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spk03: Good day, everyone, and welcome to the Carina second quarter 2023 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star, then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Sylvia Yang, Investor Relationship Manager. Please go ahead.
spk02: Thank you, operator. Hello, everyone, and welcome to Tarina's Earnings Conference Call for the second quarter of 2023. The company's earnings results were released earlier today and available on our IR website. as well as our newswire services. Today, you will hear from Ms. Nancy Ying Sun, our CEO, and Mr. Xiaobo Shao, our CFO, who will take you through the company's operational and financial results for the second quarter of 2023. After their prepared remarks, Nancy and Mr. Shao 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. Tarina 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 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. Finally, as a reminder, this conference call is being recorded. In addition, a webcast of this conference call is available on Terena's investor relations website. I will now turn the call over to Ms. Nancy Ying Sun, the CEO of Terena.
spk04: Thank you, Yang Shuang. Thank you for coming to our conference call. Thank you.
spk05: Thank you, Sylvie, and thanks, everyone, for joining our Ernest Conference Call today.
spk04: In the second quarter of 2023, the impact of the uncertainty of the external business environment in the beginning of the year has been improved. In the post-pandemic stage, the company effectively eased the impact of economic recovery on the employment market by taking cautious financial and operational strategies. It promotes the improvement of the health of children and adults in 2C businesses. The loss of group management is significantly reduced by 88%. Based on the strategic consideration of the exchange, the company has separated the school cooperation business from the relevant transactions, which has led to a net profit of 834.4 million yuan in the second quarter of the company.
spk05: In the second quarter of 2023, as the impact of uncertainty's external business environment at the beginning of this year abated, we achieved a 42% quarter-over-quarter increase in revenue. Benefiting from the prudent financial and operational strategy we adopted during the post-pandemic period, we effectively alleviated the sluggish economic recovery's impact on job market supply and demand while enhancing the financial health of our IT-focused supplementary STEM and TOC professional education services. As a result, our group's second quarter operating loss narrowed substantially by 88% quarter of a quarter. Furthermore, as part of our focused business strategy, we have carved out our college collaboration related business. This transaction brought us disposal gains, enabling us to achieve a net profit of RMB 8.344 million in the second quarter.
spk04: In the second quarter of 2023, our total income was 5.45 billion yuan. In the same period of 2022, it was 6.49 billion yuan, down by 16%. With the improvement of the external business environment, the income of young IT quality education businesses has recovered to the same level as last year. And adult professional education businesses, due to the delaying impact of the economic recovery of the market, the recovery period is longer. Our total net revenues in the second quarter of 2023 amounted to RMB 545 million, a year-over-year decline of 16% from RMB 649 million in the same period of 2022.
spk05: Among them, revenues from our IT-focused supplementary STEM education business recovered to a level of the same period last year, thanks to the improving external business environment. Meanwhile, revenue from our IT professional education business declined by 34.8% year-over-year due to a relatively longer recovery period as a result of the sluggish economic recovery's impact on this market. 二零二三年的第二季度,公司成本及费用比二零二二年同期下降了8.2%,
spk04: The second quarter of 2023, our costs and expenses decreased by 8.2% year-over-year,
spk05: many due to our reduced expenditures on rents, depreciation, and other aspects as we adjusted our management structure and optimized our stock mix and learning centers to our consistent cost reduction and efficiency enhancement strategy. Meanwhile, the year-over-year decrease in the G&A expenses was also attributable to the one-time plus action chart last year.
spk04: Now, let me walk you through our IT-focused supplementary STEM education business.
spk05: Now, let me walk you through our IT-focused supplementary STEM education business.
spk04: Although the total cost and cost increased by about 1.7% compared to the same period last year, the actual operating profit was 2533.3 million yuan. This is also a continuous impact of the first quarter's external operating environment, and the operating profit was achieved in two consecutive quarters. The increase in operating efficiency also brought us an increase in financial health.
spk05: In the second quarter of 2023, net revenues from our IT-focused supplementary STEM education business worth RMB $347.7 million in line with the second quarter of 2022. Despite a slight 1.7% year-over-year increase in costs and expenses, we achieved an operating profit of RMB $25.3 million, marking our second consecutive quarter of operating profitability. As we gradually shook off the ongoing impact of the first quarter's external business environment limitations, our plate efficiency enhancement led to the improvement of our financial health.
