| Lara Zhao | executive |
| Michael Du | executive |
Good evening, ladies and gentlemen, and thank you for joining 17EdTech Second Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded.
I'll now turn the meeting over to your host for today's call, Ms. Lara Zhao, 17EdTech's Investor Relations Manager. Please proceed, Lara.
Thank you, operator. Hello, everyone, and thank you for joining us today.
Our earnings release was distributed earlier today and is available on our IR website.
Joining us today are Mr. Michael Du, Director and Chief Financial Officer; and myself, Investor Relations Manager. Michael will walk you through our latest business performance and strategies, and I will discuss our financial performance in more details. After the prepared remarks, Michael will be available to answer your questions during the Q&A session.
Before we begin, I'd like to remind you that this conference call contains forward-looking statements as defined in Section 21 of the Securities Reform Act of 1934 and the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon management's current expectations and current market and operating conditions and relates to events that involve known, unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control. These risks may cause the company's actual results, performance or achievements to differ materially. Further information regarding these and other risks, uncertainties and factors is included in the company's filings with the U.S. SEC. The company does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise, except as required under applicable law.
I will now turn the call over to our Director and Chief Financial Officer to review some of our business development and strategic direction. Michael, please go ahead.
Thank you, Lara. Hello, everyone. Thank you all for joining us for our second quarter 2024 earnings call.
Before we begin, I would like to note that the financial information and the GAAP numbers in this release are presented on an accounting continuing operation basis and in RMB unless otherwise stated.
Let me start with our latest business update. In the second quarter, we are delighted to announce that the company has achieved a robust progress in our core business with an impressive top line growth of 165% quarter-to-quarter revenue growth, driven by significant expansion and contract winning in new potential areas.
As we optimize our operational efficiency, operational loss has shown a diminishing trend in the first half of 2024. Net loss on a GAAP basis continues to narrow for the first half of 2024 compared with the same period last year.
As we innovate and provide high-quality, efficient educational solutions, we have effectively implemented personalized teaching and learning for a broader audience in the evolving digital learning base.
Our innovative high-quality data-driven offerings are delivering substantial assistance in promoting trends in our partner schools that are positively associated with academic improvement. Examples including increased homework and exercise completion rates, [indiscernible] rates and student correction rate.
Comparison between students using and those not using our solution within the same school after semester also noted better academic performance of the students and teachers who use our solutions.
During the quarter, we continued to maintain a growth momentum in user engagement for subscription model of our comprehensive solution on expanded user base.
For additional customer groups, including both public and private ones, we are glad to see the operating metrics such as subscription retention rate. Utilization rates remain steadily improved in existing schools with significant results of attracting new customers and expanding the attention scope.
10 projects are for renewal in September this year. Out of these projects, a substantial portion of them have already renewed their counter with us, with some of them subscribing for more participating students, which leads to an effective retention rate of more than 50%. Such continuous renewal, expansion of student coverage within existing schools as well as purchase of additional value-added services and products such as learning SaaS expected to increasingly improve our revenue streams and sales efficiency.
Our sales network has also deepened as the number of schools purchased our solutions continue to increase. Currently, we are collaborating with more than 500 strategic partners to distribute our offerings in over 95 cities across 27 [indiscernible]. In this quarter, we have initiated a strategic partnership with 2 main [indiscernible] aiming to extend our distribution network and student reach to cover more customers throughout our module solutions.
We expect the collaboration will improve our market presence and both our competitive edge in the region, leading to an increased market share, possible new revenue opportunities and growth.
During the quarter, our teaching and learning SaaS business for projects exhibited consistent progress, continuing to generate revenues through successful delivery and new project.
Our district level project in Beijing and that we newly acquired in May has completed phased delivery and recognized revenue. Furthermore, as one of our key district-level initiative in Shanghai from September 2023 to June 2024, remarkable achievement has been observed. Parties have reviewed that our smart pen and paper have been in daily using [indiscernible] in Shanghai. They have completed over 23 million homeworks with a total of 460,000 cost hours and 18,000 academic evaluation and assessment practices, which covers 2,157 courses and more than 84,000 students and 4,500 teachers across 110 public schools.
Additionally, as a [indiscernible] application industry, the company activates the leading formulating the country's first standard, leveraging the technology, core expertise and innovation capabilities to fully participate and firmly consolidated industry recognition and strongly promote English technological progress and innovative practice. In respect of product service offerings, our commitment to product upgrades and customer satisfaction has driven us to continuously refine our offerings in aligning with user preference.
We have integrated personalized learning data across all learning scenarios.
Our comprehensive solutions encompassing learning resources, review of common issues personalized recommendations, tailored guidance, data feedback loops, comprehensive assessment and evaluation and reliable services. It ensures a holistic approach to resolve -- to resolving individual learning and guarantee the effective implementation of personalized learning strategy.
