iHuman Inc. Announces Third Quarter 2021 Unaudited Financial Results and Share Repurchase Program

BEIJING,Dec. 21,2021 --iHuman Inc. (NYSE: IH) ("iHuman" or the "Company"),a leading provider of tech-powered smart learning products in China,today announced its unaudited financial results for the third quarter ended September30,2021. The Company also announced that its board of directors (the "Board") has authorized a share repurchase plan under which the Company may repurchase up to US$10 million of its shares over the next 12 months (the "Share Repurchase Program").

Third Quarter 2021 Highlights

Total revenues were RMB259.0 million (US$40.2 million),a year-over-year increase of 65.1%.

Revenues from online subscriptions were RMB220.5 million (US$34.2 million),a year-over-year increase of 82.7%.

Gross profit was RMB180.2 million (US$28.0 million),a year-over-year increase of 67.5%.

Operating loss was RMB43.9 million (US$6.8 million),compared with an operating income of RMB13.5 million in the same period last year.

Net loss was RMB38.2 million (US$5.9 million),compared with a net income of RMB10.6 million in the same period last year.

Average total MAUs[1] reached a record high of 17.68 million,a year-over-year increase of 58.6%.

Number of paying users[2] was 1.64 million,a year-over-year increase of 19.7%.

Dr. Peng Dai,Director and Chief Executive Officer of iHuman,commented,"We are pleased to report another solid quarter,during which we saw continued momentum in user growth,with average total MAUs hitting a new high of 17.68 million,which was an increase of 58.6% year-over-year. This further solidified our position in the market. Our mission from the start has been to transform learning into a fun journey for every child. Essential to this has been our laser focus on high quality content and advanced technological capabilities,which we believe have been two cornerstones of our business growth. During the quarter,we continued to optimize our existing product offerings by adding new content and features that cater to the interests of kids and help them learn while having fun. For example,we added assorted themes to iHumanpedia,our STEM-focused product,which features animated video content that kids can easily relate to in their daily lives. We aim to further expand the content of this app by adding a growing series of topics in the future. Meanwhile,we continued to develop products that support the all-around development of children,especially their creativity,fitness,and overall interest in learning. We just launched iHuman Kids Workout,an AI-powered fitness app designed specifically for children. iHuman Kids Workout aims to provide a fun,scientific and effective way of exercising at home by combining physical fitness knowledge with fun and interactive content. Through our relentless efforts in product improvement and technology innovation,we believe we have laid a solid foundation for healthy development over the long-term."

Ms. Vivien Weiwei Wang,Director and Chief Financial Officer of iHuman,added,"We are happy to announce another quarter of strong growth. Total revenues increased 65.1% year-over-year to RMB259.0 million. Revenues from online subscriptions grew an even faster 82.7% year-over-year to RMB220.5 million. Our self-directed apps that feature comprehensive and engaging content allow kids to learn at their own pace in a fun and dynamic manner. Leveraging our affordable pricing and ease of use,we were able to broaden our reach while making learning more inclusive. During the quarter,we continued to strategically increase our R&D investments to expand our product portfolio both horizontally and vertically. While optimizing our existing offerings,we are also developing new products to further expand our comprehensive portfolio and better support the all-around development of children. This will provide us with new growth drivers and open up additional market opportunities going forward. As a part of our commitment to raise value for our shareholders,and in recognition of our strong financial position and outlook,we are pleased to report that our Board authorized a US$10 million share repurchase program. Looking ahead,we will continue to focus our R&D efforts on supporting product enhancements and development,further advancing our technological capabilities,expanding our content library,and further improving the accessibility of our apps as we look to achieve sustainable business growth in the future."

Third Quarter 2021 Unaudited Financial Results

Revenues

Total revenues were RMB259.0 million (US$40.2 million),an increase of 65.1% from RMB156.9 million in the same period last year.

Revenues from online subscriptions were RMB220.5 million (US$34.2 million),an increase of 82.7% from RMB120.7 million in the same period last year,primarily driven by user expansion and enhanced user engagement. Average total MAUsfor the quarter were 17.68 million,an increase of 58.6% year-over-year from 11.15 million in the same period last year. The number of paying users for the quarter was 1.64 million,a year-over-year increase of 19.7% from 1.37 million in the same period last year.

Revenues from offline products and others were RMB38.5 million (US$6.0 million),an increase of 6.4% from RMB36.2 million in the same period last year.

Cost of Revenues

Cost of revenueswere RMB78.8 million (US$12.2 million),an increase of 59.7% from RMB49.3 million in the same period last year,primarily due to an increase in channel and product costs,which was in line with the Company's revenue expansion.

Gross Profit and Gross Margin

Gross profit was RMB180.2 million (US$28.0 million),an increase of 67.5% from RMB107.6 million in the same period last year. Gross margin was 69.6%,compared with 68.5% in the same period last year.

