Q1 2023 Sunlands Technology Group Earnings Call
Actual results to differ materially from those contained in any forward looking statement.
Speaker 1: to the communist filings with the Securities and Exchange Commission. With that, I will now turn the call over to our CEO , Tom Bolu.
Speaker 2: Thank you, Yuhua. Welcome to Sunland's first quarter 2023 conference call. Prior to commencing, I would like to kindly remind all attendees that the financial information referenced in this release are presented on a continuing operation basis.
Speaker 2: and all figures are then dominated in RMB unless explicitly specified otherwise. As we reflect on the first quarter of the industry, we have witnessed a steadfast and consistent performance in the challenging operating environment.
Speaker 2: Our first quarter net revenue remains steady, reaching RMB566.9 billion, exceeding the high end of our guidance range. Our net income also experienced a slight year-over-year increase, reaching RMB118.1 billion.
Speaker 2: marking the eighth consecutive quarter of sustained profitability for our company and setting a remarkable net income margin of 31.8%. We remain optimistic about our future prospects based on this encouraging start to the year.
Speaker 2: During this quarter, we also achieved a year-over-year increase of 3.8 percentage points in our gross profit margin, setting a new record high of 88%. Meanwhile, we have maintained a sharp focus on diversifying our course content.
Speaker 2: elevating the quality of our offerings and optimizing student acquisition process. These concerted efforts have yielded remarkable results as evidenced by a substantial increase of 22.2% in new student enrollment.
Speaker 2: Moving forward, we are committed to maintaining this positive trajectory and continuing our success, employing our cost-saving and efficiency-enhancing business strategies to support un-turned sustainable growth.
Speaker 2: Now let's turn to the performance of each of our major course programs.
Speaker 2: For post-sustaining programs, our strategic reduction of marketing activities, coupled with increasing market competition from the new entrants, aiming to tap into the immense potential of the segments.
Speaker 2: led to a decline in both new student enrollments and course fittings.
Speaker 2: Despite facing intense competition and operating with a complex macro environment, we maintain our optimistic outlook for the future of our academic programs.
Speaker 2: This optimizing is particularly bolstered by the rising demand for continuing education, especially driven by the heightened employment pressures. Moving forward, we remain committed to delivering more precisely targeted education to the public.
Speaker 2: high quality post-secondary courses to our students. We believe that our 20 years of experience in exam preparation, along with our experienced and well-received teaching staff and extensive learning resources, will position us and spontaneously compared to our competitors in the long run.
Speaker 2: The sector compressing professional certification preparation, professional skills and interest courses has demonstrated outstanding performance with a year over year revenue increase exceeding 15.9%.
Speaker 2: Additionally, our relentless pursuit of developing novel interest programs has constantly borne fruit, propelling the revenue generated by the sector to an impressive growth rate of 105.7%.
Speaker 2: The substantial increase has cemented it as a significant and reliable source of income for our organization.
Speaker 2: Building upon this remarkable success, our certified commitment drives us to continuously refine our products and services, meeting the evolving learning needs of a broader universe of potential customers, ensuring that our city's
Speaker 2: will remain at the forefront of industry.
Speaker 2: The domestic economy continues to recover, leading to an overall improvement in the employment situation. However, according to the data from the National Bureau of Statistics, since the start of 2023, the U.S. unemployment rate for the individuals aged 18 to 29 is rising.
Speaker 2: 2016-24 has placed system today remained at an elevated level, reaching 20.4% in April .
Speaker 2: The first job market competition will continue to drive to growth of online education, as job seekers utilize it as a means to enhancing their skill sets and improve their chances of securing desirable employment opportunities.
Speaker 2: Additionally, we have observed that contemporary young individuals demonstrated a general inclination towards interest-based education.
Speaker 2: This recognizes the benefits it offers. The opportunity to explore and develop personal interests for personal enrichment and self-fulfillment.
Speaker 2: as well as the potential for supplemental income or career advancement.
Speaker 2: Furthermore, there are other notable trends that continue to gain momentum, such as the increasing focus on lifelong learning and the shift from offline to online education.
