LAIX Inc. Announces Second Quarter 2021 Unaudited Financial Results

ETC

SHANGHAI, Aug. 27, 2021 /PRNewswire/ — LAIX Inc. ("LAIX" or the "Company") (NYSE: LAIX), an artificial intelligence (AI) company in China that creates and delivers products and services to popularize English learning, today announced its unaudited financial results for the second quarter ended June 30, 2021.

Second Quarter 2021 Financial and Operating Highlights

  • Net income for the second quarter of 2021 was RMB14.0 million (US$2.2 million), compared with a net income of RMB12.2 million for the previous quarter and a net loss of RMB92.5 million for the same quarter last year.
  • Gross margin for the second quarter of 2021 was 80.4%, compared with 77.6% for the previous quarter and 71.9% for the same quarter last year.
  • Gross billings[1] for the second quarter of 2021 were RMB138.6 million (US$21.5 million), a 10.2% decrease from RMB154.4 million for the previous quarter and a 54.7% decrease from RMB306.2 million for the same quarter last year.
  • Net revenues for the second quarter of 2021 were RMB179.5 million (US$27.8 million), a 9.6% decrease from RMB198.5 million for the previous quarter and a 33.4% decrease from RMB269.4 million for the same quarter last year.
  • Sales and marketing expenses for the second quarter of 2021 were RMB88.9 million (US$13.8 million), a 4.3% decrease from RMB92.9 million for the previous quarter and a 55.7% decrease from RMB200.7 million for the same quarter last year.
  • Operating cash outflow for the second quarter of 2021 was RMB35.1 million (US$5.4 million), compared with RMB57.3 million for the previous quarter and RMB66.4 million for the same quarter last year.
  • Approximately 0.2 million paying users purchased the Company’s courses and services for the second quarter of 2021, compared with approximately 0.3 million paying users for the previous quarter and approximately 0.5 million paying users for the same quarter last year, primarily attributable to the Company’s stringent cost control in user acquisition expenditures.

[1] "Gross billings" for a certain period refer to the total amount of cash received from the sale of course packages in that period net of the total amount of cash refunds paid to users in the same period.

Management Comments

Dr. Yi Wang, Chairman and Chief Executive Officer of LAIX, commented, "We are pleased to have achieved another solid set of quarterly results, thanks to our dedication and relentless efforts to enhance our operating leverage and improve profitability. The gross margin and net income for the second quarter 2021 further grew to 80.4% and RMB14.0 million, up from 77.6% and RMB12.2 million, respectively, in the previous quarter."

"During the second quarter, our new growth initiatives, including enterprise learning services and international expansion, continued to make solid progress and are expected to drive meaningful user traffic and new revenue streams. We also remain fully committed to leveraging our proprietary AI technology and expanding product portfolio to provide superior value to all of our users while also exploring more opportunities in the non-language learning sector such as quality education and vocational education. We believe our operational strategy and diversified product portfolio will help us deliver long-term value to all stakeholders," Dr. Wang concluded.

Second Quarter 2021 Financial Results

Net Revenues

Net revenues for the second quarter of 2021 were RMB179.5 million (US$27.8 million), a 9.6% decrease from RMB198.5 million for the previous quarter and a 33.4% decrease from RMB269.4 million for the same quarter last year. The quarter-over-quarter decrease was primarily attributable to a decrease in gross billings caused by the decrease of paying users.

Cost of Revenues

Cost of revenues for the second quarter of 2021 was RMB35.2 million (US$5.5 million), a 20.7% decrease from RMB44.4 million for the previous quarter and a 53.5% decrease from RMB75.6 million for the same quarter last year. The quarter-over-quarter decrease was primarily due to the decrease in salaries and welfare for full-time employees, and reduced spending on IT service fee and content-related costs.

Gross Profit and Gross Margin

Gross profit for the second quarter of 2021 was RMB144.3 million (US$22.3 million), a 6.4% decrease from RMB154.1 million for the previous quarter and a 25.5% decrease from RMB193.8 million for the same quarter last year.

