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

Generated by AI AgentEarnings Decrypt
Wednesday, Sep 3, 2025 10:04 pm ET1min read
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Aime RobotAime Summary

- 51Talk reported 86.1% YoY revenue growth to $20.4M in Q2 2025, driven by increased active students and lesson consumption.

- Gross billings rose 79.7% to $28.5M, while operating expenses jumped 53.5% to $17.9M due to marketing and service investments.

- Company switched auditors to EY from Marcum to align with Big 4 mandates and expand investor base, despite no immediate stock split plans.

- Management expressed confidence in H2 momentum with Q3 gross billings guidance raised to $36.5M-$37.5M, reflecting strong demand execution.

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

Date of Call: September 3, 2025

Financials Results

  • Revenue: $20.4M, up 86.1% YOY
  • EPS: $-0.52 GAAP per ADS; $-0.46 non-GAAP per ADS
  • Gross Margin: 74.6%

Guidance:

  • Q3 2025 gross billings expected between $36.5M and $37.5M.
  • Outlook based on current market conditions and preliminary estimates; subject to change.

Business Commentary:

* Revenue Growth and Active Student Increase: - 51Talk's net revenues increased to $20.4 million in Q2, up 86.1% year-on-year. - This growth was driven by an increase in the number of active students and attended lesson consumption.

  • Gross Billings and Market Demand:
  • Gross billings grew by 79.7% year-on-year to $28.5 million.

  • The increase is attributed to healthy demand and disciplined execution.

  • Operating Expenses and Investment in Growth:

  • Q2 operating expenses rose to $17.9 million, an increase of 53.5% from the previous year.

  • This was primarily due to higher sales and marketing expenses, reflecting investments in user experience, service quality, and marketing.

  • Change in Auditing Firm:

  • 51Talk changed its auditing firm from Marcum to Ernst & Young.
  • This decision was made to widen the investor base and cater to potential investors who have mandates for Big 4 auditors.

Sentiment Analysis:

  • Management cited a strong quarter with gross billing exceeding guidance and expects positive momentum into H2 2025. Revenue grew 86.1% YOY to $20.4M. Guidance issued for higher Q3 gross billings, reflecting confidence in trajectory.

Q&A:

  • Question from Toby Lu (Private Investor): Why did you change auditors from Marcum to Ernst & Young?
    Response: To align with investor mandates favoring Big 4 auditors and broaden the potential investor base.

  • Question from Toby Lu (Private Investor): Any plans to increase stock liquidity (e.g., stock split or other measures)?
    Response: No near-term plans; focus is on improving operations, though alternatives may be considered in the future.

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