsidiary, Zhuhai Likeshuo entered into a series of contractual arrangements which are substantially the same as the contractual arrangements discussed above with the shareholders of Shenzhen Likeshuo, Shenzhen Likeshuo, and its affiliated entities to obtain effective control of Shenzhen Likeshuo and its subsidiaries.

        In the opinion of our PRC counsel these contractual arrangements are valid, binding, and do not and will not violate applicable PRC laws currently in effect, except that the pledges on the equity interests in our VIEs would not be deemed validly created until they are registered with the competent administration of industry and commerce. However, these contractual arrangements may not be as effective in providing control as direct ownership. There are substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations. For a description of the risks related to our contractual arrangements, please see "Risk Factors—Risks Related to Our Corporate Structure."

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USE OF PROCEEDS

        We estimate that we will receive net proceeds from this offering of approximately US$             million, or US$             million if the underwriters exercise their option to purchase additional ADSs in full, after deducting underwriting discounts, commissions and the estimated offering expenses payable by us and based upon an assumed initial offering price of US$            per ADS (the mid-point of the estimated public offering price range shown on the front cover of this prospectus). Assuming the number of ADSs offered by us as set forth on the cover page of this prospectus remains the same, a US$1.00 increase (decrease) in the assumed initial public offering price of US$            per ADS would increase (decrease) the net proceeds to us from this offering by US$             million, after deducting the estimated underwriting discounts and commissions and estimated aggregate offering expenses payable by us. We will not receive any of the proceeds from the sale of the ADSs being sold by the selling shareholders.

        We currently intend to use the net proceeds from this offering for the following purposes:

    approximately US$             million is expected to be used primarily to acquire or invest in companies in the private ELT industry in China, including those companies that focus on providing general adult English training and/or junior English training. As of the date of this prospectus, we have not yet identified any suitable acquisition or investment target;

    approximately US$             million is expected to be used primarily to establish new learning centers to expand our offline service network nationwide. Specifically, we will focus more on provincial and regional central cities with relatively high income per capita, developed local economy and high demand for English usage. Furthermore, we will further penetrate into tier two cities and tier three cities surrounding tier one cities, where we have already established learning centers;

    approximately US$             million is expected to be used primarily to develop our online English training services on our "Likeshuo" platform. In particular, we plan to support the research and development of course content and technologies on our "Likeshuo" platform as well as to increase investment in the marketing activities to enhance our brand recognition;

    approximately US$             million is expected to be used primarily to develop our junior English training service in terms of the research and development of the relevant course content and technologies;

    approximately US$             million is expected to be used primarily as investment in our sales efforts to strengthen our market position; and

    the remaining balance is expected to be used for working capital and general corporate purposes.

        The foregoing represents our current intentions with respect to the use and allocation of the net proceeds of this offering based upon our present plans and business conditions, but our management will have significant flexibility and discretion in applying the net proceeds of this offering. The occurrence of unforeseen events or changed business conditions may result in application of the proceeds of this offering in a manner other than as described in this prospectus.

        In utilizing the proceeds from this offering, we are permitted under the PRC laws and regulations to provide funding to our PRC subsidiaries only through loans or capital contributions and only if we satisfy the applicable government registration and approval requirements. Under the PRC laws and regulations, capital contributions to our PRC subsidiaries are required to be filed with the Ministry of Commerce and SAIC or their local counterparts and also be registered with the local banks authorized by the State Administration of Foreign Exchange of the PRC, or the SAFE. Any loan that we provide our PRC subsidiaries may not exceed a statutory limit and is required to be filed with the SAFE after

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the loan agreement is signed and at least three business days prior to any drawdown by the borrower under the loan. Currently, there is no statutory limit on the amount of funding that we can provide to our PRC subsidiaries through capital contributions. However, the maximum amount we can loan to our PRC subsidiaries is subject to statutory limits. According to the current PRC laws and regulations, we can provide funding to our PRC subsidiaries through loans of up to either (i) the amount of the difference between the respective registered total investment amount and registered capital of each of our PRC subsidiaries, or the Total Investment and Registered Capital Balance; or (ii) two times, or the then applicable statutory multiple, the amount of the respective net assets of our PRC subsidiaries, calculated in accordance with PRC GAAP, or the Net Assets Limit, at our election. If we choose to make a loan to a PRC subsidiary based on the Total Investment and Registered Capital Balance as of the date of this prospectus, subject to the completion of statutory procedures with the relevant government authorities and banks, we may extend a loan with an estimated aggregate maximum amount of approximately RMB180.0 million to our PRC subsidiaries. We may increase the Total Investment and Registered Capital Balance of our PRC subsidiaries, which is subject to the governmental procedures and may require a PRC subsidiary to increase its registered capital at the same time. We choose to make a loan to a PRC entity based on its Net Assets Limit, the maximum amount we would be able to loan to the relevant PRC entity would depend on the relevant entity's net assets and the applicable statutory multiple at the time of calculation. As of the date of this prospectus, our PRC subsidiaries have negative net assets, we cannot provide loans to them using Net Assets Limit. PRC laws and regulations may also impose more stringent limitations to cross-border loans, which will also have negative impact on our ability to fund our PRC entities. We cannot assure you that we will be able to complete or obtain these governmental filings, registrations or approvals on a timely basis, if at all. See "Risk Factors—Risks Related to Our Corporate Structure—The PRC regulation of loans and direct investments in PRC subsidiaries by offshore holding companies and governmental control of currency conversion may delay us from using the proceeds of this offering to make additional capital contributions to our PRC subsidiaries, our affiliated entities, which could harm our liquidity and our ability to fund and expand our business."

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DIVIDEND POLICY

        We previously did not declare or pay any cash dividends and have no intention to declare or pay any dividends in the near future on our ordinary shares or the ADSs representing our ordinary shares. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.

