Sunlands Technology Group Announces Unaudited Second Quarter 2024 Financial Results

BEIJING, Aug. 16, 2024 (GLOBE NEWSWIRE) — Sunlands Technology Group (NYSE: STG) (“Sunlands” or the “Company”), a leader in China’s adult online education market and China’s adult personal interest learning market, today announced its unaudited financial results for the second quarter ended June 30, 2024.

Second Quarter 2024 Financial and Operational Snapshots

  • Net revenues were RMB492.2 million (US$67.7 million), compared to RMB526.4 million in the second quarter of 2023.
  • Gross billings (non-GAAP) were RMB383.9 million (US$52.8 million), compared to RMB354.1 million in the second quarter of 2023.
  • Gross profit was RMB415.6 million (US$57.2 million), compared to RMB466.9 million in the second quarter of 2023.
  • Net income was RMB82.3 million (US$11.3 million), compared to RMB173.9 million in the second quarter of 2023.
  • Net income margin1 was 16.7% in the second quarter of 2024, compared to 33.0% in the second quarter of 2023.
  • New student enrollments2 were 168,296, compared to 154,209 in the second quarter of 2023.
  • As of June 30, 2024, the Company’s deferred revenue balance was RMB986.9 million (US$135.8 million), compared to RMB1,113.9 million as of December 31, 2023.

_______________
1Net income margin is defined as net income as a percentage of net revenues. 
2New student enrollments for a given period refer to the total number of orders placed by students that newly enroll in at least one course during that period, including those students that enroll and then terminate their enrollment with us, excluding orders of our low-price courses, such as “mini courses” and “RMB1 courses”, which we offer in the form of recorded videos or short live streaming, to strengthen our competitiveness and improve customer experience.

“In the face of challenging macroeconomic conditions, our company demonstrated enough strategic flexibility to deliver solid results in the second quarter. We achieved net revenues of RMB492.2 million and net income of RMB82.3 million. This underscored our resilience and ability to adapt in the face of adversity and demonstrates our strong commitment to cost optimization and sustainable growth. This solid financial position not only enables us to respond effectively to unpredictable circumstances, but also creates opportunities for our business to grow.

Looking ahead to the second half of the year, our top priorities are to enhance brand awareness and improve the quality of our existing products and services. We’re taking a prudent but proactive approach to expanding and refining the offerings. Our commitment to these key growth initiatives remains unwavering as we continue to focus on improving operational efficiency and profitability.” said Mr. Tongbo Liu, Chief Executive Officer of Sunlands.

Mr. Hangyu Li, Finance Director of Sunlands, commented, “We had another excellent quarter in our core business. Although business of post-secondary courses has been rather slow in recent quarters, we achieved year-over-year growth in gross billings for the fourth consecutive quarter due to new enrollments in our interest courses offerings. In addition, we realised net income of RMB82.3 million and positive operating cash flows for the quarter. This gives us the confidence to face the challenge in a dynamic environment. Looking ahead, we will continue to optimize our courses offerings while maintaining efficient operations. These strategic initiatives will enable us to capitalize on emerging opportunities, strengthen our leadership position in the industry and continue to create value for our shareholders.”

Financial Results for the Second Quarter of 2024

Net Revenues

In the second quarter of 2024, net revenues decreased by 6.5% to RMB492.2 million (US$67.7 million) from RMB526.4 million in the second quarter 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 courses offerings and sales of goods such as books and learning materials.

Cost of Revenues

Cost of revenues increased by 28.8% to RMB76.6 million (US$10.5 million) in the second quarter of 2024 from RMB59.5 million in the second quarter 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

Gross profit decreased by 11.0% to RMB415.6 million (US$57.2 million) in the second quarter of 2024 from RMB466.9 million in the second quarter of 2023.

Operating Expenses

In the second quarter of 2024, operating expenses were RMB338.9 million (US$46.6 million), representing a 9.0% increase from RMB311.0 million in the second quarter of 2023.

Sales and marketing expenses increased by 10.2% to RMB297.4 million (US$40.9 million) in the second quarter of 2024 from RMB270.0 million in the second quarter of 2023. The increase was mainly due to a growth in spending on sales activities, including enhanced compensation for sales personnel as well as increased spending on branding and marketing activities focusing on interest courses offerings.

General and administrative expenses increased by 2.2% to RMB33.8 million (US$4.7 million) in the second quarter of 2024 from RMB33.1 million in the second quarter of 2023.

