51Talk Online Education Group (NYSE:COE) Q4 2022 Earnings Conference Call March 29, 2023 8:00 AM ET Company Participants David Chung – Investor Relations Jack Huang – Chief Executive Officer Cindy Tang – Chief Financial Officer Conference Call Participants Operator Hello, ladies and gentlemen. Thank you for standing by for 51Talk Online Educational Group's Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. Today's conference call is being recorded. I woul ...

Introduction and Company Updates The company announced Q3, Q4, and full-year 2022 results, detailing strategic shifts and a legal name change [Announcement of Results](index=1&type=section&id=1.1%20Announcement%20of%20Results) 51Talk Online Education Group announced its unaudited financial results for the third quarter, fourth quarter, and full year ended December 31, 2022 - 51Talk Online Education Group (NYSE: COE) announced unaudited results for **Q3 2022, Q4 2022, and Full Year 2022**[1](index=1&type=chunk) [Strategic Business Changes](index=1&type=section&id=1.2%20Strategic%20Business%20Changes) The company completed the divestiture of its China mainland business, now focusing on international online English tutoring, and adjusted its ADS ratio - Completed divestiture of China mainland business on **June 30, 2022**, now focusing on international online English tutoring[2](index=2&type=chunk) - Legal name changed from China Online Education Group to **51Talk Online Education Group** on **September 30, 2022**[2](index=2&type=chunk) - ADS ratio changed from **1:15 to 1:60**, effective **December 15, 2022**[2](index=2&type=chunk) Financial Highlights This section summarizes the company's key financial performance metrics for the full year, fourth quarter, and third quarter of 2022 [Full Year 2022 Financial Highlights](index=1&type=section&id=2.1%20Full%20Year%202022%20Financial%20Highlights) For the full year 2022, 51Talk reported net revenues of US$15.0 million with a gross margin of 78.8%, experiencing a net loss of US$42.5 million Full Year 2022 Key Financial Highlights | Metric | Value (US$ millions) | | :-------------------------------- | :------------------- | | Net Revenues | 15.0 | | Gross Margin | 78.8% | | Net Loss | 42.5 | | Non-GAAP Net Loss | 41.8 | | Net Loss from Continuing Operations | 12.8 | | Net Loss from Discontinued Operations | 29.7 | | Operating Cash Outflow | 45.7 | | Operating Cash Inflow (Continuing Ops) | 1.9 | | Gross Billings | 28.7 | | Cash, Cash Equivalents & Time Deposits (as of Dec 31, 2022) | 23.1 | - The company completed the divestiture of its China mainland business on **June 30, 2022**; 'Continuing operations' refers to the international business, while 'discontinued operations' refers to the disposed China mainland business[2](index=2&type=chunk)[4](index=4&type=chunk) [Fourth Quarter 2022 Financial Highlights](index=2&type=section&id=2.2%20Fourth%20Quarter%202022%20Financial%20Highlights) In Q4 2022, net revenues were US$5.1 million with a gross margin of 79.0%, resulting in a net loss of US$2.0 million and positive operating cash inflow Fourth Quarter 2022 Key Financial Highlights | Metric | Value (US$ millions) | | :----------------------- | :------------------- | | Net Revenues | 5.1 | | Gross Margin | 79.0% | | Net Loss | 2.0 | | Non-GAAP Net Loss | 1.9 | | Operating Cash Inflow | 0.6 | | Gross Billings | 7.5 | [Third Quarter 2022 Financial Highlights](index=2&type=section&id=2.3%20Third%20Quarter%202022%20Financial%20Highlights) For Q3 2022, net revenues reached US$4.6 million with a gross margin of 78.6%, reporting a net loss of US$2.8 million and positive operating cash inflow Third Quarter 2022 Key Financial Highlights | Metric | Value (US$ millions) | | :-------------------------------- | :------------------- | | Net Revenues | 4.6 | | Gross Margin | 78.6% | | Net Loss | 2.8 | | Non-GAAP Net Loss | 2.6 | | Cash, Cash Equivalents & Restricted Cash (as of Sep 30, 2022) | 22.2 | | Operating Cash Inflow | 0.6 | | Gross Billings | 8.2 | Management Commentary and Business Outlook This section provides insights from the CEO on 2022 performance and strategic direction, along with key financial data and Q1 2023 outlook [CEO's Remarks on 2022 Performance and