51Talk Announces The First Profitable Year in Company History, Eyes Future Growth

Rhea-AI Summary

51Talk (COE), China's leading online education platform, announced its fourth-quarter results on March 5, 2021. The company achieved a non-GAAP net income of RMB38.6 million, marking its fifth consecutive profitable quarter, with net revenues increasing by 34.7% year-over-year to RMB535.1 million. Full year revenues also grew by 38.9% to RMB2.1 billion. Additionally, 51Talk recorded a high gross margin over 70% and operating cash flow of RMB188.5 million. The company aims to enhance user growth and brand promotion in 2021, supported by recent acquisitions and an expanding curriculum portfolio.

Positive

• Achieved a non-GAAP net income of RMB38.6 million in Q4 2020.
• Registered a 34.7% year-over-year growth in Q4 net revenues, reaching RMB535.1 million.
• Full year revenues grew by 38.9% to RMB2.1 billion in 2020.
• Maintained a gross margin exceeding 70% and recorded historical high operating cash flow of RMB188.5 million.
• Increased paying students by over 70% year-over-year in Q4 2020.

Negative

• The company's share price has historically remained low, around $6 in 2019.
• Despite positive financial results, ongoing low share price could affect investor confidence.

BEIJING, March 5, 2021 /PRNewswire/ -- 51Talk (China Online Education Group, NYSE: COE), China's leading online education platform and the first online English education brand listed in the United States, announced its unaudited financial results for the fourth quarter on March 5, 2021.

The company delivered solid results in the fourth quarter of 2020. 51Talk registered a non-GAAP net income of RMB38.6 million and its GAAP net income is RMB31.8 million, amounting to the company's fifth consecutive quarter of profitability. The company's fourth quarter net revenues maintained strong growth momentum and grew 34.7% year-over-year to reach RMB535.1 million.

However, the company's share price has a long history of staying on the low side. During 2019, 51Talk's share price was even around $6 per share. In early 2020, as U.S. investors recognized the opportunity in China's high-growth English language training market, the company's shares begun to pick up.

51Talk delivers solid financial results in the fourth quarter of 2020

The company continued to maintain a high gross margin of more than 70% and record high gross billings of RMB720.9 million. In terms of operating cash flow, the company also recorded historically high operating cash flow of RMB188.5 million, a year-over-year increase of RMB167.1 million.

"Despite 2020 presenting an array of unforeseen challenges, our strong pre-established foundational groundwork allowed us to not only manage this tumultuous period but in fact benefit from the shifting environment as we took advantage of new opportunities." said Jack Jiajia Huang, founder, chairman and chief executive officer of 51Talk.

Full year net revenues grew 38.9% to RMB2.1 billion. 2020 operating cash flow rose 80.8% to reach a historical high of RMB719.3 million, compared with RMB397.9 million in 2019, further strengthening the company's financial position for future growth.

"I'm proud that we concluded a turbulent 2020 with solid operating and financial results, evidenced by sustained revenue growth and the first profitable year in our company history," said Min Xu, Chief Financial Officer of 51Talk, as 51Talk recorded Non-GAAP net income of RMB173.7 million for 2020, compared to a net loss of RMB87.7 million in 2019.

In a late 2020 interview with Capital Watch, Xu said that he saw 51Talk's stock as undervalued. He commented with confidence that as the company grow, outperform its peers and competitors, get more news and market research out there, 51Talk will get investors' attention and the stock price will reflect its intrinsic value and growth potential."

Strong growth of paying students on 51Talk platform during Covid-19 pandemic 

Besides financial success, the fourth quarter also witnessed growth of paying students. In the fourth quarter, the number of 51Talk's paying students grew over 70.0% year-over-year driven by its effective curriculum and sound service quality, while its active students reached 353,800, up 37.6% compared with the same period in 2019. The year of 2020 also witnessed remarkable growth in new paying students which increased 60.0% year-over-year.

51Talk's strong market growth and rapid growth of paying students was due to "the impressive strategic execution of 51Talk's online K-12 English mass-market offerings", according to Huang.

