Q4 2019 Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to Sunland fourth-quarter and full-year 2019 earnings conference call at this time. All participants are in a listen-only mode after prepared remarks by the management team. There will be a question-and-answer session today's conference call is being recorded. If you have any objections you may disconnect at this time. I would now like to turn the call over to your host today in Sunland director, please go ahead.

Hello everyone and thank you for joining summer quarter and who year 2019 earnings conference call and the call. I will say I provide an update on our operational performance as well as our strategic initiatives. I would say actually season is only will give you an overview off of financial performance and also provide guidance for the first quarter of 2020 following that prepared remarks. We will move into the classroom session.

Before I hand it over to the management, I'd like to remind you of someone Safe Harbor statement in relation to today's call except for the historical information contained hearing certain of the matters discussed in this conference call are forward-looking statements off. These statements are based on current trends estimates and projections. And therefore you should not Place undue Reliance on them or looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement.

For more information about the potential risks and uncertainties. Please refer to the company's filings with the Securities and Exchange Commission.

With that I will now turn the call over to our say Tombola am supposed to culture. And so you're talking nineteen companies score against the backdrop of macroeconomics challenges during the fourth quarter. We remain focused attracting students to our online platform and improving engagement through a variety of strategic methods. First culture in in Revenue was were 549 off the meeting R&B in line with our guidance. We narrowed our net loss. Margin to 25.4% in the first quarter versus 13-2 from 3% in the same. And what's the year as you continue to manage costs and expenses in the first quarter of 2019. We continue to focus our multi-pronged strategy.

acquisition and retention

Over efforts centered about around the further development and the depreciation of our products and services through the application of big data Internet life and energy. This has a long as to produce significant operational benefits people suffer employees and students facilitate our digital Club Festival Mission and the further strengthen our data security and the risk control capability next the name. It provides Keys specifics on the driver's of our fourth quarter performers 1st. We continue developing our last e programs especially the Masters warranty products to build a more well-rounded portfolio home and meet the diverse needs of our students in 2019. The number of people entry entrance Examination for Masters programme reached the coupon many in China going off.

I'm going to 8% here and representing the fastest growth rate in the past in the past ten years equipped with a deep understanding of the end of the month as well as solid operational track record. We had been sitting upon this magnet Market Opportunity by activity investing in Masters oriented Products off making every effort to create a specialized programs and the solutions. For example, we provide students with Comprehensive tutoring and training test preparation and the MBA program interviews taught by teachers from both domestically and internationally top universities. This has resulted in a solid interest rate of 65% in 2019.

In addition, we have continued expanding our partnership with International universities in order to bring students in China access to high quality and higher education resource from Europe and the United States as well as share China's and and educational Resources with other developing countries. For example, we reached cooperation agreement to jointly launched. The master's program was renowned International universities with efforts such as this over Masters oriented products continue to attract High interest from students culminating in 19.8% of course building nearly one hundred twenty million R&B end of the first quarter from approximately 7% of course meeting only sixty million R&B at the end of the first quarter 2018 for our program will remain dedicated to improving the pig.

The steps and the efficiency of this program for our students put in nineteen our students achieve the average pass rate of sitting 1.1% This is significantly higher than the average pass rate of 43.4% achieved by self taught to students during the 2012 to 2016. According to add research for subjects such as fiscal policies and the finance principles of computer science and management color makes pass rate for our students were over 90% off the most trade in the effectiveness of our learning platform. I would also like to highlight the tremendous potential ahead of us in terms of animals to secretary and professional education wage according to the statistical report internet development in China published in August 2019 by Office of the central cyberspace Affairs commission. Yep.

and 10% of

Users have college degrees or higher while on education penetration was just 27% of total internet users as of June 2019 off both showing significant room for further expression expression, which will under the our future Cruise.

Certain they made a story of the Parker. Is he in the fourth quarter with our trial programs that enable perspective students to experience our Advanced online and mobile-only plan for Monday through a Target and the princess user outrage from classes that accurately catered to user needs and effective follow-up of users by our teachers and staff will achieve material increase in conversion rates for some of our trial classes going forward. We will continue to leverage various tools such as our mobile app and off the mini program to improve ourselves in efficiencies and our goal experience over time.

Finally in regard to the reason the coronavirus academics that has posted and presented. I presented Global challenges. Our stores have known people who have been affected by the outbreak as a show of support be donating masks Go-Go's and protective clothing with the total value of 5 million RMB. In addition to free online courses worst possible E15 meaning to medical stuff and the people most affected by the coronavirus. It's displayed disruption caused by the pandemic to our business operation. We expect the adverse impact the coronavirus outbreak has and our business and results of operations wage limited given that they current thing and other travel restrictions imposed due to the outbreak as I expected to be temporary and and that our courses and yep.

Offerings delivered in a live streaming format and can be consumed in an indoor environment looking ahead. We're optimistic about the amount and groups of our chrome rings. And then you'll still De Niro moment as we continue to stay balanced top and button and performance of reading tech knowledge high-quality educational content bought a couple of ways our solid track record of passwords position as well to capture a strong and run Crews opportunity present in the under secretary and the professional Market with that. I would like to hand over the quote our sale for Steven to run through our financials. Thank you. And hello, everyone. Thanks for joining us are not revenues were 549.7 million RMB in the first quarter of 2019 in line with our guidance are gross bearings and New Student. Yep.

