Q3 2019 Earnings Call
Ladies and gentlemen, this is the operator today's conference is scheduled to begin momentarily until that time your lines will again be placed on hold thank you for your patience.
Hello, Ladies and gentlemen, thank you for standing by for likes Inc.'s 2019 third quarter earnings Conference call. At this time all participants are in a listen only mode. After managements prepared remarks, it would be a question and answer session. Today's conference call is being recorded I'll now turn the.
A call over to your host Ms. Ms. Two hands long Investor Relations for the company. Please go ahead Giovanni.
Hello, everyone and welcome to the 20, Nike Inc. third quarter earnings conference call for likes it also known as Snooty show.
The company's results were issued earlier today and you can download earns a press release and sign up for the company's distribution list at visiting our IR website at <unk>, our thought out eight <unk> Uh huh.
Dr you own our CEO and founder I missed in our CFO will begin with some prepared remarks.
Following the prepared remarks, Mr., Jordan, who our CTO and co founder and Mr. waning Archie fighters and co founder will also join us for the Q any session.
Please note today's discussion will contain forward looking statements relating to future performance of the company not intended to qualify for the safe Harbor from liability established or the U.S. Private Securities Litigation Reform Act.
Such statements are not guarantees future performance and are subject to certain risks uncertainties assumptions and other factors.
Some of these rigs are beyond the company's control and could cause actual results to differ materially those motion in todays earnings release and discussion.
General discussion of the risk factors that could affect likes this isn't that actual results.
Put it in certain filings the company with the Securities and Exchange Commission, including its annual report.
The company does not undertake any obligation to update the forward looking information except as required by law.
During today's call management will also discuss certain non-GAAP financial measures.
There are some purposes only.
Definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results. Please see the earnings release issued earlier today.
I will now turn the call over to our CEO Dr. you Wong. Please go ahead.
Thank you for joining our board plenty 19 third quarter earnings Conference call.
The oil market competition has become increasingly intense in the past few years.
However, with our eyes set on the long term, we believe our technology empowered product driven and the user centric approach will allow us to stand out from the competition.
During the quarter, we remain committed to product development and the user experience enhancement.
While the types and we tried moments Sharon policy continue to impact.
Our topline user growth.
We were able to deliver third quarter net revenues of RMB.
262.1 million, beating the high end of our previous guidance range.
Our company has was founded when the intelligent learning industry was undergoing a fundamental transformation from human teacher based learning to powered adaptive learning.
The desire for effective personalize and affordable learning solutions, along with the rise of mobile Internet and that's about a high and big data technologies have create exciting opportunities as well as new standards for effective learning.
Backed by our store R&D and technology innovation capabilities as well as our massive user data.
Teacher products, what you about them.
Accomplish our mission to empower everyone to achieve their full potential and become a global citizen.
As of the end of the third quarter, we have recorded approximately 14.2 billion sentences and 3.0 billion minutes of conversations.
Spanning numerous proficiency levels geographic regions and that demographic groups from kids to adults.
Like every growth company.
Oh through ups and downs over the last few.
Yes its development.
Eating with current happens we have been actively exploring alternative marketing channels and optimizing our marketing strategies to restore our user growth.
He was sort of quarter.
They were point 9 million or you need to paying users purchase I'm, a courses and services and as of September 30 is 29, King we had more than 153 million total registered users on a powerful.
In the healthy growth over user community.
We appreciate the vote of confidence Castlight every one of our users through the download and purchases.
We have been striving to deliver product set to address the unique needs of each of our uses and we'll continue to investing or technologies and products raising the bar from product quality and improving the learning experience.
Our recent launch a product bell upgraded version of the authentic pronunciation product provides a one stop shop, well use us improve a whole lot spoken English.
We also introduced an upgraded version how about the only product Darwin.
Which has proven to effectively increase user engagement and drive a better learning outcomes.
Further. The addition to our continued efforts in adult English learning business in the market. We are building up our position because the kids market as expanding our international presence.
Encouraging early results. These new initiatives are expected to contribute to our user and topline growth in upcoming quarters.
