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China Online Education Reports Loss Narrowed, but Investors Hesitant

After a brief spike in early trading, shares of the education company, also known as 51Talk, fell into negative territory by the afternoon, after the company reported its quarterly results.

Anna Vodopyanova
    Jun 12, 2018 11:15 AM  PT
China Online Education Reports Loss Narrowed, but Investors Hesitant

The shares of China Online Education Group (NYSE: COE) jumped 11 cents early Tuesday driven by improved results in its financials, as the company reported its revenue grew 65 percent and net loss diminished nearly 20 percent in the first quarter this year.

The boost in the stock price was brief, however; by afternoon in New York, the company's shares were trading at $11.51 per American depository share, down nearly 2 percent.

The Beijing-based education platform, also known as "51Talk," said that its revenue was $41.9 million compared with $25.4 million in the same period a year ago thanks to an increase in student enrollment, as well as an increase in student fees. The number of active students – those, who attended lessons, rather than only broadcast lessons – in the first quarter jumped nearly 42 percent to 190,800, the company said in its statement.

Its net loss was $18 million, or a 90 cents loss per ADS, compared with a loss of $22.3 million, or a loss of $1.12 per ADS, a year ago.

The founder, chairman and chief executive officer of 51Talk, Jack Jiajia Huang, said first quarter revenue and gross billings exceeded the company's expectations. Its gross billings were $56.6 million, a year-over-year increase of 9 percent, of which the majority were billings from the K-12 market from smaller cities.

"We see a clear pathway to leverage our core competencies and grow our business," Huang said. The pathway, he said, would be focusing on 51Talk's "one-on-one" program in the K-12 market in non-tier-one cities, expansion of small class programs, and stabilization of its adult programs.

Along with 51Talk's revenue, its costs in the first quarter also increased, surging nearly 70 percent to $14.8 million. The company attributed the surge to teacher fees paid for an increased number of lessons. Operating expenses grew 14 percent in the first quarter to $44.7 million from a year ago, attributable mostly to expenses in sales and marketing, as well as general and administrative costs, as the company expanded its operations.

For the second quarter, the company said it is expecting revenue growth of between 38 percent and 43 percent from the same period last year.

In its statement today, 51Talk also announced it appointed a new co-chief financial officer, Min Xu. Previously, Xu served as CFO at ACM Research Inc., a semiconductor equipment maker, and prior to that, at UTStarcom Holding Corp., a telecom infrastructure provider.

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The stock of 51Talk briefly spiked 1 percent in early trading Tuesday, before retreating to $11.51 per share, down nearly 2 percent by afternoon.

(Source: Thomson Reuters Eikon)

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