Strategy](index=3&type=section&id=3.1%20CEO's%20Remarks%20on%202022%20Performance%20and%20Strategy) CEO Jack Jiajia Huang highlighted 2022 as a "new beginning" for 51Talk, marked by strategic divestiture, international focus, and AI integration - FY2022 marked a "**new beginning**" with **100% of revenues from international markets** after China mainland business divestiture[9](index=9&type=chunk) - Intensified localization efforts and deployed marketing/operational personnel in selected international markets from **Q3 onwards**[10](index=10&type=chunk) - Began integrating ChatGPT into products and operations to build around personalized education, believing AI-powered tutors will transform online education[11](index=11&type=chunk) - International business achieved **positive operating cash flow** during **Q3 and Q4**, demonstrating strong execution of sustainable growth strategy[11](index=11&type=chunk) [Key Financial and Operating Data Summary](index=3&type=section&id=3.2%20Key%20Financial%20and%20Operating%20Data%20Summary) A summary table presents key financial and operating data for Q2, Q3, Q4, and the full year 2022, illustrating trends in revenues, margins, billings, and active students Key Financial and Operating Data (US$ millions, except Gross Margin and Active Students) | Metric | Q2 2022 | Q3 2022 | Q4 2022 | FY 2022 | | :------------------------------------------ | :------ | :------ | :------ | :------ | | Net Revenues | 3.5 | 4.6 | 5.1 | 15.0 | | Gross Margin | 79.2% | 78.6% | 79.0% | 78.8% | | Gross Billings | 7.8 | 8.2 | 7.5 | 28.7 | | Active students with attended lesson consumption (in thousands) | 14.9 | 19.5 | 22.8 | 26.2 | [Outlook for Q1 2023](index=7&type=section&id=3.3%20Outlook%20for%20Q1%202023) For Q1 2023, 51Talk anticipates international business net gross billings between $8.0 million and $8.2 million, reflecting significant sequential and year-over-year growth - Expected net gross billings for international business in Q1 2023: **$8.0 million to $8.2 million**[24](index=24&type=chunk) - Projected sequential growth (QoQ) for Q1 2023 gross billings: **6.2% to 8.9%**[24](index=24&type=chunk) - Projected year-over-year growth (YoY) for Q1 2023 gross billings: **51.2% to 55.0%**[24](index=24&type=chunk) Detailed Financial Results This section provides a comprehensive breakdown of the company's financial performance for the third quarter, fourth quarter, and full year 2022 [Third Quarter 2022 Financial Results](index=4&type=section&id=4.1%20Third%20Quarter%202022%20Financial%20Results) In Q3 2022, net revenues were US$4.6 million, with a gross profit of US$3.6 million and a net loss of US$2.8 million Third Quarter 2022 Financial Performance | Metric | Value (US$ thousands) | | :------------------------------------------ | :-------------------- | | Net Revenues | 4,593 | | Cost of Revenues | (984) | | Gross Profit | 3,609 | | Gross Margin | 78.6% | | Total Operating Expenses | (6,187) | | Loss from Operations | (2,578) | | Non-GAAP Loss from Operations | (2,373) | | Net Loss | (2,802) | | Non-GAAP Net Loss | (2,597) | | Basic and Diluted Net Loss per ADS | (0.50) | | Non-GAAP Basic and Diluted Net Loss per ADS | (0.46) | | Active Students | 19,500 | - As of **September 30, 2022**, total cash, cash equivalents, and restricted cash stood at **US$22.2 million**, with advances from students at **US$13.2 million**[17](index=17&type=chunk) [Fourth Quarter 2022 Financial Results](index=5&type=section&id=4.2%20Fourth%20Quarter%202022%20Financial%20Results) In Q4 2022, net revenues increased to US$5.1 million, generating a gross profit of US$4.0 million and a net loss of US$2.0 million Fourth Quarter 2022 Financial Performance | Metric | Value (US$ thousands) | | :------------------------------------------ | :-------------------- | | Net Revenues | 5,051 | | Cost of Revenues | (1,062) | | Gross Profit | 3,989 | | Gross Margin | 79.0% | | Total Operating Expenses | (6,162) | | Loss from Operations | (2,173) | | Non-GAAP Loss from Operations | (2,064) | | Net Loss | (2,002) | | Non-GAAP Net Loss | (1,893) | | Basic and Diluted Net

