China Online Education Group Announces Third Quarter 2019 Results

Author: China Online Education Group / 2023-07-23 21:23 / Source: China Online Education Group

China Online Education Group Announces Third Quarter 2019 Results

BEIJING,Dec.9,2019 -- China Online Education Group ("51Talk" or the "Company") (NYSE: COE),a leading online education platform in China,with core expertise in English education,today announced its unaudited financial results for the third quarter ended September30,2019.

Third Quarter 2019Financial and Operating Highlights

Net revenues were RMB409.2 million (US$57.2 million),a 35.0% increase from RMB303.2 million for the third quarter of 2018.

Gross billings[1] were RMB547.3 million (US$76.6 million),a 28.9% increase from RMB424.5 million for the third quarter of 2018.

Gross margin was 71.7%,compared with 63.8% for the third quarter of 2018.

GAAP net loss decreased 94.1% year-over-year to RMB5.3 million and sequentially decreased 83.6% from RMB32.4 million for the second quarter of 2019.

Non-GAAP net loss decreased 97.8% year-over-year to RMB1.8 million and sequentially decreased 93.2% from RMB26.7 million for the second quarter of 2019.

Operating cash inflow was RMB123.2 million (US$17.2 million),compared with RMB1.7 million cash outflow for the third quarter of 2018.

Cash,cash equivalents,time deposits and short-term investments balance reached RMB906.4 million (US$126.8 million) as of September 30,2019.

Key Operating Data

For the three months ended

Sep. 30,

Y-o-Y

2018

2019

Change

Gross billings (in RMB millions)

424.5

547.3

28.9%

K-12 mass-market one-on-one offering

331.9

504.6

52.0%

K-12 small class offering

16.6

8.7

(47.6%)

Adult offering

54.7

29.3

(46.4%)

K-12 American Academy one-on-one offering

21.3

4.7

(77.9%)

Active students[2] (in thousands)

210.0

258.2

23.0%

"The third quarter is a seasonally strong quarter for us,and our results reflected solid execution of our focused strategy. We exceeded the high end of both our net revenues and gross billing guidance ranges by 2.3% and 5.7%,respectively,fueled in large part by a 23.0% year-over-year increase in total active students," said Mr. Jack Jiajia Huang,Founder,Chairman and Chief Executive Officer of 51Talk. "Our primary growth driver remains our K-12 mass-market one-on-one offering in non-tier-one cities[3]. K-12 mass-market one-on-one gross billings grew 52.0% year-over-year to reach RMB504.6 million and represented 92.2% of our total gross billings. The improvement in our fundamentals reflected our consistent strategy of focusing on K-12 mass market in non-tier-one cities.

"During the third quarter,we launched our mobile-friendly,interactive curriculum for levels 0 to 2 of our flagship program,Classic English Junior. The enhanced curriculum improves learning effectiveness and leads to better learning outcomes through several new features including interactive games,virtual teaching aids,improved facial emotional recognition and engaging role-play scenarios. I am also very proud to share that two of our students were selected to represent Chinese youth and present speeches in English on the topic of environmental protection at the United Nations Climate Change Conference in Madrid,Spain,on December 5,2019. Such an honor is indeed a testament to the hard work of these students,the dedication of their teachers and their supportive families.

"I am also delighted to share that we successfully delivered over 100 million one-on-one online English lessons,including free trial lessons,from our inception in 2011 through the end of November this year. As 51Talk continues to grow,we are confident our balanced growth strategy and operational focus on non-tier-one cities will continue to yield solid value for our stakeholders," Mr. Huang concluded.

"Our momentum from the first half continued into the third quarter as we achieved record high revenues,gross billings,gross margins,as well as the smallest non-GAAP net loss in our history at RMB1.8 million," said Mr. Min Xu,Chief Financial Officer of 51Talk. "We are also proud to report record high operating cash flow of RMB123.2 million for the quarter. Non-GAAP net margin improved to negative 0.4% this quarter from negative 7.6% in the second quarter this year. These results reflect the wide market appeal of our offerings and our on-going effort to improve operation efficiencies. As we wind down the year in the seasonally slower fourth quarter,we remain on track to prudently execute our balanced growth strategy."

