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Sunlands Technology Group Announces Unaudited Third Quarter 2021 Financial Results

Nov 23, 2021

Published: Nov. 23, 2021 at 4:40 AM CST | Updated: 2 hours ago

Q3 net revenues increased by 9.9% year-over-year Q3 gross billings (non-GAAP) decreased by 29.3% year-over-year Q3 net income reached RMB92.8 million

BEIJING, Nov. 23, 2021 /PRNewswire/ -- 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 third quarter ended September 30, 2021.

Third  Quarter 2021  Financial and Operational Snapshots

  • Net revenues were RMB595.1 million (US$92.4 million), representing a 9.9% increase year-over-year.
  • Gross billings (non-GAAP) were RMB462.5 million (US$71.8 million), representing a 29.3% decrease year-over-year.
  • Gross profit was RMB512.0 million (US$79.5 million), representing a 14.1% increase year-over-year.
  • Net income was RMB92.8 million (US$14.4 million), compared with net loss of RMB165.8 million in the third quarter of 2020.
  • Net income/loss margin, defined as net income/loss as a percentage of net revenues, increased to 15.6% from -30.6% in the third quarter of 2020.
  • New student enrollments [1] were 93,265, representing a 33.8% decrease year-over-year.
  • As of September 30, 2021, the Company's deferred revenue balance was RMB2,540.9 million (US$394.3 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 with our third quarter financial metrics. Our net revenues grew 9.9% year-over-year to RMB595.1 million despite the evolving industry dynamics," said Mr. Tongbo Liu, Chief Executive Officer of Sunlands. "As we resolutely executed our balanced long-term growth and profitability strategy, we recorded net income of RMB92.8 million compared with net loss of RMB165.8 million during the same period last year, notwithstanding a year-over-year decline in new enrollments and gross billings."

"Our professional certification and skills programs continued to excel during the quarter with net revenues up 148.2% year over year and our net revenues from master's degree-oriented programs also increased by 20.8% year over year, driven by our constant efforts to broaden our course catalog as well as strong user demand for career advancement and skills enhancement. We maintained profitability for two consecutive quarters as we enriched our course offerings to address varied student needs and optimized cost structure to enhance student acquisition efficiency with more cost-effective, innovative and regulation-compliant marketing tools. We will continue to refine these measures to build on this success and drive quality growth."

"With China's national policy of building a lifelong learning society in place, we are optimistic about the growth prospects of occupational education business and will contribute to this great undertaking by providing our users more premium courses with enhanced services," concluded Mr. Liu.

Ms. Selena Lu Lv, Chief Financial Officer of Sunlands, commented, "We are encouraged by our sustained profitability in the third quarter with registered net profit reaching a new high, driven by continued year-over-year top-line growth mainly attributable to professional skills and master's degree-oriented programs. Profits also benefitted from our efficient cost control measures, which led to a 35.2% year-over-year reduction in operating expenses. Notably, sales and marketing expenses as a percentage of net revenues decreased significantly, by 45.7 percentage points year-over-year. Going forward, we will continue to focus on operating efficiency enhancement, product mix optimization and service improvement, preparing us for opportunities and challenges ahead while pursuing sustainable growth."

Financial Results for the third quarter  of 2021

Net Revenues

In the third quarter of 2021, net revenues increased by 9.9% to RMB595.1 million (US$92.4 million) from RMB541.6 million in the third quarter of 2020. The increase was mainly driven by the year-over-year growth in gross billings since the second half of year 2020 through the first quarter of 2021.

Cost of Revenues

Cost of revenues decreased by 10.6% to RMB83.1 million (US$12.9 million) in the third quarter of 2021 from RMB92.9 million in the third quarter of 2020. The decrease was primarily due to reduced insurance-related costs incurred for our integrated online education service package purchased by students.

Gross Profit

Gross profit increased by 14.1% to RMB512.0 million (US$79.5 million) in the third quarter of 2021 from RMB448.7 million in the third quarter of 2020.

Operating Expenses

In the third quarter of 2021, operating expenses were RMB430.6 million (US$66.8 million), representing a 35.2% decrease from RMB664.1 million in the third quarter of 2020.

Sales and marketing expenses decreased by 37.9% to RMB353.5 million (US$54.9 million) in the third quarter of 2021 from RMB569.4 million in the third quarter of 2020. 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 17.0% to RMB63.2 million (US$9.8 million) in the third quarter of 2021 from RMB76.1 million in the third quarter of 2020. The decrease was mainly due to a decrease in compensation expenses.

