Thursday, November 24, 2022

Sunlands Expertise : Q3 2022 Earnings Name transcript

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Sunlands On-line Schooling Group [STG]

Q3 2022 Earnings Convention Name

November 23, 2022 6:30 AM ET.

Executives

Yuhua Ye, IR Consultant

Tongbo Liu, CEO and Director

Selena Lu Lv, CFO and Director

Hangyu Li, Monetary Controller

Presentation

Operator: Girls and gents, thanks for standing by, and welcome to Sunlands’ Third Quarter 2022 Earnings Convention Name. (Operator Directions). In the present day’s convention name is being recorded.

I’ll now flip the decision over to your host as we speak, Yuhua, Sunlands’ IR consultant. Please go forward.

Yuhua Ye: Hiya, everybody, and thanks for becoming a member of Sunlands’ third quarter 2022 earnings convention name. The Firm’s monetary and working outcomes had been issued in our press launch by way of newswire companies earlier as we speak and are posted on-line. You possibly can obtain the earnings press launch and join our distribution record by visiting our IR web site.

Individuals on as we speak’s name shall be our CEO Mr. Tongbo Liu, and our CFO Selena Lu Lv, and our Monetary Controller Hangyu Li. Selena will present an replace on our operational efficiency on behalf of our CEO, Mr. Liu, after which Hangyu provides you with an outline of our monetary efficiency on behalf of Selena. Administration will start with ready remarks, and the decision will conclude with a Q&A session.

Earlier than I hand it over to the administration, I would prefer to remind you of Sunlands’ Protected Harbor assertion in relation to as we speak’s name. Aside from the historic data contained herein, sure of the issues mentioned on this convention name are forward-looking statements. These statements are based mostly on our present tendencies, estimates and projections, and subsequently, you shouldn’t place undue reliance on them.

Ahead-looking statements contain inherent dangers and uncertainties. Plenty of vital elements may trigger precise outcomes to vary materially from these contained in any forward- wanting assertion. For extra details about potential dangers and uncertainties, please check with the Firm’s filings with the Securities and Alternate Fee.

With that, I’ll now flip the decision over to our CFO Selena Lu Lv.

Selena Lu Lv: Thanks, Yuhua. Hiya, everybody. Welcome to Sunlands’ Third Quarter 2022 Convention Name. Regardless of the macroeconomic uncertainty and shifting trade panorama, we delivered encouraging leads to the third quarter with sequential prime line progress, additional bottom- line enchancment and elevated new pupil enrollments. These achievements testified to the effectiveness of our strategic initiatives to prioritize profitability and wholesome progress.

Amid the continuing pandemic and unsure macro atmosphere, our third quarter internet revenues got here in at RMB576.2 million, up by 3.8% quarter-over-quarter regardless of a 3.2% year-over-year drop. To navigate the macro challenges, we remained laser-focused on value optimization and profitability quite than blind pursuit of scale growth.

We adopted a number of measures to reinforce our operational effectivity and streamline our group through the quarter. Because of our efficient expense management measures and improved operational effectivity, we decreased our G&A bills by 29.6% year-over-year and 4.7% quarter-over-quarter. These value discount initiatives enabled us to ship on our dedication to creating extra shareholder worth with sustained profitability.

Our third quarter internet revenue reached RMB168.1 million, representing an 81.1% year-over-year improve and a 46.7% quarter-over-quarter improve, demonstrating our group’s resilience throughout powerful occasions like these.

With a leaner and extra environment friendly group, we additionally additional refined our product technique within the third quarter. We targeted extra on margin accretive packages and allotted our capital and human sources accordingly to increase our course choices in these packages, resulting in an optimized product lineup and extra diversified course content material.

Moreover, we leveraged our strong and handy on-line educating infrastructure and studying sources to additional refine our companies, which has elevated our consumer stickiness and cross-selling alternatives. Given this, we’ve reworked our pupil acquisition strategies, focusing extra on customers’ lifetime worth as an alternative of investing closely in advertising actions.

