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QuantaSing Announces Unaudited Financial Results for the Third Quarter of Fiscal Year 2024

BEIJING, June 06, 2024 (GLOBE NEWSWIRE) — QuantaSing Group Limited (NASDAQ: QSG) (“QuantaSing” or the “Company”), a leading online learning service provider in China, today announced its unaudited financial results for the third quarter of the fiscal year ending June 30, 2024 (the “third quarter of FY 2024”, which refers to the quarter from January 1, 2024 to March 31, 2024).

Highlights for the Third Quarter of FY 2024

Mr. Peng Li, Chairman and Chief Executive Officer of QuantaSing, commented, “We are pleased to see the positive reception that our expanded course offerings have received from our middle-aged and elderly users. By focusing on their unique interests and needs, such as Traditional Chinese Medicine and recreational exercises like Ba Duan Jin, we are enriching their lives and fostering a vibrant community of lifelong learners. Our recent initiatives, including the educational tour program and the launch of mini-lectures, have received enthusiastic feedback, highlighting robust demand for active aging and continuous learning. During May 2024, our overseas development initiatives made solid progress, as Kelly’s Education opened its first offline school in Hong Kong. Importantly, this quarter’s growth in gross billings and user engagement has further solidified our business fundamentals. As we continue to develop and market consumer products tailored to our middle-aged and elderly users, we are excited about the opportunities ahead to enhance their well-being and extend our reach in the silver economy.”

Mr. Dong Xie, Chief Financial Officer of QuantaSing, added, “During the third quarter of fiscal year 2024, we achieved total revenues of RMB945.6 million, a 17.1% year-over-year increase driven by robust demand for our skills upgrading courses. We strategically allocated cash flow into new initiatives using our “test-and-scale” approach while closely monitoring our learning business to preserve profitability. Moving forward, our commitment to sustainable and profitable growth will continue to guide our strategic trajectory.”

Financial Results for the Third Quarter of FY 2024

Revenues

Revenues increased by 17.1% year over year to RMB945.6 million (US$131.0 million) in the third quarter of FY 2024, primarily driven by the growth in revenues from skills upgrading courses, which primarily consist of courses aiming to improve the soft skills of individuals3.

Cost of revenues

Cost of revenues was RMB145.8 million (US$20.2 million) in the third quarter of FY 2024, compared to RMB101.1 million in the third quarter of FY 2023, representing a change of 44.3%. The change was primarily due to increased labor outsourcing costs of RMB23.3 million (US$3.2 million) and higher procurement costs of RMB27.1 million (US$3.7 million), and was partially offset by a RMB15.7 million (US$2.2 million) decrease in staff costs.

Sales and marketing expenses

Sales and marketing expenses were RMB729.6 million (US$101.1 million) in the third quarter of FY 2024, compared to RMB631.4 million in the third quarter of FY 2023, representing a change of 15.6%. The change was mainly due to increases in labor outsourcing costs of RMB84.9 million (US$11.8 million) and marketing and promotion expenses of RMB89.4 million (US$12.4 million), partially offset by a decrease in staff costs of RMB73.7 million (US$10.2 million), which includes a decrease in share-based compensation expenses of RMB9.5 million (US$1.3 million).

Research and development expenses

Research and development expenses were RMB38.8 million (US$5.4 million) in the third quarter of FY 2024, compared to RMB49.6 million in the third quarter of FY 2023, representing a decrease of 21.7%. The decrease was primarily due to a decline in staff costs of RMB11.5 million (US$1.6 million), which includes a decrease in share-based compensation expenses of RMB5.2 million (US$0.7 million).

General and administrative expenses

General and administrative expenses were RMB36.4 million (US$5.0 million) in the third quarter of FY 2024, compared to RMB48.3 million in the third quarter of FY 2023, representing a decrease of 24.7%. The decrease was primarily due to a decline in share-based compensation expenses and office expenses.

Net income and adjusted net income

Net income was RMB14.6 million (US$2.0 million) in the third quarter of FY 2024, compared with a net loss of RMB22.7 million in the third quarter of FY 2023. Adjusted net income was RMB31.9 million (US$4.4 million) in the third quarter of FY 2024, compared with RMB21.7 million in the third quarter of FY 2023.

Earnings per share and adjusted earnings per share4

Basic and diluted net income per share were RMB0.09 (US$0.01) in the third quarter of FY 2024, compared with basic and diluted net loss per share of RMB0.19 in the third quarter of FY 2023. Basic and diluted adjusted net income per share were RMB0.19 (US$0.03) in the third quarter of FY 2024, compared with basic and diluted adjusted net income per share of RMB0.11 in the third quarter of FY 2023.

