Q3 2021 Sunlands Technology Group Earnings Call
Speaker 1: Ladies and gentlemen, thank you for standing by and welcome to Sunland's third quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. For prepared remarks by the management team, there will be a question and answer session.
Ladies and gentlemen, thank you for standing by and welcome to Sun <unk> third quarter 2021 earnings Conference call.
At this time all participants are in a listen only mode.
Prepared remarks by the management team there will be a question and answers.
Speaker 2: 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, Yue Ya Sunland's IR representative. Please go.
Today's conference call is being recorded.
Have any objections you may get.
At this time.
I'd like to turn the call over to your host.
Yeah, Yeah, Yeah, Tom and.
I R represented pizza.
Speaker 3: Hello everyone and thank you for joining Sunline's third quarter 2021 earnings conference call. The company's financial and operating results were issued in our press release via news wire services earlier today and are posted online. You can download the earnings press release and sign up for our distribution list by visiting our IR website.
Hello, everyone and thank you for joining Sterling's third quarter attended can do want earnings conference call. The company's financial and operating results were issued in our press release the unused why services earlier today and are posted online you can downloaded on your press release and sign up for our distribution.
List by visiting our IR website.
Speaker 4: Participants on today's call will be our CEO , Mr Tongbo Liu, and our CFO , Selena Lu Liu. Management will begin with prepared remarks and the call will conclude with a Q&A session.
On today's call will be our CEO, Mr. Tom volume and that was the F. O suddenly Malooly management will begin with prepared remarks, and then the call will conclude with a Q&A session.
Speaker 5: Before I hand it over to the management, I would like to remind you of Sunland Safe Harbor statement in relation to today's call. Except for the historical information contained herein, certain of the matters discussed in this conference call are forward-looking statements.
I hand, it over to the management I'd like to remind you all some in safe Harbor statement in relation to today's call except for the historical information contained herein.
The metals.
This conference call are forward looking statements.
Speaker 6: These statements are based on current trends, estimates, and projections, and 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 to differ materially from those contained in any forward-looking statement.
Payments are based on current trends estimates and projections and therefore, you should not place undue reliance on them.
<unk> 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 us.
Speaker 7: 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 would now like to turn the call over to our CEO , Tongbo Liu.
Georges and Exchange Commission.
With that I would now like to turn the call over to our C E O combo allele.
Yes.
Well Hello, everyone.
Speaker 8: And thank you for joining Sunland third quarter 2021 earnings conference call. We are pleased with our third quarter financial metrics. Our net revenues grow 9.9% year-over-year to RMB 595.1 million, despite the evolving industry dynamics.
Thank you for joining Sundance or culture, putting in 'twenty One earnings conference call. We're pleased with our third quarter financial metrics, our net revenues girl nine points in that person year over year to RMB.
I am not as impactful to what many despite well the industry dynamics.
Speaker 9: We recorded net profit of RMB 93.8 million compared with net loss of RMB 165.8 million during the same period last year.
We recorded net portrait of RMB 19, coupon the Ada meeting compared with net loss of RMB 165, and Muni Goldman's insane.
Pierre did last year.
Speaker 10: and a year-over-year 33.8% and 29.3% decline in new enrollments and growth spilling, respectively, which are attributed to our continued efforts to execute our balanced long-term growth and profitability strategy.
On a year over your studying.
Studying three equaled eight person kind of comes in line policy person could decline in new enrollments and goes fittings, respectively, which are let's say built into our accounting. The other airports is cute Albert patents, the long term growth and profitability.
Speaker 11: As COVID-19 pandemic resurgences in certain regions in China continue to create challenges for business operations and the broader economic recovery, businesses have taken steps to improve operating efficiency and reduce costs.
As COVID-19 pandemic the circumstance in certain regions in China continue to create challenges for business operation and the broader economy recovery has taken steps to improve operating efficiency and reduce costs.
Speaker 12: With respect to talent acquisition, many companies have become more potent in selecting talent and have raised their expectations for candidates and new hires.
