Sunlands Technology Group (STG) 2023 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to Sunlands' third quarter 2023 earnings conference call. (Operator Instructions) Today's conference call is being recorded. I will now turn the call over to your host today, Yuhua, Sunlands' IR Representative. Please, go ahead.

女士們、先生們，感謝你們的支持並歡迎參加 Sunlands 的 2023 年第三季財報電話會議。 （操作員指示）今天的電話會議正在錄音。現在我將把電話轉給今天的主持人 Sunlands IR 代表 Yuhua。請繼續。

Hello, everyone, and thank you for joining Sunlands' third quarter 2023 earnings conference call. The company's financial and operating results were issued in our press release and (technical difficulty) 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 2023 年第三季財報電話會議。該公司的財務和經營業績已於今天早些時候在我們的新聞稿和（技術難度）新聞專線服務中發布，並發佈在網上。您可以造訪我們的投資者關係網站下載收益新聞稿並註冊我們的分發清單。

Participants on today's call will be our CEO, Mr. Tongbo Liu, and our financial representative, Mr. Hangyu Li. 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將是我們的執行長劉同波先生和我們的財務代表李航宇先生。管理階層將以準備好的發言開始，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.

在我將其交給管理層之前，我想提醒您有關今天電話會議的 Sunlands 安全港聲明。除本文所包含的歷史資訊外，本次電話會議中討論的某些事項均為前瞻性陳述。這些陳述是基於當前趨勢、估計和預測，因此，您不應過度依賴它們。前瞻性陳述涉及固有風險和不確定性。

A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. For more information about 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 our CEO, Tongbo Liu.

許多重要因素可能導致實際結果與任何前瞻性聲明中包含的結果有重大差異。有關潛在風險和不確定性的更多信息，請參閱該公司向美國證券交易委員會提交的文件。現在，我將把電話轉給我們的執行長劉同博。

Thank you, Yuhua. Hello, and welcome to Sunlands' 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 figures are denominated in RMB unless explicitly specified otherwise.

謝謝你，玉華。您好，歡迎參加 Sunlands 2023 年第三季電話會議。在開始之前，我想提醒所有與會者，本新聞稿中引用的財務資訊是在持續經營的基礎上提供的，除非另有明確說明，所有數據均以人民幣計價。

In Q3, our business has constantly adjust 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 sizable net profit for ten consecutive quarters.

第三季度，我們的業務不斷適應不斷變化的經濟形勢，並在面臨挑戰的情況下取得了策略性進展。我們推動集團實現持續、高水準獲利的整體目標已取得正面成果，並連續十個季度保持可觀的淨利。

Net income reached RMB131.6 billion. Net revenues despite a flat year-over-year decrease, exceeded the high-end of our guidance range and reached RMB524.6 million. We were also pleased to say our ongoing efforts to optimize our product structure and expand our course portfolio rewarded with enhanced operational results, reflecting a 14.3% year-over-year increase in our new student enrollments and a 6.7% year-over-year increase in gross billings.

淨利達1,316億元人民幣。儘管淨收入同比持平，但超出了我們指導範圍的上限，達到 5.246 億元人民幣。我們也很高興地看到，我們不斷優化產品結構和擴大課程組合的努力得到了增強的營運成果，反映出我們的新生入學人數同比增長 14.3%，同比增長 6.7%以總賬單計算。

We are delighted in our capability to remain profitable under challenging environment. This success is attributed to improvements in gross margins, the (technical difficulty) of cost cutting measures and enhanced financial planning and analysis across the entire business. Our cost of revenue has achieved a year-over-year decrease of 24.5%. And the G&A expenses have achieved a year-over-year decrease of 21%. We firmly believe that only by adhering to long-term perspective and ensuring the healthy growth of the price, can we create sustainable value for shareholders and users.

我們很高興能夠在充滿挑戰的環境下保持獲利。這項成功歸功於毛利率的提高、成本削減措施（技術難度）以及整個業務的財務規劃和分析的加強。我們的收入成本較去年同期下降了24.5%。 G&A 費用年減 21%。我們堅信，只有堅持長遠眼光，確保價格健康成長，才能為股東和用戶創造永續的價值。

Now, let's turn to the performance of each of our major course programs. Due to uncertainties surrounding the macroeconomic environment, our degree or diploma orientated 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.