[1] Gross billings for a specific period,which is one of the Company's key operating data,is defined as the total amount of cash received for the sale of course packages and services in such period,net of the total amount of refunds in such period.

[2] An "active student" for a specified period refers to a student who booked at least one paid lesson,excluding those students who only attended paid live broadcasting lessons or trial lessons.

[3] Tier-one cities include Beijing,Shanghai,Shenzhen,Guangzhou and Tianjin.

Third Quarter 2019Financial Results

Net Revenues

Net revenues for the third quarter of 2019 were RMB409.2million (US$57.2million),a 35.0% increase from RMB303.2million for the same quarter last year. The increase was primarily attributed to an increase in the number of active students and,to a lesser extent,an increase in the average revenue per active student. The number of active students in the third quarter of 2019 was 258,000,a 23.0% increase from 210,000for the same quarter last year.

Net revenues from one-on-one offerings for the third quarter of 2019 were RMB383.4 million (US$53.6 million),a 37.6% increase from RMB278.6 million for the same quarter last year. Net revenues from small class offering for the third quarter of 2019 were RMB25.8 million (US$3.6 million),a 4.9% increase from RMB 24.6 million for the same quarter last year.

Cost of Revenues

Cost of revenues for the third quarter of 2019 was RMB116.0million (US$16.2 million),a 5.8% increase from RMB109.6 million for the same quarter last year. The increase was primarily driven by an increase in total service fees paid to teachers,mainly due tothe delivery of an increased number of paid lessons.

Cost of revenues of one-on-one offerings for the third quarter of 2019 was RMB104.6 million (US$14.6 million),a 12.6% increase from RMB92.9 million for the same quarter last year. Cost of revenues of small class offering for the third quarter of 2019 was RMB11.4 million (US$1.6 million),a 32.0% decrease from RMB16.7 million for the same quarter last year.

Gross Profit and Gross Margin

Gross profit for the third quarter of 2019 was RMB293.2million (US$41.0million),a51.5% increase from RMB193.5 million for the same quarter last year.

Gross margin for the third quarter of 2019 was 71.7%,compared with 63.8% for the same quarter last year.

One-on-one offerings gross marginfor the third quarter of 2019 was 72.7%,compared with 66.6% for the same quarter last year.The increase was mainly attributable to 1) price increases and 2) the inclusion of the Company's audio picture book in course packages,which carries a higher margin and is recognized as revenues at the time of delivery. 51Talk's small class offering gross marginfor the thirdquarter of 2019 was 56.0%,compared with 32.0% for the thirdquarter of 2018. The increase wasmainly due tooptimization of product structure of small class offerings by reducing the lower margined products.

Operating Expenses

Total operating expenses for the third quarter of 2019 were RMB299.4 million (US$41.9million),a6.1% increase from RMB282.2million for the same quarter last year. The increase was mainly the result of an increase in sales and marketing expenses,partially offset bydecreases of product development,and general and administrative expenses.

Sales and marketing expenses for the third quarter of 2019 were RMB215.4million (US$30.1 million),a16.9% increase from RMB184.2million for the same quarter last year.The increase wasmainly due tohigher sales personnel costs related to increases in both the number of sales and marketing personnel and average sales commission. Excluding share-based compensation expenses,non-GAAP salesand marketing expensesfor the third quarter of 2019 were RMB214.8million (US$30.1 million),a 17.5% increase from RMB182.7 million for the same quarter last year. Non-GAAP sales and marketing expenses,excluding branding expenses,were 32.6% of the gross billings for the third quarter of 2019,compared with 36.5% for the same quarter last year.

Product development expenses for the third quarter of 2019 were RMB38.4 million (US$5.4 million),a 15.8% decrease from RMB45.6million for the same quarter last year. Thedecrease was primarilydue to a decrease in the number of personnel. Excluding share-based compensation expenses,non-GAAPproduct developmentexpensesfor the third quarter of 2019were RMB37.3 million (US$5.2 million),a 13.9% decrease from RMB43.4 millionfor the same quarter last year.

General and administrative expenses for the third quarter of 2019 were RMB45.6 million (US$6.4million),a 12.9% decrease from RMB52.3million for the same quarter last year. Excluding share-based compensation expenses,non-GAAP general and administrative expenses for the third quarter of 2019 were RMB43.8 million (US$6.1million),a 10.5% decrease from RMB48.9million for the same quarter last year.

