China Online Education Group (COE) Reports Q3 Loss of $0.01

China Online Education Group (NYSE: COE) reported Q3 EPS of ($0.01). Revenue for the quarter came in at $57.2 million.

Third Quarter 2019 Financial and Operating Highlights

• Net revenues were RMB409.2 million (US$57.2 million), a 35.0% increase from RMB303.2 million for the third quarter of 2018.
• Gross billings[1] were RMB547.3 million (US$76.6 million), a 28.9% increase from RMB424.5 million for the third quarter of 2018.
• Gross margin was 71.7%, compared with 63.8% for the third quarter of 2018.
• GAAP net loss decreased 94.1% year-over-year to RMB5.3 million and sequentially decreased 83.6% from RMB32.4 million for the second quarter of 2019.
• Non-GAAP net loss decreased 97.8% year-over-year to RMB1.8 million and sequentially decreased 93.2% from RMB26.7 million for the second quarter of 2019.
• Operating cash inflow was RMB123.2 million (US$17.2 million), compared with RMB1.7 million cash outflow for the third quarter of 2018.
• Cash, cash equivalents, time deposits and short-term investments balance reached RMB906.4 million (US$126.8 million) as of September 30, 2019.

"The third quarter is a seasonally strong quarter for us, and our results reflected solid execution of our focused strategy. We exceeded the high end of both our net revenues and gross billing guidance ranges by 2.3% and 5.7%, respectively, fueled in large part by a 23.0% year-over-year increase in total active students," said Mr. Jack Jiajia Huang, Founder, Chairman and Chief Executive Officer of 51Talk. "Our primary growth driver remains our K-12 mass-market one-on-one offering in non-tier-one cities[3]. K-12 mass-market one-on-one gross billings grew 52.0% year-over-year to reach RMB504.6 million and represented 92.2% of our total gross billings. The improvement in our fundamentals reflected our consistent strategy of focusing on K-12 mass market in non-tier-one cities.

"During the third quarter, we launched our mobile-friendly, interactive curriculum for levels 0 to 2 of our flagship program, Classic English Junior. The enhanced curriculum improves learning effectiveness and leads to better learning outcomes through several new features including interactive games, virtual teaching aids, improved facial emotional recognition and engaging role-play scenarios. I am also very proud to share that two of our students were selected to represent Chinese youth and present speeches in English on the topic of environmental protection at the United Nations Climate Change Conference in Madrid, Spain, on December 5, 2019. Such an honor is indeed a testament to the hard work of these students, the dedication of their teachers and their supportive families.

"I am also delighted to share that we successfully delivered over 100 million one-on-one online English lessons, including free trial lessons, from our inception in 2011 through the end of November this year. As 51Talk continues to grow, we are confident our balanced growth strategy and operational focus on non-tier-one cities will continue to yield solid value for our stakeholders," Mr. Huang concluded.

"Our momentum from the first half continued into the third quarter as we achieved record high revenues, gross billings, gross margins, as well as the smallest non-GAAP net loss in our history at RMB1.8 million," said Mr. Min Xu, Chief Financial Officer of 51Talk. "We are also proud to report record high operating cash flow of RMB123.2 million for the quarter. Non-GAAP net margin improved to negative 0.4% this quarter from negative 7.6% in the second quarter this year. These results reflect the wide market appeal of our offerings and our on-going effort to improve operation efficiencies. As we wind down the year in the seasonally slower fourth quarter, we remain on track to prudently execute our balanced growth strategy."

Outlook

For the fourth quarter of 2019, the Company currently expects net revenues to be between RMB385 million to RMB390 million, which would represent an increase of approximately 29.2% to 30.8% from RMB298.1 million for the same quarter last year.

For earnings history and earnings-related data on China Online Education Group (COE) click here.

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