GlobeNewswire Inc | Sep 23, 2021 09:02AM EDT

September 23, 2021

BEIJING, Sept. 23, 2021 (GLOBE NEWSWIRE) -- 17 Education & Technology Group Inc. (NASDAQ: YQ) (17EdTech or the Company), a leading education technology company in China with an in-school + after-school integrated model, today announced its unaudited financial results for the second quarter ended June 30, 2021.

Second Quarter 2021 Highlights[1]

-- Net revenues were RMB670.9 million (US$103.9 million), which exceeded the high-end of the Company's guidance by RMB10.9 million and represented a year-over-year increase of 147.2% from RMB271.4 million in the second quarter of 2020. -- Net revenues from online K-12 tutoring services were RMB662.0 million (US$102.5 million), representing a year-over-year increase of 163.9% from RMB250.8 million in the second quarter of 2020. -- Gross billings of online K-12 tutoring services[2] (non-GAAP) were RMB769.5 million (US$119.2 million), representing a year-over-year increase of 121.9% from RMB346.8 million in the second quarter of 2020. -- Paid course enrollments[3] were approximately 1,183 thousand, representing a year-over-year increase of 131.1% from approximately 512 thousand in the second quarter of 2020. -- Gross margin was 63.0%, compared with 63.9% in the second quarter of 2020. -- Net loss was RMB266.7 million (US$41.3 million), compared with net loss of RMB169.7 million in the second quarter of 2020. -- Adjusted net loss[4] (non-GAAP), which excluded share-based compensation expenses of RMB48.5 million (US$7.5 million), was RMB218.2 million (US$33.8 million), compared with adjusted net loss (non-GAAP) of RMB149.8 million in the second quarter of 2020. Adjusted net loss (non-GAAP) as a percentage of net revenues was negative 32.5%, compared with negative 55.2% in the second quarter of 2020. -- Average MAUs[5] of in-school applications for students was 16.5 million, representing a year-over-year decrease of 24.0% from 21.7 million in the second quarter of 2020. The year-over-year decrease in MAUs was partially attributable to the high level of MAUs in the second quarter of 2020, during which period the schools in China were temporarily closed due to the COVID-19 pandemic, and the students were prompted to engage in more online education as they studied at home, and partially attributable to the implementation of Notice on Strengthening Cell Phone Management in Primary and Secondary Schools in certain provinces and cities, that limits cell phone use and prohibits assigning homework on cell phone.

_______________[1] For a reconciliation of non-GAAP numbers, please see the table captioned Reconciliations of non-GAAP measures to the most comparable GAAP measures at the end of this press release. [2] Gross billings of online K-12 tutoring services for a specific period refer to the sum of cash received from each enrollment of the Companys online K-12 tutoring courses in such period inclusive of the applicable value added tax (VAT) and surcharges, net of the total amount of refunds in such period.[3] Paid course enrollments for a certain period refer to the cumulative number of paid courses enrolled in and paid for by the Companys students, including multiple paid courses enrolled in and paid for by the same student.[4] Adjusted net loss represents net loss excluding share-based compensation expenses.[5] Average MAUs for a certain period is calculated by dividing (i) the sum of monthly active users (MAUs) for each month of such period by (ii) the number of months in such period. MAU for each month is the number of users that logged in to the in-school applications in that month at least once. When calculating MAU, each account is treated as a distinct user.

First Half 2021 Highlights

-- Net revenues were RMB1,145.1 million (US$177.4 million) represented a year-over-year increase of 128.8% from RMB500.5 million in the first half of 2020. -- Net revenues from online K-12 tutoring services were RMB1,125.0 million (US$174.2 million), representing a year-over-year increase of 142.9% from RMB463.2 million in the first half of 2020. -- Gross billings of online K-12 tutoring services (non-GAAP) were RMB1,373.0 million (US$212.7 million), representing a year-over-year increase of 123.5% from RMB614.2 million in the first half of 2020. -- Paid course enrollments were approximately 1,726 thousand, representing a year-over-year increase of 122.4% from approximately 776 thousand in the first half of 2020. -- Gross margin was 62.0%, compared with 64.0% in the first half of 2020. -- Net loss was RMB926.4 million (US$143.5 million), compared with net loss of RMB393.9 million in the first half of 2020. -- Adjusted net loss (non-GAAP), which excluded share-based compensation expenses of RMB119.4 million (US$18.5 million), was RMB807.1 million (US$125.0 million), compared with adjusted net loss (non-GAAP) of RMB328.5 million in the first half of 2020. Adjusted net loss (non-GAAP) as a percentage of net revenues was negative 70.5%, compared with negative 65.6% in the first half of 2020. -- Average MAUs of in-school applications for students was 17.7 million, representing a year-over-year decrease of 14.9% from 20.8 million in the first half of 2020.