With our conviction in the strength of a business as well as a healthy long term outlook of the company, we recently announced.
20 million dollar.
Share repurchase program.
As we execute on our strong strategic growth initiatives, we remain confident in our for future perspectives of prospects.
Is this fundamentals and the strategy for further solidifying our comp cut competitive edge in the I'm, how would the national any market.
Yeah addition, we believe this is a prudent use our cash and reinforces our ongoing committed commitment to enhancing shareholder value.
Looking ahead, while the headwinds of we chat sharing policy is expected to linger into the coming quarters and weighed on our you. The revenue growth we remain confident in our long term growth plan and the committed to fulfilling our mission.
This concludes my prepared remarks.
I'll turn the call over and far CFO , Ms. being who will discuss our key financial results.
Thank you he and the Hello, everyone.
Well, we continued to experience headwinds are marching channels. He said quarter, we delivered net revenues, surpassing the high end of our guidance range as we keep investing in exploring effective marketing channel alternative recorded a higher sales and marketing expenses as a percentage of revenues He said Claire.
However, we remain disciplined cost management, which I know going go to improve operational efficiencies and strive for long term sustainable growth.
That is now look at our key financial matrix seem as of quarter of Tempe 19.
Net revenues were 262.1, meaning a maybe a 36.7 million glass daughters in 45.2% increased from 180.5 medium and before the same quarter last year.
As of September Thirtyth Funky 19, the company had a 591.2 meeting I mean, b or 82.7 meeting U.S. dollars of deferred revenue.
The increase was primarily attributable to the overall business grows and the increased adoption of our proprietary I teacher now users in China I send alternative learning approach and a better alternatives to the traditional ways of English learning.
Also revenues was 71.8 meeting I mean, we attended meeting U.S. dollar.
49.4 increase was an increase from 48.1 meeting I mean beat for the same quarter last year. This change was primarily due to increases in salaries and benefits for certain full time employees and IP service cost, it's all such cost, resulting from general business gross and user base expense.
Yeah.
Gross profit was 190.3 meeting a movie attendees 6.6 million U.S. dollar.
43.7% increase from 132.
Okay.
Well the same quarter last year as a result of increased economies of scale.
As a result gross margin was 72.6% compared with 73.4% what same quarter last year.
Total operating expenses were 404.8 minimum be all 56.6, meaning less dollars.
52% increase from 266.4 meeting on Monday for the same quarter last year, primarily resulting from business grows activities that development and introduction of new products and the costs associated with expansion on the companies use of it.
Yes, [laughter], what 289.2 medium and be all 40.5, meaning less dollars you, 41.9% increased from 21 of 3.8, meaning I mean before the same quarter last year.
Increase was primarily due to the increases in Randy and marketing expenses and salaries and benefits, while sales and marketing personnel, including a lung study advisors.
Sales and marketing expenses as a person it up net revenue declined 210.3% for the third quarter handyman team compared with last year in 12.9% for the same quarter last year.
Research and development expenses was 57.7 medium India <unk> 8.1, many U.S. dollars, a 42.15% increased from 40.5.
Meeting him before the same quarter last year, primarily due to an increasing salaries and benefits, Washington certainty about them and personnel.
Research and development expenses, what 72% net revenues for the so called out and the 19 compared with RMB, 2.4% for the same quarter last year.
General and administrative expenses was 57.9, meaning a monkey all 80.1 8.1 million U.S. dollars [laughter] winds on 62.6% increased from 72 meeting before hand corner last year, primarily due to his question a rate bonus for key employees increases in salaries.
And benefits fill a general and administrative personnel and professional services fees.
General and administrative expenses as a percentage of net revenue was 92.1% for the so called out and he 19 compared with 12.2% lets him quarter last year.
Loss from operations was 214.5 million or maybe all 30 meeting U.S. dollars compared with 134 million I mean do you feel the same quarter last year, you, who the aforementioned the reasons, including general business gross and user base expansion.
Adjusted EBITDA was a loss when one of 3.6, meaning you may be well and the 8.5 million U.S. dollar compared with an adjusted EBITDA loss of London, a 16.6 million view for the same quarter last year.