Product development expenses decreased by 4.2% to RMB7.7 million (US$1.1 million) in the second quarter of 2024 from RMB8.0 million in the second quarter of 2023. The decrease was mainly due to declined compensation expenses related to headcount reduction of our product development personnel.

Net Income

Net income for the second quarter of 2024 was RMB82.3 million (US$11.3 million), as compared to RMB173.9 million in the second quarter of 2023.

Basic and Diluted Net Income Per Share

Basic and diluted net income per share was RMB12.00 (US$1.65) in the second quarter of 2024.

Cash, Cash Equivalents, Restricted Cash and Short-term Investments

As of June 30, 2024, the Company had RMB758.6 million (US$104.4 million) of cash, cash equivalents and restricted cash and RMB243.9 million (US$33.6 million) of short-term investments, as compared to RMB766.4 million of cash, cash equivalents and restricted cash and RMB142.1 million of short-term investments as of December 31, 2023.

Deferred Revenue

As of June 30, 2024, the Company had a deferred revenue balance of RMB986.9 million (US$135.8 million), as compared to RMB1,113.9 million as of December 31, 2023.

Share Repurchase

On December 6, 2021, the Company’s board of directors authorized a share repurchase program, under which the Company may repurchase up to US$15.0 million of Class A ordinary shares in the form of ADSs over the next 24 months. On December 1, 2023, the Company’s board of directors authorized to extend its share repurchase program over the next 24 months. As of August 14, 2024, the Company had repurchased an aggregate of 542,172 ADSs for approximately US$2.9 million under the share repurchase program.

Financial Results for the First Six Months of 2024

Net Revenues

In the first six months of 2024, net revenues decreased by 7.1% to RMB1,015.5 million (US$139.7 million) from RMB1,093.2 million in the first six months of 2023.

Cost of Revenues

Cost of revenues increased by 20.5% to RMB153.8 million (US$21.2 million) in the first six months of 2024 from RMB127.6 million in the first six months 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

Gross profit decreased by 10.8% to RMB861.7 million (US$118.6 million) from RMB965.6 million in the first six months of 2023.

Operating Expenses

In the first six months of 2023, operating expenses were RMB680.1 million (US$93.6 million), representing a 7.6% increase from RMB631.8 million in the first six months of 2023.

Sales and marketing expenses increased by 10.6% to RMB599.0 million (US$82.4 million) in the first six months of 2024 from RMB541.4 million in the first six months of 2023.

General and administrative expenses decreased by 8.7% to RMB66.4 million (US$9.1 million) in the first six months of 2024 from RMB72.7 million in the first six months of 2023. The decrease was mainly due to the decline in rental expenses as certain leases for office space were partially terminated in 2023 before the expiration of the lease term for cost saving.

Product development expenses decreased by 17.0% to RMB14.7 million (US$2.0 million) in the first six months of 2024 from RMB17.7 million in the first six months of 2023.

Net Income

Net income for the first six months of 2024 was RMB195.0 million (US$26.8 million), compared with RMB354.0 million in the first six months of 2023.

Basic and Diluted Net Income Per Share

Basic and diluted net income per share was RMB28.44 (US$3.91) in the first six months of 2024, compared with RMB51.13 in the first six months of 2023.

Outlook

For the third quarter of 2024, Sunlands currently expects net revenues to be between RMB490 million to RMB510 million, which would represent a decrease of 2.8% to 6.6% year-over-year. The above outlook is based on the current market conditions and reflects the Company’s current and preliminary estimates of market and operating conditions and customer demand, which are all subject to substantial uncertainty.

Exchange Rate

The Company’s business is primarily conducted in China and all revenues are denominated in Renminbi (“RMB”). This announcement contains currency conversions of RMB amounts into U.S. dollars (“US$”) solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to US$ are made at a rate of RMB7.2672 to US$1.00, the effective noon buying rate for June 28, 2024 as set forth in the H.10 statistical release of the Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on June 28, 2024, or at any other rate.

Conference Call and Webcast

Sunlands’ management team will host a conference call at 7:00 AM U.S. Eastern Time, (7:00 PM Beijing/Hong Kong time) on August 16, 2024, following the quarterly results announcement.

For participants who wish to join the call, please access the link provided below to complete online registration 15 minutes prior to the scheduled call start time. Upon registration, participants will receive details for the conference call, including dial-in numbers, a personal PIN and an e-mail with detailed instructions to join the conference call.

Registration Link:
https://register.vevent.com/register/BI825ca1738fae48d2807c6faff61460db  

Additionally, a live webcast and archive of the conference call will be available on the Investor Relations section of Sunlands’ website at https://ir.sunlands.com/.