現在，讓我們來看看我們每個主要課程項目的表現。由於宏觀經濟環境的不確定性，我們以學位或文憑為導向的消費者在消費方面採取了更保守的態度。受我們策略性減少行銷活動的影響，該部門的收入年減了 55.2%。

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%.

我們將透過持續的市場觀察不斷提高營運效率，並繼續致力於為在學學生提供優質課程。專業認證、專業技能、興趣項目等業務成為公司新的成長點，佔總營收的17.4%，較去年同期成長23.8%。

We have strengthened our determination and the confidence to increase investment in interest-based education following through process of testing and validation. The number of new student enrollments in professional certifications, professional skills, and interest programs, first for nine months of '23 increased by 29.1% compared to the same period of 2022. And (technical difficulty) the total number of paid students has exceeded 1.2 million since 2021.

經過檢驗驗證，我們更加堅定了加大興趣教育投入的決心與信心。專業認證、專業技能、興趣課程新生入學人數，23年前九個月較2022年同期成長29.1%。且（技術難度）付費學生總數已超過1.2自 2021 年起已達 100 萬。

Today, we would like to delve deeper into our [understanding of the sector]. There are several noteworthy shifts in the adult education landscape. Firstly, there's the burgeoning market potential of the silver economy. While the age group of 20 to 50 remains a steadfast pillar in the industry, it's crucial to highlight that the demographic set of this silver generation continues to grow. According to the data disclosed by the National Bureau of Statistics, at the end of 2022 China's elderly population reached 280 million, which aged 60 and above. Among them 153 million are Internet users, indicating that at least one every two elderly individuals has Internet access. A significant portion has already adopted the habits of online learning, communication, and socialization.

今天，我們想更深入地探討我們[對該行業的理解]。成人教育格局有幾個值得注意的變化。首先，白銀經濟市場潛力大。雖然 20 至 50 歲的年齡層仍然是該行業的堅定支柱，但必須強調的是，這一年齡層的人口持續增長。根據國家統計局揭露的數據，截至2022年底，我國老年人口達到2.8億，其中60歲以上老年人口達2.8億。其中網友規模達1.53億，這意味著每兩個老年人中至少就有一個能夠上網。很大一部分人已經養成了在線上學習、交流和社交的習慣。

Furthermore, projections indicate that during the 14th Five-Year Plan period, China's population aged 60 and above surpass 300 million accounting for over 20% of the total population. With the aging population extended life expectancy and the rising per capita income, this represents a significant incremental market.

據預測，「十四五」期間，我國60歲以上人口將超過3億，佔總人口的20%以上。隨著人口老化、預期壽命的延長和人均收入的增加，這是一個巨大的增量市場。

Based on this (technical difficulty) of course tailored to elderly individuals covering various interest areas such as vocal music, musical instrument, (technical difficulty) of accumulated content creation, services capabilities, and technological expertise. 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 painting courses, it reaches an impressive 98.25%.

基於此（技術難度）為老年人量身訂做課程，涵蓋聲樂、樂器等各個興趣領域，累積的內容創作、服務能力、技術專長（技術難度）。我們很快就得到了這個群體的認可。具體來說，根據我們的調查，書法課程的滿意度高達94.59%。而國畫課程則達到了令人印象深刻的98.25%。

We are delighted to say that this group not only learn online but also connect with like-minded friends, establishing new social relationships for our platform, which we received numerous feedback from this group and their vivid narrative resonates deeply with us, affirming the meaningful impact of our work. They illustrate how our learning platform caters to the diverse interests and the needs of various users, fostering continuous personal development and meaningful connections.

我們很高興地說，這個群體不僅在線學習，還與志同道合的朋友聯繫，為我們的平台建立了新的社交關係，我們收到了來自這個群體的大量反饋，他們生動的敘述引起了我們的深刻共鳴，肯定了有意義的影響我們的工作。它們說明了我們的學習平台如何滿足不同使用者的不同興趣和需求，促進持續的個人發展和有意義的聯繫。

Secondly, the increasingly competitive job market is still calling for higher overall qualifications for individuals leading to varied and personalized demand for adult education. The transformation is evident on the supply side as well, with the increase in the diversity of professional courses offerings. Our strategy is in alignment with the market as well. We have meticulously curated and provided a suite of premiums, tailor-made courses with a professional focus.

