Net revenues increased by 104.0%
year-over-year
LAIX Inc. (“LAIX” or the “Company”) (NYSE: LAIX), an artificial
intelligence (AI) company in China that creates and delivers
products and services to popularize English learning, today
announced its unaudited financial results for the second quarter
ended June 30, 2019.
Second Quarter 2019 Financial and Operating
Highlights
- Net revenues were RMB276.4 million (US$40.3 million), a 104.0%
increase from RMB135.5 million for the second quarter of 2018.
- Gross billings1 were RMB290.1 million (US$42.3 million), a
41.3% increase from RMB205.3 million for the second quarter of
2018.
- Gross margin was 76.5%, compared with 76.8% for the second
quarter of 2018.
- Approximately 0.9 million unique paying users purchased the
Company’s courses and services for the second quarter of 2019,
compared with approximately 0.7 million unique paying users for the
second quarter of 2018.
- Total cumulative registered users were 138.8 million as of June
30, 2019, compared with 83.8 million total cumulative registered
users as of June 30, 2018.
1 “Gross billings” for a certain period refer to the total
amount of cash received from the sale of course packages in that
period net of the total amount of cash refunds paid to users in the
same period.
CEO and CFO Comments
“During the second quarter, our top line was impacted by
tightened WeChat moments sharing policy mostly applicable to our
Liuli Reading product, and to some extent applicable to our DongNi
product as well, which affected our word-of-mouth user growth. In
addition, increased competition for traffic acquisition led by K12
players during the summer months (from late May until the end of
July) drove up the customer acquisition costs, which further
affected our user and revenue growth. With these headwinds, we have
been taking swift actions to offset the revenue impact, by
adjusting our marketing strategy and actively exploring alternative
marketing channels to grow our user community,” said Dr. Yi Wang,
Chairman and Chief Executive Officer of LAIX.
“Although the performances of our Liuli Reading and DongNi
products were unexpectedly weakened, the second quarter still
represents another period of healthy year-over-year growth for our
user community, with total registered users on our platform
reaching more than 138.8 million as of June 30, 2019 and more than
900,000 unique paying users purchasing our courses and services
just in the second quarter of 2019, demonstrating our monetization
potential,” Dr. Wang continued.
“With our foresight into industry trends and our years of focus
on cutting-edge technologies, we will continue to raise the bar for
product quality and improve the learning experience. Although we
expect the impact on our revenue growth to continue during the
remainder of the year, we are committed to the long-term vision
that AI-powered learning products will play a pivotal role in
people’s life-long learning journey. Aside from Liuli Reading and
DongNi products, we have various initiatives in the pipeline that
we have launched in the adults and kids markets, as well as the
global market, all of which are expected to contribute to our user
and top line growth in the coming quarters. Having the right
products is the key to attracting new users and enhancing
engagement, therefore, despite the additional expenses for these
initiatives in recent months, we believe the upfront investments
will better position the Company to further solidify our
competitive edge in China’s AI-powered language learning market in
the long run, and we will continue to invest in and optimize our
technologies and products,” concluded Dr. Wang.
“The unexpected headwinds in our marketing channel resulted in
decelerated top line growth in the second quarter of 2019. While
the revenue growth was lower than our previous expectation, we were
able to realize significant operating leverage improvement as our
business scaled up. This was evidenced by the improvement of sales
and marketing expenses as a percentage of net revenues on a
year-over-year basis, and gross margin remaining stable at
approximately 77%,” said Ms. Bin Yu, Chief Financial Officer of
LAIX. “Looking ahead, we expect the trend of revenue growth
deceleration to continue for the second half of the year. However,
we are continuing to invest in enriching our product portfolio in
the adults and kids markets, and explore alternative yet effective
marketing channels to reinvigorate our user growth.”
Second Quarter 2019 Financial Results
Net Revenues
Net revenues for the second quarter of 2019 were RMB276.4
million (US$40.3 million), a 104.0% increase from RMB135.5 million
for the same quarter last year. The increase was primarily
attributable to the growth of the Company’s business and the
platform-wide expansion of the Company’s paying user base as well
as to the increased adoption of the Company’s proprietary AI
teacher among users in China as an effective learning approach and
a better alternative to the traditional ways of English
learning.