Loss from Operations

Loss from operations for the third quarter of 2019 was RMB6.2 million (US$0.9 million),compared with RMB88.6 million for the same quarter last year.

Non-GAAP loss from operations for the third quarter of 2019 was RMB2.8 million (US$0.4 million),compared with RMB81.5million for the same quarter last year.

Net Loss

Net loss for the third quarter of 2019 was RMB5.3million (US$0.7million),compared with RMB90.4 million for the same quarter last year.

Non-GAAP net loss for the third quarter of 2019 was RMB1.8 million (US$0.3million),compared with RMB83.3million for the same quarter last year.

Basic and diluted net loss per American depositary share ("ADS")attributable to ordinary shareholders for the third quarter of 2019 was RMB0.26 (US$0.04),compared with RMB4.50for the same quarter last year. Each ADS represents 15 Class A ordinary shares.

Non-GAAP basic and diluted net loss per ADSattributable to ordinary shareholders for the third quarter of 2019 was RMB0.09 (US$0.01),compared with RMB4.05for the same quarter last year.

Balance Sheet

As of September 30,2019,the Company had total cash,time deposits and short-term investments of RMB906.4million (US$126.8million),compared with RMB712.1million as of December 31,2018.

The Company had deferred revenues (current and non-current) of RMB2,000.8 million (US$279.9 million) as of September30,compared with RMB1,676.1 million as of December 31,2018.

Impact of Recently Adopted New Accounting Standard

In February 2016,the FASB issued ASU 2016-02 "Leases",which generally requires lessees to recognize operating and financing lease liabilities and corresponding right-of-use assets on the balance sheet and to provide enhanced disclosures surrounding the amount,timing and uncertainty of cash flows arising from leasing arrangements. The Company adopted the new standard on January 1,2019 on a modified retrospective basis and did not restate comparative periods. The Company recognized approximately RMB55.8 million as total right-of-use assets and RMB54.2 million astotal lease liabilities for the operating leases on its consolidated balance sheet as of January 1,2019. The Company recognized RMB65.8million and RMB64.3 million as total right-of-use assets and total lease liabilities,for the operating leases on its consolidated balance sheet as of September30,2019. Other than the foregoing,the new lease standard did not have a material impact on the Company's consolidated financial statements.

Outlook

For thefourth quarter of 2019,the Company currently expects net revenues to be between RMB385 million to RMB390 million,which would represent an increase of approximately 29.2% to 30.8% from RMB298.1 million for the same quarter last year;

The above outlook is based on the current market conditions and reflects the Company's current and preliminary estimates of market and operating conditions and customer demand,which are all subject to change.

Conference Call

The Company's management will host an earnings conference call at 8:00 AM U.S. Eastern Time on December9,2019 (9:00 PM Beijing/Hong Kong time on December9,2019).

Dial-in details for the earnings conference call are as follows:

United States (toll free):

1-866-264-5888

International:

1-412-317-5226

Mainland China:

400-120-1203

Hong Kong (toll free):

800-905-945

Hong Kong:

852-3018-4992

Participants should dial-in at least 5 minutes before the scheduled start time and ask to be connected to the call for "China Online Education Group."

Additionally,a live and archived webcast of the conference call will be available on the Company's investor relations website at http://ir.51talk.com.

A replay of the conference call will be accessible until September 18,by dialing the following telephone numbers:

United States (toll free):

1-877-344-7529

International:

1-412-317-0088

Replay Access Code:

10137279

About China Online Education Group

China Online Education Group (NYSE: COE) is a leading online education platform in China,with core expertise in English education. The Company's mission is to make quality education accessible and affordable. The Company's online and mobile education platforms enable students across China to take live interactive English lessons with overseas foreign teachers,on demand. The Company connects its students with a large pool of highly qualified foreign teachers that it assembled using a shared economy approach,and employs student and teacher feedback and data analytics to deliver a personalized learning experience to its students.

