QuantaSing Group Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 28, 2024

There are 5 speakers on the call.

Operator

Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to Kwanzaa Singh's Earnings Conference Call. At this time, all participants are in a listen only mode. We will be hosting a question and answer session after management's prepared remarks. Please note that today's event is being recorded.

Operator

I will now turn the conference over to Ms. Lia Guo, Investor Relations Associate Director of the company. Please go ahead, ma'am.

Speaker 1

Thank you. Hello, everyone, and welcome to QuantiXin's earnings call for the Q4 of 2024. With us today are Mr. Peng Li, our Founder, Chairman and CEO and Mr. Tim Hsieh, our CFO.

Speaker 1

Mr. Li will provide a business overview for the quarter, then Tim will discuss the financials in more details. Following their prepared remarks, Mr. Li and Tim will be available for the QA session. I will translate for Mr.

Speaker 1

Li. You can refer to our quarterly financial results on our IR website at ir. Kwansing.com. You can also access our QA efforts call on our IR website when it becomes available a few hours after its conclusion. Before we continue, I would like to refer you to our Safe Harbor statement in our earnings press release, which also applies to this call as we will be making forward looking statements.

Speaker 1

Please note all numbers stated in the following management's prepared remarks are in RMB terms, and we will discuss non GAAP measures today, which are more thoroughly explained and reconciled to the most comparable measures reported in our earnings release and the filings with the SEC. I will now turn the call over to the CEO and Founder of QuantumSync, Mr. Li.

Speaker 2

Okay. Good morning, everyone. Thank you for joining us today. I'm excited to share our progress and strategic development for the Q4 of the fiscal year 2024. This quarter, we achieved a revenue of RMB 1000,100,000 and our adjusted net income reached historical high, improved to RMB 193,600,000 from RMB90.4 million in the same period last year.

Speaker 2

While these numbers are encouraging, they represent just the one step in our ongoing journey. Today, I'm pleased to announce a significant strategy shift for our company. We are perking towards the silver economy, aligning with our new mission of the better new London. This transition reflects our commitment to serving the holistic needs of our adult users, particularly the fewer demographic. Our vision is to become a long term partner, loved and trusted by adult users.

Speaker 2

Let me explain the rationale behind this strategic transformation. The fuel economy in China surpassed RMB 14.4 trillion in terms of final consumption value in 2023. By 2028, China's fewer population is projected to reach 650,000,000, then constituting 46.3 percent of the total population. This represents a significant market opportunity that aligns well with our strengths and experience. However, the silver economy isn't just about numbers.

Speaker 2

It's about understanding and addressing the unique needs of the demographic. Through our interactions with our users, we identified a growing demand for services and the products that cater to their spiritual and social needs. The concept of self layer is becoming increasingly important as this generation takes place to enjoy life and pursue personal interests in their later years. There is also a strong focus on health. We're selecting desire to maintain well-being and quality of life.

Speaker 2

Additionally, we will observe the significant needs for social connection and community engagement among this demographic. Our power to the civil economy is not departure from our core strengths, but rather a nature evolution of our business. Since launching our operations in July 2019, We have been focusing on adult learning, accumulating valuable experience and the insights into the needs of major learners, Building upon this foundation and our deep understanding of user needs, we took a significant step towards addressing the unique requirements of the silver population in June 2022 with the launch of Tianchi, our ground dedicated to middle aged and elderly users. This was our

Operator

Ladies and gentlemen, please do remain on line.

Speaker 2

I'm back. Okay. Am I okay now?

Operator

You may go ahead. Thank you, sir.

Speaker 2

Yes, okay. Sorry. Our power to the steel economies not have been taken from our core strengths, but rather a nature evolution of our business. Since launching our operations in July 2019, we have been focusing on adult learning, accumulating valuable the impact of learning, accumulating valuable experience and insights into the needs of major learners. Building upon this foundation and our deep understanding of user needs, we took significant steps towards addressing the unique requirements of the field population in June 2022 with the launch of GenXu, our brand dedicated to middle aged and elderly users.

Speaker 2

This will cover 1st step in recognizing and addressing the unique needs of the civil population, including their desire of self improvement, health, maintenance and social interaction. This evolution reflects our aspiration to be a trusted long term partner for our users. As their needs change over time, we are leveraging our substantial user base of 537,600,000 and our experience in serving middle aged and elderly users to realize our mission and vision more fully. Our focus in the civil economy spans 3 key areas, each designed to meet the diverse needs of our keyword demographic users. 1st, in online learning, we are leveraging our experience to create tailored topics that go beyond traditional subjects.

