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spk04: Ladies and gentlemen, thank you for standing by and welcome to the second quarter of 2022 Terrainers International INC Earnings Conference Call. At this time, all participants are in listen-only mode. After speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to slowly press star 1 and then 1 on your telephone. You will then hear an automated message advising that your hand is raised. IMS Advice Sheet at Conference is being recorded today, August 16, 2022. I would now like to hand over to your first speaker today, Ms. Sylvia Yang, the Investor Relationship Manager. Thank you. Please go ahead.
spk00: Thank you, operator. Hello, everyone, and welcome to Tarina's Earnings Conference Call for the second quarter of 2022. The company's earnings results were released earlier today and are available on our IR website. ir.edu.cm, as well as our newswire services. Today, you will hear from Ms. Nancy Yingsun, our CEO, and Ms. Ping Wei, our CFO, who will take you through the company's operational and financial results for the second quarter of 2022, and give revenue guidance for the third quarter of 2022. After their prepared remarks, Nancy and Ms. Wei will be available to answer your questions. Before we continue, Please note that the discussion today will contain certain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. TERENA does not assume any obligation to update any forward-looking statements except as required under applicable law. Also, please note that some of the information to be discussed includes non-GAAP financial measures as defined in Regulation G. The U.S. GAAP financial measures and the information reconciling these non-GAAP financial measures to Tarina's financial results prepared in accordance with U.S. GAAP are included in Tarina's earnings release, which has been posted on the company's IR website at ir.edu.cn. As a reminder, this conference call is being recorded. In addition, a webcast of this conference call is available on Tarina's Investor Relations website. I will now turn the call over to Ms. Nancy Ying Sun, the CEO of Tarina.
spk03: Thank you, Sylvia, and thanks, everyone, for joining us today. In this regard, I am happy to announce that in the second quarter of 2022, our two businesses will continue to maintain a positive growth on a healthy operating trajectory. The company's business continues to profit, with a profit rate of 7.4%. Compared to the same period last year, the loss was a profit. It is also our second consecutive quarter to achieve a net profit. The overall profit rate of the group reached 58.0%. I am pleased to announce that in the second quarter of 2022, both of our businesses continue
spk06: progress soundly on a trajectory of sustainable growth, and we achieved an operating margin of 7.4%. We have generated a net profit from operations for two consecutive quarters, which represents a major turnaround from the same quarter of last year when we were incurring losses. The group's gross profit margin reached 58.0%, which was 7.4 percentage points higher than the same quarter of last year. The adult professional education business maintained stable growth, and the gross profit margin reached 70.5%. With the healthy growth of our childhood and adolescent quality education business, its gross profit margin also reached a record high of 47.1% in this quarter. 在收入方面,我们今年第二季度总性收入达到6.49亿元。
spk03: higher than the income guidance we gave in the last quarter, which is 5.82 billion yuan in the same period in 2021, which increased by 11.4%. In the field of youth quality education, we achieved a 19.6% growth in the second quarter compared to last year. And the adult professional education business continues to maintain a steady development trend and still achieved a 3.3% growth.
spk06: Our total net revenues in the second quarter of this year reached RMB 649 million, higher than the revenue guidance we provided last quarter and represented 11.4% year-over-year increase from RMB 582 million in the same period of 2021. Our childhood and adolescent quality education business achieved a solid growth of 19.6% compared with the same period of last year, And the adult professional education business grew at a steady pace, achieving a growth of 3.3%.
spk03: While the outbreak of COVID-19 in the second quarter in Beijing, Shanghai, and other cities brought a certain degree of challenge for our business growth,
spk06: With our long-term commitment to the integration of online and offline services value system, as well as the product strategy honed throughout the whole lifecycle of our customers, our net operational cash flow turned positive compared to the same period of last year, reaching RMB 19.35 million. By the end of the second quarter of 2022, the cash balance remained solid, reaching RMB 422 million.
