Q1 2021 Sunlands Technology Group Earnings Call

Yes.

Ladies and gentlemen, thank you for standing by and welcome to suddenly it's first quarter 'twenty 'twenty 1 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 you hockey suddenly its IR representative. Please go ahead.

Hello, everyone and thank you for joining installment first quarter 'twenty 'twenty, 1 onions conference call come from Si financial and operating results were issued in our press release via Newswire services earlier today and are posted online you can download on your press release and the site.

Up for our distribution that by visiting our website on the call. Our E. C O 2 volume where I'll provide an update on our operational performance as well as our strategic initiatives I was CFO Selina slowly we I'll give you an overview of our financial upheaval.

And also provide our guidance for the second quarter up 'twenty or 'twenty 1.

Knowing 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 upsell and safe Harbor statement in relation to today's call ex.

That's what our historical information and contain a theory and some of the matters discussed in this conference call are forward looking statements.

The statements are based on current trends estimates and projections and therefore, you should not place undue reliance on them.

Looking statements involve inherent risks and uncertainties.

Important factors could cause actual results to differ materially from those contained in any forward looking statement.

For more information about potential risks and uncertainties. Please refer to the communist filings with the Securities and Exchange Commission with that I will now turn the call over to our CEO Tom volume.

So it's up to you Hollywood will come to sell non in the first quarter.

And does he wound conference call.

I'm pleased to announce that sometimes technological had a very strong opening quarter Fulton County, 1 so there wasn't any other revenues that it rose to 619 full pulling through many RMB 820.

Moving to putting non person to year over year increase the increase in net of revenues was mainly driven by the year over year goes income spitting since the second half of 2019 go spinning and seen the first culture. Those 2.5 net himself policy other mini RMB right.

Presenting Yo Yo goes of 14 important non person.

In terms of new enrollments, who achieved a 107.6 person inquiries yoga yoga, Europe, which surged to over 145 southern the students is solely the portfolio or this was driven by our continued airports in diversified in protocol frings raising brand awareness and the <unk>.

Moving and student satisfaction.

So loans continue to focus on expanding and refining its master's degree oriented programs because because of this tragedy goes opinions in master's degree oriented programs. A 10 day that it goes through a total of 17, 3.6% year over year and contributed to a possibility.

13th full person to total goes abating compared with 22 person in the same culture and multiyear deals.

Enrollment or simple I'd tell you, it's something that you've considered its a really tough 17 coupon the EDA person you're you're.

Although a masters degree programs casualty specialty to your students with full time jobs, who are more financially stable, but they havent really don't have the NIM, just time and demanding more customized assistance for learning.

Students with a full time jobs tend to be more dependable and more eager to attend online test prep courses like other.

It was all part of it that's something that we believe this fact, coupled with Sundance continue the investment in brand awareness and of course offerings. We will continue to provide the thrust for our wider market share.

We will also continue to force Marc Doyle opportunities for other professional certification and I'm, making somebody other kind of progress in growing this segment as well since the outbreak of COVID-19 knots to ear people out get them more comfortable attending 1 and cross sales to improve walking with their teeth and hope you read at his skills.

Moreover, the employment market is becoming more competitive for employees and as they are building. The gross sales. So the art yossi to attend the professional certification courses with the purpose of maintaining their level of employee rapidity. In addition, the Chinese government also established a mouthful.

Part of this day is to support the professional certification education.

Such as subsidies training butchers and so according to this day the council of China more than 27, meaning and subsea subsidize subsidize the vocational training opportunities were provided in 2020. We believe these factors will continue to play out in the <unk>.

Your true bode well for our professional certification business.

Well it is it is encouraging to see such strong growth momentum in both master's degree 1 day at the end of <unk>.

Professional certification programs.

We remain confident of our S. T programs I know, we'll continue to fine tune and expand our product offerings.

Got into those savings from actually multiple day. She is sensors of China only 218, meaning many Chinese are held plays.

She had a degree of all about representing a percentage or 15.5 per cent compared to the total population of 1 important 41 bidding in China. We believe S. T. E is still a sizable market and has the company will continue to generate revenue from this industry.

High level teaching quality is our priority and the way our devoted to recruiting first class teachers with competitive compensation packages.

End of the first culture more than 17 person until all of our teachers health degrees from pulp top tier universities in both China and other around the word. Furthermore, we are committed to building our extensive teacher rating and the training system deploying other database of case studies and the templates in teach them.