Batch you'd had in the acquisition many companies has become more Portland in selecting patent tend to have risked their inspections for candidates and the new hires.
Speaker 13: This ultimately led to a more competitive labor market in the third quarter, prompting working professionals to take enrichment courses like ours to increase their competitiveness through further education and rescaling and upscaling.
This ultimately led to a more competitive labor market in the third quarter pumping working professionals to stick enrichment courses like albers, the increase their competitiveness through further education and Reskilling and Upskilling.
Speaker 14: Meanwhile, industry dynamics are also evolving rapidly, with an increasing number of companies joining the end-of-education business after the implementation of China's K-12 after-school tutoring regulations.
Meanwhile, industry dynamics are also involved in rapidly was that increasing number of companies going into the end of the kitchen business.
The.
EBITDA invitation or China catch up after school tutoring.
Patients with this landscape, we continue to execute our patents and announce some girls and appropriately but at this stage deep and thoughts you enhance our competitiveness by focusing on optimizing our product mix improving service days, reducing called and the hunger games deal This acquisition efficiency.
Speaker 15: With this landscape, we continue to execute our balanced and long-term goals and profitability strategy and so to enhance our competitiveness by focusing on optimizing our product mix, improving services, reducing costs, and enhancing students' acquisition efficiency.
Well, we are pursuing quality crews and rather than do their skill omi.
Speaker 16: We are pursuing quality growth rather than user scale only.
Speaker 17: Our professional certificate and skills programs maintain their growth momentum during the course.
Of our professional certificate that it skills programs maintain their growth momentum during the culture.
Speaker 18: As a revenue and growth rate increased 148.2% and 49.3% year-over-year, respectively, driven by our constant efforts to bolster our core capacity.
Revenue and gross win increased 148, 2%.
The 49, 3% year over year, respectively, driven by our constant the airports to board.
Cool cool.
Oh well.
Yes.
Kind of at all.
Yeah.
Speaker 19: career advancement and skills, reflecting the students scoring adoption of our platform as we refine our course offerings with more priming and diverse course content.
Uh huh.
And skills.
It reflected a student's growing adoption of our platform I've lived with buying all of our course offerings with more premium and the birth course content.
Speaker 20: The breadth of our course offerings also appears to more people across a wider range of age groups, which could help further expand our student base. We believe that with our relentless endeavor to provide our students with a better learning experience.
Breath of our course offerings also appears to more people of course, a wider range of age groups, which could help further expand our student base.
That was all were really.
But nonetheless, the endeavor to provide our students with a 800 things very well.
Speaker 21: We are well positioned to fulfill the surge in demand for role or interest-based learning catering to adults of all ages.
We're all well positioned to fulfill the surge in demand for ROE all in the past the money type of into and out of all ages.
Speaker 22: We achieved a 20.8% year-over-year increase in net revenues in our master's degree-oriented programs.
Achieved important Ada person year over year increase in net revenues.
Masters degree programs.
Speaker 23: while new enrollment and growth ratings decreased by 22.2% and 10.2% year-over-year, respectively.
While new enrollments and gross billings decreased by 22, 2% and pinpoint two person yoga your rep productivity.
Speaker 24: as a prioritized quality growth.
I believe Paul prioritize quality growth. However, we continue to expand the Elba go global Super instilling the culture by forming additional partnerships with overseas universities and made encouraging purposes.
Speaker 25: However, we continue to expand our global footprint during the quarter by forming additional partnerships with overseas universities and make encouraging progresses. At the same time, we continue to diversify our course portfolio for this segment, looking to capture the huge growth opportunities in this market.
And at the same time, we're continuing to diversify our course portfolio for this segment looking to capture the huge growth opportunities in this market.
Speaker 26: Demand for exam preparation courses remains strong and we expect further growth given the competitive employment market. Notably, a large number of our students are middle or senior level managers.
Demand for exam preparation courses remains strong and the way breakthrough for little girls, given the competitive employment market, notably a large number of our students middle also near neighbor mentors.
