51Talk Online Education Group Announces the Results for the Fourth Quarter and Full Year 2023
- None.
- Operating expenses surged in 2023, resulting in an operating loss of US$13.9 million for the full year.
- Net loss for 2023 was US$14.0 million, compared to US$42.5 million in 2022, but still reflecting a significant loss.
- Gross margin decreased slightly to 76.8% in 2023, indicating a potential challenge in maintaining profitability.
- General and administrative expenses decreased slightly in 2023, but sales and marketing expenses saw a significant rise, impacting overall profitability.
- Despite revenue growth, the company's net loss per share remained at US$0.04 for 2023, indicating challenges in translating revenue growth into profitability.
Insights
The substantial growth in both gross billings and net revenues for 51Talk Online Education Group is indicative of a successful expansion into international markets. This expansion is particularly noteworthy as it represents the company's transition from a primarily China-focused business model to a global one. The impressive increase in active students suggests that the demand for online English education is robust and that 51Talk is capturing market share effectively.
However, the increased cost of revenues, primarily due to higher service fees paid to teachers, points to a scaling challenge. As the company grows, maintaining a balance between quality education delivery and cost management will be critical. The significant rise in sales and marketing expenses, although contributing to customer acquisition, has led to an operating loss. This strategy seems to be a double-edged sword, where the pursuit of growth is currently coming at the cost of profitability.
Investors should monitor how these investments in growth translate to long-term profitability, especially considering the company's net loss has widened despite the revenue growth. The forecasted increase in gross billings for the next quarter suggests management's confidence in continued growth, yet the ability to convert this into net income will be important for long-term sustainability.
The financial results of 51Talk reflect a dynamic growth trajectory, with net revenues and gross billings showing significant year-on-year increases. This performance could be a positive signal to investors about the company's growth potential in the online education sector. On the flip side, the reported operating and net losses, which have widened from the previous year, raise concerns about the company's current cost structure and its ability to achieve profitability.
Analyzing the balance sheet, the increase in advances from students is a positive liquidity indicator, showing that cash flow from operations might be healthy. However, the relatively stable cash and cash equivalents year over year, despite the growth in billings and revenues, may imply a high cash burn rate. This could be attributed to the aggressive investment in sales and marketing, as well as product development.
The non-GAAP measures, excluding share-based compensation, provide an alternative view of the company's performance but should be approached with caution as they exclude expenses that are indeed real costs to the company. The increase in non-GAAP net loss indicates underlying challenges in achieving operational efficiency.
The results from 51Talk highlight the growing trend of online education, particularly in the English language learning segment. The company's rapid growth in active students and its successful pivot to international markets demonstrate the scalability of its business model. The use of AI-enabled tools to enhance teaching effectiveness is a strategic move that aligns with industry trends towards personalized and technology-enhanced learning experiences.
However, the education technology industry is known for its high customer acquisition costs and the need for continuous investment in technology and content to stay competitive. The significant increases in operating expenses, especially in sales and marketing, reflect these industry challenges. The ability of 51Talk to manage these expenses while sustaining growth will be a key factor in its long-term success.
Investors should also consider the competitive landscape and regulatory environment as these can have material impacts on the company's operations. The long-term success of 51Talk will depend on its ability to differentiate itself in a crowded market and adapt to potential regulatory changes in the online education space.
Full Year 2023 Financial and Operating Highlights
- Gross billings[1] for 2023 were
US , a$39.9 million 38.4% growth from 2022. - Net revenues were
US .3 million for 2023, an$27 81.4% increase fromUS for 2022.$15.0 million - The number of active students with attended lesson consumption was approximately 50,800 in 2023, representing a
93.9% increase from 26,200 in 2022.
Fourth Quarter 2023 Financial and Operating Highlights
- Gross billings for the fourth quarter of 2023 were
US , a$11.1 million 46.8% growth from the fourth quarter of 2022. - Net revenues were
US for the fourth quarter of 2023, a$7.7 million 51.6% increase fromUS for the fourth quarter of 2022.$5.1 million - The number of active students with attended lesson consumption was approximately 40,500 in the fourth quarter of 2023, representing a
77.6% increase from approximately 22,800 for the fourth quarter of 2022.
