Sunlands Technology Group (STG) 2022 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to Sunlands Third Quarter 2022 Earnings Conference Call. (Operator Instructions) Today's conference call is being recorded. I will now turn the call over to your host today, Yuhua, Sunland's IR Representative. Please go ahead.

女士們，先生們，感謝你們的支持，歡迎來到 Sunlands 2022 年第三季度收益電話會議。 （操作員說明）正在錄製今天的電話會議。我現在將把電話轉給今天的主持人，Sunland 的 IR 代表 Yuhua。請繼續。

Hello, everyone, and thank you for joining Sunlands' Third Quarter 2022 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.

大家好，感謝您參加 Sunlands 的 2022 年第三季度收益電話會議。公司的財務和經營業績今天早些時候通過新聞專線服務發佈在我們的新聞稿中，並在網上發布。您可以下載收益新聞稿並通過訪問我們的 IR 網站註冊我們的分發列表。

Participants on today's call will be our CEO, Mr. Tongbo Liu; and our CFO, Selena Lu Lv, and our Financial Controller, (inaudible). Selena will provide an update on our operational performance on behalf of our CEO, Mr. Liu, and then (inaudible) will give you an overview of our financial performance on behalf of Selena. Management will begin with prepared remarks, and the call will conclude with a Q&A session.

今天電話會議的參與者是我們的首席執行官劉同波先生；以及我們的首席財務官 Selena Lu Lv 和我們的財務總監（聽不清）。 Selena 將代表我們的首席執行官劉先生提供我們運營業績的最新情況，然後（聽不清）將代表 Selena 向您概述我們的財務業績。管理層將從準備好的發言開始，電話會議將以問答環節結束。

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. Except for the 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 statements. For more information about the potential risks and uncertainties, please refer to the company's filings with the Securities and Exchange Commission.

在我將其移交給管理層之前，我想提醒您 Sunlands 就今天的電話會議發表的安全港聲明。除此處包含的歷史信息外，本次電話會議中討論的某些事項均為前瞻性陳述。這些陳述基於當前趨勢、估計和預測，因此，您不應過分依賴它們。前瞻性陳述涉及固有的風險和不確定性。許多重要因素可能導致實際結果與任何前瞻性陳述中包含的結果存在重大差異。有關潛在風險和不確定性的更多信息，請參閱公司向美國證券交易委員會提交的文件。

With that, I will now turn the call over to our CFO, Selena Lu Lv.

有了這個，我現在將把電話轉給我們的首席財務官 Selena Lu Lv。

Thank you, Yuhua. Hello, everyone. Welcome to Sunlands' Third Quarter 2022 Conference Call. Despite the macroeconomic uncertainty and shifting industry landscape, we delivered encouraging results in the third quarter with sequential top line growth, further bottom-line improvement and increased new student enrollments. These achievements testified to the effectiveness of our strategic initiatives to prioritize profitability and healthy growth.

謝謝你，玉華。大家好。歡迎來到 Sunlands 2022 年第三季度電話會議。儘管宏觀經濟存在不確定性和行業格局不斷變化，但我們在第三季度取得了令人鼓舞的業績，收入環比增長，利潤進一步改善，新生入學人數增加。這些成就證明了我們優先考慮盈利能力和健康增長的戰略舉措的有效性。

Amid the ongoing pandemics and uncertain macroeconomics, our third quarter net revenues came in at RMB 576.2 million up by 3.8% quarter-over-quarter despite 3.2% year-over-year drop. To navigate the macro challenges, we remain laser focused on cost optimization and the profitability rather than blind pursuit of scale expansion. We adopted multiple measures to enhance our operational efficiency and streamline our organization during the quarter. Due to our effective expense control measures and improved operational efficiency, we reduced our G&A expenses by 29.6% year-over-year and 4.7% quarter-over-quarter. This cost reduction initiative enables us to deliver on our commitment to creating additional shareholder value with sustained profitability. Our third quarter net income reached RMB 168.1 million, representing an 81.1% year-over-year increase and 46.7% quarter-over-quarter increase, demonstrating our organization's resilience during tough times like this.