Cost of Revenues
Cost of revenues for the second quarter of 2019 was RMB64.9
million (US$9.4 million), a 106.6% increase from RMB31.4 million
for the same quarter last year. This change was primarily due to
increases in (i) salaries and benefits for certain full-time
employees and (ii) IT service cost, with all such costs resulting
from the Company’s general business growth and user base
expansion.
Gross Profit and Gross Margin
Gross profit for the second quarter of 2019 was RMB211.6 million
(US$30.8 million), a 103.2% increase from RMB104.1 million for the
same quarter last year, as a result of increased economies of
scale.
Gross margin for the second quarter of 2019 was 76.5%, compared
with 76.8% for the same quarter last year.
Operating Expenses
Total operating expenses for the second quarter of 2019 were
RMB300.5 million (US$43.8 million), a 64.5% increase from RMB182.7
million for the same quarter last year, primarily resulting from
business growth activities, the development and introduction of new
products and the costs associated with the expansion of the
Company’s user base.
Sales and marketing expenses for the second quarter of 2019 were
RMB219.7 million (US$32.0 million), a 65.3% increase from RMB132.9
million for the same quarter last year. The increase was primarily
due to increases in (i) branding and marketing expenses, and (ii)
salaries and benefits for sales and marketing personnel, including
the Company’s online study advisors. Importantly, sales and
marketing expenses as a percentage of net revenues declined notably
to 79.5% for the second quarter of 2019, compared with 98.1% for
the same quarter last year.
Research and development expenses for the second quarter of 2019
were RMB52.9 million (US$7.7 million), a 46.5% increase from
RMB36.1 million for the same quarter last year, primarily due to an
increase in salaries and benefits for research and development
personnel. Research and development expenses as a percentage of net
revenues declined from the same quarter last year, representing
19.1% of net revenues for the second quarter of 2019, compared with
26.6% for the same quarter last year.
General and administrative expenses for the second quarter of
2019 were RMB27.9 million (US$4.1 million), a 103.4% increase from
RMB13.7 million for the same quarter last year, primarily due to
increases in salaries and benefits for general and administrative
personnel and professional service fees. General and administrative
expenses as a percentage of net revenues remained flat at 10.1% for
the second quarter of 2019, compared with the same quarter last
year.
Loss from Operations
Loss from operations for the second quarter of 2019 was RMB88.9
million (US$13.0 million), compared with RMB78.6 million for the
same quarter last year, due to the aforementioned reasons including
general business growth and user base expansion.
Adjusted EBITDA2
Adjusted EBITDA for the second quarter of 2019 was a loss of
RMB77.2 million (US$11.3 million), compared with an adjusted EBITDA
loss of RMB71.1 million for the same quarter last year.
2 “Adjusted EBITDA” is a non-GAAP measure, which represents
EBITDA before share-based compensation expenses. EBITDA represents
net loss before interest, tax, depreciation and amortization. See
“Reconciliations of GAAP and Non-GAAP Results” at the end of this
press release.
Foreign exchange related gains/(losses), net
Foreign exchange loss was RMB1.7 million (US$0.2 million) in the
second quarter of 2019, compared with a foreign exchange loss of
RMB5.1 million for the same quarter last year.
Income tax expenses
Income tax expenses for the second quarter of 2019 were RMB0.03
million (US$4 thousand), a 99.6% decrease from RMB6.4 million for
the same quarter last year, primarily due to the Company’s
estimated taxable loss position in current year.
Net Loss
Net loss for the second quarter of 2019 was RMB87.8 million
(US$12.8 million), compared with RMB89.9 million for the same
quarter last year.
Adjusted net loss3 for the second quarter of 2019 was RMB81.6
million (US$11.9 million), compared with RMB78.5 million for the
same quarter last year.
Basic and diluted net loss per ordinary share attributable to
ordinary shareholders for the second quarter of 2019 was RMB1.78
(US$0.26), compared with RMB5.00 for the same quarter last
year.
3 “Adjusted net loss” is a non-GAAP measure, which excludes
share-based compensation expenses. See “Reconciliation of GAAP and
Non-GAAP Results” at the end of this press release.
Balance Sheet
As of June 30, 2019, the Company’s cash, cash equivalents and
short-term investments totaled RMB729.5 million (US$106.3 million),
compared with RMB747.8 million as of December 31, 2018.
The Company had deferred revenues (current and non-current) of
RMB564.7 million (US$82.3 million) as of June 30, 2019, compared
with RMB477.6 million as of December 31, 2018.