Gross margin for the second quarter of 2021 was 80.4%, compared with 77.6% for the previous quarter and 71.9% for the same quarter last year.

Operating Expenses

Total operating expenses for the second quarter of 2021 were RMB137.1 million (US$21.2 million), a 5.7% decrease from RMB145.4 million for the previous quarter and a 52.7% decrease from RMB289.7 million for the same quarter last year. The decreases were primarily due to the cost control strategy and improvement in operating efficiency.

Sales and marketing expenses for the second quarter of 2021 were RMB88.9 million (US$13.8 million), a 4.3% decrease from RMB92.9 million for the previous quarter and a 55.7% decrease from RMB200.7 million for the same quarter last year. The decreases were primarily due to continued efforts to improve personnel management efficiency.

Research and development expenses for the second quarter of 2021 were RMB26.3 million (US$4.1 million), a 22.0% decrease from RMB33.7 million for the previous quarter and a 45.8% decrease from RMB48.5 million for the same quarter last year. The decreases were primarily due to the savings in salaries and staff benefits attributable to efficiency improvement in personnel management and the decrease in share-based compensation. 

General and administrative expenses for the second quarter of 2021 were RMB22.0 million (US$3.4 million), a 17.2% increase from RMB18.7 million for the previous quarter and a 45.7% decrease from RMB40.5 million for the same quarter last year. The quarter-over-quarter increase was primarily due to impairment losses on gift goods and textbooks for kids in light of the potential impact by the recent regulation regarding after-school tutoring for K-12 students. 

(Loss)/income from Operations

Income from operations for the second quarter of 2021 was RMB12.2 million (US$1.9 million), compared with an income from operations of RMB12.8 million for the previous quarter and a loss from operations of RMB95.9 million for the same quarter last year.

Foreign exchange related gains/(losses), net

Foreign exchange gain was RMB1.3 million (US$0.2 million) in the second quarter of 2021, compared with a foreign exchange loss of RMB0.9 million for the previous quarter and a foreign exchange gain of RMB0.1 million for the same quarter last year.

Net (loss)/income

Net income for the second quarter of 2021 was RMB14.0 million (US$2.2 million), compared with a net income of RMB12.2 million for the previous quarter and a net loss of RMB92.5 million for the same quarter last year.

Adjusted EBITDA[2] for the second quarter of 2021 was RMB24.6 million (US$3.8 million), compared with an adjusted EBITDA of RMB25.3 million for the previous quarter and an adjusted EBITDA loss of RMB77.8 million for the same quarter last year.

Adjusted net income[3] for the second quarter of 2021 was RMB19.0 million (US$2.9 million), compared with an adjusted net income of RMB19.0 million for the previous quarter and an adjusted net loss of RMB85.3 million for the same quarter last year.

Basic and diluted net income per ordinary share attributable to ordinary shareholders for the second quarter of 2021 was RMB0.28 (US$0.04), compared with basic and diluted net income per ordinary share attributable to ordinary shareholders of RMB0.24 for the previous quarter and basic and diluted net loss per ordinary share attributable to ordinary shareholders of RMB1.87 for the same quarter last year. 

[2] "Adjusted EBITDA" is a non-GAAP measure, which represents EBITDA before share-based compensation expenses. EBITDA represents net (loss)/income before interest, tax, depreciation and amortization. See "Reconciliations of GAAP and Non-GAAP Results" at the end of this press release.

[3] "Adjusted net (loss)/income" is a non-GAAP measure, which excludes share-based compensation expenses. See "Reconciliation of GAAP and Non-GAAP Results" at the end of this press release.

Balance Sheet & Cashflows

As of June 30, 2021, the Company’s cash, cash equivalents, restricted cash and short-term investments amounted to RMB133.4 million (US$20.7 million), compared with RMB172.6 million as of March 31, 2021 and RMB229.6 million as of December 31, 2020.

As of June 30, 2021, the Company’s deferred revenue and long-term deferred revenue amounted to RMB638.1 million (US$98.8 million), compared with RMB687.4 million as of March 31, 2021 and RMB746.2 million as of December 31, 2020.

