Q1 2022 Sunlands Technology Group Earnings Call

[music].

Ladies and gentlemen, thank you for standing by.

And welcome to <unk> first quarter 2022 earnings conference call.

At this time all participants are in a listen only mode.

Today's conference call is being recorded I will now.

Now I'll turn the call over to your host today you want.

I our representative please go ahead.

Hello, everyone and thank you for joining us online content to engage and get to on this conference call the company's financial and operating results is sorting out.

It needs to be on his wife's upstairs earlier today and are posted online you can download the earnings press release and sign up well our distributions by.

By visiting our website participant on today's call will be our C O combo.

The C F O b not really no.

I just mentioned will begin with prepared remarks, and then the call will conclude with a Q&A session.

Before I hand, it over to the management I'd like to remind you our safe Harbor statement in relation to today's call except for the historical information contained a theory I don't off the method that has discussed the English conference call are forward looking statements.

These statements are based on a kind.

Kind of a churn estimates and projections and therefore, you should not place undue reliance on that well it wasn't looking statements involve inherent risks and uncertainties.

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 ours.

Oh from volume.

Oh, Wow I live in the us.

We will come to some in the first quarter literally and shoe companies Corp.

Word of shaken by the ongoing COVID-19 pandemic and the geopolitical conflicts. We are also seeing huge macroeconomic uncertainties.

Times like these days, we believe the key to it just didn't seem to remain focused on.

And of course, the fishing spending and a profitability, which will help us navigate through this difficult period to that.

So we continue to use qdoba banish girls and profitability strategies during the first quarter.

Thanks to our strategic efforts, we are pleased to have carry a dog or a monitoring to something 22 was the first culture and they are perfectly it's hitting a new high of RMB 117, I'm pulling the full many.

There's some difficulty improvements compared to the NIM Lewisville, RMB 15, $3 3 million in the prior year period, and the Nanjing person to higher quarter over quarter.

As we are focused on healthy unreal and this isn't the brokers with stepped up hover close to imagine what the mean yours and emphasize still does the acquisition efficiency as such we reduced our general and administrative expenses by nine point to one person that year over year, or so straight difficulties guilt by or marketing.

This is evidenced by a 15, one putting a full person that year over year decrease in sales and marketing expenses.

This led to 19, 5% and 13 full putting two person to yogurt. Your decrease in new studios in new student enrollments and of course opinions, respectively. We should note.

Or does a person pitch equally in all of our new you'll still doesn't garland and those things are much smarter than our percentage savings in marketing spending which is due to our improvement is skilled in acquisition efficiency.

That's what a mid airports to temperature still students and increases their lifetime value and our 16th but holding our course offerings to tie to a child still does Detroit go for it.

Got it and then indeed.

Our parents stickers was also driven by our extensive premium course resources, which continued to effectively fulfill all of our students learning demands.

During the first quarter.

Fortunately.

Our band is a challenging macro environment optimizing all of our product mix and expanding our course chemical catalogues, while we're masters degree oriented and our professional skills programs, while striving to provide students with the optimal and efficient on the next bill rates in that.

The increasing tough job market.

In the first quarter, we concentrated more on designing and developing new course courses.

Uh huh.

Adverse range of skills training all of our students to enhance their overall competitiveness and thereby increase their employment opportunities.

Moving on to each of our major cost programs.

I was a little more kind of social laughs were shipped by the persistent epidemic and accelerated digital transformation.

Market is rapidly evolving <unk> shifting macro to micro economy landscape and People's way of living life is also changing.

Well it can professionals tend to sometimes to stay really rid of intend to competitive they are in their careers, but upgrading their skills and obtaining some qualifications. Meanwhile people from all walks of life adults talk up a handful of them to enrich their lives with all of our online SKU or hobby courses.

Actually two of them and put them in Korea.

Resurgence is with a number of safe social activities is limited.

As we move forward there's of course this attracting students from now and christening wider age each wrench.

Thanks to our convenient that's full and those responsive online uneventful.

Our our board course countered covering work credentials to general interest.

And that can be common or preferred choice.

Preferred of choice.

As a result, you'll still you'll still you'll still doesn't enrollments for where our professional certification on our skills programs in the first culture grew up by one person that yoga, a year and took important 20 important nonperson to quarter over quarter.

They in pension or reduction of marketing activities as I just mentioned.

Of course spinning and it's before the six were also increased by six 7% year over year. We believe that goes to the woman thing all the professional certification on the skills programs will persist given our diverse course offerings and then there are some jewelry was supposed to have a meaningful new changes.

We will continue to add a new course content and provides the customer buys the cost specific to Verizon and the group's unique preferences.

With respect to ever Masters degree into the programs.

I have seen Chris of the intense competition, that's more industry players filling the citizens, especially on the outdoor China's England implementation of new regulation banning after school tutoring for students in compulsorily under tissue.

As a result of competition and a few of them marketing promotions as part of all of our patents that goes in the perfect profitability as Tracy Newell.

New student enrollment tender those spinning as former Masters degree oriented programs declined despite the short term impact.

