Q1 2025 Sunlands Technology Group Earnings Call
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Operator: Ladies and gentlemen, thank you for standing by and welcome to Sunlands first quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. Today's conference call is being recorded.
Speaker Change: Ladies and gentlemen, thank you for standing by and welcome to Sunderland first quarter 2025, and then its conference call.
Speaker Change: This time all participants are in a listen only mode. Today's conference call is being recorded I would now turn the call over to your host today you are suddenly <unk> IR representative. Please go ahead.
Yuhua Ye: I will now turn the call over to your host today, Yuhua, Sunlands IR representative. Please go ahead.
Yuhua Ye: Hello, everyone, and thank you for joining Sunlands' first quarter 2025 earnings 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 the earnings press release and sign up for our distribution list by visiting our IR website.
Speaker Change: Hello, everyone and thank you for joining us on our first quarter 'twenty to 'twenty five earnings conference call. The company's financial and operating results were issued in our press release by Newswire services earlier today and are posted online you can download the earnings press release and sign up for our distribution list visiting our Iowa.
Yuhua Ye: Participants on today's call will be our CEO, Mr. Tongbo Liu, and our financial director, Mr. Hangyu Li. Management will begin with prepared remarks and the call will conclude with a Q&A session.
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Speaker Change: Participants on today's call will be our CEO, Mr. Jim O'neil and all of our financial Dockyards restart hungry man.
Speaker Change: Management will begin with prepared remarks, and the call will conclude with a Q&A session.
Yuhua Ye: Before I hand it over to the management, I'd like to remind you of Sunlands' safe harbor statement in relation to today's call. We set forth historical information contained herein. Certain 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. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement.
Speaker Change: Before I hand, it over to the management I'd like to remind you all that proper statement in relation to today's call except for historical information contained herein.
Speaker Change: 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 number all of these factors could cause actual results to differ materially from those contained in any forward looking.
Yuhua Ye: For more information about the potential risks and uncertainties, please refer to the company's filings with the Securities and Exchange Commission.
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Speaker Change: For more information about potential risks and uncertainties, usually it starts in the company's filings with the Securities and Exchange Commission with that I'll now turn the call over to our C O U.
Tongbo Liu: With that, I'll now turn the call over to our CEO, Tongbo Liu. Thank you, Yuhua. Hello everyone.
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Tongbo Liu: Welcome to Sunlands' first quarter 2035 earnings conference call. Prior to commencing, I would like to kindly remind all attendees that the financial information referenced in this release present on a continuing operation basis and all fingers are denominated in RMB unless explicitly specified otherwise. In the first quarter of 2025, we reported net revenue of RMB487.6 million and net income of RMB75.2 million, marking our 16th consecutive profitable quarter, an encouraging start to the year that reinforces our confidence in delivering sustainable growth throughout 2025. While net revenue remained relatively stable, our continued profitability and disciplined execution reflect the underlying resilience of our business model.
Speaker Change: Earnings Conference call.
Speaker Change: Alright, two commencing I would like to kind of remind all attendees to the financial information referenced in this release.
Speaker Change: They're continuing to operate.
Speaker Change: Bases and all fingers are denominated in RMB unless explicitly specified otherwise.
Speaker Change: In the first quarter.
Speaker Change: We reported a net revenue of RMB four seven partnerships meeting led income of RMB $75 2 million, marking our 16th consecutive birth for federal culture, not encouraging start to the year that reinforces our confidence in the delivery.
Speaker Change: And the girls route.
Speaker Change: Well Andrew revenue remained relatively stable.
Speaker Change: Continue the profitability and disciplined execution reflects the underlying resilience of our business model is income margin reached 15 corner full person supported by effective cost optimization.
Tongbo Liu: Its income margin reached 15.4%, supported by effective cost optimization and ongoing operational efficiency improvement. Meanwhile, our financial fundamentals remain robust. This quarter marks our seventh consecutive period of positive operating cash flow, underpinned by sound execution and prudent capital management.