Second Quarter 2021 Unaudited Financial Results

Net Revenues

The following table sets forth a breakdown of total revenues by amounts and percentages for the periods indicated (in thousands, except for percentages):

For the three months ended June 30, 2020 2021 Y/Y RMB % RMB USD % Net revenues: Online K-12 tutoring 250,839 92.4 % 662,039 102,537 98.7 % 163.9 %servicesOther educational 20,564 7.6 % 8,853 1,371 1.3 % -56.9 %servicesTotal 271,403 100.0 % 670,892 103,908 100.0 % 147.2 %

Net revenues for the second quarter of 2021 were RMB670.9 million (US$103.9 million), which exceeded the high-end of the Companys guidance by RMB10.9 million and represented a year-over-year increase of 147.2% from RMB271.4 million in the second quarter of 2020. The increase was primarily driven by an increase in net revenues from online K-12 tutoring services.

Net revenues from online K-12 tutoring services for the second quarter of 2021 were RMB662.0 million (US$102.5 million), representing a year-over-year increase of 163.9% from RMB250.8 million in the second quarter of 2020, accounting for 98.7% of total net revenues in the second quarter of 2021. The year-over-year increase in net revenues from online K-12 tutoring services was primarily driven by an increase in paid course enrollments. Paid course enrollments for the second quarter of 2021 were approximately 1,183 thousand, representing a year-over-year increase of 131.1% from approximately 512 thousand in the second quarter of 2020.

Net revenues from other educational services for the second quarter of 2021 were RMB8.9 million (US$1.4 million), representing a year-over-year decrease of 56.9% from RMB20.6 million in the second quarter of 2020.

Cost of Revenues

Cost of revenues for the second quarter of 2021 was RMB248.0 million (US$38.4 million), representing a year-over-year increase of 153.1% from RMB98.0 million in the second quarter of 2020. The increase was primarily due to increases in compensation costs for instructors and tutors and teaching material costs as the Company provided services to more students, which increase was largely in line with the growth of the Companys net revenues from online K-12 tutoring services during the same period.

Gross Profit and Gross Margin

Gross profit for the second quarter of 2021 was RMB422.9 million (US$65.5 million), representing a year-over-year increase of 143.9% from RMB173.4 million in the second quarter of 2020. The increase was primarily driven by the increase in the net revenues.

Gross margin for the second quarter of 2021 was 63.0%, compared with 63.9% in the second quarter of 2020. The decrease was attributable to the decrease in net revenues from other educational services for the second quarter of 2021.

Total Operating Expenses

The following table sets forth a breakdown of operating expenses by amounts and percentages of net revenues for the periods indicated (in thousands, except for percentages):

For the three months ended June 30, 2020 2021 Y/Y RMB % RMB USD % Sales and marketing 162,252 59.8 % 306,731 47,507 45.7 % 89.0 %expensesResearch and development 136,397 50.3 % 229,535 35,550 34.2 % 68.3 %expensesGeneral and administrative 45,065 16.6 % 109,500 16,959 16.3 % 143.0 %expensesImpairment for property and equipment and ? ? 56,882 8,810 8.5 % ? right-of-use assets Total operating expenses 343,714 126.6 % 702,648 108,826 104.7 % 104.4 %

Total operating expenses for the second quarter of 2021 were RMB702.6 million (US$108.8 million), including share-based compensation expenses of RMB48.5 million (US$7.5 million), representing a year-over-year increase of 104.4% from RMB343.7 million in the second quarter of 2020.

Sales and marketing expenses for the second quarter of 2021 were RMB306.7 million (US$47.5 million), including share-based compensation expenses of RMB6.5 million (US$1.0 million), representing a year-over-year increase of 89.0% from RMB162.3 million in the second quarter of 2020. The increase was primarily due to increases in salaries and welfare for sales and marketing personnel, as well as promotional course[6] expenses.

