Q1 2020 Earnings Call

[music], ladies and gentlemen, thank you for standing by and welcome to find <unk> first quarter 2020 earnings Conference call.

At this time, all participants are in 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 Daisy Wang head of Investor Relations of the company. Please go ahead.

Hello, everyone. Thank you for joining so lets first quarter 2020, <unk> earnings conference call. The Companys financial and operating results weren't you shoot in a press release, we are newswire services earlier today and our posted online you can download the earnings press release and sign up for distribution lists.

By visiting our IR website.

On the call our C. O 21, you will provide an update on our operational performance.

So with our strategic initiatives, our CFO Selena do well give you an overview of her financial performance.

I will provide our guidance for the second quarter up 2025.

Following their prepared remarks, we will move into the <unk> session.

Before I hand, it over to the Madison.

I'd like to remind you sound like safe Harbor statement in relation to todays call.

Except for historical information contains here in setting up the matters discussed in this conference call all forward looking statements.

These statements are based on current trends estimates and projections.

Therefore, you should not place undue reliance on them.

Forward looking statements involve inherent risks and uncertainties.

A number of important factors could cause actual results.

Before materially from those contained in any forward looking statements.

More information about the potential risks and uncertainties. Please refer to the companys filings with the FCC.

With that I will now turn the call over to US. The old. Please go ahead symbol [laughter] Duffy, how do I will come to some in first quarter recruiting Clinton conference call.

Hello dealer to sort of the first quarter results. Despite its somewhat didn't come the challenges stemming from the Covina 19, but then it.

Specifically, they looked almost doubled and kemper's, which are said to the almost half of our salesforce and put Coleman 12th National as T. exams from April two older stuff that has delayed a student enrollment for all of our preparation causes.

Compares to utilization as well so lets them they become the name because it due to the Tammy and go Andone improved to two about 18% during their culture. So to the extraordinary efforts will celebrate employee is setting up a robust on the infrastructure will choose of course bidding scope RMB 500 trade on a 16.8, meaning in the first quarter.

In addition to.

<unk> profitability, a improvement where they know it there's no margin narrowed by putting a full percentage points to you didn't want to 6%, resulting from our prudently managed to close quotes and expenses.

Well the cover the 19, but timing has posed challenges for both anybody deals on the bid is they have also present data emerging opportunities. The put that make has forced to schools universities Southern company is to tend to remote working out of teaching, creating a booming online learning, although the S.T. exam has been <unk>.

Postponed I'm still done so actually spending more time to prepare for pets.

On the show you a high level loyalty and he means socially I'll even for running in the first culture total cost went down by streaming classes and the number of quite as quickly as taken per okcular user increased to 19 person on the 21 person to respectively year over year, we expect to the increase engagement.

Lead to improve the exam they shoot adults any help promote although of course it seemed that future.

[noise], there's five five people changing behavior patterns through the locked up yogurt in the first go talk to anybody with gags BRL experimented with new approaches to student acquisition, I mean to increase sales efficiencies and the student conversions. In addition to our students and student acquisition.

It's tricky.

Continue to diversify over and then of course offerings to include the more mastodon day, the professional certificates and the non degree programs, but I didn't know courses to satisfy the needs of our still students to give us develop their interest in intrastate alone <unk> send the professional skills leverage over on <unk> and pitching expertize then.

On the infrastructure. This will help us drive new goes by capturing Chill Wilders still didn't pay is increasing over still does what it needs to pay for more courses and maximizing their engagement.

As a a mission critical master's programs to raise studied reached a 10 year low of tuning it prudent putting two persons in China and after you with a strong market goes the preclinical flubber paradox singing the segment or master's degree or into the program succumb to the full the need to kind of 5% of sort of course buildings, you know first quarter.

Putting funding significantly hyler compare to ways.

Well put in one person 10, those 3.7 person input is nothing untoward in 18, respectively.

The programs in particular, attracting strong interest of Robert students as well over a joint programs, where the liberty institutions, the domestically and the board I did they have done a affordable price Ranch. In addition to our efforts to drive the development on the innovation. So off of a Corbin is we have expanded of all.

Offerings, but if somebody she had built in this vertical designed specifically to provide an employee training service group to publishes I'll repeat to be trading services offered a mobile, but there's still plenty infrastructure numerous professional skilled training courses caused courses and other the net.

The services designed the full operations since its initial launch.

There appear to be training services have risk or received the positive feedback was 300 and assisting corporate clients send up it's about it's currently relatively small skilled I'm confident that I'll repeat to be training service as well well comedy Montalvo Corbin isn't doesn't mature.

But that may occur or the issue of support during this time, but on that it puts them at the me I mean I'm being cash in addition to operating free online courses to have a conditions or would it into the cover the 19 outbreak continue to gradually improve we are confident to enhance over financially.

<unk> operating results full really for the remand over the year for the long wrong well Bill.

I will further folks I'm still do an acquisition straight is diversified cashing off of course offerings upgrade of our other offerings and the investment in infrastructure well in that effort you Pedro satisfy all the skills and needs and the string thing over brand value.