Use of Non-GAAP Financial Measures

In evaluating its business,51Talk considers and uses the following measures defined as non-GAAP financial measures by the SEC as supplemental metrics to review and assess its operating performance: non-GAAP sales and marketing expenses,non-GAAP product development expenses,non-GAAP general and administrative expenses,non-GAAP operating expenses,non-GAAP loss from operations,non-GAAP income tax expenses,non-GAAP net loss,non-GAAP net loss attributable to ordinary shareholders,and non-GAAP net loss attributable to ordinary shareholders per share and per ADS. To present each of these non-GAAP measures,the Company excludes share-based compensation expenses. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures,please see the table captioned "Reconciliations of non-GAAP measures to the most comparable GAAP measures" set forth at the end of this press release.

51Talk believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance by excluding share-based compensation expenses that may not be indicative of its operating performance from a cash perspective. 51Talk believes that both management and investors benefit from these non-GAAP financial measures in assessing its performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to 51Talk's historical performance. 51Talk computes its non-GAAP financial measures using the same consistent method from quarter to quarter and from period to period. 51Talk believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision-making. A limitation of using non-GAAP measures is that these non-GAAP measures exclude share-based compensation expenses that have been and will continue to be for the foreseeable future a significant recurring expense in the 51Talk's business. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying table at the end of this press release provides more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.

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 RMB to U.S. dollars are made at a rate of RMB7.1477to US$1.00,the rate in effect as of September 28,2019as certified for customs purposes by the Federal Reserve Bank of New York.

Safe Harbor Statement

This press release contains statements that may constitute "forward-looking" statements pursuant to 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","likely to" and similar statements. Among other things,51Talk's business outlook and quotations from management in this announcement,as well as 51Talk's strategic and operational plans,contain forward-looking statements. 51Talk may also make written or oral forward-looking statements in its periodic reports to the Securities and Exchange Commission ("SEC"),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 statements about 51Talk's beliefs and expectations,are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement,including but not limited to the following: 51Talk's goals and strategies; 51Talk's expectations regarding demand for and market acceptance of its brand and platform; 51Talk's ability to retain and increase its student enrollment; 51Talk's ability to offer new courses; 51Talk's ability to engage,train and retain new teachers; 51Talk's future business development,results of operations and financial condition; 51Talk's ability to maintain and improve infrastructure necessary to operate its education platform; competition in the online education industry in China; the expected growth of,and trends in,the markets for 51Talk's course offerings in China; relevant government policies and regulations relating to 51Talk's corporate structure,business and industry; general economic and business condition in China,the Philippines and elsewhere and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in 51Talk's filings with the SEC. All information provided in this press release is as of the date of this press release,and 51Talk does not undertake any obligation to update any forward-looking statement,except as required under applicable law.

CHINA ONLINE EDUCATION GROUP

UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

(Inthousands)

As of

Dec. 31,

2018

2019

RMB

US$

ASSETS

Current assets

Cash and cash equivalents

413,143

227,684

31,854

Time deposits

162,688

214,182

29,965

Short term investment

136,304

464,547

64,993

Inventory

776

109

Prepaid expenses and other current assets

242,499

257,324

36,001

Total current assets

954,634

1,164,513

162,922

Non-current assets

Property,plant and equipment,net

35,341

24,481

3,425

Intangible assets,net

11,790

9,064

1,268

Goodwill

4,223

591

Right of use assets

65,782

9,203

Other non-current assets

4,230

6,846

958

Total non-current assets

55,584

110,396

15,445

Total assets

1,010,218

1,274,909

178,367

LIABILITIES

Current liabilities

Short-term loan

30,362

4,248

Deferred revenues

1,658,800

1,994,883

279,094

Accrued expenses and other current liabilities

209,910

196,611

27,507

Lease liability

34,642

4,847

Taxes payable

16,917

22,023

3,081

Total current liabilities

1,885,627

2,278,521

318,777

Non-current liabilities

Long-term loan

69,045

Deferred revenues

17,321

5,904

826

Deferred tax liabilities

Lease liability

29,669

4,151

Other non-current liabilities

853

1,049

147

Total non-current liabilities

87,240

36,622

5,124

Total liabilities

1,972,867

2,315,143

323,901

Total shareholders' (deficit)

(962,649)

(1,040,234)

(145,534)

Total liabilities and shareholders' deficit

1,367

CHINA ONLINE EDUCATION GROUP

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands except for number of shares and per share data)