Speaker Change: Operational efficiency improvements.
Speaker Change: Meanwhile, our financial fundamentals remain robust this quarter marks our seventh seventeens.
Speaker Change: Evans consecutive period period of positive operating cash flow underpinned by sound execution and prudent capital management.
Tongbo Liu: Looking ahead, we will continue to refine our business mix, concentrating on high margin, high potential areas to reinforce structural flexibility and long-term resilience. On the product front, we continue to deepen and diversify our course portfolio. We refine our core subject areas while extending into adjacent domains such as wellness and lifestyle, relying with increasing diverse needs of lifelong learners. Driven by our course diversification strategy, this quarter's total enrollments reached over 179,000, also supported by meaningful improvements in learner engagement and retention. Technology also remains central to our strategy. This quarter, we further advanced the digital transformation of cooperations by embedding AI tools that enhance curriculum precision and boost learner engagement.
Speaker Change: He will continue to refine our pins mix.
Speaker Change: Concentrating on high margin high potential areas to reinforce structure flexibility in the downturn resilience.
Speaker Change: On the product front, we continue to deepen and diversify our portfolio, we refine our core subjects errors, while it's turned into a job.
Speaker Change: Adjusted demand such as wellness and lifestyle lie in ways and questioning the worst needs of lifelong learners driving by our course diversification strategy with <unk>.
Speaker Change: Quarters total enrolments reached over 179000, or so supported by meaningful improvements in engagement and the retention.
Speaker Change: Technology also remains central to our strategy this quarter with further advanced to the digital transformation of collaborations by embedding AI tools that enhance cook alarm possession and the boost in their engagement now, let's turn to the performance of each of our major cost programs.
Tongbo Liu: Now, let's turn to the performance of each of our major course programs. In the first quarter of 2005, degree and diploma for post-secondary programs contributed 9.7% of total revenue. This sector has experienced a moderated trajectory and our celebrated scale-back investments has allowed us to reallocate resources toward high-growth opportunities more effectively.
Speaker Change: In the first quarter of <unk> five degree and in keeping them off works to post sector programs contributed nine 7% of total revenue.
Speaker Change: The sector has experienced a moderate trajectory an hour and hour celebrated a scaled back in <unk>.
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Speaker Change: Has allowed us to locate relocate resources toward high growth opportunities more effectively.
Tongbo Liu: Going forward, we will continue to monitor micro-education trends and demographics shifts closely, ensuring our approach remains agile and responsive to evolving conditions. The sector encompassing interest-based programs, professional skills development, and professional certification preparation accounted for a substantial 78.2% of our total revenue, with interest-driven courses emerging as a fundamental pillar. Unlocking the full potential of interest-learned learning among middle-aged and senior learners remains a central strategic priority. In this area, we have remained steadfast in pursuing a clear future-oriented strategy rooted in openness, integration, and innovation, while deepening our initiatives across multiple fronts. First, we have embraced a partnership-driven approach to amplify value creation.
Speaker Change: Going forward, we will continue to monitor macro.
Speaker Change: Asian trains and the demographic shifts Coty, Inc.
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Speaker Change: At Yale and a responsive to evolving conditions.
Speaker Change: The sicker encompassing and interest based programs professional skills development and professional certification preparation accounted a full is up substantially.
Speaker Change: Substantial 17, eight 2% of our total revenue.
Speaker Change: With interest drive that of course is emerging as a fundamental Peter.
Speaker Change: Nope unlocking the full potential of interest the land learning among middle aged and this and the nurse remains a central strategy for us.
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Speaker Change: In this area, we have remained steadfast in pursuing a career future oriented Australia be rooted in openings integration and innovation, while deepening our initiatives across multiple fronts.
Speaker Change: First we'll have embraced our partner's share partnerships driving an approach to amplify value creation as China's aging population expands the senior consumer market is drawing increased participation from diverse industries, including consumer brands.