spk03: In terms of cost management, by optimizing the process of business management, improving team operation efficiency and effective cost control, our overall cost has been improved. In the second quarter of 2022, the company cost decreased by 5.4% compared to the same period in 2021. The second quarter created a profit of 3.77 billion yuan, which increased by 27.9% compared to the same period last year. Due to strict cost and cost control measures,
spk06: In terms of cost control, by optimizing business management process, improving operation efficiency, and implementing effective spending control, we achieved sizable improvement in our cost efficiency. In the second quarter of 2022, The company's cost of revenue decreased by 5.4% and gross profit reached RMB 377 million, an increase of 27.9% compared with the same period of last year. At the same time, we generated net profit of RMB 47.92 million in the quarter while for the same period of last year. We were still having operational losses thanks to our strict expense control measures.
spk03: Next, let me walk you through our childhood and adolescent quality education businesses. The total revenue of the business is 53.4%. The number of readers has increased from 14.02 million people in the second quarter of 2021 to 25.9% and reached 17.65 million people in the same period in 2022. At the same time, with the stable growth of revenue and the effective control of the operating costs of various centers, our second quarter's net profit increased by 66.5% net revenue from the childhood and adolescent quality education was RMB 346 million in the quarter, up 19.6% from RMB 289 million in the second quarter of 2021, accounting for 53.4% of our total business revenue.
spk06: Enrollment increased 25.9% to 176,500 in the second quarter of 2022, from 140,200 in the same period of 2021. In the second quarter of 2022, with steady growth of our revenue and effective cost control, our gross profit in the second quarter increased by 66.5% year-on-year, and our gross profit margin increased by 13.3 percentage points year-on-year to 47.1%. In terms of customers, compared to last year's same period, through the continued increase of students, 81.6% increased compared to last year's same period.
spk03: The ratio of customers and paid students is 65.0% in the second quarter of 2021, It has increased by 14.9% to 79.9% in the second quarter of 2022. In this quarter, the total cost of tuition is 4.35 million yuan. It has increased by 33.8% compared to the 3.25 million yuan in the second quarter of 2021. This fully reflects our youth education business. In terms of customer acquisition, the number of renewal students increased by 81.6% this quarter, compared with the same period of last year.
spk06: The number of students acquired by word-of-mouth referral and renewal students accounted for 79.9% of our fee-paying students in the second quarter of 2022, up by 14.9 percentage points from 65.0% in the second quarter of 2021. The total number of our fee-paying enrollments in this quarter was 43,500, up by 33.8%. from 32,500 in the second quarter of 2021. This indicates that the high teaching quality and good learning results of our childhood and adolescent quality education have started to pay off, rewarding us with strong word-of-mouth referral and repeat student enrollment growth. 78.8% of the students who have enrolled for more than one year have renewed their fees.
spk03: In the central operation, we continue to improve the efficiency of the central operation and optimize the operating cost of the center, thereby expanding the capacity of the three centers. In the second quarter of 2022, the number of centers in the youth quality education business was reduced from 235 at the end of the second quarter of 2021 to 8, to 227 at the end of the second quarter of 2022. At the same time, the number of students in the three centers was increased from 595 in the US center last year In terms of the operation of our centers, we continue to focus on improving the center operation efficiency.
spk06: thus optimizing the operation cost of centers and expanding the single center capacity. In the second quarter of 2022, the total number of centers providing the childhood and adolescent quality education business decreased from 235 at the end of the second quarter of 2021 to 227 at the end of the second quarter of 2022. Meanwhile, the number of students enrolled per center increased from 595 last year to 767 in the second quarter of 2022. In the second quarter, average revenue percentage rose to 22.8%, from about RMB 1.23 million last year to about RMB 1.51 million in the same period of 2022. 接下来和大家介绍一下成人IC职业教育业务的情况。 Next, moving on to our adult IT professional education business.