Key Financial and Operating Data | For the three months ended | For the year ended | ||||||
Jun. 30, | Sept. 30, | Dec. 31, | Dec. 31, | |||||
2023 | 2023 | 2023 | 2023 | |||||
Net Revenues (in US$ millions) | 6.3 | 7.8 | 7.7 | 27.3 | ||||
Gross Margin | 78.4 % | 76.3 % | 75.6 % | 76.8 % | ||||
Gross Billings (in US$ millions) | 9.8 | 10.9 | 11.1 | 39.9 | ||||
Active students with attended lesson consumption[2] | 29.7 | 36.0 | 40.5 | 50.8 | ||||
"While FY2023 represents the sophomore year of our global expansion, it is the first full year where we entirely dedicated ourselves to bring our global business on a solid footing to penetrate selected markets. Financially, FY2023 is the first year of four full quarters of
"During FY2023, we had just over 50 thousand active students with attended lesson consumption and gross billings of
In terms of technology, our broad-based efforts to deploy AI enabled tools to elevate the effectiveness of our human teachers is starting to bear fruits. Our teachers and learning consultants obtain more comprehensive and accurate quantitative student assessments to customize students' learning path. In addition we equip teachers with tools to engage with students more effectively and provide an elevated learning experience. As a consequence, our students will obtain more personalized exercises, be exposed to more immersive interactions and benefit from more accurate assessments." Mr. Huang concluded.
Fourth Quarter 2023 Financial Results
Net Revenues and Gross Margin
Net revenues for the fourth quarter of 2023 were
Cost of revenues for the fourth quarter of 2023 was
Gross profit for the fourth quarter of 2023 was
Gross margin for the fourth quarter of 2023 was
Operating Expenses
Total operating expenses for the fourth quarter of 2023 were
Sales and marketing expenses for the fourth quarter of 2023 were
Product development expenses for the fourth quarter of 2023 were
General and administrative expenses for the fourth quarter of 2023 were
Loss from Operations
Operating loss for the fourth quarter of 2023 was
Non-GAAP operating loss for the fourth quarter of 2023 was
Net Loss
Net loss for the fourth quarter of 2023 was
Excluding share-based compensation expenses of
Basic and diluted net loss per share attributable to ordinary shareholders for the fourth quarter of 2023 was
Excluding share-based compensation expenses of
Basic and diluted net loss per American depositary share ("ADS") attributable to ordinary shareholders for the fourth quarter of 2023 was
Excluding share-based compensation expenses of
Balance Sheet
As of December 31, 2023, the Company had total cash, cash equivalents, time deposits of
The Company had advances from students[3] of
Full Year 2023 Financial Results
Net Revenues and Gross margin
Net revenues for 2023 were
Cost of revenues for 2023 was
Gross profit for 2023 was
Gross margin for 2023 was
Operating Expenses
Total operating expenses for 2023 were
Sales and marketing expenses for 2023 were
Product development expenses for 2023 were
General and administrative expenses for 2023 were
Loss from Operations
Operating loss for 2023 was
Excluding share-based compensation expenses of
Net Loss
Net loss for 2023 was
Excluding share-based compensation expenses of
Basic and diluted net loss per share attributable to ordinary shareholders for 2023 was
Excluding share-based compensation expenses of
Basic and diluted net loss per American depositary share attributable to ordinary shareholders for 2023 was
Excluding share-based compensation expenses of
[1] Gross billings for a given period, which is one of the Company's key operating data, is defined as the total amount of cash received and receivable from third party payment platforms for the sale of course packages and services in such period, net of the total amount of refunds in such period. The gross billings data included herein was from the Company's business system and converted with quarterly corresponding exchange rate, which may lead to differences with bank records. |
[2] An "active student with attended lesson consumption" for a given period refers to a student who attended at least one paid lesson, excluding those students who only attended paid live broadcasting lessons or trial lessons. |
[3] "Advances from students" is defined as the amount of obligation to transfer goods or service to students or business partners for which consideration has been received from students in advance. The deposits from students are also presented in the total amount of "advances from students." |
[4] "Continuing operations" refers to the Company's remaining international business after the divestiture of its |
[5] "Discontinued operations" refers to the Company's |
Outlook
For the first quarter of 2024, the Company currently expects net gross billings to be between
The above outlook is based on current market conditions and reflects the Company's current and preliminary estimates of market and operating conditions and customer demand, which are all subject to change.