Research and development expenses for the second quarter of 2021 were RMB229.5 million (US$35.6 million), including share-based compensation expenses of RMB12.3 million (US$1.9 million), representing a year-over-year increase of 68.3% from RMB136.4 million in the second quarter of 2020. The increase was primarily due to an increase in salaries and welfare for research and development personnel.

General and administrative expenses for the second quarter of 2021 were RMB109.5 million (US$17.0 million), including share-based compensation expenses of RMB29.7 million (US$4.6 million), representing a year-over-year increase of 143.0% from RMB45.1 million in the second quarter of 2020. The increase was primarily due to an increase in salaries and welfare for general and administrative personnel, which included an increase in share-based compensation expenses.

Impairment for property and equipment and right-of-use assets for the second quarter of 2021 were RMB56.9 million (US$8.8 million), compared with nil in the second quarter of 2020. As a result of the changes in regulatory environment in the online education industry, combined with the Companys financial performance, the Company performed an impairment assessment on its long-term assets and recognized impairment losses in the second quarter of 2021.

_________________[6] Promotional course refers to the online K-12 large-class after-school tutoring courses that are free.

Loss from Operations

Loss from operations for the second quarter of 2021 was RMB279.8 million (US$43.3 million), compared with RMB170.3 million in the second quarter of 2020. Loss from operations as a percentage of net revenues for the second quarter of 2021 was negative 41.7%, compared with negative 62.8% in the second quarter of 2020. The significant improvement was due to improvement in overall operational efficiency.

Net Loss

Net loss for the second quarter of 2021 was RMB266.7 million (US$41.3 million), compared withnet loss ofRMB169.7 million in the second quarter of 2020.

Adjusted Net Loss (non-GAAP)

Adjusted net loss (non-GAAP) for the second quarter of 2021 was RMB218.2 million (US$33.8 million), compared with RMB149.8 million in the second quarter of 2020. Adjusted net loss (non-GAAP) as a percentage of net revenues was negative 32.5% in the second quarter of 2021, compared with negative 55.2% in the second quarter of 2020.

Please refer to the attached table for a reconciliation of adjusted net loss (non-GAAP) to net loss under U.S. GAAP.

Share Outstanding

As of June 30, 2021, the Company had 493,148,952 ordinary shares issued and outstanding.

Cash and Cash Equivalents

Cash and cash equivalents were RMB2,160.0 million (US$334.5 million) as of June 30, 2021, compared with RMB2,835.0 million as of December 31, 2020.

Deferred Revenue (Current and Non Current)

Deferred revenue was RMB718.4 million (US$111.3 million) as of June 30, 2021, representing an increase of 20.1% from RMB598.3 million as of December 31, 2020. The increase was primarily attributable to our rapid business expansion.

Other Recent Developments

As previously disclosed, the Company's business, financial condition and corporate structure are expected to be materially affected in future periods by the changing regulatory environment.The overall magnitude of the impact remains uncertain at this time.

The Company provided updates on new regulations and regulatory development on July 26 and August 25, respectively, which are available at https://ir.17zuoye.com/. The Company encourages investors to refer to the website and original Chinese regulations for details.

Board Change

Mr. Dun Xiao, the Companys co-founder and director, has resigned from his position as a director of the Company due to personal reasons, effective September 23, 2021.

Business Outlook

Due to the uncertainty related totherecent regulatory and operating environment, the Company decides not to issue guidance in the near term in order to give the management more flexibility to focus on the operations and transformation.

Conference Call Information

Due to the uncertainty related totherecent regulatory and operating environment, the Company will not hold a conference call to discuss the financial results for the second quarter of 2021.

Non-GAAP Financial Measures

17EdTechs management uses non-GAAP financial measures to gain an understanding of 17EdTechs comparative operating performance and future prospects. Gross billings of online K-12 tutoring services and adjusted net loss are being used as non-GAAP measurements in evaluating the operating performance.

The Company defines gross billings of online K-12 tutoring services for a specific period as the sum of cash received from each enrollment of our online K-12 tutoring courses in such period inclusive of the applicable VAT and surcharges, net of the total amount of refunds in such period. The Company generally bills its students for the entire course fee at the time of sale of its courses and recognizes revenue proportionally as the classes are delivered over a period typically lasting four months or less. The Company also offers students a content playback service once each of the live tutoring class is delivered. In the content playback service, students have unlimited access to recorded audio-video content of the previous live tutoring classes for three years. The related revenue for playback is recognized proportionally over the playback period. The Company considers gross billings to be a valuable measure for monitoring the sales of our online courses and the business performance of its after-school tutoring services in general.