And its termination dimensional teaching channels to ensure total notes teaching Stewart standards driven by all the airports in pursuing high level teaching quality, who are in suit is truly that other students level of satisfaction has reached a record high according to our internal survey.

Aside from our airports in upgrades and teaching quality, we continue to expand and improve our Academy research team refine our research and development to framework for new courses with the assistance of AI technologies.

Other to widen our course offerings and the sinter rates the past with insured introduced new of course, a new courses. We believe our academy of researching a continue to grow our research personnel will have better opportunities to become more specialized in haynesville. Her all academy this spring, which will further enhance.

Others are.

Suddenly juice synergies between all of our new course offerings.

And the subsequently improved day overrule other kind of medical research efficiency. We are confident this snowball effect Academy research will pave the way to force.

Saudi they're fighting over our competitive position and strengthening our economy, most impulse of cyclical right undercut your industry.

Looking ahead well.

Endeavoring to per day parade of her masters degree oriented in the professional skills programs to capture the benefits of economy skilled well started fighting over market, leading leading position U S. P programs without devoted to delivering the best learning experience 12 are still done.

So they can have the best career prospects prospects, while also creating values for all stake holders.

Is that I will turn the call of 12 or sales force arena to run through our financials.

Thank you from ball Hello, everyone. We are pleased to see first Dakota natural revenue speech guidance once again and hit a record high its rising brand recognition for our master's degree oriented and our professional skills programs.

Bolstered our topline growth momentum.

Our ongoing diversification from FTE programs, and our commitment to optimizing the student's experience affirms our confidence in sustaining this momentum.

We also managed to lower costs.

Leave a range 52, 2% and 16.3 percentage reductions in G&A and R&D expenses, respectively.

Result, first quarter net loss narrowed 18, 7% year over year to $53.3 million RMB.

As we look ahead, our marketing department, we will continue to explore avenues to promote brand awareness, while our sales team will target a higher referral rate and the sales conversion rate to fuel future growth.

And most importantly, our management is keeping an eye on implementing optimal strategies that deliver the best returns for all shareholders.

Now let me walk you through some of the key financial results for the first quarter of 2021, all comparisons are year over year and all numbers are in RMB unless otherwise noted.

In the first quarter net revenues were 694.3 million an increase of 22, 9% year over year. The increase was mainly driven by the year over year growth in gross billings since the second half of 2020.

Cost of revenues increased by 9.8% to $106.4 million in the first quarter from 96 points from 9 million in the first quarter of 2020 the.

The increase was primarily due to an increase in compensation expenses.

Gross profit increased by 25, 6% to $587.9 million from $468.2 million in the first quarter of 2020 and.

In the first quarter operating expenses were 666.6 million, representing a $17.4 percentage increase from 567.8 million in the first quarter of 2020 sales.

Sales and marketing expenses increased by 32, 5% to 600 to 6.4 million in the first quarter from 457, non meaning in the first quarter of 2020.

The increase was mainly due to increase in number 1 compensation expenses related to our sales and marketing personnel and number 2 spending on branding and marketing activities, including more marketing promotional activities to diversifying student acquisition channels.

The rule and other administrative expenses were $42.3 million in the first quarter of 2020 Watt peak, raising 52, 2% year over year.

Due to the decline in compensation expenses.

Product development expenses decreased by 16, 3% to $17.9 million in the first quarter from 21.4 million in the first quarter of 2020.

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

Other income decreased to $21.3 million in the first quarter of 2021 from 29 million in the first quarter of 2020. The decrease was primarily due to a decrease in value added tax exemption offered by the relevant authorities as part of the national Cold.

19 relief effort.

Net loss for the first quarter was $53.3 million compared to $65.6 million in the first quarter of 2020.

And then looted net loss per share was 7.87 in the first quarter of 'twenty 'twenty 1.

As of March 31st 2021, the company had $826.6 million of cash and cash equivalents and $306.5 million of short term investments.

As of March 2031, 2020, 1 the company had a deferred revenue balance of $2902.5 million compared with 3 saw those $24.4 million as of December 31, 2020.

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

Capital expenditures were 1.7 million in the first quarter compared to 8.7 million in the first quarter of 2020.

And now for our outlook for.

For the second quarter of 2021, some lands currently expects net revenues to be between 600 million to 620 million, which should represent an increase of 17, 1% and 21% year over year is auto loans.

Based on the current market conditions.

That reflects the company's management's current and preliminary estimates of market.