Operating Expenses

Total operating expenses were RMB224.1 million (US$34.8 million),an increase of 138.3% from RMB94.0 million in the same period last year.

Research and development expenses were RMB131.1 million (US$20.3 million),an increase of 134.7% from RMB55.9 million in the same period last year,primarily due to a rise in payroll-related expenses and outsourcing expenses as the Company continued to expand its research and development capabilities,and enhance and develop its tech-powered smart learning products.

Sales and marketing expenses were RMB67.2 million (US$10.4 million),an increase of 195.7% from RMB22.7 million in the same period last year,primarily due to an increase in advertising and promotion expenses as the Company strategically strengthened its brand recognition as a publicly listed company,as well as an increase in payroll-related expenses.

General and administrative expenseswere RMB25.8 million(US$4.0 million),an increase of 67.1% from RMB15.4 million in the same period last year,primarily due to an increase in payroll-related expenses and compliance costs related to being a publicly listed company.

Operating Income (Loss)

Operating loss was RMB43.9 million (US$6.8 million),compared with operating income of RMB13.5 million in the same period last year.

Excluding share-based compensation expenses,adjusted operating loss[3] was RMB41.5 million (US$6.4 million),compared with adjusted operating income of RMB13.5 million in the same period last year.

Net Income (Loss)

Net loss was RMB38.2 million (US$5.9 million),compared with net income of RMB10.6 million in the same period last year.

Adjusted net loss[3]was RMB35.8 million (US$5.6 million),compared with adjusted net income of RMB10.6 million in the same period last year.

Net loss attributable to ordinary shareholderswas RMB38.2 million (US$5.9 million),compared with net income attributable to ordinary shareholders of RMB6.6 million in the same period last year.

Adjusted net loss attributable to ordinary shareholders was RMB35.8 million (US$5.6 million),compared with adjusted net income attributable to ordinary shareholders of RMB6.6 million in the same period last year.

Basic and diluted net loss per ADSwere RMB0.72 (US$0.11),compared with basic and diluted net income per ADS of RMB0.15 in the same period last year. Each ADS represents five Class A ordinary shares of the Company.

Adjusted diluted netloss per ADSwas RMB0.67 (US$0.10),compared with adjusted diluted net income per ADS of RMB0.15 in the same period last year.

Deferred Revenue and Customer Advances

Deferred revenue and customer advances were RMB331.4million (US$51.4million) as of September 30,2021,compared with RMB268.6million as of December 31,2020,primarily driven by user expansion and enhanced user engagement.

Cash and Cash Equivalents

Cash and cash equivalents were RMB918.9 million (US$142.6 million) as of September 30,compared with RMB861.7 million as of December 31,2020.

[1] "Average total MAUs" refers to the monthly average of the sum of the MAUs of each of the Company's apps during a specific period,which is counted based on the number of unique mobile devices through which such app is accessed at least once in a given month,and duplicate access to different apps is not eliminated from the total MAUs calculation.

[2] "Paying users" refers to users who paid subscription fees for premium content on any of the Company's apps during a specific period; a user who makes payments across different apps using the same registered account is counted as one paying user,and a user who makes payments for the same app multiple times in the same period is counted as one paying user.

[3] "Adjusted operating income (loss)" and "adjusted net income (loss)" exclude share-based compensation expenses. Please see "Non-GAAP Financial Measures" and "Unaudited Reconciliation of GAAP and non-GAAP Results" at the end of this press release.

Share Repurchase Program

The Board has authorized a share repurchase plan under which the Company may repurchase up to US$10 million of its shares over the next 12 months. The Company's proposed repurchases may be made from time to time through open market transactions at prevailing market prices,in privately negotiated transactions,in block trades and/or through other legally permissible means,depending on the market conditions and in accordance with applicable rules and regulations. The timing and dollar amount of repurchase transactions will be subject to the Securities and Exchange Commission (the "SEC") Rule 10b-18 and/or Rule 10b5-1 requirements. The Board will review the Share Repurchase Program periodically,and may authorize adjustments of its terms and size or suspend or discontinue the program. The Company expects to fund the repurchases under the Share Repurchase Program with its existing cash balance.

Exchange Rate Information

The U.S. dollar (US$) amounts disclosed in this press release,except for those transaction amounts that were actually settled in U.S. dollars,are presented solely for the convenience of the reader. The conversion of Renminbi (RMB) into US$ in this press release is based on the exchange rate set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System as of September 30,which was RMB6.4434 to US$1.00. The percentages stated in this press release are calculated based on the RMB amounts.

