51Talk Online Education Group reported a significant revenue increase for Q3 2024, with net revenues reaching $14 million, marking a 79.4% year-over-year growth. Despite this positive development, the company faced an operating loss of $0.8 million and a net loss attributable to shareholders of $0.6 million. The stock responded positively, with a 9.72% increase in premarket trading, reflecting investor confidence in the company's strategic initiatives and market expansion efforts.
Key Takeaways
- Revenue grew by 79.4% year-over-year to $14 million.
- The company reported an operating loss of $0.8 million.
- Stock price increased by 9.72% in premarket trading.
- Significant AI adoption is enhancing operational efficiencies.
- Expansion into Southeast Asian and Spanish-speaking markets is underway.
Company Performance
51Talk Online Education Group demonstrated robust revenue growth in Q3 2024, driven by increased demand and strategic market expansions. The company's focus on AI adoption has improved operational efficiencies, including lead conversion rates and student experiences. Despite these advancements, the company reported an operating loss, highlighting ongoing challenges in achieving profitability.
Financial Highlights
- Revenue: $14 million (79.4% increase YoY)
- Gross margin: 78.7%
- Gross billings: $19.8 million (80.7% increase YoY)
- Operating loss: $0.8 million
- Net loss attributable to shareholders: $0.6 million
- Total (EPA:TTEF) cash, cash equivalents, and time deposits: $25.6 million
- Advances from students: $39.7 million
Market Reaction
The stock price of 51Talk Online Education Group rose by 9.72% in premarket trading, reaching $17.98. This increase reflects investor optimism about the company's strong revenue growth and strategic initiatives, including AI integration and market expansion. The stock is nearing its 52-week high of $19.75, indicating positive sentiment despite the company's reported losses.
Company Outlook
Looking ahead, 51Talk aims to achieve net gross billings of $20.5-$21 million in Q4 2024. The company is focused on quality growth and maintaining positive cash flow in 2025. Expansion into new markets, particularly in Southeast Asia and Spanish-speaking regions, remains a key strategic priority.
Executive Commentary
CEO Jack Huang emphasized the company's commitment to localization and growth strategies, stating, "We are committed to our localization strategies around the world." He also highlighted the role of AI in driving performance, noting, "The acceleration of AI adoption across our group has become a significant driver this quarter."
Q&A
During the earnings call, analysts inquired about cash flow and market expansion plans. CEO Jack Huang confirmed the company's focus on growth and confidence in achieving positive cash flow in 2025. He also mentioned ongoing exploration of opportunities in Vietnamese and Spanish-speaking markets.
Risks and Challenges
- Sustained operating losses could impact future profitability.
- Increased marketing expenses may pressure margins.
- High advances from students could pose future financial liabilities.
- Market expansion efforts may face challenges in new regions.
- Macroeconomic factors could affect consumer spending and demand.
Full transcript - 51Talk Online Education Group DRC (COE) Q3 2024:
Conference Operator: Hello, ladies and gentlemen. Thank you for standing by for 51 Talk Online Education Group's Third Quarter 2024 Earnings Conference Call. At this time, all participants will be in a listen only mode. Today's conference call is being recorded. I would now like to turn the call over to your host, Mr.
David Cheung, Investor Relations for the company. Please go ahead, David.
David Cheung, Investor Relations, 51 Talk Online Education Group: Hello, everyone, and welcome to the Q3 2024 earnings conference call of 51talk. The company's results were issued by 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 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 and A session. Before we continue, please note that the discussion will contain forward looking statements made under the Safe Harbor provisions of the U. S.
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 U. S.
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 earnings press release and this conference call include discussion of unaudited GAAP 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 Wang.
Jack, please go ahead.
Jack Huang, CEO, 51 Talk Online Education Group: Thank you, David. Hello, everyone. Thank you very much for joining our conference call today. Our gross momentum has been well sustained into the 3rd quarter with gross billings once again surpassing our earlier guidance. Looking ahead, we are confident in our ability to maintain our growth momentum going forward, while accounting for some anticipated seasonality.