Product development expenses decreased by 24.7% to RMB14.0 million (US$2.2 million) in the third quarter of 2021 from RMB18.6 million in the third quarter of 2020. The decrease was mainly due to a decrease in compensation expenses.

Other Income

Other income was RMB12.9 million (US$2.0 million) in the third quarter of 2021, compared with RMB47.3 million in the third quarter of 2020. Other income for the third quarter of 2021 was mainly comprised of rental income of RMB7.0 million. 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 third quarter of 2021 was RMB92.8 million (US$14.4 million), compared with net loss of RMB165.8 million in the third quarter of 2020.

Basic and Diluted Net Income Per Share

Basic and diluted net income per share was RMB14.16 (US$2.20) in the third quarter of 2021.

Cash and Cash Equivalents and Short-term Investments

As of September 30, 2021, the Company had RMB661.2 million (US$102.6 million) of cash and cash equivalents and RMB178.8 million (US$27.7 million) of short-term investments, compared with RMB760.7 million of cash and cash equivalents and RMB517.8 million of short-term investments as of December 31, 2020.

Deferred Revenue

As of September 30, 2021, the Company had a deferred revenue balance of RMB2,540.9 million (US$394.3 million), compared with RMB3,024.4 million as of December 31, 2020.

Capital Expenditures

Capital expenditures were incurred primarily in connection with information technology ("IT") infrastructure equipment and leasehold improvements necessary to support the Company's operations. Capital expenditures were RMB1.8 million (US$0.3 million) in the third quarter of 2021, compared with RMB14.3 million in the third quarter of 2020.

Financial Results for the First Nine Months of 2021

Net Revenues

In the first nine months of 2021, net revenues increased by 18.5% to RMB1,918.9 million (US$297.8 million) from RMB1,619.2 million in the first nine months of 2020.

Cost of Revenues

Cost of revenues decreased by 0.9% to RMB286.8 million (US$44.5 million) in the first nine months of 2021 from RMB289.4 million in the first nine months of 2020.

Gross Profit

Gross profit increased by 22.7% to RMB1,632.1 million (US$253.3 million) from RMB1,329.8 million in the first nine months of 2020.

Operating Expenses

In the first nine months of 2021, operating expenses were RMB1,616.8 million (US$250.9 million), representing a 9.8% decrease from RMB1,791.8 million in the first nine months of 2020.

Sales and marketing expenses decreased by 7.0% to RMB1,409.1 million (US$218.7 million) in the first nine months of 2021 from RMB1,515.2 million in the first nine months of 2020.

General and administrative expenses decreased by 28.8% to RMB157.1 million (US$24.4 million) in the first nine months of 2021 from RMB220.7 million in the first nine months of 2020.

Product development expenses decreased by 9.4% to RMB50.7 million (US$7.9 million) in the first nine months of 2021 from RMB55.9 million in the first nine months of 2020.

Other I ncome

Other income for the first nine months of 2021 was RMB42.3 million (US$6.6 million), compared with RMB93.8 million in the first nine months of 2020. 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 nine months of 2021 was RMB61.6 million (US$9.6 million), compared with net loss of RMB357.5 million in the first nine months of 2020.

Basic and Diluted Net Income Per Share

Basic and diluted net income per share was RMB9.69 (US$1.50) in the first nine months of 2021, compared with net loss per share of RMB52.85 in the first nine months of 2020.

Capital Expenditures

Capital expenditures were incurred primarily in connection with IT infrastructure equipment and leasehold improvements necessary to support the Company's operations. Capital expenditures were RMB11.2 million (US$1.7 million) in the first nine months of 2021, compared with RMB22.3 million in the first nine months of 2020.

Outlook

For the fourth quarter of 2021, Sunlands currently expects net revenues to be between RMB590 million to RMB610 million, which would represent an increase of 0.9% to 4.3% 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 RMB6.4434 to US$1.00, the effective noon buying rate for September 30, 2021 as set forth in the H.10 statistical release of the Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on September 30, 2021, 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, (8:00 PM Beijing/Hong Kong time) on November 23, 2021, 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 November 30, 2021, by dialing the following telephone numbers:

International: 

+1-412-317-0088

US toll free:

+1-877-344-7529

Replay access code:

10162001

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 from operations and Non-GAAP net loss 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 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 exclude share-based compensation expenses, and basic and diluted net loss 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