Tongbo Liu: As China's aging population expands, the senior consumer market is drawing increased participation from diverse industries, including consumer brands. health care service providers, and a traditional medium. This convergence presents significant opportunities for core sector collaboration. Following last year's successful partnership with Beijing TV, we established a new cooperation with Hunan TV's Happy Shopping Platform this quarter, leveraging its broad consumer reach and brand influence.
Speaker Change: Health care service providers and traditional media. This come there's convergence presents significant opportunities for core sector collaboration.
Speaker Change: In last year's successful partnership with Beijing TV.
Tim: As Tim reached a New York operation with Hunan Tvs Happy shopping platform this quarter, leveraging its broad consumer reach and brand influence.
Tongbo Liu: Second, we have further strengthened our hybrid delivery model to meet the evolving needs of other learners. For this demographic, education is not only about acquiring knowledge. It is equally about social participation and emotional fulfillment. To address this need, we have adopted primarily online, supplemented by offline hybrid model that offers both flexibility and depth. This model has proven especially effective in boosting learner retention and satisfaction. Notably, our Creative Study Tour with integrated education content with cultural travel has been particularly well-received for their immersive and differentiated value. At the same time, we are deepening our cross-sector collaboration by partnering with galleries and museums to develop cultural resorting experiences, further strengthening engagement within the senior segment.
Speaker Change: Well have further strengthened our hybrid delivery model to meet the evolving needs of older and the nurse for this demographic and Acacia is not only about acquiring no niche. It is equally a powder social participation and emotional fulfillment to address this need we have adopted primarily.
Speaker Change: Online supplemented by offline hybrid model that offers both flexibility and impacts.
Speaker Change: This model has proven especially effective in boosting the rotation and and satisfaction and ultimately our creative started tour was integrated education countered with couch or travel has been particularly well received before their immersive and different differentiated value are the same.
Speaker Change: We are deepening our cost sector collaboration partner temporary ways galleries museums to call developed cultural resultant experiences further strengthening engagement. We're seeing this in your segment.
Tongbo Liu: Third, we have refined our curriculum design with a self-developed assets framework, which is answer, comment, supervisor, and study to fuel ongoing growth and ensure learner success. This dual-teacher model, while pairs academic mentors and learning facilitators, makes our courses more accessible, engaging, and outcome-driven. Leveraging this collaborative learning system, we have attained a 98% course competition rate among new students and a 14% increase in knowledge retention, scoring its effectiveness in delivering substantial educational outcomes. Beyond academic innovation, social mission remains integral to our strategy. Each year, we organize nearly 100 free public interest activities, ensure elderly individuals with cultural or intellectual oppressions can access meaningful learning experiences.
Speaker Change: Third we have refined our cooking arm design with a self developed assays framework, which is answer Cummins supervisor and a study to feel I'm going to send the insured and the success. This dual teacher model well pairs epitome lenders and the lending facility.
Speaker Change: Papers mixed although of course, it's more assessable engaging and outcome driver leveraging this collaborate collaborative learning system, we have attained in a 98% coarse competition rates among new students and 14 person increasing noted your attention a scoring its effectiveness.
Speaker Change: We can substitute ensuring application.
Speaker Change: And patient outcomes.
Speaker Change: Beyond Academy innovation, Social mission remains integral to our strict each year.
Speaker Change: There is nearly a 100, a free public interest activities ensure elderly individuals with culture or in intact your operations.
Speaker Change: It's meaningful and experiences with.
Tongbo Liu: We view this not only as an expression of corporate responsibility, but as a long-term investment in brand trust and mission.
Speaker Change: This not only as an expression of cover corporate corporate responsibility, but as a long term investment in brand and trust and the mission.
