Q3 2023 Sunlands Technology Group Earnings Call
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Speaker 1: Ladies and gentlemen, thank you for standing by and welcome to Sunland's third quarter 2023 earnings conference call. At this time all participants are in listen-only mode. Today's conference call is being recorded.
Ladies and gentlemen, thank you for standing by and welcome to Sean lunch, that's core to 'twenty to 'twenty three earnings conference call.
At this time, all participants are in listen only mode.
Today's conference call is being recorded.
Speaker 1: I will now turn the call over to your host today, Yuhua Sunlands, IR representative. Please go ahead.
I will now turn the call over to your host today, you've won Sundance IR Representative. Please go ahead.
Speaker 2: Hello, everyone, and thank you for joining Sunland's 3rd Quarter 2023 Earnings Conference Call. The company's financial and operating results were issued in our press release, and they were spotlighted 30 days 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.
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Thank you for joining from in the corner.
This conference call the company's financial and operating results were issued in La that's neat.
If not why is that it's really up to date and are posted online you can download it on your press release and sign up.
Well I'll, let distribution list by visiting our IR website.
Speaker 2: Participants on today's call will be our CEO , Mr. Tung Bo Liu, and our financial representative, Mr. Han Rui Li. 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. <unk>.
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Yeah, they're not ended the call will conclude with a Q&A session.
Speaker 2: Before I hand it over to the management, I'd like to remind you of some landscape harbor statement in relation to today's call. Except for the historical information contained herein, some of the matters discussed in this conference call are forward-looking statements. 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.
Before I hand, it over to the management.
Now to remind you all staying in safe Harbor statements in relation to today's call except for the historical information contained you eat some of them that I E. If congress called forward looking statements you've.
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 2: 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 Communist filings with the Securities and Exchange Commission. With that, I will now turn the call over to our CEO , Tu Bo-Liu.
Another important component of that could cause actual results to give up 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 Alethia.
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Speaker 3: Thank you, Yuhua. Hello, everyone. Welcome to Sunland's third 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 and all fingers are denominated in RMB unless explicitly specified otherwise.
Thank you Hello, everyone.
We will come to Sundance sort of quarter, two in Italy, It's a very comprehensive call.
Prior to commencing I'll, let you kind of remind all 10 days that the financial information.
Any statement that is reduce are presented on a continuing operations basis and all fingers are denominated in RMB unless explicitly specified otherwise.
Speaker 3: In Q3, our business has constantly adjusted to the evolving economic landscape and has strategically progressed despite the challenges. Our overarching objective of propelling the group towards sustained and high-level profitability has yielded positive results as we maintained sustainable net profits for 10 consecutive quarters.
In Q3, our business has constantly adjusted to the evolving economy landscape and how state digitally progressed despite the challenges.
Our overarching objective are propelling the group towards systems and the high level of profitability has yielded positive results.
Benton suitable and they're perfect for 10 consecutive quarters.
Speaker 3: Net income reached $131.6 billion. Net revenues, despite a slight year-over-year decrease, exceeded the high end of our guidance range and reached $524.6 million.
Net income reached 131.6, beginning with our revenues despite a slight year over year decrease except the heightened of our guidance range and reached five consumed $4 6 million. What we're also pleased to say our ongoing efforts to optimize our paradox struck.
Speaker 3: We were also pleased to see our ongoing efforts to optimize our product structure and expand our cost portfolio rewarded with enhanced operational results, reflecting a 14.3% over your increase in our new student enrollment.
Sure and expand our course portfolio rewarded with enhanced operational results, reflecting a $14, 3% year over year, increasing our new skilled in the eurobond.
Speaker 3: and 6.7% over your increase in growth spending.
And then second a seven person yogurt your increase in gross billings.
Speaker 3: We are delighted in our capability to remain profitable under a challenging environment. This success is a tribute to improvements in gross margins, the implementation of cost-cutting veneers, and enhanced financial planning and analysis across the entire business. Our cost of revenue has achieved a year-over-year decrease of 24.5%.
We are delighted in our capability to remain profitable under challenging environment.
