Q4 2020 Sunlands Technology Group Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to Sunlamps fourth quarter and full year 'twenty 'twenty earnings Conference call.

At this time, all participants will be 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 conference over to your host today, you want E. Sunland IR representative. Please go ahead.

Yeah.

Hello, everyone from some of your for joining from on sports.

Sure Yeah, simple turnkey I'm asking rents call on his financial and operating results were issued in all the press release, the our newswire services earlier today and not posted online you can download of the earnings press release and the start up all the distribution list by visiting our IR website on the call.

Oh of somebody who will provide an update on all the operational performance of our strategic initiatives I was the F. O have you not really fully well give you an overview of the financial performance and also provide our guidance for the first quarter of 'twenty. It's under one following their prepared remarks.

We will move into the Q&A session before I hand, it over to the management I'd like to remind you of some of those safe Harbor statements in relation for today's call except for the historical information contained herein for you some of the matters discussed in this conference call forward looking statements.

These statements are based on current strength estimates and projections and therefore, you should not place undue reliance on the <unk>.

Forward looking statements involve inherent risk of an eye on southern Kid.

On the all important factors could cause actual results could differ materially from those contained in any forward looking statement from all information about the potential Christmas and.

Please refer to the Communist findings with the curious on the Exchange Commission.

With that I'll now turn the call over to our CEO of some volume.

Some of your flow Hello, everyone.

We'll come to the sometimes the force culture on the full year of confronting conference cool.

Well first of all the the Euro zone.

Those unusual challenges some of the changes will conclude theater tickets on engine was steady in the Saudi the girls in the Air Force culture. The continue to the other stretch day focus on developing diverse product offerings, improving student acquisition efficiency and the hunting canceled on defensiveness and the pursuit of the opportunity you see in the.

That's the overrule demands girls full head on vacation in the professional skills of programs.

On the fourth quarter of.

All of a net of revenues right.

Five.

On the full up on the sense, meaning of RMB, scoring of cyclical on the three per cent compared to the same share of or the afternoon 19 cents to enhance operational efficiency and expand it of course categories of Aneel skills until you Harlan and of course, some remarkable the pie 15 1.8 of person you're of a year or two.

Over 114 of southern in the airports culture.

The driving force behind of the start of still didn't go gross was all the further expansion of course the portfolio spanning all over the categories based on the solely of the foundation of our vertically on to the progress of.

Its fruition of diverse avenues for user acquisition as well as the.

Has the operating efficiency and the service quality or still contributes to the two day strong girls.

Oh from Masters degree of Orange the programs continue to yield the robust the results of intermittent team with.

The COVID-19 pandemic impacting many industries than the correlating Hayley I'll sort of in the market. There has been the increasing crystallization of the importance of post of graduate education. The.

National post the granting of the entrance exams for the it seems like the one concluded in December December was registered at the current reaching a record high of foremost circle on the it meaning in the way of well prepared to handle the growth in volume and demand as the competition intensifies and automation in the race count.

The decline we are seeing more at the kinds of willing to pay for preparation of Cortez.

Net of a master's degree on the programs showed a strong growth momentum in 2017, whereas the six the certain coupons on them, meaning RMB goes fittings, increasing 14, non point of 5% compared with 2019.

The Saudi the performance of it.

Well the result of all of our high quality and the pillar of course is that helps the capture the increasing number of Abdicant full of post graduate the scale studies two of them most of the working professionals.

We are also developing more undergraduate oriented programs to music changing demands of the end authentication.

All of her rich opportunity to send the various options for people wanting to pursue their undergraduate on fishing between life.

For example, well and the preparation of course, there's typing entrance exam for and also the universities and the opening of the diversity of China. He ambition two O S. T programs, which will further diversify our income sources and the consolidated consolidates all of our marks for the issue.

The online education has the Cam you become more visible and the why the real step to the in China and of the Chinese government has been supportive in the vocational.

Quality of local publication on continuing education, we believe the demand the full quality on the non coastal sector of course is we will continue with the girl and the well will position the true sales growth opportunities. So that's the way the rollout diversified the cocoa dorm mix made him the virus demand.

On the fourth quarter, but wasn't necessarily the past goes I. The way further develop the more professional certification on the skills of course is the only enrollments in the fourth quarter and of course, the more than six times of year over year, primarily due to the increase in professional skills and the general interest causes the catering to go and demand for.

Diverse person of personal education.

The low base not the year, but divide up the more general course of helping users the users of cultivate soft skills interests and the hobbies.

And we saw a surge in interest for the of course is on especially during the Covid pandemic on.

The airports and the expansion of course portfolio have paved the way for permit for pardon me of seeing further growth as we continue to release steel of course, they send the program is to satisfy the market demand was all of of course portfolio sort of the foundation the Italian fetching the skill of our powered user pay it's full of both existing and new programs.

To sit in their fields.

Yeah.

In pursuit of both the operating efficiency on the hunting curriculum the effectiveness of the team further improve the average user acquisition on the service quality the scene.

Neighbors asked you the advanced yourself, the rising opportunities on professional certification and of skill syndication with further improved all of ourselves and pushing the seed to serve all of our enlarge the per doctor portfolios and we saw a notable increase in the efficiency of our work force, what's driving traffic acquisition costs. The also expanded.

All of our sales channel so repeat the beef training service working well working on ways corporations and the institutions, which began to bear fruit. We are confident of that the integration of various channels type of thing and the way to users and the corporate customers will further increase all of our market penetration and the user base as well as the Optum.

All of our user acquisition cost.