Speaker 2: As we move forward, we remain committed to adapting our educational offerings to meet the evolving demands of learners and leveraging their strengths to facilitate accessible, effective, and lifelong educational experiences.
Speaker 2: While we have made significant accomplishments, it is important to acknowledge that we are also confronted with challenges in other aspects of our business.
Speaker 2: The persistent macro uncertainties and the evolving market dynamics have influenced customer behavior for several of our products offerings.
Speaker 2: leading to a year-over-year decrease in net revenues. We have been proactive in addressing the challenges by refining our operations and closely managing our expenses. Looking ahead, we will continue to explore our potential revenue streams.
Speaker 2: diversifying our products and services offerings to enhance our resilience in the face of various challenges.
Speaker 2: In conclusion, our performance in the first quarter of 2023 reflects our commitment to balance growth and profitability.
Speaker 2: We remain focused on delivering high quality education and expanding our market presence.
Speaker 2: We extend our gratitude for your presence today and the continued support you provide. Thank you and we look forward to your valuable engagement.
Speaker 2: With that, I will turn the call to our financial controller, Hangyu, to run through our financials.
Speaker 2: Thank you, Tung Bo. Hello, everyone. I'd like to present our first quarter results, which have met our expectations and demonstrated our steadfast commitment to achieve sustainable growth.
Speaker 3: Despite a 7.6% year-over-year decrease in night revenues.
Speaker 3: Throughout the quarter, we maintained our disciplined cost management practices and streamlined operations to boost our efficiency and profitability.
Speaker 3: leading to a 7.3% year-over-year decrease in operating expenses.
Speaker 3: This focused approach to cost optimization has brought positive outcomes as evidenced by the growth in our net income from RMB 170.4 million in the first quarter of 2022.
Speaker 3: to RMB 100 on the 80.1 minute in the current quarter.
Speaker 3: Looking ahead, we maintain a positive outlook on our long-term growth prospects.
Speaker 3: We will continue to expand our portfolio of online course offerings, optimize our course structure and deliver exceptional services to our students.
Speaker 3: These strategic measures will enable us to capture the emerging opportunities and consolidate our leadership position in the industry.
Speaker 3: Now let me walk you through some of our key finance results for the first quarter of 2023.
Speaker 3: All comparisons are here over here, and all numbers are in RMB unless otherwise noted.
Speaker 3: In the first quarter of 2023,
Speaker 3: Net revenues were $566.9 million.
Speaker 3: A decrease of 7.6% year over year.
Speaker 3: Cost of revenue decreased by 29.5% to 68.2 million in the first quarter of 2023 from 96.7 million in the fourth quarter of 2022.
Speaker 3: The decrease was primarily due to declined compensation expenses related to high-con reduction of our cost of revenues personnel, including teachers and mentors.
Speaker 3: Growth profit decreased by 3.5% to 498.7 million.
Speaker 3: from 516.6 million in the first quarter of 2022.
Speaker 3: In the fourth quarter of 2023,
Speaker 3: Operating expenses were 320.7 minutes.
Speaker 3: representing a 7.3% decrease from 345.8 million in the fourth quarter of 2022.
Speaker 3: Sales and marketing expenses decreased by 8% to 271.4 million in the first quarter of 2023.
Speaker 3: from 295 million in the first quarter of 2022.
Speaker 3: The decrease was mainly due to declined compensation expenses related to high counter reduction of our sales and marketing personnel.
Speaker 3: General and administrative expenses increased by 3.1% to 39.6 million in the first quarter of 2023.
Speaker 3: from 38.5 million in the fourth quarter of 2022.
Speaker 3: Product development expenses decreased by 21.7%.
Speaker 3: to 9.7 minutes in the fourth quarter of 2023.
Speaker 3: from 12.4 million in the fourth quarter of 2022.
Speaker 3: The decrease was mainly due to declined compensation expenses related to high cost reduction of our product development personnel.
Speaker 3: Other income decreased by 8.3% to 8.8 million in the first quarter of 2023.