Adjusted net loss represents net loss excluding share-based compensation expenses and such adjustment has no impact on income tax.

Gross billings of online K-12 tutoring services and adjusted net loss are used by 17EdTechs management in their financial and operating decision-making as a non-GAAP financial measure, because management believes it reflects 17EdTechs ongoing business and operating performance in a manner that allows meaningful period-to-period comparisons. 17EdTechs management believes that non-GAAP measures provide useful information to investors and others in understanding and evaluating 17EdTechs operating performance in the same manner as management does, if they so choose. Specifically, 17EdTech believes the non-GAAP measures provide useful information to both management and investors by excluding certain charges that the Company believes are not indicative of its core operating results.

The non-GAAP financial measures have limitations. They do not include all items of income and expense that affect 17EdTechs income from operations. Specifically, these non-GAAP financial measures are not prepared in accordance with GAAP, may not be comparable to non-GAAP financial measures used by other companies and, with respect to the non-GAAP financial measures that exclude certain items under GAAP, do not reflect any benefit that such items may confer to 17EdTech. Management compensates for these limitations by also considering 17EdTechs financial results as determined in accordance with GAAP. The presentation of this additional information is not meant to be considered superior to, in isolation from or as a substitute for results prepared in accordance with US GAAP.

Exchange Rate Information

The Group's business is primarily conducted in China and all of the revenues are denominated in Renminbi (RMB). However, periodic reports made to shareholders will include current period amounts translated into U.S. dollars (USD or US$) using the exchange rate as of balance sheet date, for the convenience of the readers. Translations of balances in the consolidated balance sheets and the related consolidated statements of operations, comprehensive loss, change in shareholders' deficit and cash flows from RMB into USD as of and for the three months and the six months ended June 30, 2021 are solely for the convenience of the readers and were calculated at the rate of US$1.00=RMB6.4566 representing the noon buying rate set forth in the H.10 statistical release of the U.S. Federal Reserve Board on June 30, 2021. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on June 30, 2021, or at any other rate.

About 17 Education & Technology Group Inc.

17 Education & Technology Group Inc. is a leading education technology company in China with an in-school + after-school integrated model. The Company provides a smart in-school classroom solution that delivers data-driven teaching, learning and assessment products to teachers, students and parents, covering over 70,000 K-12 schools in 2020.

Leveraging the Companys in-school leadership, 17EdTech offers online K-12 large-class after-school tutoring services that complement students in-school learning. Powered by its integrated model and technology, 17EdTechs online K-12 large-class after-school tutoring courses stand out in terms of its unique approach to personalization, realized through a data-driven understanding of individual students in-school performance, as well as district-level localized insights.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as will, expects, anticipates, future, intends, plans, believes, estimates and similar statements. Statements that are not historical facts, including statements about 17EdTechs beliefs and expectations, are forward-looking statements. 17EdTech may also make written or oral forward-looking statements in its periodic reports to the SEC, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: 17EdTechs growth strategies; its future business development, financial condition and results of operations; its ability to continue to attract and retain users, convert non-paying users into paying users and increase the spending of paying users, the trends in, size of, and relevant government policies and regulations relating to Chinas online education market; its expectations regarding demand for, and market acceptance of, its products and services; its expectations regarding its relationships with business partners; general economic and business conditions; and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in 17EdTechs filings with the SEC. All information provided in this press release is as of the date of this press release, and 17EdTech does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

For investor and media inquiries, please contact:

17 Education & Technology Group Inc.Mr. Raymond HuangE-mail: ir@17zuoye.com

ChristensenIn ChinaMr. Eric YuanPhone: +86-138-0111-0739E-mail: Eyuan@christensenir.com

In USMs. Linda BergkampPhone: +1-480-614-3004E-mail: lbergkamp@christensenir.com



17 EDUCATION & TECHNOLOGY GROUP INC.UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands of RMB and USD, except for share and per ADS data, or otherwisenoted)