For the three months ended

For the nine months ended

Sep. 30,

Jun. 30,

2018

2019

2018

2019

RMB

US$

RMB

Net revenues

303,153

353,424

409,152

57,242

847,466

1,085,547

Cost of revenues

(109,642)

(107,559)

(115,988)

(16,227)

(299,109)

(329,275)

Gross profit

193,511

245,865

293,164

41,015

548,357

756,272

Operating expenses

Sales and marketing

expenses

(184,222)

(188,369)

(215,415)

(30,138)

(519,088)

(590,071)

Product development

expenses

(45,603)

(41,362)

(38,396)

(5,372)

(142,426)

(120,459)

General and administrative

expenses

(52,333)

(50,389)

(45,598)

(6,379)

(162,561)

(147,146)

Total operating expenses

(282,158)

(280,120)

(299,409)

(41,889)

(824,075)

(857,676)

Loss from operations

(88,647)

(34,255)

(6,245)

(874)

(275,718)

(101,404)

Interest income

2,556

5,070

709

6,648

11,677

Interest expense and other

expenses,net

(3,288)

(503)

(2,692)

(376)

(4,711)

(7,533)

Loss before income tax

expenses

(89,454)

(31,202)

(3,867)

(541)

(273,781)

(97,260)

Income tax expenses

(936)

(1,182)

(1,431)

(200)

(2,957)

(3,761)

Net loss

(90,390)

(32,384)

(5,298)

(741)

(276,738)

(101,021)

Net loss attributable to

ordinary shareholders

(90,021)

Weighted average number of

ordinary shares used in

computing basic and diluted

loss per share

305,225,472

307,458,227

308,834,290

308,290

304,112,455,221

Net loss per share attributable

to ordinary shareholders

basic and diluted

(0.30)

(0.11)

(0.02)

(0.00)

(0.91)

(0.33)

Net loss per ADS attributable to

ordinary shareholders

basic and diluted

(4.50)

(1.58)

(0.26)

(0.04)

(13.65)

(4.93)

Comprehensive loss:

Net loss

(90,021)

Other comprehensive loss

Foreign currency translation

adjustments

9,212

6,683

8,436

1,180

12,479

9,401

Total comprehensive loss

(81,178)

(25,701)

3,138

439

(264,259)

(91,620)

Share-based compensation expenses are included in the operating expenses

as follows:

Sales and marketing expenses

(1,481)

(1,119)

(609)

(85)

(4,092)

(2,012)

Product development expenses

(2,223)

(1,617)

(1,063)

(149)

(5,540)

(3,254)

General and administrative expenses

(3,420)

(2,915)

(1,800)

(252)

(10,677)

(7,727)

CHINA ONLINE EDUCATION GROUP

Reconciliation of Non-GAAP Measures to the Most Comparable GAAP Measures

(In thousands except for number of shares and per share data)

For the three months ended

For the nine months ended

Sep. 30,

2018

2019

2018

2019

RMB

US$

RMB

Sales and marketing expenses

(184,071)

Less: Share-based compensation expenses

(1,012)

Non-GAAP sales and marketing expenses

(182,741)

(187,250)

(214,806)

(30,053)

(514,996)

(588,059)

Product development expenses

(45,459)

Less: Share-based compensation expenses

(2,254)

Non-GAAP product development expenses

(43,380)

(39,745)

(37,333)

(5,223)

(136,886)

(117,205)

General and administrative expenses

(52,146)

Less: Share-based compensation expenses

(3,727)

Non-GAAP general and administrative expenses

(48,913)

(47,474)

(43,798)

(6,127)

(151,884)

(139,419)

Operating expenses

(282,676)

Less: Share-based compensation expenses

(7,124)

(5,651)

(3,472)

(486)

(20,309)

(12,993)

Non-GAAP operating expenses

(275,034)

(274,469)

(295,937)

(41,403)

(803,766)

(844,683)

Loss from operations

(88,404)

Less: Share-based compensation expenses

(7,993)

Non-GAAP loss from operations

(81,523)

(28,604)

(2,773)

(388)

(255,409)

(88,411)

Income tax expenses

(936)

(1,761)

Less: Tax impact of Share-based

compensation expenses

Non-GAAP income tax expenses

(936)