Speaker 3: from 9.6 million in the first quarter of 2022.
Speaker 3: Night income for the first quarter of 2023 was 180.1 million, compared with night income of 179.4 million in the first quarter of 2022.
Speaker 3: Basic and diluted net income per share was 26 in the first quarter of 2023.
Speaker 3: I saw smart the 31st
Speaker 3: 2023, the company had 721.8 million of cash and cash equivalents and 87.7 million of short-term investments.
Speaker 3: As of March 31, 2023, the company had a deferred revenue balance of $1,513.9 million compared with $1,690.9 million as of September 31, 2022. No expenditures were incurred.
Speaker 3: primarily in connection with IT infrastructure equipment and at least hold improvement necessary to support the company's operations.
Speaker 3: Capital expenditures were 3.8 million in the first quarter, compared with 0.9 million in the first quarter of 2022.
Speaker 3: expenditures were 3.8 million in the first quarter compared with 0.9 million in the first quarter of 2022. And now for our outlook.
Speaker 3: For the second quarter of 2023,
Speaker 3: Sunlight currently expects night revenues to be between RMB400 and 18 million to RMB500 million.
Speaker 3: Weight would represent a decrease of 9.9% to 13.5% year over year.
Speaker 3: This outlook is based on the current market conditions and reflects the company's management current and preliminary estimates of market, operating conditions and customer demand, which are all subject to change.
Speaker 3: With that, I'd like to open up the call to the questions.
Speaker 3: I'd like to open up the call to the questions. operator
Speaker 3: At this time, ladies and gentlemen, we now begin the question and answer session. If you wish to ask a question, please press star 1 1 on your telephone. Please press star 1 1 on your telephone.
Speaker 3: Please star 11 if you wish to ask a question and star 11 if you wish to withdraw your question.
Speaker 4: There are no questions on the phone.
Speaker 3: At this time we are shutting off for a question, so this will conclude our question and answer session. At this time I would like to turn the conference back over to you for any closing remarks.
Speaker 1: Once again, thank you everyone for joining today's call. We look forward to speaking with you again soon. Good day and good night.
Speaker 4: That concludes the conference for today. Thank you for participating. You may hold this connect.
Speaker 5: Thank you.
Speaker 4: Ladies and gentlemen, thank you for standing by and welcome to the Sunlands First Quarter 2022 earnings tolerance call. At this time all participants are in a listen only mode.
Speaker 4: Today's conference call is being recorded.
Speaker 4: I will now turn the conference over to the host. You have summoned AR representatives. Please go ahead.
Speaker 1: Hello everyone and thank you for joining Sunland's first quarter 2023 earnings conference call. The coming financial and operating results were issued in our press list. There are news wire services earlier today and are posted online. You can download the earnings press list and sign up for our distribution list by visiting our IR website.
Speaker 1: Participants on today's call will be our CEO , Mr. Tung Bo Liu, and our financial controller, Mr. Haun Yili. Management will begin with prepared remarks and the call will conclude with a Q&A session. Before I hand it over to the management, please take your seats.
Speaker 1: I'd like to remind you of Sunland Safe Harbor statement in relation to today's call. Except for historical information contained herein, certain of the matters discussed in this conference call are forward-rooting statements.
Speaker 1: 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.
Speaker 1: A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement.
Speaker 1: For more information about potential risks and uncertainties, please refer to the Communist Violence with the Securities and Exchange Commission.
Speaker 1: With that, I will now turn the call over to our CEO , Tom Bolu.
Speaker 2: Thank you, Yuhua Haleiwa. Welcome to Sunland's first quarter, 2020-03 conference call.
Speaker 2: Prior to commencing, I would like to kindly remind all attendees that the financial information referenced in this release is presented on a continuing operation basis, and all figures are then nominated in RMB unless expressly specified otherwise.
Speaker 2: As we reflect on the first quarter of the industry, we have witnessed a steadfast and consistent performance in the challenge operating environment. Our first quarter net revenue remains steady, reaching RMB 566.9 million, exceeding the high end of our guidance range.