As of December As of June 30, 31, 2020 2021 2021 RMB RMB USD ASSETS Current assets Cash and cash equivalents 2,834,962 2,159,971 334,537Restricted cash 170 170 26Prepaid expenses and other current assets 211,448 185,540 28,736 Total current assets 3,046,580 2,345,681 363,299 Non-current assets Property and equipment, net 105,223 119,527 18,512Right-of-use assets 200,157 308,724 47,815Other non-current assets 37,782 37,320 5,780 TOTAL ASSETS 3,389,742 2,811,252 435,406 LIABILITIES Current liabilities Accrued expenses and other current liabilities (including accruedexpenses and other current liabilities of the consolidated VIEs without 539,787 559,652 86,679recourse to the Group of RMB213,481 and RMB270,508 as ofDecember 31, 2020 and June 30, 2021, respectively)Deferred revenue, current (including deferred revenue, current of theconsolidated VIEs without recourse to the Group of RMB571,827 and 596,307 715,513 110,819RMB705,782 as of December 31, 2020 and June 30, 2021,respectively) Operating lease liabilities, current (including operating lease liabilities,current of the consolidated VIEs without recourse to the Group of 69,409 112,798 17,470RMB46,835 and RMB74,748 as of December 31, 2020 and June 30,2021, respectively) Total current liabilities 1,205,503 1,387,963 214,968

As of As of June 30, December 31, 2020 2021 2021 RMB RMB USD Non-current liabilities Deferred revenue, non-current (including deferred revenue,non-current of the consolidatedVIEs without recourse to the 1,982 2,882 446 Groupof RMB1,982 and RMB2,882 as of December 31, 2020 and June30, 2021, respectively) Operating lease liabilities,non-current (including operating leaseliabilities, non-current of theconsolidated VIEs without 118,107 183,352 28,398 recourse tothe Group of RMB56,427 and RMB107,801 as of December 31,2020 and June 30, 2021, respectively) TOTAL LIABILITIES 1,325,592 1,574,197 243,812 SHAREHOLDERS' EQUITY Class A ordinary shares 275 277 43 Class B ordinary shares 38 38 6 Additional paid-in capital 10,653,403 10,772,795 1,668,493 Accumulated other comprehensive 49,614 29,553 4,576 incomeAccumulated deficit (8,639,180 ) (9,565,608 ) (1,481,524 ) TOTAL SHAREHOLDERS' EQUITY 2,064,150 1,237,055 191,594 TOTAL LIABILITIES AND 3,389,742 2,811,252 435,406 SHAREHOLDERS' EQUITY

17 EDUCATION & TECHNOLOGY GROUP INC.UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands of RMB and USD, except for share and per ADS data, or otherwisenoted)

For the three months ended June 30, 2020 2021 2021 RMB RMB USD Net revenues 271,403 670,892 103,908 Cost of revenues (Note 1) (97,995 ) (248,003 ) (38,411 ) Gross profit 173,408 422,889 65,497 Operating expenses (Note 1) Sales and marketing expenses (162,252 ) (306,731 ) (47,507 )Research and development (136,397 ) (229,535 ) (35,550 )expensesGeneral and administrative (45,065 ) (109,500 ) (16,959 )expensesImpairment for property andequipment and right-of-use ? (56,882 ) (8,810 )assets Total operating expenses (343,714 ) (702,648 ) (108,826 ) Loss from operations (170,306 ) (279,759 ) (43,329 ) Interest income 3,115 8,092 1,253 Interest expense (1,705 ) ? ? Foreign currency exchange gain 76 2,808 435 Other income, net (922 ) 2,118 328 Loss before provision for (169,742 ) (266,741 ) (41,313 )income tax Income tax expenses ? ? ? Net loss (169,742 ) (266,741 ) (41,313 )Accretion of convertible (447,777 ) ? ? redeemable preferred sharesNet loss available to ordinary shareholders of 17 (617,519 ) (266,741 ) (41,313 )Education & Technology Group Inc.Net loss per ordinary share Basic and diluted (10.52 ) (0.55 ) (0.09 )Net loss per ADS (Note 2) Basic and diluted (26.30 ) (1.38 ) (0.23 )Weighted average shares used in calculating net lossper ordinary share Basic and diluted 58,718,662 482,811,981 482,811,981

Note 1: Share-based compensation expenses were included in the cost andoperating expenses as follows:

For the three months ended June 30, 2020 ?? 2021 ?? 2021 RMB RMB USDShare-based compensation expenses:Sales and marketing expenses 4,140 6,519 1,010 Research and development 9,155 12,286 1,903 expensesGeneral and administrative 6,676 29,713 4,602 expensesTotal 19,971 48,518 7,515 Note 2: Two ADSs represent five Class A ordinary shares.

