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spk02: Good evening and good morning, ladies and gentlemen, and thank you for standing by for 17 EdTech's second quarter 2024 earnings conference call. At this time, all participants are in listen-only mode. After the management's prepared remarks, there will be a question and answer session. As a reminder, today's conference call is being recorded. I'll now turn the meeting over to your host for today's call, Ms. Lara Zhao, 17 EdTech's investor relations Manager. Please proceed, Laura.
spk01: Thank you, Alpreta. Hello, everyone, and thank you for joining us today. Our earnings release was distributed earlier today and is available on our IR website. Joining us today are Mr. Michael Du, Director and Chief Financial Officer, and myself, Investor Relations Manager. Michael will walk you through our latest business performance and strategies and I will discuss our financial performance in more details. After the prepared remarks, Michael will be available to answer your questions during the Q&A session. Before we begin, I'd like to remind you that this conference call contains forelooking statements as defined in Section 31E of the Securities Exchange Act of 1934 and the U.S. Private Securities Litigation Reform Act of 1995. These four looking segments are based upon management's current expectations and current market and operating conditions and relate to events that involve known and unknown risks, uncertainties, and other factors, all of which are difficult to predict and many of which are beyond the company's control. These risks may cause the company's actual results, performance, or achievements to differ materially. For the information regarding these and other risks, uncertainties, and factors, it's included in the company's filings with the US SEC. The company does not undertake any obligation to update any forelooking statements as a result of new information, future events, or otherwise except as required under applicable law. I will now turn the call over to our director and chief financial officer, to review some of our business development and strategic direction. Michael, please go ahead.
spk00: Thank you, Laura. Hello, everyone. Thank you all for joining us on our second quarter of 2024 earnings call. Before we begin, I would like to note that the financial information and gap numbers in this release are presented on an accounting operation basis and in IMB, unless otherwise stated. Let me start with our latest business update. In the second quarter, we are delighted to announce that the company has achieved a robust progress in our core business, with an impressive top-line growth of 165 percent quarter-to-quarter revenue growth, driven by significant expansion in contract winnings in new potential areas. As we optimize our operation efficiency, operational loss has shown a diminishing trend in the first half of 2024. Net loss on gap basis continues to narrow for the first half of 2024 compared with the same period last year. As we innovate and provide high-quality, efficient educational solutions, we have effectively implemented personalized teaching and learning for a broader audience in the evolving digital learning landscape. Our innovative, high-quality data-driven soft offerings are delivering substantial assistance in promoting trends in our partner schools that are positively associated with academic improvements. Examples include increased homework and exercise completion rates, teachers' grading rates, and students' correction rates. Comparisons between students using and those not using our solution within the same school after semester also noted better academic performance of the students and teachers who use our solutions. During the quarter, we continue to maintain a gross momentum in user engagements for subscription models of our comprehensive solutions on the expanded user base. For additional customer groups, including both public and private ones, we are glad to see the operating metrics such as subscription retention rates, utilization rates remain steadily improved in existing schools, with significant results achieved in attracting new customers and expanding potential service scope. Ten projects are due for renewal in September this year. Out of these projects, a substantial portion of them have already renewed their counter with us, with some of them subscribing for more participating students, which leads to effective retention rates of more than 150%. Such continuous renewal, expansion of student coverage within existing schools, as well as purchase of additional value-added services and products, such as learning paths, are expected to increasingly improve our revenue stream and sales efficiency. Our sales network has also deepened as the number of schools purchase our solutions continue to increase. Currently, we are collaborating with more than 500 strategic partners to distribute our offerings in over 95 cities across 27 policies. In this quarter, we have initiated a strategic partnership with two major local distributors in Qingdao Shandong Province, aiming to expand our distribution network and student-rich to cover more customers throughout our module-based solutions. We expect the collaboration will enhance our market presence and boost our competitive edge in the region, leading to an increased market share, possible new revenue opportunities and growth. During the quarter, Our teaching and learning soft business for district-level projects exhibits consistent growth, progress, continue to generate revenues through successful delivery and new project winning. Our district-level project in Beijing Xichen and that we newly acquired in May has completely faced delivery and recognized revenues. Furthermore, as one of our key district-level initiatives in Shanghai, From September 2023 to June 2024, remarkable achievements have been observed. Statistics have revealed that our smart pen and paper have been in daily use in Minghang District of Shanghai. They have completed over 23 million homework assignments with a total of 460,000 class hours and 18,000 academic evaluations and assessment practices, which covers 2,157 classes and more than 84,000 students and 4,500 teachers across 110 public schools. Additionally, as a deep cultivator in the dot matrix plan application industry, the company actively formulating the country's first dot matrix plan group standard, leveraging its technological expertise and innovation capabilities to fully participate and firmly consolidate industry recognition, and strongly promotes industry technological progress and innovative practice. In aspects of product and service offerings, our commitment to product upgrades and customer satisfaction has driven us to continuously refine our offerings in line with user preference. We have integrated personalized learning data across all learning scenarios. Our comprehensive solutions encompassing learning resources, review of common issues, personalized recommendations, tailored homework guidance, data feedback loops, comprehensive assessment and evaluations, and reliable services. It ensures a holistic approach to resolve to resolving individual learning obstacles and guarantees the effective implementation of personalized learning strategies. Presently, our platform has 330,000 active student users engaging in daily coursework with a cumulative of more than 35 million completed homework assignments. The teaching application products based on regular data collection have clearly demonstrated the value-added effects in enhancing learning outcomes within our partner schools, resulting in their dynamic improvements. Now I will turn the call over to Lara to walk you through our latest financial performance. Thank you.