        Our board of directors has complete discretion in deciding whether to distribute dividends. Even if our board of directors decides to pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors.

        If we pay any dividends, our ADS holders will be entitled to such dividends to the same extent as holders of our Class A ordinary shares, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. See "Description of American Depositary Shares." Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars.

        We are a holding company with no material operations of our own. We conduct our operations primarily through our affiliated entities in China. PRC regulations may restrict the ability of our PRC subsidiaries to pay dividends to us. As a result, our ability to pay dividends and to finance any debt we may incur depends upon dividends paid by our subsidiaries. If our existing subsidiaries or any newly formed subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us.

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CAPITALIZATION

        The following table sets forth our capitalization as of March 31, 2019 presented on:

    an actual basis; and

    an as adjusted basis, to reflect the issuance and sale of Class A ordinary shares in the form of ADSs offered hereby at an assumed initial public offering price of US$            per ADS, the mid-point of the estimated public offering price range shown on the front cover of this prospectus, after deducting underwriting discounts, commissions and estimated offering expenses payable by us and assuming no exercise of the underwriters' option to purchase additional ADSs and no other change to the number of ADS sold by us as set forth on the cover page of this prospectus.

        You should read this table in conjunction with "Selected Consolidated Financial and Operating Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in this prospectus.

 
  As of March 31, 2019  
 
  Actual   As adjusted  
 
  RMB   US$   RMB   US$  
 
  (in thousands, except for share and
per share data)

 

Shareholders' deficit:

   
 
   
 
   
 
   
 
 

Ordinary shares

    219     33              

Subscriptions receivable

    (219 )   (33 )            

Additional paid-in capital(1)

    169,458     25,250              

Accumulated deficit

    (347,013 )   (51,707 )            

Non-controlling interest

    22,735     3,387              

Total shareholders' deficit

   
(154,820

)
 
(23,070

)
           

(1)
A US$1.00 increase (decrease) in the assumed initial public offering price of US$            per ADS, the midpoint of the estimated range of the initial public offering price shown on the cover page of this prospectus, would increase (decrease) each of additional paid-in capital, total shareholders' equity and total capitalization by US$             million, assuming the number of ADSs offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

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DILUTION

        If you invest in our ADSs, you will experience dilution to the extent of the difference between the initial public offering price per ADS you pay in this offering and the pro forma net tangible book value per ADS immediately after this offering. Dilution results from the fact that the assumed initial public offering price per ordinary share is substantially in excess of the net tangible book value per ordinary share attributable to the existing shareholders for our presently outstanding ordinary shares.

        Our net tangible book value as of March 31, 2019 was approximately US$             million, or US$            per ordinary share outstanding at that date, and US$            per ADS. Net tangible book value per ordinary share is determined by dividing our net tangible book value by the number of outstanding ordinary shares. Our net tangible book value is determined by subtracting the value of our acquired net intangible assets, goodwill, total liabilities and minority interests from our total assets. Dilution is determined by subtracting net tangible book value per ordinary share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

        Without taking into account any other changes in such net tangible book value after March 31, 2019, other than to give effect to the issuance and sale of the ordinary shares in the form of ADSs offered hereby at an assumed initial public offering price of US$            per ADS, which is the mid-point of the estimated public offering price range shown on the front cover of this prospectus and, after deducting underwriting discounts and commissions and estimated offering expenses payable by us and assuming no exercise of the underwriters' option to purchase additional ADSs and no other change to the number of ADSs sold by us as set forth on the cover page of this prospectus, our pro forma net tangible book value as of March 31, 2019, would have been US$             million, US$            per outstanding ordinary share, including ordinary shares underlying our outstanding ADSs, and US$            per ADS. This represents an immediate increase in pro forma net tangible book value of US$            per ordinary share, or US$            per ADS, to existing shareholders and an immediate dilution in pro forma net tangible book value of US$            per ordinary share, or US$            per ADS, to new investors in this offering. The following table illustrates such per ordinary share dilution:

Assumed initial public offering price per ordinary share

  US$    

Assumed initial public offering price per ADS

  US$    

Net tangible book value per ordinary share as of March 31, 2019

  US$    

Increase in net tangible book value per ordinary share attributable to price paid by new investors

  US$    

Pro forma net tangible book value per ordinary share after the offering

  US$    

Dilution in net tangible book value per ordinary share to new investors in the offering

  US$    

Dilution in net tangible book value per ADS to new investors in the offering

  US$    

        A US$1.00 increase (decrease) in the assumed initial public offering price of US$            per ADS (mid-point of the estimated public offering price range shown on the front cover of this prospectus) would increase (decrease) our pro forma net tangible book value after giving effect to the offering by US$             million, the pro forma net tangible book value per ordinary share and per ADS after giving effect to this offering by US$            per ordinary share and US$            per ADS and the dilution in pro forma net tangible book value per ordinary share and per ADS to new investors in this offering by US$            per ordinary share and US$            per ADS, assuming no change to the number of ADSs offered by us as set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma information discussed above is illustrative only. Our net tangible book value following the closing of this offering is

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subject to adjustment based on the actual initial public offering price of our ADSs and other terms of this offering determined at pricing.

        The following table summarizes on a pro forma basis the differences as of March 31, 2019 between the shareholders at our most recent fiscal year end and the new investors with respect to the number of ordinary shares purchased from us, the total consideration paid and the average price per ordinary share paid before deducting the underwriting discounts and commissions and estimated offering expenses payable by us. The total ordinary shares do not include ADSs issuable if any of the options to purchase our ordinary shares outstanding as of March 31, 2019 are exercised or ADSs issuable upon the exercise of the option to purchase additional ADSs granted to the underwriters. The information in the following table is illustrative only and the total consideration paid and the average price per ordinary share equivalent and per ADS equivalent is subject to adjustment based on the actual initial public offering price of our ADSs and other terms of this offering determined at pricing.