Speaker 2

We will introduce the health and wellness topics like, traditional Chinese exercise as well as many lectures on traditional Chinese medicine theory. We are also offering courses in areas like calligraphy and piano, catering to the cultural and artistic interests of our users. This call is not only provide learning opportunities, but also foster a sense of community. Secondly, we are developing offline consumption and service scenarios. Recognizing the importance of real world experiences for our users.

Speaker 2

Our study tour projects have expanded to multiple routes, including Beijing, Yudao Mountain and Shanghai, Combining high quality travel with learning opportunities, we are exploring offline centers as hubs for in person classes and social gatherings and developing Hamburg's onlineoffline courses to provide the best of both worlds. We also partnered with local communities to offer free offline courses receiving positive feedback. Lastly, we are expanding into sales of our branded consumer products through live e commerce and offline channels. Our e commerce live streaming business launched in June 2023 are showing rapid growth, offering products like Chinese vehicle and wellness products. We are developing private label products based on our user insights.

Speaker 2

With our wireless products showing particularly strong performance, We are not just focusing our fiscal products, but also exploring services that contribute to overall well-being. While e commerce is our primary sales channel, We are considering how offline centers could serve as the physical retail point. By focusing on these 3 interconnected areas, we are creating a comprehensive ecosystem that serves the educational, social and the consumer needs of the fewer population. This approach allow us to leverage our existing strengths and with well expanding into new high potential areas of the civil economy. Now let me update you on our current business performance.

Speaker 2

We continue to innovate in our course offerings. For example, we introduced the traditional health courses like R and D and study tours that combine culture and learning tailored for the dual demographic. Our offline activities have been positively successful. In August, we held the 2024 Shenshu Park Catagrophe Competition, bringing together nearly 100 students for enriching artistic gathering. This event combined an exhibition of outstanding work outside creative competition and cross experience session, creating a diverse and engaging offline arts gathering.

Speaker 2

Students have the opportunity to interact closely with lectures and expert judges, fostering a library's learning community. Our study tour projects have incentive to multiple routes, including Beijing, Ui Yang Mountain and Shanghai. These tours goes beyond traditional high quality travel experience by being cooperating learning on the experiential element. Participants can complete relevant of student studies, broaden their horizons and enrich their spiritual and cultural life while traveling. This approach of learning while traveling truly embodies our philosophy of aducate entertainment.

Speaker 2

We also collaborated with local pharmacies to host health and wellness lectures. For instance, we participated in the Terrace University celebration of a partner services, where we opened up a health and wellness lecture series. The events we see the assay strategic response, demonstrating the strong demand for health related knowledge among our target demographic. Since offline initiatives, combined with our online offerings, have contributed significantly to our user growth. I'm pleased to report that our registered users have reached 127,600,000 with 400,000 paying users this quarter, forming a solid foundation for our business development.

Speaker 2

This result, user base not only validates our approach, but also provides a strong platform for our future growth initiatives. Building on this foundation, our newly initiative, particularly in wellness products e commerce, has shown rapid growth. The journey of our wellness products grew by 83.3 percent quarter over quarter from RMB 18,300,000 in Q3 to RMB 30 3,600,000 in Q4. This impressive growth not only validates our live streaming capabilities, but also demonstrates strong user demand for high quality products tailored to the fewer population. It's a clear indication that our strategy towards the fewer economy is is resonating with our target audience and yielding tangible results.

Speaker 2

This success is evidenced not only in our product offerings and the user growth, but also has built up solid financial position. As of June 30, 2034, we had cash and cash cash restricted cash and short term investments of RMB 1,000,000 to be RMB 6,300,000. This robust financial condition provides us with flexibility to invest in our strategic transition value, maintaining operational stability. Such a strong financial position is crucial as our navigates the challenges and opportunities presented by our power to the Sewer Economy. While we are focusing on the Sewer Economy in Mainland China, we are not losing sight of broader opportunities.

Speaker 2

Regarding talent allocation, it will continue to serve as our window to grow international markets, not limited to the fuel population. While our primary focus remains on the fuel economy in mainland China, Credit allocation allow us to maintain our presence in the broader education markets and provide valuable impact into international trends and opportunities. This new approach ensures that we are well positioned to capitalize on both domestic and international opportunities in the evolving education landscape. Looking to the future, we are taking various steps to expand our presence in the civil economy. We are expanding our productive range to include more health and wellness customer base tailored to middle aged and elderly performance, which includes not only physical products, but also services and experiences that contribute to overall well-being.