在持續的流行病和不確定的宏觀經濟中，儘管同比下降 3.2%，但我們第三季度的淨收入為人民幣 5.762 億元，環比增長 3.8%。為了應對宏觀挑戰，我們仍然專注於成本優化和盈利能力，而不是盲目追求規模擴張。我們在本季度採取了多項措施來提高我們的運營效率並精簡我們的組織。由於我們採取了有效的費用控制措施並提高了運營效率，我們的 G&A 費用同比減少了 29.6%，環比減少了 4.7%。這一降低成本的舉措使我們能夠兌現我們的承諾，以持續的盈利能力創造額外的股東價值。我們第三季度的淨收入達到人民幣 1.681 億元，同比增長 81.1%，環比增長 46.7%，顯示了我們組織在這樣的困難時期的韌性。

With a leaner and more efficient organization, we also further refined our product strategy in the third quarter. We focused more on margin accretive programs and allocated our capital and human resources accordingly to expand our course offerings in those programs, leading to an optimized product lineup and more diversified course content. Additionally, we leveraged our solid and convenient online teaching infrastructure and the learning resources to further refine our services, which has increased our user stickiness and cross-selling opportunities.

憑藉更精簡和更高效的組織，我們還在第三季度進一步完善了我們的產品戰略。我們更專注於增加利潤的項目，並相應地分配我們的資本和人力資源，以擴大我們在這些項目中的課程設置，從而優化產品陣容和更多樣化的課程內容。此外，我們利用穩固便捷的在線教學基礎設施和學習資源進一步完善我們的服務，這增加了我們的用戶粘性和交叉銷售機會。

Given this, we have transformed our student acquisition methods, focusing more on users' lifetime value instead of investing heavily in marketing activities. As you may have seen in our earnings release published earlier today, our sales and marketing expenses declined by 23.9% year-over-year and 8.2% quarter-over-quarter. And as a percentage of net revenues, sales and marketing expenses were down by 12.7 percentage points year-over-year. Despite that, our new student enrollments for the quarter rose by 44.7% year-over-year and 11.8% quarter-over-quarter, reaffirming the effectiveness of our business strategies.

鑑於此，我們改變了我們的學生獲取方式，更多地關注用戶的生命週期價值，而不是在營銷活動上投入巨資。正如您在今天早些時候發布的收益報告中看到的那樣，我們的銷售和營銷費用同比下降 23.9%，環比下降 8.2%。銷售和營銷費用占淨收入的百分比同比下降 12.7 個百分點。儘管如此，我們本季度的新生入學人數同比增長 44.7%，環比增長 11.8%，再次證明了我們業務戰略的有效性。

Turning to our learning programs. Our professional certification and scale programs continued to grow strongly as evidenced by 91.3% year-over-year increase in new student enrollments, which drove gross billings to be rise by 51.8% year-over-year. Net revenues generated by this sector also increased by 83.7% year-over-year. This growth was primarily attributable to our efforts in expanding our course catalog to target diverse age groups as we start to capture the rising demand we witnessed for various skills and hobbies courses during the quarter.

轉向我們的學習計劃。我們的專業認證和規模計劃繼續強勁增長，新入學人數同比增長 91.3% 證明了這一點，這推動總收入同比增長 51.8%。該部門產生的淨收入也同比增長 83.7%。這一增長主要歸功於我們努力擴大我們的課程目錄以針對不同年齡段的人群，因為我們開始捕捉到我們在本季度目睹的對各種技能和愛好課程不斷增長的需求。

In the third quarter, pandemic associated lockdowns led to the postponement for transformation of certain qualification tests, affecting our exam preparation programs for those tests. Nevertheless, demand for our preparation courses for professional exams remain solid as intense career competition prompted working professionals to enhance their competitiveness or sharpening their skills with courses from educational providers such as Sunlands. In addition to courses for working professionals, we continue to develop new courses to satisfy other course learning and (inaudible). We are excited about what we are offering and we offer our students. As we have always been committed to helping to build a lifelong learning society.

