Release Date: August 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Achieved strong growth in Q2, exceeding guidance.
- 75.1% increase in net revenues from the same quarter last year.
- Gross margin for the second quarter was 78.1%.
- Gross billings grew by 61.3% from the same quarter last year.
- Strategic investments in diverse markets are yielding positive results.
Negative Points
- Q2 operating expenses increased by 39.7% compared to the same quarter last year.
- Sales and marketing expenses rose by 43.6% due to higher personnel costs.
- Product development expenses increased by 22.6% from the same quarter last year.
- General and administrative expenses increased by 35.8% from the same quarter last year.
- Overall Q2 operating loss was USD2.4 million, and net loss was USD1.3 million.
Q & A Highlights
Q: Congratulations on a great quarter. Just a quick question on the new market you guys are going after. I know originally you guys were in China. It was 100% there, and the tutors were mostly from the Philippines. So then you went to Asia, but now it looks like you're spreading out in Japan and the Middle East. Are you using AI? Are you using local teachers? Can you explain a little on the new market you guys are looking to enter or are you looking to enter every market going forward? Thank you.
A: Thank you very much for your question. Yes, our new markets include Southeast Asia, Japan, and the Middle East. Our core product remains the foreign tutor model, primarily using Filipino tutors. However, we are also utilizing AI technology to enhance the interactivity and personalization of lessons. AI is used for pre-lesson previews and post-lesson reviews, making it an integral part of our solution.
Q: Excellent. Thank you. My final question is about market size. In China, you reached close to USD300 million in gross billings. Do you think the markets outside China are as big or bigger, and what is your outlook for the next 5 to 10 years?
A: Yes, we are very confident about the market size outside of China. We believe that markets in developing countries like Thailand, Malaysia, and Vietnam, as well as developed countries like Japan and Korea, have significant demand and fewer competitors compared to China. We are optimistic that the market size outside of China is at least as big, if not bigger, and we expect substantial growth in the next 5 to 10 years.
Q: Can you provide more details on your financial performance this quarter?
A: Second quarter net revenues were USD11 million, a 75.1% increase from the same quarter last year, driven by an increase in active students and lesson consumption. Gross margin was 78.1%, and gross billings grew by 61.3% to USD15.9 million. Operating expenses were USD11 million, a 39.7% increase, primarily due to higher sales and marketing expenses. Overall, Q2 operating loss was USD2.4 million, and net loss was USD1.3 million, an 18.1% and 56.5% decrease from the same quarter last year, respectively.
Q: What are your expectations for the third quarter of 2024?
A: For the third quarter of 2024, we expect net gross billings to be between USD17 million and USD18 million. This outlook is based on current market conditions and reflects our preliminary estimates of market and operating conditions and customer demand.
Q: How are you leveraging AI technology in your operations?
A: We are utilizing AI technology to enhance the interactivity and personalization of lessons provided by our Filipino tutors. AI is used for pre-lesson previews and post-lesson reviews, making the learning experience more engaging and tailored to individual needs. This integration of AI helps improve the overall effectiveness of our educational offerings.
Q: What are the key drivers behind your revenue growth this quarter?
A: The key drivers behind our revenue growth this quarter include an increase in active students and higher lesson consumption. Our strategic investments in diverse markets and the use of AI technology have also contributed to our strong performance.
Q: Can you elaborate on your localization efforts and their impact?
A: Our localization efforts have allowed us to gain a deeper understanding of individual markets, enabling us to meet specific local needs more effectively. This approach has improved our product market fit and has been instrumental in driving higher retention rates and customer referrals.
Q: What are your strategic priorities for the near future?
A: Our strategic priorities include continuing our global expansion based on local needs and platform strength enabled by AI. We will make targeted investments to enhance team efficiency and local customer experience, aiming to drive higher retention rates and more customer referrals.
Q: How do you view the competitive landscape outside of China?
A: We believe that the competitive landscape outside of China is less intense compared to the heavily competitive market in China. This presents us with significant opportunities to capture market share and achieve substantial growth in the coming years.
Q: What is your cash position at the end of the second quarter?
A: At the end of the second quarter, our total cash, cash equivalents, and time deposits were USD21 million. Including deposits in third-party payment channels, the total balance would have been USD24.2 million. Advances from students were USD34.5 million.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