Speaker 2

We are also exploring offline centers as a way to share and serve more fewer customers. This center will serve as digital touch points for our brands, allowing customers to experience our production facilities first line. They will also provide spaces for community building and the recruitment activities, which are particularly valued by our packaged demographic. Our dedicated business team for the fuel economy continues to optimize the back strategy to meet the evolving needs of this demographic. We are investing in market research and the customer feedback loops to ensure that our offering remains relevant and available to our users.

Speaker 2

In conclusion, our strategic shift represents a natural evolution of our business, positioning us for sustainable long term growth and value creation. Our healthy transition to focusing on the fewer economies and natural progression in our journey to help people live better, live longer and become their top kids' long term partner. This shift is not resulting in challenges. We are entering new markets and developing new competition space, which carries inherent risk. However, we believe that our strong foundation in advertising education, our technology will have the capabilities and our deep understanding of our user base position position us well for success in this new endeavor.

Speaker 2

Given the nature of this transformation, we have decided to continue providing specific guidance. This decision allows us to focus on long term value creation rather than short term measures. We believe this approach aligns better with our strategic goals and the nature of the markets we are into. We are committed to creating a long term value in the civil economy, and we look forward to sharing our progress with you in the quarters to come. We believe that by focusing on the civil economy, we are not just pursuing business opportunity, but also addressing significant societal needs.

Speaker 2

As China's population ages, there is a growing demand for products and services greater to the needs and the performance of other add ons. We are proud to be at the forefront of meeting these needs. Now I will hand over to Qing, our CFO, who will provide more details on our financial performance. Qing, please go ahead.

Speaker 3

Thank you. Before I go into details of our financial results, please note that all amounts are in RMB terms that the reporting period is the Q4 of fiscal year 2024 ended on June 30, 2024. And in addition to GAAP measures, we will also be discussing non GAAP measures to provide greater clarity on the trends in our actual operations. For the Q4 of fiscal year 2024, we achieved total revenues of CAD1000,100,000 a year over year growth of 20.7 percent mainly driven by the growth in revenues from skills upgrading courses. Among our revenues, revenues from individual online learning services grew by 25.7% year over year to RMB906.7 million or 90.7 percent of total revenues, mainly due to continued demand from skills upgrading courses.

Speaker 3

Our gross billings of individual online learning services increased by 3.4% year over year to $774,400,000 Revenues from Enterprise Services were $56,600,000 a change of 45.5 percent from a year ago and representing 5.7% of total revenues, primarily due to a decrease in revenues from related party transactions. Gross profit was RMB858.8 million, representing a gross margin of 85.9%, compared to 86% in the same period last year. Total operating expenses were RMB622.9 million compared to RMB664.7 million in the same period last year. To break this down, sales and marketing expenses were RMB580.1 million, representing a change of 1.2% year over year, mainly due to our increased marketing efforts. As a percentage of total revenue, non GAAP sales and marketing expenses, which exclude share based compensation, decreased to 57.4% from 67.8% a year ago.

Speaker 3

Research and development expenses were US21.2 million dollars representing a decrease of 60.4% year over year, primarily driven by our more selective decisions regarding our R and D initiatives. As a percentage of total revenue, non GAAP R and D expenses, which exclude share based compensation, decreased to 3% from 5.5 percent a year ago. General and administrative expenses were RMB11.6 million, representing a decrease of 69 0.6% year over year, primarily due to decreases in share based compensation and office expenses. As a percentage of total revenue, non GAAP G and A expenses, which excluded share based compensation, decreased to 2.5% from 3.2 percent a year ago. Net income was RMB196,600,000.

Speaker 3

Excluding share based compensation and impairment loss on long lived assets and goodwill, adjusted net income was RMB193.6 million, representing adjusted net margin of 19.4% during the quarter. Basic and diluted net income per share were RMB1.22 and RMB1.18 during the quarter. Adjusted basic and diluted net income per share were RMB1.2 and RMB1.16 during the quarter. Turning to our balance sheet. As of June 30, 2024, our company held RMB1026,300,000 in cash and cash equivalents, restricted cash and short term investments, compared to RMB930,600,000 as of June 30, 2023.

