China Online Education Group (NYSE:COE) Q2 2020 Earnings Conference Call - Final Transcript

Sep 08, 2020 • 08:00 am ET

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China Online Education Group (NYSE:COE) Q2 2020 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Vincent Yu of Needham & Company. Please go ahead.

Analyst
Vincent Yu

Thank you, management, for taking my question and congrats on the great quarter. I have three questions. The first question is, can you guys elaborate on the recently introduced Level-K courses, for example, the course pricing compared to our K-12 offering, and will we also focus on targeting lower-tier cities as well?

The second question is, we are noticing more marketing efforts made by us as well as competitors. How should we think about the sales and marketing expenses for second half 2020?

The third question is for -- as we -- we are seeing great quarter for both active students and gross billings. Has the reopening of schools have any impact on our operation or should we expect to see steady growth for both metrics in second half 2020 and going forward? Thank you.

Executive
Jack Jiajia Huang

[Foreign Speech]

Executive
Min Xu

So, Jack already answered question one and I will answer question two and question three.

So what we know -- we developed this new Level-K courses because we're seeing there a lot of demand from the students from age three-to-six years old and a lot of times the level zero courses we have already is actually too difficult for them. So that is why we spent -- we invest a lot to develop this Level-K course. And in order to make the courses more suitable for the younger age, the kids, we added a lot of games, components and we added a lot of innovation. We increased a lot of the interaction between the teachers and the students. And we also retrained our teachers, so that, so that they understand how to teach younger aged kids. So we -- right now, majority our students, actually more than 70% of those are in the non-Tier 1 city. So, obviously, naturally, we believe our new Level-K Lesson will be -- will attract many of the younger kids in the lower tier city to be able to study, start early on English training. And we believe this will help us further penetrate the lower tier cities.

So, as -- talk about question two and basically, you're saying, I'll just repeat the question. So, you are noticing more marketing efforts made by 51Talk as well as our competitors and how should we think about sales and marketing expenses for the second half. So first of all -- first of all, I want to stress that we are not directly competitors to either AI players or large cloud players, who are actually the major players who are elevating their effort on sales and marketing. And because we focus mostly on spoken English, which is kind of a capability development instead of the test prep and so we are -- our product actually is relatively high priced compared to the low priced AI lessons or large class lessons. So, we're actually targeting different demands.