As you could have seen in our earnings launch printed earlier as we speak, our gross sales and advertising bills declined by 23.9% year-over-year and eight.2% quarter-over-quarter. And as a share of internet revenues, gross sales and advertising bills had been down by 12.7 share factors year-over- 12 months. Regardless of that, our new pupil enrollments for the quarter rose by 44.7% year-over-year and 11.8% quarter-over-quarter, reaffirming the effectiveness of our enterprise methods.

Turning to our studying packages. Our skilled certification and expertise packages continued to develop strongly, as evidenced by a 91.3% year-over-year improve in new pupil enrollments, which drove gross billings to rise by 51.8% year-over-year.

Web revenues generated by this sector additionally elevated by 83.7% year-over-year. This progress was primarily attributable to our efforts in increasing our course catalog to focus on various age teams, as we sought to seize the rising demand we witnessed for numerous expertise and hobbies programs through the quarter.

Within the third quarter, pandemic-associated lockdowns led to the postponement or cancellation of sure qualification checks, affecting our examination preparation packages for these checks. However,

demand for our preparation programs for skilled exams remained strong, as intense profession competitors prompted working professionals to reinforce their competitiveness or sharpen their expertise with programs from academic suppliers akin to Sunlands.

Along with programs for working professionals, we continued to develop new programs to fulfill different cohorts’ studying and leisure wants. We’re enthusiastic about what we’re providing and can supply our college students, as we’ve at all times been dedicated to serving to to construct a lifelong studying society. We are going to proceed to seize alternatives on this sector to ship extra high-demand programs and high-quality companies to our college students.

Due to our in depth course choices, premium course high quality, and skilled educating employees, we’re happy to see college students throughout a wider vary of ages adopting our platform, in addition to larger variety within the programs they select. Consequently, we achieved sequential progress in new pupil enrollments for our skilled expertise packages for five consecutive quarters.

We’re additionally glad to have performed a component in serving to our college students obtain their studying targets, bringing them a way of achievement. Going ahead, we are going to proceed to regulate our course choices on this sector based mostly on market demand, maximizing our worth by additional contributing to our college students’ success and our society as an entire.

Subsequent, our grasp’s degree-oriented packages. Through the quarter, the difficult macro atmosphere, the pandemic, and the aggressive market dynamics continued to weigh on our efficiency on this class. Because of macroeconomic weak spot, some individuals could select to delay their increased training plans, as the price for acquiring an MBA diploma is comparatively excessive in comparison with different self-improvement choices. In the meantime, the pandemic additionally prevented some individuals from pursuing abroad postgraduate training.

Lastly, market competitors was more and more intense since extra trade gamers joined this sector after the Ok-12 training trade reform. Taken collectively, these elements resulted in decreased demand for our grasp’s degree-oriented preparation programs, resulting in a decline in gross billings and new pupil enrollments.

Earlier than I conclude, I want to point out that alongside our efforts to solidify our trade place with our present studying packages, we’ve additionally been prudently exploring another new enterprise initiatives to drive our future progress. We’re conducting in-depth market analysis on these initiatives, akin to combining retail or commerce with course sale. By maximizing our strengths as an training supplier to increase our product and repair portfolio, we sit up for enhancing our danger administration and creating extra income streams whereas bringing extra worth to our college students.

Trying forward, we’re assured that our confirmed enterprise methods and continued dedication to delivering premium and tailor-made programs to extra college students will assist us navigate present challenges and obtain significant progress.

That concludes Tongbo’s ready remarks. With that, I’ll flip the decision over to our Monetary Controller, Hangyu, to run by means of our financials on behalf of me.

Hangyu Li: Thanks, Selena. Hiya, everybody. We’re happy with our third quarter outcomes amid a smooth macro atmosphere. Our internet revenues reached RMB576.2 million through the quarter, exceeding the excessive finish of our steering vary by 6.7% regardless of a slight 3.2% year-over-year lower.