Conference Call
The Company's management will host an earnings conference call at 8:00 AM
Dial-in details for the earnings conference call are as follows:
1-888-346-8982 | |
International: | 1-412-902-4272 |
800-120-6157 | |
Mainland | 4001-201203 |
800-905945 | |
852-301-84992 |
Participants should dial-in at least 5 minutes before the scheduled start time and ask to be connected to the call for "51Talk Online Education Group."
Additionally, a live and archived webcast of the conference call will be available on the Company's investor relations website at http://ir.51talk.com.
A replay of the conference call will be accessible until March 29, 2024, by dialing the following telephone numbers:
1-877-344-7529 | |
International: | 1-412-317-0088 |
Replay Access Code: | 5998929 |
About 51Talk Online Education Group
51Talk Online Education Group (NYSE American: COE) is a global online education platform with core expertise in English education. The Company's mission is to make quality education accessible and affordable. The Company's online and mobile education platforms enable students to take live interactive English lessons, on demand. The Company connects its students with a large pool of highly qualified teachers that it assembled using a shared economy approach, and employs student and teacher feedback and data analytics to deliver a personalized learning experience to its students.
Use of Non-GAAP Financial Measures
In evaluating its business, 51Talk considers and uses the following measures defined as non-GAAP financial measures by the SEC as supplemental metrics to review and assess its operating performance: non-GAAP sales and marketing expenses, non-GAAP product development expenses, non-GAAP general and administrative expenses, non-GAAP operating expenses, non-GAAP operating income/(loss), non-GAAP net income/(loss), non-GAAP net income/(loss) attributable to ordinary shareholders, and non-GAAP net income/(loss) attributable to ordinary shareholders per share and per ADS. To present each of these non-GAAP measures, the Company excludes share-based compensation expenses. The presentation of these 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 GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliations of non-GAAP measures to the most comparable GAAP measures" set forth at the end of this press release.
51Talk believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance by excluding share-based compensation expenses that may not be indicative of its operating performance from a cash perspective. 51Talk believes that both management and investors benefit from these non-GAAP financial measures in assessing its performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to 51Talk's historical performance. 51Talk computes its non-GAAP financial measures using the same consistent method from quarter to quarter and from period to period. 51Talk believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision-making. A limitation of using non-GAAP measures is that these non-GAAP measures exclude share-based compensation expenses that have been and will continue to be for the foreseeable future a significant recurring expense in the 51Talk's business. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying table at the end of this press release provides more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures..
Safe Harbor Statement
This press release contains statements that may constitute "forward-looking" statements pursuant to the "safe harbor" provisions of the
51TALK ONLINE EDUCATION GROUP | ||||||||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(In thousands) | ||||||||
As of | ||||||||
Dec. 31, | Dec. 31, | |||||||
2022 | 2023 | |||||||
US$ | US$ | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | 18,186 | 12,625 | ||||||
Time deposits | 4,872 | 10,764 | ||||||
Prepaid expenses and other current assets | 3,509 | 6,245 | ||||||