I'm going to have that starting from April starting this do you will survive. This therefore the company. So do you have has served sunland chief strategy officer since joining the company in 2015 and has been a in instrument two parts of the sudden imagine minting medians three rounds of private financing and they come covenants.

Appeal was that I will let you handover the call taller simplicity not to run through our financials.

Thank you for the introduction Campbell and Hello, everyone.

Thanks for joining us I'm very happy to begin my new role with the company and hosting this conference call.

I will have my face anniversary with Sandler July this here in the past the five years I have been privileged to serve settlements and deeply into passionately engaged in these growth and development I strongly believe that the online education industry is winding up the most promising industries in China.

The feature today together with sort of all our CEO and my best dependent or a we'll communicate our accompanies strategies operational performance on corporate governance transparently opening in the responsibility to the capital markets.

During the first quarter, we continued our balanced approach to both revenue growth and profitability. We were pleased especially amongst the difficulties cost to buy the Colgate 19 outbreak to seize the standard spreads in our gross profit, which increased sequentially for two quarters in a role as well.

<unk> narrowing our NAV floppies, both sequentially and year over year.

Its cost structure optimization as it continues to priority our operating expenses decreased 7.3% compared with the same period last year.

Looking ahead, we are optimistic that along with our new initiatives focused on you didn't deposition and embraced the content because further leverage our existing infrastructure to improve both to assist in the ability and effectiveness of our business model and ultimately drive long term girls.

Now, let me walk you through some off the key financial results for the first quarter Twentytwenty, all comparisons year over year, and all numbers I RMB.

In the first quartile Twentytwenty. That's revenue were 565.1 billion relatively flat to the first quarter of 29 team.

Cost of revenues increased by 13.4%.

96.9 million in the first quartile twentytwenty from 85.5 million into first quarter of talking on team.

Which was primarily due to an increase expenses relating to fees to educational institutions.

Gross profit decreased by 2.2% to 468.2 million from 474 hundred 78.7 million, you're the first quartile 29 team.

In the first quarter 220, operating expenses were 557.82 million, representing a 7.3% decrease.

From 612.7 million in the first quartile 2019.

Sales and marketing expenses decreased by 7.29% to 457.29 million in the first quartile twentytwenty.

Probably 497.3 million in the first quartile 20 line team.

The decrease was mainly due to rate used to marketing spending reflectively reflective of displayed prudent cost management and they did decrease expenses related to sales in the marketing personnel.

General and administrative expenses was 88.5 million in the first quartile twentytwenty relatively flat compared compared with the first quarter 2019.

I've got to development expenses.

Great to by 20.6% to 21.4 meeting in the first quartile twentytwenty.

From 27 million in the first quarter of 2019.

The decrease was primarily due to a decrease in the competition incurred related to our product and technology development personnel during the quarter.

Other income increased to 29 Neely into first quarter from 298000 in the first quarter of 2019. The increase was primarily due to the value added tax exemption offered by the relevant authorities in the amount of.

19.8 million.

During the cold late 19th outbreak added government subsidies.

8.44 million.

Net loss for the first quartile of Twentytwenty, what safety 65.6 million compared with 112.9 relating to first quartile of 29 team.

Basic and diluted net loss per share was 9.62 in the first quartile twentytwenty.

As of March 31st Twentytwenty. The company had 1000 340.2 million of cash cash equivalents.

143.4 million no short term investment.

Compared with 1400 2.2 million of cash and cash equivalents and 217.6 million O'shea some investments as of December 31st 29 team.

As of March 30, Onest Twentytwenty the company had deferred revenue balance of 3000 105.5 million.

Compared with three solvent 228.8 billion as though as of December 31st It's why he 19.

Capital expenditures were incurred primarily in connection with IP infrastructure equipment on the leasehold improvement necessary to support soundness operation.

Capital expenditure were 7 million in the first quartile twentytwenty compared with 1.1 going into first quarter, if not 20 land 19.

For the second quartile Twentytwenty select carbon saliq back.

That's a revenues to be between 500 million to 520 million, which would represent a decrease of 9.5% to 5.29% year over year.

Above outlook is based on the current market conditions on the reflects the company managements current and the pretty leave me Lorraine asking myself market operating conditions and the customer demand, which are all subject to change.

With that I'd like to open up the core two questions operator.

We will now begin the question and answer session to ask a question you May Press Star then one on your touched on calls if you're using a speakerphone. Please pick up your handset before president and chief.

To withdraw from the question can you. Please press Star then too.

For the benefit of all participants on today's call. If you wish to ask your question to management in Chinese. Please immediately repeat your question in English.

We will pause momentarily to assemble our roster.

Again, if you have a question isn't star then one.

There are no questions at this time I would like to turn the conference back over to Daisy Wang head of Investor Relations for closing remarks.

Once again, thank you everyone for joining todays call. We look forward to speaking with you again soon but they have good night.

[noise]. This concludes the earnings conference call you May now disconnect your lines. Thank you.

Yeah.