Balance Sheet

As of March 31, 2024, the Company had cash and cash equivalents and short-term investments of RMB1,149.9 million (US$159.3 million), compared with RMB930.6 million as of June 30, 2023.

Financial Outlook

Based on currently available information, for the fourth quarter of FY 2024 (which refers to the quarter from April 1, 2024 to June 30, 2024), the Company expects its revenues to be in the range of RMB900.0 million to RMB930.0 million, representing a year-over-year increase of 8.7% to 12.3%. The forecasts reflect the Company’s current and preliminary views on the market and its operating conditions, which are subject to change.

Recent Developments

On June 9, 2023, the Company announced that its board of directors had approved a share repurchase program of up to US$20.0 million of the Company’s Class A ordinary shares in the form of American Depositary Shares (“ADSs”) for a 12-month period beginning on June 9, 2023 (the “Share Repurchase Program”). As of March 31, 2024, the Company had cumulatively repurchased an aggregate of approximately 2.6 million ADSs for approximately US$11.5 million under the Share Repurchase Program.

On March 20, 2024, as part of its initiative to expand the e-commerce business and the AI and technology business, the Company, through one of its wholly-owned PRC subsidiaries, entered into a partnership agreement to form a PRC limited partnership enterprise for future equity investment (the “Partnership”), in which the Company served as a limited partner and committed to subscribing for 43.29% of the interests in the Partnership for an aggregate capital contribution of RMB100.0 million. Up to the date of this press release, the Company has fulfilled its initial capital contribution of RMB3.0 million.

Conference Call Information

The Company’s management team will hold a conference call at 7:00 A.M. Eastern Time on Thursday, June 6, 2024 (7:00 P.M. Beijing Time on the same day) to discuss the financial results. Listeners may access the call by dialing the following numbers:

International: 1-412-902-4272
United States Toll Free: 1-888-346-8982
Mainland China Toll Free: 4001-201203
Hong Kong Toll Free: 800-905945
Conference ID: QuantaSing Group Limited
   

The replay will be accessible through June 13, 2024 by dialing the following numbers:

International: 1-412-317-0088
United States Toll Free: 1-877-344-7529
Access Code: 7529094
   

A live and archived webcast of the conference call will be available at the Company’s investor relations website at https://ir.quantasing.com.

Non-GAAP Financial Measures

To supplement the Company’s consolidated financial statements, which are prepared and presented in accordance with U.S. GAAP, the Company uses gross billings of individual online learning services, adjusted net income/(loss) and basic and diluted adjusted net income/(loss) per ordinary share as its non-GAAP financial measures. Gross billings of individual online learning services for a specific period represents revenues of the Company’s individual online learning services net of the changes in deferred revenues in such period, further adjusted by value-added tax in such period. Adjusted net income/(loss) represents net (loss)/income excluding share-based compensation expense. Basic and diluted adjusted net income/(loss) per ordinary share represents adjusted net income/(loss) attributable to ordinary shareholders of QuantaSing Group Limited divided by weighted average number of ordinary shares outstanding during the periods used in computing adjusted net income/(loss) per ordinary share, basic and diluted. The Company believes that the non-GAAP financial measures provide useful information about the Company’s results of operations, enhance the overall understanding of the Company’s past performance and future prospects and allow for greater visibility with respect to key metrics used by the Company’s management in its financial and operational decision-making.

The non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. The non-GAAP financial measures have limitations as analytical tools, and when assessing the Company’s operating performance, investors should not consider them in isolation, or as a substitute for revenue, net (loss)/income, net (loss)/income per ordinary share, basic and diluted or other consolidated statements of operations data prepared in accordance with U.S. GAAP. The Company’s definition of non-GAAP financial measures may differ from those of industry peers and may not be comparable with their non-GAAP financial measures.

The Company mitigates these limitations by reconciling the non-GAAP financial measures to the most comparable U.S. GAAP performance measures, all of which should be considered when evaluating the Company’s performance. For more information on these non-GAAP financial measures, please see the table captioned “QuantaSing Group Limited Unaudited Reconciliation of GAAP and Non-GAAP Results” near the end of this release.

Exchange Rate Information

This announcement contains translations of certain Renminbi (“RMB”) amounts into U.S. dollars (“US$”) at specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from Renminbi to U.S. dollars were made at the rate of RMB7.2203 to US$1.00, the exchange rate on March 29, 2024, set forth in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the Renminbi or U.S. dollars amounts referred to could be converted into U.S. dollars or Renminbi, as the case may be, at any particular rate or at all.