(1,761)

Net loss

(90,021)

Less: Share-based compensation

expenses

(7,993)

Non-GAAP net loss

(83,266)

(26,733)

(1,826)

(255)

(256,429)

(88,028)

Net loss attributable to ordinary

shareholders

(90,021)

Less: Share-based compensation

expenses,net of tax

(7,993)

Non-GAAP net loss attributable to ordinary

shareholders

(83,028)

Weighted average number of

ordinary shares used in

computing basic and diluted loss

per share

305,221

Non-GAAP net loss per share attributable to ordinary

shareholders

basic and diluted

(0.27)

(0.09)

(0.01)

(0.00)

(0.84)

(0.29)

Non-GAAP net loss per ADS attributable to ordinary

shareholders

basic and diluted

(4.05)

(1.30)

(0.09)

(0.01)

(12.60)

(4.29)

CHINA ONLINE EDUCATION GROUP

UNAUDITED ADDITIONAL INFORMATION

(In thousands except for number of shares and per share data)

For the three months ended

For the nine months ended

Sep. 30,

2018

2019

2018

2019

RMB

US$

RMB

Net revenues

One-on-one offerings

278,602

320,310

383,386

53,637

778,310

999,151

Small class offerings

24,551

33,114

25,766

3,605

69,156

86,396

Total net revenues

303,547

Cost of revenues

One-on-one offerings

(92,946)

(92,477)

(104,639)

(14,640)

(253,899)

(287,907)

Small class offerings

(16,696)

(15,082)

(11,349)

(1,587)

(45,210)

(41,368)

Total cost of revenues

(109,275)

Gross profit

One-on-one offerings

185,656

227,833

278,747

38,997

524,411

711,244

Small class offerings

7,855

18,032

14,417

2,018

23,946

45,028

Total gross profit

193,272

Gross margin

One-on-one offerings

66.6%

71.1%

72.7%

67.4%

71.2%

Small class offerings

32.0%

54.5%

56.0%

34.6%

52.1%

Consolidated gross margin

63.8%

69.6%

71.7%

64.7%

69.7%

Sales and marketing expenses[4]

One-on-one offerings

(163,114)

(173,811)

(203,848)

(28,520)

(460,753)

(548,508)

Small class offerings

(21,108)

(14,558)

(11,567)

(1,618)

(58,335)

(41,563)

Total Sales and marketing

expenses

(184,071)

Product development expenses[5]

One-on-one offerings

(33,835)

(36,234)

(34,028)

(4,761)

(107,873)

(105,431)

Small class offerings

(11,768)

(5,128)

(4,368)

(611)

(34,553)

(15,028)

Total Product development

expenses

(45,459)

General and administrative expenses[6]

One-on-one offerings

(43,874)

(45,845)

(42,251)

(5,911)

(135,336)

(133,030)

Small class offerings

(8,459)

(4,544)

(3,347)

(468)

(27,225)

(14,116)

Total General and administrative

expenses

(52,146)

Operating expenses

One-on-one offerings

(240,823)

(255,890)

(280,127)

(39,192)

(703,962)

(786,969)

Small class offerings

(41,335)

(24,230)

(19,282)

(2,697)

(120,113)

(70,707)

Total Operating expenses

(282,676)

Loss from operations

One-on-one offerings

(55,167)

(28,057)

(1,380)

(195)

(179,551)

(75,725)

Small class offerings

(33,480)

(6,198)

(4,865)

(679)

(96,167)

(25,679)

Total Loss from operations

(88,404)

[4] Share-based compensation expenses included in the sales and marketing expenses for one-on-one offerings and small class offerings were RMB561 and RMB48 respectively for the third quarter of 2019,and RMB1,342 and RMB139 respectively for the third quarter of 2018.

[5] Share-based compensation expenses included in the product development expenses for one-on-one offerings and small class offerings were RMB806 and RMB257 respectively for the third quarter of 2019,756 and RMB467 respectively for the third quarter of 2018.

[6] Share-based compensation expenses included in the general and administrative expenses for one-on-one offerings and small class offerings were RMB1,784 and RMB16 respectively for the third quarter of 2019,and RMB3,346 and RMB74 respectively for the third quarter of 2018.