Earnings call transcript: 51Talk’s Q4 2024 sees strong revenue growth

51Talk Online Education Group reported robust financial results for Q4 2024, with net revenues surging by 117.3% year-over-year to $15.2 million. Despite an operating loss, the company demonstrated significant progress in its operational efficiency and market expansion efforts. The stock, currently trading at $22.72, shows remarkable momentum with a 233% return over the past year according to InvestingPro data. While the stock fell 3.48% in the latest session, it maintains strong performance metrics with a 42% gain over the past six months.

Key Takeaways

• Net revenues increased by 117.3% year-over-year.
• Gross billings grew by 93.4% to $21.4 million.
• The company recorded an operating loss of $900,000.
• 51Talk is focusing on AI integration to enhance its educational offerings.
• The stock price dropped 3.48% following the earnings announcement.

Company Performance

51Talk’s Q4 2024 results reflect strong growth in the online education sector, driven by increased demand for personalized learning solutions. The company’s revenue growth of 117.3% year-over-year underscores its competitive position in the market. Despite an operating loss, 51Talk is leveraging AI to improve operational efficiency and expand its geographic reach, which could bolster future performance.

Financial Highlights

• Net Revenues: $15.2 million (↑117.3% YoY)
• Gross Margin: 77.5%
• Gross Billings: $21.4 million (↑93.4% YoY)
• Operating Loss: $900,000
• Net Loss Attributable to Shareholders: $1.4 million (↓80.175% YoY)
• Total Cash and Equivalents: $29.2 million

Outlook & Guidance

Looking ahead, 51Talk projects Q1 2025 gross billings to be between $21.5 million and $22 million. With analysts forecasting 98.36% revenue growth for FY2024 and the company maintaining a strong financial health momentum score of 4.09 out of 5 according to InvestingPro, 51Talk’s commitment to expanding market presence and enhancing product offerings through AI technology positions it well for continued growth. This strategic focus is expected to drive further growth and operational efficiency.

Executive Commentary

Jack Huang, CEO of 51Talk, emphasized the company’s growth trajectory, stating, "We concluded financial year 2024 with gross billings growing by 74.4% year over year." He also highlighted the role of AI in personalizing education, saying, "AI will enable more personalized course plans and exercises." Huang expressed optimism about the company’s expansion plans: "We are expanding into new geographic markets to drive further growth."

Risks and Challenges

• Market Competition: The online education sector is highly competitive, with numerous players vying for market share.
• Economic Conditions: Fluctuations in economic conditions could impact consumer spending on education.
• Technological Integration: Successful integration of AI technology is crucial for maintaining a competitive edge.
• Regulatory Changes: Changes in education regulations could affect operational strategies.
• Geopolitical Tensions: Expanding into new markets involves navigating different regulatory environments and potential geopolitical issues.

51Talk’s Q4 2024 performance showcases its strong revenue growth and strategic initiatives aimed at long-term success. However, the company’s stock price decline indicates investor caution, possibly due to the operating loss and broader market conditions. As 51Talk continues to innovate and expand, its focus on AI and market penetration will be key factors to watch.

Full transcript - 51Talk Online Education Group DRC (COE) Q4 2024:

Conference Operator: Hello, ladies and gentlemen. Thank you for standing by. For 51Talk Online Education Group’s Fourth Quarter twenty twenty four Earnings Conference Call. At this time, all participants are in a listen only mode. Today’s conference call is being recorded.

I would now like to turn the call over to your host, Mr. David Cheung, Investor Relations for the company. Please go ahead, David.

David Cheung, Investor Relations, 51Talk: Hello, everyone, and welcome to the fourth quarter twenty twenty four earnings conference call of 51Talk. The company’s results were issued via NewsWire services earlier today and are posted online. You can download the earnings press release and sign up for the company’s distribution list by visiting ir.51talk.com. Mr. Jack Huang, our CEO and Miss Cindy Tang, our CFO, will begin with some prepared remarks.