Net cash used in operating activities were RMB35.1 million (US$5.4 million) and RMB66.4 million for the three months period ended June 30, 2021 and 2020, respectively. As of June 30, 2021, the Company’s total shareholders’ deficit was RMB676.3 million (US$104.7 million) and the current liabilities exceeded the current assets by RMB708.2 million (US$109.7 million).

The Company’s liquidity to meet its future working capital is based on its ability to enhance user engagement and retention by offering higher quality and diversified courses after the consideration of the uncertainty impacted by the recent regulation changes on education industry, while optimizing traffic acquisition strategy to efficiently control and reduce user related costs. The Company will further preserve liquidity and manage cash flows by reducing various discretionary expenditure including labor costs and other operating expenses. The Company’s liquidity is also based on its ability to obtain capital financing from equity or debt investors. Currently, the Company believes that it has sufficient cash to fund operations for at least the next 12 months with the implementation of the above mentioned measures.

Recent Developments

Preliminary non-binding going private proposal

On August 4, 2021, the board of directors of the Company (the "Board") received a preliminary non-binding proposal letter from Dr. Yi Wang, co-founder, chairman of the Board and chief executive officer of the Company, Mr. Zheren Hu, co-founder, director and chief technology officer of the Company, Dr. Hui Lin, co-founder, director and chief scientist of the Company (collectively, the "Founders"), and PCIL IV Limited (together with its affiliated investment entities, "Primavera," and together with the Founders, the "Buyer Group"), to acquire all of the outstanding ordinary shares of the Company (the "Ordinary Shares"), including the Class A ordinary shares represented by the American Depositary Shares of the Company (the "ADSs," each representing one Class A ordinary share) that are not already held by the Buyer Group for a proposed purchase price of US$1.13 per Ordinary Share or ADS in cash (the "Proposed Transaction"). On August 6, 2021, the Board formed a special committee (the "Special Committee") consisting of two independent directors, Dr. Li-Lan Cheng, who serves as the chairman of the Special Committee, and Ms. Min (Jenny) Zhang, to evaluate and consider the Proposed Transaction. On August 17, 2021, the Special Committee retained Houlihan Lokey (China) Limited as its financial advisor and Kirkland & Ellis as its U.S. legal counsel in connection with its review and evaluation of the Proposed Transactions.

The Board cautions the Company’s shareholders and others considering trading the Company’s securities that the Special Committee is continuing its evaluation of the Proposed Transaction and other strategic alternatives of the Company and that, at this time, no decisions have been made by the Special Committee with respect to the Company’s response to the Proposed Transaction. There can be no assurance that any definitive offer will be received, that any definitive agreement will be executed relating to the Proposed Transaction, or that the Proposed Transaction or any other similar transaction will be approved or consummated. The Company does not undertake any obligation to provide any updates with respect to any transaction, except as required under applicable law.

New regulations regarding after-school tutoring and other relevant matters 

On July 24, 2021, China’s official state media, including Xinhua News Agency and China Central Television, announced the Opinions on Further Alleviating the Burden of Homework and After-School Tutoring for Students in Compulsory Education (the "Opinion"), issued by the General Office of the CPC Central Committee and the General Office of the State Council. The Opinion contains high-level policy directives about requirements and restrictions related to after-school tutoring services, including, among others, (i) no approval will be granted to new institutions providing after-school tutoring services on academic subjects to students at China’s compulsory education stage ("Academic AST Institutions"), existing Academic AST Institutions need to be registered as non-profit institutions, and an approval mechanism will be adopted for online Academic AST Institutions; (ii) Academic AST Institutions are prohibited from raising funds through public market or capitalization; (iii) listed companies are prohibited from raising capital to invest in Academic AST Institutions; (iv) foreign stake in Academic AST Institutions is prohibited, including through contractual arrangement. Academic AST Institutions in violation of the above restrictions need to take rectification measures. The Opinion further provides that Academic AST Institutions are prohibited from providing online tutoring services to pre-school children, or providing tutoring services on academic subjects in compulsory education during public holidays, weekends and school breaks; and Academic AST Institutions must follow the pricing guidance to be established by relevant authorities.  Administration on institutions providing after-school tutoring services on academic subjects in high schools (which do not fall within China’s compulsory education system) shall take into consideration the Opinion for reference. Besides, on July 29, 2021, the General Office of the Ministry of Education issued the Notice on Further Clarifying the Scope of Academic Subjects and Non-academic Subjects with respect to After-School Tutoring Services in the stage of Compulsory Education, which categorizes English tutoring services involving contents of courses contained in national curriculum standards as tutoring services on academic subjects.