This success is attributable to improvements in gross margins.
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Cost of revenue has achieved a year over year decrease of <unk>, 4%, 5%.
Speaker 3: And Gen A expenses have achieved a year-over-year decrease of 21%.
And the G&A expenses and have achieved a year over year decrease of 21% with firmly believes that only by adhering to announce them perspective, and ensuring the health. It goes up the price can we create sustainable value for shareholders and our users.
Speaker 3: We firmly believe that only by adhering to long-term perspective and ensuring the healthy growth of the enterprise can we create sustainable value for shareholders and users.
Speaker 3: Now let's turn to the performance of each of our major course programs.
Now, let's turn to the performance of each of our major major cost programs due to uncertainties surrounding the macro economy. If you aren't environment. Our degree our degree or diploma oriented as consumers have adopted a more conservative approach to the spending there.
Speaker 3: Due to uncertainties surrounding the microeconomic environment, our degree or diploma-oriented consumers have adopted a more conservative approach to the spending. This sector experienced a year-over-year revenue decline of 55.2%, influenced by our strategic reduction in marketing activities.
Victor experienced a year over year revenue decline of 15, five 2% influenced by others.
Reduction in marketing activities.
Speaker 3: We will persistently enhance our operational efficiency through continuous market observation and remain dedicated to providing premium courses for our in-progress students. The segment including professional certifications, professional skills, and interest programs has represented as our new growth driver, accounting for 17.4% of the total revenue and exhibiting a year-over-year revenue growth of 23.8%.
Hello, persistently enhance our operational efficiency through continuous market observation and remanded Katie to providing premium because it's full over in purpose with students.
The segments, including professional certifications professional skills and interest programs has represented over milk girls driver accounting for 17 point, a full person up there to the revenue and the painting a year over year revenue growth of 10 history from the Ed persons, we have strengthened our determination and confidence to him.
Speaker 3: We have strengthened our determination and the confidence to increase investment in interest-based education following through process of testing and validation.
Increased investment interest based allocation following suit.
So per se of self testing and validation and validation the number of new student environments and professional certifications, preventing the skills and the interest programs first.
Speaker 3: The number of new student environments in professional certifications, professional skills, and interest programs in the first three months of 2023 increased by 29.1% compared to the same period of 2022, and the number of head students has exceeded 1.2 million since 2021.
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Speaker 3: Today, we would like to delve deeper into our understanding of the end-of-the-end data center. There are several noteworthy shifts in the end-of-the-end application landscape.
Today, we would like to delve deeper into another city.
Or there are several noteworthy as shifts in the end authentication landscape firstly, there's a herculean market.
Speaker 3: Firstly, there's the burgeoning market potential of the silver economy. While the age group of 20 to 15 remains a steady fast pillar in the industry, it's crucial to highlight that the demographic size of the silver generation continues to grow. According to the data disclosed by the National Bureau of Statistics,
Potential of the silver economy, while the age group of 20, and 13% to 15 remains steadfast pillar in the industry is crucial to highlight that the demographics of the silver generation continues to grow according to the data disclosed by the National Bureau of statistics.
Speaker 3: At the end of 2022, China's elderly population reached 280 million, which is 16 and above. Among them, 153 million are internet users, indicating that at least one in every two elderly individuals has internet access.
Turning to Chinas out the elderly population reached 280, meaning which urged the 16 on the BOP among them 115, 3 million internet users, indicating that at least the way he ever to elderly individuals has internet access.
Speaker 3: a significant portion has already adopted the habits of online learning, communication, and socialization. Furthermore, projections indicate that during the 14th five-year plan period, China's population aged 60 and above surpassed 300 million, accounting for over 20% of the total population.
And the liver kind of portion has already adopted the habits of Atlanta name communication, and especially with Asian, Furthermore, projections indicated that during the.
14th five year plan period, China, China's population edge.
Surpass 300, abandoning accounting for over 20% of the total operation.
Speaker 3: With the aging population, extended life expectancy, and the rising per capita income, this represents a significant incremental market.
