Hello, ladies and gentlemen, thank you for standing by for 51Talk Online Education Group's Third Quarter 2024 Earnings Conference Call. At this time, all participants will be in a listen-only mode. Today's conference call is being recorded. I would now like to turn the call over to your host, Mr. David Chung, Investor Relations for the company.

Please go ahead, David..

Hello, everyone, and welcome to the third quarter 2024 earnings conference call of 51Talk. The company's results were issued by Newswire services earlier today and are posted online. You can download the earnings press release and sign up for the company's distribution list by visiting ir.51talk.com. Mr. Jack Huang, our CEO, and Ms.

Cindy Tang, our CFO will begin with some prepared remarks. Following the prepared remarks, there will be a Q&A session. Before we continue, please note that the discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding this and other risks and uncertainties is included in the company's Form 20-F and other public filings as filed with the U.S. Securities and Exchange Commission.

The company does not assume any obligation to update any forward-looking statements except as required under the applicable law. Please also note that earnings press release and this conference call include discussion of unaudited GAAP financial information as well as unaudited non-GAAP financial measures.

51Talk's press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures. I will now turn the call over to our CEO, Jack Huang. Jack, please go ahead..

Thank you, David. Hello, everyone. Thank you very much for joining our conference call today. Our growth momentum has been well sustained into the third quarter, with gross billings once again surpassing our earlier guidance.

Looking ahead, we are confident in our ability to maintain our growth momentum going forward, while accounting for some anticipated seasonality. We are committed to our localization strategies around the world, while actively pursuing opportunities to extend service offerings with supplementary products for our existing students.

Furthermore, we would highlight that in our commitment to sustainable growth, we have successfully maintained an upward trajectory in our operating cash flow in the past two quarters. This is evidenced by the improvement in our cash balance over the quarter, and we anticipate that this positive trend will continue in the coming periods.

The acceleration of AI adoption across our group has become a significant driver this quarter. We have observed improvements in lead conversion rates, tutor management, and student classroom experiences, all powered by AI.

Our deep understanding of customer needs, combined with the strategic implementation of AI technologies, aligns with our objective of becoming a globally leading EdTech company. With that, I will now turn the call over to Cindy, our CFO..

Thank you, Jack. Now, let me walk you through our third quarter financial details. Third quarter net revenues were US$14 million, a 79.4% increase from the same quarter last year, largely driven by the increase of active students with attended lesson consumption. Gross margin for the third quarter was 78.7%.

Gross billings grew by 80.7% from the same quarter last year to US$19.8 million. Q3 operating expenses were US$11.8 million, an increase of 20.6% compared to the same quarter last year.

Specifically, this has been driven by Q3 sales and marketing expenses of US$8.2 million, an 18.3% increase from the same quarter last year, due to higher sales personnel costs related to increases in the number of sales and marketing personnel. Q3 product development expenses were US$0.8 million, a 3.3% decrease from the same quarter last year.

Finally, Q3 general and administrative expenses were US$2.8 million, a 38.6% increase from the same quarter last year. Overall, Q3 operating loss was US$0.8 million, while net loss attributable to the company's ordinary shareholders was US$0.6 million, a 79.6% and 83.6% decrease from the same quarter last year, respectively.

Q3 GAAP and non-GAAP earnings per ADS were negative US$0.11 and US$0.07, respectively. The company's total cash, cash equivalents and time deposits were US$25.6 million at the end of the third quarter. Advances from students was US$39.7 million at the end of the third quarter.

Looking forward to the fourth quarter of 2024, we currently expect net gross billings to be between US$20.5 million and US$21 million. The above outlook is based on our current market conditions and reflects the company's current and preliminary estimates of the market and operating conditions and customer demand, which are all subject to change.

This concludes our prepared remarks. We will now open the line for questions. Operator, please go ahead..

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And the first question will come from John Banks with Garden State Securities. Please go ahead..

Hey, congratulations. Great quarter, especially with the number of customers you have. Just a couple of quick questions. Next year, Jack, like -- with cash flow, so -- with profitability, I know that you're at a big growth phase of the company.

Can you just give a little color about cash flow and maybe profitability going into next year? And my second question, with new markets you guys are looking to get into, Spanish, Vietnamese, on your website, any color on like the new markets you're entering for next year? Thank you very much, and congratulations..

Well, thank you very much for your question. So, regarding your first question about the cash flow in 2025, as we mentioned in the ER, our target is quality growth. So, our top priority for the company is the growth. So, we aim to have a good growth rate in 2025.

And of course, as you can see from last quarter, we have achieved a positive cash flow of about above US$2 million. So, we are very much confident that we can achieve a positive cash flow in the whole year of 2025. Regarding your second question about the new markets, yes, we are -- one of our growth strategy is to expand into more markets.

As you may see that right now, we -- 51Talk is -- we are in Southeast Asia, like Malaysia, like Thailand, and we are going to open the market in Vietnam. Right now, we are doing some pilots there. And we are also -- as you can see that we have the Arabic version, so we are right now in the Arabic areas as well.

And of course, we see that the Spanish world is a big market with a population of over 500 million population. So, we are looking into it. But right now, we don't have a team there, but it's possible -- we are considering to have a pilot in the Spanish speaking market. What is the third question? Sorry..

No, those were my two questions. Thank you very much. Congratulations. Company looks like -- you guys -- for next year, looks very good..

Thank you very much..

[Operator Instructions] And this will conclude our question-and-answer session. I would like to turn the conference back over to Mr. David for any closing remarks. Please go ahead, sir..

Thank you, once again, for joining us today. If you have further questions, please contact 51Talk's Investor Relations through the contact information provided on our website..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..