EX-99.1 2 dp174317_ex9901.htm EXHIBIT 99.1

 

Exhibit 99.1

 

Sunlands Technology Group Announces Unaudited

First Quarter 2022 Financial Results

 

Q1 net revenues decreased by 11.7% year-over-year

Q1 gross billings (non-GAAP) decreased by 34.2% year-over-year

Q1 net income reached RMB179.4 million

 

BEIJING, May 31, 2022 -- Sunlands Technology Group (NYSE: STG) (“Sunlands” or the “Company”), a leader in China’s online post-secondary and professional education, today announced its unaudited financial results for the first quarter ended March 31, 2022.

 

First Quarter 2022 Financial and Operational Snapshots

 

·Net revenues were RMB613.3 million (US$96.7 million), representing an 11.7% decrease year-over-year.

 

·Gross billings (non-GAAP) were RMB390.6 million (US$61.6 million), representing a 34.2% decrease year-over-year.

 

·Gross profit was RMB516.6 million (US$81.5 million), representing a 12.1% decrease year-over-year.

 

·Net income was RMB179.4 million (US$28.3 million), compared with net loss of RMB53.3 million in the first quarter of 2021.

 

·Net income/loss margin, defined as net income/loss as a percentage of net revenues, increased to 29.3% from -7.7% in the first quarter of 2021.

 

·New student enrollments1 were 117,182, representing a 19.5% decrease year-over-year.

 

·As of March 31, 2022, the Company’s deferred revenue balance was RMB2,170.9 million (US$ 342.5 million).

 

 

1 New student enrollments for a given period refers 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). In June 2019, we introduced low-price courses, including “mini courses” and “RMB1 courses,” to strengthen our competitiveness and improve customer experience. We offer such low-price courses mainly in the formats of recorded videos or short live streaming.

 

 

 

“We are pleased to have carried our momentum into 2022, with our first quarter net profit hitting a new high of RMB179.4 million, a significant improvement compared to a net loss of RMB53.3 million in the prior year period and 19.0% higher quarter-over-quarter. This was driven by the ongoing strong execution of our balanced growth and profitability strategy as well as our extensive course resources, which continue to effectively fulfill our users’ learning demands,” said Mr. Tongbo Liu, Chief Executive Officer of Sunlands.

 

“As we focused on healthy and sustainable growth with an emphasis on student acquisition efficiency, we strategically scaled back on our marketing activities, as evidenced by a 51.4% year-over-year decrease in sales and marketing expenses. This led to 19.5% and 34.2% year-over-year decreases in new student enrollments and gross billings, respectively. Despite that, we continued to forge ahead, optimizing our product mix and expanding our course catalogs for our master’s degree-oriented and professional skills programs while striving to provide our students with an optimal learning experience. In light of the increasingly tough job market in the first quarter, we concentrated more on designing and developing new courses to provide a diverse range of skills training for our students to enhance their overall competitiveness and thereby increase their employment opportunities. Going forward, we will remain dedicated to empowering each of our students’ individual success by constantly evolving and enriching our product offerings to satisfy their needs, which we believe will benefit our long-term growth and contribute to China’s economic development against macro headwinds,” concluded Mr. Liu.

 

Ms. Selena Lu Lv, Chief Financial Officer of Sunlands, commented, “We are excited to start the year with encouraging first quarter results. Our net revenues reached RMB613.3 million during the quarter, above the top end of our guidance range despite an 11.7% year-over-year decrease, as we remain unwavering regarding meaningful and sustainable growth instead of blind pursuit of scale expansion amid the existing complex macroeconomic environment. Meanwhile, we continued to manage our costs responsibly, thanks to which our operating expenses in the first quarter declined by 48.1% year-over-year. As a result, we sustained our profitability in this quarter, with net profit margin reaching 29.3%, representing a substantial 37.0 percentage point increase year-over-year. Notably, we also maintained positive operating cash flow in the first quarter at RMB10.1 million. We are confident that our improved operational efficiency and profitability, combined with our unremitting efforts to diversify

 

 

 

course offerings and enhance service quality, will drive our future growth while creating additional value for our students, employees and shareholders.”