[Memorandum of Association](index=1&type=section&id=Memorandum%20of%20Association) Outlines **51Talk Online Education Group**'s foundational details: Cayman Islands incorporation, name, registered office, shareholder liability, and authorized share capital - The company's name is **51Talk Online Education Group**, and its registered office is located in the Cayman Islands[2](index=2&type=chunk) - The liability of each shareholder is limited to the amount, if any, that is unpaid on the shares they hold[3](index=3&type=chunk) Authorized Share Capital Structure | Category | Details | | :--- | :--- | | **Total Authorized Capital** | **US$150,000** | | **Total Shares** | **1,500,000,000** shares | | **Class A Ordinary Shares** | **1,000,000,000** shares at **US$0.0001** par value each | | **Class B Ordinary Shares** | **350,000,000** shares at **US$0.0001** par value each | | **Other Classes** | **150,000,000** shares of such class as the Board may determine | [Articles of Association](index=4&type=section&id=Articles%20of%20Association) Details internal regulations, covering share rights, shareholder meetings, director duties, financial policies, and administrative provisions, adopted **September 30, 2022** [Interpretation and Preliminary](index=4&type=section&id=Interpretation%20and%20Preliminary) Defines key terms like "ADS," "**Class A/B Ordinary Share**," "**Ordinary Resolution**," and "**Special Resolution**," clarifying legal and procedural vocabulary - Defines "**Class A Ordinary Share**" and "**Class B Ordinary Share**" as shares with a par value of **US$0.0001** each, with specific rights as detailed in the articles[13](index=13&type=chunk)[14](index=14&type=chunk) - An "**Ordinary Resolution**" requires a **simple majority** vote, while a "**Special Resolution**" requires a majority of **not less than two-thirds** of the votes cast[24](index=24&type=chunk)[26](index=26&type=chunk) - The business of the Company may be conducted as the Directors see fit, and the Register of Members shall be kept at a location determined by the Directors, or at the Registered Office by default[30](index=30&type=chunk)[32](index=32&type=chunk) [Share Capital](index=9&type=section&id=Share%20Capital) Details share structure and rules, including issuance authority, Class A and B share rights, and modification procedures [General Share Provisions](index=9&type=section&id=General%20Share%20Provisions) Outlines the Board's authority to issue and allot unissued shares, modify rights for share classes, and handle share certificates and fractional shares - Directors have **absolute discretion** to issue and allot unissued shares, including creating new classes or series with preferred rights, without the approval of Members[33](index=33&type=chunk) - Materially adverse variation of rights for any share class requires the written consent of the holders of **three-fourths** of the issued shares of that class or a **Special Resolution** passed at a separate meeting of that class[42](index=42&type=chunk) - The creation of new shares ranking equally with (`pari passu`) or subsequent to existing shares is not considered a material adverse variation of rights[43](index=43&type=chunk) [Class A and Class B Ordinary Shares](index=10&type=section&id=Class%20A%20and%20Class%20B%20Ordinary%20Shares) Defines the dual-class share structure, specifying differential voting rights and conversion terms from **Class B** to **Class A** shares Voting and Conversion Rights of Share Classes | Share Class | Votes per Share | Conversion Rights | | :--- | :--- | :--- | | **Class A Ordinary Share** | **One (1)** | Not convertible into **Class B** shares | | **Class B Ordinary Share** | **Ten (10)** | Convertible into **one (1)** **Class A** share at any time by the holder | - A **Class B Ordinary Share** will automatically and immediately convert into **one Class A Ordinary Share** upon its sale or transfer to any person who is not an Affiliate of the shareholder[39](index=39&type=chunk) - Except for voting and conversion rights, **Class A** and **Class B Ordinary Shares** rank equally (`pari passu`) and have the same rights, preferences, and privileges[41](index=41&type=chunk) [Shareholder Obligations and Company Rights](index=12&type=section&id=Shareholder%20Obligations%20and%20Company%20Rights) Details the company's rights over shares, including **paramount lien**, calls on unpaid shares, and procedures for forfeiting shares - The Company has a **first