其次，就業市場的競爭日益激烈，對個人綜合特質的要求仍然較高，成人教育需求呈現多元、個人化。隨著專業課程提供多樣性的增加，供給面的轉變也很明顯。我們的策略也與市場保持一致。我們精心策劃並提供了一套以專業為重點的優質、量身定制的課程。

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. Additionally, we have carefully augmented our selection of interest-based courses in response to the burgeoning inclination towards personalized and passion (technical difficulty). We strive to provide a comprehensive range of additional services and products that extend beyond the confines of transitional learning experience.

我們很高興看到學生堅定不移地積極參與課程，並且為幫助他們應對動態工作環境的挑戰而感到自豪。此外，我們還仔細增加了基於興趣的課程選擇，以應對個人化和熱情（技術難度）日益增長的傾向。我們努力提供全面的附加服務和產品，超越過渡性學習經驗的範圍。

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 content. 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% compared to the previous quarter.

此外，我們也一直密切關注新技術在業界的應用，例如最新的AIGC技術在我們的教育業務內容中的應用。我們看好該技術的發展前景。值得一提的是，我們的產品開發費用也較上季成長了5.3%。

In summary, drawing on our decades of valuable experience and industry acclaim, we are poised to rapidly and efficiently expand our market presence. Going forward, our dedication remains unwavering as we adjust our education offerings to align with the changing needs of learners, reinforcing our leading position in adult education sector.

總之，憑藉我們數十年的寶貴經驗和行業讚譽，我們準備好快速有效地擴大我們的市場份額。展望未來，我們將堅定不移地調整我們的教育產品，以滿足學習者不斷變化的需求，鞏固我們在成人教育領域的領先地位。

With that, I will turn the call to our Financial Controller, Hangyu Li, to run through our financials.

接下來，我將致電我們的財務總監李航宇，以了解我們的財務狀況。

Thank you, Tongbo Liu. 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. As you can see, last quarter was another excellent quarter in operations. As a result of steady growth in interest-based programs, new student enrollments went up by 14.3%. Our gross billings increased by 6.7% year over year. Thanks to our strategy of balanced, sustainable growth, and profitability. Gross profit margin increased by 2.5 percentage points to 87.8% compared to the same period last year.

謝謝劉同博。大家好。我很高興公佈我們第三季的業績，該業績符合我們的預期，並證明了我們追求永續成長的有效性。正如您所看到的，上季度是營運方面又一個出色的季度。由於興趣課程的穩定增長，新生入學人數增加了 14.3%。我們的總帳單年增 6.7%。得益於我們平衡、永續成長和獲利的策略。毛利率較去年同期成長2.5個百分點至87.8%。

Operating expenses as a percentage of gross billings, decreased by 2.1 percentage points compared to the third quarter of last year. These improvements were reflected in our net income. Last quarter, we achieved net income of RMB131.6 million, our 10th profitable quarter since the second quarter of 2021.

營運費用佔總帳單的百分比比去年第三季下降了 2.1 個百分點。這些改善反映在我們的淨利潤中。上季度，我們實現淨利潤1.316億元人民幣，這是自2021年第二季度以來我們第10個盈利季度。

Looking ahead, we are optimistic about long-term growth. We are committed to expanding online course offerings, optimizing cost effectiveness, and providing exceptional service to our students. 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 (technical difficulty) value for our stakeholders.

展望未來，我們對長期成長持樂觀態度。我們致力於擴大線上課程種類、優化成本效益並為學生提供卓越的服務。這些策略舉措有利於我們抓住新的機遇，鞏固我們在產業中的地位，進而幫助我們維持產業競爭優勢，並持續為利害關係人創造（技術難度）價值。

Now let me walk through some of our key financial results for the third quarter of 2023. All comparisons are year-over-year, and all numbers are in RMB unless otherwise noted. In the third quarter of 2023, net revenues were RMB524.6 million, a decrease of 9% year over year. Cost of revenue decreased by 24.5% to RMB64.1 million in the third quarter of 2023 from RMB84.9 million in the third quarter of 2022. The decrease was primarily due to lower compensation expenses related to our cost of revenue personnel.

