Sunlands Technology Group (STG) 2024 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. And welcome to Sunlands second-quarter 2024 earnings conference call. (Operator Instructions) Today's conference call is being recorded.

女士們先生們，謝謝你們的支持。歡迎參加 Sunlands 2024 年第二季財報電話會議。 （操作員指示）今天的電話會議正在錄音。

I will now turn the call over to your host today, Yuhua, Sunlands IR representative. Thank you. Please go ahead.

現在我將把電話轉給今天的東道主Sunlands IR 代表餘華。謝謝。請繼續。

Hello, everyone. And thank you for joining today's Sunlands second-quarter 2024 earnings conference call. The company's financial and operating results were issued in our press release via Newswire services earlier today and now posted online. You can download the earnings press release and sign up for our distribution list by visiting our IR website.

大家好。感謝您參加今天的 Sunlands 2024 年第二季財報電話會議。該公司的財務和經營業績已於今天早些時候透過 Newswire 服務在我們的新聞稿中發布，現已發佈在網上。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. Li Hangyu. 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. 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 company's filings with the Securities and Exchange Commission.

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。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。

With that, I will now turn the call over to our CEO, Tongbo Liu.

現在，我將把電話轉給我們的執行長劉同博。

Thank you, Yuhua. Hello, everyone. Welcome to Sunlands second-quarter 2024 conference call. Prior to commencing, I would like to kindly remind all attendees that the financial information referenced in this release is presented on a continuing operation business and all figures are denominated in RMB, unless expressively specified otherwise.

謝謝你，玉華。大家好。歡迎參加 Sunlands 2024 年第二季電話會議。在開始之前，我想提醒所有與會者，除非另有明確說明，本新聞稿中引用的財務資訊是針對持續經營業務的，所有數據均以人民幣計價。

In the face of challenging macroeconomic conditions, our company demonstrated strategic flexibility to deliver solid results in the second quarter. We achieved a net revenue of RMB492.2 million and a net income of RMB82.3 million. This underscores our resilience and ability to ability to adapt in the face of adversity and demonstrates our strong commitment to cost reduction and sustainable growth. Our cash flow also remains solid with net cash flow from operating activities showing consistent positively over the past four quarters. This strong financial standing not only equips us to handle unpredictable circumstances effectively, but also create opportunities for pioneering business development.

面對充滿挑戰的宏觀經濟形勢，我們公司展現了策略彈性，在第二季取得了穩健的表現。我們實現淨收入人民幣 492.2 百萬元，淨利 82.3 百萬元。這凸顯了我們面對逆境的韌性和適應能力，並表明了我們對降低成本和永續成長的堅定承諾。我們的現金流也保持穩健，經營活動產生的淨現金流在過去四個季度中一直表現出積極的勢頭。強大的財務實力不僅使我們能夠有效應對不可預測的情況，而且還為開創性業務發展創造了機會。

It is also worth noting that the diversification of interest cost offering has continued to bear fruit. With overall new student enrollments up by 9.1% year-over-year and a corresponding 8.4% increase in gross billings. The strategy aims not only to attract a broader and a more varied user base but also to foster increased engagement to repeat purchases and to capitalize on core selling opportunities across our extensive product portfolio. As we continue to expand our core selection and refine our offerings, we are poised to uncover even more market opportunities. Our substantial user base will provide a strong foundation for this growth, enabling us to maximize the lifetime value of each customer.

另外值得注意的是，利息成本多元化持續取得成果。新生入學總數年增 9.1%，總帳單相應增加 8.4%。該策略不僅旨在吸引更廣泛、更多樣化的用戶群，而且旨在提高重複購買的參與度，並利用我們廣泛的產品組合中的核心銷售機會。隨著我們繼續擴大我們的核心選擇並完善我們的產品，我們準備好發現更多的市場機會。我們龐大的用戶群將為這種成長提供堅實的基礎，使我們能夠最大限度地提高每個客戶的終身價值。

Looking ahead to second half of the year, our top priorities are to enhance brand awareness and improve the quality of our existing products and services. We are taking a prudent but proactive approach to expanding and refining the offerings. Our commitment to the key growth initiatives remains unwavering as we continue to focus on improving operational efficiency and profitability.