Is decline that fifteen pounds?

5% and 22.6% respectively year-over-year primary as a result of slowing macroeconomic economic growth in China during the first month. We continue to pursue a balanced approach to improve profitability while executing our student acquisition strategy by focusing on streamlining our customer our administrative expenses as well as sales and marketing Spencer's decreased by 30.9% and 10.2% respectively compared with the same quarter last name our cost efficiency Improvement measures led to a reduction in that laws in the first quarter to 139.5 million or 24% lower wage compared with the laws of 183.7 million in fourth quarter of 2018 looking into twenty-twenty. We are optimistic that our dedication to persistent product wage.

The service upgrades will continue to bring value to our customers and ultimately our shareholders. Now, let me walk you through some of the key financial results for the first quarter of school year 2019. All comparisons are a year-over-year and phone numbers are R&B in the first quarter of 2019 night revenues decreased by 3.4% to 549.7 million from 568.8 million in the first quarter of 2018. The decrease was mainly due to the decrease of gross bearings in 2018 compared with 2018 cars of revenues increased by 29.3% to one hundred and one point five million in the first quarter of 2019 from Thursday 7 to eight point five million in the first quarter of 2018, which was primarily due to insurance premiums related to online education services with insurance job.

Since late in 2018 gross profit decreased by 8.6% to 448.2 million from 490.3 million in the first quarter of 2018 in the first quarter of 2019. Operating expenses were 599.99 599.00 million representing a 14.4% decrease from 699.7 million in the first quarter of 2018 sales and marketing expenses decreased by 6.2% to 476.1 million in the first quarter of 2019 from 530.1 million in the first quarter of 2018. The decrease was mainly due to reduced the marketing spanning reflective of disciplined and prudent cost management as well as a decrease expenses related wage.

to sales and marketing person

No, General and administrative expenses decreased by 30.9% to ninety eight point six million in the first quarter of 2019 from 152.6 million in the fourth quarter of 2018 due to a decrease office and conversation related expenses product development expenses decreased by 9.9% off 24.3 million in the first quarter of 2019 from twenty-seven million in the first quarter of 2018. The the increase the decrease was primarily due to a decrease in the number of employees and compensation paid to settlers product and Technology development Personnel during the quarter night loss for the first quarter of 2019 was 139 find the only comparable is 183.7 million the first quarter 2018 basic and diluted $9 per share was 20.46 RMB wage.

First quarter of 2019 as of December 31st, 2019 the company had $1,400 and 2.2 million cash and cash equivalents and two hundred Seventeen point six million of short-term Investments comparables 1248 point eight million of cash and cash equivalents and 1000 with the twenty eight point six million short term investments as of December 31st, 2018, as of December 31st, 2019. The company had a deferred revenue balance of 3228.8 million compared with 3286 million as of December 31st, 2018 down to expenditures were incurred primarily in connection with purchases of buildings and infrastructure equipment necessary to support and less operations Capital expenditures off.

Or ten point four million in the first quarter of 2019 compared with 263.1 million in the first quarter of 2018, and in terms of the key financial results from a year 2019, let me walk you through in the details tool in the year of 2019 not revenues increased by 11.1% to 2.2 billion to billion in 2018 cars revenues increased by 20% to RMB 396.3 million is the year of 2019 from R&B 338.4 million in 2018. Gross profit increased by 9.4% to 1.8 billion from 1.6 billion in 2018 worth in 2019. Operating expenses were 2.3 billion representing a 15.5% decrease from 2.7 billion in 2018. Yep.

Those are the marketing expenses.

Decreased by 16.7% to 1.8 billion in 2019 from 2.2 billion in 2018. The decrease was Millie do to reduce them in spanning reflective a disciplined prevent cause management and the decrease in the expenses of sales and marketing Personnel expenses decreased by 18.1% to 363.3 million in 2019 from 443.7 million 2018 product development expenses increased by 33.8% to 101.7 million in 2019 from Seventy-Six million 2018 night. Last for 2019 was 395.2 Million compared with 927 million in 2018 basic and diluted nice night. Last pressure was 57 month.

It was in 2019 compared various 147.27 RMB in 2018 Capital expenditures what incur primary connection with purchases buildings and infrastructure in equipment necessary to support silence operations Capital expenditures were twenty five point five million 2019 compared with five hundred and eighteen point four million in 2018.

For the first quarter 2028 Sundance currently expects not revenues to be between 540 million to 560 million which would represent a decrease of 4.3% to 0.7% year-over-year. The above all log is based on the current market conditions and reflects. The company name is current and the preliminary estimates of Market operating conditions and the customer demand which are all subject to change with that. I'd like to open up the call to questions. I asked operator, please.

You will now begin the question-and-answer session to ask a question. You may press * then 1 on a touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys to withdraw your question, please press * then two for the benefit of all participants on today's call. If you wish to ask your questions to management in Chinese, please immediate could you repeat your question in English at this time? We will pause momentarily to assemble the roster.

again, if you have a question, please press * then 1

No further questions. This concludes our question-and-answer session at this time. I'd like to turn the conference back over to Union blue investor relations director for any closing remarks.

Once again, thank you everyone for making efforts joining today's call besides the serious coronavirus disruptions. We look forward to speaking with you again and good day and good night.

This concludes the earnings conference call. You may now disconnect your lines. Thank you.