and paramount lien** on every share for all amounts payable in respect of that share, which extends to any dividends[49](index=49&type=chunk) - Directors can make calls on shareholders for any money unpaid on their shares, providing at least **fourteen calendar days**' notice[53](index=53&type=chunk) - If a shareholder fails to pay a call, the Directors may, after giving notice, forfeit the shares by a resolution. The person whose shares are forfeited remains liable for the money owed at the date of forfeiture[58](index=58&type=chunk)[59](index=59&type=chunk) [Share Transactions](index=15&type=section&id=Share%20Transactions) Governs the transfer, transmission, redemption, and purchase of shares, outlining procedures for transfers and rights of representatives - The Directors have **absolute discretion** to decline to register any transfer of shares that are not fully paid up or on which the Company has a lien[62](index=62&type=chunk) - The legal personal representative of a deceased shareholder is the only person recognized by the Company as having title to the shares[67](index=67&type=chunk) - The Company may issue redeemable shares and purchase its own shares. Prior to purchase, redemption, or surrender, the Directors may determine that such shares shall be held as **Treasury Shares**[74](index=74&type=chunk)[76](index=76&type=chunk) [Alteration of Share Capital](index=16&type=section&id=Alteration%20of%20Share%20Capital) Describes mechanisms for altering share capital, requiring **Ordinary Resolution** for increases, consolidation, subdivision, or cancellation, and **Special Resolution** for reduction - The Company can increase its share capital by an **Ordinary Resolution**[71](index=71&type=chunk) - An **Ordinary Resolution** is also sufficient to consolidate shares into larger amounts, subdivide shares into smaller amounts, or cancel shares that have not been taken[72](index=72&type=chunk) - The Company may reduce its share capital by a **Special Resolution**[73](index=73&type=chunk) [Shareholder Meetings](index=17&type=section&id=Shareholder%20Meetings) Establishes the framework for conducting shareholder meetings, covering calling, notice requirements, quorum, procedures, and voting rights [General Meetings and Notices](index=17&type=section&id=General%20Meetings%20and%20Notices) Details procedures for convening general meetings, including who can call meetings, shareholder requisition rights, and minimum notice requirements - Shareholders holding at least **one-third (1/3)** of the aggregate votes of all issued and outstanding shares can requisition an extraordinary general meeting[78](index=78&type=chunk) - A minimum of **ten (10) calendar days**' notice is required for any general meeting[80](index=80&type=chunk) - The Directors may cancel or postpone any duly convened general meeting at any time prior to the meeting, except for meetings requisitioned by shareholders[86](index=86&type=chunk) [Proceedings and Voting](index=19&type=section&id=Proceedings%20and%20Voting) Outlines rules for conducting business at general meetings, defining quorum, voting procedures, and differential voting rights for share classes - The quorum for a general meeting is at least two shareholders present in person or by proxy, holding in aggregate **not less than fifty percent (50%)** of all votes attaching to all issued shares[83](index=83&type=chunk) - On a poll, every shareholder shall have **one vote** for each **Class A Ordinary Share** and **ten (10) votes** for each **Class B Ordinary Share** they hold[90](index=90&type=chunk) - A resolution in writing signed by all shareholders entitled to vote is as valid and effective as if it had been passed at a duly convened general meeting[85](index=85&type=chunk) [Directors and Management](index=22&type=section&id=Directors%20and%20Management) Details the governance structure related to the Board of Directors, covering appointment, removal, remuneration, powers, duties, and delegation [Appointment, Removal, and Remuneration](index=22&type=section&id=Appointment%202C%20Removal%2C%20and%20Remuneration) Specifies rules for Board composition and compensation, including director appointment by **Ordinary Resolution** or Board, and removal by **Ordinary Resolution** - The