With all of our commitment to offering high quality on allocation, we have established the procedures to both procure on the train on the training first of all the way to teachers. We have also improved their services to courage active end of participate participant per trade lending, which is especially valuable for <unk>.

And of the students in 2013, the number of class participants increased of 29.3 person year over year in the S. T. E exam held October from team, we maintained the high level of postulates of above 16%, what's your furthers the Monday at all of our market leadership.

It was the first quarter, we held off of annual teaching contest to motivate teaching implement the focus on the teaching quality and creates a virtuous circle of timing.

Exclusive use of referrals because they're on.

Oh acquisition, and the zone and sustainable growth.

On the older closest all of its fear of runs of the T shirts, and the most of the dollars still further.

Apply at the cutting edge AI technology into all of our teaching per se as a of air system is able to predict students exam scores based on their practice performers within the accuracy rates at the 18% at the Kansas well first of all of just change the helps students students adjusted their standard plans accordingly.

He also implore the employed.

In order to analyze the analyzed and the per day or predict.

Predicts the most of Brooklyn, the program to the test the questions using all of the robust historical examination database and big data analyses of comparability in the.

First quarter, we further expanded our exercise of database on and of course, the number of exam questions to the eighth on June 5000, representing year over year of goes of it's important the 8%.

[noise] heading further into the existing one little Bon ton.

On the general T and the adapter ability as we remain committed to enhancing the day rate of Montana rollout of total nodes and the diversified the per docs on the service's full end up continue on vacation and the skill training.

We are also keeping a close eye on improving our operating efficiency as well as expanding on a boosting sales channels was that all of you.

The turn the call over to our simple sitting now to run through all of our financials.

Thank you Tamara.

The one in the fourth quarter, when she kind of our strategy the balance business growth on the perfect ability and the challenging environment.

Our natural revenues continued to grow at a healthy rate.

The high end of our guidance by $4 four per cent.

As we further improved operating efficiency.

<unk> optimized the cost of our general and administrative expenses in the fourth quarter declined 44, 6% year over year, which contributed to the significant narrowing of our net loss to $73 5 million RMB from 139.5.

Any of the arm day in the fourth quarter of 2019.

Our net loss margin decreased considerably to 12, 6% from $25 four per cent and the fourth quarter of two of 2019.

Going forward, we will continue to refine our operating on the sales execution as we strive for a robust and sustainable long term growth in the other key consistently create value for our students from shareholders as well as the broader society.

Now let me walk you through some of the key financial results for the fourth quarter 'twenty 'twenty all comparisons are year on year and on numbers I RMB unless otherwise noted.

In the fourth quarter net revenue was $584 6 million an increase of six 3% year over year cost of revenue decreased by three 6% to $97 8 million in the fourth quarter from 100 and the one.

5 million in the fourth quarter of 2019 the.

The decrease was primarily due to reduced insurance related costs incurred for all of our integrated online education service package purchased by Skus.

Gross profit increased by eight 6% to $486 7 million from 448.2 meeting in the fourth quarter of <unk>.

On the 19th.

In the first quarter operating expenses were 673 7 million, representing the 12, 5% increase from 599 million in the fourth quarter of 2019.

Sales and the marketing expenses increased by 27, 8% to 800 in the eight $608 5 million in the fourth quarter from 400 of $76 1 million in the fourth quarter of 2019.

The increase was mainly due to increases in number one compensation expenses related to our sales and the marketing personnel and number two spending on branding and the marketing activities, including more marketing.

The motion activities to diversify student acquisition channels.

General and administrative expenses was $54 7 million in the fourth quarter of 2020 decreased by 44 point.

<unk>, 6% year over year, many due to the decrease in compensation expenses.

Product development expenses decreased by.

$56 four per cent to $10 6 million in the fourth quarter from $24 three of them getting in the fourth quarter of 2019. The decrease was primarily due to a decrease in the compensation expenses incurred related to our production in the technology development personnel during the.

Water.

Other income increased to $109 4 million in the fourth quarter from 629 in the first quarter of 2019.

The increase was primarily due to the value added tax exemption of $77 5 million offered by the relevant authorities as part of the National COVID-19 relief efforts.

Net loss for the fourth quarter was $73 5 million compared with 179 5 million in the fourth quarter of 2019.

Basic and diluted.

Net loss per share was 10.87 in the fourth quarter of 2020.

As of December 31st the 2020 of the company.

Has 767 million of cash and the cash equivalents and 517.8 million of short term investments.

As of December 31st of 2020, the company had the deferred revenue balance of three so the $24 4 million compared with 3200 on 28.8 million as of December 31, 2019.

Capital expenditures were incurred primarily in connection with Ikea infrastructure of equipment and the leasehold improvement necessary to support the company's operations.

Cash capital expenditures were $4 7 million in the fourth quarter compared of ways 10, 4 million in the fourth quarter of 2019.

For more of our 'twenty to 'twenty four year financial results. Please refer to our earnings press release for further details.

And now for our outlook for the first quarter of 'twenty 'twenty. One some of them is currently expects net revenue to be between $670 million.

RMB, two 690 million RMB, which would represent an increase of 18, 6% and the 22 points one percentage year over year. This outlook is based on the current market conditions on the reflects the company's management's current on the preliminary estimate.

The market.

The conditions and the customer demand, which are all subject to change.

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

Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

Again, if you have a question.

Please press Star then one.

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

Showing no questions. This will conclude our question and answer session.

At this time I'd like to turn the conference back over to you want E. IR representative for any closing remarks.

Well again, thank you Abu on well joined today's call. We look forward to speaking with you again soon good day and good night.

This concludes the earnings conference call you May now disconnect. Your line. Thank you.

Okay.

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