在第三季度，與大流行相關的封鎖導致某些資格考試的轉型推遲，影響了我們為這些考試準備的計劃。儘管如此，由於激烈的職業競爭促使在職專業人士通過 Sunlands 等教育機構提供的課程提高競爭力或提高技能，對我們的專業考試準備課程的需求依然強勁。除了針對在職專業人士的課程，我們不斷開發新課程以滿足其他課程的學習和（聽不清）。我們對我們提供的東西感到興奮，我們為我們的學生提供。正如我們一直致力於幫助建立一個終身學習的社會。

We will continue to capture opportunities in these sectors to deliver more high-demand courses and high-quality services to our students. Thanks to our extensive course options, premium course quality and experience with teaching staff. We are pleased to see students across a wider range of age stages adopting our platform as well as greater diversity in the courses too. As a result, we achieved sequential growth in new student enrollments for our professional skills program for 5 consecutive quarters. We are also glad to have played a part in helping our students achieve their learning goals, bringing them a sense of fulfillment. Going forward, we will continue to adjust our course offerings in this sector based on market demand maximizing our value by further contributing to our students' success and our society as a whole.

我們將繼續抓住這些領域的機會，為我們的學生提供更多高需求的課程和高質量的服務。得益於我們廣泛的課程選擇、優質的課程質量和教學人員的經驗。我們很高興看到更廣泛年齡階段的學生採用我們的平台，課程也更加多樣化。因此，我們的專業技能項目的新生入學人數連續 5 個季度實現連續增長。我們也很高興能夠幫助我們的學生實現他們的學習目標，給他們帶來成就感。展望未來，我們將繼續根據市場需求調整我們在該領域的課程設置，通過進一步為學生的成功和整個社會做出貢獻來最大化我們的價值。

Next, our master's degree-oriented programs. During the quarter, the challenging macro environment, the pandemics and the competitive market dynamics continue to weigh on our performance in this category. Due to macroeconomic weakness, some people may choose to delay their higher education plans and as the cost for obtaining an MBA degree is relatively high compared to other self-improvement options. Meanwhile, the pandemic also prevented some people from pursuing overseas post-graduate education. Lastly, market competition was increasingly intense with more industry players join this sector after the K-12 education industry reform. Taken together, these factors resulted in reduced demand for our master's degree-oriented preparation courses leading to a decline in gross billings and student enrollments.

接下來，我們的碩士學位課程。在本季度，充滿挑戰的宏觀環境、流行病和競爭激烈的市場動態繼續影響我們在這一類別中的表現。由於宏觀經濟疲軟，一些人可能會選擇推遲他們的高等教育計劃，而且與其他自我提升選擇相比，獲得 MBA 學位的成本相對較高。同時，疫情也讓部分人無法出國深造。最後，K-12教育行業改革後，市場競爭日趨激烈，越來越多的行業參與者加入該行業。總而言之，這些因素導致對我們以碩士學位為導向的預備課程的需求減少，從而導致總收入和學生入學率下降。

Before I conclude, I would like to mention that alongside our efforts to solidify our industry position with our existing learning programs we have also been prudently exploring some other new business initiatives to drive our future growth. We are conducting in-depth market research on those initiatives such as combining retail or commerce with courses skills. By maximizing our strength as an education provider to expand our product and service portfolio, we look forward to enhancing our risk management and creating additional revenue streams while bringing more value to our students. Looking ahead, we are confident that our proven business strategy and continued commitment to delivering premium and tailored courses to more students will help us navigate current challenges and achieve meaningful growth.

在結束之前，我想提一下，除了我們努力通過現有的學習計劃鞏固我們的行業地位外，我們還一直在審慎地探索其他一些新的業務計劃，以推動我們未來的增長。我們正在對這些舉措進行深入的市場研究，例如將零售或商業與課程技能相結合。通過最大限度地發揮我們作為教育提供商的實力來擴展我們的產品和服務組合，我們期待加強我們的風險管理並創造額外的收入來源，同時為我們的學生帶來更多價值。展望未來，我們相信，我們行之有效的業務戰略以及為更多學生提供優質和定制課程的持續承諾將幫助我們應對當前挑戰並實現有意義的增長。

That concludes Tongbo's prepared remarks. With that, I will turn the call over to our Financial Controller, (inaudible), to run through our financials on behalf of me.