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Speaker 3: Based on this, there is, of course, tailored to elderly individuals covering various interest areas, such as vocal music, musical instruments, and educational planning. There is an opportunity to focus on a combination of content creation, services capabilities, and technological expertise.
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Speaker 3: We quickly gained recognition from this group, specifically, according to our survey, the satisfaction rate for calligraphy courses is as high as 94.59% and for traditional Chinese printing courses, it reaches an impressive 98.25%.
We're quickly gained a recognition from this group spend specifically according to our survey.
Thats faction grateful Telegraphing causes is as high as 19, four points 59 persons and for traditional tenants punting courses.
It's just an impressive 98 to five persons who are collapsing to you say that this group not only online but also <unk>.
Speaker 3: We are delighted to say that this group not only learn online, but also can connect with recommended friends, establish new social relationships from our platform, which we received numerous feedback from this group and their vivid narratives resonate deeply with us, affirming the meaningful impact of our work.
Next with documented friends is termination neil's social relationships for our platform, which we received in numerals feedback from this group handle their way right. The narratives resonates deeply with us are firmly the meaningful impact of a bubble work there.
Speaker 3: They illustrate how our learning plan caters to the diverse interests and learning needs of various users, fostering continuous personal development and meaningful connections.
Enough trades over a horrible in the plan for caters to the diverse interests and eliminates the wearers users fostering continuous personal development tens of meaningful connections.
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The increase in in competitive job market is still calling for higher overall codification for individuals living are varied and personalize the demand pull and authentication.
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The increase in the diversity of professional courses offerings. Our surgery is in alignment with the market as well we have meticulously surety then the provided a suite of premiums.
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Speaker 3: We are pleased to witness our students' unwavering commitment to actively participate in the courses. And we take pride in assisting them in navigating the challenges of the dynamic working environment.
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Participating in the courses and we take pride in assisting them in navigating the challenges of the pandemic working environment. Additionally, we have carefully argument at our selection of in interest based courses in response to the burgeoning inclination towards personalized than the passenger.
Speaker 3: Additionally, we have carefully argumented our selection of in interest based courses in response to the burgeoning inclination towards personalized and the passion. We strive to provide a comprehensive range of additional services and products that extend beyond the confines of traditional learning experience.
We strive to provide a.
Comprehensive range of ambition of services and products that extend beyond the confines of traditional lending experience.
Speaker 3: Furthermore, we have also been closely monitoring the application of new technologies in our industry, such as the latest AIGC technology in our educational business conference.
Furthermore, we have also been closely monitoring the application of new technologies, and our industry such as the latest Aig's knowledge.
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Speaker 3: We are optimistic about the prospects of the development of this technology. It's worth mentioning that our product development expenses have also increased by 5.3 percent compared to the previous quarter. In summary, drawing on a decade of valuable experience and industry acclaim, we are positive to rapidly and efficiently expand our market presence going forward.
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The prospects of the development of this technology, it's worth mentioning that of a product development expenses have also increased by five 3% compared to the previous culture in summary, drawing on it they've heard of valuable experience in the industry acclaim.
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Market presence going forward.
Speaker 3: With dedication, our dedication remains unwavering as we adjust our educational offerings to align with the changing needs of learners, reinforcing our leading position in adult education sector. With that, I will turn the call to our financial controller, Hangyu, to run through our financials.
With dedication.
Our tactician Ribband unwavering eyes.
We adjust our educational offerings to align with the changing needs of the nurse reinforcing our leading position and authentication sector was that I will turn the call over financial controller hungry to run through our financials.
Speaker 4: Thank you, Tongbo. Hello, everyone. I'm pleased to present our third quarter results, which are in line with our expectations and demonstrate the effectiveness of our pursuit of sustainable growth.
Thank you <unk> Hello, everyone I'm pleased to present, our first quarter results, which are in line with our expectations and demonstrate the effectiveness of our pursuit of sustainable growth.
Speaker 4: As you can see, last quarter was another excellent quarter in operation.
As you can see last quarter was another excellent quarter in operations.