Tongbo Liu: element. Recent policy developments further reinforce our confidence. This government's focus on stimulating domestic consumption and expanding service-oriented sectors, including cultural, tourism, and education, align closely with our strategic direction. Targeted initiatives and physical incentives for innovation in community-based and lifelong learning programs affirm that we are operating in the right space at the right time, with ample room to scale, lead, and grow. Taken together, these efforts reflect our holistic and forward-looking approach to lifelong learning. Today's adult learners are increasingly value conscious, second priming, immersive and social engaging experiences. This shift affirms our early position and highlights the long term potential of adult learning economy.
Speaker Change: Element.
Tongbo Liu: Part of the development further reinforced our confidence with governments focused on.
Speaker Change: Stimulating demand.
Speaker Change: The Mustangs domestic consumption and expanding service oriented sectors, including cultural.
Speaker Change: There is an allocation like because it aligns closely with our strategic direction Paclitaxel in the actives and the physical incentives for innovation in community based and lifelong learning programs affirms that we are operating in the wireless space at the right time with ample room to <unk>.
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Speaker Change: Taken together these efforts reflect hover, let's take a look forward looking approach to lifelong learning today is about the nurse and personally and values.
Speaker Change: Meadow cancers second framing immersive and social engaging experiences this shift affirms our early position and highlights the long term potential of adult learning economy moving forward. We will continue to continue enhancing offers offerings strengthening.
Tongbo Liu: Moving forward, we will continue enhancing our offerings, strengthening ecosystem integration, and deepen engagement, ensuring we remain well positioned to lead this evolving sector. While macroeconomic and geopolitical uncertainties persist, the impact on our business has been limited given our domestic focus. Nonetheless, we remain vigilant, proactively managing risks, while staying alert to new opportunities. Looking ahead, we will continue strengthening our core capabilities, expanding our core offerings, embracing Internet-generated technologies, and disciplining the focus on value creation. We are confident this approach will deliver sustainable, long-term returns for shareholders and meaningful learning outcomes for our students.
Speaker Change: <unk> and strengthening ecosystem integration and deepen engagement, ensuring we remain well positioned to lead this evolving sector.
Speaker Change: The macro economy, and geopolitical geopolitical uncertainties persist the impacts on our business has been limited given our domestic focus.
Speaker Change: Nonetheless, we remain vigilant proactively managing risks, while staring alerts to new opportunities looking ahead, we will continue strengthening our core capabilities and strengthening our core offerings.
Speaker Change: Embraer embracing internet.
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Speaker Change: Our disciplined focus on value creation. We are confident this approach will deliver sustainable long term returns for shareholders and the meaningful outcomes for our students.
Tongbo Liu: This concludes my prepared remarks.
Speaker Change: This concludes my prepared remarks with that I will turn the call 12 are you.
Hangyu Li: With that, I will turn the call to our financial director, Mr. Han, to run through our financials. Thank you, Tongbo. Hello, everyone. I'm pleased to report our results for the first quarter of 2025. During the quarter, we successfully responded to the volatile market environment and achieved solid results. We had a gross profit margin of 85.2% and a net income margin of 15.4%. With net income of 75.2 million, this solid start is a testament to our prudent financial management and the sustainability of our business. Our co-interest and the professional certification programs continue to be engines of growth.
Speaker Change: You're right.
Speaker Change: To run through our financials.
Speaker Change: Thank you <unk> Hello, everyone I'm pleased to report our results for the first quarter of 2025.
Speaker Change: During the quarter, we successfully responded to the volatile market environment and achieved solid results.
Speaker Change: We had gross profit margin of 85, 2% and the net income margin of 15, 4% with net income of $75 2 billion. This solid start is a testament to our prudent financial management and the sustainability of our business.
Speaker Change: Our core interest and professional certification programs continue to be engines of growth.
Hangyu Li: The series of successful strategic initiatives supported average order value growth of 7.5% and resulted in 169,083 new student enrollment. Financially, we maintained positive operating cash flows for the 7th consecutive quarter with cash equivalents and short-term investments totaling $796.9 million. Our healthy financial position further strengthens our ability to cope with market uncertainties while making strategic investments. Looking ahead, we maintain efficient operations, enhance artificial intelligence-driven cross-personalization, and capitalize on policy benefits in the lifelong learning space. Despite the recent decline in revenues, we believe our healthy financial position and the flexible business model will allow us to capitalize on the long-term opportunities in China's aging-driven education market.