Following the prepared remarks, there will be a Q and A session. Before we continue, please note that the discussion will contain forward looking statements made under the Safe Harbor provisions of The U. S. Private Securities Litigation Reform Act of 1995. Forward looking statements involve inherent risks and uncertainties.

As such, the company’s results may be materially different from the views expressed today. Further information regarding this and other risks and uncertainties is included in the company’s Form 20 F and other public filings as filed with the U. S. Securities and Exchange Commission. The company does not assume any obligation to update any forward looking statements, except as required under the applicable law.

Please also note that earnings press release and this conference call include discussion of unaudited GAAP financial information as well as unaudited non GAAP financial measures. Lifonetalk’s press release contains a reconciliation of the unaudited non GAAP measures to the unaudited most directly comparable GAAP measures. I’ll now turn the call over to our CEO, Jack Huang. Jack, please go ahead.

Jack Huang, CEO, 51Talk: Thank you, David. Hello, everyone. Thank you for joining our conference call today. We concluded financial year 2024 with gross billings growing by 74.4% year over year and net revenues increasing by 87 year over year. Even more encouraging is that we achieved this while strengthening our cash position, delivering a full year positive operating cash flow of $5,800,000 Throughout financial year 2024, we made significant progress in building out our local teams and developing more localized marketing and product contents.

We are also expanding into new geographic markets to drive further growth. In 2024, we’ve already seen the benefits of integrating AI into our operations, reflected in the improvement of operational efficiency and a narrowing of operating losses. We believe 2025 will continue to be a pivotal year for AI adoption and further efficiency improvements. Especially, AI will enable more personalized course plans and exercises tailored to students’ proficiency levels, as well as enhanced progress tracking. With that, I will now turn the call over to Cindy, our CFO.

Cindy Tang, CFO, 51Talk: Thank you, Jack. Now let me walk you through our fourth quarter financial details. Fourth quarter net revenues were $15,200,000 a 117.3% increase from the same quarter last year, largely driven by the increase of active students with attended lesson consumption. Gross margin for the fourth quarter was 77.5%. Gross billings grew by 93.4% from the same quarter last year to US21.4 million dollars Q4 operating expenses were US13.4 million dollars an increase of 35.6% compared to the same quarter last year.

Specifically, this has been driven by Q4 sales and marketing expenses of $10,100,000 a 40.9% increase from the same quarter last year due to higher sales personnel costs related to increases in the number of sales and marketing personnel and higher marketing expenses. Q4 product development expenses were US0.9 million dollars an 8% increase from the same quarter last year. Finally, Q4 general and administrative expenses were $2,400,000 a 28% increase from the same quarter last year. Overall, Q4 operating loss was 900,000.0 while net loss attributable to the company’s ordinary shareholders was US1.4 million dollars an 80.175.7% decrease from the same quarter last year, respectively. Q4 GAAP and non GAAP earnings per ADS were negative 0.24 and $0.2 respectively.

The company’s total cash, cash equivalents and time deposits were $29,200,000 at the end of the fourth quarter. Advantages from students were $45,100,000 at the end of the fourth quarter. Looking forward to the first quarter of twenty twenty five, we currently expect the net gross billings to be between US21.5 million dollars and US22 million dollars The above outlook is based on our current market conditions and reflects the company’s current and preliminary estimates of the market and operating conditions and customer demand, which are all subject to change. This concludes our prepared remarks. We will now open the line for questions.

Operator, please go ahead.

Conference Operator: Thank you. We will now begin the question and answer session. And our first question will come from Damon Zhang with Eurutis Investments. Please go ahead, sir. As we are reaching the end of our conference call, I’d like to turn the call back over to the company for closing remarks.

Mr. David, please go ahead.

David Cheung, Investor Relations, 51Talk: Thank you once again for joining us today. If you have further questions, please contact FiveOne Talks Investor Relations through the contact information provided on our website.

Conference Operator: This concludes today’s conference call. You may now disconnect your lines. Thank you.

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