Speaker 3

In conclusion, our financial results for the Q4 reflect a strong and stable financial position. This solid foundation is crucial as we embark on our strategic transition towards the civil economy. Our robust balance sheet and improved profitability provide us with the flexibility and resources needed to invest in our new initiatives, while remaining operational stability. As we move forward, we are focusing on long term value creation rather than short term metrics, which aligns with our strategic goals and the evolving nature of our target market. While we have continued providing specific guidance, we remain committed to prudent financial management and transparent communication with our shareholders.

Speaker 3

We are confident that our strong financial footing, combined with our strategic focus on the silver economy, positions us well for the sustainable success in this promising market. That concludes my prepared remarks. Operator, let's open up the call for questions. Thank you.

Operator

Thank you. We will now begin the question and answer session. Our first question comes from the line of Steve Silver of Argus Research. Your line is now open. Please go ahead.

Speaker 4

Thank you, operator, and thanks for taking the questions and congratulations on a productive fiscal 2024. First question, can you provide any update on the competitive landscape for e commerce live streaming in China? It seems that more companies are announcing efforts to participate in similar markets.

Speaker 3

Thank you. I think I will let our Chairman and CEO, Matt to answer this question. Hi, Matt.

Speaker 2

Yes, okay. Okay, okay. I'll take the question. I'll answer in Chinese and Leo will translate for me.

Speaker 1

Thank you very much for your question. China's e commerce live streaming market has huge potential and is rapidly evolving and increasingly competitive. According to the data that we have gathered, we believe that around 2023, the total market will reach around RMB5 1,000,000,000,000 and with a projected 20% cigar between 2024 to 2026. This would be a big opportunity even as more companies enter the market. We believe that our capability is uniquely positioned to succeed.

Speaker 1

First of all, we have taken a targeted approach focused on specific needs of our core middle aged and elderly user base. Secondly, we are building on the strong foundation of our existing user base and technology for infrastructure. Thirdly, we are developing our own private label products, which will bring good profits and margins to us, particularly in areas like in Chinese liquor and wellness products that resonate with our target users. By focusing on meeting the long term needs of our established user base, we believe that we can create long term sustainable value in this space. Our goal is to provide a comprehensive ecosystem that serves our target users' learning, social and consumer needs.

Speaker 1

While the market is immense and competitive, its size and strong growth provide opportunities for well positioned players. We're confident that our targeted strategy, existing user relationships and technology capability and our operation capability give us a strong position for the growth in this market.

Speaker 2

Okay. That's all. Thank you for your question.

Speaker 4

Great. And then as a quick follow-up on the e commerce platform, is there any targeted number of products that Kuantaseng will be selling or plans to sell either through private label or on third party products? Thank you.

Speaker 3

Thank you for your question. I will take this one. I think it's more detail. First, I think we follow our systematic user centric approach in our product selection and development process, focusing on meeting the long term needs of our core population, our core customer profile. We start by deeply understanding our users' needs and our large base of middle aged and elderly users provides us with valuable insights into their preferences.

Speaker 3

We also carefully select and test product categories that align with our users' interests and their demand, allowing us to focus resources on the most promising areas. And also we for product sourcing, we are on a journey from 3rd party products to developing our own private label offerings. This approach allows us to better control quality, build brand loyalty and satisfy our users' long term needs. And also we are taking a focused approach to product development, aiming to maintain a core set of approximately within 10 flagship products, primarily in Viennese. This strategy ensures high quality across our offerings and build strong brand recognition among our users.

Speaker 3

So this is one of our focus strategy. By focusing on select products that truly resonate with our audience, we aim to build lasting relationships and drive sustainable growth in our live e commerce business. And also this aligns with our overall philosophy of providing comprehensive high quality solutions to our users' needs. Yes, I think this is my answer. Thank you.

Speaker 4

Thank you.

Operator

Steve, do you have any other follow-up questions?

Speaker 4

No, that was all for me. Thank you so much.

Operator

Thank you. As there are no further questions, I'd like to hand the conference back to management for closing remarks.

Speaker 1

Thank you again for joining our call today. If you have any further questions, please

Speaker 4

feel free to contact us or submit a request through our IR website.

Speaker 1

We look forward to us or submit a request through our IR website. We look forward to speaking with everyone in our next call. Have a good day.

Speaker 2

Okay. Thank you.

Operator

Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.

Powered by Quartr
Earnings Conference Call
QuantaSing Group Q4 2024
00:00 / 00:00