Non-GAAP Financial Measures

iHuman considers and uses non-GAAP financial measures,such as adjusted operating income (loss),adjusted net income (loss),adjusted net income (loss) attributable to ordinary shareholders and adjusted diluted net income (loss) per ADS,as supplemental metrics in reviewing and assessing its operating performance and formulating its business plan. The presentation of non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). iHuman defines adjusted operating income (loss),adjusted net income (loss) attributable to ordinary shareholders and adjusted diluted net income (loss) per ADS excluding share-based compensation expenses. Adjusted operating income (loss),adjusted net income (loss) attributable to ordinary shareholders and adjusted diluted net income (loss) per ADS enable iHuman's management to assess its operating results without considering the impact of share-based compensation expenses,which are non-cash charges. iHuman believes that these non-GAAP financial measures provide useful information to investors in understanding and evaluating the Company's current operating performance and prospects in the same manner as management does,if they so choose.

Non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. Non-GAAP financial measures have limitations as analytical tools,which possibly does not reflect all items of expense that affect our operations. Share-based compensation expenses have been and may continue to be incurred in our business and are not reflected in the presentation of adjusted net income (loss) attributable to the Company's ordinary shareholders. In addition,the non-GAAP financial measures iHuman uses may differ from the non-GAAP measures uses by other companies,including peer companies,and therefore their comparability may be limited. The presentation of these non-GAAP financial measures is not intended to be considered in isolation from or as a substitute for the financial information prepared and presented in accordance with GAAP.

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 iHuman's beliefs and expectations,are forward-looking statements. Among other things,the description of the management's quotations in this announcement contains forward-looking statements. iHuman may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (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: iHuman's 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,and size of,China's edutainment 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 iHuman's filings with the SEC. All information provided in this press release is as of the date of this press release,and iHuman does not undertake any obligation to update any forward-looking statement,except as required under applicable law.

About iHuman Inc.

iHuman Inc. is a leading provider of tech-powered smart learning products in China that is committed to transforming learning into a fun journey for every child. Benefiting from a deep legacy that combines a strong foundation in edutainment,decades of industry experience with cutting-edge technologies,and an outstanding reputation for original entertainment content,iHuman provides children with unique,interactive,and entertaining experiences to stimulate their natural curiosity and interest in learning. The Company's comprehensive suite of innovative and high-quality products include interactive and self-directed online apps and offline products that cover a broad variety of areas to develop children's creativity and abilities in independent reading,critical thinking,and scientific reasoning and foster their natural interest in traditional Chinese culture. Leveraging advanced technological capabilities,including 3D engines,proprietary edutainment know-how,AI/AR functionality,and big data analysis,iHuman believes it will continue to provide superior learning experiences that are effective and fun for children in China and all over the world through its integrated suite of tech-powered smart learning products.

For more information about iHuman,please visit https://ir.ihuman.com/.

For investor and media enquiries,please contact:

iHuman Inc.

Mr. JustinZhang

Investor Relations Director

Phone: +86 10 5780-6606

E-mail: ir@ihuman.com

Christensen

In China

Mr. Eric Yuan

Phone: +86-13801110739

E-mail: Eyuan@christensenir.com

In US

Ms. Linda Bergkamp

Phone: +1-480-614-3004

E-mail: lbergkamp@christensenir.com

iHumanInc.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$")

except for number of shares,ADSs,per share and per ADS data)

December 31,

September30,

2020

2021

2021

RMB

RMB

US$

ASSETS

Current assets

Cash and cash equivalents

861,682

918,866

142,606

Accounts receivable,net

77,965

73,388

11,390

Amounts due from related parties

322

4,044

628

Inventories,net

16,873

24,839

3,855

Prepayments and other current assets

64,619

76,873

11,931

Total current assets

1,021,461

1,098,010

170,410

Non-current assets

Property and equipment,net

6,390

13,091

2,032

Intangible assets,net

11,789

18,888

2,931

Operating leaseright-to-use assets

6,521

53,728

8,338

Other non-current assets

784

1,578

245

Total non-current assets

25,484

87,285

13,546

Total assets

1,046,945

1,185,295

183,956

LIABILITIES

Current liabilities

Accounts payable

21,551

36,855

5,720

Amounts due to related parties

485

25,374

3,938

Deferred revenue and customer advances

268,613

331,442

51,439

Accrued expenses and other current liabilities

107,029

120,110

18,641

Current operating lease liabilities

1,544

30,461

4,727

Total current liabilities

399,222

544,242

84,465

Non-current liabilities

Non-current operating lease liabilities

5,070

17,892

2,777

Total non-current liabilities

5,070

17,892

2,777

Total liabilities

404,292

562,134

87,242

SHAREHOLDERS' EQUITY

Ordinary shares (par value of US$0.0001 per share,

700,000,000 Class A shares authorized as of December

31,2020 and September 30,2021; 122,622,382 Class A

shares issued and outstanding as of December 31,2020;