spk03: 优化业务结构,降低成本,提高运营效率 是我们承认IT职业教育业务坚持的目标以及关注点。 2022年的第二季度,虽然受疫情反复的影响, 局部城市的中心暂停线下授课,但有赖于 Our stable and reliable online course delivery service ability allows our courses to be delivered in high quality. At the same time, since 2002, the company has insisted on developing a product strategy that serves users for the rest of their lives, bringing IT-related lifelong learning course products to students, promoting the reform and update of the resupply product system, including those within the Business Intervention course, Hongmao, Huawei, and other authentic products are widely appreciated by students, effectively improving our resale. Good-quality educational products and good delivery services are integrated, making our second quarter of 2022 to achieve a business income of $3.03 billion, which has increased by 3.3% compared to the second quarter of 2021, with $2.93 billion. In the second quarter, adult vocational education has a profit of $2.13 billion, which is higher than that of 2021,
spk06: Optimizing content quality and core system, reducing cost, and improving operational efficiency and effectiveness is the consistent goal and focus of our adult professional IT education. In the second quarter of 2022, although offline courses were suspended temporarily in some of our urban centers due to the resurgence of the pandemic, our courses were delivered with high quality thanks to our stable and mature online course delivery system. Simultaneously, since 2022, we have adhered to the lifelong learning product strategy and launched a broad selection of courses for students' lifelong learning journey. To that end, during this quarter, we reformed and updated our short-term courses like CID course and our tech industry certificate courses such as Red Hat and Huawei to encourage students to stay with us longer and sign up for more courses. This combination of high-quality education products and excellent delivery services enabled us to achieve net business revenue of RMB 303 million in the second quarter of 2022, up 3.3% from RMB 293 million in the same period of 2021. Gross profit of adult professional education business in the second quarter was RMB 213 million, up 8.7% from RMB 196 million in the second quarter of 2021. With the development trend of seeking progress while maintaining stability, the gross profit margin of our business increased to 70.5%.
spk03: In the second quarter of 2022, we continued to strengthen the management and control of costs and operating expenses. In terms of adult business, the total cost and operating expenses decreased by 15.6% from the same period in 2021. Through the optimization of the online customer channels and the improvement of the customer conversion rate for the front-end recruiters, our customer efficiency has been improved, and the investment in the customer side has been effectively reduced. Compared to the same period last year, our market cost has dropped by 13.2%. At the same time, we will optimize the number of centers to 98 in the second quarter of 2022. Throughout the quarter, we continued to strengthen the management and control of costs and operating expenses, and the total cost and expenses for our adult professional education business decreased
spk06: by 15.6% compared to the same period in 2021. By optimizing the online customer acquisition channels and enhancing the lead conversion of the admission consultants, our customer acquisition efficiency has improved and the spending in customer acquisition decreased by 13.2% as compared with the same period of last year. At the same time, the number of centers was optimized to 98, by the end of the second quarter in 2022. The average single center revenue increased by 2.3% from about RMB 3.00 million in the second quarter of 2021 to about RMB 3.07 million in the second quarter of 2022.
spk03: Despite a challenging macro environment in the second quarter partially due to the COVID-19 pandemic, with the continuous improvement in the quality of our online course and services,
spk06: we continue to receive favorable employer feedback and achieve good results from our students. The employment rate of our students within six months after graduation was 97 this quarter.
spk03: That concludes my review of the company's operations for the second quarter of 2022. According to the company's performance announcement this afternoon, the board of directors appointed Ms. Wei Ping to take on the position of CFO of the company. Hereby, on behalf of Dami Education, I welcome Ms. Wei Ping's participation. I believe that with her rich experience and professional ability in the field of education and the Internet, she will help the company to build a new milestone on its future business development. At the same time,
spk06: 我们感谢刘永金先生对于过去两年来在CFO岗位上的贡献。 As you have learned from the press release this afternoon, the Board of Directors has appointed Ms. Wei Ping as the new CFO of the company. On behalf of Tarina, I would like to welcome Ms. Wei Ping to join us. We believe that with her rich experience and professional ability in the field of education and Internet, Ping will help the company make new milestones. At the same time, we thank Mr. Calvin Wang Ki Lao for his dedication as CFO over the past two years.
spk03: Next,
spk06: I will turn the call to Ping to walk you through the financials of the second quarter of 2022. Thank you, Nancy.
