Sunlands Technology Group (NYSE: STG), Announces Unaudited Q12019 Financial Results

Net revenues increased by 38.800percent year-over-year

Gross billings (non-GAAP) decreased by 28.600percent year-over-year

New student enrollments[1] decreased by 34.200percent year-over-year

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  Q1ended March 31, 2019.

 Q1 2019 Financial and Operational Highlights

  1. Net revenues were RMB564.200M (US$84.100M), representing a 38.800percent increase year-over-year.
  2. Gross billings (non-GAAP) were RMB663.9 M (US$98.900M), representing a 28.600percent decrease year-over-year.
  3. Gross profit was RMB478.700M (US$71.300M), representing a 42.600percent increase year-over-year.
  4. Net loss was RMB112.900M (US$16.800M), representing a 54.000percent decrease year-over-year. Net loss margin, defined as net loss as a percentage of net revenues, decreased to 20.000percent from 60.300percent in the  Q1of 2018.
  5. New student enrollments were 100,051.00, representing a 34.200percent decrease year-over-year.
  6. As of March 31, 2019, the Company’s deferred revenue balance was RMB3,372.200M (US$502.500M).

Financial Results for the  Q1of 2019

Net Revenues

In the  Q1of 2019, net revenues increased by 38.800percent to RMB564.200M (US$84.100M) from RMB406.4 M in the  Q1 of 2018. The increase was mainly driven by the growth in the number of students[2] in the  Q1 of 2019 compared with the  Q1 of 2018, following new student enrollments continuous increase over the past years.

Cost of Revenues

Cost of revenues increased by 20.900percent to RMB85.5 00M (US$12.700M) in the  Q1of 2019 from RMB70.700M in the  Q1 of 2018, which was primarily due to the increase in the compensation for faculty members.

Gross Profit

Gross profit increased by 42.600percent to RMB478.700M (US$71.300M) from RMB335.700M in the  Q1of 2018.

Operating Expenses

In the  Q1of 2019, operating expenses were RMB612.700M (US$91.300M), representing a 4.2percent increase from RMB588.300M in the  Q1 of 2018.

Sales and marketing expenses were RMB497.300M (US$74.100M) in the  Q1of 2019, compared with RMB499.000M in the  Q1 of 2018.

General and administrative expenses increased by 13.8percent to RMB88.400M (US$13.200M) in the  Q1of 2019 from RMB77.700M in the  Q1 of 2018. The increase was mainly due to an increase in compensation expenses, mainly as a result of hiring more research and development personnel to strengthen Sunlands’ IT infrastructure and research and development capabilities.

Product development expenses increased by 132.700percent to RMB27.000M (US$4.000M) in the  Q1of 2019 from RMB11.600M in the  Q1 of 2018. The increase was primarily due to an increase in the number of employees and compensation paid to Sunlands’ course and educational content professionals and technology development personnel during the quarter.

Net Loss

Net loss for the  Q1of 2019 was RMB112.900M (US$16.800M), compared with RMB245.200M in the  Q1 of 2018.

Basic and Diluted Net Loss Per Share

Basic and diluted net loss per share was RMB16.48 (US$2.46) in the  Q1of 2019.

Cash and Cash Equivalents and Short-term Investments

As of March 31, 2019, the Company had RMB1,276.200M (US$190.200M) of cash and cash equivalents and RMB836.800M (US$124.700M) of short-term investments,  compared with RMB1,248.800M of cash and cash equivalents and RMB1,028.600M of short-term investments, as of December 31, 2018.

Deferred Revenue

As of March 31, 2019, the Company had a deferred revenue balance of RMB3,372.200M (US$502.5 00M).

Capital Expenditures

Capital expenditures were incurred primarily in connection with purchases of buildings and IT infrastructure equipment necessary to support Sunlands’ operations. Capital expenditures were RMB1.1 M (US$0.200M) in the  Q1of 2019, compared with RMB147.7 M in the  Q1 of 2018.

Outlook

For the second quarter of 2019, Sunlands currently expects net revenues to be between RMB550.00M to RMB570.00M, which would represent an increase of 14.200percent to18.300percent year-over-year.

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