Sunlands Online Education Group (NYSE: NYSE:STG), an online education company, has reported its third-quarter financial results for 2024. Despite a tough market environment, the company demonstrated financial resilience with total revenue reaching RMB 491.3 million, a slight decrease of 0.2% from the previous quarter. However, net profit saw a notable increase of 8.6%, amounting to RMB 89.3 million.
Key Takeaways
- Total (EPA:TTEF) revenue slightly declined by 0.2% sequentially to RMB 491.3 million.
- Net profit grew by 8.6% to RMB 89.3 million.
- Net revenues decreased by 6.4% year-over-year, primarily due to lower post-secondary course billings.
- Sales of learning materials and interest-based offerings showed growth.
- Operating expenses rose by 1.4%, with sales and marketing expenses up by 2.7%.
- The company is diversifying its educational offerings, focusing on interest-based education for older adults.
- Total enrollments increased by 11.2% year-over-year in the first nine months.
- Q1 2024 net revenues are projected to be between RMB 450-470 million, a 13.2% to 16.9% decrease year-over-year.
- Strong cash position with $535.9 million in cash, cash equivalents, and restricted cash as of September 30, 2024.
Company Outlook
- Sunlands forecasts Q1 2024 net revenues to be in the range of RMB 450-470 million.
- The company is strategically investing in innovation and curriculum diversification.
Bearish Highlights
- Year-over-year decrease in net revenues by 6.4% due to lower post-secondary course billings.
- Anticipated year-over-year decline in Q1 2024 net revenues by 13.2% to 16.9%.
Bullish Highlights
- Growth in sales of learning materials and interest-based educational offerings.
- Increase in total enrollments by 11.2% over the year.
- Strong cash reserves to support ongoing business activities and investments.
Misses
- Despite overall resilience, the company did not achieve growth in net revenues compared to the previous year.
Q&A Highlights
- CEO Tongbo Liu emphasized the modest sequential decline in total revenue but pointed out the strategic investments in innovation.
- Financial Director Han Yu Li highlighted the company's efforts in creating value for stakeholders and exploring new expansion opportunities.
In his statements, CEO Tongbo Liu acknowledged the slight decline in total revenue but remained optimistic about the company's strategic investments and long-term growth. Financial Director Han Yu Li echoed this sentiment, focusing on value creation and expansion.
As Sunlands continues to navigate the competitive online education sector, its focus on diversifying educational products and services for different age groups, particularly older adults, is a key part of its strategy to maintain a stable financial position and foster growth in the face of market challenges. The company's strong cash position positions it well for future investments and innovations to meet the evolving needs of learners.
Full transcript - Sunlands Technology Group (STG) Q3 2024:
Conference Operator: Ladies and gentlemen, thank you for standing by, and welcome to Sunlands Third Quarter 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, Zhi Hua, Cenan's IR President. Please go ahead.
Zhi Hua, IR President, Cenan: Hello, everyone, and thank you for joining Cenan's Q3 2024 Earnings Conference Call. The company's financial and operating results were issued in our press release via New Square 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. Tung Huo Liu and our Financial Director, Mr.
Han Yu Li. Management will begin with the prepared remarks and the call will conclude with a Q and A session. Before I hand it over to the management, I'd like to remind you of Soma's Safe Harbor statement in relation to today's call. Except from 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 now 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 statements. 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, Sunlands: Thank you, Yu Hua. 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 are presented on a continuing operation basis and all fingers 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 491,300,000 representing a modest sequential decline of 0.2%. However, our net profit reached RMB89.3 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. Our ability to consistently maintain stable profitability across various periods further substantiate our strategic focus on long term value 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 realigning our business model to better cater to evolving customer needs. In the 1st 9 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. 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 yield significant returns. As the sector aligns with border economy and demographic shifts, we remain highly optimistic about its growth potential and well positioned to capitalize on the unique opportunities it presents. To continually innovate and cater to the evolving interest of our senior learners, we have enriched our curriculum with specialized courses, particularly focusing on the arts, including same Slack 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 elder students. Alongside the educational advancements, we have also enhanced our educational travel offerings, regularizing the value of experiential learning.
We have expanded our study tours to include a wide array of destinations from the cultural richness of domestic cities to the diverse landscapes of international locals. Each itineraries is carefully researched and the customer to meet the diverse needs of seniors, combining socialization, learning and entertainment. Through this deliberate effort to in cost development and the iterative improvement of our educational trial programs. We have the ability to support our senior learners in their pursuit of lifelong learning, enabling them to explore new 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 assessable high quality education that meets the needs of today's job market. For many young professionals earning an additional degree of Equinoma not only enhances their skills, but also boosts their competence, gaining their competitive edge in their careers. 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 continue to support as we embark on this exciting journey together. With that, I will turn the call to our Financial Director, Han Yu, to run through our financials.
Han Yu Li, Financial Director, Sunlands: Thank you, Tongbo. 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 continue 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. Going forward, we are committed to enhancing our cost trends through a number of strategic initiatives for continued growth and the success of our business. We're continuing to create value for our stakeholders and finding new avenues for expansion. Now, let me walk you through some of our key final results for the Q3 of 2024.
All comparisons are year over year and all fingers are in RMB unless otherwise noted. For the Q1 of 2024, net revenues decreased by 6.4% to $491,300,000 from $524,600,000 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 cost base offerings and the sales of goods such as books and learning materials. Cost of revenues increased by 28 percent to $82,100,000 in the Q3 of 2024 from $64,100,000 in the Q3 of 2023. The increase was primarily due to an increase in the cost of revenue from sales of goods such as books and the learning materials.
Gross profit decreased by 11.1% to $409,200,000 in the Q3 of 2024 from $460,500,000 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 $343,400,000 representing a 1.4% increase from $338,900,000 in the Q3 of 2023. Sales and marketing expenses increased by 2.7% to $303,000,000 in the Q3 of 2024 from $295,000,000 in the Q3 of 2023. The increase was mainly due to a growth in the headcount of our sales and marketing personnel.
General and administrative expenses decreased by 1.8 percent to $34,500,000 in the Q3 of 2024 from $35,100,000 in the Q3 of 2023. Product development expenses decreased by 30.5 percent to $5,800,000 in the Q3 of 2024 from $8,400,000 in the Q3 of 2023. The decrease was mainly due to decline in income expenses related to high count reduction of our product development personnel. Net increase for the Q3 of 2024 was RMB89.3 million as compared to RMB131.6 million in the Q3 of 2023. Basic and diluted net income per share was $13,080,000 in the Q3 of 2024.
As of September 30, 2024, the company had $535,900,000 of cash, cash equivalents and restricted cash and $257,900,000 of short term investments as compared to $766,400,000 of cash, cash equivalents and restricted cash and RMB142.1 million of short term investments as of December 31, 2023. As of September 30, 2024, the company had a deferred revenue balance of RMB 920.6 million as compared to RMB1113.9 million as of December 31, 2023. Now for our outlook. For the Q1 of 2024, Sun Life currently expects net revenues to be between RMB450 1,000,000 to RMB470 1,000,000, a decrease of 13.2% to 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 up for questions. Operator?
Conference Operator: Thank 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 Yihua for any closing remarks.
Zhi Hua, IR President, Cenan: Once again, thank you everyone for joining today's call. We look forward to speaking with you again soon. Good day and good night.
Conference Operator: This concludes this conference call. You may now disconnect your line. Thank you.
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