Speaker Change: A series of successful strategic initiatives supported average order value growth of seven 5% and the resulted in 116 9083, new student enrollments.
Speaker Change: Fast nationally we maintained positive operating cash flows for the seventh consecutive quarter with cash cash equivalents and short term investments totaling 796 9 million.
Speaker Change: Our healthy financial position furthest trends, our ability to cope with market uncertainties, we are making strategic investments.
Hangyu Li: Looking ahead, we maintain efficient operations enhance artificial intelligence driven cost personnel inflation on the capped who lives policy benefits in the lifelong learning pace.
Speaker Change: Despite the recent decline in revenues, we believe our healthy financial position and flexible business model will allow us to capitalize on the long term opportunities in China's aging driven application market.
Hangyu Li: Let me know.
Speaker Change: Let me now.
Hangyu Li: walk you through some of the key financial results for the first quarter of 2025. Unless otherwise noted, all figures are in RMB, and all comparisons are made year over year. In the first quarter of 2025, net revenues decreased by 6.8% to $487.6 million from $523.2 million in the first quarter of 2024. The decrease was partly driven by the decline in gross billing from post-secondary courses over the recent quarter. resulting in a year-over-year decrease in net revenues from post-secondary quality. Cost of revenue decreased by 6.3% to 72.3 million in the first quarter of 2025. from 77.2 million in the first quarter of 2024.
Speaker Change: Walk us through some of the key financial results for the first quarter of 2025.
Speaker Change: Unless otherwise noted all figures are in RMB and all comparisons are made year over year.
Speaker Change: In the first quarter of 2025 net revenues decreased by six 8%.
Speaker Change: 400 and.
Speaker Change: $87 6 million from $523 2 million in the fourth quarter of 2024.
Speaker Change: The decrease primarily treated by the decline in gross billing from post secondary causes over the recent quarters.
Hangyu Li: Resulting in a year over year decrease in revenues from post secondary cause it.
Speaker Change: Cost of revenue decreased by six 3% to seven T. Two pond three minutes in the first quarter of 2025.
Speaker Change: From $77 2 million in the fourth quarter of 2024.
Hangyu Li: The decrease was mainly due to the declined compensation expenses related to high-cost reduction. including teachers and mentors. gross profit decreased by 7.9% to 415.3 minutes in the first quarter of 2025. from 446.1 million in the first quarter of 2024. In the first quarter of 2025, operating expenses were $341.1 million, which were the same as the first quarter of 2024. Sales and marketing expenses were 304 million. in the first quarter of 2025, which remained relatively stable as compared to 301.6 million in the first quarter of 2024. general and administrative expenses increased by 5.9% to $34.5 million in the fourth quarter of 2025.
Speaker Change: The decrease was mainly due to the decline compensation expenses.
Speaker Change: Related to headcount reduction.
Speaker Change: Including teachers and mentors.
Speaker Change: Gross profit decreased by 7.9% too.
Speaker Change: Two 400 under 15.3 minutes in the first quarter of 2025.
Speaker Change: From 446 1 million in the fourth quarter of 2024.
Speaker Change: In the fourth quarter of 2025 operating expenses was 341 1 million, which was the same as the first quarter of 2024.
Speaker Change: Sales and marketing expenses was $304 million.
Speaker Change: In the fourth quarter of 2025, which remained relatively stable as compared to 300 and the one 6 million in the first quarter of 2024.
Speaker Change: General and administrative expenses increased by five 9% to 34.5 minutes in the first quarter of 2025.