 
  Ordinary shares
purchased
  Total
consideration
   
   
 
 
  Average price per
ordinary share
equivalent
  Average price per
ADS equivalent
 
 
  Number   %   Amount   %  

Existing shareholders(1)

                          US$     US$    

New investors

                          US$     US$    

Total

                      100.0              

(1)
Assumes an initial public offering price of US$            per ADS, the midpoint of the estimated range of the initial public offering price shown on the front cover of this prospectus.

        The dilution to new investors will be US$            per ordinary shares and US$            per ADS, if the underwriters exercise in full their option to purchase additional ADSs.

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EXCHANGE RATE INFORMATION

        We conduct substantially all of our operations in China. All of our revenue, costs and expenses are denominated in Renminbi. This prospectus contains translations of certain Renminbi amounts into U.S. dollars at specified rates. Unless otherwise stated, the translation of Renminbi into U.S. dollars has been made at the rate of RMB6.7112 to US$1.00, the exchange rate as set forth in the H.10 statistical release of the Federal Reserve Board on March 29, 2019. We make no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, the rates stated below, or at all. The PRC government imposes controls over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign exchange and through restrictions on foreign trade. On May 17, 2019, the noon buying rate as set forth in the H.10 statistical release of the Federal Reserve Board was RMB6.9182 to US$1.00.

        The following table sets forth information concerning the rates of exchange of US$1.00 into RMB for the periods indicated. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in this prospectus or will use in the preparation of our periodic reports or any other information to be provided to you.

 
  Noon Buying Rate  
Period
  Period End   Average(1)   Low   High  
 
  (RMB per US$1.00)
 

2013

    6.0537     6.1412     6.0537     6.2438  

2014

    6.2046     6.1704     6.0402     6.2591  

2015

    6.4778     6.2869     6.1870     6.4896  

2016

    6.9430     6.6549     6.4480     6.9580  

2017

    6.5063     6.7350     6.4773     6.9575  

2018

    6.8755     6.6090     6.2649     6.9737  

2019

                         

January

    6.6958     6.7863     6.6958     6.8708  

February

    6.6912     6.7337     6.6822     6.7907  

March

    6.7112     6.7119     6.6916     6.7381  

April

    6.7374     6.7161     6.7032     6.7418  

May (from May 1, 2019 to May 17, 2019)

    6.9182     6.8146     6.7319     6.9182  

Source: Federal Reserve Statistical Release

(1)
Averages for a period are calculated by using the average of the exchange rates on the end of each month during the period. Monthly averages are calculated by using the average of the daily rates during the relevant period.

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SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

        The following selected consolidated statements of comprehensive income/(loss) data for the years ended December 31, 2016, 2017 and 2018, selected consolidated balance sheets data as of December 31, 2017 and 2018, and selected consolidated cash flow data for the years ended December 31, 2016, 2017 and 2018 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. In addition, the following selected consolidated statements of comprehensive income/(loss) data for the three months ended March 31, 2018 and 2019, selected consolidated balance sheets data as of March 31, 2019, and selected consolidated cash flow data for the three months ended March 31, 2018 and 2019 have been derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. We have prepared the unaudited condensed consolidated financial statements on the same basis as our audited consolidated financial statements, except for the adoption of ASU No. 2016-02, "Leases" on January 1, 2019, as mentioned in note 3 to our unaudited condensed consolidated financial statements included elsewhere in this prospectus. Our consolidated financial statements are prepared and presented in accordance with U.S. GAAP.

        Meten International Education Group was incorporated as an exempted company with limited liability in the Cayman Islands in July 2018 and as our offshore holding company in connection with the Reorganization. Our businesses have historically been conducted through Shenzhen Meten and our operating results prior to the Reorganization, the details of which are described in note 1(b) to our consolidated financial statements included elsewhere in this prospectus, have historically been included in the consolidated financial statements of Shenzhen Meten. The Reorganization was completed in November 2018, the consolidated financial statements included in this prospectus are prepared on a consolidated basis to include our operating results using historical amounts as if our Company had been in existence throughout the periods presented.

        Our historical results are not necessarily indicative of results expected for future periods. You should read this Selected Consolidated Financial and Operating Data section together with our consolidated financial statements and the related notes and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section included elsewhere in this prospectus.

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  For the Year Ended December 31,   For the Three Months Ended
March 31,
 
 
  2016   2017   2018   2018   2019  
 
  RMB   RMB   RMB   US$   RMB   RMB   US$  
 
  (in thousands)
 
 
   
   
   
  Unaudited
  Unaudited
  Unaudited
  Unaudited
 

Consolidated Statements of Comprehensive (Loss)/Income Data:

                                           

Revenues

    801,545     1,149,721     1,424,234     212,217     332,362     314,803     46,907  

Cost of revenues

    (344,810 )   (467,967 )   (627,996 )   (93,574 )   (132,316 )   (172,772 )   (25,744 )

Gross profit

    456,735     681,754     796,238     118,643     200,046     142,031     21,163  

Operating expenses

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Selling and marketing expenses

    (268,643 )   (373,065 )   (425,217 )   (63,359 )   (99,921 )   (108,608 )   (16,183 )

General and administrative expenses

    (198,431 )   (237,509 )   (293,157 )   (43,682 )   (65,027 )   (81,626 )   (12,163 )

Research and development expenses

    (18,187 )   (21,217 )   (26,178 )   (3,901 )   (7,707 )   (5,867 )   (874 )