Board of Directors shall consist of **no less than three (3) Directors**[98](index=98&type=chunk) - The Board may appoint any person as a Director to fill a casual vacancy or as an addition to the existing Board. A Director can also be appointed by an **Ordinary Resolution** of the Company[99](index=99&type=chunk) - A Director can be removed from office by an **Ordinary Resolution** of the Company[100](index=100&type=chunk) [Powers, Duties, and Proceedings](index=24&type=section&id=Powers%2C%20Duties%20and%20Proceedings) Outlines extensive powers of Directors to manage business, appoint officers, delegate powers, and details Board meeting proceedings and conflict of interest handling - The business of the Company is managed by the Directors, who may exercise all powers of the Company[107](index=107&type=chunk) - The quorum necessary for the transaction of business by the Directors is a majority of the Directors then in office, unless fixed otherwise by the Directors[122](index=122&type=chunk) - A resolution in writing signed by all Directors is as valid as if it had been passed at a duly called and constituted meeting[127](index=127&type=chunk) [Borrowing Powers and The Seal](index=25&type=section&id=Borrowing%20Powers%20and%20The%20Seal) Grants Directors authority to exercise all borrowing powers, including raising money, mortgaging assets, and issuing securities, and specifies company seal protocol - Directors have the discretion to exercise all powers of the Company to raise or borrow money, mortgage or charge its assets, and issue debentures and other securities[115](index=115&type=chunk) - The Company's Seal can only be affixed to an instrument with the authority of a resolution from the Directors[116](index=116&type=chunk) [Financial Provisions](index=28&type=section&id=Financial%20Provisions) Covers the company's financial policies, including dividend declaration, account maintenance, audit procedures, capitalization of reserves, and Share Premium Account [Dividends](index=28&type=section&id=Dividends) Outlines dividend distribution process, including interim dividends by Directors, final dividends by **Ordinary Resolution**, and forfeiture of unclaimed dividends - Directors may declare dividends, and the Company may declare dividends by **Ordinary Resolution**, but no dividend shall exceed the amount recommended by the Directors[132](index=132&type=chunk) - Dividends may be paid wholly or partly by the distribution of specific assets with the sanction of an **Ordinary Resolution**[136](index=136&type=chunk) - Any dividend that remains unclaimed for a period of **six years** from its declaration date may be forfeited by the Board and will revert to the Company[137](index=137&type=chunk) [Accounts, Audit, and Financial Year](index=29&type=section&id=Accounts%2C%20Audit%2C%20and%20Financial%20Year) Addresses accounting and reporting obligations, including Directors determining book-keeping, auditor appointment, and setting the financial year end - The books of account are always open to inspection by Directors, but shareholders do not have inspection rights except as conferred by law or authorized by the Directors or an **Ordinary Resolution**[138](index=138&type=chunk)[140](index=140&type=chunk) - The Directors may appoint an auditor for the Company and determine their remuneration[140](index=140&type=chunk) - Unless the Directors prescribe otherwise, the financial year of the Company ends on **December 31st** each year[156](index=156&type=chunk) [Capitalisation of Reserves and Share Premium Account](index=30&type=section&id=Capitalisation%20of%20Reserves%20and%20Share%20Premium%20Account) Allows capitalization of reserves (including Share Premium Account) via **Ordinary Resolution** to issue fully paid shares or debentures, and mandates Share Premium Account establishment - With the authority of an **Ordinary Resolution**, the Directors can capitalize amounts from reserves (including Share Premium Account and profit and loss account) to distribute as fully paid shares or debentures to shareholders[142](index=142&type=chunk) - The Directors are required to establish a Share Premium Account and credit to it any premium paid on the issue of any share[145](index=145&type=chunk) [Corporate Administration