Safe Harbor Statements

This announcement contains forward-looking statements within the meaning of Section 27A of Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended and the Private Securities Litigation Reform Act of 1955. All statements other than statements of historical or current fact included in this press release are forward-looking statements, including but not limited to statements regarding QuantaSing’s financial outlook, beliefs and expectations. These statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “potential,” “continue,” “ongoing,” “targets,” “guidance” and similar statements. Among other things, the Financial Outlook in this announcement contains forward-looking statements. The Company may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the “SEC”), 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. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: the Company’s growth strategies; its future business development, results of operations and financial condition; its ability to attract and retain new users and learners and to increase the spending and revenues generated from users and learners; its ability to maintain and enhance the recognition and reputation of its brand; its expectations regarding demand for and market acceptance of its services and products; trends and competition in China’s adult learning market; changes in its revenues and certain cost or expense items; the expected growth of China’s adult learning market; PRC governmental policies and regulations relating to the Company’s business and industry, general economic and political conditions in China and globally, and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks, uncertainties, or factors is included in the Company’s filings with the SEC, including, without limitation, the final prospectus related to the IPO filed with the SEC dated January 24, 2023. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this press release. All forward-looking statements are qualified in their entirety by this cautionary statement, and the Company undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date hereof.

About QuantaSing Group Limited

QuantaSing is a leading online service provider in China dedicated to improving people’s quality of life and well-being by providing lifelong personal learning and development opportunities. The Company is the largest service provider in China’s online adult learning market and China’s adult personal interest learning market in terms of revenue, according to a report by Frost & Sullivan based on data from 2022. By leveraging its proprietary tools and technology, QuantaSing offers easy-to-understand, affordable, and accessible online courses to adult learners, empowering users to pursue personal development. Leveraging its extensive experience in individual online learning services and its robust technology infrastructure, the Company has expanded its services to corporate clients, and diversified its operations into its e-commerce business and its AI and technology business.

For more information, please visit: https://ir.quantasing.com.

Contact

Investor Relations
Leah Guo
QuantaSing Group Limited
Email: ir@quantasing.com 
Tel: +86 (10) 6493-7857

Robin Yang, Partner
ICR, LLC
Email: QuantaSing.IR@icrinc.com 
Phone: +1 (212) 537-0429

________________________________

1 Gross billings of individual online learning services is a non-GAAP financial measure. For a reconciliation of revenues of individual online learning services to gross billings of individual online learning services, see the “Non-GAAP Financial Measures” section and the table captioned “QuantaSing Group Limited Unaudited Reconciliation of GAAP and Non-GAAP Results” below. 
2 Adjusted net income/(loss) is a non-GAAP financial measure. For a reconciliation of net (loss)/income to adjusted net income/(loss), see the “Non-GAAP Financial Measures” section and the table captioned “QuantaSing Group Limited Unaudited Reconciliation of GAAP and Non-GAAP Results” below. 
3 The Company has adopted a new presentation of its revenues since the second quarter of FY 2024, which split other personal interest courses into skills upgrading courses and recreation and leisure courses, to better align with its business strategies and provide useful and updated information to investors. Skills upgrading courses mainly include short-video production courses and memory training courses. Recreation and leisure courses mainly include personal well-being courses, electronic keyboard courses and standing meditation courses. The historical revenues presentation has been conformed to the current presentation. 
4 Basic and diluted adjusted net income/(loss) per ordinary share are non-GAAP financial measures. For a reconciliation of basic and diluted net (loss)/income per ordinary share to basic and diluted adjusted net income/(loss) per ordinary share, see the “Non-GAAP Financial Measures” section and the table captioned “QuantaSing Group Limited Unaudited Reconciliation of GAAP and Non-GAAP Results” below.

QUANTASING GROUP LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except for share and per share data)
 
  As of
  June 30,
2023
  March 31,
2024
  March 31,
2024
  RMB   RMB   US$
           
ASSETS          
Current assets:          
Cash and cash equivalents 764,281   971,575   134,562
Short-term investments 166,303   178,367   24,704
Accounts receivable, net 12,251   28,564   3,956
Amounts due from related parties 29,116   2,291   317
Inventory, net   7,185   995
Prepayments and other current assets 136,681   182,877   25,328
Total current assets 1,108,632   1,370,859   189,862
           