(Loss)/income from operations

    (28,526 )   49,963     51,686     7,701     27,391     (54,070 )   (8,057 )

Other income (expenses):

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Interest income

    2,578     4,103     1,150     171     375     178     27  

Interest expenses

    (769 )   (9 )   (8 )   (1 )   (2 )   (351 )   (52 )

Foreign exchange gain/(loss), net

    67     (184 )   21     3     34     (3 )    

Gains on available-for-sale investments

    890     2,485     3,916     584     484          

Government grants

    4,434     4,046     7,817     1,165     2,524     1,659     247  

Equity in income/(loss) on equity method investments

    (842 )   (150 )   1,668     249     1,267     2,553     380  

Others, net

    2,890     (373 )   1,649     246     309     (63 )   (9 )

(Loss)/income before income tax

    (19,278 )   59,881     67,899     10,118     32,382     (50,097 )   (7,464 )

Income tax (expense)/benefit

   
(7,869

)
 
(19,539

)
 
(14,454

)
 
(2,154

)
 
(4,346

)
 
7,936
   
1,183
 

Net (loss)/income

   
(27,147

)
 
40,342
   
53,445
   
7,964
   
28,036
   
(42,161

)
 
(6,281

)

Less: Net loss attributable to non-controlling interests

    (2,862 )   (218 )   (3,809 )   (568 )   (620 )   (1,006 )   (150 )

Net (loss)/income attributable to shareholders of our Company

   
(24,285

)
 
40,560
   
57,254
   
8,532
   
28,656
   
(41,155

)
 
(6,131

)

Less: Accretion of redeemable owner's investments

    10,577     19,000     9,814     1,462     4,685          

Net (loss)/income available to shareholders of our Company

    (34,862 )   21,560     47,440     7,070     23,971     (41,155 )   (6,131 )

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  As of December 31,   As of March 31,  
 
  2017   2018   2019  
 
  RMB   RMB   US$   RMB   US$  
 
  (in thousands)
 
 
   
   
  Unaudited
  Unaudited
  Unaudited
 

Consolidated Balance Sheets Data:

                               

Current assets

                               

Cash and cash equivalents

    321,776     174,679     26,028     117,992     17,581  

Short-term investments

    50,187                  

Contract assets

    11,851     14,208     2,117     14,946     2,227  

Accounts receivable, net

    1,111     2,221     331     7,883     1,175  

Other contract costs

    43,041     46,503     6,928     45,184     6,733  

Prepayments and other current assets

    65,013     104,761     15,610     114,615     17,078  

Amounts due from related parties

    77,363     28,706     4,277     5,452     812  

Prepaid income tax

    3,523     12,674     1,888     12,616     1,880  

Total current assets

    573,865     383,752     57,179     318,688     47,486  

Non-current assets

                               

Restricted cash

    6,581     14,787     2,203     10,284     1,532  

Other contract costs

    13,752     7,968     1,187     11,863     1,768  

Equity method investments

    18,008     23,426     3,491     25,980     3,871  

Property and equipment, net

    195,411     211,954     31,582     206,678     30,796  

Operating lease right-of-use assets

                409,721     61,050  

Intangible assets, net

        36,904     5,499     29,192     4,350  

Deferred tax assets

    26     4,072     607     13,004     1,938  

Goodwill

    53,542     276,905     41,260     276,905     41,260  

Long-term prepayments and other non-current assets

    44,329     46,978     7,000     57,112     8,510  

Total non-current assets

    331,649     622,994     92,829     1,040,739     155,075  

Total assets

    905,514     1,006,746     150,008     1,359,427     202,561  

Current liabilities

                               

Accounts payable

    7,056     13,974     2,082     9,882     1,473  

Bank loans

                35,000     5,216  

Deferred revenue

    341,328     432,083     64,382     412,939     61,530  

Salary and welfare payable

    70,032     67,892     10,116     78,207     11,653  

Financial liability from contracts with customers

    437,027     423,163     63,053     474,108     70,644  

Accrued expenses and other payables

    34,478     78,625     11,715     43,092     6,421  

Current lease liabilities

                118,638     17,678  

Income taxes payable

    9,481     3,468     517     6,006     895  

Amounts due to related parties

    9,272     20,073     2,991     4,740     706  

Total current liabilities

    908,674     1,039,278     154,856     1,182,612     176,216  

Non-current liabilities

                               

Deferred revenue

    42,707     52,169     7,773     31,913     4,755  

Deferred tax liabilities

    7,489     23,101     3,442     20,223     3,013  

Operating lease liabilities

                272,698     40,633  

Non-current tax payable

        6,801     1,013     6,801     1,014  

Total non-current liabilities

    50,196     82,071     12,228     331,635     49,415  

Total liabilities

    958,870     1,121,349     167,084     1,514,247     225,631  

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  As of December 31,   As of March 31,  
 
  2017   2018   2019  
 
  RMB   RMB   US$   RMB   US$  
 
  (in thousands)
 
 
   
   
  Unaudited
  Unaudited
  Unaudited
 

Mezzanine equity

                               

Redeemable owners' investment

    219,619                  

Shareholders' deficit

                               

Ordinary shares

        219     33     219     33  

Subscription receivable

        (219 )   (33 )   (219 )   (33 )

Additional paid-in capital

    88,517     167,514     24,960     169,458     25,250  

Accumulated other comprehensive income

    140                  

Accumulated deficit

    (363,112 )   (305,858 )   (45,574 )   (347,013 )   (51,707 )

Total deficit attributable to shareholders of the Company

    (274,455 )   (138,344 )   (20,614 )   (177,555 )   (26,457 )

Non-controlling interests

    1,480     23,741     3,538     22,735     3,387  

Total shareholders' deficit

    (272,975 )   (114,603 )   (17,076 )   (154,820 )   (23,070 )