Hangyu Li: from 32.6 million in the fourth quarter of 2024. product development expenses decreased by 11% to $6.2 million in the fourth quarter of 2025. from 7 million in the first quarter of 2024. The decrease was mainly due to declined compensation expenses related to high content reduction of our product development personnel. Net income for the first quarter of 2025 was $75.2 million, as compared to $112.7 million in the first quarter of 2024. basic and diluted night income per share was 11.12 in the fourth quarter of 2025. As of March 31, 2025, the company had $596.2 million of cash and cash equivalents and $200.7 million of short-term investment.
Speaker Change: From 32 6 million in the fourth quarter of 2024.
Speaker Change: Product development expenses decreased by 11% to $6 2 million in the first quarter of 2025.
Speaker Change: From 7 million in the first quarter of 2024.
Speaker Change: The decrease was mainly due to declines compensation expenses related to higher contra reduction of our product development personnel.
Speaker Change: Net income for the first quarter of 2025 was $75 2 billion.
Speaker Change: Compared to 107 million in the first quarter of 2024.
Speaker Change: Basic and diluted net income per share was 11, one two in the fourth quarter of 2025.
Speaker Change: As of March 31st 2025, the company had $596 2 billion of cash and cash equivalents.
Speaker Change: 200 point, the $7 million of short term investments.
Hangyu Li: as compared to $507.2 million of cash equivalents and $276 million of short-term investments as of December 31, 2024. As of March 31, 2025, the company had a deferred revenue balance of $891.6 million as compared to $916.5 million as of December 31, 2024.
Speaker Change: As compared to 500 under seven 2 million of cash cash equivalents.
Speaker Change: 276 million of short term to give back.
Speaker Change: As of December 31st 2024.
Speaker Change: As of March 31st 2025, the company had a deferred revenue balance.
Speaker Change: 891 6 million.
Speaker Change: As compared to $916 5 million as of December 31, 2024.
Hangyu Li: Now for our outlook for the 6th quarter of 2025. Sunlands currently expects net revenues to be between 500 million to 520 million. which would represent an increase of 1.6% to 5.6% year over year.
Speaker Change: Now for our outlook for the second quarter of 2025.
Speaker Change: Frontline's current rent to be expects net revenues to be between 500 million to $520 million.
Speaker Change: Which would represent an increase of one 6% to five 6% year over year.
Hangyu Li: This outlook is based on the current market conditions and reflects the company's management current and preliminary estimate of current market operating conditions and customer demand, which are all subject to change.
Speaker 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.
Operator: With that, I'd like to open up the call to the questions. operator. Thank you.
Hangyu Li: With that I'd like to open up the call to questions.
Operator: Operator.
Operator: If you wish to ask a question, please press star 1, 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1, 1 again.
Speaker Change: Thank you.
Speaker Change: I wish to ask a question. Please press star one one on your telephone and wait for your name to be announced.
Joe: Joe Your question. Please press star one one again.
Operator: 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. Once again, if you wish to ask a question, please press star 1, 1 on your telephone. As a reminder, if you do wish to ask a question, please press star 1, 1 on your telephone.
Operator: The benefit of all participants on today's call.
Joe: You wish to ask your question to management in Chinese. Please immediately repeat your question in English.
Joe: Okay.
Joe: Okay.
Speaker Change: Once again, if you wish to ask a question. Please press star one one on your telephone.
Operator: Okay.
Operator: Okay.
Speaker Change: As a reminder, if you do wish to ask a question. Please press star one one on your telephone.
Speaker Change: Yes.
Operator: As we are showing no questions, I will conclude our question and answer session.
Speaker Change: As we are showing nice questions I 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.
Yuhua Ye: At this time, I would like to turn the conference back over to Yuhua 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.
Speaker Change: Once again, thank you everyone for joining today's call. We look forward to speaking with you again soon good day and good night.
Operator: This concludes this conference call. You may now disconnect your line. Thank you.
Yuhua Ye: This concludes this conference call you May now disconnect. Your line. Thank you.
Speaker Change: Okay.
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Operator: Okay.
Speaker Change: Okay.
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Speaker Change: Okay.
Speaker Change: [music].