51Talk Online Education Group (COE) 2023 Q3 法說會逐字稿

Hello, ladies and gentlemen, thank you for standing by for 51Talk Online Education Group's Third Quarter 2023 Earnings Conference Call. (Operator Instructions) Today's conference call is being recorded.

I would now turn the call over to your host Mr. David Chung, Investor Relations for the company. Please go ahead, David.

Hello, everyone, and welcome to the Third Quarter 2023 Earnings Conference Call of 51 Talk. The company's results were issued via newswire services earlier today and are posted online. You can download the earnings press release and sign up for the company's distribution list by visiting g ir.51talk.com.

Mr. Jack Huang, our CEO, and Ms. Cindy Tang, our CFO, will begin with some prepared remarks. Following the prepared remarks, there will be a Q&A session.

Before we continue, please note that the discussion will contain forward-looking statements made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today.

Further information regarding this and other risks and uncertainties is included in the company's Form 20-F and other public filings as filed with the US Securities and Exchange Commission. The Company does not assume any obligation to update any forward-looking statements except as required under the applicable law.

Please also note that our earnings press release and this conference call include discussion of and also the financial information as well as unaudited non-GAAP financial measures. 51Talk's press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures.

I'll now turn the call over to our CEO, Jack Huang. Please go ahead.

Thank you, David. Hello, everyone. Thank you for joining our conference call today. Our growth continued in the third quarter with gross fillings coming in at the high end of the guidance. During the quarter, we focused on our growth activities in our electric in markets where we see high potential and the benefit from early mover advantage is that we have continued to localize our materials to adapt to the local audiences.

Although we are still very much in the expansion mode, we are achieving positive cash flow. Our cash increased by USD1.2 million compared to the previous quarter. We remain committed to our sustainable gross approach. In terms of technology, we focus on how in a relative AI can firstly further enhance our products to more personalized and interactive functionality to help our customers practice in a more engaging way.

Secondly, we deploy generated AI to empower our service teams to guide our students and their parents more effectively through the cost cycle. We equally use large [data] models to enhance our curriculum by creating more personalized adaptive course materials. With that I will now turn the call over to Cindy <unk>, our CFO.

Thank you, Jack. Our business momentum carried into the third quarter as net revenues were USD7.8 million representing 25.0% sequential growth. Gross margin for the third quarter was 76.3%. Gross billings grew by 11.3% quarter-over-quarter to USD10.9 million at the high end of guidance.

Q3 operating expenses were USD9.8 million, an increase of 25.0%, compared to the last quarter. Specifically, this has been driven by Q3, sales and marketing expenses of USD6.9 million, a 35.2% sequential increase from Q2 due to further increases in marketing and branding spend. Q3 product development expenses was USD0.9 million, a 25.1% sequential increase due to increased research and development projects and personnel.

Finally, Q3 general and administrative expenses were USD2.0 million, flattish compared to Q2. Overall, Q3 operating loss was USD3.9 million, while net loss was USD3.9 million at 30.5% and 33.3% sequential increase from Q2, respectively.

Q3 GAAP and non-GAAP earnings per ADS were negative USD0.68 and USD0.64, respectively. The company's total cash, cash equivalents and time deposits were USD22.9 at the end of the third quarter. Advances from students were USD23.7 million at the end of the third quarter.

Looking forward to the fourth quarter of 2023, we currently expect the net gross billings to be between USD11.0 million and USD11.5 million. The above outlook is based on our current market conditions and reflects the company's current and preliminary estimates of the market and operating conditions and customer demand, which are all subject to change.

This concludes our prepared remarks. We will now open the line for questions. Operator, please go ahead.

Yes. Thank you. At this time we will begin the question and answer session. (Operator Instructions) All right. At this time, I would like to return the call back over to the company for closing remarks. And Mr. David, please go ahead.

Thank you once again for joining us today. If you have further questions, please contact 51Talk's Investor Relations through the contact information provided on our website. Thank you.

Thank you. This concludes this conference call. You may disconnect your line at this time. Thank you.