Commitments and contingencies

                     

Total liabilities, mezzanine equity and shareholders' deficit

    905,514     1,006,746     150,008     1,359,427     202,561  

 

 
  For the Year Ended December 31,   For the Three Months Ended
March 31,
 
 
  2016   2017   2018   2018   2019  
 
  RMB   RMB   RMB   US$   RMB   RMB   US$  
 
  (in thousands)
 
 
   
   
   
  Unaudited
  Unaudited
  Unaudited
  Unaudited
 

Selected Consolidated Cash Flow Data:

                                           

Net cash flow generated from/(used in) operating activities

    92,624     259,708     78,535     11,701     (9,672 )   (41,411 )   (6,170 )

Net cash used in investing activities

    (110,586 )   (128,629 )   (74,793 )   (11,145 )   (85,643 )   (34,778 )   (5,182 )

Net cash generated from/(used in) financing activities

    123,636     6,021     (142,633 )   (21,252 )   (1,376 )   14,999     2,234  

Net increase/(decrease) in cash and cash equivalents and restricted cash

    105,674     137,100     (138,891 )   (20,696 )   (96,691 )   (61,190 )   (9,118 )

Cash and cash equivalents and restricted cash at the beginning of year/period

    85,583     191,257     328,357     48,927     328,357     189,466     28,231  

Cash and cash equivalents and restricted cash at the end of the year/period

    191,257     328,357     189,466     28,231     231,666     128,276     19,113  

Non-GAAP Financial Measures

        To supplement our consolidated financial statements which are presented in accordance with U.S. GAAP, we also use adjusted EBITDA as an additional non-GAAP financial measure. We present this non-GAAP financial measure because it is used by our management to evaluate our operating performance. We also believe that such non-GAAP financial measure provides useful information to investors and others in understanding and evaluating our consolidated results of operations in the same

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manner as our management and in comparing financial results across accounting periods and to those of our peer companies.

        Adjusted EBITDA should not be considered in isolation or construed as an alternative to net income/(loss) or any other measure of performance or as an indicator of our operating performance. Investors are encouraged to compare the historical non-GAAP financial measure with the most directly comparable GAAP measures. Adjusted EBITDA presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data. We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure.

        Adjusted EBITDA represents net income/(loss), which excludes depreciation and amortization and income tax expenses/(benefit), before share-based compensation expenses and offering expenses. The table below sets forth a reconciliation of our net loss to adjusted EBITDA for the period indicated:

 
  For the Year Ended December 31,   For the Three Months Ended
March 31,
 
 
  2016   2017   2018   2018   2019  
 
  RMB   RMB   RMB   US$   RMB   RMB   US$  
 
  (in thousands)
 

Net (loss)/income

    (27,147 )   40,342     53,445     7,964     28,036     (42,161 )   (6,281 )

Subtract:

                                           

Net interest income

    1,809     4,094     1,142     170     373     (173 )   (25 )

Add:

                                           

Income tax expense/(benefit)

    7,869     19,539     14,454     2,154     4,346     (7,936 )   (1,183 )

Depreciation and amortization

    31,659     36,768     54,944     8,187     9,550     16,449     2,451  

EBITDA

    10,572     92,555     121,701     18,135     41,559     (33,475 )   (4,988 )

Add:

                                           

Share-based compensation expenses

    6,557     7,886     7,648     1,140     1,924     1,944     290  

Offering expenses

            14,766     2,199     1,629     3,158     470  

Adjusted EBITDA

    17,129     100,441     144,115     21,474     45,112     (28,373 )   (4,228 )

Key Operating Data

        The following table presents our key operating data for the periods indicated:

 
  As of/for the Year
Ended December 31,
  As of/for
the Three
Months
Ended
March 31,
 
 
  2016   2017   2018   2019  

Student enrollment

    55,758     82,728     118,277     28,617  

Gross billings (RMB'000)

    974,878     1,318,690     1,424,026     334,770  

Number of self-operated learning centers

    85     94     119     120  

Number of franchised learning centers

    2     8     16     16  

Course withdrawal rate(1) %

    6.9     9.1     10.2     10.2  

(1)
Refers to the amount of refunds we issued in a specific period of time as a percentage of the sum of the amount of gross billings and the amount of refunds for such period.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the section entitled "Selected Consolidated Financial Data and Operating Data" and our consolidated financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Risk Factors" and elsewhere in this prospectus.

Overview

        We are a leading general ELT service provider in China. We are committed to improving the overall English competence and practical English skills of the general Chinese population. We are a leader in China's fast-growing general ELT market. According to the Frost & Sullivan Report, we are the second largest player in China's offline general ELT market in terms of revenue in 2018. We offer a comprehensive ELT service portfolio comprising general adult English training, junior English training, overseas training services, online English training and other English language-related services to students from a wide range of age groups.

        We have established a highly scalable offline-online business model. We have a nationwide offline network of both self-operated learning centers and franchised learning centers. As of March 31, 2019, we had established a nationwide offline learning center network of 120 self-operated learning centers covering 26 cities in 14 provinces, autonomous regions and municipalities in China, and 16 franchised learning centers across 11 provinces and municipalities in China as of March 31, 2019. In terms of the number of self-operated learning centers, we were ranked first in the general ELT market in China as of December 31, 2018, when we had 119 self-operated learning centers, according to the Frost & Sullivan Report. We also operate the "Likeshuo" platform to offer online live streaming English training services. As of March 31, 2019, we had approximately 830,000 registered users on our "Likeshuo" platform and cumulatively over 160,000 paying users, who purchased our online English training courses or trial lessons. As of the same date, the cumulative number of student enrollments in our online English training courses since 2014 was approximately 98,000 and we had delivered over 2.8 million accumulated course hours to our students online. According to the Frost & Sullivan Report, we were the second largest online general adult ELT service provider in China in terms of revenue in 2018.