About Sunlands

Sunlands Technology Group (NYSE: STG) (“Sunlands” or the “Company”), formerly known as Sunlands Online Education Group, is a leader in China’s adult online education market and China’s adult personal interest learning market. With a one to many live streaming platform, Sunlands offers various interest, professional skills and professional certification preparation courses as well as degree- or diploma-oriented post-secondary courses. Students can access the Company’s services either through PC or mobile applications. The Company’s online platform cultivates a personalized, interactive learning environment by featuring a virtual learning community and a vast library of educational content offerings that adapt to the learning habits of its students. Sunlands offers a unique approach to education research and development that organizes subject content into Learning Outcome Trees, the Company’s proprietary knowledge management system. Sunlands has a deep understanding of the educational needs of its prospective students and offers solutions that help them achieve their goals.

About Non-GAAP Financial Measures

We use gross billings, EBITDA, non-GAAP operating cost and expenses, non-GAAP income from operations and Non-GAAP net income per share, each a non-GAAP financial measure, in evaluating our operating results and for financial and operational decision-making purposes.

We define gross billings for a specific period as the total amount of cash received for the sale of course packages, net of the total amount of refunds paid in such period. Our management uses gross billings as a performance measurement because we generally bill our students for the entire course tuition at the time of sale of our course packages and recognize revenue proportionally over a period. EBITDA is defined as net income excluding depreciation and amortization, interest expense, interest income, and income tax expenses. We believe that gross billings and EBITDA provide valuable insight into the sales of our course packages and the performance of our business.

These non-GAAP financial measures should not be considered in isolation from, or as a substitute for, their most directly comparable financial measure prepared in accordance with GAAP. A reconciliation of the historical non-GAAP financial measures to their respective most directly comparable GAAP measure has been provided in the tables included below. Investors are encouraged to review the reconciliation of the historical non-GAAP financial measures to their respective most directly comparable GAAP financial measures. As gross billings, EBITDA, operating cost and expenses excluding share-based compensation expenses, general and administrative expenses excluding share-based compensation expenses, sales and marketing expenses excluding share-based compensation expenses, product development expenses excluding share-based compensation expenses, non-GAAP net income exclude share-based compensation expenses, and basic and diluted net income per share excluding share-based compensation expenses have material limitations as an analytical metric and may not be calculated in the same manner by all companies, it may not be comparable to other similarly titled measures used by other companies. In light of the foregoing limitations, you should not consider gross billings and EBITDA as a substitute for, or superior to, their respective most directly comparable financial measures prepared in accordance with GAAP. We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure.

Safe Harbor Statement

This press release contains forward-looking statements made under the “safe harbor” provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “confident” and similar statements. Sunlands may also make written or oral forward-looking statements in its reports filed with or furnished to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Any statements that are not historical facts, including statements about Sunlands’ beliefs and expectations, are forward-looking statements that involve factors, risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors and risks include, but not limited to the following: Sunlands’ goals and strategies; its expectations regarding demand for and market acceptance of its brand and services; its ability to retain and increase student enrollments; its ability to offer new courses and educational content; its ability to improve teaching quality and students’ learning results; its ability to improve sales and marketing efficiency and effectiveness; its ability to engage, train and retain new faculty members; its future business development, results of operations and financial condition; its ability to maintain and improve technology infrastructure necessary to operate its business; competition in the online education industry in China; relevant government policies and regulations relating to Sunlands’ corporate structure, business and industry; and general economic and business condition in China Further information regarding these and other risks, uncertainties or factors is included in the Sunlands’ filings with the U.S. Securities and Exchange Commission. All information provided in this press release is current as of the date of the press release, and Sunlands does not undertake any obligation to update such information, except as required under applicable law.

For investor and media enquiries, please contact:
Sunlands Technology Group
Investor Relations
Email: [email protected]
SOURCE: Sunlands Technology Group

 
SUNLANDS TECHNOLOGY GROUP
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except for share and per share data, or otherwise noted)
 
    As of December 31,   As of June 30,
    2023   2024   2024
    RMB   RMB   US$
ASSETS            
Current assets            
Cash and cash equivalents   763,800   753,559   103,693
Restricted cash   2,578   5,013   690
Short-term investments   142,084   243,858   33,556
Prepaid expenses and other current assets   109,018   120,156   16,534
Deferred costs, current   14,274   6,708   923
Total current assets   1,031,754   1,129,294   155,396
             
