Sunlands Technology Group Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 14, 2025

Key Takeaways

  • Positive Sentiment: Our Q2 revenue rose 9.5% year-over-year to RMB 539 million and net income surged 154% to RMB 126.6 million, expanding net margin to 23.5%.
  • Positive Sentiment: The strategic pivot from degree-centric offerings to non-degree programs (professional skills and interest-based courses) now represents 77.6% of total revenue, with interest-based learning up over 15% year-on-year.
  • Positive Sentiment: Sunlands’ focus on the “silver” demographic (ages 15–75) has driven tens of millions of private users, over 1 million full-price paying students, an ~18% completion rate, 16%+ repurchase rate, and >95% satisfaction.
  • Positive Sentiment: AI-powered personalized learning, including a Mandarin voice-interactive assistant for older learners, underpins dynamically assembled courses and real-time feedback across our proprietary SaaS platform.
  • Neutral Sentiment: The outlook for Q3 projects net revenues of RMB 500–520 million (1.8%–5.8% growth YoY), reflecting current market conditions but subject to substantial uncertainty.
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Earnings Conference Call
Sunlands Technology Group Q2 2025
00:00 / 00:00

There are 4 speakers on the call.

Operator

Thank for standing by, and welcome to Sunlands Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. Today's conference call is being recorded. I'll now turn the call over to your host today, Yuhua, Sunlands' IR representative. Please go ahead.

Speaker 1

Hello, everyone, and thank you for joining Sunland's second quarter twenty twenty five 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 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, mister Tongbo Liu and our financial representative, mister Hongyu Li. Management will begin with prepared remarks, and the call will conclude with a Q and A session.

Speaker 1

Before I hand it over to the management, I'd like to remind you of Celine's Safe Harbor statement in relation to today's call. Except for the historical information contained herein, certain 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.

Speaker 1

For more information about the potential risks and uncertainties, please refer to the company's filings with the Securities and Exchange Commission. With that, I'll now turn the call over to our CEO, Tongbo Liu.

Speaker 2

Okay. Thank you, Yuhua. Hello, everyone. Welcome to Sunlands' second quarter twenty twenty five conference call. Prior to commencing, I would like to kindly remind all entities that the financial information referenced in this release are presented on a continuing operation basis.

Speaker 2

And our fingers are denominated in RMB unless explicitly specified otherwise. In the 2025, we achieved solid momentum across key performance metrics. The revenue reached RMB539 million, up 9.5% year over year, supported by resilient and the demand and the continued expression of our course offerings. Notably, net income in this quarter surged to RMB $1.26 6,600,000.0 with net margin expanding to 23.5%, representing a 154% increase from the same period last year and the 158.5% sequential jump. This marks a significant step change in our learning capacities.

Speaker 2

Now let's turn to the performance of our venture courses programs. Our net our degree and the diploma oriented post secretary offerings was the cornerstone of our legacy business models now contributed a possibility of our total revenue. By intentionally resizing this business line, we have redirected resources to faster growing, higher margin areas that better align with involving the the learning. The adult education landscape in China is undergoing a structural transformation. Learners are shifting from pursuing formal credentials to seeking practical skills, emotional enrichment, and lifelong growth.

Speaker 2

According to third party research, the market is expected to exceed RMB 1 training by '27 with a five year CAGR of 12.6%. Online online location in particular is projected to grow at 17.3%, reflecting strong momentum behind the digital first, then centric models. We've identified we we identified this shift early. Since 2021, we have excluded a daily deliberated transition from a degree centric approach to three pillar models, degree programs, professional skills, and interest based on the name. This evolution was not a product expression.

Speaker 2

It redefined our value proposition, granted in deep user insight and the long term activation. Today, non degree programs including professional certifications, practical skills, and interest based courses contributed positively 77.6% of our of total revenue. Among them, interest based learning has demonstrated exceptional growth, achieving over 15% year over year revenue growth. In 2024 and the 2025, the sector recorded the enrollments of our 517,003 300,000 respectively. Based on current momentum and the visibility, we believe Sunlands had established a learning a leading position in China's adult interest based education sector.

Speaker 2

The core driver of this growth is our focus on the silver demographic, learners aged 15 to 75, which have emerged as a high potential audience. By the end of this quarter, we have built a private user access of tens of millions senior users with over 1,000,000 paying for full price courses. Based on internal estimates, the segment achieves cost completion rate of around 18%, repurchase rate of over 16%, and a satisfaction levels for certain courses generally above 95%. Beyond metrics, our platforms have become a meaningful social hub for retirees. Many users once facing solitude or social coming are now finding new peer networks, sharing passions, and building lasting connections through online forums and offline meetup.

Speaker 2

What emerges is a high impact social graph born from the learning experiences itself where courses spark conversations and conversations evolve into communities. This is a multiplier effect of intelligent purpose driven education. Complementing this demographic for focus is our second growth engine, intelligent person personalization powered by AI. If demographic define who we teach, intelligent adaptive adaptive technology define how. Our proprietary SaaS platform trained on two acres of adult education data and the billions of interactions delivers personalized content, real time feedback, and the dynamical dynamic dynamically assembled courses at scale.