Operating conditions and customer demand, which are all subject to change with that I'd like to open up the call to the question.

Greater.

Thank you we will now begin the question and answer session.

That's a good question you May Press Star then 1 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 2 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 at this time, we will pause momentarily to assemble our roster.

Yeah.

Our first question is from Henry Lee from True Fund. Please go ahead.

Uh huh.

Tomorrow.

Go ahead.

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Is it like a hawk Oh, we got wrong or do you want to use it to them to call it you're not talking to your growth.

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Tom.

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Are you you're in Arizona.

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Tom I.

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Andy you chose the woman, that's you're going from down because on the yellow.

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Australia and free cash flow.

Youre welcome Nick Joseph.

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So when do you shop at home from the MBA they'll have that actually eating that going onto the yard that cash that sell all of that from the sandwiches that she would have that would be major holiday. Each 10 dollar to go swishes, especially use oil.

Alex I Wonder if that's all true social and initial accounts, you say, you're crazy clue Giovanni.

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You sound like she was he or she has gone down a little bit Thiago Thiago.

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Relative to here when do you see their bodies.

Shifting to Lincoln.

Our next question comes from Phoebe a churn from C. D. C capital. Please go ahead.

Hello management.

So thanks for sharing because I E.

I'll, even get the you know the question from Mr. Lee.

So I'm not sure if theres any repeating a question Susan yes, I'm, sorry, my apologies, but I would definitely true probably answer in English.

So my first question would be could you. Please kindly provide the breakdown of I P E and M B a.

Natural orientated business and other a certificate.

No sector.

The second would be that.

Why did the reason.

You know growth is lower than natural revenue.

From Q1.

Yeah.

Okay I, maybe I can answer your second question first because all we do.

We pray connect or the or the growth spilling from from the from the students, but we need to recur the revenue by.

During the serious period, so what that means our revenue we're not equal to the gross billing all the time and that's quite a range, but I mean from the I'm, sorry, but I mean from the previous quarter. You mean, because we know that you have you said that the pre collect nature.

Education sector, that's why growth to me is always higher probably than net revenue and that is why also we observed from the previous quarter.

Hi, Yes, I, let me finish my answer.

So the the speech to to recognize the the gross billing quietly patents are a mixture of our products. When you kind of say during the past several quarters.

The percentage of certificate and the M B, a will get higher and higher and that the.

The the PRA serious purity off day, 2 categories are much shorter than the S. T. E. That's means a waste of time weighted the developmental sales structure changes day, the direct recognition peer range or be shorter day.

That means faster that's why our revenue now is greater than the gross billing.

Thank you that perfectly answered my question.

Okay could you repeat your first question sorry.

There's a breakdown of revenue at or graph growth filling up different business sectors.

Oh, that's quite similar to the first question razor.

Our gross billing infrastructure I can repeat the.

The the structure from the percentage of S. S T a cash.

Current accounts for 24% percent and out of the 8 accounts for 33, 8%.

The third category accounts for 41%.

As for net growth.

And you made the revenue second used revenue percentage.

Right.

The revenue S T accounts for 60% that's.

That to me is that comes from the from the gross peeling off of lost maybe the E.

Pardon me, ladies and gentlemen, it appears the speaker line has dropped please standby while we reconnect. Thank you for your patience.

Okay.

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Pardon me, everyone. We have reconnected with the speakers. Please go ahead.

Sorry for the full day disconnection can't can you hear me from the.

I will continue to to answer the first question from.

From C C C D C capital.

Yeah.

Yeah.

Okay, how about this.

Structural fall off net gross billing and net revenue I think the question is is it for 2 days this angle and the percentage of our S. T. A in that gross billing will be 'twenty 'twenty, 4% M. B a accounts for 33.

Each percentage and the third 1 accounts for 40, 42%.

And regarding to the large revenue the structure is different S. T accounts for 60.

4%.

And MBA accounts for <unk>.

53, 8% and the third 1.

The third 1 accounts.

Yeah.

Yeah.

Okay.

Net revenue I'm, sorry, sorry, net revenue the S. T accounts for 40, 42, 8% and being a cost for 22, 6%.

And the third 1.

Appointed Sarky, 4%.

Okay.

Yeah.

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

At this time I would like to turn the conference back over to you Paul.

I represented for any closing remarks.

Once again, thank you everyone for joining today's call. We look forward to speaking with you again soon well day and good night.

This concludes the earnings conference call you May now disconnect your lines.

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