Non-current assets            
Property and equipment, net   786,670   772,389   106,284
Intangible assets, net   975   1,011   139
Right-of-use assets   135,820   128,418   17,671
Deferred costs, non-current   68,773   59,582   8,199
Long-term investments   61,354   49,179   6,767
Deferred tax assets     14,713   2,025
Other non-current assets   33,160   34,190   4,705
Total non-current assets   1,086,752   1,059,482   145,790
TOTAL ASSETS   2,118,506   2,188,776   301,186
SUNLANDS TECHNOLOGY GROUP
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except for share and per share data, or otherwise noted)
 
    As of December 31,   As of June 30,
    2023    2024    2024 
    RMB   RMB   US$
LIABILITIES AND SHAREHOLDERS’ EQUITY            
             
LIABILITIES            
Current liabilities            
Accrued expenses and other current liabilities   409,691     424,117     58,362  
Deferred revenue, current   553,812     426,030     58,624  
Lease liabilities, current portion   8,019     8,673     1,193  
Long-term debt, current portion   38,654     38,654     5,319  
Total current liabilities   1,010,176     897,474     123,498  
             
Non-current liabilities            
Deferred revenue, non-current   560,111     560,908     77,184  
Lease liabilities, non-current portion   157,269     152,944     21,046  
Deferred tax liabilities   3,742     2,841     391  
Other non-current liabilities   6,994     7,256     998  
Long-term debt   104,665     85,338     11,743  
Total non-current liabilities   832,781     809,287     111,362  
TOTAL LIABILITIES   1,842,957     1,706,761     234,860  
             
SHAREHOLDERS’ EQUITY            
Class A ordinary shares (par value of US$0.00005, 796,062,195 shares            
authorized; 3,131,807 and 3,131,807 shares issued as of December 31, 2023            
and June 30, 2024, respectively; 2,702,523 and 2,687,391 shares            
outstanding as of December 31, 2023 and June 30, 2024, respectively)   1     1      
Class B ordinary shares (par value of US$0.00005, 826,389 shares            
authorized; 826,389 and 826,389 shares issued and outstanding            
as of December 31, 2023 and June 30, 2024, respectively)            
Class C ordinary shares (par value of US$0.00005, 203,111,416 shares            
authorized; 3,332,062 and 3,332,062 shares issued and outstanding            
as of December 31, 2023 and June 30, 2024, respectively)   1     1      
Treasury stock            
Accumulated deficit   (2,171,284 )   (1,976,297 )   (271,948 )
Additional paid-in capital   2,305,042     2,303,270     316,940  
Accumulated other comprehensive income   143,276     156,527     21,539  
Total Sunlands Technology Group shareholders’ equity   277,036     483,502     66,531  
Non-controlling interest   (1,487 )   (1,487 )   (205 )
TOTAL SHAREHOLDERS’ EQUITY   275,549     482,015     66,326  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY   2,118,506     2,188,776     301,186  
SUNLANDS TECHNOLOGY GROUP
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except for share and per share data, or otherwise noted)
 
    For the Three Months Ended June 30,
    2023    2024    2024 
    RMB   RMB   US$
Net revenues   526,353     492,223     67,732  
Cost of revenues   (59,491 )   (76,627 )   (10,544 )
Gross profit   466,862     415,596     57,188  
             
Operating expenses            
Sales and marketing expenses   (269,969 )   (297,443 )   (40,930 )
Product development expenses   (7,992 )   (7,657 )   (1,054 )
General and administrative expenses   (33,085 )   (33,829 )   (4,655 )
Total operating expenses   (311,046 )   (338,929 )   (46,639 )
Income from operations   155,816     76,667     10,549  
Interest income   7,561     10,576     1,455  
Interest expense   (2,046 )   (1,516 )   (209 )
Other income, net   8,171     3,015     415  
Gain/(loss) on disposal of subsidiaries   247     (250 )   (34 )
Income before income tax benefit            
and gain/(loss) from equity method investments   169,749     88,492     12,176  
Income tax benefit   1,404     78     11  
Gain/(loss) from equity method investments   2,730     (6,318 )   (869 )
Net income   173,883     82,252     11,318  
             
Less: net income attributable to non-controlling interest            
Net income attributable to Sunlands Technology Group   173,883     82,252     11,318  
Net income per share attributable to ordinary shareholders of            
Sunlands Technology Group:            
Basic and diluted   25.12     12.00     1.65  
Weighted average shares used in calculating net income            
per ordinary share:            
Basic and diluted   6,921,304     6,852,828     6,852,828  
SUNLANDS TECHNOLOGY GROUP
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands)
 
