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What’s the cause behind incline of China Online Education Group (COE) stock?

China Online Education Group (COE) saw a push of 8.19% in the premarket today. However, the last trading session closed at $2.32 with a decline of 2.52%.

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Second Quarter 2021 Results

COE reported second-quarter 2021 results on 28th September 2021. The company reported that the second quarter of 2021 had net revenues of RMB579.8 million (US$89.8 million), 17.5 percent more from RMB493.5 million the previous year. A rise in the number of active students was largely responsible for the increase, which was somewhat offset by a fall in average revenue per active student.

Moreover, the second quarter of 2021 had a gross margin of 72.7 percent, compared to 70.9 percent in the same period the previous year. The gain was mostly due to a drop in cost per lesson, which was somewhat offset by a fall in income per lesson. The cost of revenues in the second quarter of 2021 was RMB158.1 million (US$24.5 million), 10.2%  more from RMB143.6 million the previous quarter.

The majority of the rise was attributable to an increase in total service fees given to instructors, owing to an increase in the number of paid classes. Furthermore, sales and marketing costs totaled RMB315.8 million (US$48.9 million). Lastly, non-GAAP sales and marketing costs for the second quarter of 2021 were RMB313.4 million (US$48.5 million) excluding share-based compensation charges, up 32.0 percent from RMB237.4 million in the same quarter previous year.

First Quarter 2021 results

COE announced the first quarter 2021 results on 17th May 2021. The first quarter of 2021 had net revenues of RMB600.4 million (US$91.6 million), 23.3 percent more than RMB487.1 million in the same time the previous year. The rise was mostly due to an increase in active students, which was somewhat offset by a drop in average revenue per active student. Moreover, there were 392,700 active students, 37.0 percent more than 286,600 the previous quarter.

The cost of revenue in the first quarter of 2021 was RMB159.7 million (US$24.4 million), up 10.9 percent from RMB144.0 million the previous quarter. A rise in total service fees paid to instructors, owing to an increase in the number of paid classes, was the primary reason for the increase. Moreover, the first quarter of 2021 had a gross margin of 73.4 percent, up from 70.4 percent the previous year. The price per lesson increased, which accounted for the majority of the rise.

The sales and marketing costs totaled RMB318.9 million (US$48.7 million), 39.7% up from RMB228.4 million the previous year. Increased salespeople costs, as a result of a rise in the number of sales and marketing professionals, as well as higher marketing and branding expenses, accounted for the majority of the increase. Last but not least, non-GAAP sales and marketing expenditures were 39.6 percent of gross billings, compared to 32.3 percent in the same time the previous year.

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