        We experienced significant growth in the past several years. Our revenue increased from RMB801.5 million in 2016 to RMB1,149.7 million in 2017, and further to RMB1,424.2 million (US$212.2 million) in 2018, largely due to the expansion of our learning center network involving an increase in the number of self-operated and franchised learning centers, as well as additional student enrollment in our offline and online English training courses. Our revenue decreased from RMB332.4 million for the three months ended March 31, 2018 to RMB314.8 million (US$46.9 million) for the same period in 2019. Along with the expansion of our learning center network, our brands have also strengthened. This has allowed us to maintain our position as a market leader, improve our profitability and enjoy a highly loyal customer base. We recorded adjusted EBITDA of RMB17.1 million, RMB100.4 million and RMB144.1 million (US$21.5 million) for the years ended December 31, 2016, 2017 and 2018, respectively. We also recorded adjusted EBITDA of RMB45.1 million for the three months ended March 31, 2018 and negative adjusted EBITDA of RMB28.4 million (US$4.2 million) for the three months ended March 31, 2019. Our net results improved and from a net loss of RMB27.1 million in 2016 to a net income of RMB40.3 million in 2017, and further to a net income of RMB53.4 million (US$8.0 million) in 2018. We recorded a net loss of RMB42.2 million (US$6.3 million) for the three months ended March 31, 2019.

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Major Factors Affecting Our Results of Operations

        We operate in China's ELT market, and our results of operations and financial condition are significantly affected by the general factors driving this market. China's rapid economic growth over the past two decades and the increasing per capita disposable income have led to both increased spending on English language education services and intensified competition for high-quality education resources.

        We have benefited from a number of factors, including, but not limited to, China's rising birth rate, which largely results from the rising population in large urban centers, increases in average household income, increasing number of high-income families, limited penetration of ELT services across China, favorable government policies that support the growth of private education enterprises and permits that increase operational and pricing flexibility, and the continued focus on study-abroad opportunities by parents.

        At the same time, our results are subject to the changes in the regulatory regime governing the education industry in China. The PRC government regulates various aspects of our business and operations, including the qualification and licensing requirements for entities that provide education services, standards for operating facilities and limitations on foreign investments in the education industry. In addition, the PRC laws and regulations on private education and training services and related regulatory practices are constantly evolving, involve substantial uncertainties, and their implementation differs from region to region. For example, among our self-operated learning centers in operation as of March 31, 2019, 81 of them did not have the private school operating permits or business licenses, or were operating beyond the authorized business scope. While we believe some of these learnings centers were not required to obtain such private school operating permits based on local regulations, 46 of them were probably operating without the requisite private school operating permits or business licenses, or were operating beyond their authorized business scope, and they contributed to an aggregate of approximately 14.4% of our total gross billings for the three months ended March 31, 2019. In particular, three of these 46 learning centers located in Xi'an, Guangzhou and Shenzhen have been ordered to suspend their operations for rectification by the relevant local education authorities until they obtain the required private school operating permits, and they contributed to an aggregate of approximately 2.2% of our total gross billings for the three months ended March 31, 2019. Notwithstanding the above, we have continued to operate all of these 46 leaning centers and have not received any further notice or sanction from the relevant government authorities as of the date of this prospectus. Based on our understanding of the current PRC regulatory framework and discussion with our PRC counsel and the relevant local regulatory authorities, we currently believe that we will not be required to actually suspend the operation of any substantial number of our learning centers notwithstanding the regulatory uncertainties. However, we cannot assure you that PRC regulatory authorities will not take any action contrary to our belief in the future, in which case our revenues, gross profit, income from operations and net income may decrease significantly and our liquidity and capital resources may also be materially and adversely affected. See "Risk Factors—Risks Related to Our Business and Industry—We are required to obtain various operating permits and licenses for our English training services in China and failure to comply with these requirements may materially and adversely affect our business operations." For description of the evolving regulatory landscape in China, see "Regulations—Regulations on Private Education in the PRC."

        While our business is influenced by factors affecting the offline and online ELT market in China generally, we believe our results of operations are more directly affected by company-specific factors, including the major factors highlighted below.

Student Enrollment

        Our revenue primarily consists of course and service fees from students enrolled in our offline English training and online English training services, which is directly driven by the number of our student enrollments, which represents the number of actual new sales contracts entered into between us

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and our students, excluding the number of refunded contracts and contracts with no revenue generated during a specified period of time. Our total student enrollment increased by 112.1% from 55,758 in 2016 to 118,277 in 2018. Growth in our student enrollment is dependent on our ability to retain our current students and to recruit new students.

        Our ability to retain existing students is largely dependent on the variety and quality of our course offerings, the quality of our teachers and students' overall satisfaction with the education services we offer. A substantial number of the students are enrolled in our courses through word-of-mouth referrals. Consequently, our ability to recruit new students is largely dependent on our reputation and brand recognition, which are affected by our branding activities and other selling and marketing efforts. Our reputation and brand recognition were primarily driven by the satisfaction of our students and the high quality of our teaching staff. We have expanded our service offerings to a full spectrum of offline and online English training services, including general adult English training and overseas English training services to students of a wide range of age groups since the inception of our first self-operated learning center. In 2014, we launched our online English learning platform "Likeshuo" to offer online live streaming ELT courses to a wider coverage of student base. In 2018, we commenced to offer junior English training, which is mainly designed for students aged between six to 18, and introduced a new curriculum, the "Explore Curriculum," for our general adult English training.

