51Talk's Q2 2025 Earnings Call: Contradictions Emerge on Auditor Changes, Stock Liquidity, and Expansion Plans

The above is the analysis of the conflicting points in this earnings call

Date of Call: None provided

Financials Results

• Revenue: $20.4M, up 86.1% YOY
• EPS: GAAP EPS: -$0.52; Non-GAAP EPS: -$0.46 (no prior-period comparison provided)
• Gross Margin: 74.6% (no prior-period comparison provided)

Guidance:

• Management expects positive momentum to carry into 2025 and reiterated confidence in Q3 trajectory.
• Gross billings expected to be $36.5M–$37.5M (preliminary, subject to market and demand changes).

Business Commentary:

* Revenue Growth and Student Demand: - 51Talk reported net revenues of US$20.4 million for Q2 2025, an 86.1% increase from the same quarter last year. - The growth was primarily driven by an increase in active students with higher attended lesson consumption.

• Operational Expenses and Investments:
• Q2 operating expenses were US$17.9 million, up 53.5% compared to the same quarter last year.

• The increase was largely due to sales and marketing expenses, which rose 74.8%, and higher costs related to additional personnel.

• AI Integration and Strategic Investments:

• 51Talk continues to invest in enhancing user experience and service quality

• These investments are aimed at strengthening the company's competitive position and embedding AI across its products and processes.

• Financial Performance and Market Outlook:

• The company's gross billing exceeded guidance, reflecting healthy demand and disciplined execution.
• For 2025, the company expects net gross billings to be between $36.5 million and $37.5 million.

Sentiment Analysis:

• Management called Q2 a strong quarter with gross billing exceeding guidance. Net revenues rose 86.1% YOY to $20.4M and gross billings grew 79.7% YOY to $28.5M. They issued outlook for gross billings of $36.5M–$37.5M. Offsetting factors: operating loss was $2.7M and net loss was $3.0M.

Q&A:

• Question from Tobey Lu (Private Investor): Why did you change auditors from Marcum to Ernst & Young (EY)?
  Response: To meet mandates of potential investors who require a Big Four auditor, thereby broadening the eligible investor base.

• Question from Tobey Lu (Private Investor): Any plans to improve low trading liquidity (e.g., stock split or other measures)?
  Response: No near-term actions; focus remains on operational execution, though alternatives may be considered in the future.