Speaker 4: As a result of steady growth in interest-based programs, new student enrollments went up by 14.3%, and growth billions increased by 6.7% year-over-year.
As a result of steady growth in interest base programs.
New student enrollments went up by 14 points, 3% and.
Gross billings increased by six 7% year over year.
Speaker 4: Thanks to our strategy of balanced, sustainable growth and profitability.
Thanks to our strategy of balanced sustainable growth and profitability.
Speaker 4: Gross profit margin increased by 2.5 percentage points to 87.8% compared to the same period last year. Operating expenses as a percentage of gross billings decreased by 2.1 percentage points compared to the third quarter of last year.
This profit margin increased by 2.5 percentage points to 87.8% compared to the same period last year.
<unk> expenses as a percentage of gross billings decreased by two one percentage points compared.
Compared to the third quarter of last year.
Speaker 4: These improvements were reflected in our night income. Last quarter we achieved night income of 131.6 million, our 10th profitable quarter since the second quarter of 2021.
This improvement was reflected in our nine income last quarter. We achieved net income of 131 6 million our turns profitable quarter since the second quarter of 2021.
Speaker 4: Looking ahead, we are optimistic about long-term growth. We are committed to expanding online course offerings, optimizing course effectiveness, and providing exceptional service to our students.
Looking ahead, we are optimistic about the long term growth.
We're committed to expanding online course offerings optimizing cost effectiveness and providing exceptional service to our students.
Speaker 4: These strategic initiatives are conductive to seizing new opportunities and consolidating our position in the industry, which in turn will help us maintain our competitive edge in the industry and continue to value our stakeholders.
These strategic initiatives are conductive to seeding new opportunities and consolidating our position in the industry, which we hope as our competitive edge in the industry.
Continue to Cook.
All of our stakeholders.
Speaker 4: Now, let me walk through some of our key final results for the third quarter of 2023.
Now, let me walk through some of our key final readout for the third quarter of 2023.
Speaker 4: All comparisons are year-over-year and all numbers are in RMB unless otherwise noted.
All comparisons are year over year and the old numbers are in RMB unless otherwise noted.
Speaker 4: In the first quarter of 2023, net revenues were $524.6 million, a decrease of 9% year-over-year.
In the first quarter of 2023 net revenues were $524 6 million.
Decrease of 9% year over year.
Speaker 4: Cost of revenue decreased by 24.5% to $64.1 million in the third quarter of 2023.
Cost of revenue decreased by 24, 5% to $64 1 million in the third quarter of 2023 from $84 9 million in the third quarter of 2022.
Speaker 4: from $84.9 million in the third quarter of 2022. The decrease was primarily due to lower compensation expenses related to our cost of revenue assessment. Gross profit decreased by 6.3%.
The decrease was primarily due to lower compensation expenses related to our cost of revenue recognition.
Gross profit decreased by six 3% to 400, and <unk> 5 million from $491 3 million in the third quarter of 2022.
Speaker 4: to $460.5 million from $491.3 million in the first quarter of 2022.
Speaker 4: In the third quarter of 2023, operating expenses were $368.5 million, representing a 4.1% increase from $325 million in the third quarter of 2022.
In the third quarter of 2023 operating expenses were $368 5 million, representing a four 1% increase from 325 million in the third quarter of 2022.
Speaker 4: Sales and marketing expenses increased by 9.6% to 295 million in the first quarter of 2023.
Sales and marketing expenses increased by nine 6% to 295 million in the third quarter of 2023.
Speaker 4: from 269.1 million in the third quarter of 2022.
From $259 1 million in the third quarter of 2022.
Speaker 4: primarily due to increased spend on branding and marketing activities.
Primarily due to increased spend on branding and marketing activities.
Speaker 4: General and administrative expenses decreased by 21% to $35.1 million in the third quarter of 2023, from $44.4 million in the third quarter of 2022.
General and administrative expenses decreased by 21% to 35 1 million in the third quarter of 2023.
From $44 4 million in the third quarter of 2022.