Non-current assets:          
Property and equipment, net 7,409   6,700   928
Intangible assets, net   2,807   389
Operating lease right-of-use assets 84,009   64,891   8,987
Deferred tax assets 2,084   13,721   1,900
Goodwill   7,389   1,023
Other non-current assets 21,296   21,365   2,959
Total non-current assets 114,798   116,873   16,186
TOTAL ASSETS 1,223,430   1,487,732   206,048
           
LIABILITIES          
Current liabilities:          
Accounts payables 62,094   87,001   12,049
Accrued expenses and other current liabilities 171,160   222,664   30,839
Income tax payable 8,794   5,103   707
Contract liabilities, current portion 517,213   527,948   73,120
Advance from customers 144,397   201,124   27,855
Operating lease liabilities, current portion 41,092   46,277   6,409
Total current liabilities 944,750   1,090,117   150,979
           
Non-current liabilities:          
Contract liabilities, non-current portion 7    
Operating lease liabilities, non-current portion 52,840   29,359   4,066
Total non-current liabilities 52,847   29,359   4,066
TOTAL LIABILITIES 997,597   1,119,476   155,045
QUANTASING GROUP LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS – continued
(Amounts in thousands, except for share and per share data)
 
  As of
  June 30,
2023
  March 31,
2024
  March 31,
2024
  RMB   RMB   US$
           
SHAREHOLDERS’ EQUITY          
Class A ordinary shares 78     81     11  
Class B ordinary shares 34     34     5  
Treasury stock     (75,189 )   (10,414 )
Additional paid-in capital 1,171,092     1,206,870     167,150  
Accumulated other comprehensive income 22,182     17,228     2,386  
Accumulative deficit (969,688 )   (780,768 )   (108,135 )
TOTAL QUANTASING GROUP LIMITED SHAREHOLDERS’ EQUITY 223,698     368,256     51,003  
Non-controlling interests 2,135          
TOTAL SHAREHOLDERS’ EQUITY 225,833     368,256     51,003  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 1,223,430     1,487,732     206,048  
QUANTASING GROUP LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS)
(Amounts in thousands, except for shares and per share data)
 
  For the Three Months
Ended March 31,
  For the Nine Months
Ended March 31,
  2023   2024   2024   2023   2024   2024
  RMB   RMB   US$   RMB   RMB   US$
                       
Revenues   807,243     945,570     130,960     2,253,034     2,795,248     387,137  
Cost of revenues (101,057 )   (145,848 )   (20,200 )   (275,372 )   (409,058 )   (56,654 )
                       
Gross Profit 706,186     799,722     110,760     1,977,662     2,386,190     330,483  
                       
Operating expenses:                      
Sales and marketing expenses (631,380 )   (729,620 )   (101,051 )   (1,835,439 )   (2,006,884 )   (277,950 )
Research and development expenses (49,601 )   (38,840 )   (5,379 )   (166,171 )   (123,655 )   (17,126 )
General and administrative expenses (48,309 )   (36,390 )   (5,040 )   (137,225 )   (114,211 )   (15,818 )
Total operating expenses (729,290 )   (804,850 )   (111,470 )   (2,138,835 )   (2,244,750 )   (310,894 )
                       
(Loss)/Income from operations (23,104 )   (5,128 )   (710 )   (161,173 )   141,440     19,589  
                       
Other income:                      
Interest income 1,811     2,513     348     2,659     8,369     1,159  
Others, net 5,206     7,685     1,064     15,158     22,163     3,070  
                       
(Loss)/Income before income tax (16,087 )   5,070     702     (143,356 )   171,972     23,818  
Income tax (expense)/benefit (6,576 )   9,560     1,324     (17,986 )   16,948     2,347  
                       
Net (loss)/ income (22,663 )   14,630     2,026     (161,342 )   188,920     26,165  
                       
Other comprehensive income/(loss)                      
Foreign currency translation adjustments, net of nil tax 3,461     423     59     4,798     (4,954 )   (686 )
Total other comprehensive income/(loss) 3,461     423     59     4,798     (4,954 )   (686 )
                       
Total comprehensive (loss)/income (19,202 )   15,053     2,085     (156,544 )   183,966     25,479  
                       
Net (loss)/Income (22,663 )   14,630     2,026     (161,342 )   188,920     26,165  
Accretion of the Company’s preferred shares (2,867 )           (22,379 )        
Net (loss)/income attributable to ordinary shareholders of QuantaSing Group Limited (25,530 )   14,630     2,026     (183,721 )   188,920     26,165  
                       