We're confident of that hover will proven profitability stretch D highly capable teaching and stuff and optimize teaching and services will position us for downturn goes in this segment.

There is still enormous potential according to our intention intelligence research market size for Masters in entrance exam preparation courses has reached RMB six one bidding, but doing one representing a 28, 1% year over year increase and easy.

Expect it to continue to grow.

To conclude.

I believe that was a brace and the quality of our courses over effect effective teaching system and our experienced team advantages that will.

Survives.

For her future girls going forward, we will remain dedicated to empowering our each of our students in any way to say is by constantly involving an engaging of our product offerings to satisfy their needs, which we believe will benefit our long term gross and they'll come.

No country people to China to call our economy development against the macro headwinds.

With that I will turn the call of 12, or so close to me not so Russell our financials.

Thank you Hello, everyone.

We are excited to start.

How is your first quarter results.

NASA revenues reached RMB 613.3 million during the quarter above the top end of our guidance range. Despite 11, 7%.

Sequence.

We remain unwavering regarding many important and sustainable growth instead of flying for DHL scale expansion for me to say.

In complex macro.

Mommy environment.

Meanwhile, we continue to manage our costs responsibly.

Palm Springs, Thanks to wage our operating expenses in the first quarter declined by 48, 1%.

It.

As a result, we suspend all our profitability again this quarter with net profit margin, reaching 29, 3% representing a substantial 37 percentage points increase year over year, notably we also maintained positive operating cash.

In the first quarter.

RMB pinpoint to 1 million.

We are confident that our improved operational efficiency and profitability combined with our already meeting an effort she's diversified course offerings and he has service quality, we are drive our future growth, while creating additional value for our students.

<unk> and its shareholders.

Now let me walk you through some of our key financial results for the first quarter of 'twenty to 'twenty two.

All comparisons are year over year, and all numbers I RMB unless otherwise noted.

In the first quarter of 2022 net revenues were.

Thanks, $13 3 million a decrease of 11, 7%.

Cost of revenues decreased by nine 1% to 96 centimeters in the first quarter of 'twenty to 'twenty two.

106, 4 million in the first quarter of 2021.

This was primarily due to declines in compensation expenses related to our cost of revenue, especially now and to reduce insurance related costs incurred for our integrated online education service package.

Five students.

Gross profit decreased by 12, 1% to $516 6 million from 587 9 million in the first quarter of 'twenty 2021.

In the first quarter of 2022 operating expenses were 345.8 million, representing a 48, 1% decrease from $666 6 million in the first quarter of 2021.

Sales and marketing expenses decreased by 51, 4% to 290 895 million in the first quarter of 2022 from 606.4 million in the first quarter of 2021.

The decrease was mainly due to lower spending on R&D and the marketing activities.

The decline in compensation expenses related to our sales and marketing personnel.

General and administrative expenses decreased by nine 1% to 38 5 million in the first quarter of 2022 from 42 3 million in the first quarter of 2021.

Decrease was mainly due to fishing and rental expenses.

Client compensation expenses related to general and administrative personnel.

Product development expenses decreased by 31% to $12 4 million in the first quarter of 'twenty to 'twenty two from $17 9 million in the first quarter of 2021.

Product development expenses were many comprised of compensation expense.

Other income decreased by 40, 54.9% to $9 6 million in the first quarter of 2022 from $21 3 million in the first quarter of 2021.

Decrease was primarily because value added tax exemption offered by the relevant authorities as part of national called COVID-19 relief efforts.

To that end in April 2021.

Net income for the first quarter of 'twenty to 'twenty, two was 179 4 million.

<unk> net loss.

$3 3 million in the first quarter of 2021.

Basic and diluted net income per share was.

207.16 in the first quarter of 'twenty to 'twenty two.

As of March 31st 2022, the company had 600 to 330.

$37 7 million of cash and cash equivalents.

To $19 9 million of short term investments.

As of March 31st 2022, the company had a deferred revenue balance well.

2000, 270.9 billion compared with $2348 2 million as of December 31st 2021.

Detroit expenditures were incurred primarily in connection with IP infrastructure equipment, and the leasehold improvement necessary to support the company's operation.

Expenditure were zero points my meeting in the first quarter computers ways, one 7 million in the first quarter of 2021.

Now for our outlook.

For the second quarter of 2022.

Currently back net revenue to be between RMB 520 million to RMB 540 million.

Which would represent a decrease of 14 going to 2% to 17.4% year over year.

Its outlook is based on the current market conditions.

Blacks 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 core to the questions operator.

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

I ask a question you May press Star then one on your Touchtone phone.

If you are using a speakerphone please pick up your handset before pressing the keys.

To withdraw your question please.

First Star then two.

What was the benefit of all participants on today's call.

If you wish to ask a question to management in Chinese. Please immediately repeat your question in English.

We will pause momentarily to assemble our roster.

Ladies and gentlemen, as a reminder, its star then one if you have a question.

Yeah.

No further questions. This will conclude our question and answer session.

At this time I'd like to turn the conference back over to you.

All references on the room for any closing remarks.

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

This concludes the earnings conference call you May now disconnect. Your lines. Thank you and have a wonderful day.

Okay.