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 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 Second 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 the 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. Gross billings for the second quarter reached USD 39.3 million, once again exceeding the high end of our guidance announced in June 2026 and representing a growth of 38.1% year-over-year. Demand across our key markets remains robust. We generated USD 4.9 million of net operating cash inflow during the quarter. On July 1, we launched our next-generation learning product, Global Communicator, built with our strategic partner, Oxford University Press. The world students learn in, the characters they meet and the lessons themselves are all generated end-to-end by our AI-powered content production platform. The same platform will power new regions, new languages and even new subjects. It is the foundation for what we build next. Our priority for the remainder of 2026 is to sustain healthy growth by building on last year's success. Following an exceptionally strong quarter in Q3 2025, we are investing more efficiently in the third quarter of 2026, moving us towards profitability and long-term shareholder value. 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. Net revenues for the second quarter were USD 32.4 million, a 58.8% 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 73.9%. Gross billings grew by 38.1% from the same quarter last year to USD 39.3 million. Q2 operating expenses were USD 26 million, an increase of 41.8% compared to the same quarter last year. Specifically, this has been driven by Q2 sales and marketing expenses of USD 19.3 million, a 48.8% increase from the same quarter last year, primarily attributable to higher sales personnel costs driven by headcount growth in the sales and marketing team as well as increased marketing and branding expenses from intensified promotional activities. Q2 product development expenses were USD 2.4 million, a 96.6% increase from the same quarter last year. Finally, Q2 general and administrative expenses were USD 4.3 million, broadly flat compared to the same quarter last year. Overall, second quarter operating loss narrowed to USD 2.1 million from USD 3.2 million in the same quarter last year, and net loss attributable to the company's ordinary shareholders was USD 3.1 million compared with USD 3.5 million in the same quarter last year. Q2 GAAP and non-GAAP earnings per ADS were negative USD 0.51 and USD 0.43, respectively. The company's total cash, cash equivalents and time deposits were USD 40.1 million at the end of the second quarter. Advances from students were USD 86.7 million at the end of the second quarter. Looking forward to the third quarter of 2026, we currently expect the net gross billings to be between USD 41 million and USD 43 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. This concludes our prepared remarks. We will now open the line for questions. Operator, please go ahead.

[Operator Instructions] 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.

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

This concludes this conference call. You may now disconnect your lines. Thank you.