51Talk Online Education Group (COE) Earnings Call Transcript & Summary

Hello, ladies and gentlemen. Thank you for standing by for 51Talk Online Education Group's Second Quarter 2025 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded. I will now turn the call over to your host, Mr. David Chung, Investor Relations for the company. Please go ahead, David.

Hello everyone. And welcome to the second quarter 2025 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 Ms. Cindy Tang, our CFO, will begin with some prepared remarks. Following the prepared remarks, there will be a Q&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 known 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. 51Talk's press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures. I will now turn the call over to our CEO, Jack Huang. Jack, please go ahead.

Thank you, David. Hello, everyone. Thank you very much for joining our conference call today. Q2 2025 has been a strong quarter for us. The gross billing exceeded our guidance, reflecting healthy demand and disciplined execution. We expect this positive momentum to carry into the second half of 2025. Our third quarter guidance reflects our confidence in the company's trajectory. We have also deepened our investments in enhancing user experience and service quality. We believe these initiatives will strengthen our competitive position and create durable long-term value for our shareholders. AI remains integral to our strategy and operations with applications spanning across the company. We remain steadfast in our commitment to developing robust infrastructure and systems necessary to embed AI across our products and processes with the objective of delivering exceptional learning experience to our students at scale. With that, I will now turn the call over to Cindy, our CFO.

Thank you, Jack. Now let me walk you through our second quarter financial details. Second quarter net revenues were USD 20.4 million, an 86.1% increase from the same quarter last year, largely driven by the increase of active students with attended lesson consumption. Gross margin for the second quarter was 74.6%. Gross billings grew by 79.7% from the same quarter last year to USD 28.5 million. Q2 operating expenses were USD 17.9 million, an increase of 53.5% compared to the same quarter last year. Specifically, this has been driven by Q2 sales and marketable expenses of USD 12.8 million, a 74.8% increase from the same quarter last year due to the rise in marketing and branding expenses resulting from marketing and branding activities as well as higher sales personnel costs related to increases in the number of sales and marketing personnel. Q2 product development expenses were USD 1.2 million, a 45.5% increase from the same quarter last year. Finally, Q2 general and administrative expenses was USD 3.9 million, a 39.1% increase from the same quarter last year. Overall, Q2 operating loss was USD 2.7 million, while net loss attributable to ordinary shareholders was USD 3 million, a 12.7% and 144.7% increase from the same quarter last year, respectively. Q2 GAAP and non-GAAP earning per ADS were negative USD 0.52 and USD 0.46, respectively. The company's total cash, cash equivalents and time deposits were USD 30.9 million at the end of the second quarter. Advances from students were USD 56.4 million at the end of the second quarter. Looking forward to the third quarter of 2025, we currently expect the net gross billings to be between USD 36.5 million and USD 37.5 million. The above outlook is based on our current market conditions and reflect 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.

[Operator Instructions] The first question today comes from [ Toby Lu ], a private investor. Please go ahead.

Dear management team, congratulations for heavy -- such a good results. Yes. So I have 2 questions. The first question is I noticed that we have changed the accounting firm with the Ernst & Young, so could you please describe the reasons that why we changed it from Marcum to Ernst & Young and -- yes, so what was the consideration behind that?

Thank you very much. This is your first question, right?

Yes.