Q2 2022 Sunlands Technology Group Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to Sun Lance second quarter 2022 earnings Conference call.

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

Today's conference call is being recorded.

I'll now turn the call over to your host today, you suddenly have IR representative. Please go ahead.

Hello, everyone and thank you for joining us on in second quarter of 222 on your conference call. The company's financial and operating results were issued in our press release via Newswire services earlier today and are posted online you can download it on your press release and sign up for our distribution business.

By visiting our IR website.

On today's call will be our C. D C O Mr Kumar and our CFO , Linda Moody menu management will begin with prepared remarks, and the call will conclude with a Q&A session.

I hand, it over to the management I'd like to remind you of some nice safe Harbor statement in relation to today's call except for the historical information contained herein.

The matters discussed in this conference call are forward looking statements.

Statements are based on our current trend.

Estimates and projections and therefore, you should not place undue reliance on them forward.

Forward looking statements involve inherent risks and often to a number of important factors could cause actual results to differ materially from those contained in any forward looking statement.

For more information about potential risks and awesome you. Please refer to the Communist flight filings with the Securities and Exchange Commission.

With that I will now turn the call over to our C. O combo all you.

Hello, everyone.

So none since second quarter 2022 conference call M. The part that makes resurgence in the macro economy Whitney as soon as they took in the quarter, we achieved RMB one.

Fifth a 114.6, meaning net income representing a full four increase year over year. The increase was primarily driven by our consistent emphasis on operating efficiency and Saudi the execution of our business.

Business strategies.

That's the way it remains a steadfast well and well liver getting their company through external uncertainties.

We're also pleased to see other of our continued efforts to optimize all of a paradox makes and they expand our real cost per photo rewarded with improving operational results, reflecting a 39 point to full person over your increase in Melbourne at Oh, where new students.

It was still doesn't enrollment.

And it was reduced year over year decrease in gross billings.

We accomplished this by acquiring students from a wider range of age groups with hydro CLC efficiency has really caught on in all of our sales and marketing expenses by a certain pool from the 8% year over years.

As a result, Ah theres really loves Hello.

Highlights other organizational resilience and reinforce our confidence in our strategy to achieve balanced growth and profitability.

They're sitting with culture with a massive but that make outbreaks in several major cities severity disruptive business operations of course, the era of industries.

But then make also resulted in the cancellation of many qualification exams affecting demand for our professional certificate courses and they did it and leading us to seek other pockets of opportunity to increase the profitability in the segment.

For the more aimed at the complex macro environment fitness took a more conservative approach and they are in their operations and the ever say, it's close to a reduction in our efficiency improvement will behave or.

Where does it go off in kind of thing they are risk resistance against the backdrop of consumers who are more prudent about purchasing discretionary goods for example.

They made temporary a temporary delays their self improvement plans within the spirit two combats the lingering external uncertainties in the macro environment.

Also prioritize the cash flow mentioned, Montana profitability generating business, while continuing to improve our cost efficiency.

Okay.

Despite that many people remained in associate off take about holding their skill is hoping to elevate to the overall comparisons.

Competence the way it was in the highly competitive job market.

Are there others also sought ways to ship called pandemic.

In Russia in Russia, such as.

And then of course, there's resulting in searching demand for skilled causes is such where it says there's opportunity to deliver in that enhance the learning experience to our students and to develop the new skilled training courses towards the choice of border Rachel students' needs, helping all of our students improve their career for the stability and the competitive.

He is in the job market or kind of a scale inquiries side hustle to say is aimed through tough times either as a result of those opinions full professional certification and skills program and they sit in the culture group I E. T T putting that person that year over year, driven by a 19 full putting them person.

But your increase in new student enrollments.

Revenues generated by these programs also increased by 13 points 30 person year over year. Furthermore, although alright tendency of course, which sources high teaching quality and efficient online learning platform have contributed to improve the student and the status.

Satisfaction and its thickness as well as a high number of referral rate.

But we're continuing to optimize our product mix, we will kept developing premium courses covering covering in demand skills in the general interests as well as industry recognized credentials wherever it.

It is temporary it is temporary as the brand awareness in this field diverse class choices and the quality of course content. We are confident that we can continue to attract new students and capture additional growth opportunity presented by students of rising demand.

Masters degree onto the programs, new student enrollments and gross billings decreased on the back of our strict strategic reduction of marketing activities and.

So in market competition as new players try to capitalize on this segments in numerous potential.

How do you do it rotates teaching stuff, which is difficult to replicate for late comers to the segment is considered a Tuesday man differentiating different differentiate 18 factor among industry players.

So we believe that's over 19 years experience in exam preparation experienced and will really say, what the teacher and stuff and the extensive lending resources will position us.

And third tasha or sturdy compare to two other competitors in the long run.

Despite the intense competition in the complex macro environment. We are proud of the great critical roles that we have played in helping all of our students achieved individually.

In the face of huge economy uncertainty.