spk04: From the customer acquisition front, enrollment increased since the beginning of the first quarter, benefiting from our premium courses and delivery quality, as well as our very excellent word-of-mouth referral. This facilitated our recovery from the ongoing impact
spk05: of the challenging external business environment. In the second quarter of 2023, enrollment reached 177,500, a slight decrease from one year ago. Among them, renewable students and students enrolled through word-of-mouth referrals accounted for 76.3% of new fee-paying students. Regarding the operation of our centers, the total number of centers providing ID-focused supplementary STEM education services declined to 215 as of the end of the second quarter of 2023, from 227 at the end of the second quarter of 2022. At the same time, the number of students enrolled per center increased from 767 in the second quarter of last year to 822 in the same period of 2023, while revenue per center increased to RMB 1.61 million in the second quarter of 2023 from RMB 1.51 million last year. 接下来和大家介绍一下成人IT职业教育业务的情况。 Next, moving to our IT professional education business. 在往期收款和市场需求的叠加影响之下,第二季度成人业务的净收入同比下降了34.8%。 As the business environment improved, the net revenue of our IT professional education business increased by 43% for the upper quarter. This business is experiencing a relatively longer recovery period. As the sluggish overall post-pandemic economic recovery continues to affect job market supply and demand to a certain extent, impacted by weak market demand and reduced cash receipts in the past quarters, net revenue for our IT professional education business decreased by 34.8% year over year.
spk04: 2023年第二季度,成人职业教育业务的中心数量由2022年第二季度末的98个减少至52个。除院校合作业务剥离的影响,成人2C中心由去年同期的75个竟减少23个。 For a long time, the strict control of central operation management is accompanied by the reduction in the number of centers, which also allows us to effectively control the operating costs. At the same time, by continuously implementing personnel optimization, improving operating efficiency, and achieving the overall upgrade of the organization's refined management level, the overall operating loss of adult businesses is significantly reduced by 85.4%.
spk05: We strictly adhered to our operating strategy of cost reductions and efficiency enhancements during this quarter, driving a decrease in our IT professional education business total cost of 15.5% year-over-year. Its gross margin decreased due to the revenue decline. On the operation front, our total number of centers providing IT professional education services declined to 15,200 at the end of the second quarter of 2023, from 1998 and the second quarter of 2022, including the impact of our carve-out of the college collaboration related business of a net reduction in the number of centers providing QC IT professional education services was 23, compared with 75 centers one year ago. Our long-term disciplined control of the center operations as well as the decreased number of centers enabled us to effectively control our operating expenses. Meanwhile, as we continued to optimize the staff mix, enhance operating efficiency, and comprehensively upgrade our organization's refining management, we significantly narrowed our operating loss in our overall IT professional education business by 85.4% quarter over quarter.
spk04: In addition, in order to further focus on the core advantage of the company, i.e. 2C adult IT professional education and youth IT quality education, the company has broadcast the school cooperation business in the second quarter of 2023. The company will only retain a small number of shares. As mentioned above, the broadcast of school cooperation business will help the company to improve financial health, and will also focus the company's management center on the improvement of the two core business operating levels and profitability.
spk05: In addition, in order to focus on our core competence, that is, providing 2C IT professional and STEM education services, the company carved out the college collaboration related business in the second quarter of 2023 and retained only the minority interest. As we mentioned before, the carve out of our college collaboration related business will improve our financial health while allowing us to focus on enhancing of operational capability and the profitability of our two core businesses. 以上是我对公司2023年第二季度运营情况的分享。 That concludes my review of the company's operations for the second quarter of 2023. 由于2022年末至2023年初外部经营环境的动态影响已经基本消除。
spk04: The impact of the uncertainties in the external business environment spanning the end of 2022 through the beginning of 2023 has almost faded away.
spk05: Although the IT professional education business will take some time to recover due to the sluggish economic recovery impact on the job market demand, our IT-focused supplementary STEM education business is benefiting from the relatively strong market demand in the supplementary STEM education field, demonstrating our business resilience.
spk04: During this period, we will continue to enhance our operating capability
spk05: and management efficiency with a more focused operational strategy while adapting to the evolving market demand across digital transformation and artificial intelligence by adjusting our course catalogs accordingly to empower the students' development. We believe this will prepare the company's long-term growth and drive our profitability improvement.
spk04: Looking forward to the future, as the business environment stabilizes, digital transformation and the rapid development of artificial intelligence will continue to drive the growth of the demand for information-based talent in the market. Although in the short term, the supply and demand of the employment market is relatively good for economic recovery, but with the promotion of professional education policies, we believe that by more in line with the needs of students, the course products will more fit the needs of the market, thereby helping students to adapt better to the development of society and drive employment.