spk01: And hello, everyone. Now, let me walk you through some of the financial highlights of this quarter. Please also refer to the press release for more information. For the second quarter of 2022, the company recorded operating income of 48 million RMB, or 7.2 million US dollars, compared to operating loss of 90.7 million RMB in the same period of 2021. Non-GAAP operating income, which excluded share-based compensation expenses, was 49.2 million RMB or 7.3 million US dollars in the second quarter of 2022, compared to non-GAAP operating loss of 86.6 million RMB in the same period of 2021. This was achieved by a combination of healthy growth of total net revenues, which was 11.4% of increase to 648.8 million US RMB or 96.9 million US dollars in the quarter from 582.3 million RMB in the same period of last year and well-executed cost controls during this quarter. Due to these measures, cost of revenues decreased by 5.4% to 272.3 million RMB or 40.7 million US dollars in the second quarter of 2022 from 287.9 million RMB in the same quarter last year. Furthermore, Total operating expenses decreased by 14.7% to 328.5 million RMB, or 49 million US dollars, in the second quarter of 2022, from 385.1 million RMB in the same period of 2021. The main contributors of the cost and expense reductions include, firstly, closing of low-performing centers and optimizing headcount to improve efficiency. As a result, as Nancy mentioned earlier, our optimized learning centers for both childhood and adolescent quality education and adult professional education businesses have decreased to 227 and 98 centers, respectively, and our headcount decreased by 11.8 percent. optimizing spending on marketing and sales, and keeping our focus to operational excellency, which is through focusing on quality of content, delivery, and services, we continue to generate more word-of-mouth referral enrollments and higher lifetime value of our students. And finally, improved efficiency and streamlined OMO strategy further helped with overall operational efficiency, resulting in lower general and administrative spending. While a one-time provision for the expected settlement of a cost action partially resulted in an increase in G&A expense in the second quarter, we expect G&A to stay at a low level in the next few quarters. As a result of the foregoing, Net income was 47.9 million RMB or 7.2 million US dollars in the second quarter of 2022, compared to net loss of 76.7 million RMB in the same period of 2021. Non-GAAP net income, which excluded share-based compensation expenses, was 49.1 million RMB or 7.3 million US dollars in the second quarter of 2022, compared to net loss of 72.5 million RMB in the same period last year. Now, on EPS side, basic income per ADS was RMB 4.36, or 65 cents, US dollars, in the second quarter of 2022. compared to loss per ADS of RMB 6.97 in the second quarter of 2021. Diluted income per ADS was RMB 4.29 or 64 cents US in the second quarter of 2022, compared to loss per ADS of RMB 6.97 in the second quarter last year. As of June 30, 2022, the total balance of cash, cash equivalents, and time deposits increased by 9.2 million RMB to 425.6 million RMB, or 63.5 million US dollars. The increase was mainly from net cash inflow from operating activities in the second quarter of this year of 19.4 million RMB, or 2.9 million US dollars. Capital expenditures in the second quarter were 8.9 million RMB, or 1.3 million US dollars, mainly from purchasing of office equipment and payment to renovate teaching centers. Share repurchase also contributed to the cash outflow in the quarter. This concludes my financial highlights. Nancy will share with you our business outlook for the second half of 2022 and give revenue guidance for next quarter. Nancy, please.
spk03: Thanks for Ms. Wei's summary of the financial performance for the second quarter of 2022.
spk06: Now turning to the company's outlook for the next quarter.
spk03: Now turning to the company's outlook for the next quarter. At the same time, we continue to upgrade. At the same time, we continue to upgrade the efficiency of operation. Under the repeated potential factors of the epidemic. Maintain the healthy development of business. And strive for continuous profit. In the financial industry. According to the company's current estimate, the net income total in the third quarter of 2022 is estimated to be between 6.20 billion yuan and 6.50 billion yuan. In the third quarter of 2021, the net income increased by 0.8% to 5.7%. The company is based on the current market situation, giving top-level guidance to reflect the initial statistics of the current market and company business situation. These situations may change.
spk06: In the second half of 2022, we will continue to optimize our OMO-based customer acquisition and product delivery system students with high quality courses and better services to further enhance our competitiveness and earn our students' trust and confidence. generating more word-of-mouth and referral-based growth. At the same time, we will continue to improve operational efficiency so as to maintain healthy and sustained profitability in spite of potential challenges of future pandemic outbreaks. In terms of financial guidance, based on the company's current estimates, our total net revenues for the third quarter of 2022 are expected to be between RMB $620 million and RMB660 million, representing a year-over-year increase of 0.8% to 5.7% from net revenues for the third quarter of 2021. The company's guidance reflects a preliminary estimate of our current market environment and company operating conditions based on current market conditions, which may change. 以上是我们对于未来的展望及收入的指引。
spk03: Above is our outlook for the future and the revenue guidance. I would like to take this opportunity to thank you again for your following and support. We are now ready for questions.
spk06: Thank you.
