Continues to Accelerate the Deployment of New Business Strategy and Empower Training Platform with Integrated Metaverse-based Technologies

WUXI, China, Dec. 4, 2021 — Skillful Craftsman Education Technology Ltd. ("the Company") (NASDAQ: EDTK), an education technology company providing interactive online learning services, today announced its financial results for the first six months of fiscal year 2022 ended September 30, 2021.

First Six Months of Fiscal Year 2022 Financial and Operational Highlights

All financial figures are in US Dollars unless otherwise noted.

• Revenue was $11.9 million, compared with $15.3 million for the same period of last year, representing a 23% decrease, primarily due to a decrease in the number of total fee-paying members resulting from the decline in training needs of workers from rural area as the urbanization continued.
• Gross profit was $3.6 million, compared with $8.5 million for the same period of last year, representing a 58% decrease. The decrease was mainly due to the combined effect of the decrease in revenue and an increase in cost of revenue as the Company incurred increased fees in courseware, software copyrights and virtual simulation in connection with its efforts to shift target customers to students at vocational schools.
• Gross profit margin was 30%, compared with 55% for the same period of last year. The main reason was the cost spent in platform upgrade and courses enrichment did not result in the expansion of customer base to the extent expected.
• Net loss was $43.3 thousand, compared with net income of $4.4 million for the same period of last year. The decrease was due to the decrease in revenue, an increase in the cost of revenue and an increase in general and administrative expenses.
• Basic and diluted earnings per share were $0.00, compared with $0.44 for the same period of last year.
• Total fee-paying members⁽¹⁾ was 1.1 million, compared with 3.3 million during the same period of last year, representing a 68% decrease. The decrease was primarily due to the combined effect of (i) the shrinking training needs of workers from rural area as a result of the development of urbanization, and (ii) unsatisfactory acquisition of new customers among students at vocational schools, who nowadays tend to be more interested in mobile live streaming and short video training courses than the personal computer courses offered by the Company.

Mr. Xiaofeng Gao, Chairman and CEO of Skillful Craftsman Education Technology Ltd., commented, "To seize the market opportunities, we have accelerated the deployment of new business strategy and new technology since the first half year of 2021. With respect to business development, the Company is leveraging online cloud technology service and flexible employment service platform, to cooperate with schools and institutions to provide them with high quality vocational training. It has already landed in the two major fields of Chinese medicine basic education and hotel management. With respect to technology enhancement, the Company will integrate metaverse technology with big data, cloud technology and traditional Augmented Reality (AR) simulation teaching capabilities. Through co-constructing metaverse vocational labs with universities and ecological chain companies, the Company plans to launch multi-persons collaborative simulation skills training platform based on metaverse. We remain optimistic about the vocational education industry based on the Opinions on Promoting the High-quality Development of Modern Vocational Education (the "Opinions") issued by the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council. The Opinions encourage companies to participate in and support the development of vocational education, which provides clear directions and positive incentives for the Company’s future development. We believe our brand, strategic development and the supporting policy will position us well for the future and we are confident in creating long-term value and returns for our shareholders."

First Six Months of Fiscal Year 2022 Financial Results

All figures refer to the first six months of fiscal year 2022 ended September 30, 2021 unless otherwise stated

Revenue

Revenue decreased by 23% to $11.9 million, from $15.3 million for the same period of last year, primarily due to a decrease in the number of total fee-paying members resulting from the decline in training needs of workers from rural area as the urbanization continued.

Cost of Revenue

Cost of revenue increased by 21% to $8.3 million, from $6.8 million for the same period of last year. The increase of cost of revenue was mainly caused by the increase of $0.8 million amortization of the newly purchased courseware and software copyrights, and the increase of virtual simulation fee by $0.6 million, both related to the Company’s efforts to shift target customers to students at vocational schools.

Gross Profit and Gross Margin

Gross profit decreased by 58% to $3.6 million, from $8.5 million for the same period of last year. The decrease was mainly due to the combined effect of increased cost of revenue in courseware, software copyrights and virtual simulation fees and decrease in revenue.

Gross margin decreased by 25 percentage points to 30%, from 55% for the same period of last year. The main reason was the cost spent in platform upgrade and courses enrichment did not result in the expansion of customer base to the extent expected.

Operating Expenses

Operating expenses increased by 27% to $3.0 million, from $2.4 million for the same period of last year.

Sales and marketing expenses decreased by 18% to $0.7 million, from $0.9 million for the same period of last year. The decrease was mainly due to the decreases in both of the promotion expenses and telecommunications service fees.

General and administrative expenses increased by 53% to $2.3 million, from $1.5 million for the same period of last year. The increase was primarily caused by the increased compensation paid to employees, audit fees, the insurance fee and consulting fees for the period ended September 30, 2021.

Income Before Tax

Income before tax expense decreased by 90% to $0.6 million, from $6.1 million for the same period of last year.

Net (loss)/Income

Net loss was $43.3 thousand, compared with net income of $4.4 million for the same period of last year.

Basic and diluted earnings per share were $0.00, compared with $0.44 for the same period of last year.

Cash and Cash Equivalents

As of September 30, 2021, the Company had cash and cash equivalents of $23.7 million, compared with $17.5 million as of March 31, 2021.

Cash Flow

Net cash generated from operating activities was $1.8 million, compared with $6.6 million for the same period of last year.

Net cash provided by investing activities was $4.4 million, compared with net cash used in investing activities $14.2 million for the same period of last year.

Net cash generated from financing activities was nil, compared with $13.24 million for the same period of last year.

About Skillful Craftsman

Skillful Craftsman is an education technology company that provides interactive online vocational training and virtual simulation experimental training courses. The Company began operations in Wuxi, China in 2013 and is a key supporter for China education reform and development for labor employment. For more information, please visit: ir.kingwayup.com

Safe Harbor Statement

This report contains "forward-looking statements" for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 that represent our beliefs, projections and predictions about future events. All statements other than statements of historical fact are "forward-looking statements," including any projections of earnings, revenue or other financial items, any statements of the plans, strategies and objectives of management for future operations, any statements concerning proposed new projects or other developments, any statements regarding future economic conditions or performance, any statements of management’s beliefs, goals, strategies, intentions and objectives, and any statements of assumptions underlying any of the foregoing. Words such as "may", "will", "should", "could", "would", "predicts", "potential", "continue", "expects", "anticipates", "future", "intends", "plans", "believes", "estimates" and similar expressions, as well as statements in the future tense, identify forward-looking statements.

Forward-looking statements are based on information available at the time those statements are made and management’s belief as of that time with respect to future events. These statements are necessarily subjective and involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any future results, performance or achievements described in or implied by such statements. Such risks, uncertainties, and other factors include, but are not limited to, our ability to improve launch and leverage new technologies and cooperative relationships or anticipate market demand in a timely or cost-effective manner, and those factors discussed under the headings "Risk Factors", "Operating and Financial Review and Prospects," and elsewhere in our Annual Report on Form 20-F. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of whether, or the times by which, our performance or results may be achieved. Actual results may differ materially from expected results described in our forward-looking statements, including with respect to correct measurement and identification of factors affecting our business or the extent of their likely impact, and the accuracy and completeness of the publicly available information with respect to the factors upon which our business strategy is based or the success of our business. The Company disclaims any intention to, and undertakes no obligation to, update or revise any forward-looking statement.

For investor and media enquiries, please contact:

Skillful Craftsman
Investor Relations Department
Email: iredtk@kingwayedu.cn

Ascent Investor Relations LLC
Tina Xiao
Tel: +1 917-609-0333
Email: tina.xiao@ascent-ir.com