The Company is an artificial intelligence company in China that creates and delivers products and services to popularize English learning for all-age groups. The majority of the Company’s products and services, such as English Liulishuo and Liuli Reading, are designed to target adults, mostly college students and professionals, while only a limited portion of the Company’s products and services target kids of three to twelve years old ("K-12 Students"). Furthermore, the products and services the Company delivers to K-12 Students primarily aim to enhancing their reading, hearing and speaking abilities instead of providing English tutoring services on content contained in national curriculum standards. However, as the Opinion is newly issued and only provides high-level policies on Academic AST Institutions, there are substantial uncertainties as to how the Opinion will be interpreted and implemented and to what extent the Opinion would be applicable to us. The Company is closely monitoring the latest regulatory development and carefully assessing its implications on the Company’s business, especially the Opinion’s impact on the Company’s English learning services related to K-12 Students. The Company will continue to make all necessary efforts to comply with all applicable rules and regulations, including those to be adopted following the policy directives of the Opinion and proactively seek guidance from the government authorities in this respect.

About LAIX Inc.

LAIX Inc. ("LAIX" or the "Company") is an artificial intelligence (AI) company in China that creates and delivers products and services to popularize English learning. Its proprietary AI teacher utilizes cutting-edge deep learning and adaptive learning technologies, big data, well-established education pedagogies and the mobile internet. LAIX believes its innovative approach fundamentally transforms learning. LAIX provides its products and services on demand via its mobile apps, primarily its flagship "English Liulishuo" mobile app launched in 2013. On the Company’s platform, AI technologies are seamlessly integrated with diverse learning content incorporating well-established language learning pedagogies, gamified features and strong social elements to deliver an engaging, adaptive learning experience. LAIX provides a variety of courses inspired by a broad range of topics and culture themes to make English learning more interesting and is committed to offering a fun, interactive learning environment to motivate and engage its users.

For more information, please visit: http://ir.laix.com.

Use of Non-GAAP Financial Measures

The Company uses adjusted EBITDA and adjusted net (loss)/income, each a non-GAAP financial measure, in evaluating its operating results and for financial and operational decision-making purposes.

The Company believes that adjusted EBITDA and adjusted net (loss)/income help identify underlying trends in its business that could otherwise be distorted by the effect of certain expenses that the Company includes in (loss)/income from operations and net (loss)/income. The Company believes that adjusted EBITDA and adjusted net (loss)/income provide useful information about its results of operations, enhance the overall understanding of its past performance and future prospects and allow for greater visibility with respect to key metrics used by the management of the Company in its financial and operational decision-making.

Adjusted EBITDA and adjusted net (loss)/income should not be considered in isolation or construed as an alternative to (loss)/income from operations, net (loss)/income or any other measure of performance or as an indicator of the Company’s operating performance. Investors are encouraged to review the historical non-GAAP financial measures to the most directly comparable GAAP measures. Adjusted EBITDA and adjusted net (loss)/income presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data. The Company encourages investors and others to review its financial information in its entirety and not rely on a single financial measure.

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 Renminbi to U.S. dollars are made at a rate of RMB6.4566 to US$1.00, the rate in effect as of June 30, 2021 published by the Federal Reserve Board.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under 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," "confident," "potential," "continue" or other similar expressions. Among other things, the quotations from management in this announcement, as well as LAIX’s strategic and operational plans, contain forward-looking statements. LAIX may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission, 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 but not limited to statements about LAIX’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, and a variety of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: LAIX’s goals and strategies; LAIX’s future business development, results of operations and financial condition; the expected growth of the education market; LAIX’s ability to monetize the user base; fluctuations in general economic and business conditions in China; PRC governmental policies, laws and regulations relating to the Company’s industry; the potential impact of the COVID-19 to LAIX’s business operations and the economy in China and elsewhere generally; and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in the Company’s filings with the Securities and Exchange Commission. All information provided in this press release and in the attachments is as of the date of the press release, and the Company undertakes no duty to update such information, except as required under applicable law.

