Q1 2021 LAIX Inc Earnings Call
Okay.
Hello, Ladies and gentlemen, thank you for standing by and far likes Inc. First quarter 'twenty 'twenty, 1 earnings conference call at.
At this time all participants are in listen only mode. After management's prepared remarks, there will be a question and answer session. Today's conference call is being recorded.
I'll now turn the call over to your host Mr. Robinson, Chief Financial Officer of the company. Please go ahead Ben.
Hello, everyone and welcome to the legs for fiscal quarters or something that's going to be 1 of the original.
Cool.
And these results was issued earlier today and you can download the earnings press release and sign up for the Companys and distribution list by visiting our IR website.
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And I used the discussion will contain forward looking statements relating to future performance of the company.
Such statements and other guarantees and southern future performance and are subject to certain risks and <unk>.
Certainties some physician visits are beyond the companys control and that could cause the actual results to differ materially from those mentioned the new todays earning release and this discussion.
Generally, it's pushing up the risk effective debt could affect that likes the business and our financial results is included in our filings with the SEC The company.
And does not undertake any obligation to update the forward looking information, except as required by law.
The non-GAAP financial measures will be pretty value for comparison purpose only.
And some of these measures and a reconciliation table are available in the news release, we issued earlier today.
I will now turn the call over to our CEO and Dr. Wang Li. Please go ahead.
Thank you and Hello, everyone.
Thank you for joining our first quarter 2020.1 earnings conference call.
We're pleased to have made lot of progress and our operations, which led to outstanding performance and the first quarter 2021.
Well not revenue.
$198.5 million moving our previous guidance range.
Gross margin and further expanded to 77, 6% and supply.
And what percent and the previous quarter.
We have achieved meaningful profitability on a quantitative basis for the first time ever reporting net income of RMB 12, 2 million for the first quarter.
We have been proactively and making sure they can put their choice and enhancing our operating efficiency and optimizing our organizational structure.
And our margin expansion and improved profitability.
As we move to further our leadership position and the market with our user centric product and services.
We have been and secondly, enhancing the user experience by providing technology powered.
<unk> oriented courses and services.
April.
We paid and launched our AI teacher out.
As a standalone product.
And it's still being tested and we have received very very positive feedback from desktop and <unk>.
Particular debt overall rating for Alex.
Which we believe is.
Probably 1 of the first.
Such AI robotics, Palmer sectional shooter and the <unk>.
Road.
From our paid users.
Or some other site with over 80% of them give you a 5 star rating.
Interestingly I like the T true 1.
And of the top 3 reasons why users like with product, even though Alex is only and AI teacher.
With the goal to provide a user centered learnings theories Alex is a mash and leap forward.
Forward and AI powered 19 or new technology.
And it's a very innovative product.
And the other fleet around the world.
And can be introduced to as a standalone product.
<unk> integrated into other products with it.
Great and monetization potential.
And in fact, the average conversation.
And bitching, Alex and they use it over 12 minutes per session, which is probably the world's longest average conversation pie.
Old duplex voice system and a human.
Since the beginning of our business, we have been focusing on improving our R&D capabilities and are therefore.
The best known win.
And it comes to cutting edge technology.
And therefore, our proprietary placement test RPT test, which is a fully automated adaptive assets and that is new this lessening leading vocabulary grandma and speaking skills.
And enabling our users to have a better assessment of their comprehensive comprehensive English skills.
By the end of March 2021.
Over 75 million unique learners.
Finished our PG test.
Moreover, our PT tech with 1 of the first.
New tests that have been aligned to both the China standard and English language affinity or the CFC national standard and ended.
And to the comment you can framework and reference for language on the CE Mark.
The commercial potential of <unk> Paas is huge and not only can be used as a supplement to 4 inch and Ernest.
And also be further apply to enterprise training and SaaS platform.
Turning to our new initiatives as we discussed on our last earnings call, we plan to tap into new markets and continued with growth potential.
By exploring and assistant and the effective.
Customer acquisition channels, and developing new curriculum and content.
We think we can capture further market share with our effective and affordable products and services.
Enterprise learning services is another focus of the ovens and 2021.
Utilizing our industry, leading AI technology.
We believe we cash out.
And our corporate customers.
Wished and improve their employees and English skills.
We are developing customized solutions and professional talent and training system tailored.
And as such the industry, including different.
Hi.
Courseware and vocabularies flipping from worsening scenario.
We see great potential and this area.
And in addition.
We are developing courses and related related to the COVID-19.
Corporation.
Especially for the overseas market.
We believe all these efforts combined.
Aligning.
To further support of our long term growth prospects and improving user acquisition efficiency for our business and we're pleased to see that we have made solid progress on these fronts.
Before I turn the call over to things and.
And suddenly we believe.
We have established strong brand and reputation high quality products and <unk>.
<unk> and user acquisition channels and advanced proprietary technology.
Bob.
Positioned to well and enabled us to capture the growing demand for election on it and China and globally.
At the same time, while we continue to execute executing our growth initiatives, we remain sharply focused on improving operational efficiency.
