China Online Education Registers 90% Revenue Decline In Q1

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  • China Online Education Group COE (51Talk) reported a first-quarter FY22 revenue decline of 89.7% year-on-year to $9.5 million.
  • COE did not recognize $48.0 million in non-compliant lesson consumptions as revenues.
  • The number of active students with general lesson consumption was 298,600, down 24.0% Y/Y.
  • Gross margin loss was (14.0)% versus 73.4% a year ago.
  • Non-GAAP loss from operations was $(21.4) million, versus $2.3 million a year ago.
  • Non-GAAP net loss per ADS was $(0.94).
  • 51Talk held $126.4 million in cash and equivalents.
  • COE founder, Chair, and CEO Jiajia Jack Huang said, "With the rapid growth of our overseas business, we exceeded our target on gross billings in the first quarter. Our first-quarter net gross billings have reached $5.3 million, representing 79.9% sequential growth."
  • Huang agreed to acquire COE's online English tutoring businesses in the China mainland via Dasheng Holding (HK) Limited for $1.
  • RelatedChina Online Education Spins Off China Mainland Business
  • COE has changed its reporting currency from the Renminbi (RMB) to the U.S. dollar ($) to focus on its overseas business.
  • Outlook: COE expects Q2 net gross billings from the oversea business of $7.2 million - $7.5 million, representing sequential growth of 36.1% - 41.8%.
  • Regulatory Crackdown: China's internet security watchdog has launched an investigation into the China National Knowledge Infrastructure (CNKI), Reuters reports.
  • China Cyberspace Administration aimed to preempt security risks of national data, protecting national security and safeguarding public interest through scrutiny and summoned CNKI management for a meeting.
  • On May 13, the State Administration for Market Regulation launched an antitrust investigation into CNKI after China's top research group, the Chinese Academy of Sciences, decided to suspend its use of CNKI, citing high subscription fees.
  • Price Action: COE shares traded higher by 5.19% at $1.42 in the premarket on the last check Friday.
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