Number and Maturity of the Learning Centers

        Our revenue growth is also driven by the number of our self-operated and franchised learning centers, which directly affects our overall student enrollment, as well as the maturity of our existing learning centers. Our ability to increase the number of self-operated and franchised learning centers depends on a variety of factors, including, but not limited to, identifying suitable locations and partners, hiring high-caliber teaching staff and other necessary personnel for the new learning centers, and other investment in implementing our centralized management across our offline learning center network. As of March 31, 2019, we had 120 self-operated learning centers covering 26 cities and 14 provinces in China, and 16 franchised learning centers across 11 provinces and municipalities in China. We have adopted a prudent approach to seek and evaluate qualified franchisees and implemented centralized management across all our self-operated and franchised learning centers in various stages. In addition, the maturity of our learning centers affects our revenue growth and profitability. Newly established learning centers normally start contributing to our revenue growth and profitability after an initial ramp-up period, which typically lasts between one to two years. In 2016, 2017 and 2018 and the three months ended March 31, 2019, most of our newly established learning centers were able to generate sufficient gross billings to cover their operating costs during the ramp-up period. The number of our self-operated learning centers had grown steadily in recent years, increasing from 70 as of January 1, 2016 to 119 as of December 31, 2018, and further to 120 as of March 31, 2019. As our network continues to grow in size, we believe that our large business scale strengthens our brands and enhances our reputation, which in turn supports the further growth of our network. The number of our learning centers in operation may also be affected by changes in PRC regulatory framework and practices. Among the 120 self-operated learning centers as of March 31, 2019, 46 of them were probably operating without the requisite private school operating permits or business licenses, or were operating beyond their authorized business scope, and three of them have been ordered to suspend their operations for rectification by the relevant local education authorities. While we have continued to operate all of these 46 leaning centers and have not received any further notice or sanction from the relevant government authorities as of the date of this prospectus, we cannot assure you that the PRC regulatory authorities will not take any further action in the future. If we have to actually suspend the business operation of any of our learning centers, our results of operation and financial conditions could be materially and adversely affected. See "Risk Factors—Risks Related to Our Business and Industry—We are required to obtain various operating permits and licenses for our English training

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services in China and failure to comply with these requirements may materially and adversely affect our business operations.

Pricing

        Our revenue is directly affected by the pricing of our courses and the type of services offered. We typically charge students course and service fees based on the total number of course hours, the class sizes and the types of the courses the student enrolls in, or the types of services we provide to such student. When we set fee rates for our courses and services, we also consider the general economic condition in and the income level of the residents of the relevant locations of our learning centers, the local demand for our services and our competitors' fee rates for similar service offerings. See "Business—Pricing and Refund Policies" for details of our pricing policy.

        We implement our effective centralized management systems at a majority of our franchised learning centers and require them to adhere to our standardized pricing and refund policies we apply at our self-operated learning centers in order to maintain stable student retention rates and efficient operations at our franchise learning centers. We may adjust the course and service fees for new contracts when we have upgraded our existing courses or developed new courses and services. The course and service fee levels of our learning centers remained relatively stable in 2016, 2017 and 2018, and the three months ended March 31, 2019. In the long run, we seek to gradually increase our course and service fee levels without compromising our student enrollment.

Cost Control and Operating Efficiency

        Our profitability depends significantly on our ability to improve our operating efficiency through cost control. Our cost of revenues consists primarily of teaching staff costs and property expenses for our self-operated learning centers. Teaching staff costs depend on the number of our teachers we employ and their levels of compensation. We offer attractive compensation to our teachers to attract and retain the best teaching talent. The number of our full-time teachers, study advisors and teaching service staff increased from 1,558 as of December 31, 2016 to 1,754 as of December 31, 2017 and 2,152 as of December 31, 2018, and further to 2,313 as of March 31, 2019. In line with our efforts to enhance our teaching quality, the growth of student enrollment and the expansion of our network and course offerings.

        Our operating expenses consist of sales and marketing expenses, general and administrative expenses and research and development expenses. Historically, we have incurred significant sales and marketing expenses primarily because we utilize a variety of sales and marketing approaches to increase our student enrollment and strengthen our brand recognition, including, but not limited to, various offline sales activities. See "Business—Marketing and Sales." In addition, we leverage our developed offline and online marketing channels to recruit new students.

        Going forward, we expect that our total costs and expenses will increase in line with the expansion of our network and education service offerings. Also, we expect to incur additional costs and expenses associated with becoming a public company. However, this increase is likely to be partially offset by our increasing economies of scale and improved operating efficiency.

Upgrade and Diversification of Course and Service Offerings

        The diversification of our course and service offerings has had a positive impact on our revenue growth and we believe it will continue to positively impact our growth going forward. However, it may have a negative impact on our revenue recognitation and results of operations during the transition period as we gradually roll out new courses and services across our nationwide learning center network. We currently have a wide spectrum of offline and online English training course offerings. Our extensive portfolio of services allows us to extend our service to a wider group of customers and conduct cross-selling between our offline and online English training businesses, improve student

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stickiness to realize synergies across these business lines and thereby, maximize student lifetime value that we could capture. For example, historically, we have witnessed significant growth in our online English training business since the launch of our "Likeshuo" platform in 2014. The synergy created by such offline-online business model effectively helped us to increase customer conversion rate at reasonable costs. We expect to achieve ramp-up and expansion of our online English training business in an economical and effective manner with the support from our extensive offline learning center network.

        In addition, in early 2018, driven by the increasing English learning demand from younger aged students, we decided to further expand our business segments to include junior English training in selected regions where we have extensive network coverage and brand recognition. We also introduced the new "Explore Curriculum" for our general adult English training beginning in 2018. While we believe such new curriculum will have a positive long-term impact on improving our students' comprehensive and practical English language abilities, the implementation of the new curriculum across our nationwide network of self-operated learning centers nevertheless adversely affected the course hours delivered and segment revenue recognized during the transition period.