I will now turn the call over to our CFO Bing Sun, who will discuss our key financial results.
Let's now look at our key financial metrics in the first quarter as do some of it from 2.1.
Net revenue were RMB 100, and mandate H quantifying milling.
15, <unk> 7 percentage decrease from RMB 230 price went to $5 million for the previous quarter and.
13 percentage decrease from RMB 208 point to $3 million for the same quarter last year.
The quarter over quarter decrease was primarily attributable to a decrease in gross billings and caused by the company for stringent cost control and user acquisition expenditures.
Cash flow for revenue was RMB $44.4 million attendees and 3.2% a decrease from RMB 57, 8 million, Inc. For the previous quarter and.
43, 6 percentage decreased from <unk> 78, and <unk> for the same and therefore, the same quarter last year.
The CDR and we'll put the change was primarily due to the decrease in salaries and welfare for full time employees and the savings and IP service fee.
Gross profit and it was RMB 154 to 1 mirroring and.
13 from 2% a decrease from RMB 100 December 7 and frontier 6 milling per the previous quarter and there are 3 point to 1 percentage increase from loan from <unk> 149, and finally for the same quarter last year.
Gross margin was 77, 6% compared to <unk> 75 for and to 4 percentage for the previous quarter and a 65 from 1 to 5 percentage and for the same quarter last year.
Total operating expenses were RMB 145 from performing.
Certainly true for and to 5% decrease from.
And the $216.2 mailing for the previous quarter.
And then a 58% decrease from RMB $346.1 million for the same quarter last year.
Kansas and were primarily due to stringent cost control and new user acquisition expenditures and the improvement in our operating efficiency.
Sales and marketing expenses were RMB 19, 2 printed 9 moving.
38, 2% decrease from RMB $154 million for the previous quarter and.
64, 9% and decrease from RMB $264.7 million for the same quarter last year.
The decrease was primarily due to the company through stringent cost per controlling advertising and the user acquisition expenditures and the secondaries are decreasing and salary and staff and benefits due to the efficiency improvement personnel and management.
Sales and marketing expenses as a percentage of net revenue decreased to 46, 8% for the first quarter of 2 southern the 'twenty 1.
Comparatively the 63, <unk> and 9% and for the previous quarter and a 115% to 9% for the same quarter last year.
Research and development expenses were RMB, <unk> 7 million and.
<unk> 3 percentage decrease from RMB $77.2 million for the previous quarter.
And 48 months and 1% decrease from RMB $59.2 million for the same quarter last year.
The change was primarily due to the efficiency improvements in personnel and management.
R&D expenses as a percentage of from net revenue was 17% for the first quarter and based on day..1 competitor was 15 climbed to 80% for the previous quarter and the attendee and 5.9% for the same quarter last year.
G&A expenses were RMB.
And in 18 to 7 milling.
Our survey to kind of 2 percentage a decrease from RMB 27 tons and 6 million from the <unk>.
Previous quarter and.
15% to 3% a decrease from RMB $282.1 million for the same quarter last year.
The change was the primary future and impairment charge on the lease hold improvement to in the previous quarter.
G&A expenses as a percentage or from net revenue decreased to 294% for the first per quarter compared to 11, 7% for the previous quarter and the 900% to 7% for the same quarter last year.
Net income from operation was RMB, <unk> 8 million compared to a loss from operations of RMB $77.6 million from the previous quarter and net loss from operations of RMB $119.6 from defined milling and for the same quarter last year.
Net income was RMB $12.2 million compared with a net loss of RMB $34 million to $7 million for the previous quarter and a net loss of RMB 197 million for the same quarter last year.
Adjusted net income was RMB 19 million compared to resent other adjusted and net loss offline <unk> 9 and $9 million for the previous quarter and.
And adjusted net loss of RMB $189.2 million for the same quarter last year.
Basic and diluted net income per ordinary share attributable to ordinary share for this for the first quarter of 2021.
The RMB 2004, <unk> compared to basic and diluted net loss per ordinary share attributable to ordinary shareholders.
Through <unk> 17 cents for the previous quarter.
And 3 and the 99 for the same quarter last year.
In terms of our balance sheet and.
As of March 31, <unk>, the company's cash cash equivalents into restricted cash and short term investments that totaled.
The 172.6 milling compare the RMB 200 attendees and $9.6 million and sorry for December 31, 2 some in 'twenty.
That's all from March 30, 127, and listen to them the companies to defer the revenue and the long term deferred revenue totaled RMB 687, 4 million compared to <unk> 746 from $2 million as of December Serbia first the 2 southern and <unk>.
Net cash used in operating activity score and the $57.3 million.
And RMB and 99.8 million for the 3 months period ended March 31, the Tucson, and Luton tier 1 and the true southern Lufthansa and respectively.
Excellent amongst other things.
First the Tucson and into 'twenty, 1 the company's total.
Total shareholders.
This deficit was RMB 692 points or 2 milling.
Turning to the liability exceeds current assets by RMB 700 attempted to point a full milling.
The company from recruited him to meet.
