Q3 2022 Sunlands Technology Group Earnings Call

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

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

Today's conference call is being recorded.

I will now turn the call over to your host today you.

Well Sunland IR representative please go ahead.

Hello, everyone and thank you for joining from third quarter and didn't get to on this conference call.

These financial results were issued in our class B, our newswire services earlier today and that will get online you can download it on your press release and sign up for our distribution list by visiting our IR website.

On today's call, we have our C. E O. He said somebody who and I would be Oh, no not loose leaf and our financial controller.

Neat and you know we have provided an update of our operational performance on behalf of our C. O W. And now all you will get you Oh go with you.

Our financial performance on behalf of Cynthia Meng.

Do we have to begin with prepared remarks, and 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 herein.

Matters discussed in this conference call are forward looking statements.

You made months are based on current estimates and projections and therefore, you should not place undue reliance on the 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.

More information about the potential risks and uncertainties. These refer to the company's filings with Securities and Exchange Commission.

I will now turn the call over to our CFO .

Yeah.

Thank you <unk> Hello, everyone will come to some in third quarter 2022 conference call.

Despite the macroeconomic uncertainty and the shipping industry landscape, we can lever probably can result in the third quarter.

We showed top line growth.

For the bottom line improvement I mean, you placed a new student enrollment.

These achievements justified to the effectiveness of our strategic initiatives and prioritize profitability and healthy growth.

Amid the ongoing pandemic and uncertain macroeconomic our third quarter matching revenue came in at RMB 576.

Up by three 8% quarter over quarter. Despite a great point keep her first year over year.

Can navigate the macro challenges, we remain laser focused on cost optimization and a perfect ability rather than blind person there Joe.

Sure.

Weird keeps mouthful measures to enhance our operational efficiency.

And streamline our organization during the quarter.

Q2, our effective expense control measures and improved operational efficiency.

We reduced our G&A expenses by 29, 6% year over year.

We'll put 7% quarter over quarter.

This cluster reduction initiative enables us to deliver on our commitments.

18, additional shareholder that where does that stand perfect village.

Our third quarter net income reached RMB 168.1.

Representing an 81, 1% year over year equally.

Oh, 48, 46, 7% quarter over quarter.

Demonstrating our organization.

Julien tough times like this.

With a leaner and more efficient organization will also further refined our product strategy in the third quarter.

We're focused more on marking our graduate programs.

Locating our capital and human resources Accordingly.

And our course offerings and dose cohort.

Oh one.

Leading to an optimized kodak to lighten up on the more diversified course Thompson.

Additionally, we leveraged our salads and a convenient online teaching infrastructure and the learning resources to further refine our services, which has increased our user stickiness on the cross selling opportunity.

Even then we have transformed our union's acquisition matters.

And more on his or her lifetime value with that all investing heavily marketing our kids.

You may have seen in our earnings release published earlier today, our sales and marketing expenses declined by 23, 9%, no ear and eight 2% quarter over quarter.

And as a percentage of net revenue yields in the marketing expenses were down by 12, 7%.

Vintage corn Yep Yep.

Despite that our newest you'd mentioned enrollments for the quarter rose by 44, 7% year over year, and they are important 8% quarter over quarter.

Reaffirming the effectiveness of our business.

Turning to our lending programs.

Our professional certification.

Two one hunting to grow stronger as evidenced by a 91, 3% year over year increase.

Do you see them from Goldman.

So closely linked to the lives by eight 5% to one 8% yes.

That's revenue generated by this sector or still increased by 83, 7% year over year.

This was primarily attributable to our efforts.

Our courts have long power gauge diverse hbox as we sought to capture the right. The rising demand. We are looking at school real real skills and hobby courses during the quarter.

In the third quarter, but then make associated get locked down.

She's a postponement or cancellation of certain qualification test.

Well that Qunar example, Kirby who and what those terms.

Nevertheless demand for our preparatory courses for professional exams remains solid.

Parents career competition for pumps for pumping working professionals to enhance their competitiveness or shopping with your field with courses educational providers such as some.

And that you shouldn't two courses for working professionals.

You need to develop new courses can you said you can buy other cohorts Birmingham to linger.

We are excited about what we are offering and we offer our students as.

We have always been committed to helping to build a long lifelong learning society.

We will continue to capture opportunities.

Actor could deliver more high demand and high quality services to our students.

Our extensive course option premium core quality and experience to teach and stuff. We are pleased to see you there across a wider range of free agents adopting our platform as well as Fletcher diversity in the courses to choose as a result, we achieved sequential growth.

New student enrollments for our professional field of one.

Five consecutive quarters.

We're also glad to have played a part in helping our students achieve their learning go green.

Reading them and so forth.

Fulfillment.

Going forward, we will continue to adjust our course offerings.

Sector based on market men maximizing our value by further contributing to our student success and our society as a whole.

Next our master's degree oriented ones.

During the quarter, the challenging macro environment will cause that makes and the competitive market.

And do you need to wait on our performance.

In this category.

Macroeconomic listener some people may choose.

You delayed their higher education plans.