 

Financial Results for the first quarter of 2022

 

Net Revenues

 

In the first quarter of 2022, net revenues decreased by 11.7% to RMB613.3 million (US$96.7 million) from RMB694.3 million in the first quarter of 2021. The decrease was mainly driven by the year-over-year decline in gross billings.

 

Cost of Revenues

 

Cost of revenues decreased by 9.1% to RMB96.7 million (US$15.3 million) in the first quarter of 2022 from RMB106.4 million in the first quarter of 2021. The decrease was primarily due to: (i) declined compensation expenses related to our cost of revenues personnel; and (ii) reduced insurance-related costs incurred for our integrated online education service package purchased by students.

 

Gross Profit

 

Gross profit decreased by 12.1% to RMB516.6 million (US$81.5 million) in the first quarter of 2022 from RMB587.9 million in the first quarter of 2021.

 

Operating Expenses

 

In the first quarter of 2022, operating expenses were RMB345.8 million (US$54.6 million), representing a 48.1% decrease from RMB666.6 million in the first quarter of 2021.

 

Sales and marketing expenses decreased by 51.4% to RMB295.0 million (US$46.5 million) in the first quarter of 2022 from RMB606.4 million in the first quarter of 2021. The decrease was mainly due to: (i) lower spending on branding and marketing activities; and (ii) declined compensation expenses related to our sales and marketing personnel.

 

General and administrative expenses decreased by 9.1% to RMB38.5 million (US$6.1 million) in the first quarter of 2022 from RMB42.3 million in the first quarter of 2021. The decrease was mainly due to: (i) a decrease in rental expenses; and (ii) declined compensation expenses related to general and administrative personnel.

 

 

 

Product development expenses decreased by 31.0% to RMB12.4 million (US$1.9 million) in the first quarter of 2022 from RMB17.9 million in the first quarter of 2021. Product development expenses were mainly comprised of compensation expenses.

 

Other Income

 

Other income decreased by 54.9% to RMB9.6 million (US$1.5 million) in the first quarter of 2022 from RMB21.3 million in the first quarter of 2021. The decrease was primarily because value-added tax exemption offered by the relevant authorities as part of the national COVID-19 relief effort came to an end in April 2021.

 

Net Income

 

Net income for the first quarter of 2022 was RMB179.4 million (US$28.3 million), compared with net loss of RMB53.3 million in the first quarter of 2021.

 

Basic and Diluted Net Income Per Share

 

Basic and diluted net income per share was RMB27.16 (US$4.28) in the first quarter of 2022.

 

Cash, Cash Equivalents and Short-term Investments

 

As of March 31, 2022, the Company had RMB637.7 million (US$100.6 million) of cash and cash equivalents and RMB219.9 million (US$34.7 million) of short-term investments, compared with RMB676.7 million of cash, cash equivalents and restricted cash and RMB184.2 million of short-term investments as of December 31, 2021.

 

Deferred Revenue

 

As of March 31, 2022, the Company had a deferred revenue balance of RMB2,170.9 million (US$342.5 million), compared with RMB2,348.2 million as of December 31, 2021.

 

Capital Expenditures

 

Capital expenditures were incurred primarily in connection with information technology infrastructure equipment and leasehold improvements necessary to support the Company’s operations. Capital expenditures were RMB0.9 million (US$0.1 million) in the first quarter of 2022, compared with RMB1.7 million in the first quarter of 2021.

 

Outlook

 

 

 

For the second quarter of 2022, Sunlands currently expects net revenues to be between RMB520 million to RMB540 million, which would represent a decrease of 14.2% to 17.4% 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 RMB6.3393 to US$1.00, the effective noon buying rate for March 31, 2022 as set forth in the H.10 statistical release of the Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on March 31, 2022, or at any other rate.

 

 

 

Conference Call and Webcast

 

Sunlands’ management team will host a conference call at 7:30 AM U.S. Eastern Time, (7:30 PM Beijing/Hong Kong time) on May 31, 2022, following the quarterly results announcement.