spk05: 我们将继续充分利用自身的优势致力于创造更高的股东价值。 Looking ahead, as the business environment stabilizes, companies' rising need for digital transformation and the rapid development of artificial intelligence will drive the continuous growth of market demand for IT talents. Although the normalization of the job market supply and demand will lag behind economic recovery in the short term, We are confident that, supported by favorable professional education policies, we can help our students adapt to social development and promote employment by creating courses that cater to their needs as well as the professional needs of the market. As always, we will continue to fully leverage our own competitive advantages to create additional shareholder value.
spk04: According to the announcement of the company's early release, the board of directors appointed Mr. Shao Xiaobo to be the CFO of the company. Here, I only represent Danei Education to welcome Mr. Shao Xiaobo's participation. We believe that with his rich experience and professional ability in education and the Internet field, he will help the company through the combination of finance and operation management to achieve new breakthroughs in operation efficiency improvement and profitability.
spk05: As announced previously in another public filing, the Board of Directors has appointed Mr. Xiaobo Xiao as the company's Chief Financial Officer. On behalf of Terena, I would like to send a warm welcome to Mr. Xiao. We believe that with his abundant experience in the education and internet field, and his professional expertise. He will help us achieve new breakthroughs in operational efficiency and profitability enhancement through a combination of financial and operational management activities. Meanwhile, I would like to thank Ms. Ping Wei for her contributions during her tenure as our CFO over the past year.
spk04: Next, let's have CFO Mr. Shao Xiaobo introduce the financial situation for the second quarter of 2023.
spk05: Next, I will turn the call over to Minister Xiaobo Xiao to walk you through our financials for the second quarter of 2023.
spk00: Thank you, Nancy. And hello, everyone. Now let me walk you through some of our second quarter financial highlights. Please also refer to the press release for more information. For the second quarter of 2023, the company narrowed its operating loss to RMB $6.8 million. compared to an opening loss of RMB 58.8 million in the first quarter. While we experienced a tough and a challenging transition period in the first quarter, our business have gradually recovered in the second quarter and recorded sequential growth of 42% in revenue. Representing a relatively resilient recovery and an improved operating environment, The uncertainty of sustained economic recovery in the post-pandemic phase has an impact on employment supply and demand, which has led to a relatively longer recovery period for the adult professional education business. Although we narrowed the decline of cash collection in the adult business year over year, recognized revenue still decreased due to lower cash receipts. Meanwhile, thanks to restored social mobility, Our IT-focused STEAM education has emerged from the temporary closures of our learning centers. With stable and continuous demand for STEAM education, we witnessed relatively healthy year-over-year growth in cash receipts, contributing to the return of STEAM education's net revenue to the same level as in the same period of 2022. Our total net revenues in the second quarter of this year was RMB 545 million, a 16% decrease from the same quarter of last year. The decrease in revenue was primarily attributable to IT professional education, given its lower student enrollment number resulting from the closure of lower profitability teaching centers. as well as the impacts of the college collaboration related business divestiture, with only two masses of revenue recognized in the second quarter of this year. Our cost of revenues decreased by 2.2% to RMB 266.3 million in the second quarter of this year, from 272.3 million in the same period of last year. The decrease was mainly due to a decrease in personnel cost attributable to headcount reduction and a decrease in rental fees and the depreciation cost attributable to the closure of some teaching centers during this period. The decrease was partially offset by the increase in cost of camps and the competition activities in this quarter amid the high demand for extracurricular courses. Although the decline in revenues exceeded the reduction in the cost of revenues, resulting in a decrease in gross profit to RMB 278.7 million and a narrowed gross margin at 51.1%. Our effective operational measures partially offset the impact in the post-pandemic phase. Total operating expenses decreased by 13.1%. to RMB 285.5 million in the second quarter of this year, from 328.5 million in the same period of 2022. Total non-GAAP operating expenses, which excluded share-based compensation expenses, decreased by 13% to RMB 284.6 million in the second quarter of this year, from 27.4 million in the same period of 2022. Total share-based compensation expenses allocated to the related operating expenses decreased by 23.5% to 0.9 million in the second quarter of this year from 1.1 million in the same period of last year. Selling and marketing expenses decreased by 3.7% to RMB 151 million in the second quarter of 2023 from RMB 156.9 million in the same period of last year. The decrease was mainly due to a decrease in the personnel-related costs, resulting from a decrease in the number of sales staff in the second quarter of 2023, partially offsetting the increased advertising costs during the recovery phase. Benefiting from the effective control of marketing spending as