通博準備好的發言到此結束。有了這個，我將把電話轉給我們的財務總監，（聽不清）代表我檢查我們的財務狀況。

Thank you, Selena. Hello, everyone. We are pleased with our third quarter results amid a soft macro environment. Our net revenue reached RMB 576.2 million during the quarter, exceeding the high end of our guidance reached by 6.7%, despite a slight 3.2% year-over-year decrease, benefiting from our dedicated efforts under major steps in cost control and operational efficiency enhancement.

謝謝你，賽琳娜。大家好。在疲軟的宏觀環境下，我們對第三季度的業績感到滿意。本季度我們的淨收入達到人民幣 5.762 億元，超出我們指導的上限 6.7%，儘管同比略微下降 3.2%，這得益於我們在成本控制和運營效率提升方面的重大舉措的不懈努力.

Our third quarter operating expenses declined by 24.5% year-over-year and 7.4% quarter-over-quarter. As a result, we maintained our profitability with a net income of RMB 168.1 million, up 81.1% year-over-year and 46.7% quarter-over-quarter. Our net profit margin for the quarter remained solid at 29.2%, expanding 13.6 percentage points year-over-year and 8.6 percentage points quarter-over-quarter.

我們第三季度的運營費用同比下降 24.5%，環比下降 7.4%。因此，我們保持了盈利能力，淨收入為人民幣 1.681 億元，同比增長 81.1%，環比增長 46.7%。我們本季度的淨利潤率保持穩定在 29.2%，同比增長 13.6 個百分點，環比增長 8.6 個百分點。

Moving forward, we will continue to prudently manage costs and expenses enrich our course offerings and further optimize our operations, aiming for continued success and additional shareholder value. Now let me walk you through some of our key financial results for the third quarter of 2022. All comparisons are year-over-year and all numbers are in RMB, unless otherwise noted. In the first quarter of 2022, net revenue were RMB 576.2 million, a decrease of 3.2% year-over-year.

展望未來，我們將繼續審慎地管理成本和開支，豐富我們的課程設置，進一步優化我們的運營，以實現持續成功和額外的股東價值。現在讓我向您介紹我們 2022 年第三季度的一些主要財務業績。除非另有說明，否則所有比較均為同比，所有數字均以人民幣為單位。 2022年第一季度，淨收入為人民幣5.762億元，同比下降3.2%。

Cost of revenue increased by 2.2% to RMB 84.9 million in the third quarter of 2022 from RMB 83.1 million in the first quarter of 2021. The increase was primarily due to increased service fees paid to educational institutions and increased cooperation costs.

收入成本從 2021 年第一季度的 8310 萬元人民幣增長 2.2% 至 2022 年第三季度的 8490 萬元人民幣。增長的主要原因是支付給教育機構的服務費增加以及合作成本增加。

Gross profit decreased by 4% to RMB 491.3 million from RMB 512 million in the third quarter of 2021.

毛利從 2021 年第三季度的人民幣 5.12 億元下降 4% 至人民幣 4.913 億元。

In the third quarter of 2022, Operating expenses were RMB 325 million, representing a 24.5% decrease from RMB 430.6 million in the third quarter of 2021.

2022年第三季度，營業費用為人民幣3.25億元，較2021年第三季度的人民幣4.306億元下降24.5%。

Sales and marketing expenses decreased by 23.9% to RMB 269.1 million in the third quarter of 2022 from RMB 353.5 million in the third quarter of 2021. The decrease was mainly due to the lower spending on branding and marketing activities and the declined compensation expenses related to our sales and marketing personnel.