17 EDUCATION & TECHNOLOGY GROUP INC.Reconciliations of non-GAAP measures to the most comparable GAAP measures(In thousands of RMB and USD, except for share, per share and per ADS data)

For the three months ended June 30, 2020 2021 2021 RMB RMB USD Net revenues of online K-12 tutoring 250,839 662,039 102,537 services Add: VAT and surcharges 15,050 83,507 12,934 Add: ending deferred revenue 331,661 685,599 106,186 Add: ending refund liability 16,366 38,860 6,019 Less: beginning deferred revenue 263,348 691,352 107,077 Less: beginning refund liability 3,751 9,124 1,413 Gross billingsof online K-12 346,817 769,529 119,186 tutoring services (non-GAAP) For the three months ended June 30, 2020 2021 2021 RMB RMB USD Net Loss (169,742 ) (266,741 ) (41,313 )Share-based compensation 19,971 48,518 7,515 Adjusted net loss (149,771 ) (218,223 ) (33,798 )

17 EDUCATION & TECHNOLOGY GROUP INC.UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands of RMB and USD, except for share and per ADS data, or otherwisenoted)

For the six months ended June 30, 2020 2021 2021 RMB RMB USD Net revenues 500,451 1,145,138 177,359 Cost of revenues (Note 1) (180,187 ) (435,628 ) (67,470 ) Gross profit 320,264 709,510 109,889 Operating expenses (Note 1) Sales and marketing expenses (355,301 ) (920,258 ) (142,530 )Research and development expenses (269,086 ) (439,462 ) (68,064 )General and administrative (93,960 ) (239,218 ) (37,050 )expensesImpairment for property and ? (56,882 ) (8,810 )equipment and right-of-use assets Total operating expenses (718,347 ) (1,655,820 ) (256,454 ) Loss from operations (398,083 ) (946,310 ) (146,565 ) Interest income 4,699 15,089 2,337 Interest expense (2,726 ) ? ? Foreign currency exchange gain 332 1,861 288 Other income, net 1,829 2,932 454 Loss before provision for income (393,949 ) (926,428 ) (143,486 )tax Income tax expenses ? ? ? Net loss (393,949 ) (926,428 ) (143,486 )Accretion of convertible (572,201 ) ? ? redeemable preferred sharesNet loss available to ordinary (966,150 ) (926,428 ) (143,486 )shareholders of 17Education & Technology Group Inc. Net loss per ordinary share Basic and diluted (16.57 ) (1.92 ) (0.30 )Net loss per ADS (Note 2) Basic and diluted (41.43 ) (4.80 ) (0.75 )Weighted average shares used in calculating net lossper ordinary share Basic and diluted 58,293,721 482,100,675 482,100,675 Note 1: Share-based compensation expenses were included in the cost andoperating expenses as follows:

For the six months ended June 30, 2020 2021 2021 RMB RMB USDShare-based compensation expenses: Sales and marketing expenses 7,171 11,594 1,796 Research and development expenses 26,537 23,249 3,601 General and administrative 31,731 84,524 13,091 expensesTotal 65,439 119,367 18,488 Note 2: Two ADSs represent five Class A ordinary shares.

17 EDUCATION & TECHNOLOGY GROUP INC.Reconciliations of non-GAAP measures to the most comparable GAAP measures(In thousands of RMB and USD, except for share, per share and per ADS data)

For the six months ended June 30, 2020 2021 2021 RMB RMB USD Net revenues of online K-12 tutoring 463,224 1,125,039 174,246 services Add: VAT and surcharges 27,793 111,287 17,236 Add: ending deferred revenue 331,661 685,599 106,186 Add: ending refund liability 16,366 38,860 6,019 Less: beginning deferred revenue 218,919 564,911 87,494 Less: beginning refund liability 5,907 22,869 3,542 Gross billingsof online K-12 614,218 1,373,005 212,651 tutoring services (non-GAAP) For the six months ended June 30, 2020 2021 2021 RMB RMB USD Net Loss (393,949 ) (926,428 ) (143,486 )Share-based compensation 65,439 119,367 18,488 Adjusted net loss (328,510 ) (807,061 ) (124,998 )