China Online Education Group Powered Industry to Witness Sustainable Growth by 2021

BEIJING, May 18, 2021 /PRNewswire/ -- 51Talk (China Online Education Group, NYSE: COE), China's leading online education platform, was in the spotlight these days as it announced it has achieved its 6th consecutive quarterly earnings, following the release of its unaudited financial results for the first quarter of 2021 on May 17, 2021.

Founded in 2011, 51Talk registered a non-GAAP net income of RMB 16.8 million and GAAP net income RMB 8 million respectively.

The 10-year-old company's first quarter net revenues sustained a growing momentum and increased 23.3 percent year-over-year to reach more than RMB 600 million. The gross margin was 73.4 percent, in comparison with 71.7 percent for the fourth quarter of 2020.

"We are delighted to report another solid quarter as first quarter net revenue reached RMB600.4 million, a 23.3 percent year-over-year increase that once again beat the top end of our guidance," said Jack Huang Jiajia, Founder, Chairman and Chief Executive Officer of 51Talk.

Huang also said that net revenues of its K-12 one-on-one mass market offering had grown by 36 percent in comparison with the same period last year, and that the rising number of active students on the platform was the main reason behind the increase.

The number of active students reached 393,000, which is a 37 percent increase compared to the same period in 2020.

Acquisitions and cooperation eyed for future growth

On the occasion of celebrating its 10^th anniversary, 51Talk has also announced its "strategic upgrading" on its 2021 strategic meeting held in March. Instead of overwhelmingly relying on one-on-one English speaking courses, 51Talk has taken big strides towards business expansion. From March to May, 51Talk has revealed three significant moves to the public.

In March, 51Talk announced the acquisition of GKid, a Shanghai-based online English education platform that offers innovative AI-driven online English courses through interactive animation and picture books for children aged 3 to 8, to further improve its AI capabilities.

During the same month, 51Talk has cooperated with one of the largest children's magazine publishers in the United States- Highlights. 51Talk claimed that it would integrate Highlights stories with its Classic English Junior courses for deep learning on a variety of topics and levels.

In April, the company announced that it has struck a deal to acquire 100 percent equity interest in Koala Reading in exchange for ordinary shares to help develop the professional reading ability assessment of its consumers.

Huang shared that the recent acquisitions would help 51Talk with its long-term growth opportunities.

"We are leveraging its expertise in Chinese reading assessments, and planning to further develop a trailblazing English reading skill evaluation system that allows us to improve our product offerings," said the 36-year-old CEO.

"In addition, the acquisition of Koala Reading has also broadened our curriculum product line and added Chinese-related courses, which is in line with our long-term strategy of further enriching the curriculum product portfolio," added Huang.

51Talk's chief financial officer, Xu Min, echoed Huang's statement. "We will also continue to build different tools and systems to explore new growth drivers, but our core business will not change in the next three to five years," he said.

According to Capital Watch, the company in 2021 plans on further expanding its user base through promotions, diversified offerings, and upgraded features, advancing toward its goal of growing into China's largest e-learning ecosystem focusing on the English language.

Leading market share shows winner-take-all industry situation

China's top research institutes, the Chinese Academy of Sciences, and Ipsos Group on March 25, co-released a report on China's K-12 online education research, showing 51Talk has topped the list of national-level market share by holding 54 percent in the online English education sector.

Over the past years, lower-tier expansion has been regarded as a strategic priority for 51Talk. The report showed that among third and fourth-tier cities, 51Talk is the dominating platform in the market, holding a market share of 60 percent. For students in lower-tier cities of China, their educational resources are not as favorable as their counterparts from big cities like Beijing, Shanghai and Guangzhou.

51Talk has been investing in lower-tier research and development (R&D) to make its platform more usable to students who may not have access to PCs or laptops.

However, lower-tier expansion is not inconsistent with top-tier recognition. The data from the report shows that in the first and second-tier cities, the company also ranks first, claiming 42 percent, followed by LAIX and Jiliguala at 15 percent and 14 percent, respectively.

The report also revealed that 51Talk ranked first among the most popular online English learning platforms in China. Of those polled, 54 percent said they use 51Talk frequently and 31 percent said they would like to try the platform in the near future.

"Market share is a prominent factor to reveal a brand's position both in the industry and among the consumers. We have been long operating in the sector for ten years, and will continue to expand our loyal student base through leveraging our expertise and by constantly advancing our technology," said Xu.

Quality-oriented education highlighted in future

In recent months, China's government has spared no effort to rein in the sprawling after-school training companies to reduce students' excessive academic burden.

The government has taken various measures to regulate after-school training institutions. They include banning middle and primary schools from taking students' extracurricular qualifications into consideration during school enrollment, forbidding tutoring companies from exam-oriented tuition methods, teaching advanced materials outside the national syllabus or hiring teachers from public schools.

However, the country has also encouraged both schools and institutions to focus more on quality-oriented education.

In comparison with tradition examination-oriented education, the term refers to the education model that aims at improving the quality of educated people and attaching importance to people's ideological and moral qualities, ability training, personality development, and the education of both physical and mental health.

51Talk has always positioned itself as an advocate of quality-oriented education and stood in line with national policy and denied the excesses of China's educational rat race. Therefore, the company believes that future growth will not be overshadowed by regulatory risks.

"We have made a stand against examination-oriented education, and we believed that English study should be learned with the right attitude," Huang said.

"More and more Chinese families are aware that English is an effective tool to get to know the world well. At 51Talk, we will not tell you the secrets of getting higher scores in examinations, but we will help children understand English as an art of living, and know the world in a better and comprehensive manner," added Huang.

China's online tutoring industry experienced rapid growth last year due to the COVID-19 pandemic, reaching 257 billion yuan in 2020, up 35.5 percent year-on-year, according to Shanghai-based market consultancy iResearch. The report estimated the industry would reach 490 billion yuan by 2024.

SOURCE China Online Education Group