125,122,382 Class A shares issued and 122,382

outstanding as of September 30,2021; 200,000 Class

B shares authorized,144,000 Class B ordinary shares

issued and outstanding as of December 31,2020 and

September 30,2021; 100,000 shares (undesignated)

authorized,nil shares (undesignated) issued and

outstanding as of December 31,

2021)

184

184

29

Additional paid-in capital

1,050,304

1,063,953

165,123

Accumulated other comprehensive loss

(21,861)

(25,860)

(4,013)

Accumulated deficit

(385,974)

(415,116)

(64,425)

Total shareholders' equity

642,653

623,161

96,714

Total liabilities and shareholders' equity

1,956

iHumanInc.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$")

except for number of shares,ADSs,per share and per ADS data)

For the three months ended

For the nine months ended

September 30,

June 30,

September 30,

2020

2021

2021

2021

2020

2021

2021

RMB

RMB

RMB

US$

RMB

RMB

US$

Revenues

Online subscriptions

120,682

199,198

220,461

34,215

273,144

611,519

94,906

Offline products and others

36,220

22,061

38,522

5,979

69,234

95,381

14,803

Total Revenues

156,902

221,259

258,983

40,194

342,378

706,900

109,709

Cost of revenues

Online subscriptions

(30,921)

(50,645)

(55,758)

(8,654)

(70,450)

(153,373)

(23,803)

Offline products and others

(18,426)

(16,351)

(23,027)

(3,574)

(39,013)

(57,812)

(8,972)

Gross profit

107,555

154,263

180,198

27,966

232,915

495,715

76,934

Operating expenses

Research and development expenses

(55,865)

(93,053)

(131,088)

(20,345)

(129,539)

(306,253)

(47,530)

Sales and marketing expenses

(22,729)

(45,298)

(67,216)

(10,432)

(51,112)

(165,441)

(25,676)

General and administrative expenses

(15,420)

(19,364)

(25,761)

(3,998)

(32,884)

(67,694)

(10,506)

Total operating expenses

(94,014)

(157,715)

(224,065)

(34,775)

(213,535)

(539,388)

(83,712)

Operating income (loss)

13,541

(3,452)

(43,867)

(6,809)

19,380

(43,673)

(6,778)

Other income,net

3,829

5,121

5,695

884

5,588

14,361

2,229

Income (loss) before income taxes

17,370

1,669

(38,172)

(5,925)

24,968

(29,312)

(4,549)

Income tax benefit (expenses)

(6,737)

238

(23)

(4)

(8,694)

170

26

Net income (loss)

10,633

1,907

(38,195)

(5,929)

16,274

(29,142)

(4,523)

Accretion to redemption value of contingently redeemable

ordinary shares

(3,996)

-

-

-

(10,445)

-

-

Net income (loss) attributable to ordinary shareholders

6,637

1,929)

5,829

(29,523)

Net income (loss) attributable to ordinary shareholders per

ADS:

- Basic

0.15

0.04

(0.72)

(0.11)

0.14

(0.55)

(0.08)

- Diluted

0.15

0.03

(0.72)

(0.11)

0.14

(0.55)

(0.08)

Weighted average number of ADSs:

- Basic

43,010,752

53,324,476

53,476

43,476

- Diluted

43,752

54,680,936

53,476

Total share-based compensation expenses included in:

Cost of revenues

-

257

244

38

-

768

119

Research and development expenses

-

1,524

(24)

(4)

-

5,211

809

Sales and marketing expenses

-

986

767

119

-

2,930

455

General and administrative expenses

-

1,458

1,379

214

-

4,740

736

iHumanInc.

UNAUDITED RECONCILIATION OF GAAP AND NON-GAAP RESULTS

(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$")

except for number of shares,

2020

2021

2021

2021

2020

2021

2021

RMB

RMB

RMB

US$

RMB

RMB

US$

Operating income (loss)

13,778)

Share-based compensation expenses

-

4,225

2,366

367

-

13,649

2,119

Adjusted operating income (loss)

13,541

773

(41,501)

(6,442)

19,380

(30,024)

(4,659)

Net income (loss)

10,523)

Share-based compensation expenses

-

4,119

Adjusted net income (loss)

10,633

6,132

(35,829)

(5,562)

16,274

(15,493)

(2,404)

Accretion to redemption value of contingently redeemable

ordinary shares

(3,996)

-

-

-

(10,445)

-

-

Adjusted net income (loss) attributable to ordinary

shareholders

6,637

6,562)

5,829

(15,404)

Diluted net income (loss) per ADS

0.15

0.03

(0.72)

(0.11)

0.14

(0.55)

(0.08)

Impact of non-GAAP adjustments

-

0.08

0.05

0.01

-

0.26

0.03

Adjusted diluted net income (loss) per ADS

0.15

0.11

(0.67)

(0.10)

0.14

(0.29)

(0.05)

Weighted average number of ADSs – diluted

43,476

Weighted average number of ADSs – adjusted

43,476

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