Release Date: December 13, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• 51 Talk Online Education Group (COE) reported a 79.4% increase in net revenues for Q3 2024 compared to the same quarter last year.
• Gross billings grew by 80.7% year-over-year, reaching $19.8 million.
• The company has successfully maintained an upward trajectory in operating cash flow, with a positive cash flow of over $2 million in the last quarter.
• AI adoption has significantly improved lead conversion rates, tutor management, and student classroom experiences.
• 51 Talk is expanding its market presence, with plans to enter new regions such as Vietnam and potentially Spanish-speaking markets.

Negative Points

• Q3 operating expenses increased by 20.6% year-over-year, driven by higher sales and marketing costs.
• The company reported an operating loss of $0.8 million for the third quarter.
• Net loss attributable to ordinary shareholders was $0.6 million, despite improvements from the previous year.
• General and administrative expenses rose by 38.6% compared to the same quarter last year.
• The company faces inherent risks and uncertainties in its forward-looking statements, which could impact future results.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Signs with COE.

Q: Can you provide some insights on cash flow and profitability for the next year? Also, what new markets are you planning to enter? A: (Jack Wang, CEO) Our focus is on quality growth, and we aim for a good growth rate in 2025. We achieved a positive cash flow of over $2 million last quarter and are confident in maintaining positive cash flow throughout 2025. Regarding new markets, we are expanding in Southeast Asia, including Vietnam, and exploring opportunities in Arabic-speaking regions. We are also considering a pilot in the Spanish-speaking market, although we currently do not have a team there.

Q: What are the key drivers behind the company's growth momentum in the third quarter? A: (Jack Wang, CEO) Our growth momentum is sustained by our localization strategies and the extension of service offerings with supplementary products. Additionally, the adoption of AI technologies has significantly improved lead conversion rates, tutor management, and classroom experiences, aligning with our goal of becoming a leading tech company.

Q: Can you elaborate on the financial performance for the third quarter? A: (Cindy Tang, CFO) Net revenues for the third quarter were $14 million, a 79.4% increase from the same quarter last year, driven by increased active students and lesson consumption. Gross margin was 78.7%, and gross billings grew by 80.7% to $19.8 million. Operating expenses increased by 20.6% to $11.8 million, primarily due to higher sales and marketing expenses. The operating loss was $0.8 million, and the net loss was $0.6 million, both significantly reduced from the previous year.

Q: What is the outlook for the fourth quarter of 2024? A: (Cindy Tang, CFO) We expect net growth billings to be between $20.5 million and $21 million, based on current market conditions and preliminary estimates of market and operating conditions and customer demand.

Q: How has AI adoption impacted the company's operations this quarter? A: (Jack Wang, CEO) AI adoption has been a significant driver this quarter, enhancing lead conversion rates, tutor management, and classroom experiences. This strategic implementation aligns with our objective of becoming a globally leading tech company.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.