展望下半年，我們的首要任務是提升品牌知名度，提升現有產品和服務的品質。我們正在採取審慎但積極主動的方法來擴展和完善產品。我們對關鍵成長計畫的承諾仍然堅定不移，我們將繼續專注於提高營運效率和獲利能力。

Now, let's turn to the performance of each of our major areas. The sector, including interest, professional skills, and professional certification preparation programs has been a pivotal driver of our growth, contributing 76.7% of our total revenue and anticipating an 11% year-over-year increase. Distinguishing itself from traditional test-oriented courses, the adult online education market is evolving, with learning objectives becoming more diverse. We believe there are significant opportunities in the interest-based education area, driven by broader educational growth. We realized early on the great potential of interest-based courses particularly within the self-adhered demographic. Recent market developments have validated our strategic version.

現在，讓我們來看看我們每個主要領域的表現。該行業，包括興趣、專業技能和專業認證準備項目，一直是我們成長的關鍵驅動力，貢獻了我們總收入的 76.7%，預計將年增 11%。與傳統的應試課程不同，成人線上教育市場正在不斷發展，學習目標更加多元。我們相信，在更廣泛的教育成長的推動下，以興趣為基礎的教育領域存在著巨大的機會。我們很早就意識到基於興趣的課程的巨大潛力，特別是在自我堅持的人群中。最近的市場發展驗證了我們的策略版本。

Degree -- or diploma-oriented post-secondary courses accounted for 10.7% of our total revenue, which is consistent with our near-term growth. To enhance their competitiveness in employment, the demand for working adults to upgrade their degrees or diplomas has remained steady. Online education offers convenience and flexibility, enabling working adults to balance career development with competency enhancement. We are optimistic about the future of this area and will dynamically adjust our business arrangements, as necessary.

學位或文憑導向的專上課程占我們總收入的 10.7%，這與我們的近期成長一致。為提升就業競爭力，在職人士提昇學位或文憑的需求持續穩定。線上教育提供便利性和靈活性，使在職成年人能夠平衡職業發展與能力提升。我們對該領域的未來持樂觀態度，並將根據需要動態調整我們的業務安排。

In addition, we are enhancing our online course offerings with ongoing user research to meet diverse needs. Beyond maintaining our leading position in senior arts education, we are venturing into new areas. Leveraging over two decades of expertise and insights, we are poised to gain a competitive edge by aligning our courses with market demands.

此外，我們還透過持續的用戶研究來增強我們的線上課程產品，以滿足多樣化的需求。除了保持我們在高級藝術教育領域的領先地位之外，我們還在開拓新的領域。憑藉二十多年的專業知識和見解，我們準備好透過使我們的課程與市場需求保持一致來獲得競爭優勢。

Furthermore, we have expanded into products and services around course offerings for this demographic such as the new materials and educational travel. For the former, we tend to work with top tier supply chains to ensure the head standards of product delivery. In terms of educational travel, we have already achieved a remarkable success, with revenue 6 times that of the same period last year.

此外，我們也圍繞著針對這一人群的課程提供產品和服務，例如新材料和教育旅行。對於前者，我們傾向於與頂級供應鏈合作，以確保產品交付的主要標準。在教育旅行方面，我們已經取得了令人矚目的成功，營收是去年同期的6倍。

In June, we introduced the Echoes of the Yellow River Expedition trip, collaborative project with Beijing Radio and Television station. This trip was consisted of visiting several cities along the Yellow River to sketch famous landmarks under the guidance of a distinguished artists, with the TV crew documenting the entire process. During the trip, participants gained a comprehensive learning experience both on the road and in the field. Feedback from participants indicated that they appreciated the range of activities, including lectures, unique field trips, and ongoing in-depth Q&A sessions with the artists. This activity is not only enriches our offerings, but also greatly enhances visibility and the reputation of our brand.

6月，我們推出了與北京廣播電視台合作的「黃河迴響」考察之旅。這次旅行包括在著名藝術家的指導下參觀黃河沿岸的幾個城市，繪製著名的地標，並由電視攝製組記錄整個過程。在旅途中，參與者在路上和實地獲得了全面的學習經驗。參與者的回饋表明，他們對一系列活動表示讚賞，包括講座、獨特的實地考察以及與藝術家持續深入的問答環節。這項活動不僅豐富了我們的產品，也大大提升了我們品牌的知名度和美譽度。

These updates provide a snapshot of our business progress. Now, let's delve into industry insights. As a company firmly believing in technology as the key driver for innovation, we are proactively participating in the AIGC wave. Our platform now integrates AI to synthesize the voices of distinguished educators, providing timely and personalized learning support to address students' queries. Additionally, we have incorporated AI-driven assignment grading, which offers rapid and objective evaluations, enhancing assessment accuracy and efficiency while reducing the administrative burden on our educators. For instance, the AI-simulated teacher now provides calligraphy evaluations for students, saving approximately two hours of teacher time per day. This allows them to focus more on teaching and interaction.