Business success in the fourth quarter could not go without 51Talk's up-to-date curriculums, cutting-edge technologies, and quality services.

51Talk was the first platform to build an online English teaching network, and the first to set up a team of experts to prepare English teaching materials for young Chinese users and continue to subdivide the curriculum with the core of the one-to-one model for young people.

51Talk has been focusing on the field of English education, and has achieved good results with its courses and small classes for younger kids. It underpins the importance of the learning experience and performance in a bid that every student can get quality English teaching resources.

51Talk's "Education for All" strategy and its high-quality Filipino Teachers' One-On-One Model have helped the leading platform achieve excellent results.

In 2020, the company made improving competency within itself a top priority. Aware of its users' thirst for excellent English teachers, 51Talk has introduced about 30,000 high-quality Filipino foreign teachers over the past ten years and kept improving operations in terms of product, technology, and service to enhance human efficiency and ensure teaching quality through refined management. Beside every Filipino teacher, a Chinese tutor was there to follow the study process, monitoring the performance and offering needed services when necessary.

In September 2020, the company also ramped up a series of level K courses for children aged between three and five, which are easy to learn, fun to play with, and friendly to viewers, helping them make a good start on learning the English language.

As a staunch technology advocate, 51Talk welcomes the combination of AI technology and online English education. 51Talk just finished the acquisition of GKid, a Shanghai-based online English education platform, who offers innovative AI-driven online English courses through highly interactive animation and picture books for children from three to eight.

Huang believes that this acquisition both extends 51Talk's addressable market and broadens its product and curriculum portfolio. He foresees "potential collaboration and integration opportunities" between 51Talk's platform and GKid's products and industry-leading AI technologies.

User growth, market, brand promotion key to 2021's market expansion

"As we head further into 2021, we are focusing on user growth and enhanced brand promotions to drive market share expansion." Huang said.

To achieve this goal, 51Talk will continue to optimize its learning experiences through upgraded product offerings and an enriched curriculum mix to better attract and retain users, develop innovative AI-powered robotic tutors to help students review core knowledge points with the aim of enhancing overall learning efficiency, and integrate more interactive features into its textbooks to make its courses more interesting and engaging to young children, according to Huang.

The company is also diversifying its curriculum portfolio to provide a holistic learning experience, through investing in R&D, upgrading services to students, and expanding its teacher operations.

51Talk targets to further increase its branding and marketing efforts to heighten brand awareness as it seeks for future growth. In 2021, experience stores will continue to be a major part of its online merge offline strategy to boost market penetration in non-tier-one cities. There are more than 100 experience stores in 20 provinces in China till the end of 2020.

Xu added that in 2021, investment will be channeled towards the development of its curriculum, technology and brand as 51Talk looks to capitalize on market dynamics, drive user growth and achieve the leading market position.

Education has been one of China's fast-growing industries, boosted by the rising household income, parents' willingness to spend on their children's studies, government incentives, and the end to the one-child policy. By providing students across China with access to quality English education, 51Talk is standing out to achieve its mission of helping China speak with the world.

51Talk firmly believes that English education should not be a luxury, and that education for all is its goal. 51Talk will strive to provide quality English education to more families in 2021.

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SOURCE 51Talk

FAQ

What were 51Talk's Q4 2020 revenues and profits?

51Talk reported Q4 2020 net revenues of RMB535.1 million and a non-GAAP net income of RMB38.6 million.

How did 51Talk perform financially in 2020?

In 2020, 51Talk's full year revenues rose by 38.9% to RMB2.1 billion, with a non-GAAP net income of RMB173.7 million.

What is 51Talk's growth strategy for 2021?

51Talk plans to focus on user growth and brand promotion, enhance product offerings, and invest in R&D and technology.

How many paying students did 51Talk have in Q4 2020?

The number of paying students grew over 70% year-over-year, reaching 353,800 active students.

What major acquisition did 51Talk make recently?

51Talk acquired GKid, a Shanghai-based online English education platform, to broaden its product and curriculum portfolio.