Sunlands Technology Group Q3 2024 Earnings Report

Sunlands Technology Group EPS Results

• Actual EPS: $0.93
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Sunlands Technology Group Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Sunlands Technology Group Announcement Details

• Quarter: Q3 2024
• Date: 11/22/2024
• Time: Before Market Opens
• Conference Call Date: Friday, November 22, 2024
• Conference Call Time: 5:30AM ET

Sunlands Technology Group (NYSE:STG), formerly known as Sunlands Online Education Group, is a China-based online education company. The company provides education and learning services primarily to adult students through digital platforms, supporting flexible access to courses and instructional content.

Sunlands’ offerings have included preparation programs for professional certification examinations, vocational and career-development courses, and other educational programs designed to help learners improve their professional knowledge and skills. Its platform has used online classes, live instruction, recorded lessons, learning materials and related student-support services.

The company serves learners in China and has historically focused on the growing market for online adult education and lifelong learning. Sunlands Technology Group is listed on the New York Stock Exchange under the symbol STG.

Sunlands Technology Group Q3 2024 Earnings Call Transcript

Key Takeaways

• Sunlands reported a Q3 net profit of RMB89.3 million, an 8.6% sequential increase despite a 0.2% revenue decline, underscoring sustained profitability.
• Total enrollments in the first nine months rose 11.2% year over year, reflecting the effectiveness of its strategic realignment toward high-return offerings.
• Interest-based and professional skills courses now account for 33.6% of revenues, boosted by expanded senior learner programs and educational travel services.
• Cash and cash equivalents fell to RMB 535.9 million as of September 30, 2024, from RMB 766.4 million at year-end, and deferred revenue dropped to RMB 920.6 million, indicating softer liquidity and pre-paid bookings.
• The company forecasts Q1 2024 net revenues of RMB 450 million to RMB 470 million, a 13.2%–16.9% year-over-year decline, signaling near-term top-line pressure.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to Sunlands' Q3 2024 earnings conference call. At this time, all participants are in listen-only mode. 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.

[Yuhua Ye, Head of Investor Relations at Sunlands Technology Group]

Hello everyone, and thank you for joining Sunlands' Q3 2024 earnings conference call. The company's financial and operating results were issued in our press release vianewswire services earlier today and are posted online. You could download the earnings press release and sign up for our distribution list by visiting our IR website. Participants on today's call will be our CEO, Mr. Tongbo Liu, and our Financial Director, Mr. Hangyu Li. Management will begin with the prepared remarks, and the call will conclude with a Q&A session. 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.

[Yuhua Ye, Head of Investor Relations at Sunlands Technology Group]

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 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.

[Tongbo Liu, CEO at Sunlands Technology Group]

Thank you, Yuhua. Hello everyone. Welcome to Sunlands' Q3 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 basis, and all figures are denominated in RMB unless explicitly specified otherwise. As we reflect on our performance for the Q3 of 2024, we are pleased to report that our business has remained resilient amidst the challenging market environment. Our total revenue for the quarter stood at RMB 491.3 million, representing a modest sequential decline of 0.2%. However, our net profit reached RMB 89.3 million, an 8.6% increase from the previous quarter, driven by our strategic realignment towards high return areas. These results not only highlight our ability to maintain steady growth despite external pressures but also reinforce the effectiveness and sustainability of our business model.

[Tongbo Liu, CEO at Sunlands Technology Group]

Our ability to consistently maintain stable profitability across various periods further substantiates our strategic focus on long-term revenue generation and operational excellence. This approach, we believe, is foundational to our ongoing success and positions us well for future growth. While the industry remains in a period of structural change, we have proactively adapted, relying on our business model to better cater to evolving customer needs. In the first nine months of this year, our total enrollments grew by 11.2% year-over-year, highlighting the effectiveness of our business strategies. We are continuing to invest strategically in innovation and are confident that our efforts to optimize our portfolio will drive long-term growth. As market conditions stabilize, we are well-positioned to seize new opportunities and build on our current momentum.

[Tongbo Liu, CEO at Sunlands Technology Group]

Looking ahead, the company will continue to strengthen its brand presence, enhance the user experience, and delve deeper into the learning needs of users across different age groups. Through continuous innovation, we aim to provide learners with more diverse and high-quality educational products and services. At the same time, the company will further optimize its cost structure, focusing resources on the most promising opportunities. We believe these actions will drive sustainable profitability, growth, and position the company to lead the adult online education sector in the long term. Now, let's turn to the performance of each of our major course programs. The interest, professional skills, and professional certification preparation course sector, including professional certifications, skill development, and interest-based programs, has been instrumental in driving our growth, contributing to 33.6% of our total revenues. Notably, our early investments in interest-based education for older adults have yielded significant returns. As the sector aligns with the broader economy and demographic shifts, we remain highly optimistic about its growth potential and are well-positioned to capitalize on the unique opportunities it presents. To continually innovate and cater to the evolving interests of our senior learners, we have enriched our curriculum with specialized courses, particularly focusing on the arts, including themes like oil painting, vocal music, and traditional Chinese painting. These courses are specifically designed to be engaging and accessible, fostering both creativity and a sense of accomplishment among elderly students. Alongside these educational advancements, we have also enhanced our educational travel

[Tongbo Liu, CEO at Sunlands Technology Group]

Each itinerary is carefully researched and customized to meet the diverse needs of seniors, combining socialization, learning, and entertainment. Through these deliberate efforts in course development and the iterative improvement of our educational travel programs, we have the ability to support our senior learners in their pursuit of lifelong learning, enabling them to explore their interests and passions in an engaging and supportive environment, ultimately realizing commercial value for our offerings in this growing market. In addition, our traditional degree or diploma-oriented post-secondary programs contributed 9.2% to our total revenues, reflecting our ongoing efforts to optimize our structure and align with our strategic goals. There has always been strong demand for accessible, high-quality education that meets the needs of today's job market. For many young professionals, earning an additional degree or diploma not only enhances their skills but also boosts their confidence, giving them a competitive edge in their careers.