spk01: Thanks, Michael, and thank you, everyone, for joining the call. I will now walk you through our financial and operating results. Please note that all financial data I talk about will be presented in R&D terms. I would like to remind you that the quarterly results we present here should be taken with care and reference to our potential future performance are subject to potential impact from seasonality and one-off events as a result of the series of regulations introduced in 2021 and corresponding adjustments to our business model, organization, and workforce. In the second quarter of 2024, we recorded net revenues of 67.5 million RMB, compared with 25.5 million RMB in the first quarter of 2024, representing 165% of the increase on a quarter-on-quarter basis. Net loss on a gap basis for the second quarter of 2024 was 55.7 million RMB, compared with 47.9 million RMB in the second quarter of 2023. The adjusted net loss non-GAAP for the second quarter of 2024 was 42.6 million RMB, compared with adjusted net loss non-GAAP of 28.6 million RMB in the second quarter of 2023. Gross margin for the second quarter of 2024 was 16.0%. compared with 48.3% in the second quarter of 2023. As of June 30, 2024, we have cash reserves of 410.7 million RMB on our balance sheet, providing sufficient funds for future development. Next, I will go through our second quarter financials in greater detail. Net revenues. Net revenues for the second quarter of 2024 was 67.5 million RMB, which remained relatively stable compared with 69.2 million RMB in the second quarter of 2023. Cost of revenues for the second quarter of 2024 was 56.7 million RMB, representing a year-over-year increase of 58.6%. from 35.8 million RMB in the second quarter of 2023, which was mainly due to the increase in project deliveries of our teaching and learning SaaS offerings during that quarter. Gross profit for the second quarter of 2024 was 10.8 million RMB, compared with 33.5 million in the second quarter of 2023. Gross margin for the second quarter of 2024 was 16.0%, compared with 48.3% in the second quarter of 2023, which was mainly due to the higher proportion of lower margin mixed deliveries in our teaching and learning science project during the quarter. Total operating expenses for the second quarter was 71.0 million RMB, including 13.1 million RMB RMB of share-based compensation expenses, representing a year-over-year decrease of 22.3% from 91.3 million RMB in the second quarter of 2023. Lost from operations for the second quarter of 2024 was 60.2 million, compared with 57.8 million in the second quarter of 2023. Loss from operations as a percentage of net revenues for the second quarter was negative 89.2%, compared with negative 83.5% in the second quarter of 2023. Net loss for the second quarter of 2024 was 55.7 million RMB, compared with net loss of 47.9 million in the second quarter of 2023. Net loss as a percentage of net revenues was negative 82.5% in the second quarter of 2024, compared with negative 69.2% in the second quarter of 2023. Adjusted net loss non-GAAP for the second quarter of 2024 was 42.6 million, compared with adjusted net loss of $28.6 million in the second quarter of 2023. Adjusting net loss non-GAAP as a percentage of net revenues was negative 63.1% in the second quarter, compared with negative 41.2% of net revenues of adjusting net loss as a percentage of net revenues in the second quarter of 2023. Please refer to the table captioned Reconciliations of Non-GAAP Measures to the Most Comparable GAAP Measures. At the end of this press release for reconciliation of net loss under U.S. GAAP to adjusted net loss. Non-GAAP. Cash and cash equivalents and term deposits. Cash and cash equivalents and term deposits were $410.7 million. as of June 30, 2024, compared with $476.7 million as of December 31, 2023. In addition, we would like to announce that the company's Board of Directors renewed our share repurchase program on September 4, 2024, under which the company is authorized to repurchase up to $10 million of companies' ADS or common shares in the next 12 months. The company's board of directors will review the share repurchase program periodically and may authorize adjustment of its term and size. Looking to the future, we will continue to explore and innovate. We will cultivate product optimization and channel innovation to further strengthen our core competitiveness. Our aim is to provide competitive, personalized educational overall solutions and high-quality educational products and services that enhance effectiveness, contributing to China's educational digital transformation and sustainable development. With that, that concludes our prepared remarks. Thank you. Up later, we are now ready to begin the Q&A session. Thank you. Thank you.
spk02: We will now begin the question-and-answer session. To ask a question, please press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. As a reminder, to ask a question, please press star 11 on your telephone. I'm sharing no questions at this time, and I'll turn the conference back to Ms. Lara Zhao for closing comments.
spk01: Thank you, operator. In closing, on behalf of 17 AirTags management team, we would like to thank you for your participation on today's call. If you require any further information, please feel free to reach out to us directly. Thank you for joining us today. This concludes the call.
spk02: Thank you for your participation in today's conference. This concludes the program. You may now disconnect.
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