Presently, our platform has 330,000 active student users engaging in daily coursework with a cumulative of more than 35 million translated homework designments. The teach application products based on regular data collection has clearly demonstrated the value-add effects in enhancing learning outcomes within our partner schools, resulting in the academic improvements.
Now I will turn the call over to Lara to walk you through our latest financial performance. Thank you.
Thanks, Michael, and thank you, everyone, for joining the call. I will now walk you through our financial and operating results. Please note that all financial data I talk about will be presented in RMB terms. I would like to remind you that this -- that the quarterly results we present here should be taken with care and reference to our potential future performance are subject to potential impact from seasonality and one-off events as a result of the series of regulations introduced in 2021 and correct funding adjustments to our business model, organization and workforce.
In the second quarter of 2024, we recorded net revenues of RMB 67.5 million compared with RMB 25.5 million in the first quarter of 2024, representing 165% of the increase on a quarter-on-quarter basis. Net loss on a GAAP basis for the second quarter of 2024 was RMB 55.7 million compared with RMB 47.9 million in the second quarter of 2023. The adjusted net loss non-GAAP for the second quarter of 2024 was RMB 42.6 million compared with adjusted net loss non-GAAP of RMB 28.6 million in the second quarter of 2023. Gross margin for the second quarter of 2024 was 16.0% and compared with 48.3% in the second quarter of 2023.
As of June 30, 2024, we have cash results of RMB 410.7 million on our balance sheet, providing sufficient funds for future development.
Next, I will go through our second quarter financials in greater detail. Net revenues. Net revenues for the second quarter of 2024 was RMB 67.5 million, which remained relatively stable compared with RMB 69.2 million in the second quarter of 2023. Cost of revenues for the second quarter of 2024 was RMB 56.7 million, representing a year-over-year decrease of -- an increase of 58.6% from RMB 35.8 million in the second quarter of 2023, which was mainly due to the increase in project deliveries of our teaching and learning SaaS offerings during the quarter.
Gross profit for the second quarter of 2024 was RMB 10.8 million compared with RMB 33.5 million in the second quarter of 2023. Gross margin for the second quarter of 2024 was 16%, 16.0%, compared with 48.3% in the second quarter of 2023, which was mainly due to the higher proportion of lower margin mix deliveries in our teaching and learning SaaS projects during the quarter. Total operating expenses for the second quarter was RMB 71.0 million, including RMB 13.1 million of share-based compensation expenses, representing a year-over-year decrease of 22.3% from RMB 91.3 million in the second quarter of 2023.
Loss from operations. Loss from operations for the second quarter of 2020 was RMB 60.2 million compared with RMB 57.8 million in the second quarter of 2023. Loss from operations as a percentage of net revenues for the second quarter was negative 89.2% compared with negative 83.5% in the second quarter of 2023. Net loss for the second quarter of 2024 was RMB 55.7 million compared with net loss of RMB 47.9 million in the second quarter of 2023. Net loss as a percentage of net revenues was negative 82.5% in the second quarter of 2024 compared with negative 69.2% in the second quarter of 2023. Adjusted net loss non-GAAP for the second quarter of 2024 was RMB 42.6 million compared with adjusted net loss of RMB 28.6 million in the second quarter of 2023. Adjusted net loss non-GAAP as a percentage of net revenues was negative 63.1% in the second quarter compared with negative 41.2% of net revenues -- of adjusted net -- of adjusted net loss as a percentage of net revenues in the second quarter of 2023.
Please refer to the table for the reconciliations of non-GAAP measures to the most comparable GAAP measures. At the end of this press release for a reconciliation of net loss under U.S. GAAP to adjusted net loss non-GAAP.
Cash and cash equivalents and term deposits. Cash and cash equivalents and term deposits were RMB 410.7 million as of June 30, 2024 compared with RMB 476.7 million as of December 31, 2023.
In addition, we would like to announce that the company's Board of Directors renewed our share repurchase program on September 1, 2024, under which the company is authorized to repurchase up to $10 million of company's ADS or common shares in the next 12 months. The company's Board of Directors will review the share repurchase program periodically and may authorize adjustment of its terms and size.
Looking to the future, we will continue to explore and innovate.
We will cultivate product optimization and channel innovation to further strengthen our core competitiveness.
Our aim is to provide competitive personalized educational overall solutions and high-quality educational products and services that enhance effectiveness, contributing to China's educational digital transformation and sustainable development.
With that, that concludes our prepared remarks. Thank you. Operator, we are now ready to begin the Q&A session.
[Operator Instructions] I'm showing no questions at this time. I'll now turn the conference back to Ms. Lara Zhao for closing comments.
Thank you, operator. In closing, on behalf of 17EdTech's management team, we would like to thank you for your participation on today's call.
If you require any further information, please feel free to reach out to us directly. Thank you for joining us today. This concludes the call.
Thank you for your participation in today's conference. This does conclude the program.
You may now disconnect.