Outlook
For the third quarter of 2019, the Company currently
expects:
- Net revenues to be between RMB230.0 million to RMB250.0
million, which would represent an increase of approximately 27.4%
to 38.5% from RMB180.5 million for the same quarter last year;
This forecast reflects the Company’s current and preliminary
view on the current business situation and market conditions, which
is subject to change.
Other Announcement
The Company also announced that Ms. Bin Yu has notified the
Company that she is planning to resign from her position as the
Company’s Chief Financial Officer due to personal reasons. The
Company has initiated a search to identify a replacement for Ms.
Yu. During this period, Ms. Yu will continue to serve as the
Company’s Chief Financial Officer and facilitate a smooth
transition until a replacement is found. Dr. Yi Wang, Chairman and
Chief Executive Officer of LAIX, expressed appreciation to Ms. Yu
for her great contributions to the Company on behalf of the Board
of Directors and management team.
Conference Call
The Company’s management will host an earnings conference call
at 8:00 AM U.S. Eastern Time on August 27, 2019 (8:00 PM
Beijing/Hong Kong time on August 27, 2019).
Dial-in details for the earnings conference call are as
follows:
United States (toll free):
+1-877-396-2308
International:
+1-647-689-5527
China:
400-048-6136
China, Domestic:
400-043-3098
Hong Kong:
+852-5803-0358
Conference ID:
4494395
Participants should dial-in at least 10 minutes before the
scheduled start time to be connected to the call.
Additionally, a live and archived webcast of the conference call
will be available on the Company’s investor relations website at
http://ir.laix.com/investors.
About LAIX Inc.
LAIX Inc. (“LAIX” or the “Company”) is an artificial
intelligence (AI) company in China that creates and delivers
products and services to popularize English learning. Its
proprietary AI teacher utilizes cutting-edge deep learning and
adaptive learning technologies, big data, well-established
education pedagogies and the mobile internet. LAIX believes its
innovative approach fundamentally transforms learning. LAIX
provides its products and services on demand via its mobile apps,
primarily its flagship “English Liulishuo” mobile app launched in
2013. On the Company’s platform, AI technologies are seamlessly
integrated with diverse learning content incorporating
well-established language learning pedagogies, gamified features
and strong social elements to deliver an engaging, adaptive
learning experience. LAIX provides a variety of courses inspired by
a broad range of topics and culture themes to make English learning
more interesting and is committed to offering a fun, interactive
learning environment to motivate and engage its users.
For more information, please visit: http://ir.laix.com.
Use of Non-GAAP Financial Measures
We use adjusted EBITDA and adjusted net loss, each a non-GAAP
financial measure, in evaluating our operating results and for
financial and operational decision-making purposes.
We believe that adjusted EBITDA and adjusted net loss help
identify underlying trends in our business that could otherwise be
distorted by the effect of certain expenses that we include in loss
from operations and net loss. We believe that adjusted EBITDA and
adjusted net loss provide useful information about our results of
operations, enhance the overall understanding of our past
performance and future prospects and allow for greater visibility
with respect to key metrics used by our management in its financial
and operational decision-making.
Adjusted EBITDA and adjusted net loss should not be considered
in isolation or construed as an alternative to loss from
operations, net loss or any other measure of performance or as an
indicator of our operating performance. Investors are encouraged to
review the historical non-GAAP financial measures to the most
directly comparable GAAP measures. Adjusted EBITDA and adjusted net
loss presented here may not be comparable to similarly titled
measures presented by other companies. Other companies may
calculate similarly titled measures differently, limiting their
usefulness as comparative measures to our data. We encourage
investors and others to review our financial information in its
entirety and not rely on a single financial measure.
Exchange Rate Information
This announcement contains translations of certain RMB amounts
into U.S. dollars at a specified rate solely for the convenience of
the reader. Unless otherwise noted, all translations from Renminbi
to U.S. dollars are made at a rate of RMB6.8650 to US$1.00, the
rate in effect as of June 28, 2019 published by the Federal Reserve
Board.
Safe Harbor Statement
This announcement contains forward-looking statements. These
statements are made under the “safe harbor” provisions of the U.S.
Private Securities Litigation Reform Act of 1995. These
forward-looking statements can be identified by terminology such as
“will,” “expects,” “anticipates,” “aims,” “future,” “intends,”
“plans,” “believes,” “estimates,” “confident,” “potential,”
“continue” or other similar expressions. Among other things, the
Outlook and quotations from management in this announcement, as
well as LAIX’s strategic and operational plans, contain
forward-looking statements. LAIX may also make written or oral
forward-looking statements in its periodic reports to the U.S.