這些更新提供了我們業務進展的快照。現在，讓我們深入了解產業見解。作為一家堅信科技是創新關鍵驅動力的公司，我們正在積極參與 AIGC 浪潮。我們的平台現在整合了人工智慧來綜合傑出教育工作者的聲音，提供及時和個人化的學習支援來解決學生的疑問。此外，我們也採用了人工智慧驅動的作業評分，可以提供快速、客觀的評估，提高評估的準確性和效率，同時減輕教育工作者的管理負擔。例如，人工智慧模擬老師現在為學生提供書法評估，每天節省老師約兩個小時的時間。這使他們能夠更加專注於教學和互動。

On the macroeconomic policy front, we continue to receive encouraging news about the government's strong support for the industry in which we operate. In August, the State Council introduced a policy aimed at promoting the high-quality development of service consumption. The policy supports the integration of the accommodation industry with tourism, recreation, and educational travel, and also emphasizes the importance of senior consumption and educational consumption. Guided by these policy directives, we are committed to developing quality products and services to better serve our students and users.

在宏觀經濟政策方面，我們不斷收到政府對我們所在產業大力支持的令人鼓舞的消息。 8月，國務院推出促進服務消費高品質發展政策。政策支持住宿業與旅遊、休閒、教育旅遊融合發展，同時也強調老年消費、教育消費的重要性。在這些政策指令的指導下，我們致力於開發優質的產品和服務，以便更好地為我們的學生和用戶服務。

The adult education market presents both opportunities and challenges. On the way forward, we will continue to focus on providing high-quality courses, experimenting with education peripheral products and services, and maximizing shareholder value. Thank you for your interest and support today.

成人教育市場機會與挑戰並存。未來，我們將繼續專注於提供優質課程、嘗試教育週邊產品和服務、實現股東價值最大化。感謝您今天的關注與支持。

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

接下來，我會將電話轉給我們的財務長 Hangyu，以了解我們的財務狀況。航宇，請。

Thank you, Tongbo. Hello, everyone. I'd like to present our second quarter results, which are in line with our expectations.

謝謝你，童博。大家好。我想介紹一下我們第二季的業績，該業績符合我們的預期。

We have been profitable since the second quarter of 2021. Our business continues to dynamically adjust to market conditions while prudently pursuing new opportunities. Our gross margin was 84.4% and net margin was 16.7%, making us profitable for the 13th consecutive quarter. Growth in sales revenues from interest course offerings compensated for the decline in the post-secondary courses, maintaining a stable profitability.

我們自 2021 年第二季以來一直實現盈利。我們的毛利率為 84.4%，淨利潤率為 16.7%，使我們連續 13 個季度獲利。興趣課程銷售收入的成長彌補了專上課程銷售收入的下降，並維持了穩定的獲利能力。

In addition, we had healthy cash flows, with four consecutive quarters of positive net cash from operating activities. Our solid cash position not only enhances our ability to cope with an uncertain environment, but also provides opportunities for innovative business expansion. Revenues from education peripheral products and services accounted for 11.5% of the total in the quarter, and our efforts to diversify the offerings are working well.

此外，我們擁有健康的現金流，連續四個季度來自經營活動的淨現金為正。我們堅實的現金狀況不僅增強了我們應對不確定環境的能力，也為創新業務擴張提供了機會。教育週邊產品和服務收入佔本季總收入的11.5%，我們多元化的努力效果良好。

We are optimistic about the long-term prospects. Looking ahead, we will continue to optimize our course offerings while maintaining efficient operations. These strategic initiatives will enable us to capitalize on emerging opportunities, strengthen our leadership position in the industry, and continue to create value for our shareholders.

我們對長期前景持樂觀態度。展望未來，我們將繼續優化我們的課程設置，同時保持高效運作。這些策略舉措將使我們能夠利用新興機遇，鞏固我們在行業中的領導地位，並繼續為股東創造價值。

Now, let me walk you through some of our key financial results for the second quarter of 2024. All comparisons are year-over-year and all figures are in RMB unless otherwise noted.