Total current assets | 26,567 | 29,634 | ||||||
Non-current assets | ||||||||
Property and equipment, net | 25 | 138 | ||||||
Intangible assets, net | 104 | 92 | ||||||
Right-of-use assets | 769 | 723 | ||||||
Deferred tax assets | - | 72 | ||||||
Other non-current assets | 169 | 348 | ||||||
Total non-current assets | 1,067 | 1,373 | ||||||
Total assets | 27,634 | 31,007 | ||||||
LIABILITIES | ||||||||
AND SHAREHOLDERS' EQUITY/(DEFICIT) | ||||||||
Current liabilities | ||||||||
Advances from students | 15,167 | 27,432 | ||||||
Accrued expenses and other current liabilities | 4,341 | 5,026 | ||||||
Amounts due to related parties | 389 | 4,550 | ||||||
Lease liability | 427 | 590 | ||||||
Taxes payable | 186 | 301 | ||||||
Total current liabilities | 20,510 | 37,899 | ||||||
Non-current liabilities | ||||||||
Lease liability | 307 | 41 | ||||||
Other non-current liabilities | 156 | 176 | ||||||
Deferred tax liabilities | 84 | - | ||||||
Total non-current liabilities | 547 | 217 | ||||||
Total liabilities | 21,057 | 38,116 | ||||||
Total shareholders' equity/(deficit) | 6,577 | (7,109) | ||||||
Total liabilities and shareholders' equity/(deficit) | 27,634 | 31,007 | ||||||
51TALK ONLINE EDUCATION GROUP | ||||||||||
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||
(In thousands except for number of shares and per share data) | ||||||||||
For the three months ended | For the twelve months ended | |||||||||
Dec 31, | Sep. 30, | Dec 31, | Dec 31, | Dec 31, | ||||||
2022 | 2023 | 2023 | 2022 | 2023 | ||||||
US$ | US$ | US$ | US$ | US$ | ||||||
Net revenues | 5,051 | 7,828 | 7,659 | 15,048 | 27,299 | |||||
Cost of revenues | (1,062) | (1,858) | (1,868) | (3,194) | (6,322) | |||||
Gross profit | 3,989 | 5,970 | 5,791 | 11,854 | 20,977 | |||||
Operating expenses | ||||||||||
Sales and marketing expenses | (3,985) | (6,905) | (7,646) | (13,279) | (24,101) | |||||
Product development expenses | (435) | (868) | (864) | (2,865) | (3,088) | |||||
General and administrative | (1,742) | (2,048) | (1,867) | (8,068) | (7,727) | |||||
Total operating expenses | (6,162) | (9,821) | (10,377) | (24,212) | (34,916) | |||||
Loss from operations | (2,173) | (3,851) | (4,586) | (12,358) | (13,939) | |||||
Interest income | 24 | 29 | 67 | 27 | 165 | |||||
Other expenses, net | 147 | (43) | (105) | (453) | (268) | |||||
Loss before income tax expenses | (2,002) | (3,865) | (4,624) | (12,784) | (14,042) | |||||
Income tax (expenses)/benefit | - | 1 | 12 | (60) | 65 | |||||
Loss from continuing operations, | (2,002) | (3,864) | (4,612) | (12,844) | (13,977) | |||||
Loss from discontinued operations, | - | - | - | (29,712) | - | |||||
Net loss, all attributable to the | (2,002) | (3,864) | (4,612) | (42,556) | (13,977) | |||||
Weighted average number of | 337,549,708 | 341,725,689 | 342,841,445 | 335,640,275 | 341,070,214 | |||||
51TALK ONLINE EDUCATION GROUP | |||||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||
(In thousands except for number of shares and per share data) | |||||||||||
For the three months ended | For the twelve months ended | ||||||||||
Dec 31, | Sep. 30, | Dec 31, | Dec 31, | Dec 31, | |||||||
2022 | 2023 | 2023 | 2022 | 2023 | |||||||
US$ | US$ | US$ | US$ | US$ | |||||||
Net loss per share attributable to ordinary shareholders | |||||||||||
Basic and diluted | (0.01) | (0.01) | (0.01) | (0.13) | (0.04) | ||||||
Net loss per ADS attributable to ordinary shareholders | |||||||||||
Basic and diluted | (0.36) | (0.68) | (0.81) | (7.61) | (2.46) | ||||||
Share-based compensation expenses are included in the operating expenses as follows: | |||||||||||
Sales and marketing expenses | (30) | (33) | (31) | (17) | (149) | ||||||
Product development expenses | (45) | (44) | (45) | (149) | (179) | ||||||
General and administrative expenses | (34) | (166) | (170) | (546) | (582) | ||||||