[Tongbo Liu, CEO at Sunlands Technology Group]

We remain committed to supporting this demand, ensuring our programs continue to be relevant and impactful for our learners' professional growth. Moving forward, we will continue to maintain our drive for innovation and our commitment to high-quality education. We will refine our services to better meet the evolving market demands and provide learners with an even more exceptional learning experience. We deeply appreciate your attention, trust, and continued support as we embark on this exciting journey together. With that, I will turn the call to our Financial Director, Hangyu Li, to run through our financials.

[Hangyu Li, Financial Director at Sunlands Technology Group]

Thank you, Tongbo Liu. Hello everyone. I'd like to present our Q3 results, which are consistent with our expectations. While net revenues decreased slightly year-over-year due to changes in our product mix, we continue to maintain a steady level of profitability in the quarter. Our business is full of opportunities and challenges, and our team continues to improve operational capabilities with each challenge to ensure that we are fully prepared to capitalize on every opportunity and overcome any obstacle. In addition to the earnings, we have maintained strong cash flow from operating activities. This has allowed us to be more flexible in making strategic adjustments and managing risk, while improving the company's ability to navigate market volatility and uncertainty.

[Hangyu Li, Financial Director at Sunlands Technology Group]

Going forward, we are committed to enhancing our core strengths through a number of strategic initiatives to further ensure continued growth and the success of our business, while continuing to create value for our stakeholders and finding new avenues for expansion. Now, let me walk you through some of our key financial results for the Q3 of 2024. All comparisons are year-over-year, and all figures are in RMB, unless otherwise noted. For the Q3 of 2024, net revenues decreased by 6.4% to RMB 491.3 million, from RMB 524.6 million in the Q3 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-based programs and sales of goods such as books and learning materials.

[Hangyu Li, Financial Director at Sunlands Technology Group]

Cost of revenues increased by 28% to CNY 82.1 million in the Q3 of 2024, from CNY 64.1 million in the Q3 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. Gross profit decreased by 11.1% to CNY 409.2 million in the Q3 of 2024, from CNY 460.5 million in the Q3 of 2023. The decrease was due to the lower gross profit from sales of goods. In the Q3 of 2024, operating expenses were CNY 343.4 million, representing a 1.4% increase, from CNY 338.9 million in the Q3 of 2023. Sales and marketing expenses increased by 2.7% to CNY 303 million in the Q3 of 2024, from CNY 295 million in the Q3 of 2023. The increase was mainly due to a growth in the headcount of our sales and marketing personnel.

[Hangyu Li, Financial Director at Sunlands Technology Group]

General and administrative expenses decreased by 1.8% to RMB 34.5 million in the Q3 of 2024, from RMB 35.1 million in the Q3 of 2023. Product development expenses decreased by 30.5% to RMB 5.8 million in the Q3 of 2024, from RMB 8.4 million in the Q3 of 2023. The decrease was mainly due to declining headcount expenses related to headcount reduction of our product development personnel. Net increase for the Q3 of 2024 was RMB 89.3 million, as compared to RMB 131.6 million in the Q3 of 2023. Basic and diluted net income per share was RMB 13.08 in the Q3 of 2024. As of September 30, 2024, the company had RMB 535.9 million of cash equivalents and restricted cash, and RMB 257.9 million of short-term investments, as compared to RMB 766.4 million of cash equivalents and restricted cash, and RMB 142.1 million of short-term investments as of December 31st, 2023.

[Hangyu Li, Financial Director at Sunlands Technology Group]

As of September 30th, 2024, the company had a deferred revenue balance of RMB 920.6 million, as compared to RMB 1,113.9 million as of December 31, 2023. Now, for our outlook for the Q4 of 2024, Sunlands currently expects net revenues to be between RMB 450 million to RMB 470 million, a decrease of 13.2%-16.9% 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 demands, which are all subject to change. With that, I'd like to open the call to the questions. Operator.

[Operator]

Thank you. We'll begin the question and answer session. To ask a question, please press star 11 on your telephone. To hear a message advising hands raised. To withdraw your question, please press star 11 again. For the benefit of all participants on today's call, if you wish to ask a question in Chinese, management will immediately repeat your question in English. Please stand by while we get the participant roster. As a reminder, to ask a question, please press star 11 on your telephone keypad. Once again, that's star 11 for questions. At this time, we're showing no questions, so this will conclude our question and answer session. At this time, I'll turn the conference back to Yuhua for any closing remarks.

[Yuhua Ye, Head of Investor Relations at Sunlands Technology Group]

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.

Participants

Executives

• Hangyu Li, Financial Director
• Tongbo Liu, CEO
• Yuhua Ye, Head of Investor Relations