 

The dial-in details for the live conference call are:

 

International: +1-412-902-4272
US toll free: +1-888-346-8982
Mainland China toll free: 400-120-1203
Hong Kong toll free: 800-905-945
Hong Kong: +852-3018-4992

 

Please dial in 10 minutes before the call is scheduled to begin. When prompted, ask to be connected to the call for “Sunlands Technology Group.” Participants will be required to state their name and company upon entering the call.

 

A live webcast and archive of the conference call will be available on the Investor Relations section of Sunlands’ website at http://www.sunlands.investorroom.com/.

 

A replay of the conference call will be available 1 hour after the end of the conference call until June 07, 2022, by dialing the following telephone numbers:

 

International:  +1-412-317-0088
US toll free: +1-877-344-7529
Replay access code: 7410658

 

About Sunlands

 

 

 

Sunlands Technology Group (NYSE: STG) (“Sunlands” or the “Company”), formerly known as Sunlands Online Education Group, is the leader in China's online post-secondary and professional education. With a one to many, live streaming platform, Sunlands offers various degree and diploma-oriented post-secondary courses as well as online professional courses and educational content, to help students prepare for professional certification exams and attain professional skills. Students can access its 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 expense, non-GAAP loss/income from operations and Non-GAAP net loss/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 loss/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 loss/income exclude share-based compensation expenses, and basic and diluted net loss/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: sl-ir@sunlands.com

 

The Piacente Group, Inc.

Brandi Piacente

Tel: +1-212-481-2050

Email: sunlands@tpg-ir.com

 

Yang Song

Tel: +86-10-6508-0677

Email: sunlands@tpg-ir.com

 

SOURCE: 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 March 31,
   2021  2022
   RMB  RMB  US$
ASSETS         
Current assets               
     Cash and cash equivalents   626,715    637,700    100,595 
     Restricted cash   50,008    -    - 
     Short-term investments   184,159    219,897    34,688 
     Prepaid expenses and other current assets   176,349    128,322    20,242 
     Deferred costs, current   89,353    74,632    11,773 
Total current assets   1,126,584    1,060,551    167,298 
Non-current assets               
     Property and equipment, net   857,648    848,379    133,828 
     Intangible assets, net   2,761    2,531    399 
     Right-of-use assets   362,335    356,752    56,276 
     Deferred costs, non-current   109,020    98,692    15,568 
     Long-term investments   54,844    53,690    8,469 
     Deferred tax assets   39,265    34,706    5,475 
     Other non-current assets   40,163    43,426    6,850 
Total non-current assets   1,466,036    1,438,176    226,865 
TOTAL ASSETS   2,592,620    2,498,727    394,163 
                
LIABILITIES AND SHAREHOLDERS’ DEFICIT               
                
LIABILITIES               
Current liabilities               
Accrued expenses and other current liabilities (including accrued expenses               
        and other current liabilities of the consolidated VIEs without recourse to               
        Sunlands Technology Group of RMB197,467 and RMB197,459 as of               
        December 31, 2021 and March 31, 2022, respectively)   586,043    508,757    80,254 
Deferred revenue, current (including deferred revenue, current of the consolidated VIEs               
        without recourse to Sunlands Technology Group of RMB295,958 and               
        RMB286,579 as of December 31, 2021 and March 31, 2022, respectively)   1,266,948    1,136,859    179,335 
Lease liabilities, current portion (including lease liabilities, current portion of the                
   consolidated VIEs without recourse to Sunlands Technology Group of RMB8,366               
       and RMB13,168 as of December 31, 2021 and March 31, 2022, respectively)   14,310    19,589    3,090 
Long-term debt, current portion (including long-term debt, current portion of the                
     consolidated VIEs without recourse to Sunlands Technology Group of nil and nil                
         as of December 31, 2021 and March 31, 2022, respectively)   38,654    38,654    6,098 
Total current liabilities   1,905,955    1,703,859    268,777 

 

 

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS-continued

 

(Amounts in thousands, except for share and per share data, or otherwise noted)

 