And we remain committed to doing the right thing to maintain all of our influence in this in this field.

Simple.

On June 18.

We held our fifth M. B a N D education promotion event with many top universities in China, joining us to share their M. B a admissions in inflammation.

The event was a great success in attracting huge number number of students to participate.

In terms of government policies were encourage by the Chinese government support of diverse forms of the education as evidenced by the revised vocational educational adopted during the meeting of the standup comedy of the 19th National Peoples countries on April 20.

This was the first major reform in hone 'twenty.

25 years since the law was enacted in 1996.

It upgrades the theaters of vocational education in China to be equally important as general education and encourage us encourages collaboration between schools and the.

Interfaces, while also supporting social participation in vocational education.

The government is planning to adopt traverse mean yours to organize diverse forms of of a professional education.

I charged training prior to employee to employment on the job training right employment training for the unemployed young unemployed and other special groups of people, which significantly enhanced our comfort doesn't seem the industry well will closely follow the government policy and we will remain steadfast thing over.

Her contributions to China's airport to improve its work for workforce skills and employment rates through acute patient education.

Finally, I'm pleased to state that in June in June in June we declared a special cash dividend to share all of a sincere swish when shareholders. Following full count sick I'm kind of let's say Q2 quarters of corporate liquidity going forward, we will strive.

To create additional shareholder value by continuously improving our profitability and cash flow. How does the same time, we remain focused on developing diverse skill and interest of courses and enhancing our teaching and service quality to attract new students with a target.

Of bringing life changing and fulfilling learning experience to our students well is that I will turn the call of 12 or Stifel suddenly not to run through our financials.

Thank you tore.

Yeah.

Our second quarter results were in line with our expectations.

So what's the lifespan.

Right.

One 8% year over year decrease.

Revenues.

Joe.

Well.

During the quarter continuing.

Excuse me.

Initial team debuted a high mutation.

We're optimizing our expense management.

<unk> 32.

Year over year decrease.

Okay.

Our cost efficiency program that is notable.

Net income.

RMB 22, 1 million for the second quarter of 2021 to RMB $114 6 million.

For this quarter.

Going forward, we are optimistic that our continued efforts to broaden our online course offerings streamline our cost structure.

Okay.

He provided.

Okay.

Okay.

Well I'll come back and enable us to realize long term growth.

Now, let me walk you through some of our key financial results for the second quarter.

All comparisons are year over year and all numbers.

Otherwise no change.

In the second quarter of 2022 natural revenues were 555 million <unk>.

A decrease of 11, 8% year over year.

Cost of revenue decreased by six 2% to $91 2 million in the second quarter of Funky tiny team.

From 97.3.

Oh.

The decrease was primarily due to the decline.

Employee compensation expenses related to the cost of revenues.

Profit decreased by 12, 9% to 463 points.

From $532 2 million.

Second quarter of 'twenty.

In the second quarter of 2022 operating expenses were 351 points cheaper.

Representing a 32, 4% decrease from mine from five to $19 6 million in the second quarter of 'twenty.

Sales and marketing expenses.

Creased by 34 eight.

8%.

293 million in the second quarter 'twenty to 'twenty two.

$449 1 million in the second quarter was 2021, the decrease was mainly due to number one lower spending on branding and marketing activities.

<unk> declined.

Expenses related to our sales and marketing personnel.

General.

Administrative expenses decreased by nine 7% to $46 6 million in the second quarter of 2000 tonnes a team from $51 6 million in the second quarter of 2021.

Product development expenses decreased by 38.3.

3% to $11.

6 million in the second quarter of 2022 from $18 8 million in the second quarter of 2021.

Development expenses, where marine come crosstown compensation expense.

Other income decreased by 41, 8%.

Q4 dollars 8 million in the second quarter of 2022 from $8 2 million in the second quarter of 'twenty.

Net income for the second quarter of 'twenty to 'twenty two was.

114.6 million compared to $22 1 million.

Quarter of 2021.

Basic and diluted net income per share.

F 16.8 mines in the second quarter of 2022.

As of June 32022, the company has.

727, 5 million of cash and cash equivalents.

$138.

7 million of short term investments.

As of June 30, 2022 the company had a deferred revenue balance.

$1998 1 million compared to ways to solve and $348 2 million as of December 31st 2021.

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

So expenditure work.

<unk> 3 million in the second quarter compared with seven.

782 million in the second quarter of 2021.

Okay.

And now for our outlook for the third quarter of 'twenty 'twenty. Two summer currently expect net revenues to be between RMB 520 million.

To RMB 540 <unk>.

Which would represent a decrease of nine 3%.

26% year over year.

This outlook is based on the current market conditions on the 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 core to the questions operator.

We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

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

To withdraw your question. Please press Star then two.

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.

Showing no questions at this time this will conclude our.

Question and answer session now I'd like to turn the conference back over to you <unk> IR representative.

Zander for any closing remarks.

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

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

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