Speaker 2

Besides besides, we also introduced a Mandarin voice active active we aided AI assistant that understands no or accented speech for older learners. Embodied as expressive meta humans, This assistance makes learning into intuitive, human, and emotional resident. Guided by our access framework answer, comment supervisor study, we ensure consistent support and the meaningful outcomes. The silver economy is emerging as one of China's most transformative growth frontiers as the stickers. With our first mover advantages, proven execution capabilities, and the technology infrastructure refined over two deckers, Sunlands is uniquely positioned to lead in senior education.

Speaker 2

We extended our gratitude to for your presence today, and they continue to support you you provide. Thank you, and we look forward to your valuable engagement. With that, I will turn the call over to our financial director, Heng Yu, to run through our financials.

Speaker 3

Thank you, Tungbo. Hello, everyone. I'd like to share our second quarter results, which came in strong and right in line with our expectations. Another quarter of disciplined execution and the durable growth. Net revenues for the quarter grew 9.5% year over year to RMB 539,000,000, a direct result of our strategic shift towards the civil economy market.

Speaker 3

Interest based courses were the primary growth driver for our revenue, contributing 78% of total revenue this quarter. For the 2025, new student enrollments in interest based courses exceeded 300,000 with cumulative enrollments surpassing 2,100,000 since 2020. This aligns with our focus on the keyword demographic. Our prime our private user ecosystem, which numbers in the tens of million, has converted into over 1,000,000 paying users, boosting 80% cost completion rates and a 60% repurchase rate, metrics that fuel revenue stability. Our net income for the quarter reached RMB 126,600,000.0 with a net margin of 23.5%, a 6.8 percentage points increase from the same period last year.

Speaker 3

We have now achieved 17 consecutive quarters of profitability, demonstrating the resilience of our strategy and the disciplined operational execution across cycles. Net cash from operating activities remained positive for the eighth consecutive quarter, reinforcing both the resistance of our execution and the strength of our underlying cash engine. This robust financial foundation gives us the ability to navigate uncertainty and the conviction to double down on high return growth areas when opportunities arise. Looking ahead, we remain focused on generating high quality earnings, scaling operational efficiency, and channeling resources into innovation. Our long term playbook is clear, broaden our course portfolio, sharpen our course structure, and elevate the learning experience for every student we serve.

Speaker 3

These strategic levers are positioning us to lead decisively as the future of online education continues to unfold. Now let me walk you through some of our key final results for the 2025. All companies are year over year, and all numbers are in RMB unless otherwise noted. In the 2025, net revenues increased by 9.5% to 539,000,000 from 492,200,000.0 in the 2024. The increase was primarily driven by the growth in gross billings from interest courses.

Speaker 3

Cost of revenues decreased by 9.1% to 69,600,000.0 in the 2025 from 76,600,000.0 in the 2024. The decrease was mainly due to the declined compensation expenses related to high contraction of our teachers and mentors for degree or diploma orientated postsecondary courses. Gross profit increased by 12.9% to 469,400,000.0 in the 2025 from 415,600,000.0 in the 2024. In the 2025, operating expenses was 342,600,000.0, representing a 1.1% increase from 338,900,000.0 in the 2024. Sales and the marketing expenses increased by 1.7% to 302,500,000.0 in the 2025 from 297,400,000.0 in the 2024.

Speaker 3

General and administrative expenses decreased by 2% to 33,200,000.0 in the 2025 from 33,800,000.0 in the 2024. Product development expenses decreased by 9.3% to 6,900,000.0 in the 2025 from 7,600,000.0 in the 2024. The decrease was mainly due to declined compensation expenses related to high account reduction of our product development personnel. Net income for the 2025 was 126,600,000.0 as compared to 82,300,000.0 in the 2024. Basic and the diluted net income per share was 18.75 in the 2025.

Speaker 3

As of 06/30/2025, the company had 586,700,000.0 of cash and cash equivalents and restricted cash and 166,600,000.0 of short term investments as compared to 507,200,000.0 of cash and cash equivalents and a $2.2176000000 of short term investments as of 12/31/2024. As of 06/30/2025, the company had a deferred revenue balance of 814,300,000.0 as compared to 915,500,000.0 as of 12/31/2024. And now for our outlook, for the 2025, Sunlight currently expects net revenues to be between 500,000,000 to 520,000,000, which would represent an increase of 1.8% to 5.8% year over year. The outlook is based on the current market conditions and reflect the company's current and preliminary estimates of market, operating conditions, and customer demand, which are all subject to substantial uncertainty. With that, I'd like to open up the call to the questions.

Speaker 3

Operator?

Operator

Thank you. We will now begin the question and answer session. To ask a question, please press 11 on your telephone, and wait for your name to be announced. To withdraw your question, please press 11 again. 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.

Operator

Please stand by while we compile the q and a roster. Once again, it's star one one for questions. At this time, we're showing no questions. So this will conclude our question and answer session. At this time, I would like to turn the conference back over to Yihua for any closing remarks.

Speaker 1

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 lines. Thank you.

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