Speaker 2: Our net income also experienced a slight year-over-year increase, reaching RMB 118.1 billion, marking the eighth consecutive quarter of sustained profitability for our company and setting a remarkable net income margin of 31.8.
Speaker 2: We remain optimistic about our future prospects based on this encouraging start to the year. During this quarter, we also achieved a year-over-year increase of 3.8 percentage points in our gross profit margin.
Speaker 2: Sitting a new record high of 88%.
Speaker 2: Meanwhile, we have maintained a sharp focus on diversifying our course content.
Speaker 2: elevating the quality of our offerings and optimizing student acquisition process. These concerted efforts have yielded remarkable results as evidenced by a substantial increase of 22.2% in new student enrollments.
Speaker 2: Moving forward, we are committed to maintaining this positive trajectory and continuing our success, employing our cost of savings and efficiency-enhancing business strategies to support unturned sustainable growth. Now, let's turn to the performance of each of our major
Speaker 2: cost programs. For post-secondary programs, our strategic reduction of marketing activities coupled with increasing market competition from the new entrants aiming to tap into the immense potential of the segments.
Speaker 2: led to a decline in both new student enrollments and course fittings.
Speaker 2: Despite facing intense competition and operating with a complex macro environment, we maintain our optimistic outlook for the future of our academic programs.
Speaker 2: This optimizing is particularly bolstered by the rising demand for continuing education, especially driven by the heightened employment pressures.
Speaker 2: Moving forward, we remain committed to delivering more precisely targeted, high-quality post-sensory courses to our students.
Speaker 2: We believe that over 20 years of experience in exam preparation, along with our experienced and well-received teaching staff and extensive learning resources, we will position us and have been continuously compared to other competitors in the long run.
Speaker 2: compressing professional certification preparation, professional skills, and interest courses has demonstrated outstanding performance with a year over year revenue increase exceeding 15.9%. Additionally...
Speaker 2: Our relentless pursuit of developing normal interest programs has constantly borne fruit, preparing the revenue generated by the sector to an impressive growth rate of 105.7%. The substantial increase has cemented it as a significant and reliable source of income.
Speaker 2: for our organization. Building upon this remarkable success, our certified commitment drives us to continuously refine our products and services, meeting the evolving learning needs of the broader universe of potential customers, ensuring that we remain at the forefront of industry.
Speaker 2: The domestic economy continues to recover, leading to an overall improvement in the employment situation. However, according to the data from the National Bureau of Statistics, since the start of 2023, the U.S. unemployment rate for the individuals aged 18 to 29 is rising.
Speaker 2: 2016-24 has placed consistently remained at an elevated level, reaching 20.4% in April .
Speaker 2: The first job market competition will continue to drive to growth of online education, as job seekers utilize it as a means to enhancing their skill sets and improve their chances of securing desirable employment opportunities.
Speaker 2: Additionally, we have observed that contemporary young individuals demonstrated a general inclination towards interest-based education.
Speaker 2: This recognizes the benefits it offers. The opportunity to explore and develop personal interests for personal enrichment and self-fulfillment.
Speaker 2: as well as the potential for supplemental income or career advancement.
As we move forward, we remain committed to adapting our indication of offerings to meet the evolving demands of our nurse and the leveraging the trains to <unk>.
Accessible effective and lifelong educational experiences.
While we have made significant.
Our accomplishment it is important to add loans that were also confronted with challenges in other aspects of our business.
The persistent macro uncertainties involving.
Involving market dynamics have influenced.
Or behavior for several of our pretax offerings, leading to a year over year decrease in revenues there have been proactive in other tracing the challenges by refining our operations and cultivating managing our expenses.
Looking ahead, we will continue to explore other potential revenue streams.
Diversifying our products and services offerings to enhance our resilience in the face of various changes.
In conclusion, our performance in the first quarter of 2003 reflects our commitment to balance growth and the profitability. We remain focused on delivering high quality education and expanding our market presence.