Key Components of Results of Operations

Revenues

        In 2016, 2017 and 2018 and the three months ended March 31, 2019, we primarily offered general adult English training, overseas training services, online English training, junior English training and other English language-related services. The table below sets forth a breakdown of our revenue for the periods indicated:

 
  For the Year Ended December 31,   For the Three Months Ended March 31,  
 
  2016   2017   2018   2018   2019  
 
  RMB   %   RMB   %   RMB   US$   %   RMB   %   RMB   US$   %  
 
  (in thousands, except for percentages)
 
 
   
   
   
   
   
  Unaudited
   
  Unaudited
   
  Unaudited
  Unaudited
   
 

General adult English training(1)

    572,135     71.4     785,480     68.3     903,756     134,664     63.5     233,696     70.3     171,220     25,513     54.4  

Overseas training services

    180,606     22.5     228,294     19.9     223,601     33,318     15.7     54,229     16.3     46,703     6,959     14.8  

Online English training

    46,915     5.9     121,196     10.5     212,302     31,634     14.9     40,480     12.2     51,806     7,719     16.5  

Junior English training

                    65,490     9,758     4.6             39,432     5,876     12.5  

Other English language-related services(2)

    1,889     0.2     14,751     1.3     19,085     2,843     1.3     3,957     1.2     5,642     840     1.8  

Total

    801,545     100.0     1,149,721     100.0     1,424,234     212,217     100.0     332,362     100.0     314,803     46,907     100.0  

(1)
Includes revenue from the sales of goods, such as educational materials and food and beverages sold at our self-operated learning centers.

(2)
Includes (i) franchise fees received from our franchised learning centers under the "Meten" brand; and (ii) revenue generated from our "Shuangge English" App.

        Revenue generated from general adult English training was RMB572.1 million, RMB785.5 million and RMB903.8 million (US$134.7 million), representing 71.4%, 68.3% and 63.5% of our total revenue in 2016, 2017 and 2018, respectively, and RMB233.7 million and RMB171.2 million (US$25.5 million), representing 70.3% and 54.4% of our total revenue for the three months ended March 31, 2018 and 2019, respectively. Revenue generated from overseas training services was RMB180.6 million, RMB228.3 million and RMB223.6 million (US$33.3 million), representing 22.5%, 19.9% and 15.7% of our total revenue in 2016, 2017 and 2018, respectively, and RMB54.2 million and RMB46.7 million (US$7.0 million), representing 16.3% and 14.8% of our total revenue for the three months ended March 31, 2018 and 2019, respectively. Revenue generated from junior English training was RMB65.5 million (US$9.8 million) in 2018, representing 4.6% of our total revenue in 2018, and RMB39.4 million (US$5.9 million), representing 12.5% of our total revenue for the three months ended March 31, 2019. With respect to our general adult English training, overseas training services and junior English training, we generally collect course/service fees upfront from our students or in installments. We have refund policies in place for our general adult English training, overseas training

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services and junior English training, and will refund the relevant course/service fees partially or fully depending on when the request is made by the students in the applicable refund period. For our general adult English training, overseas training services, and junior English training, we record the course/service fees initially as financial liabilities from contracts with customers, and then as deferred revenue depending on whether the course/service fees under the relevant contracts are refundable.

        Revenue generated from our online English training was RMB46.9 million, RMB121.2 million and RMB212.3 million (US$31.6 million), representing 5.9%, 10.5% and 14.9% of our total revenue in 2016, 2017 and 2018, respectively, and RMB40.5 million and RMB51.8 million (US$7.7 million), representing 12.2% and 16.5% of our total revenue for the three months ended March 31, 2018 and 2019, respectively. Students of our online English training services purchase prepaid study cards to enroll in the courses. We typically allow a refund of the course fees for any undelivered course/service hours after deducting a platform operation charge associated with delivering such courses/services online if a student requests a refund during the contract period. We record the proceeds collected from online English training initially as financial liabilities from contracts with customers, and revenue is generally recognized proportionately as the course hours are delivered. For details of our pricing and refund policies, please see "Business—Pricing and Refund Policies." In addition, for further details of our revenue recognition policies, please see "—Critical Accounting Policies—Revenue Recognition."

        We generate other revenue primarily from the franchised learning centers under the "Meten" brand through which our franchise partners are authorized to use our brand and are required to adopt our centralized management system. We receive an initial or renewal franchise fee when we enter into or renew a franchise agreement, and a one-time design consulting fee. During the term of the franchise, we charge each franchised learning center a recurring franchise fee based on an agreed percentage of its collected course and service fees and related individual course materials fees. Our other revenue also includes revenue generated from our self-developed "Shuangge English" App, which applies the cutting-edge voice evaluation technology to improve students' listening, speaking and reading abilities. See "Business—Our Education Services—Other English Language-related Services" for details.

Cost of Revenues

        Our cost of revenues consists primarily of (i) staff costs, including teaching staff costs and, to a lesser extent, costs relating to research and curriculum development team; (ii) property expenses, including rental, utilities and maintenance expenses of our learning centers; (iii) depreciation and amortization, which represents the depreciation of real properties and equipment for learning centers, amortization of operating lease right-of-use assets and amortization of our training services related intangible assets; and (iv) others, which primarily include consulting fees, foreign teacher-related administrative expenses and teaching materials costs. Our cost of revenues accounted for 43.0%, 40.7% and 44.1%, of our revenues in 2016, 2017 and 2018, respectively, and 39.8% and 54.9% for the three months ended March 31, 2018 and 2019, respectively. The following table sets forth the components of cost of revenues both in absolute amount and as a percentage of our total cost of revenues for the periods indicated.