現在讓我來介紹一下我們 2023 年第三季的一些主要財務業績。除非另有說明，所有比較均為同比，所有數字均以人民幣為單位。 2023年第三季淨收入為人民幣5.246億元，年減9%。收入成本從 2022 年第三季的 8,490 萬元下降 24.5% 至 2023 年第三季的 6,410 萬元。這一下降主要是由於與收入人員成本相關的薪資費用減少。

Gross profit decreased by 6.3% to RMB460.5 million from RMB491.3 million in the third quarter of 2022. In the third quarter of 2023, operating expenses were RMB338.5 million, representing a 4.1% increase from RMB325 million in the third quarter of 2022. Sales and marketing expenses increased by 9.6% to RMB295 million in the third quarter of 2023 from RMB269.1 million in the third quarter of 2022, primarily due to increased spend on branding and marketing activities.

毛利由2022年第三季的人民幣4.913億元下降6.3%至人民幣4.605億元。2023年第三季營運費用為人民幣3.385億元，比第三季的人民幣3.25億元成長4.1% 2022年第億元，比第三季的人民幣3.25億元成長4.1% 2022年第億元第三季銷售和行銷費用從2022年第三季的人民幣2.691億元成長9.6%至2023年第三季的人民幣2.95億元，主要是因為品牌和行銷活動支出增加。

General and administrative expenses decreased by 21% to RMB35.1 million in the third quarter of 2023 from RMB44.4 million in the third quarter of 2022. Product development expenses decreased by 27% to RMB8.4 million in the third quarter of 2023 from RMB11.5 million in the third quarter of 2022. Product development expenses were mainly comprised of compensation expenses.

管理費用從2022 年第三季的人民幣4,440 萬元下降21% 至2023 年第三季的人民幣3,510 萬元。產品開發費用從2022 年第三季的人民幣840 萬元下降27% 至人民幣840 萬元。2022年第三季為 1,150萬元。產品開發費用主要包括補償費用。

Net income for the third quarter of 2023 was RMB131.6 million compared with net income of RMB168.1 million in the third quarter of 2022. Basic and diluted net income per share was RMB19.13 in the third quarter of 2023. As of September 30, 2023, the company had RMB751.8 million of cash, cash equivalents, and restricted cash; and RMB122.3 million of short-term investments.

2023年第三季淨利為人民幣1.316億元，而2022年第三季淨利為人民幣 1.681億元。2023年第三季基本及稀釋每股淨利為人民幣 19.13元。截至9月截至2023年12月30日，公司擁有現金、現金等價物及限制性現金人民幣7.518億元；短期投資人民幣1.223億元。

As of September 30, 2023, the company had a deferred revenue balance of RMB1,277 million compared with RMB1,690.9 million as of September 31, 2022. Capital expenditure were incurred primarily in connection with IT infrastructure equipment and a leasehold improvement necessary to support the company (technical difficulty).

截至2023年9月30日，公司遞延收入餘額為人民幣12.77億元，而截至2022年9月31日為人民幣16.909億元。資本支出主要與IT基礎設施設備和支援所需的租賃改善有關。公司（技術難度）。

Capital expenditures were RMB1.4 million in the third quarter compared with RMB1.3 million in the third quarter of 2022.

第三季資本支出為人民幣 140 萬元，而 2022 年第三季資本支出為 130 萬元。

And now for our outlook for the third quarter of 2023, Sunlands currently expects net revenues to be between RMB419 million to RMB510 million, which would represent a decrease of 11.9% to 15.3% year over year. 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.

現在我們展望2023年第三季度，Sunlands目前預期淨收入在人民幣4.19億元至人民幣5.10億元之間，年減11.9%至15.3%。該展望基於當前市場狀況，反映了公司管理層對市場營運狀況和客戶需求的當前和初步估計，這些估計可能會發生變化。

With that, I'd like to open up the call to the questions. Operator?

至此，我想開始提問。操作員？

(Operator Instructions) 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.

（操作員說明）為了今天電話會議所有參與者的利益。如果您想用中文向管理階層提問，請立即用英文重複您的問題。

(Operator Instructions) There are no questions so far.

（操作員說明） 到目前為止沒有任何問題。

(Operator Instructions) 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.

（操作員說明） 此時，還沒有問題出現，因此問答環節結束。現在，我想把會議轉回給餘華做總結發言。

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 this conference call. You may now disconnect your line. Thank you.

本次電話會議到此結束。現在您可以斷開線路。謝謝。