We are committed to our localization strategies around the world, while actively pursuing opportunities to extend service offerings with supplementary products for our existing students. Furthermore, we would highlight that in our commitment to sustainable growth, we have successfully maintained upward trajectory in our operating cash flow in the past two quarters. This is evidenced by the improvement in our cash balance over the quarter, and we anticipate that this positive trend will continue in the coming period. The acceleration of AI adoption across our group has become a significant driver this quarter. We have observed improvements in lead conversion rates, tutor management and students' classroom experiences, all powered by AI.
Our deep understanding of customer needs combined with the strategic implementation of AI technologies aligns with our objective of becoming a globally leading ad tech company. With that, I will now turn the call over to Cindy, our CFO.
Cindy Tang, CFO, 51 Talk Online Education Group: Thank you, Jack. Now let me walk you through our Q3 financial details. 3rd quarter net revenues were US14 $1,000,000 a 79.4% increase from the same quarter last year, largely driven by the increase of active students with attended testing consumption. Gross margin for the Q3 was 78.7%. Gross billings grew by 80.7% from the same quarter last year to US19.8 million dollars Q3 operating expenses were US11.8 million dollars an increase of 20.6 percent compared to the same quarter last year.
Specifically, this has been driven by Q3 sales and marketing expenses of US8.2 million dollars an 18.3% increase from the same quarter last year due to higher sales personnel costs related to increases in the number of sales and marketing personnel. Q3 product development expenses were US0.8 million dollars a 3.3% decrease from the same quarter last year. Finally, Q3 general and administrative expenses were US2.8 million dollars a 38.6% increase from the same quarter last year. Overall, Q3 operating loss was US0.8 million dollars while net loss attributable to the company's ordinary shareholders was US0.6 million dollars a 79.6 percent and 83.6 percent decrease from the same quarter last year, respectively. Q3 GAAP and non GAAP earnings per ADS were negative US0.11 dollars and US0.07 dollars respectively.
The company's total cash, cash equivalents and time deposits were $25,600,000 at the end of the Q3. Advances from students was $39,700,000 at the end of the Q3. Looking forward to the Q4 of 2024, we currently expect net gross billings to be between US20.5 million dollars US21 million dollars 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.
Conference Operator: Thank you. We will now begin the question and answer session. And the first question will come from John Banks with Garden State Securities. Please go ahead.
John Banks, Analyst, Garden State Securities: Hey, congratulations. Great quarter, especially with the number of customers you have. Just a couple of quick questions. On next year, Jack, like with cash flow, so with profitability, I know you're at a big growth phase of the company. Can you just give a little color about cash flow and maybe profitability going into next year?
And my second question, with new markets you guys are looking to get into, Spanish, Vietnamese on your website, any color on like the new markets you're entering for next year? Thank you very much and congratulations.
Jack Huang, CEO, 51 Talk Online Education Group: Well, thank you very much for your question. So regarding your first question about the cash flow in 2025, As we mentioned in the ER, our target is quality growth. So our top priority for the company is the growth. So we aim to have a good growth rate in 2025. And of course, as you can see from last quarter, we have achieved a positive cash flow of about above US2 $1,000,000
David Cheung, Investor Relations, 51 Talk Online Education Group: So we
Jack Huang, CEO, 51 Talk Online Education Group: are very much confident that we can achieve a positive cash flow in the whole year of 2025. Regarding your second question about the new markets, yes, we are one of our growth strategy is to expand into more markets. As you may see that right now, we 51 talk is we are in Southeast Asia like Malaysia, like Thailand, and we are going to open the market in Vietnam. Right now, we are doing some pilots there. And we are also as you can see that we have the Arabic version.
So we are right now in the Arabic areas as well. And of course, we see that the Spanish world is a big market with a population of over 500,000,000 population. So we are looking into it. But right now, we have we don't have a team there, but it's possible we are considering to have a pilot in the Spanish speaking market. What is the third question?
Sorry.
John Banks, Analyst, Garden State Securities: No, those are my two questions. Thank you very much. Congratulations. Company, it looks like you guys for next year looks very good.
Jack Huang, CEO, 51 Talk Online Education Group: Thank you very much.
Conference Operator: And this will conclude our question and answer session. I would like to turn the conference back over to Mr. David for any closing remarks. Please go ahead, sir.
David Cheung, Investor Relations, 51 Talk Online Education Group: Thank you once again for joining us today. If you have further questions, please contact Livefroon Talks Investor Relations through their contact information provided on our website.
Conference Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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