現在，讓我向您介紹我們 2024 年第二季度的一些主要財務業績。

For the second quarter of 2024, net revenues decreased by 6.5% to RMB492.2 million from RMB526.4 million in the second quarter of 2023. The decrease was primarily driven by the decline in gross billings from post- secondary courses over the recent quarters, partially offset by the growth in revenues from interest courses offerings.

2024年第二季度，淨收入從2023年第二季度的人民幣5.264億元下降6.5%至人民幣4.922億元。興趣課程收入的成長所抵銷。

Cost of revenues increased by 28.8% to RMB76.6 million in the second quarter of 2024 from RMB59.5 million the second quarter of 2023. The increase was primarily due to an increase in the cost of revenues from sales of goods such as books and learning materials.

收入成本從 2023 年第二季的 5,950 萬元增加至 2024 年第二季的 7,660 萬元，成長 28.8%。

Gross profit decreased by 11.0% to RMB415.6 million in the second quarter of 2024 from RMB466.9 million the second quarter of 2023.

毛利較2023年第二季的人民幣4.669億元下降11.0%至2024年第二季的人民幣4.156億元。

In the second quarter of 2024, operating expenses were RMB338.9 million, representing a 9.0% increase from RMB311 million in the second quarter of 2023.

2024年第二季度，營運費用為人民幣3.389億元，較2023年第二季的人民幣3.11億元成長9.0%。

Sales and marketing expenses increased by 10.2% to RMB297.4 million in the second quarter of 2024 from RMB270.0 million in the second quarter of 2023. The increase was mainly due to the growth in spending on sales activities, including enhanced compensation for sales personnel as well as increased spending on branding and marketing activities focusing on interest courses offerings.

銷售及行銷費用由2023年第二季度的人民幣2.700億元增加10.2%至2024年第二季度的人民幣2.974億元。課程為重點的品牌和行銷活動支出。

General and administrative expenses increased by 2.2% to RMB33.8 million in the second quarter of 2024 from RMB33.1 million in the second quarter of 2023.

一般及行政費用從2023年第二季的人民幣3,310萬元增加2.2%至2024年第二季的人民幣3,380萬元。

Product development expenses decreased by 4.2% to RMB7.7 million in the second quarter of 2024 from RMB8 million in the second quarter of 2023. The decrease was mainly due to declined compensation expenses related to headcount reduction of our product development personnel.

產品開發費用從2023年第二季的人民幣800萬元下降4.2%至2024年第二季的人民幣770萬元。

Net income for the second quarter of 2024 was RMB82.3 million, as compared to RMB173.9 million in the second quarter of 2023.

2024年第二季淨利為人民幣8,230萬元，而2023年第二季淨利為人民幣1.739億元。

Basic and diluted net income per share was 12% in the second quarter of 2024.

2024年第二季基本和稀釋每股淨利為12%。

As of June 30, 2024, the company had RMB758.6 million of cash, cash equivalents and restricted cash and RMB243.9 million of short-term investments, as compared to RMB766.4 million of cash, cash equivalents and restricted cash and RMB142.1 million of short-term investments as of December 31, 2023.

截至2024年6月30日，本公司擁有現金、現金等價物及限制性現金人民幣758.6百萬元以及短期投資人民幣243.9百萬元，而現金、現金等價物及限制性現金人民幣766.4百萬元及短期投資人民幣142截至2023年12月31日，短期投資為10萬。

As of June 30, 2024, the company had a deferred revenue balance of RMB986.9 million, as compared to RMB1,113.9 million as of December 31, 2023.

截至2024年6月30日，公司遞延收入餘額為人民幣9.869億元，而截至2023年12月31日為人民幣11.139億元。

Now, for our outlook. For the second quarter of 2024, we currently expects net revenues to be between RMB490 million to RMB510 million, a decrease of 2.8% to 6.6% year-over-year. This outlook is based on the current market conditions and reflects the company's management's current and preliminary estimate of market, operating conditions and customer demand, which are all subject to change.

現在，我們的展望。 2024年第二季度，我們目前預期淨收入在人民幣4.9億元至人民幣5.1億元之間，年減2.8%至6.6%。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) At this time, we are showing no further questions. So this will conclude our 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） 目前，我們沒有顯示任何進一步的問題。我們的問答環節到此結束。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。

Ladies and gentlemen, this concludes this conference call. Thank you for your participation. You may now disconnect your lines.

女士們、先生們，本次電話會議到此結束。感謝您的參與。現在您可以斷開線路。