We extend our gratitude for your presence today and continue to support that you provide thank you and we look forward to your available engagement.
What is that.
I'll turn the call over.
12 of our financial controller hung you choose runs through our financials.
Okay.
Thank you Hello, everyone I would like to present, our first quarter results, which have met our expectations and demonstrated our steadfast commitment to achieve a 10% growth. Despite a seven 6% on a year over year decrease in line with revenues.
Throughout the quarter, we maintained our disciplined cost management practices.
Streamlined operations to boost our efficiency and profitability.
Leading to a seven 3% year over year decrease in operating expenses.
This focused approach to cost optimization has brought positive outcomes.
<unk> by the growth in our net.
Income from RMB, $179 4 million in the fourth quarter of 2022.
To RMB $181 million in the current quarter.
Looking ahead, we maintain a positive outlook on our long term growth prospects.
We'll continue to expand our portfolio of online course offerings.
<unk>, our cost structure and deliver exceptional service to our students.
This strategic matter, we would enable us to capture the market opportunities on the consolidated our leadership position in the industry.
Now, let me walk you through some of our key financial results for the first quarter of 2023.
All comparisons are year over year, and all numbers are in RMB unless otherwise noted.
In the first quarter of 2023.
<unk> revenues were $566 9 million.
<unk> of seven 6% year over year.
Cost of revenue decreased by 29, 5% to $68 2 million in the first quarter of 2023.
96, 7 million in the fourth quarter of 2022.
The decrease was primarily due to declines compensation expenses related to high cost a reduction of our cost of revenues plus now.
Clothing theater and a mentor.
Gross profit decreased by three 5% to $498 7 million.
From $515 6 million in the fourth quarter of 2022.
In the first quarter of 2023.
Operating expenses was 320 partners and seven minutes.
Representing a seven 3% decrease from 300.
$45 8 million in the fourth quarter of 2020.
Sales and marketing expenses decreased by 8% to 271 4 million in the first quarter of 2023.
295 million in the first quarter of 2022.
The decrease was mainly due to declines compensation expenses related to headcount reduction of our sales and marketing personnel.
Okay.
And administrative expenses increased by three 1% to $39 6 million in the first quarter of 2023.
38, 5 million in the fourth quarter of 2022.
Product development expenses decreased by 21, 7% to $9 7 million in the fourth quarter of 2023.
Two points for many in the fourth quarter of 2022.
The decrease was mainly due to declines compensation expenses.
The two highest cost reduction of our product development personnel.
Other income decreased by eight 3% to eight 8 million in the first quarter of 2023.
Nine 6 million in the fourth quarter of 2022.
Net income for the fourth quarter of 2023.
$180 1 million compared with net income of 179 4 million in the first quarter of 2022.
Basic and diluted net income per share was 26 in the first quarter of 2020.
As of March 31st.
2023, the company had seven.
121, 8 million of cash and cash equivalents.
87, 7 million of short term investments.
As of March 31st 2023.
Company had a deferred revenue balance of 1500 on a $13 9 million.
Comparative with 1690 $9 million as of September 31, 2022.
Capital expenditures were incurred primarily in connection with IP infrastructure agreement.
Lease hold improvement asthma.
All of the company's operations.
Capital expenditure was three 8 million in the fourth quarter compared with one 9 million in the first quarter of 2022.
And now for our outlook.
For the second quarter of 2023.
Sunlight comment.
19 revenues to be between RMB 418 million to RMB 500 million.
Would represent a decrease of nine 9% to 13 five.
5% year over year.
This outlook is based on the current market conditions and reflect 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.
Peter.
At this time, ladies and gentlemen, we will now begin the question and answer session.
If you wish to ask a question. Please press star one on your kind of fun.
Okay.
Please star one if you wish to ask a question.
Star One if you wish to withdraw your question.
There are no questions on the phone.
At this time, we're showing no further questions. So this concludes our question and answer session. At this time I would like to turn the conference back over to you for any closing remarks.
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.
That concludes the conference for today. Thank you for participating you may all disconnect.