Looking telco space and its ability to enhance user engagement and retention, while optimizing traffic acquisition and strategy to efficiently control and the reviews per user related to costs.
The company will further preserve liquidity and to manage the cash flow by reducing very discretionary expenditure.
The company and so liquidity is also based on its ability to obtain tests or financing from equity or debt investments.
Currently the company believes that it has sufficient cash to fund operations for at least the next 12 months with the implementation of the above mentioned and matches.
Now and extending into outlets.
For the second and hotels per sub and that's into 1 but come from they currently expect.
Net revenue to be between RMB $160 million to a 180 million, which would represent a decrease of approximately 19, 4% to 9.3% from RMB $198 million to $5 million for the first quarter outputs and deepens and warm.
And a decrease of approximately 48.6% to 33, 2% from RMB 269, Quanta Formula Inc. For the same quarter of last year.
This forecast reflects the company's current and preliminary view on the current business of saturation and the market conditions, which is subject to change this.
This concludes our prepared remarks, we will now open the call to questions.
Sir Please go ahead.
Thank you to ask a question you will need to press star 1 on your telephone and can you draw. Your question press the pound key for the benefit of all participants on today's call. If you wish to ask your question from management and Chinese.
Immediately repeat your question in English.
Your first question comes from the line of Allison Shang with Morgan Stanley. Your line is open.
Thank you Manny.
And management.
I have 2 questions from investors.
Okay.
And thank you Nathan environment.
We noticed that.
Ladies and tunnels.
And regarding not advertisement and.
And so all of that.
English total Inc. Right, Keith 60, and wondering how does that impact key trials.
Thanks, Matt.
And remember that you have.
From.
English product okay.
And also and secondly on.
And how do you price.
And now cross selling channel and also from Martin Chen from UBS.
So is that to maintain net profit at the 19.
Thank you.
Hey, Thank you for the question of LCR assets looks like.
We were very very closely and monitoring.
And the regulation changes recently.
First of all.
Net.
The majority of our revenue.
Okay.
The adult business, which is not impacted.
And secondly.
With regard to the business.
First of all we focus entirely.
And.
Net.
Skills.
Not test prep per ounce.
Real communicative.
Capabilities and the kids and.
We are still.
Mostly and monitoring.
Regulation changes and.
And.
A bulk of our traffic.
Actually.
Non.
It does not come from.
Tough acquisition, but.
Internal.
Cross sell from our adult business.
And our adult use this who are also parents themselves.
So the impact.
Advertising and limitation would be.
And.
Limited new blocks.
And we.
We have been.
Italy, increasing our internal.
All right as well so as of as.
As a mean to.
Diversify our.
User acquisition.
Capability.
So these are some of the day.
<unk> debt.
We have and our controller to adaptive.
Regulation changes.
And also we.
We are investing.
And some other.
Areas of.
Sutures value.
And that.
Or not.
Debt.
And the.
Calculated.
Bye.
Yes.
By the regulation changes.
And.
The other way too.
Diversify our portfolio and.
Continue to serve our users.
Our net thing answer the second part of the cash.
Yes take care of their secondary crushing as their doctor Ejector says.
We are pleased to announce that we achieved the profitability on the <unk>.
Quarterly basis and for the first per time ever.
Our continued focus on improving our operating the.
Leverage led to a total operating expense for the first quarter of 2021, decreasing and by shifting to a slight percentage quarter over quarter and 68% per year over year. This is for that test them and once again to our from tremendous commitment and ability to.
Executed cost per control.
We saw momentum is starting to stabilize we hope and we expect that our new business initiatives.
You mentioned the huge parts will contribute more and more in the future.
And we'll be happy to discuss these initiatives and more details once theyre more substantiated and go.
Moving forward, our focus will remain and enhancing operational efficiency and improving our bottom line.
Okay. Thank you very much.
Your next question comes from the line of January Inc.
From Chinese per capita online Schmidt your line is open.
Hi management, Congrats Jane and profitability from the first time in your history and.
And I'm wondering if this is sustainable and how should we expect the bottom line to train and income quarters. Thank you.
Thanks, Jimmy for the question.
I think I might have.
I've just mentioned.
And in my previous or respond.
We showed the product the ability for the first time.
And this positive first quarter, and then I kind of like just to mention that we will continue to focus on improving operational leverage and whether we can increase through our growth rates and may come with growth and sustainable and the bottom line stay positive and it depends on our ability like I just said well then we.
And continue to keep our.
And healthy cost per structure on 1 hand and on the other hand, whether we can effectively and quickly.
And they implemented our growth initiative like he has suggested mentioning the for example, the oversea market expansion and they are using and I'll, let PPE and test the capability to expand into new market and this along and so forth. So.
Okay. Thank you.
So there are no further questions now I'd like to turn the call back over to the company for closing remarks.
Thank you and once again for joining us if you have further questions. Please feel free to contact the likes of Investor relations and through the contact information provided on our website or TPG Investor Relations.
This concludes today's conference call you May now disconnect. Your line. Thank you.
Thank you.
And.
And.
And then.
And then.