Speaker 27: are strongly motivated to acquire more knowledge and sharpen their management skills through MBA and EMBA degree education.
Strongly motivated to acquire more knowledge and the shopping their management skills through M. P. M E M B a degree education.
Speaker 28: Helping them to achieve their learning goals will continue to be a priority as we see solid growth momentum and potential in this.
Helping them to achieve their lending goes we'll continue to be a priority at Lacey, Saudi that goes momentum and the potential in this space and you know our S. T programs scope to optimize our product mix go spinning seven new enrolment enrolling enrollments for SCE more moderate moderate pain.
Speaker 29: Turning now to our SDE programs, as we strive to optimize our product mix, growth speeding and new enrollments for SDE moderators.
Moderator.
Speaker 30: moderated, which was also particularly due to the lightening regulation on advertisements for continuing education. We believe these regulations will help the industry achieve healthy and sustainable goals and contribute to China's effort to build a lifelong learning society.
Moderated which was also a party shortage due to the lack of new regulation advertising plans for continuing education. We believe there's regulations will help the industry achieve healthy and sustainable growth in countries uncomfortable to China's airports you build a lifelong learning society.
Speaker 31: We have implemented strict compliance standards and will continue to monitor and comply with relevant rules and regulations while providing quality courses to our students.
We'll have improved England Monday, that's great compliance standards and will continue to monitor in a combined way relevant rules regulations, while providing quality cortez to our students. In addition adopted stringent policies and attractive.
Speaker 32: In addition, we adopted stringent policies and attractive incentive plans to enhance our operations and services in the third quarter, with the goal of providing students a smoother, more rewarding learning experience. We also implemented effective cost reduction measures with an emphasis on improving student acquisition efficiency, resulting in a 35.2% year-over-year drop in operating expenses. For more information visit www.fema.gov
He plans to enhance all of our operations and the services in the third quarter with the goal of providing scaled into a month or more rewarding than the experience with silicon prelim Monday effective cost reduction mean years was that person is improving still acquisition efficiency, resulting in.
Is 30, 512% year over year adult and operating expenses.
We achieved this remarkable improvement by fully embracing technology and utilizing the natural scenic areas across our various segments to realize meaningful growth.
To achieve this remarkable improvements by fully embracing walnuts.
And utilizing their nature or centers across our various segments triggered as meaningful goes well.
We leverage targeted cost-effective new media marketing tools to acquire students and also continue to capitalize on course-selling opportunities among different programs to increase repurchase rate and user lifetime value.
They leverage pocket pocketed cost effective nuomi their marketing tools.
<unk> acquire students and also continue to capture and capitalize course city.
Two notice amount you put in programs to increase repeat purchase rates and user lifetime value.
We maintain the profitability for two consecutive quarters as we enrich our course offerings for the various students' needs to optimize the course structure to enhance student acquisition efficiency with more cost-effective, innovative, and regulation compliant market tools. We will continue to refine these new years to build on these strengths and drive quality goals.
We met tons of perfect ability for two consecutive.
Quarters, I'd wait enriched Abra course offerings.
Mr. Varun Berry students' needs to optimize the cost structure to enhance student acquisition of pregnancy.
With a more cost effective innovative and the regulation complying to market tools, we will continue to refine the new York's to build out this space and the Glasgow quality goes.
That concludes my prepared remarks. Thank you, and I will turn the call to our CEO , Selena, for further review of our financials. Selena, please.
That concludes my prepared remarks, thank you and I will turn the call. It 12, our CFO Serena who will further review of our financials.
Yes.
Thank you. Hello, everyone, and thank you for attending Salon's third quarter conference call.
Thank you Sundar Hello, everyone and thank you for attending <unk> third quarter conference call.
We are encouraged by our system's profitability in the third quarter with registered net profit reaching a new high.
We are encouraged by our systems perfect ability in the third quarter was registered snatch profit, reaching a new high.
Driven by continued year-over-year top-line growth, many are contributable to professional skills and master's degree-oriented programs.
Driven by continued year over year top line growth.
