Sunlands Technology Group (STG) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to Sunlands' First Quarter 2024 Earnings Conference Call. [Operator Instructions] 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.

Hello, everyone, and thank you for joining Sunlands' First Quarter 2024 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 can 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 prepared remarks, and the call will conclude with the 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. 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. With that, I will now turn the call over to our CEO, Tongbo Liu.

Thank you Yuhua. Hello everyone. Welcome to Sunlands' First Quarter 2024 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 [indiscernible] [Audio Gap] 2024 maintained stability amidst challenging conditions. Despite a year-over-year decrease, our net revenue and net income for the quarter stood at CNY 523.2 million and CNY 112.7 million, respectively. This marks our 12th consecutive quarter of profitability, underscoring our operational efficiency and the commitment to shareholder value. With strong focus on robust and enduring expansion, we bolstered our endeavors in cost control [Technical Difficulty].

Ladies and gentlemen please stay on the line, your conference will resume shortly. Presenter please continue.

Additionally, our enrollment surged by 22.8% to a historical high of over 175,000, demonstrating the enhanced proficiency in acquiring students. This improvement reflects our dedicated initiatives to attract new users and enhance user retention and engagement by refining our cost offerings to meet diverse learning needs. Looking ahead, we remain optimistic about our long-term profitability. We endeavor to closely monitor and enhance student experience across all phases of teaching, learning assessment and practice. Moving forward, we are dedicated to delivering exceptional services and products while exploring avenues for further business growth and operational efficiency improvements. Now let's turn to the performance of each of our major course programs. Our post-secondary programs now account for 14.3% of our total revenue. A testament to our strategic structure optimizations and alignment with our latest investment return goals. Given the structural makeup of educational attainment with the Chinese population, the universal access to compulsory education and the prevailing demand of the job market. We are still convinced these programs are in demand, and we remain dedicated to providing premium courses to our in-progress students. In addition, we continue to pursue B2B strategy decisively, leverage our deep-rooted expertise in this area. Through our SaaS platform Luxueyun, we provide small and medium-sized organizations with comprehensive solutions, including extensive course content, authentic examination questions and advanced teaching management tools to help them improve their teaching and content distribution abilities. Our aim is to provide our partners with advanced intuitive tools that can significantly improve the learning experience for their users and ultimately enhance the quality and efficiency across the industry. The sector, including professional certifications, professional skills and interest programs continue to be our primary growth engine, contributing 74.4% to the total revenue. Interest program, in particular, has exhibited a 22.2% year-over-year growth. In this sector, our strategy remains unwavering to continuously expand our course offerings. Attract a broader audience through varied curriculum, enhance customer retention rates and ultimately optimize the lifetime value of our users. This approach has proven successful as evidenced by a 32.4% increase in new enrollments in our interest-based education programs this quarter, underscoring the effectiveness of our strategic initiatives. Through ongoing practice, we have gained fresh insights into different age groups. Shifting our approach to course design and service. For example, unlike younger individuals, whose educational pursuits are often career-oriented or driven by external expectations. More mature learners seek experiences that enrich their lives, bring enjoy and foster meaningful connections. The fundamental difference [ necessitates ] a substantial departure from traditional education and paradigms in both curriculum development and service delivery models. Simply migrating existing course online does not suffice. Instead, we must intricately align with the unique needs of this demographic to enhance and customize our offerings accordingly. Moreover, the service delivery model should be adaptable and considerate of their physical and cognitive abilities, emphasizing the creation of a supportive and inclusive learning environment, that encourages active participation and continuous engagement. We have consistently pushed the boundaries of our innovative curriculum achieved notable milestones through industry integration. A prime example is our educational travel adventure projects launched in March 2023, which are well suited for the elderly. At the end of the first quarter of 2024, we have already crafted over 40 study tour routes. According to McKinsey 2024 China Consumer Trends report, senior citizens in first-tier cities have a spending expectations for travel that notably exceeded those who of the general population, marking this as the burgeoning market segment. These consumers are not primarily driven by price when deciding which travel products to purchase. Instead, they seek diverse, high-quality and unique travel experiences, making premium travel products, particularly well received. Setting ourselves apart from traditional tourist offerings, we seamlessly integrate components from our courses such as the art of traditional Chinese painting into [indiscernible] of the journey, enriching experience with cultural depth and immersive learning opportunities. In the first 3 months of 2024 alone, revenue from educational travel adventure projects has already surpassed 65% of the earnings for the entire of 2023. In the future, we will expand our efforts into other areas to offer our elderly users a wider array of products aiming to extend their customer life cycle. Furthermore, as a company in embracing cutting-edge artificial intelligence technology we have steadily enhanced our integration of AI into our business operations. For example, we streamlined content creation processes focused on increasing page views and refined multiple models to deliver personalized teaching. This led to a reduction in production time and significantly boosted the efficiency of our operational teams. We will continue to monitor updates in large models and apply to our business, ultimately enhancing our users' learning experience. While we have achieved significant milestones, it's essential to acknowledge that we also face challenges. Moving forward, we are dedicated to adjusting our strategies to navigate market uncertainties. Where our focus will remain on delivering high-quality education, expanding our market presence and/or repricing shareholder value. Thank you for your presence today. With that, I will turn the call to our Financial Director, Hangyu, to run through our financials.