    For the Three Months Ended June 30,
    2023   2024   2024
    RMB   RMB   US$
Net income   173,883   82,252   11,318
Other comprehensive income, net of tax effect of nil:            
Change in cumulative foreign currency translation adjustments   29,603   3,715   511
Total comprehensive income   203,486   85,967   11,829
Less: comprehensive income attributable to non-controlling interest      
Comprehensive income attributable to Sunlands Technology Group   203,486   85,967   11,829
SUNLANDS TECHNOLOGY GROUP
RECONCILIATION OF GAAP AND NON-GAAP RESULTS
(Amounts in thousands)
 
    For the Three Months Ended June 30,
    2023    2024 
    RMB   RMB
Net revenues   526,353     492,223  
Less: other revenues   (42,377 )   (62,094 )
Add: tax and surcharges   9,779     15,740  
Add: ending deferred revenue   1,379,073     986,938  
Add: ending refund liability   107,319     126,797  
Less: beginning deferred revenue   (1,513,896 )   (1,044,866 )
Less: beginning refund liability   (112,188 )   (130,840 )
Gross billings (non-GAAP)   354,063     383,898  
         
Net income   173,883     82,252  
Add: income tax benefit   (1,404 )   (78 )
Add: depreciation and amortization   7,677     7,362  
Add: interest expense   2,046     1,516  
Less: interest income   (7,561 )   (10,576 )
EBITDA (non-GAAP)   174,641     80,476  
SUNLANDS TECHNOLOGY GROUP
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except for share and per share data, or otherwise noted)
 
    For the Six Months Ended June 30,
    2023    2024    2024 
    RMB   RMB   US$
Net revenues   1,093,229     1,015,463     139,732  
Cost of revenues   (127,646 )   (153,790 )   (21,162 )
Gross profit   965,583     861,673     118,570  
             
Operating expenses            
Sales and marketing expenses   (541,383 )   (599,018 )   (82,428 )
Product development expenses   (17,672 )   (14,667 )   (2,018 )
General and administrative expenses   (72,725 )   (66,381 )   (9,134 )
Total operating expenses   (631,780 )   (680,066 )   (93,580 )
Income from operations   333,803     181,607     24,990  
Interest income   14,122     19,865     2,734  
Interest expense   (4,170 )   (3,120 )   (429 )
Other income, net   16,969     8,795     1,210  
Gain/(loss) on disposal of subsidiaries   247     (250 )   (34 )
Income before income tax (expenses)/benefit            
and loss from equity method investments   360,971     206,897     28,471  
Income tax (expenses)/benefit   (6,327 )   469     65  
Loss from equity method investments   (654 )   (12,379 )   (1,703 )
Net income   353,990     194,987     26,833  
             
Less: net income attributable to non-controlling interest   1          
Net income attributable to Sunlands Technology Group   353,989     194,987     26,833  
Net income per share attributable to ordinary shareholders of            
Sunlands Technology Group:            
Basic and diluted   51.13     28.44     3.91  
Weighted average shares used in calculating net income            
per ordinary share:            
Basic and diluted   6,923,858     6,854,922     6,854,922  
SUNLANDS TECHNOLOGY GROUP
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands)
 
    For the Six Months Ended June 30,
    2023   2024   2024
    RMB   RMB   US$
Net income   353,990   194,987   26,833
Other comprehensive income, net of tax effect of nil:            
Change in cumulative foreign currency translation adjustments   27,276   13,251   1,823
Total comprehensive income   381,266   208,238   28,656
Less: comprehensive income attributable to non-controlling interest   1    
Comprehensive income attributable to Sunlands Technology Group   381,265   208,238   28,656
SUNLANDS TECHNOLOGY GROUP
RECONCILIATION OF GAAP AND NON-GAAP RESULTS
(Amounts in thousands)
 
    For the Six Months Ended June 30,
    2023    2024 
    RMB   RMB
Net revenues   1,093,229     1,015,463  
Less: other revenues   (84,224 )   (120,968 )
Add: tax and surcharges   27,774     32,109  
Add: ending deferred revenue   1,379,073     986,938  
Add: ending refund liability   107,319     126,797  
Less: beginning deferred revenue   (1,690,946 )   (1,113,923 )
Less: beginning refund liability   (133,066 )   (143,744 )
Gross billings (non-GAAP)   699,159     782,672  
         
Net income   353,990     194,987  
Add: income tax expenses/(benefit)   6,327     (469 )
Add: depreciation and amortization   15,267     14,793  
Add: interest expense   4,170     3,120  
Less: interest income   (14,122 )   (19,865 )
EBITDA (non-GAAP)   365,632     192,566  


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