Benefitting from our devoted efforts and measured steps in value management and operational effectivity enhancement, our third quarter working bills declined by 24.5% year-over-year and seven.4% quarter-over-quarter. Consequently, we maintained our profitability with a internet revenue of RMB168.1 million, up 81.1% year-over-year and 46.7% quarter-over-quarter.

Our internet revenue margin for the quarter remained strong at 29.2%, increasing 13.6 share factors year-over-year and eight.6 share factors quarter-over-quarter. Shifting ahead, we are going to proceed to prudently handle prices and bills, enrich our course choices and additional optimize our operations, aiming for continued success and extra shareholder worth.

Now let me stroll you thru a few of our key monetary outcomes for the third quarter of 2022. All comparisons are year-over-year, and all numbers are in RMB except in any other case famous.

Within the third quarter of 2022, internet revenues had been 576.2 million, a lower of three.2% year-over-year. Value of income elevated by 2.2% to 84.9 million within the third quarter of 2022 from 83.1 million within the third quarter of 2021. The rise was primarily on account of elevated service charges paid to academic establishments and elevated cooperation prices.

Gross revenue decreased by 4% to 491.3 million from 512 million within the third quarter of 2021.

Within the third quarter of 2022, working bills had been 325 million, representing a 24.5% lower from 430.6 million within the third quarter of 2021.

Gross sales and advertising bills decreased by 23.9% to 269.1 million within the third quarter of 2022 from 353.5 million within the third quarter of 2021. The lower was primarily as a result of decrease spending on branding and advertising actions, and the declined compensation bills associated to our gross sales and advertising personnel.

Basic and administrative bills decreased by 29.6% to 44.4 million within the third quarter of 2022 from 63.2 million within the third quarter of 2021. The lower was primarily on account of a decline in rental bills.

Product growth bills decreased by 17.5% to 11.5 million within the third quarter of 2022 from 14 million within the third quarter of 2021. The lower was primarily on account of a decline in compensation bills.

Different revenue decreased by 58.6% to five.3 million within the third quarter of 2022 from 12.9 million within the third quarter of 2021.

Web revenue for the third quarter of 2022 was 168.1 million, in contrast with 92.8 million within the third quarter of 2021.

Fundamental and diluted internet revenue per share was 24.08 within the third quarter of 2022.

As of September 30, 2022, the Firm had 678.8 million of money and money equivalents and 170.1 million of short-term investments.

As of September 30, 2022, the Firm had a deferred income steadiness of 1,798.6 million in contrast with 2,348.2 million as of December 31, 2021.

Capital expenditures had been incurred primarily in reference to IT infrastructure tools and a leasehold enchancment essential to assist the Firm’s operations. Capital expenditures had been 1.3 million within the third quarter in contrast with 1.8 million within the third quarter of 2021.

And now for our outlook. For the fourth quarter of 2022, Sunlands at present expects internet revenues to be between RMB520 million and RMB540 million, which might symbolize a lower of 8.3% to 11.7% year-over-year. This outlook is predicated on the present market circumstances and displays the Firm’s administration’s present and preliminary estimate of the market, working circumstances and buyer demand, that are all topic to alter.

That concludes Selena’s ready remarks. With that, I would prefer to open up the decision to the questions. Operator?

Questions and Solutions

Operator: We are going to now start the question-and-answer session. (Operator Directions).

Displaying no additional questions, this can conclude our question-and-answer session. Now, I want to flip the convention again over to Yuhua Ye, IR Consultant, for any closing remarks.

Yuhua Ye: As soon as once more, thanks, everybody, for becoming a member of as we speak’s name. We sit up for talking with you once more quickly. Good day and good night time.

Operator: This concludes the earnings convention name. You could now disconnect your line. Thanks.



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