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

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

As of December 31,

As of September 30,

2020

2021

RMB

RMB

US$

ASSETS

Current assets

     Cash and cash equivalents

760,710

661,230

102,621

     Short-term investments

517,815

178,765

27,744

Prepaid expenses and other current assets

117,637

164,975

25,604

     Deferred costs, current

158,092

103,447

16,055

Total current assets

1,554,254

1,108,417

172,024

Non-current assets

     Property and equipment, net

511,092

865,929

134,390

     Intangible assets, net

1,211

3,091

480

Land use right, net

13,564

13,359

2,073

     Right-of-use assets

488,877

368,161

57,138

     Deferred costs, non-current

170,160

118,553

18,399

     Long-term investments

64,093

64,199

9,964

     Deferred tax assets

13,015

6,380

990

     Other non-current assets

444,628

40,707

6,318

Total non-current assets

1,706,640

1,480,379

229,752

TOTAL ASSETS

3,260,894

2,588,796

401,776

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 RMB175,900 and RMB167,167 as of

        December 31, 2020 and September 30, 2021, respectively)

607,789

525,171

81,506

Deferred revenue, current (including deferred revenue, current of the consolidated VIEs

        without recourse to Sunlands Technology Group of RMB435,254 and

        RMB317,243 as of December 31, 2020 and September 30, 2021, respectively)

1,463,165

1,372,983

213,084

Lease liabilities, current portion (including lease liabilities, current portion of the

   consolidated VIEs without recourse to Sunlands Technology Group of RMB15,833 and

        RMB12,974 as of December 31, 2020 and September 30, 2021, respectively)

30,702

19,649

3,049

Payables to acquire buildings (including payables to acquire buildings of the

        consolidated VIEs without recourse to Sunlands Technology Group of nil and nil

        as of December 31, 2020 and September 30, 2021, respectively)

61,540

-

-

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, 2020 and September 30, 2021, respectively)

32,500

38,654

5,999

Total current liabilities

2,195,696

1,956,457

303,638

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 September 30,

2020

2021

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

RMB468,577 and RMB295,146 as of December 31, 2020 and September 30, 2021,

respectively)

1,561,278

1,167,903

181,256

Lease liabilities, non-current portion (including lease liabilities, non-current portion

of the consolidated VIEs without recourse to Sunlands Technology Group of

RMB340,763 and RMB325,003 as of December 31, 2020 and September 30, 2021,

respectively)

532,538

412,022

63,945

    Deferred tax liabilities (including deferred tax liabilities of the consolidated

VIEs without recourse to Sunlands Technology Group of RMB3,203 and RMB2,065

as of December 31, 2020 and September 30, 2021, respectively)

15,220

9,548

1,482

Other non-current liabilities (including other non-current liabilities of the consolidated

VIEs without recourse to Sunlands Technology Group of RMB135 and RMB963

as of December 31, 2020 and September 30, 2021, respectively)

7,664

9,308

1,445

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, 2020 and September 30, 2021, respectively)

160,625

191,636

29,741

Total non-current liabilities

2,277,325

1,790,417

277,869

TOTAL LIABILITIES

4,473,021

3,746,874

581,507

SHAREHOLDERS' DEFICIT

    Class A ordinary shares (par value of US$0.00005, 796,062,195 shares

authorized; 1,978,621 and 2,085,939 shares issued as of December 31, 2020

and September 30, 2021, respectively; 1,792,560 and 1,899,878 shares

outstanding as of December 31, 2020 and September 30, 2021, 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, 2020 and September 30, 2021, respectively)

-

-

-

Class C ordinary shares (par value of US$0.00005, 203,111,416 shares

authorized; 4,110,248 and 4,002,930 shares issued and outstanding

as of December 31, 2020 and September 30, 2021, respectively)

1

1

-

    Treasury stock

-

-

-

    Additional paid-in capital

2,367,168

2,367,464

367,425

    Accumulated deficit

(3,675,129)

(3,609,949)

(560,255)

    Accumulated other comprehensive income

96,490

88,649

13,758

Total Sunlands Technology Group shareholders' deficit

(1,211,469)

(1,153,834)

(179,072)

Noncontrolling interest

(658)

(4,244)

(659)

TOTAL SHAREHOLDERS' DEFICIT

(1,212,127)

(1,158,078)

(179,731)

TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT

3,260,894

2,588,796

401,776

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

For the Three Months Ended September 30,

2020

2021

RMB

RMB

US$

Net revenues

541,631

595,128

92,362

Cost of revenues

(92,928)

(83,103)

(12,897)

Gross profit

448,703

512,025

79,465

Operating expenses

     Sales and marketing expenses

(569,424)

(353,508)

(54,864)

     Product development expenses

(18,565)

(13,980)

(2,170)

     General and administrative expenses

(76,100)

(63,156)

(9,802)

Total operating expenses

(664,089)

(430,644)

(66,836)

 (Loss)/income from operations

(215,386)

81,381

12,629

Interest income

5,778

3,144

488

Interest expense

(2,838)