Contribute to all key professional skills and a master's degree or engine programs.
Profits also benefited from our efficient cost control measures.
The states are still benefits from our efficient cost control measures, which led to a 35, 2% year over year reduction in operating expenses.
which led to a 35.2% year-over-year reduction in operating expenses.
Notably, sales and marketing expenses as a percentage of net revenues decreased significantly by 45.7 percentage points year-over-year.
Notably he also had some marketing expenses as a percentage of natural revenues decreased significantly by 45, seven percentage points year over year.
Going forward, we will continue to focus on operating efficiency enhancement, product mix optimization, and service improvement.
Going forward, we will continue to focus on operating efficiency enhancement project makes.
Optimization and service improvement.
which will prepare us for the opportunities and challenges ahead while pursuing sustainable growth.
Which we are prepared for the opportunities and challenges ahead why are pursuing sustainable growth.
Now I would like to share our financial results for the third quarter of 2021 in detail.
No I would just like to hear our financial results for the third quarter of 2021 in detail.
In the third quarter of 2021 natural revenues increased by nine 9% to RMB $595 1 million from RMB $541 6 million in the third quarter of 2020.
In the third quarter of 2021, national revenues increased by 9.9 percent to RMB 595.1 million from RMB 541.6 million in the third quarter of 2020.
The increase was mainly driven by year-over-year growth in growth feelings since the second half of 2020 through the first quarter of 2021. Cost of revenues decreased by
The increase is what the increase was mainly driven by year over year growth in gross billings in the second half of 2020 through the first quarter of 2021.
Cost of revenues decreased by 10%.
Pinpoint 6% to RMB $83 1 million Mis third quarter 2021 from RMB 92 points 90 late in the third quarter of 'twenty to 'twenty.
The decrease was primarily due to reduced insurance-related costs incurred for our integrated online education service package purchased by students.
The decrease was primarily due to reduced <unk>.
Lawrence related costs incurred for our integrated online education service package, which is the basket.
Gross profit increased by 14.1% to RMB 512 million in the third quarter of 2021 from RMB 448.7 million in the third quarter of 2020.
Well gross profit increased by 14.1% to RMB 512 million the third quarter of 2021 from RMB $448 7 million in the third quarter of 2020.
In the third quarter of 2021, operating expenses were RMB 430.6 million, representing a 35.2% decrease.
In the third quarter of 2021 operating expenses were RMB 436 million, representing a 35.2% equally.
from RMB $64.1 million in the third quarter of 2020.
RMB 654.1.
Quarter of 2020.
Sales and the marketing expenses decreased by 37.9%.
Sales and marketing expenses decreased by 37, 9%.
to RMB $353.5 million in the third quarter of 2021, from RMB $549.6 million.
To RMB $353 5 million in the third quarter of 2021 from RMB 549 point.
569.4 million in the third quarter of 2020. The decrease was mainly due to, number one, lower spending on branding and marketing activities, and number two, decreased composition expenses related to our sales and marketing personnel.
$569 4 million in the third quarter of 2020. The decrease was mainly due to number one lower spending on branding and marketing activities and number two decreased compensation expenses related to our sales and marketing personnel.
General and administrative expenses decreased by 17% to RMB.
General and administrative expenses decreased by 17% to RMB $63.2 million in the third quarter of 2021.
$3 2 million in the third quarter of 2021.
from RMB 76.1 million in the third quarter of 2020. The decrease was mainly due to a decrease in compensation expense.
RMB $76 1 million in the third quarter of 2020.
The decrease was mainly due to a decrease in compensation expenses.
Product development expenses decreased by 24, 7% to RMB 14 million in the third quarter of 'twenty to 'twenty one.
Product development expenses decreased by 24.7% to R&D $14 million in the third quarter of 2021.
from RMB 18.6 million in the third quarter of 2020. The decrease was mainly due to a decrease in compensation expenses.
From RMB $18 6 million in the third quarter of 2020 a.
The decrease was mainly due to a decrease in compensation expenses.