well as a decrease in personnel-related costs, selling and marketing expenses decreased by 19.8% to RMB 264.2 million in the first half of this year, from RMB 329.3 million in the same period of last year. General administrative expenses decreased by 25.1% to RMB 118.8 million in the second quarter of this year, from RMB 158.7 million in the same period of last year. The decrease was mainly due to a headcount reduction, as well as a one-time provision related to a class action lawsuit in the previous period. There was no such expense accrual for the second quarter of this year. Research and development expenses increased by 21.9% to RMB 15.7 million in the second quarter of 2023, from RMB 12.9 million in the same period of 2022. The increase was mainly due to an increase in spending on operating systems improvement to enhance operating efficiency. As a result of foregoing, operating loss was RMB 6.8 million in the second quarter of 2023, compared to operating income of RMB 48 million in the same period of last year. Non-GAAP operating loss, which excluded share-based compensation expenses, was RMB 5.9 million in the second quarter of 2023, compared to a non-debt operating income of RMB 149.2 million in the same period of 2022. As we mentioned last quarter, we spent of the college collaboration related business in the second quarter, which brought a gain on disposal of 26.8 million. This contributed to net income of RMB 8.3 million in the second quarter of 2023, compared to a net income of RMB 47.9 million in the same period of last year. Non-GAAP net income, which excluded share-based compensation expenses, was RMB 9.2 million in the second quarter of this year, compared to non-GAAP net income of RMB 49.1 million in the same period of 2022. Also, with the gain of disposal, We narrowed our net loss to RMB 41.6 million and the non-GAAP net loss to RMB 39.6 million for the first six months of 2023. Now on the EPS side. Basic income per EPS was RMB 0.7 in the second quarter of 2023. Diluted income per ADS was RMB 0.67 in the second quarter of this year. Non-GAAP basic income per ADS, which excluded share-based compensation expenses, was RMB 0.78 in the second quarter of this year. Non-GAAP diluted income per ADS, which excluded share-based compensation expenses, was RMB 0.75 in the second quarter of 2023. Next cash outflow from operating activities in the second quarter of this year was RMB 20 million. During the second quarter, we received RMB 76.6 million in payment for the disposition of the two buildings we own. The remaining final payment was already settled in the third quarter. Capital expenditures in the second quarter of 2023 were RMB 11.6 million. As mentioned earlier, we experienced a challenging quarter with a relatively laggy recovery of the adult business. As of June 30 of 2023, the total balance of cash Cash equivalents and the restricted cash was RMB 368.1 million, a decrease of RMB 5.9 million from December 31st of 2022. That concludes my financial highlights section. Thank you again for your attention and support. Now let's open the floor for questions.
spk03: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Again, if you have a question, please press star, then one, to be joined into the queue. Our first question comes from He Xu with Everbloom. Please go ahead.
spk01: Thank you for having me here.
spk05: I have a question to you. According to the statistics, the company registered improvement quarter to quarter. I'm wondering what are the major drawing factors behind except for the improvement on the operating environment? Thank you.
spk04: Thank you very much for your question. With the improvement of the operating environment, the mobility of society is also improving. Therefore, the delivery of goods and courses throughout the county is gradually recovering to the normal operating rhythm. In addition to the improvement of the overall operating environment, The third point is that Thank you for posting this question. I'm going to offer you three major factors as far as I could understand.
spk05: First of all, as the general business environment is on the improvement, we are seeing a boost up of the social liquidity as a natural result. We are seeing the cost of the customer acquisition as well as the delivery of the courses are on the improvement as well. That is the first reason. And secondly, we are also conducting a wide range of social events such as challenges, competitions, and camps for the youth and the youngsters. They are also getting good experiences, which would naturally win the word of mouth among the general users and potential customers. For the third reason, we are also seeing friendly policies as well. Currently, we are seeing the good policy to promoting the growth of the programming abilities as well as the STEM education services. The parents are developing new awareness, which is leading us to have a deeper market penetration So the good news is we are seeing the market is getting stabilized with a good growing momentum. Thank you. So thank you for staying with us in the previous years as well as in the upcoming years. And thank you for your support to Terena again.
spk02: Hi, operator. Could you answer again? OK.
spk03: Thank you. Again, if you would like to join the question queue, please press star, then 1 to be joined in the queue. As I see no further questions, I would like to turn the conference back over to Sylvia Yang for any closing remarks.
spk02: 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.edu.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. Thank you.
spk03: The conference has now concluded. Thank you for attending today's presentation. You may all now disconnect.
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