spk04: As a reminder, to ask a question, you will need to slowly press star 1 and then 1 on your telephone and wait for your name to be announced. Once again, it's star 1 and then 1 on your telephone. Please stand by while we compile the Q&A roster. This will take a few moments.
spk05: Once again, please press star 1 and then 1 on your telephone. We are going to proceed with the first question. Please stand by. Okay.
spk04: We have the first question coming from the line of 3Q. From 3Q, please ask your question.
spk02: Okay. First of all, congratulations to the company for achieving continuous profit in the second quarter. And during the pandemic, you can also achieve continuous income growth and maintain profit. I would like to know what you think is the core competitiveness of the company.
spk06: So the first question is, first of all, let me say congratulations to the company to achieve continued profitability in the second quarter of 2022. Especially during the pandemic period, the company can achieve continuous revenue growth and stay profitable. So we were wondering, what would be the competitive edge of your company now? My second part of the question is, we observed that the policy environment is quite favorable to our business. So the future of our adult professional education business is very promising. So what is your opinion on the competition landscape?
spk01: Nancy, please answer this question. I'll have our CEO, Nancy, to answer this question. Nancy.
spk03: Okay. Thank you very much for your question. I'm Nancy. Let me answer your first question.
spk06: Thank you so much for the question. First of all, I'm Nancy. Let me take the first part of your question.
spk03: In the past 20 years, we have accumulated very rich experience in the IT training industry. Based on this rich level of experience, we are continuously optimizing and upgrading the online and offline integration of our customers and product research and product interaction. This has led to an increase in the efficiency of our multi-channel customers. At the same time, the product system of our two businesses is also continuously upgrading. and maintains a very high quality of delivery. I think you can see from the information we share that our social business has a stable reputation and fee rate. You can also see that we recognize the good employment rate of our business. These are all the guarantees of our core competitiveness. In other words, we are in the stable improvement of both the front-end customers and the back-end delivery capabilities. This will maintain our continuous competitiveness.
spk06: Over the past 20 years, we have gained very rich experience in terms of delivering training for adult IT professional education. And also, we emphasize on our OMO online merging offline education. We have very good customer acquisition experience. We have very good delivery of our products. as well as the good design of our product-based interaction, and also we have very good R&D skills and know-how. In terms of multi-channel customer acquisition, we're also very good at that as well. And we also are very good at our product design, product system iteration, and we are very good at our delivery. So those are our competitive edge. To be more specific, We are very good at word of mouth and renewal students when it comes to our childhood and adolescent quality education. And we are very good at job application for our adult professional education business. Our graduates from our adult professional education business all achieved good jobs. So those are our competitive edge for our two businesses and That is my answer for your first part of the question.
spk03: so that our adult businesses can continue to maintain positive development with a mature management model. Among them, our adult businesses include the 2C business, which also faces the 2B business of university collaboration and education integration. Our 2C recruitment has contributed 86% of the entire adult business, which has also made a great contribution to our profit.
spk06: Let me take the second part of your question. Actually, we've enjoyed very favorable policy support from the government in China, which is really conducive to our professional education, which is also very conducive to the overall sound growth of this professional education industry. We are very good at customer acquisition, also about product delivery at the back end. We are also very successful happy with our center operation, and we are also very good at product R&D. So those actually serves a very stable growth for our business. In terms of our adult professional education, we not only have 2C business, but also 2B business working with universities. So in terms of our 2C side, our enrollment actually contributed to more than 68% of our total revenue. So those are our competitive edge, and that is why we are very satisfied with our, and very promising about our future.
spk03: So that concludes my answer to both of your questions. Thank you very much again for raising that question. Thank you, Nancy.
spk04: Once again, as a reminder to ask a question, you will need to slowly press star 1 and then 1 on your telephone and wait for your name to be announced.
spk05: We do not have any other questions at the moment.
spk04: Presenters, please continue.
spk00: Thank you, operator. If there are no further questions at present, we would like to conclude by thanking everyone for joining our conference call. We welcome you to reach out to us directly by emailing at ir.tdu.cn. Should you have any questions or requests for additional information, we encourage you to visit our investor relations site at ir.edu.cn. Thank you.
spk04: Ladies and gentlemen, that does conclude our call for today. Thank you for participating. You may now disconnect your lines.
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