(3,042)

(472)

Other income, net

47,253

12,853

1,995

 (Loss)/income before income tax expenses

(165,193)

94,336

14,640

Income tax expenses

(369)

(1,110)

(172)

Loss from equity method investments

(202)

(431)

(67)

Net (loss)/income

(165,764)

92,795

14,401

Less: Net loss attributable to noncontrolling interest

(80)

(2,506)

(389)

Net (loss)/income attributable to Sunlands Technology Group

(165,684)

95,301

14,790

Net (loss)/income per share attributable to ordinary shareholders of

 Sunlands Technology Group:

     Basic and diluted

(24.62)

14.16

2.20

Weighted average shares used in calculating net (loss)/income

    per ordinary share:

     Basic and diluted

6,729,197

6,729,197

6,729,197

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Amounts in thousands)

For the Three Months Ended September 30,

2020

2021

RMB

RMB

US$

Net (loss)/income

(165,764)

92,795

14,401

Other comprehensive loss, net of tax effect of nil:

Change in cumulative foreign currency translation adjustments

(35,782)

(1,105)

(171)

Total comprehensive (loss)/income

(201,546)

91,690

14,230

Less: comprehensive loss attributable to noncontrolling

interest

(80)

(2,506)

(389)

Comprehensive (loss)/income attributable to Sunlands Technology

Group

(201,466)

94,196

14,619

SUNLANDS TECHNOLOGY GROUP

RECONCILIATION OF GAAP AND NON-GAAP RESULTS

(Amounts in thousands)

For the Three Months Ended September 30,

2020

2021

RMB

RMB

Net revenues

541,631

595,128

Less: other revenues

(5,450)

(26,497)

Add: tax and surcharges

57,543

41,674

Add: ending deferred revenue

3,090,296

2,540,886

Add: ending refund liability

239,526

222,266

Less: beginning deferred revenue

(3,066,569)

(2,690,221)

Less: beginning refund liability

(202,651)

(220,745)

Gross billings (non-GAAP)

654,326

462,491

Net (loss)/income

(165,764)

92,795

Add: income tax expenses

369

1,110

depreciation and amortization

10,773

9,561

interest expense

2,838

3,042

Less: interest income

(5,778)

(3,144)

EBITDA (non-GAAP)

(157,562)

103,364

SUNLANDS TECHNOLOGY GROUP

RECONCILIATION OF GAAP AND NON-GAAP RESULTS

(Amounts in thousands)

For the Three Months Ended September 30,

2020

2021

RMB

RMB

Cost of revenues

92,928

83,103

Less: Share-based compensation expenses in cost of revenues

(17)

(39)

Non-GAAP cost of revenues

92,911

83,064

Sales and marketing expenses

569,424

353,508

Less: Share-based compensation expenses in sales and marketing expenses

(14,015)

13

Non-GAAP sales and marketing expenses

555,409

353,521

General and administrative expenses

76,100

63,156

Less: Share-based compensation expenses in general and administrative expenses

(14,128)

(67)

Non-GAAP general and administrative expenses

61,972

63,089

Operating costs and expense

757,017

513,747

Less: Share-based compensation expenses

(28,160)

(93)

Non-GAAP operating costs and expense

728,857

513,654

Loss/(income) from operations

215,386

(81,381)

Less: Share-based compensation expenses

(28,160)

(93)

Non-GAAP loss/(income) from operations

187,226

(81,474)

Net loss/(income) attributable to Sunlands Technology Group

165,684

(95,301)

Less: Share-based compensation expenses

(28,160)

(93)

Non-GAAP net loss/(income) attributable to Sunlands Technology Group

137,524

(95,394)

Net loss/(income) per share attributable to ordinary shareholders of

 Sunlands Technology Group:

     Basic and diluted

24.62

(14.16)

Non-GAAP net loss/(income) per share attributable to ordinary shareholders of

 Sunlands Technology Group:

     Basic and diluted

20.44

(14.18)

Weighted average shares used in calculating net loss/(income)

    per ordinary share:

     Basic and diluted

6,729,197

6,729,197

Weighted average shares used in calculating Non-GAAP net loss

    per ordinary share:

     Basic and diluted

6,729,197

6,729,197

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

For the Nine Months Ended September 30,

2020

2021

RMB

RMB

US$

Net revenues

1,619,212

1,918,934

297,814

Cost of revenues

(289,431)

(286,811)

(44,512)

Gross profit

1,329,781

1,632,123

253,302

Operating expenses

     Sales and marketing expenses

(1,515,161)

(1,409,068)

(218,684)

     Product development expenses

(55,930)

