NEWS WRAP: iHuman sales and profit decline despite user growth

The maker of education products for children said its revenue fell 11% in the third quarter, while its profit plunged 41%

By Teri Yu

Children’s educational products and services provider iHuman Inc. (IH.US) reported on Friday its net income tumbled 41% year-on-year to 24.7 million yuan ($3.52 million) in the quarter through June from 42.1 million yuan a year earlier. Its revenue fell 11% to 215 million yuan from 241 million yuan a year earlier.

China’s slowing economy has hurt consumer spending on discretionary items like educational products and services like iHuman’s, leading many companies to report declining revenue. Despite the declines, iHuman pointed out the latest period was its 10th consecutive profitable quarter, and that it ended the period with a strong cash position of 1.13 billion yuan. The company’s average total monthly active users (MAU) for the latest quarter totalled 24.57 million, up 20.8% year-over-year.

“We made steady progress in advancing our strategic priorities, intensifying our efforts across multiple fronts to build momentum for our sustainable growth,” said CEO Peng Dai.

During the quarter, the company developed an experimental product specifically designed for use with Apple’s Vision Pro goggles, delivering immersive experiences that it hopes will captivate children.

iHuman has also accelerated its global expansion efforts, which led to a 26.4% increase in its sales and marketing expenses in the latest quarter. The company launched a few new themes targeting young audiences worldwide, and its Kunpeng animation studio also made notable progress internationally through its Cosmicrew franchise. The franchise gained visibility with a movie and animated TV series using the Cosmicrew name that aired in several global markets.

In mid 2021, China implemented regulations to reduce academic pressure on families and promote education equality, banning most after-school tutoring services for K-12 students. While that ban didn’t apply to children-oriented products and services like the ones sold by iHuman, it has spurred some education technology companies to explore international markets as a diversification move.

iHuman was founded in Beijing in 1996 initially focused on educational content. The company went public in October 2020 and has since leveraged advanced technologies such as AI and big data to create educational experiences through its various interactive apps.

The company’s shares rose 17.4% on Friday after the announcement, though even after the rally the stock is still down 33% this year.

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