LAIX Inc.
Q4 2020 Earnings Call Transcript

Published: 27 Apr 2021

[Operator:]

Ladies and gentlemen, thank you for standing by for LAIX Inc.'s Fourth Quarter 2020 Earnings Conference Call. . After the management's prepared remarks, there will be a question-and-answer session. Today's conference call is being recorded. I will now turn the call over to your host, Mr. Harry He, Investor Relations Director of the company. Please go ahead, sir.

[Harry He:]

Thank you, Maria. Hello, everyone, and welcome to the First Quarter 2020 Earnings Conference Call for LAIX, also known as Liulishuo. The company's results were issued earlier today, and you can download the earnings press release and sign up for the company's distribution list by visiting our IR website at ir.laix.com. Dr. Yi Wang, our CEO and Founder; and Mr. Bing Sun, our CFO, will begin with some prepared remarks.

[Yi Wang:]

Thank you, Harry. Hi, everyone. Thank you for joining our fourth quarter 2020 earnings conference call. In the fourth quarter, we continued to put great efforts into enhancing operating efficiency and have made solid progress on both our organizational restructuring and cost control initiatives. The total net revenue in the quarter were RMB235.5 million, which beat our previous guidance. Gross profit margin grew to 75.4% from 72.9% in the previous quarter. Our net loss was reduced to RMB34.7 million, a 50.9% decrease from the previous quarter and is expected to improve even further in the first quarter of 2021. Since our inception, we have been constantly exploring user needs and improving the user learning experience, forming a technology-based, content-oriented and user experience-centered company culture and system. Looking ahead, we plan to expand into new markets and countries with high-growth potential by increasing user acquisition channel efficiency and developing new curriculum content. In terms of enterprise learning services, we plan to utilize AI technologies to provide corporate customers with more customized solutions and professional talent training system tailored for specific industries and needs.

[Bing Sun:]

Thank you, Yi, and hello, everybody. Let's now take a look at our key financial metrics in the fourth quarter of 2020. Net revenue were RMB235.5 million, a 1.7% decrease from RMB239.4 million for the previous quarter and a 1.8% increase from RMB231.4 million for the same quarter last year. The quarter-over-quarter decrease was primarily attributable to a decrease in our gross billings caused by the company's stringent cost control in user acquisition expenditures. Cost of revenue was RMB57.8 million, an 11% decrease from RMB65 million for the previous quarter and a 25% decrease from RMB77.1 million for the same quarter last year. The quarter-over-quarter change was primarily due to the cost control in IT-related service and optimization of personnel management. Gross profit was RMB177.6 million, a 1.8% increase from RMB174.5 million for the previous quarter and a 15.1% increase from RMB154.3 million for the same quarter last year. Gross margin was 75.4% compared with 72.9% for the previous quarter and 66.7% for the same quarter last year. Total operating expenses were RMB215.2 million, a 14.6% decrease from RMB252.1 million for the previous quarter and a 41.5% decrease from RMB367.7 million for the same quarter last year. The changes were primarily due to stringent cost control in user acquisition expenditures and optimization of operation structure. Sales and marketing expenses were RMB150.4 million, an 18.9% decrease from RMB185.5 million for the previous quarter and a 43.6% decrease from RMB266.9 million for the same quarter last year. The decrease was primarily due to the company's stringent cost control in advertising and user acquisition expenditures and, secondarily, the decrease in salary and staff benefits due to the optimization of personnel management. R&D expenses were RMB37.2 million, an 18.9% decrease from RMB45.8 million for the previous quarter and a 30.1% decrease from RMB53.2 million for the same quarter last year. The changes were primarily due to the efficiency optimization in personnel management. G&A expenses were RMB27.6 million, a 33% increase from RMB20.8 million for the previous quarter, primarily due to a onetime impairment charge on leasehold improvement. The G&A expenses decreased by 42% from RMB47.7 million for the same quarter last year, primarily due to the efficiency optimization in personnel management.

[Operator:]

And we have a question coming from the line of Leah Fen from ChinaRock Capital.

[Unidentified Analyst:]

In the prepared remarks, you mentioned the net loss will be further improved in the next quarter. Could you please elaborate more on that?

[Yi Wang:]

Well, thank you for the question. As we continued to focus on improving operating efficiency and cost savings, the operating expenses decreased by 42% year-over-year in Q4 of 2020. This is a positive sign. So it even decreased substantially more in Q1 of this year, 2021, which proves again our company's commitment and execution capability in cost control. As you all know, right now, the main contributor to our revenue is still the Adults business, and we see good opportunity to continue to leverage different means to acquire users and -- while improve our product offering to optimize the overall conversion efficiency. As our main business begins to stabilize, we hope that our new business initiatives, in the meantime, will be able to contribute more in the future. So I'd be happy to discuss further when they are more materialized. Thank you for the question.

[Operator:]

And we don't have further questions at this time. I will now turn the call back to Mr. Harry He.

[Harry He:]

Thank you, once again, for joining us. If you have further questions, please feel free to contact Investor Relations through the contact information provided on our website or TPG Investor Relations. Operator?

[Operator:]

And this concludes today's conference call. Thank you for participating. You may now disconnect your lines.

[Bing Sun:]

Thank you.

[Harry He:]

Thank you.