LAIX Announces Financial Results as Shares Plummet
With the epidemic acting as a catalyst for online education firms, will LAIX perform even better in 2020?
LAIX, known as Liulishuo (LAIX: NYSE) in China considers itself an artificial intelligence (AI) company that creates and delivers products and services to popularize English learning. The firm announced its unaudited financial results for the fourth quarter and full-year ended December 31, 2019.
According to the NYSE-listed company earnings report, it generated a revenue of CNY 1.02 billion (USD 147 million) in 2019, an increase of 60.6%. The annual cash income of CNY 1.29 billion (USD 185 million), an increase of 31.2%. The firm saw a 73.3% gross profit margin with an annual gross profit of CNY 749.7 million (USD 107.7 million).
Net revenue for the fourth quarter was CNY 231.4 million (USD 33.2 million), a 3.1% increase from CNY 224.5 million for the fourth quarter of 2018. Gross billings were CNY 341.9 million (USD 49.1 million), a 4.8% decrease from CNY 359.0 million for the same period last year. The gross margin was 66.7%, compared with 68.1% for the fourth quarter of 2018. Approximately 0.7 million paying users purchased the company’s courses and services for the fourth quarter of 2019, compared with approximately 1.0 million paying users for the fourth quarter of 2018. Total cumulative registered users were 161.6 million as of December 31, 2019, compared with 110.3 million total cumulative registered users as of December 31, 2018.
When asked about the current situation concerning the impact of the epidemic on the overall competitive landscape and long-term implications with more and more people experiencing the online digital classroom and its impact on penetration, CEO and Chairman Yi Wang said:
“We focus mainly on building an AI-enabled interactive learning experience, product-driven learning experience. We believe this can definitely capture the movement from offline to online very nicely. We see now, a very clear trend both in adult space and also in the kid space, we believe a more accelerated movement from pure off-line to online or online and off-line combined. So we think we are very well-positioned to capture this opportunity.”
Although the results seemed to be rather positive, the firm was among the top losers of the stock market on Friday (the day LAIX announced the results). Shares dived 12.05% to USD 3.94 from its previous close of USD 4.48. The one-year price forecast for LAIX stock indicates that the average analyst price target is USD 20.08 per share. This means the stock has a potential increase of 409.64% from where the LAIX share price has been trading recently.
Analysts at Goldman lowered their recommendation on shares of LAIX from Neutral to Sell in their report released on February 03. Morgan Stanley analysts have also lowered their rating of the firm’s stock from Equal-Weight to Underweight.
We believe that the situation created by the epidemic has definitely boosted online education and given firms from the track a huge opportunity. Education companies are likely to benefit from the increased attention for their services for some time. After both students and parents become more familiar with online teaching, they can be enticed to try other products and pay for services down the road.
China’s online education market is expected to more than triple to CNY 696 billion (USD 99.3 billion) in 2023 from last year’s CNY 203 billion, according to research firm Frost & Sullivan.