Speaker 4: Product development expenses decreased by 27% to $8.4 million in the third quarter of 2023, from $11.5 million in the third quarter of 2022.
Product development expenses decreased by 27% to $8 4 million in the third quarter of 2023.
Eli one 5 million in the third quarter of 2022.
Speaker 4: Product development expenses were mainly comprised of compensation expenses.
Product development expenses were mainly comprised of compensation expenses.
Ninth income for the third quarter of 2023 was 131 6 million compared with Knight income of 100 under $68 1 million in the third quarter of 2022.
Speaker 4: Basic undiluted net income per share was 19.13 in the third quarter of 2023.
Basic and diluted net income per share was 19 <unk> in the third quarter of 2023.
Speaker 4: As of September 30, 2023, the company had $751.8 million of cash, cash equivalents, and restricted cash, and $122.3 million of short-term investments. As of September 30, 2023, the company had $751.8 million of cash, cash equivalents, and restricted cash, and $122.3 million of short-term investments.
As of September 30th 2023, the company had 751 8 million of cash cash equivalents and restricted cash and $122 3 million of short term investments.
As of September the 30th 2023.
Speaker 4: The company had a deferred revenue balance of $1,277 million compared with $1,690.9 million as of September 31, 2021.
The company had a deferred revenue balance of $177 million compared with $1690 9 million as of September 31st 2022.
Speaker 4: Capital expenditures were incurred primarily in connection with IT infrastructure equipment and a leasehold improvement necessary to support the company's...
Capital expenditures were incurred primarily in connection with infrastructure equipment, and the leasehold improvement necessary to support the company.
Speaker 4: Capital expenditures were $1.4 million in the third quarter, compared with $1.3 million in the third quarter of 2022.
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Capital expenditures were $1 4 million in the third quarter compared with $1 3 million in the first quarter of 2022.
Speaker 4: And now for our outlook, for the first quarter of 2023, sunlights currently expect night revenues to be between 490 million to 510 million.
And now for our outlook for the fourth quarter of 2023 sunlight currently expect net revenues to be between $419 million.
Two $510 million.
Speaker 4: which would represent a decrease of 11.9% to 15.3% year over year.
Which would represent a decrease of 11, 9% to 15, 3% year over year.
Speaker 4: This outlook is based on the current market conditions and reflects the company's management's current and preliminary estimates of market, operating conditions, and customer demand, which are all subject to change.
This outlook is based on the current market conditions and reflects the company's management's current and preliminary estimates of market operating conditions and customer demand, which are all subject to change.
Speaker 4: With that, I'd like to open up the call to the questions of Peter.
With that I'd like to open up the call to questions.
Peter.
Speaker 1: Thank you. To ask a question you will need to press star 1 and 1 on your telephone and wait for your name to be announced and to withdraw your question please press star 1 and 1 again.
Thank you to ask a question you will need to press star one and one on your telephone and wait for your name to be announced and to withdraw. Your question. Please press star one and one again.
Speaker 1: 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.
For 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.
Okay.
Speaker 1: once again if you would like to ask a question you will need to press star 1 and 1 on your telephone and wait for your name to be announced and to withdraw your question you can press star 1 and 1 again.
And once again, if you would like to ask a question you will need to press star one and one on your telephone and wait for your name to be announced until your question you compress Star one again.
Okay.
Speaker 1: are no questions so far. Once again if you would like to ask a question please press star 1 and 1 on your telephone.
Our next question so far once again, if you would like to ask a question. Please press star one and one on your telephone.
Speaker 1: At this time there are no questions coming through so that will conclude the question and answer session. At this time I would like to turn the conference back over to Yuhua for any closing remarks.
At this time there are no questions coming through so that will concur.
A question and answer session at this time I would like to turn the conference back over to you for any closing remarks.
Once again, thank you everyone for joining today's call.
Speaker 2: We look forward to speaking with you again soon. Good day and good night.
We look forward to speaking with you again soon good day and good night.
Speaker 1: This concludes this conference call. You may now disconnect your line. Thank you.
This concludes this conference call you May now disconnect. Your line. Thank you.
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