Net (loss)/income per ordinary share                      
– Basic (0.19 )   0.09     0.01     (2.23 )   1.14     0.16  
– Diluted (0.19 )   0.09     0.01     (2.23 )   1.10     0.15  
Weighted average number of ordinary shares used in computing net (loss)/income per ordinary share                      
– Basic 135,768,739     164,753,256     164,753,256     82,295,042     166,399,349     166,399,349  
– Diluted 135,768,739     170,890,581     170,890,581     82,295,042     171,089,530     171,089,530  
Share-based compensation expenses included in                      
Cost of revenues (7,560 )   (2,878 )   (399 )   (19,523 )   (9,945 )   (1,377 )
Sales and marketing expenses (12,318 )   (2,779 )   (385 )   (39,934 )   8,678     1,202  
Research and development expenses (8,762 )   (3,599 )   (498 )   (41,269 )   (10,611 )   (1,470 )
General and administrative expenses (15,719 )   (8,039 )   (1,113 )   (53,167 )   (28,961 )   (4,011 )
QUANTASING GROUP LIMITED
UNAUDITED RECONCILIATION OF GAAP AND NON-GAAP RESULTS
(Amounts in thousands, except for shares and per share data)
 
The following table below sets forth a reconciliation of revenues to gross billings for the periods indicated:
 
  For the Three Months
Ended March 31,
  For the Nine Months
Ended March 31,
  2023   2024   2024   2023   2024   2024
  RMB   RMB   US$   RMB   RMB   US$
                       
Revenues of individual online learning services: 724,716     828,127     114,694     2,013,784     2,457,588     340,372  
Add: value-added tax 46,213     52,986     7,338     127,929     147,665     20,451  
Add: ending deferred revenues(1) 677,272     744,320     103,087     677,272     744,320     103,087  
Less: beginning deferred revenues(1) (644,586 )   (643,929 )   (89,183 )   (531,662 )   (661,360 )   (91,597 )
                     
Gross billings of individual online learning services 803,615     981,504     135,936     2,287,323     2,688,213     372,313  

(1) Deferred revenues include contract liabilities, advance from customers, and refund liability of individual online learning services included in “accrued expenses and other current liabilities.”

 
QUANTASING GROUP LIMITED
UNAUDITED RECONCILIATION OF GAAP AND NON-GAAP RESULTS – continued
(Amounts in thousands, except for shares and per share data)
 
The following table below sets forth a reconciliation of net (loss)/income to adjusted net income/(loss) and basic and diluted net (loss)/income per ordinary share to basic and diluted adjusted net income/(loss) per ordinary share for the periods indicated:
 
  For the Three Months
Ended March 31,
  For Nine Months
Ended March 31,
  2023   2024   2024   2023   2024   2024
  RMB   RMB   US$   RMB   RMB   US$
                       
Net (loss)/income (22,663 )   14,630   2,026   (161,342 )   188,920   26,165
Add: Share-based compensation 44,359     17,295   2,395   153,893     40,839   5,656
                     
Adjusted net income/(loss) 21,696     31,925   4,421   (7,449 )   229,759   31,821
Accretion of the Company’s preferred shares (2,867 )       (22,379 )    
Income allocation to participating preferred shares (3,431 )            
Adjusted net income/(loss) attributable to ordinary shareholders of QuantaSing Group Limited 15,398     31,925   4,421   (29,828 )   229,759   31,821
                       
Weighted average number of ordinary shares used in computing net (loss)/income per ordinary share                      
– Basic 135,768,739     164,753,256   164,753,256   82,295,042     166,399,349   166,399,349
– Diluted 135,768,739     170,890,581   170,890,581   82,295,042     171,089,530   171,089,530
Weighted average number of ordinary shares used in computing adjusted net income/(loss) per ordinary share                      
– Basic 135,768,739     164,753,256   164,753,256   82,295,042     166,399,349   166,399,349
– Diluted 142,354,949     170,890,581   170,890,581   82,295,042     171,089,530   171,089,530
                       
Net (loss)/income per ordinary share                      
– Basic (0.19 )   0.09   0.01   (2.23 )   1.14   0.16
– Diluted (0.19 )   0.09   0.01   (2.23 )   1.10   0.15
Non-GAAP adjustments to net (loss)/income per ordinary share                      
– Basic 0.30     0.10   0.02   1.87     0.24   0.03
– Diluted 0.30     0.10   0.02   1.87     0.24   0.04
Adjusted net income/(loss) per ordinary share                      
– Basic 0.11     0.19   0.03   (0.36 )   1.38   0.19
– Diluted 0.11     0.19   0.03   (0.36 )   1.34   0.19


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