and Miscellaneous](index=31&type=section&id=Corporate%20Administration%20and%20Miscellaneous) Covers administrative and legal matters, including serving notices, indemnification of directors, winding up procedures, and amending articles [Notices and Information](index=31&type=section&id=Notices%20and%20Information) Specifies methods for serving notices to shareholders and states that shareholders are not entitled to discover trade secrets or sensitive business information - Notices to shareholders can be served personally, by mail, by electronic mail, by facsimile, or by placing it on the Company's Website (with prior written consent from the member)[146](index=146&type=chunk) - Shareholders are not entitled to require discovery of information that is in the nature of a trade secret or which the Board believes is not in the members' interests to communicate to the public[151](index=151&type=chunk) [Indemnity](index=33&type=section&id=Indemnity) Provides for indemnification of directors and officers against costs and liabilities incurred in duties, except for dishonesty, willful default, or fraud - Every Director, Secretary, and other officer of the Company is indemnified against all actions, costs, losses, and liabilities incurred in the execution of their duties[154](index=154&type=chunk) - This indemnification does not cover liabilities arising from an individual's own dishonesty, wilful default, or fraud[154](index=154&type=chunk)[155](index=155&type=chunk) [Winding Up](index=34&type=section&id=Winding%20Up) Outlines procedures for distributing assets during winding up, allowing liquidator to divide assets in kind via **Special Resolution**, and how losses are borne - In a winding-up, the liquidator may, with the sanction of a **Special Resolution**, divide the company's assets in-specie or in-kind among the members[159](index=159&type=chunk) - If assets are insufficient to repay the whole of the share capital, the losses will be borne by members in proportion to the par value of the shares they hold[160](index=160&type=chunk) [Amendments, Record Dates, and Continuation](index=34&type=section&id=Amendments%2C%20Record%20Dates%2C%20and%20Continuation) Details procedures for amending Articles by **Special Resolution**, Directors fixing record dates, and re-registering the company in another jurisdiction - The Company may amend its Articles of Association at any time by a **Special Resolution**[161](index=161&type=chunk) - To determine shareholder rights for meetings or dividends, the Directors may close the Register of Members for up to **40 days** or fix a record date in advance[162](index=162&type=chunk)[164](index=164&type=chunk) - The Company may, by **Special Resolution**, resolve to be registered by way of continuation in a jurisdiction outside the Cayman Islands[166](index=166&type=chunk)

China Online Education Group. (NYSE:COE) Q2 2022 Earnings Conference Call August 30, 2022 8:00 AM ET Company Participants Jack Jiajia Huang - CEO Min Xu - CFO Conference Call Participants Operator Hello, ladies and gentlemen, thank you for standing by for China Online Education Group's Second Quarter 2022 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded. I will now turn the call over to your host, Miss. Ni Yan [ph] Investor Relations for the company. Please go ahea ...

China Online Education Group (NYSE:COE) Q1 2022 Earnings Conference Call June 24, 2022 8:00 AM ET Company Participants Jack Huang - CEO Min Xu - CFO Conference Call Participants Operator Hello, ladies and gentlemen, thank you for standing by for China Online Education Group's First Quarter 2022 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded. I will now turn the call over to your host, Ms. [Neon], Investor Relations for the company. Please go ahead, Ni. Unidentifi ...

China Online Education Group (NYSE:COE) Q2 2021 Earnings Conference Call September 28, 2021 8:00 AM ET Company Participants Jack Huang - CEO Min Xu - CFO Conference Call Participants Vincent Yu - Needham & Company Disclaimer*: This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within the transcript are designed to help you navigate the audio should the corresponding text be unclear. The machine-assisted output provided is partly edited and is desig ...