Securities and Exchange Commission, in its annual report to
shareholders, in press releases and other written materials and in
oral statements made by its officers, directors or employees to
third parties. Statements that are not historical facts, including
but not limited to statements about LAIX’s beliefs and
expectations, are forward-looking statements. Forward-looking
statements involve inherent risks and uncertainties, and a variety
of factors could cause actual results to differ materially from
those contained in any forward-looking statement. Further
information regarding these and other risks is included in the
Company’s filings with the Securities and Exchange Commission. All
information provided in this press release and in the attachments
is as of the date of the press release, and the Company undertakes
no duty to update such information, except as required under
applicable law.
LAIX INC.
UNAUDITED CONSOLIDATED BALANCE
SHEETS
(Amount in thousands of
Renminbi ("RMB") and US dollars ("US$"))
As of
As of
December 31, 2018
June 30, 2019
RMB
RMB
US$
ASSETS
Current assets:
Cash and cash equivalents
344,722
305,609
44,517
Short-term investments
403,107
423,880
61,745
Accounts receivable, net
14,404
11,886
1,731
Prepayments and other current assets
109,550
67,668
9,857
Total current assets
871,783
809,043
117,850
Non-current assets:
Property and equipment, net
42,606
83,851
12,214
Investment in equity fund
5,753
5,762
839
Intangible assets, net
1,289
1,204
175
Operating lease right-of-use assets, net
(1)
-
172,626
25,146
Other non-current assets
12,011
9,605
1,400
Deferred tax assets
16,940
16,940
2,468
Total non-current assets
78,599
289,988
42,242
Total assets
950,382
1,099,031
160,092
LIABILITIES
Current liabilities:
Accounts payable
69,558
85,595
12,468
Deferred revenue
477,595
564,659
82,252
Salary and welfare payable
108,317
119,879
17,462
Tax payable
58,881
60,721
8,845
Operating lease liability, current (1)
-
44,552
6,490
Accrued liabilities and other current
liabilities
16,106
9,280
1,351
Total current liabilities
730,457
884,686
128,868
Non-current liabilities:
Deferred revenue, non-current
32
-
-
Operating lease liability, non-current
(1)
-
125,792
18,324
Other non-current liabilities
1,000
4,192
611
Total non-current liabilities
1,032
129,984
18,935
Total liabilities
731,489
1,014,670
147,803
Shareholders’ equity
Class A Ordinary shares
194
204
29
Class B Ordinary shares
121
121
18
Subscriptions receivable from founding
shareholders
(122)
(122)
(18)
Additional paid-in capital
1,139,250
1,158,988
168,826
Accumulated other comprehensive income
16,318
17,153
2,499
Accumulated (deficit)
(936,868)
(1,091,983)
(159,065)
Total shareholders’ equity
218,893
84,361
12,289
Total liabilities and shareholders’
equity
950,382
1,099,031
160,092
(1) On January 1, 2019, the Company adopted ASC 842, the new
lease standard, using the additional transition method. No
cumulative effect adjustment to the opening balance of retained
earnings was required.
LAIX INC.
