Online English Education Platform 51Talk Reports Its Third Consecutive Quarterly Profit

Rhea-AI Summary

China Online Education Group (51Talk) reported its second quarter 2020 financial results, marking its third consecutive quarter of profitability. Non-GAAP net income reached RMB39.6 million, while GAAP net income stood at RMB32.8 million. The company maintained a strong gross margin exceeding 70% and achieved record gross billings of RMB676.4 million. Net revenue increased by 40% year-over-year, totaling RMB493.5 million. With a market share of 46% in the K-12 online English education sector, 51Talk continues to attract customers through its competitive pricing and high-quality teaching, primarily leveraging Filipino teachers.

Positive

• Third consecutive quarter of profitability with non-GAAP net income of RMB39.6 million.
• Achieved record gross billings of RMB676.4 million.
• Net revenue increased by 40% year-over-year to RMB493.5 million.
• Maintained a gross margin exceeding 70%.
• Ranked first in market share with 46% in the K-12 online English education market.

Negative

• None.

BEIJING, Sept. 16, 2020 /PRNewswire/ -- China Online Education Group ("51Talk" or the "Company") (NYSE:COE), China's leading online English education brand and the first online English education brand listed in the United States, released its second quarter 2020 financial results. In the second quarter, non-GAAP net income was RMB39.6 million, and GAAP net income was RMB32.8 million, amounting to the Company's third consecutive quarter of profitability and becoming China's only online English education brand to achieve it.

51Talk also continued to maintain a high gross margin of more than 70% and record high gross billings of RMB676.4 million. Operating cash flow was RMB172.1 million, a year-over-year increase of RMB72.9 million while net revenue was RMB493.5 million, a 40% increase year-over-year.

51Talk maintains leading position in market share

China's K-12 Online English Development Blue Book 2020 ("Blue Book"), released by Southern Weekly, a well-known Chinese media, and the big-data research center of Chinese Academy of Social Sciences, shows that 51Talk ranks first among its industry peers at 46% market share, with the next two peers coming in at 18% and 16%. The Blue Book also shows that Chinese parents believe 51Talk provides the most superior service offering when it comes to improving their children's English listening and speaking skills. The parents also noted that their children's speaking skills improved significantly after enrolling in 51Talk.

According to K-12 Online English One-on-One User Trend Research released by CTR Market Research, 51Talk enjoys total brand leadership with its cumulative 100 million classes delivered since its establishment in 2011. Its customer satisfaction rating also ranks first in the industry.

Strong market penetration in China and the Philippines fueled consistent profitability

In the second quarter of 2020, 71.3% of gross billings from the K-12 one-on-one mass market courses are from non-tier-one cities while 28.7% are from first-tier cities. Over the past two years, the growth of users in non-tier-one cities has exceeded that of first-tier cities. The success of this continuous downward market penetration has enabled 51Talk to attract customers with its competitive pricing, which further contributed to revenue growth.

51Talk's strong market growth has made it possible for its online teachers, a bulk of whom reside in the Philippines, to enjoy better profits with their one-on-one courses. In the three most recent financial quarters, 51Talk has maintained a high gross margin of 70%. Instead of allocating a big chunk of its resources in traditional advertising and marketing, 51Talk focused on teaching quality and effectiveness as well as word-of-mouth referrals, to greatly reduce operating costs.

Since 51Talk started its operations in the Philippines, it has developed programs and campaigns to create awareness about the benefits of being an online English teacher. This year, the company welcomed Miss Universe 2015 Pia Wurtzbach as its brand ambassador to attract more Filipino teachers.

Philippine teachers now more popular in China

In China, parents prefer Filipino teachers compared with counterparts from Europe and United States, according to the CTR Market Research. Although Filipinos are not native English speakers, the Philippine education system as well as businesses, use the English language, and thus the country consistently maintains top English proficiency ratings. Filipino teachers have been studying and learning English as a second language for years, so they are equipped with a deeper and more technical understanding of how to teach the English language.

Filipinos also take pride in their strong customer service. They are generally mild-mannered, modest, passionate, enthusiastic, cheerful and patient, which are ideal qualities to possess in order to effectively teach English to young kids. In addition, there is no time difference between the Philippines and China, so students and teachers can easily connect with more flexible class schedules. With all these advantages, Filipino teachers have gradually become the face of online English teachers in China.

51Talk's "Education for All" strategy, its downward market penetration approach, and its high-quality "Filipino Teachers' One-On-One Model" have helped the leading platform achieve excellent results in the second quarter of 2020. Brighter prospects also await the online English education industry as studies have shown that the scale of China's K-12 online education market is expected to exceed RMB304.5 billion in 2020. 51Talk, which leverages "Filipino Teachers' One-On-One Model" with a cost-effective and sustainable strategy, will surely continue to improve profitability in the future.

 

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SOURCE China Online Education Group

FAQ

What were 51Talk's net income results for Q2 2020?

In Q2 2020, 51Talk reported a non-GAAP net income of RMB39.6 million and a GAAP net income of RMB32.8 million.

How did 51Talk's revenue change year-over-year in Q2 2020?

51Talk's net revenue increased by 40% year-over-year, reaching RMB493.5 million.

What is 51Talk's market share in the K-12 online English education sector?

51Talk holds a leading market share of 46% in the K-12 online English education sector.

What were 51Talk's gross billings in Q2 2020?

51Talk recorded gross billings of RMB676.4 million in Q2 2020.

What is the significance of Filipino teachers for 51Talk?

51Talk benefits from employing Filipino teachers due to their strong English proficiency and customer service skills, enhancing the learning experience for students.