Financial Data and Key Metrics - Net revenues for Q1 2021 were RMB 600 million, a 23% YoY increase from RMB 487 million in Q1 2020 [9] - Gross margin for Q1 2021 was 73%, up from 70% in Q1 2020, driven by slightly higher revenue per lesson [10] - Non-GAAP net income for Q1 2021 was RMB 17 million, compared to RMB 57 million in Q1 2020 [9] - Active students in Q1 2021 were 393,000, a 37% YoY increase from 287,000 in Q1 2020 [9] - Gross billings for Q1 2021 were RMB 685 million, a 15% YoY increase, driven by a 43% YoY growth in order numbers, partially offset by a 20% YoY decline in order size [13] Business Line Data and Key Metrics - Net revenues from K-12 one-on-one mass market offerings grew 36% YoY in Q1 2021, driven by a 37% YoY increase in active students [6] - One-on-one gross margin for Q1 2021 was 74%, while small class gross margin was 66% [10] - The acquisition of Koala Reading is expected to enhance the company's English reading skill evaluation system and expand its curriculum portfolio [7] Market Data and Key Metrics - The company's K-12 mass market English education strategy focuses on improving student satisfaction and investing in research and course offerings [8] - The appointment of Maine Mendoza as a brand ambassador strengthens the company's brand recognition in the Philippines [8] Company Strategy and Industry Competition - The company is leveraging Koala Reading's expertise in Chinese reading assessments to improve its English-learning products and expand its curriculum offerings [7] - The company is focused on ramping up market efforts and improving student satisfaction in the K-12 mass market English education sector [8] - The company is investing in AI-powered robotic tutors and optimizing curriculums to enhance the learning experience [7] Management Commentary on Operating Environment and Future Outlook - The company expects Q2 2021 net revenues to be between RMB 597 million and RMB 603 million, representing a 21% to 22% YoY increase [14] - The company anticipates a 10% decline in ARPU for Q1 and Q2 2021, with ARPU expected to remain flat in Q3 and Q4 2021 [24] - The company is cautiously optimistic about the regulatory environment, expecting detailed regulations for after-school training to be issued soon [17] Other Important Information - The company had a total cash balance of RMB 1.73 billion at the end of Q1 2021, flat compared to the end of 2020 [13] - Advances from students at the end of Q1 2021 were RMB 2.76 billion, slightly up from RMB 2.72 billion at the end of 2020 [13] Summary of Q&A Session Question: Impact of Private Education Sector Development Guidelines - The guidelines are mostly focused on private schools rather than after-school training, and the company expects detailed regulations for after-school training to be issued soon [17] - The guidelines are generally positive for vocational education and training, and slightly positive for private high school education [17] Question: Strategy for Koala Reading Acquisition - The company plans to leverage Koala's expertise in AI and machine learning to develop an English assessment system that improves the learning experience for existing students [26] - The company will continue to operate the Koala brand in 2021 and decide on its future branding strategy later [26] Question: Q2 2021 Guidance and Outlook for 2021 - The Q2 2021 revenue guidance reflects a 10% decline in ARPU and a comparison to a strong base in 2020 due to COVID-19 [22] - The company expects active student growth in 2021 to be between 2019 and 2020 levels, with ARPU declining by roughly 10% in Q1 and Q2, and remaining flat in Q3 and Q4 [24] Question: Resource Allocation and Koala Reading Integration - The company's priority for 2021 is to develop an English assessment system using Koala's expertise, while continuing to support Koala's Chinese-reading product [26] - The company plans to allocate resources to improve the learning experience and customer acquisition through the Koala acquisition [26] Question: Revenue Contribution from Koala Reading - The revenue contribution from Koala Reading is expected to be insignificant in the near term, as its ASP is relatively small compared to the company's current ASP [30] Question: Cash Flow and Regulatory Impact on Q2 Guidance - Q1 2021 operating cash flow was RMB 39 million, impacted by annual payments and bonuses, as well as the GKid acquisition [34] - The Q2 2021 guidance partially accounts for potential regulatory changes, with the company expecting some slowdown due to regulatory overhang [35]