On Tuesday, Chinese online education platform 51Talk reported their net revenues for Q2 during which they pulled in 579.8 million yuan ($89.8 million), a 17.5% year-on-year increase. However, the company’s net loss was 27.0 million yuan, compared with net income of 32.8 million yuan for the second quarter of 2020.
The growth of their second quarter net revenue was primarily driven by a 35.7% year-over-year increase in the number of active students. “Net loss for the second quarter is attributable mainly to higher operating expenses that we incurred as we spent more on brand building and upgrading course offerings and services,” said Xu Min, Chief Financial Officer of 51Talk.
According to the financial report, 51Talk’s net income mainly comes from its one-to-one courses, small-class business and others. Among them, the net income of the K-12 one-on-one business was 534.6 million yuan, up 27.9% year-on-year, accounting for 92.17% of the company’s total revenue. Net income from small-class business was 16.8 million yuan, down 41.1% year-on-year, while other net income was 28.4 million yuan, down 39.7% year-on-year.
Cost of revenues for the second quarter was 158.1 million yuan, a 10.2% increase from 143.6 million yuan from the same quarter last year. The increase was primarily driven by an increase in total service fees paid to teachers, mainly due to an increased number of paid lessons.
For the third quarter of 2021, the company currently expects net revenues to be between 550.0 million yuan and 555.0 million yuan, which would represent an increase of approximately 2.1% to 3.1% from 538.5 million yuan from the same quarter last year. In addition, the company’s future operational and financial performance depends on the implementation of the “double reduction” policy and the success of the company’s business adjustment plans, which is subject to inherent uncertainties at this time.
China’s Ministry of Education recently issued a document stating that “the employment of foreign personnel inside the borders of the PRC must comply with regulations, and the employment of overseas-based teachers to carry out training activities is strictly prohibited.” 51Talk said at that time that it would firmly support the policy, and has begun to actively adjust and transform its business.
However, 51Talk was asked to carry out further adjustments to its business on September 22. The firm broke rules by offering classes on public holidays and during the summer vacation, as well as by selling training courses conducted by overseas nationals, the Beijing Municipal Education Commission said.
Aligned with the requirements, 51Talk launched brand new All-Round Proficiency Courses in a smaller class format for children and teenagers. These courses would be led by Chinese teachers. Meanwhile, it plans to develop its overseas business by offering one-on-one classes for international K-12 and adult student users taught by foreign teachers. 51Talk, which has focused on English courses for adults since its establishment, says it will continue to invest more in that field in the future.
“Where there are new challenges, there will also be new opportunities. In keeping with the revised framework and regulations for our industry, we will continue to innovate our course offerings and explore growth opportunities,” said Huang Jiajia, Founder, Chairman and Chief Executive Officer of 51Talk.