   As of December 31,  As of March 31,
   2021  2022
   RMB  RMB  US$
Non-current liabilities               
Deferred revenue, non-current (including deferred revenue, non-current               
of the consolidated VIEs without recourse to Sunlands Technology Group of               
RMB257,071 and RMB255,618 as of December 31, 2021 and March 31, 2022,               
respectively)   1,081,231    1,034,089    163,124 
Lease liabilities, non-current portion (including lease liabilities, non-current portion               
of the consolidated VIEs without recourse to Sunlands Technology Group of               
RMB318,598 and RMB318,184 as of December 31, 2021 and March 31, 2022,               
respectively)   404,133    401,986    63,412 
    Deferred tax liabilities (including deferred tax liabilities of the consolidated               
VIEs without recourse to Sunlands Technology Group of RMB2,312 and RMB2,223               
as of December 31, 2021 and March 31, 2022, respectively)   21,782    13,037    2,057 
Other non-current liabilities (including other non-current liabilities of the consolidated               
VIEs without recourse to Sunlands Technology Group of RMB963 and RMB963               
as of December 31, 2021 and March 31, 2022, respectively)   11,698    11,667    1,840 
Long-term debt, non-current portion (including long-term debt, non-current portion of the               
consolidated VIEs without recourse to Sunlands Technology Group of nil and nil               
as of December 31, 2021 and March 31, 2022, respectively)   181,973    172,309    27,181 
Total non-current liabilities   1,700,817    1,633,088    257,614 
TOTAL LIABILITIES   3,606,772    3,336,947    526,391 
                
SHAREHOLDERS’ DEFICIT               
    Class A ordinary shares (par value of US$0.00005, 796,062,195 shares               
authorized; 2,085,939 and 2,085,939 shares issued as of December 31, 2021               
and March 31, 2022, respectively; 1,839,553 and 1,818,126 shares               
outstanding as of December 31, 2021 and March 31, 2022, 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, 2021 and March 31, 2022, respectively)   -    -    - 
Class C ordinary shares (par value of US$0.00005, 203,111,416 shares               
authorized; 4,002,930 and 4,002,930 shares issued and outstanding               
as of December 31, 2021 and March 31, 2022, respectively)   1    1    - 
    Treasury stock   -    -    - 
    Accumulated deficit   (3,456,073)   (3,275,435)   (516,687)
    Additional paid-in capital   2,364,313    2,363,014    372,756 
    Accumulated other comprehensive income   82,532    79,913    12,604 
Total Sunlands Technology Group shareholders’ deficit   (1,009,226)   (832,506)   (131,327)
Non-controlling interest   (4,926)   (5,714)   (901)
TOTAL SHAREHOLDERS’ DEFICIT   (1,014,152)   (838,220)   (132,228)
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT   2,592,620    2,498,727    394,163 

 

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

(Amounts in thousands, except for share and per share data, or otherwise noted)

 

   For the Three Months Ended March 31,
   2021  2022
   RMB  RMB  US$
Net revenues   694,298    613,314    96,748 
Cost of revenues   (106,422)   (96,720)   (15,257)
Gross profit   587,876    516,594    81,491 
                
Operating expenses               
     Sales and marketing expenses   (606,429)   (294,997)   (46,535)
     Product development expenses   (17,916)   (12,355)   (1,949)
     General and administrative expenses   (42,298)   (38,460)   (6,067)
Total operating expenses   (666,643)   (345,812)   (54,551)
 (Loss)/income from operations   (78,767)   170,782    26,940 
Interest income   5,861    3,166    499 
Interest expense   (2,557)   (2,725)   (430)
Other income/(expense), net   21,283    9,592    1,513 
Impairment loss on long-term investments   -    (500)   (79)
(Loss)/income before income tax (expenses)/benefit
   (54,180)   180,315    28,443 
Income tax benefit/(expenses)   348    (691)   (109)
Gain/(loss) from equity method investments   553    (213)   (34)
Net (loss)/income   (53,279)   179,411    28,300 
                