Other income was RMB $12.9 million in the third quarter of 2021 compared with RMB $47.3 million in the third quarter of 2020.
Other income was RMB 12 points 9 million in the third quarter of 2021 compared with RMB $47 3 million in the third quarter of 2020.
Other income for the third quarter of 2021 was money comprised of rental income of RMB $7 million. The decrease was primarily because value-added tax consumption offered by the relevant authorities as part of the national COVID-19 relief effort came to an end in April 2021.
Other income for the third quarter of 2021 lending comprised of rental income.
RMB 7 million.
Decrease was primarily caused value.
<unk> consumption offered by the relevant authorities as part of the National COVID-19 relief efforts came to an end in April 2021.
Net income for the third quarter of 2021 was R&B $92.8 million compared with net loss of R&B $165.8 million in the third quarter of 2020.
Net income for the third quarter of 2021 was RMB 19.82 million.
Compared with net loss of <unk>.
RMB 165, 8 million in the third quarter of 2020.
As of September 30, 2021, the company had earned $661.2 million of cash and cash equivalents.
As of September 30th 2021.
<unk> had RMB 661.2 million of cash and cash equivalents.
and RMB 178.8 million of short-term investment.
And RMB 178, 8 million of short term investments.
As of September 30, 2021, the company had a deferred revenue balance of RMB 2,540.99.
As of September 30, 2021 the company had a deferred revenue balance of RMB seven.
<unk> thousand 549 million.
Capital expenditures were incurred primarily in connection with IT infrastructure equipment and leasehold improvements necessary to support the company's operations.
Capital expenditures were incurred primarily in connection with I can infrastructure equipment and leasehold improvements.
Necessary to support the company's operations.
Capital expenditures were RMB 1.8 million in the third quarter of 2021, compared with RMB 14.3 million in the third quarter of 2020.
Capital expenditures were RMB 1.8 million in the third quarter of 2021, compared with RMB $14 3 million in the third quarter 'twenty.
For more of our 2021 first nine-month financial results, please refer to our earliest press release for further details.
For more of our 2021 first the nine month financial results. Please refer to our earnings press release for further details.
And now for our outlook, for the fourth quarter of 2021, Sunland currently expects net revenue to be between RMB 590 million and RMB 610 million, which would represent an increase of
And now for our outlook for the fourth quarter of 'twenty or 'twenty. One cell is currently expect net revenue to be between RMB 590 million and RMB 610 million, which would represent an increase though.
0.9% to 4.3% year-over-year.
Yeah, we'll put 9% to four 3% year over year.
This outlook is based on current market conditions and reflects the company's management current and preliminary estimates of the market.
This outlook is based on current market conditions and reflects the company's management's current and preliminary estimates of the market.
operating conditions, and customer demands, all of which are subject to change.
Operating conditions and customer demand all of which are subject to change.
With that, I'd like to open the call to questions, operator.
With that I'd like to open the call to questions operator.
Thank you.
Thank you. We will now begin the question and answer session. To ask a question, press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the key. To withdraw questions used, please press star then 2.
Now begin our question and answer session.
Ask the question.
And then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing Pete.
So question to you please.
Please press Star then two.
For the benefit of all participants in today's call, if you wish to ask your questions in management in Chinese, please immediately repeat your question in English. At this time, we'll pause momentarily.
All participants in 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.
Again, if you have a question. Please press Star then one.
Since there appears to be no questions, this will conclude our question and answer session. At this time, I'd like to turn the conference back over to Yuwei Ye, IR representative, for any closing remarks.
Since there appears to be no questions. This will conclude our question and answer session. At this time I'd like to turn the conference.
Back over to Gateway IR representative for any closing remarks.
Once again thank you everyone for joining today's call. We look forward to speaking with you again soon. Good day and good night.
Well again, thank you everyone for joining today's call and we look forward to speaking with you again soon good day and good night.
Okay.
This concludes the earnings conference call. You may now disconnect your line. Thank you for attending.
This concludes the earnings conference call you May now disconnect. Your line. Thank you.
Okay.