51Talk Online Education Group ($COE)

Hello, ladies and gentlemen. Thank you for standing by for 51Talk Online Education Group's First Quarter 2026 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.

Thank you. Hello, everyone, and welcome to the first quarter 2026 earnings conference call of 51Talk. The company's results were issued by 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 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. 51Talk'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.

Thank you, David. Hello, everyone. Thank you very much for joining our conference call today. We delivered a solid set of results this quarter, highlighted by 52% year-over-year gross billings growth, exceeding the high end of our guidance, and narrowing sequential operating loss despite the seasonal softness, typical of the first quarter. We remain committed to refining our products and services to be more localized and better cater to students across each of our markets with a particular focus on enhancing the user experience. Underlying demand for English learning remains robust across our key markets, and we are optimistic about their growth potential. We have accelerated the development of our platform, our Tutor Network and our AI plus human learning experience. We expect the next generation of our learning product to begin rolling out later this year, offering our customers a significantly more personalized and engaging experience. Our AI-native approach enables us to deliver this upgrade with greater efficiency. We are confident in our long-term growth trajectory and remain committed to disciplined capital allocation and creating value for our shareholders. With that, I will now turn the call over to Cindy, our CFO.

Thank you, Jack. Now let me walk you through our first quarter financial details. Net revenues for the first quarter was USD 31.2 million, a 70.9% increase from the same quarter last year, largely driven by the increase of active students with attended lesson consumption. Gross margin for the first quarter was 73.7%. Gross billings grew by 51.9% from the same quarter last year to USD 33.3 million. Q1 operating expenses were USD 24.4 million, an increase of 57.2% compared to the same quarter last year. Specifically, this has been driven by Q1 sales and marketing expenses of USD 17.9 million, a 59% increase from the same quarter last year, primarily attributable to higher sales personnel costs, driven by head count growth in the sales and marketing team as well as increased marketing and branding expenses from promotional activities. Q1 product development expenses were USD 1.9 million an 84.9% increase from the same quarter last year. Finally, Q1 general and administrative expenses were USD 4.6 million, a 42% increase from the same quarter last year. Overall, first quarter operating loss narrowed to USD 1.4 million from USD 1.5 million in the same quarter last year, while net loss attributable to the company's ordinary shareholders was USD 2.3 million compared with USD 1.7 million in the same quarter last year. Q1 GAAP and non-GAAP earnings per ADS were negative USD 0.39 and USD 0.3, respectively. The company's total cash, cash equivalents and time deposits were USD 35.5 million at the end of the first quarter. Advances from students were USD 78.9 million, at the end of the first quarter. Looking forward to the second quarter of 2026, we currently expect a net gross billing to be between USD 36 million to USD 38 million. 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. Operator, please go ahead.

[Operator Instructions] The first question comes from Linda [ Boltonviser ] with Water Tower Research.

Yes. I just wanted to ask a little bit more, if you could give details -- further details about the next version of your platform that's rolling out later this year. Could you give us specifics about the timing of the rollout? And then what some of the enhanced features are?

Okay. Thank you very much for your question. So the next generation product that we are developing right now is a new -- is a product with foreign tutors and as well as a lot of AI features, and integrated with a lot of gamification functions. Especially we integrated the new types of technology platform in terms of the gamification. So -- and we will integrate more about the user data and with the LLM analysis, so that we can better serve our customers to -- in terms of their learning outcomes and in terms of their personalized learning journey. Okay. Thank you.

As we are nearing 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.

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

This concludes the conference call. You may now disconnect your line. Thank you.