UNAUDITED CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS
(Amount in thousands of
Renminbi ("RMB") and US dollars ("US$")
except for number of shares
and per share data)
Three months ended
Six months ended
June 30
March 31
June 30
June 30
June 30
2018
2019
2019
2018
2019
RMB
RMB
RMB
US$
RMB
RMB
US$
Net revenues
135,529
253,304
276,427
40,266
232,308
529,731
77,164
Cost of revenues
(31,394)
(59,690)
(64,865)
(9,449)
(55,007)
(124,555)
(18,143)
Gross profit
104,135
193,614
211,562
30,817
177,301
405,176
59,021
Operating expenses:
Sales and marketing expenses
(132,905)
(193,628)
(219,734)
(32,008)
(259,849)
(413,362)
(60,213)
Research and development expenses
(36,089)
(50,079)
(52,882)
(7,703)
(60,941)
(102,961)
(14,998)
General and administrative expenses
(13,714)
(20,047)
(27,895)
(4,063)
(26,291)
(47,942)
(6,984)
Total operating expenses
(182,708)
(263,754)
(300,511)
(43,774)
(347,081)
(564,265)
(82,195)
Loss from operations
(78,573)
(70,140)
(88,949)
(12,957)
(169,780)
(159,089)
(23,174)
Other income/(expenses):
Interest income
1,281
301
761
111
1,406
1,062
155
Foreign exchange related (losses)/gains,
net
(5,061)
699
(1,711)
(249)
(828)
(1,012)
(147)
Change in fair value of short-term
investment
-
2,123
1,815
264
-
3,938
574
Other (expenses)/income, net
(1,132)
(227)
269
39
(604)
42
6
Loss before income taxes
expenses
(83,485)
(67,244)
(87,815)
(12,792)
(169,806)
(155,059)
(22,586)
Income tax expenses
(6,420)
(28)
(28)
(4)
(12,456)
(56)
(8)
Net loss
(89,905)
(67,272)
(87,843)
(12,796)
(182,262)
(155,115)
(22,594)
Series A Preferred share redemption value
accretion
(659)
-
-
-
(1,313)
-
-
Series B Preferred share redemption value
accretion
(3,380)
-
-
-
(6,705)
-
-
Series C Preferred share redemption value
accretion
(5,299)
-
-
-
(10,520)
-
-
Net loss attributable to LAIX Inc.'s
ordinary shareholders
(99,243)
(67,272)
(87,843)
(12,796)
(200,800)
(155,115)
(22,594)
LAIX INC.
UNAUDITED CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS
(Amount in thousands of
Renminbi ("RMB") and US dollars ("US$")
except for number of shares
and per share data)
Three months ended
Six months ended
June 30
March 31
June 30
June 30
June 30
2018
2019
2019
2018
2019
RMB
RMB
RMB
US$
RMB
RMB
US$
Net loss
(89,905)
(67,272)
(87,843)
(12,796)
(182,262)
(155,115)
(22,594)
Other comprehensive income/(loss)
—Foreign currency translation adjustment,
net of nil tax
21,826
(13,770)
14,605
2,128
2,596
835
122
Comprehensive loss
(68,079)
(81,042)
(73,238)
(10,668)
(179,666)
(154,280)
(22,472)
Net loss per Class A and Class B
ordinary shares
—Basic and Diluted
(5.00)
(1.40)
(1.78)
(0.26)
(10.12)
(3.19)
(0.46)
Weighted average number of Class A and
Class B ordinary shares used in per share calculation
—Basic and Diluted
19,834,535
47,952,231
49,246,017
49,246,017
19,834,535
48,609,846
48,609,846
LAIX INC.
Reconciliation of GAAP and
Non-GAAP Results
(Amount in thousands of
Renminbi ("RMB") and US dollars("US$")
except for percentage
data)
Three months ended
Six months ended
June 30, 2018
March 31, 2019
June 30, 2019
June 30, 2018
June 30, 2019
RMB
RMB
RMB
US$
RMB
RMB
US$
Net loss
(89,905)
(67,272)
(87,843)
(12,796)
(182,262)
(155,115)
(22,594)
Add:
Share-based compensation expenses
11,364
12,820
6,239
909
19,663
19,059
2,776
Depreciation of property, plant and
equipment
1,242
2,438
5,001
728
2,036
7,439
1,084
Amortization of prepaid interest expense
and service fees to loan companies
1,061
160
92
13
1,685
252
37
Income tax expenses
6,420
28
28
4
12,456
56
8
Substract:
Interest income
(1,281)
(301)
(761)
(111)
(1,406)
(1,062)
(155)
Adjusted EBITDA
(71,099)
(52,127)
(77,244)
(11,253)
(147,828)
(129,371)
(18,844)
Net loss
(89,905)
(67,272)
(87,843)
(12,796)
(182,262)
(155,115)
(22,594)
Add back:
Share-based compensation expenses
11,364
12,820
6,239
909
19,663
19,059
2,776
Adjusted net loss
(78,541)
(54,452)
(81,604)
(11,887)
(162,599)
(136,056)
(19,818)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190827005395/en/
For investor and media inquiries, please contact: LAIX
Inc. Chuhan Wang Investor Relations Email: ir@laix.com
The Piacente Group Investor Relations Brandi Piacente Tel:
+1-212-481-2050 Email: liulishuo@tpg-ir.com
Emilie Wu Tel: +86-21-6039-8363 Email: liulishuo@tpg-ir.com
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