YXT.com Narrows Its Loss For The First Nine Months Of The Year As It Shifts Focus To Large Business Customers
Detroit, Michigan
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December 03, 2024 10:00 AM Eastern Standard Time
By Meg Flippin, Benzinga
YXT.com Group Holding Limited (NASDAQ: YXT), the Chinese digital enterprise learning solutions provider, narrowed its losses in the first nine months of the year as operational efficiency improvements, including the use of artificial intelligence, took hold.
During the nine months ended September 30, 2024, YXT.com, which leverages a SaaS services model to usher in a new era in corporate training, posted a net loss of RMB14.9 million, which was much narrower than the RMB245.3 million loss it had in the same period a year ago. It marked the first time YXT.com reported its financial results as a public company. In August, YXT.com went public on the NASDAQ, raising about $25 million.
“While the period presented macro challenges that impacted enterprise training spending, we remained focused on executing our strategic priorities. We continued to deepen our relationships with large enterprise clients, as evidenced by our growing penetration among Fortune 500 companies,” said Peter Lu, Director, Founder and Chairman of YXT.com, who was recently appointed CEO. With his years of experience, YXT.com expects Lu’s appointment as CEO will improve its strategic decision-making efficiency and effective execution. “Our product's new AI features have been well-received by key customers, enabling us to maintain healthy retention rates despite the challenging environment. Looking ahead, we remain cautiously optimistic about our long-term growth prospects, supported by the fundamental need for digital learning solutions, our strengthening position in the large enterprise segment, and our continuous product innovation and enhancement."
Margin Improvement On Display
For the first nine months of the year YXT.com reported margins expanded to 60.4% from 59.3%. What’s more, revenue generated from subscription-based solutions accounted for 91.7% of total revenue, up from 82.5% in the year-ago period. YXT.com has been purposefully focused on large enterprise clients that bring with it recurring revenue. Also aiding margins were operational efficiency improvements driven by AI automation and optimization of the company’s service team structure.
During the first nine months of 2024, YXT.com was focused on implementing AI-powered solutions across several business functions. YXT.com pointed to the deployment of automated sales assistants as one example. That AI tool helps the sales team identify and prioritize opportunities. The company also introduced Smart ServiceDesk, which handles routine service inquiries and in its development process, YXT.com is using AI-assisted code development and testing tools, which has streamlined its ability to deliver customized solutions for its enterprise clients. As of the end of September, YXT.com had cash of RMB488.7 million, slightly lower than the RMB496.2 million as of December 31, 2023.
YXT.com’s Big Business Push
YXT.com leverages advanced technologies, including AI, speech recognition, adaptive learning, anti-cheating and simulation, to provide customers with targeted training and learning paths for employees based on their positions and required skills. Using the insights the company has gleaned across different industries and business scenarios, YXT.com says it can offer companies a personalized recommendation engine that designs optimal learning paths for employees. The company says its solutions accurately match personnel, positions and courses for employees across China.
It’s a big market YXT.com is going after. As of 2023, the digital corporate learning market in China was valued at RMB126.0 billion, according to Frost & Sullivan. Its forecast is to reach RMB 300.0 billion in 2028, growing at a CAGR of 18.9%. Among large enterprises in China, the market is projected to grow at a CAGR of 20.5%. YXT.com reports that according to Frost & Sullivan, it is the largest digital corporate learning solution provider in China in terms of total revenue, subscription revenue and number of subscription customers in 2023.
That’s not to say there won’t be hiccups along the way. The first nine months of the year have been a challenging environment for training spending in China, with companies cutting budgets for everything from new hardware to digital training. YXT.com isn’t immune to that, but it has been pivoting away from the small and medium businesses sector and toward large enterprises that have more stable spending patterns.
It’s resulting in short term pain but for what YXT.com thinks will be long term gain. For the first nine months of 2024 ending September 30, revenue was RMB241.7 million, compared with RMB328.8 million in the same period of last year. The net decrease was RMB20.1 million excluding the deconsolidation effect, says the company. Net revenue retention rates of subscription customers decreased to 101.0% from 104.8%. The change was due to YTX.com’s strategic shift toward large enterprise accounts which the company says has consistent demand for corporate learning solutions. This realignment resulted in a planned reduction of small and medium-sized customers from its portfolio.
Opportunities Abound
It makes sense YXT.com would double down on the large business market for training. Not only does YXT.com get to show off its AI-driven capabilities but it gets to do it at a larger scale. There’s also the potential for higher revenue since large businesses typically have bigger training budgets. Budgets also tend to be more steady and reliable than with small businesses. There’s also the potential for bigger brand recognition. Working with big companies puts YXT.com’s brand in front of a lot of individuals.
YXT.com is focused on three main areas: deepening its relationships with large enterprise customers, expanding its AI-powered learning solutions and maintaining operational efficiency, all of which should help it grow.
“Our financial results for the first nine months of 2024 demonstrate the effectiveness of our operational optimization initiatives. Through strategic cost management and AI-enabled operational improvements across multiple functions, we significantly narrowed our net loss,” said Pun Leung Liu, Chief Financial Officer of YXT.com.”We remain committed to disciplined cost control while continuing to invest in strategic areas that drive long-term growth, particularly our technology capabilities and enterprise-focused solutions.”
Featured photo by Scott Graham on Unsplash.
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