(50,669)

(7,864)

     General and administrative expenses

(220,738)

(157,103)

(24,382)

Total operating expenses

(1,791,829)

(1,616,840)

(250,930)

Loss from operations

(462,048)

15,283

2,372

Interest income

18,915

13,157

2,042

Interest expense

(8,966)

(8,029)

(1,246)

Other income, net

93,802

42,301

6,565

Loss before income tax expenses

(358,297)

62,712

9,733

Income tax expenses

1,349

(963)

(149)

Loss from equity method investments

(528)

(155)

(24)

Net (loss)/income

(357,476)

61,594

9,560

Less: Net loss attributable to noncontrolling interest

(87)

(3,586)

(557)

Net (loss)/income attributable to Sunlands Technology Group

(357,389)

65,180

10,117

Net (loss)/income per share attributable to ordinary shareholders of

 Sunlands Technology Group:

     Basic and diluted

(52.85)

9.69

1.50

Weighted average shares used in calculating net (loss)/income

    per ordinary share:

     Basic and diluted

6,762,508

6,729,197

6,729,197

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Amounts in thousands)

For the Nine Months Ended September 30,

2020

2021

RMB

RMB

US$

Net (loss)/income

(357,476)

61,594

9,560

Other comprehensive loss, net of tax effect of nil:

Change in cumulative foreign currency translation adjustments

(18,932)

(7,841)

(1,217)

Total comprehensive (loss)/income

(376,408)

53,753

8,343

Less: comprehensive loss attributable to noncontrolling

interest

(87)

(3,586)

(557)

Comprehensive (loss)/income attributable to Sunlands Technology

Group

(376,321)

57,339

8,900

SUNLANDS TECHNOLOGY GROUP

RECONCILIATION OF GAAP AND NON-GAAP RESULTS

(Amounts in thousands)

For the Nine Months Ended September 30,

2020

2021

RMB

RMB

Net revenues

1,619,212

1,918,934

Less: other revenues

(16,438)

(58,208)

Add: tax and surcharges

127,300

119,873

Add: ending deferred revenue

3,090,296

2,540,886

Add: ending refund liability

239,526

222,266

Less: beginning deferred revenue

(3,228,770)

(3,024,443)

Less: beginning refund liability

(128,478)

(232,859)

Gross billings (non-GAAP)

1,702,648

1,486,449

Net loss

(357,476)

61,594

Add: income tax expenses

(1,349)

963

depreciation and amortization

31,256

28,266

interest expense

8,966

8,029

Less: interest income

(18,915)

(13,157)

EBITDA (non-GAAP)

(337,518)

85,695

SUNLANDS TECHNOLOGY GROUP

RECONCILIATION OF GAAP AND NON-GAAP RESULTS

(Amounts in thousands)

For the Nine Months Ended September 30,

2020

2021

RMB

RMB

Cost of revenues

289,431

286,811

Less: Share-based compensation expenses in cost of revenues

(33)

(45)

Non-GAAP cost of revenues

289,398

286,766

Sales and marketing expenses

1,515,161

1,409,068

Less: Share-based compensation expenses in sales and marketing expenses

(14,273)

72

Non-GAAP sales and marketing expenses

1,500,888

1,409,140

General and administrative expenses

220,738

157,103

Less: Share-based compensation expenses in general and administrative expenses

(14,915)

(324)

Non-GAAP general and administrative expenses

205,823

156,779

Operating costs and expense

2,081,260

1,903,651

Less: Share-based compensation expenses

(29,221)

(297)

Non-GAAP operating costs and expense

2,052,039

1,903,354

Loss/(income) from operations

462,048

(15,283)

Less: Share-based compensation expenses

(29,221)

(297)

Non-GAAP loss/(income) from operations

432,827

(15,580)

Net loss/(income) attributable to Sunlands Technology Group

357,389

(65,180)

Less: Share-based compensation expenses

(29,221)

(297)

Non-GAAP net loss/(income) attributable to Sunlands Technology Group

328,168

(65,477)

Net loss/(income) per share attributable to ordinary shareholders of

 Sunlands Technology Group:

     Basic and diluted

52.85

(9.69)

Non-GAAP net loss/(income) per share attributable to ordinary shareholders of

 Sunlands Technology Group:

     Basic and diluted

48.53

(9.73)

Weighted average shares used in calculating net loss/(income)

    per ordinary share:

     Basic and diluted

6,762,508

6,729,197

Weighted average shares used in calculating Non-GAAP net loss/(income)

    per ordinary share:

     Basic and diluted

6,762,508

6,729,197

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SOURCE Sunlands Technology Group

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