China Online Education Group (NYSE: COE) reported Q2 EPS of ($0.19). Revenue for the quarter came in at $51.5 million, versus $0 reported last year.

Second Quarter 2019 Financial and Operating Highlights

• Net revenues were RMB353.4 million (US$51.5 million), a 25.4% increase from RMB281.7 million for the second quarter of 2018.
• Gross billings were RMB498.5 million (US$72.6 million), an 18.7% increase from RMB420.0 million for the second quarter of 2018.
• Gross margin was 69.6%, compared with 65.7% for the second quarter of 2018.
• GAAP net loss decreased 56.1% year-over-year to RMB32.4 million and sequentially decreased 48.9% from RMB63.3 million for the first quarter of 2019.
• Non-GAAP net loss decreased 60.2% year-over-year to RMB26.7 million and sequentially decreased 55.0% from RMB59.5 million for the first quarter of 2019.
• Operating cash inflow was RMB99.2 million (US$14.5 million), compared with RMB27.1 million for the second quarter of 2018.

"In addition to strong top-line performance, our balanced approach to both growth and profitability continues to bear positive results. Our Non-GAAP net loss for the second quarter narrowed further to RMB26.7 million, from a loss of RMB59.5 million in the first quarter, representing an improvement of net margin to negative 7.6% from negative 18.4%. The historically low Non-GAAP net loss can be credited to our focus on teaching quality, student satisfaction, and our continued pursuit to optimize operational efficiency and improve profitability. I am very proud to share that we successfully delivered over 90 million one-on-one online English lessons, which also include free trial lessons, from our inception in 2011 through the end of August this year. This is a nice milestone to mark in our vision to empower everyone to talk to the world. Going forward, we will continue to strengthen our core K-12 mass-market one-on-one business in non-tier-one cities by offering high-quality programs coupled with best-in-class technology," Mr. Huang concluded.

Mr. Min Xu, Chief Financial Officer of 51Talk, added, "Second quarter saw continued focus on the comprehensive execution of our operating model with a sharp emphasis on cost efficiency and the pursuit of profitability. We achieved historically high cash flow from operations of RMB99.2 million in the second quarter, a 265.8% year-over-year increase from RMB27.1 million in the same quarter last year. Consolidated gross margin expanded by 3.9 percentage points year-over-year to 69.6%, driven by significant gross margin improvement of both our one-on-one and small class offerings. With our focused growth strategy targeting non-tier-one cities and continued optimization of operating efficiencies, we are confident we can continue to deliver healthy growth and improve our profitability in the second half of 2019."

Outlook

For the third quarter of 2019, the Company currently expects:

• Net revenues to be between RMB395 million to RMB400 million, which would represent an increase of approximately 30.3% to 31.9% from RMB303.2 million for the same quarter last year;
• Total gross billings to be between RMB513 million to RMB518 million, which would represent an increase of approximately 20.8% to 22.0% from RMB424.5 million for the same quarter last year.
• Gross billings for the Company\'s one-on-one business are expected to be between RMB505 million to RMB510 million, which would represent an increase of approximately 23.8% to 25.0% from RMB407.9 million for the same quarter last year.
• Gross billings for 51Talk\'s small class business are expected to be approximately RMB8 million, which would represent a decrease of approximately 51.8% from RMB16.6 million for the same quarter last year.

The above outlook is based on the 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.

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