For investor and media inquiries, please contact:

LAIX Inc.
Investor Relations
Email: ir@laix.com 

The Piacente Group Investor Relations
Brandi Piacente
Tel: +1-212-481-2050
Email: liulishuo@tpg-ir.com

Emilie Wu
Tel: +86-21-6039-8363
Email: liulishuo@tpg-ir.com

 

 

 

LAIX INC.

 UNAUDITED CONSOLIDATED BALANCE SHEETS

 (Amount in thousands of Renminbi ("RMB") and US dollars ("US$"))

 As of

As of

December 31, 2020

June 30, 2021

RMB

RMB

US$

 ASSETS

 Current assets:

 Cash and cash equivalents

137,996

118,991

18,429

 Restricted cash

511

551

85

 Short-term investments

91,049

13,907

2,154

 Accounts receivable, net

5,892

4,916

761

 Prepayments and other current assets

58,272

40,729

6,308

 Total current assets

293,720

179,094

27,737

 Non-current assets:

 Property and equipment, net

30,074

23,808

3,687

 Investment in equity fund

5,711

5,654

876

 Intangible assets, net

14,341

10,751

1,665

 Operating lease right-of-use assets, net

82,488

55,605

8,612

 Other non-current assets

5,866

4,779

740

 Deferred tax assets

13,547

13,547

2,098

 Total non-current assets

152,027

114,144

17,678

 Total assets

445,747

293,238

45,415

 LIABILITIES 

 Current liabilities:

 Accounts payable 

83,576

65,632

10,165

 Deferred revenue

689,325

599,262

92,814

 Salary and welfare payable

132,433

96,253

14,908

 Tax payable

77,327

78,745

12,196

 Operating lease liability, current

31,845

25,974

4,023

 Accrued liabilities and other current liabilities

19,382

21,468

3,324

 Total current liabilities

1,033,888

887,334

137,430

 Non-current liabilities:

 Deferred revenue, non-current

56,905

38,862

6,019

 Operating lease liability, non-current

56,903

34,744

5,381

 Other non-current liabilities

10,614

8,551

1,324

 Total non-current liabilities

124,422

82,157

12,724

 Total liabilities

1,158,310

969,491

150,154

 Shareholders’ deficit

 Class A Ordinary shares

212

214

33

 Class B Ordinary shares

121

121

19

 Subscriptions Receivable from shareholders

(201)

(299)

(46)

 Treasury Stock

(15,327)

(15,327)

(2,374)

 Additional paid-in capital

1,198,852

1,211,305

187,607

 Accumulated other comprehensive income

10,256

8,032

1,244

 Accumulated deficit

(1,906,476)

(1,880,299)

(291,222)

 Total shareholders’ deficit

(712,563)

(676,253)

(104,739)

 Total liabilities and shareholders’ deficit

445,747

293,238

45,415

 

 

 

LAIX INC. 

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME

(Amount in thousands of Renminbi ("RMB") and US dollars ("US$")

except for number of shares and per share data)

Three months ended

Six months ended

June 30

March 31

June 30

June 30

June 30

2020

2021

2021

2020

2021

RMB

RMB

RMB

US$

RMB

RMB

US$

Net revenues

269,405

198,544

179,464

27,795

497,743

378,008

58,546

Cost of revenues

(75,646)

(44,418)

(35,205)

(5,453)

(154,445)

(79,623)

(12,332)

Gross profit

193,759

154,126

144,259

22,342

343,298

298,385

46,214

Operating expenses:

Sales and marketing expenses

(200,726)

(92,926)

(88,899)

(13,769)

(465,466)