51TALK ONLINE EDUCATION GROUP | ||||||||||||
Reconciliation of Non-GAAP Measures to the Most Comparable GAAP Measures | ||||||||||||
(In thousands except for number of shares and per share data) | ||||||||||||
For the three months ended | For the twelve months ended | |||||||||||
Dec 31, | Sep. 30, | Dec 31, | Dec 31, | Dec 31, | ||||||||
2022 | 2023 | 2023 | 2022 | 2023 | ||||||||
US$ | US$ | US$ | US$ | US$ | ||||||||
Sales and marketing expenses | (3,985) | (6,905) | (7,646) | (13,279) | (24,101) | |||||||
Less: Share-based compensation expenses | (30) | (33) | (31) | (17) | (149) | |||||||
Non-GAAP sales and marketing expenses | (3,955) | (6,872) | (7,615) | (13,262) | (23,952) | |||||||
Product development expenses | (435) | (868) | (864) | (2,865) | (3,088) | |||||||
Less: Share-based compensation expenses | (45) | (44) | (45) | (149) | (179) | |||||||
Non-GAAP product development expenses | (390) | (824) | (819) | (2,716) | (2,909) | |||||||
General and administrative expenses | (1,742) | (2,048) | (1,867) | (8,068) | (7,727) | |||||||
Less: Share-based compensation expenses | (34) | (166) | (170) | (546) | (582) | |||||||
Non-GAAP general and administrative expenses | (1,708) | (1,882) | (1,697) | (7,522) | (7,145) | |||||||
Operating expenses | (6,162) | (9,821) | (10,377) | (24,212) | (34,916) | |||||||
Less: Share-based compensation expenses | (109) | (243) | (246) | (712) | (910) | |||||||
Non-GAAP operating expenses | (6,053) | (9,578) | (10,131) | (23,500) | (34,006) | |||||||
Loss from operations | (2,173) | (3,851) | (4,586) | (12,358) | (13,939) | |||||||
Less: Share-based compensation expenses | (109) | (243) | (246) | (712) | (910) | |||||||
Non-GAAP loss from operations | (2,064) | (3,608) | (4,340) | (11,646) | (13,029) | |||||||
51TALK ONLINE EDUCATION GROUP | ||||||||||||||
Reconciliation of Non-GAAP Measures to the Most Comparable GAAP Measures | ||||||||||||||
(In thousands except for number of shares and per share data) | ||||||||||||||
For the three months ended | For the twelve months ended | |||||||||||||
Dec 31, | Sep. 30, | Dec 31, | Dec 31, | Dec 31, | ||||||||||
2022 | 2023 | 2023 | 2022 | 2023 | ||||||||||
US$ | US$ | US$ | US$ | US$ | ||||||||||
Income tax (expenses)/benefit | - | 1 | 12 | (60) | 65 | |||||||||
Less: Tax impact of Share-based compensation | - | - | - | - | - | |||||||||
Non-GAAP income tax (expenses)/benefit | - | 1 | 12 | (60) | 65 | |||||||||
Loss from continuing operations, net of income tax | (2,002) | (3,864) | (4,612) | (12,844) | (13,977) | |||||||||
Less: Share-based compensation expenses | (109) | (243) | (246) | (712) | (910) | |||||||||
Non-GAAP loss from continuing operations, net of | (1,893) |
(3,621) | (4,366) | (12, 132) | (13,067) | |||||||||
Loss from discontinued operations, net of income tax | - | - | - | (29,712) | - | |||||||||
Less: Share-based compensation expenses | - | - | - | - | - | |||||||||
Non-GAAP loss from discontinued operations, net of | - | - | - | (29,712) | - | |||||||||
Net loss, all attributable to the Company's ordinary | (2,002) | (3,864) | (4,612) | (42,556) | (13,977) | |||||||||
Less: Share-based compensation expenses | (109) | (243) | (246) | (712) | (910) | |||||||||
Non-GAAP net loss, all attributable to the | (1,893) | (3,621) | (4,366) | (41,844) | (13,067) | |||||||||
Weighted average number of ordinary shares used in | 337,549,708 | 341,725,689 | 342,841,445 | 335,640,275 | 341,070,214 | |||||||||
Non-GAAP net loss per share attributable to ordinary shareholders | ||||||||||||||
Basic and Diluted | (0.01) | (0.01) | (0.01) | (0.12) | (0.04) | |||||||||
Non-GAAP net loss per ADS attributable to ordinary shareholders | ||||||||||||||
Basic and Diluted | (0.34) | (0.64) | (0.76) | (7.48) | (2.30) | |||||||||
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SOURCE 51Talk Online Education Group
FAQ
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