It's the cost of pool, depending on M. B, a degree with relatively high compared to others see also an improvement options.

Meanwhile, the pandemic also prevented some people from pursuing overseas post graduate education.

Luckily market competition was quisling, Ken it's more industry players joined the sector. After the K 12 education industry.

Taken together these factors resulted in reduced demand for our masters degree oriented preparation course, they do.

A decline in both ceilings and student enrollment.

Before I conclude I would like to mention that alongside our efforts to solidify our industry position with our existing learning coupon.

I have also been prudently boredom some.

Other new business initiatives to drive our future growth.

We are conducting in depth market research on this initiative, especially on combining retail or commerce with Cortez Hills.

By maximizing our strengths and that education cause either expand our product and service portfolio and look forward to helping our risk management and Courtney can additional revenue stream like while bringing more value to our students.

Looking at our house, where Kobe downsides, our proven business strategy.

Continued commitment to delivering premium and tailored courses to more students.

Help us navigate current challenges and achieve meaningful growth.

Oh.

That concludes.

Matt.

With that I will turn the call over to our financial control on how to run through our financials on behalf of them.

Thank you Tony.

Hello, everyone.

With our quarterly results, let me welcome back home to the government.

I would not revenue reached RMB 550.

<unk> 17 2 billion during the quarter.

Beating the high end of our guidance by.

Perfect.

Probably the lack of sleep, one 2% year over year decrease.

I'm just thinking from our dedicated efforts in the backyard steps.

Cost control and operational efficiency.

The cultural fit.

It declined by 24.5% you're open to either.

And that's important.

Quarter over quarter.

As a result.

We maintained our properties.

With the net income.

150.

58 points Washington.

Oh 81, 1% year over year.

46, 47% quarter over quarter.

I would not profit margin for the quarter remains holdings punchy by 2%.

Hunting 13, six points year over year.

On the.

6% points quarter over quarter.

Moving forward, we will continue to prudently manage costs.

Yeah.

And the reach of our course offerings and further optimize our operations.

For continued success on the additional shareholder button.

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

All comparisons are year over here.

The old numbers argued unless.

Unless otherwise noted.

In the first cultural until 'twenty two.

<unk> revenue worldwide.

On the seven two.

2 million.

A decrease of three 2% year over year.

Total revenue increased by 2.2%.

Eight nine minutes in the third quarter 2022.

From 83.1 unit, the first quarter of 2021.

The increase was primarily due to increased perfect.

Page two kitchen, the institution and the increased cooperation colt.

Gross profit decreased by 4% to 491 point, So you said it well.

So I figured I'd try there.

2021.

In the third quarter of 'twenty towards the tool.

Parents, as well 325 million.

Representing a 24, 5% decrease.

<unk> hundred three.

Pardon me in the first quarter 2021.

On the marketing expense decreased by 23, 9%.

Two 259 1 million in the first quarter of 2020 two.

So $353 5 million in the third quarter of 2021.

The decrease was mainly due to the lower.

On the marketing activities.

The decline in compensation expenses related to our field marketing personnel.

General and administrative expenses decreased by 29, 6%.

$244 4 million.

2022.

From 63.2 minute Coker after 2021.

The decrease was mainly due to the clock inventory.

Both Dr. Giovanni has decreased by 17, 5%.

11.5 tenants in the first quarter of 2022.

From 14 minutes in the first quarter of 2021.

The decrease was mainly due to a decline in compensation.

Other income decreased by 58, 6%.

I want to briefly.

In the third quarter of 2022.

From 12 5 million the third quarter of 2021.

Marketing costs for the third cultural 2022 with 168 1 million.

Comparatively 92 8 million.

I'll talk to you 'twenty one.

Basic and diluted net income per share was 24.08 in.

In the third quarter of 2022.

As of September 30th 2022.

The company had 678.

Cash and cash equivalents.

On the 170 point once it is all short term investments.

As of September 30th 2022.

The company had a deferred revenue balance once all of them.

That's 198 6 million.

Comparatively two fold and so on.

$42 two.

Two minutes I felt September 30th.

Pete Petit.

Capital expenditures were incurred.

In connection with I T.

<unk> equipment.

Our leasehold improvement that's what Paul was the Companys operation.

Capital expenditures were one three minutes in the third quarter.

Paired with 1.8 communities in the first quarter of 2021.

I don't know.

Ultimately.

For the fourth quarter of 2022.

<unk> currently expects net.

Revenue to become RMB 500 under TBD on the R U 500 and automated.

Which would represent a decrease of <unk> eight.

3% to 11, 7% year over here.

This outlook is based on the current market conditions.

In fact, the companies manage covenant.

Great.

Most of the market.

Operating condition.

Customer demand, which are subject to change.

That concludes our meeting.

Our prepared remarks.

With that I can ask.

Okay. After the call to the crusher.

Operator.

Yeah.

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're using a speaker phone 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.

This time, we will pause momentarily to assemble our roster.

Again, if you would like to ask a question. Please press Star then one.

Showing no further questions. This will conclude our question.

There isn't an answer session now I'd like to turn the conference back over to you for E. 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.

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

[music].