iHuman IPO: Chinese Edutainment Company Debuts on NYSE
The iHuman IPO came to U.S. investors despite tensions between Washington and Beijing. As countries continue to feel the effect of the coronavirus, iHuman’s edutainment products are part of a growing market.
But is iHuman stock a good investment? Here’s what we know…
iHuman IPO: The Business
Michael Yufeng Chi founded iHuman. It’s a Chinese edutainment company. Edutainment is entertainment, such as video games, movies or shows, that is designed to be educational. The goal is to make learning more fun and enjoyable for children both inside and outside the classroom. It’s claimed that Walt Disney was the first to use the term when describing the True-Life Adventures series.
IHuman’s first learning app, iHuman Chinese, debuted in 2016. It includes content on subjects such as languages, math, culture and STEM. In the iHuman prospectus, the company states:
With innovative and high-quality products and services targeting both individual users and education organizations, we have built a trusted and well recognized brand, as well as a massive and loyal following among families and educators throughout China.
iHuman’s Growing Market
The iHuman IPO delivered a company in a unique market to investors. As the coronavirus continues to affect day-to-day life, parents are looking for ways to entertain their children without taking away from their education time. Teachers are also looking for better ways to hold children’s attention during online learning and social distancing.
IHuman breaks down China’s childhood education market into two categories: formal and non-formal, or complementary. Formal education is education within school, with tuition paid for children to attend classes on a campus. Complementary education includes both classroom-based learning, such as in pre-school or after-school centers; and content-based learning, which is delivered through online products and smart learning devices.
According to its prospectus, iHuman claims China’s complementary childhood education market grew from $62.8 billion in 2015 to $116.6 billion in 2019. The company expects this market to be worth $200 billion. IHuman says this increase is due to a large, stable child population, increasing focus on childhood education and higher rates of household disposable income. In 2015, the penetration rate of edutainment products in the complementary education market was 48.2%. This number grew to 69.1% in 2019 and is expected to increase to 80.8% in 2020.
So it looks like iHuman stock is an investment in a strong, growing market. But another important aspect of the iHuman IPO is the company’s finances.
iHuman Stock: Financial and Proceeds Use
In 2018, iHuman’s revenue totaled $19.7 million, with about $3.3 million coming from services and $16.4 million from materials and devices. Then, iHuman saw impressive growth in 2019. Total revenue increased to $32 million. Most of this growth came from learning services, which grew to $16 million. And for the six months ended June 30, 2020, total revenue was $27.7 million. This was a 102% growth compared with the company’s $13.7 million in revenue in 2019.
In addition to revenue growth, iHuman seems to be managing expenses better. In 2019, total operating expenses increased to $61.7 million from $13.2 million in 2018. But expenses decreased significantly in the first six months of 2020 compared with the same period in 2019. In 2019, expenses totaled $49 million in June. But for 2020, expenses were less than half that, at $17.9 million.
Lastly, iHuman recorded net losses for 2018 and 2019. But for the first six months of 2020, the company was able to record a net profit. For the six months ended June 30, 2019, iHuman’s net loss was $40.6 million, which was most of the company’s $41.2 million total net loss for the year. But for the first half of 2020, the company recorded a net profit of $842,700.
According to the company, the iHuman IPO proceeds will be used to expand product and service offerings, develop existing products and services, improve its technology structure, grow marketing and brand promotions and for general corporate purposes.
iHuman IPO Details
IHuman filed with the SEC on September 8, 2020. The iHuman IPO date was October 9, 2020. The offer included 7 million shares at $12 a share. The deal raised $84 million and gave the company a market cap of $649 million. iHuman stock trades on the NYSE under the ticker symbol IH.
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