Less: Net loss attributable to non-controlling interest   (350)   (1,227)   (194)
Net (loss)/income attributable to Sunlands Technology Group   (52,929)   180,638    28,494 
Net (loss)/income per share attributable to ordinary shareholders of               
 Sunlands Technology Group:               
     Basic and diluted   (7.87)   27.16    4.28 
Weighted average shares used in calculating net (loss)/income               
    per ordinary share:               
     Basic and diluted   6,729,197    6,650,244    6,650,244 

 

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME

 

(Amounts in thousands)

 

   For the Three Months Ended March 31,
   2021  2022
   RMB  RMB  US$
Net (loss)/income   (53,279)   179,411    28,300 
Other comprehensive loss/(income), net of tax effect of nil:               
Change in cumulative foreign currency translation adjustments   2,422    (2,619)   (413)
Total comprehensive (loss)/income   (50,857)   176,792    27,887 
Less: comprehensive loss attributable to non-controlling
               
interest   (350)   (1,227)   (194)
Comprehensive (loss)/income attributable to Sunlands Technology               
Group   (50,507)   178,019    28,081 

 

 

SUNLANDS TECHNOLOGY GROUP

 

RECONCILIATION OF GAAP AND NON-GAAP RESULTS

 

(Amounts in thousands)

 

   For the Three Months Ended March 31,
   2021  2022
   RMB  RMB
Net revenues   694,298    613,314 
Less: other revenues   (15,422)   (26,907)
Add: tax and surcharges   37,494    27,212 
Add: ending deferred revenue   2,902,451    2,170,948 
Add: ending refund liability   232,207    197,494 
Less: beginning deferred revenue   (3,024,443)   (2,348,179)
Less: beginning refund liability   (232,859)   (243,236)
Gross billings (non-GAAP)   593,726    390,646 
           
           
           
Net (loss)/income   (53,279)   179,411 
Add: income tax (benefit)/expenses   (348)   691 
depreciation and amortization   8,479    9,887 
interest expense   2,557    2,725 
Less: interest income   (5,861)   (3,166)
EBITDA (non-GAAP)   (48,452)   189,548 

 

 

SUNLANDS TECHNOLOGY GROUP

 

RECONCILIATION OF GAAP AND NON-GAAP RESULTS

 

(Amounts in thousands)

 

   For the Three Months Ended March 31,
   2021  2022
   RMB  RMB
Cost of revenues   (106,422)   (96,720)
Less: Share-based compensation expenses in cost of revenues   (51)   (33)
Non-GAAP cost of revenues   (106,371)   (96,687)
           
Sales and marketing expenses   (606,429)   (294,997)
Less: Share-based compensation expenses in sales and marketing expenses   (155)   (78)
Non-GAAP sales and marketing expenses   (606,274)   (294,919)
           
General and administrative expenses   (42,298)   (38,460)
Less: Share-based compensation expenses in general and administrative expenses   95    (257)
Non-GAAP general and administrative expenses   (42,393)   (38,203)
           
Operating costs and expense   (773,065)   (442,532)
Less: Share-based compensation expenses   (111)   (368)
Non-GAAP operating costs and expense   (772,954)   (442,164)
           
(Loss)/income from operations   (78,767)   170,782 
Less: Share-based compensation expenses   (111)   (368)
Non-GAAP (loss)/income from operations   (78,656)   171,150 
           
Net (loss)/income attributable to Sunlands Technology Group   (52,929)   180,638 
Less: Share-based compensation expenses   (111)   (368)
Non-GAAP net (loss)/income attributable to Sunlands Technology Group   (52,818)   181,006 
           
Net (loss)/income per share attributable to ordinary shareholders of          
 Sunlands Technology Group:          
     Basic and diluted   (7.87)   27.16 
Non-GAAP net (loss)/income per share attributable to ordinary shareholders of          
 Sunlands Technology Group:          
     Basic and diluted   (7.85)   27.22 
           
Weighted average shares used in calculating net (loss)/income          
    per ordinary share:          
     Basic and diluted   6,729,197    6,650,244 
Weighted average shares used in calculating Non-GAAP net (loss)/income          
    per ordinary share:          
     Basic and diluted   6,729,197    6,650,244