銷售和營銷費用從 2021 年第三季度的人民幣 3.535 億元下降 23.9% 至 2022 年第三季度的人民幣 2.691 億元。下降的主要原因是品牌和營銷活動支出減少以及與我們的銷售和營銷人員。

General and administrative expenses decreased by 29.6% to RMB 44.4 million in the third quarter of 2022 from RMB 63.2 million in the third quarter of 2021. The decrease was mainly due to a decline in rental expenses.

一般及行政費用從 2021 年第三季度的人民幣 6320 萬元下降 29.6% 至 2022 年第三季度的人民幣 4440 萬元。減少的主要原因是租金費用下降。

Product development expenses decreased by 17.5% to RMB 11.5 million in the third quarter of 2022 from RMB 14 million in the third quarter of 2021. The decrease was mainly due to a decline in compensation expenses.

產品開發費用從 2021 年第三季度的人民幣 1,400 萬元下降 17.5% 至 2022 年第三季度的人民幣 1,150 萬元。下降的主要原因是薪酬費用下降。

Other income decreased by 58.6% to RMB 5.3 million in the third quarter of 2022 from RMB 12.9 million in the third quarter of 2021.

其他收入從 2021 年第三季度的人民幣 1290 萬元下降 58.6% 至 2022 年第三季度的人民幣 530 萬元。

Net income for the third quarter of 2022, was RMB 168.1 million compared with RMB 92.8 million in the third quarter of 2021.

2022 年第三季度的淨收入為人民幣 1.681 億元，而 2021 年第三季度為人民幣 9280 萬元。

Basic and diluted net income per share was 24.08% in the third quarter of 2022.

2022 年第三季度每股基本和稀釋淨收益為 24.08%。

As of September 30, 2022, the company had RMB 678.8 million of cash and cash equivalents and RMB 170.1 million of short-term investments.

截至2022年9月30日，公司持有現金及現金等價物6.788億元，短期投資1.701億元。

As of September 30, 2022, the company had a deferred revenue balance of RMB 1,798.6 million compared with RMB 2,348.2 million as of September (sic) [December] 31, 2021.

截至 2022 年 9 月 30 日，公司的遞延收入餘額為 17.986 億元人民幣，而截至 2021 年 9 月（原文如此）[12 月]31 日為 23.482 億元人民幣。

Capital expenditures were incurred primarily in connection with IT restructure equipment and leasehold improvement necessary to support the company's operations. Capital expenditures were RMB 1.3 million in the third quarter compared with RMB 1.8 million in the third quarter of 2021.

資本支出主要與支持公司運營所需的 IT 重組設備和租賃資產改善有關。第三季度資本支出為人民幣 130 萬元，而 2021 年第三季度為人民幣 180 萬元。

And now for our outlook. For the fourth quarter of 2022, Sunlands currently expect net revenue to be [between] RMB 520 million and RMB 540 million, which would represent a decrease of 8.3% to 11.7% year-over-year. This outlook is based on the current market conditions and reflects the company's management current and preliminary estimates of the market, operating conditions and customer demand, which are all subject to change.

現在是我們的展望。對於 2022 年第四季度，Sunlands 目前預計淨收入將在 5.2 億元人民幣至 5.4 億元人民幣之間，同比下降 8.3% 至 11.7%。該展望基於當前市場狀況，反映了公司管理層對市場、經營狀況和客戶需求的當前和初步估計，這些都可能發生變化。

That concludes Selena's prepared remarks. With that, I'd like to open up the call to the questions. Operator?

賽琳娜準備好的發言到此結束。有了這個，我想打開問題的電話。操作員？

(Operator Instructions) Showing no further questions, this will conclude our question-and-answer session. Now I'd like to turn the conference back over to Yuhua Ye, IR representative for any closing remarks.

（操作員說明）沒有進一步的問題，我們的問答環節到此結束。現在，我想將會議轉回給 IR 代表 Yuhua Ye，以發表任何閉幕詞。

Once again, thank you, everyone, for joining today's call. We look forward to speaking with you again soon. Good day and good night.

再次感謝大家參加今天的電話會議。我們期待很快再次與您交談。早安，晚安。

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

收益電話會議到此結束。您現在可以斷開線路。謝謝。