China Online Education Group (NYSE:COE) Q1 2019 Earnings Conference Call Transcript

Jun 14, 2019 • 08:00 am ET

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China Online Education Group (NYSE:COE) Q1 2019 Earnings Conference Call Transcript

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Presentation
Executive
Jack Huang

in the same period, one year ago. As we move through the year, our key goal will be to continue to make learning accessible throughout China by bringing out our educational offerings to underserved markets. Based on our model, we can easily leverage our existing programs in these non-tier-one cities. We have a stable and a scalable process in place with our foreign teachers operations is the Philippines to support this growth.

With our teacher recruiting, training and the management systems firmly in place, as well as strong local government support, we are confident in our ability to scale our teacher sourcing capabilities as we expected, as we expand. In 2019 we will continue to dedicate resources to increasing the accessibility of our courses, improving our exposure and strengthening the quality of our offerings and technology, while achieving a balance between building our top line and improving our bottom line.

So, with that I will now turn the call over to our CFO, Xu Min.

Executive
Min Xu

Thank you Jack. The diligent execution of our more focused mass market strategy contributed to improve the bottom line and healthy growth in the first quarter. We reduced our non-GAAP net loss by a 55.1% to RMB59.5 million from RMB132.4 million in fourth quarter 2018. Our one-on-one business gross billings grew by 37.4% year-over-year. And our overall gross billings, gross margins reached 67.3%, up from 64.6% for the first quarter of 2018.

In addition, gross billings increased by 28.1% year-over-year -- gross profit increased by 28.1% year-over-year to RMB217.2 million. Through enhanced sales training and improving sales capacity planning, emphasis on referrals and prudent cost control and cash deployment, we will spur our opportunity for growth, while improving our bottom line.

Now, I would like to walk you through our first quarter 2019 financial highlights. Net revenues for the first quarter of 2019 were RMB323.0 million, a 23.0% increase from RMB262.6 million for the first quarter of 2018. The increase was primarily attributed to an increase in the number of active students. The number of active students in the first quarter of 2019 was approximately 227,000, a 19.2% increase from approximately 190,000 in the first quarter of 2018.

Net revenues from one-on-one offerings for first quarter of 2019 were RMB295.5 million, a 20.4% increase from RMB245.5 million for the first quarter of 2018. Net revenues from small class offerings for first quarter of 2019 were RMB27.5 million compared with (ph) RMB19.1 million for the first quarter of 2018. Costs of revenues for first quarter of 2019, was RMB105.7 million, a 13.8% increase from RMB92.9 million for the first quarter of 2018. The increase was primarily driven by an increase in total service fees paid to teachers, mainly due to an increased number of paid lessons.

Cost of revenues of one-on-one offerings for the first quarter of 2019 was RMB90.8 million, a 12.0% increase from RMB81.1 million for the first quarter of 2018. Cost of revenues of small class offerings for the first quarter of 2019