Foreign exchange loss was 2.6.
Zero point, Fourmillion U.S. dollar compared with a foreign exchange loss of 3.5, meaning I mean people at the same quarter last year.
Income tax expenses, what you're going to meeting him be attending nine selden's U.S. daughters.
96.3% decrease from 5.7, meaning I mean do you feel the same quarter last year.
Primarily due to the Companys estimated exlar positioning occurring here.
Net loss was 214.1 million him be also he meaning less dollars compared with one of 42.4 medium and maybe for the same quarter last year.
Adjusted net loss was 209.7 meeting and then be RMB 9.3 meeting U.S. dollar compared with Washington, D.C. meeting the me before the same quarter last year.
Basic and diluted.
I didn't know share attributable to ordinary shareholders was 4.3, 33 and will be 61 cents compared with seven point 66, and before the same quarter last year.
In terms of our balance sheet as of September Thirtyth 2019, the company's cash cash equivalents restricted cash and short term investments totaled 621.2, meaning a movie or 86.9, many U.S. autos compared with 747.8, meaning I mean be as of December type.
Of course putty knives HM.
To the dynamic nature of the underlying business the company will maintain flexibility in funding I spend adequate cash cash equivalents.
Turning to our outlook for the fourth quarter can be magazine. The company currently expect that revenues to be between 230, meaning a maybe up to 20 to 50 meeting and maybe which we would have a present an increase of approximately 2.4% to 11.4% from 200 ton before.
Five meeting or maybe for the same quarter last year.
This forecast reflects the company's current and preliminary view and the current business situation and market conditions, which is subject to change.
This concludes our prepared remarks, well now open the call to questions. As a reminder, me the children, who are 60 and co founder and Mr. Wheeling, our chief scientist and cofounder of joining us for the Q and they session.
Operator, Please go ahead.
Thank you if you would like to ask a question at this time. Please press star one on your telephone for the benefit of all participants on today's call. If you wish to ask your question to management in Chinese. Please immediately repeat your question in English. Thank you again, such as Star one on your.
Telephone to ask a question.
[noise].
We do have a question. Your first question comes from Christine Cho from Goldman Sachs. Your line is open. Please go ahead.
I think you. So can you just give us some color around your guidance for guidance for fourth quarter.
And also some details to how you see the sales and marketing trend.
Bobby I am going forward. Please.
Thank you.
[noise] [noise], yeah as you see the guidance for Q4 is still quite conservative at the net revenues is between 230 million to meet with one or 50, meaning him and b.
In Q3 in the past quarter, we continue to experience the impact to all the heightened the we chat show a moment.
How does he and the increased traffic acquisition cost.
Okay got you can see all come from acquisition expenses I feel relatively high.
Compared with previous quarters in Q3.
We will continue to closely evaluate our ROI across our mix.
One channel marketing channels.
To explore effective ways to grow our user base.
In the meantime.
We also will I mean, we also committed to improve our product experience.
We believe our rich engaging content.
People on product mix and increased brand awareness will help us to attract more organic traffic in the future, which will hopefully drive down our overall CZ costs net sales and marketing expenses in future.
Thank you Christina.
Again, if you would like to ask a question. Please press star and the number one on your telephone keypad.
Your next question comes from Oh see Shane from Morgan Stanley . Your line is open. Please go ahead.
Thank you management I have no question.
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I'm just wondering do happen.
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As I mentioned, just now a this quarter Janney as a part of the high.
Previous quarter, mainly due to a one time off discretionary bonus to some key.
And senior employees.
To appreciate their contribution in the past years.
Company, and we do not expect such discretionary bonus in the future quarters.
So the DNA in future quarters will remain stable as the previous quarters.
[laughter].
Okay.
[noise] [noise] again, if you would like to ask a question. Please press Star then the number one on your telephone keypad.
Has there no further questions now I'd like to turn the call back over to the company for closing remarks.
Thank you once again for joining us if you have further questions. Please feel free to contact likes Investor Relations. He was a contact information provided on our website, where TPG investor relations.
[noise].
This concludes today's conference call you may now disconnect your lines. Thank you.