(181,825)

(28,161)

Research and development expenses

(48,482)

(33,710)

(26,280)

(4,070)

(107,701)

(59,990)

(9,291)

General and administrative expenses

(40,461)

(18,741)

(21,958)

(3,401)

(62,600)

(40,699)

(6,303)

Total operating expenses

(289,669)

(145,377)

(137,137)

(21,240)

(635,767)

(282,514)

(43,755)

Other operating income

25

4,097

5,072

786

43

9,169

1,420

(Loss)/income from operations

(95,885)

12,846

12,194

1,888

(292,426)

25,040

3,879

Other income/(expenses):

Interest income/(expenses)

366

(1,430)

(1,159)

(180)

1,049

(2,589)

(401)

Foreign exchange related gains/(losses), net

140

(948)

1,317

204

(2,179)

369

57

Change in fair value of short-term investment

806

29

4

1

1,323

33

5

Investment income

493

771

119

1,264

196

Other income, net

2,098

1,169

971

150

2,780

2,140

331

(Loss)/income before income taxes expenses

(92,475)

12,159

14,098

2,182

(289,453)

26,257

4,067

Income tax expenses

(28)

(80)

(12)

(57)

(80)

(12)

Net (loss)/income

(92,503)

12,159

14,018

2,170

(289,510)

26,177

4,055

Net (loss)/income attributable to LAIX Inc.’s
ordinary shareholders

(92,503)

12,159

14,018

2,170

(289,510)

26,177

4,055

 

 

LAIX INC.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME

(Amount in thousands of Renminbi ("RMB") and US dollars ("US$")

except for number of shares and per share data)

Three months ended

Six months ended

June 30

March 31

June 30

June 30

June 30

2020

2021

2021

2020

2021

RMB

RMB

RMB

US$

RMB

RMB

US$

Net (loss)/income

(92,503)

12,159

14,018

2,170

(289,510)

26,177

4,055

Other comprehensive (loss)/income

—Foreign currency translation adjustment, net of nil tax

(385)

1,049

(3,273)

(507)

6,391

(2,224)

(344)

Comprehensive (loss)/income

(92,888)

13,208

10,745

1,663

(283,119)

23,953

3,711

Net (loss)/income per Class A and Class B
ordinary shares

—Basic

(1.87)

0.24

0.28

0.04

(5.87)

0.53

0.08

—Diluted

(1.87)

0.24

0.28

0.04

(5.87)

0.52

0.08

Weighted average number of Class A and Class B
ordinary shares used in per share calculation

—Basic

49,337,462

49,637,358

50,053,539

50,053,539

49,348,103

49,846,690

49,846,690

—Diluted

49,337,462

50,242,298

50,242,183

50,242,183

49,348,103

50,243,482

50,243,482

 

 

LAIX INC.

Reconciliation of GAAP and Non-GAAP Results

(Amount in thousands of Renminbi ("RMB") and US dollars("US$")

except for percentage data)

Three months ended

Six months ended

June 30

2020

March 31

2021

June 30

2021

June 30

2020

June 30

2021

RMB

RMB

RMB

US$

RMB

RMB

US$

Net (loss)/income

(92,503)

12,159

14,018

2,170

(289,510)

26,177

4,055

Add:

Share-based compensation expenses

7,241

6,882

5,023

778

15,015

11,905

1,844

Depreciation of property, plant and equipment

7,781

4,859

4,365

676

15,128

9,224

1,429

Income tax expenses

28

80

12

57

80

12

Subtract:

Interest (income)/expenses

(366)

1,430

1,159

180

(1,049)

2,589

401

Adjusted EBITDA

(77,819)

25,330

24,645

3,816

(260,359)

49,975

7,741

Net (loss)/income

(92,503)

12,159

14,018

2,170

(289,510)

26,177

4,055

Add back:

Share-based compensation expenses

7,241

6,882

5,023

778

15,015

11,905

1,844

Adjusted net (loss)/income

(85,262)

19,041

19,041

2,948

(274,495)

38,082

5,899

 

Related Links :

http://www.liulishuo.com

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