Sunlands Technology Group ADR

Ladies and gentlemen, thank you for standing by and welcome to Sunland's second quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. After prepared remarks by the management team, there will be a question and answer session. Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the call over to your host today, Yuhua Ye, Sunland's IR representative. Please go ahead.

Hello, everyone, and thank you for joining Sunland's second quarter 2020 earnings conference call. The conference financial and operating results were issued in a press release via newswire services earlier today and are posted online. You can download the earnings press release and sign up for our distribution list by visiting our IR website. On the call, our CEO, Tongbo Liu, will provide an update on our operational performance as well as our strategic initiative. Our CFO, Selena Lu Lu, will give you an overview of our financial performance and also provide our guidance for the second quarter of 2020. Following their prepared remarks, we will move into the Q&A session. Before I hand it over to the management, I'd like to remind you of some Save Harbor Statement in relation to today's call. Except for the historical information contained herein, certain of the matters discussed in this conference call are forward-looking statements. These statements are based on current trends, estimates, and projections, and therefore you should not place undue reliance on them. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. For more information about potential risks and uncertainties, please refer to the company's filings with the Securities and Exchange Commission. With that, I will now turn the call over to our CEO, Tongbo Liu.

Thank you, Yuhua. Hello, everyone. Welcome to Sunland's same-quarter 2020 Conference Call. The COVID-19 pandemic in China was effectively contained during the second quarter. Due to the varying work reception requirements in different regions, the average reception rate of our Wuhan campus and the headquarters in Beijing was about 18%. Against this backdrop, we are pleased with maintaining steady growth in the second quarter. Thanks to our self-developed collaborative online office system, efficient operation management, and rigorous execution will achieve the satisfactory financial results for this quarter. Our net revenues reached 512.5 million RMB in line with our guidance. Additionally, we are proud to say that our more than 8,000 employees in four cities are all safe and sound. Our growth spilling achieved year-over-year growth for the first time in five quarters, increasing by 21.3%. to 531.5 million RMB compared with the prior year period. In addition, new student enrollment increased by 10.2% year-over-year. The increases were mainly driven by our strategy to diversify product and service offerings, continuous expansion in training course categories, improved efficiency of our sales team, as well as tremendous efforts from all of our employees. Next. Let me provide highlights at the business segment level. Our business mainly works on three categories. STE, master's degree-oriented programs, and professional certification and skills programs. Our STE programs have maintained a solid market position and market share. And master's degree-oriented programs have become our strong new growth driver. According to Ministry of Education, the number of applicants for postgraduate programs are expected to reach a record high of 3.41 million, representing an increase of 510,000 or 17.6% year-over-year from 2.9 million in 2019. In response to the strong growth of applicants, the Ministry of Education made an announcement in February to expand the number of admissions in 2020 by 189,000 from last year's level. The ever-expanding number of people taking the postgraduate admission test comes from the rising pressure of employment in China and increasing demand for talents with higher education from enterprises. According to China Education Online, former students, mostly working professionals, accounted for 45% of those taking the postgraduate admission test in 2018. Leveraging our students' accrediting experience and service advantages for this group of people, we focused on providing the postgraduate admission test preparation for working professionals and have achieved remarkable results. Our master's degree-oriented programs have gone year-over-year for eight consecutive quarters, Goal speedings of master's degree-oriented programs for this quarter reached a new high of 135.2 million RMB, up 58.7% year-over-year, and accounting for 25.4% of total goal speedings. This proportion was significantly higher than 2019 and 2018, during which our master's degree-oriented programs accounted for only 17.9% and 5.5% of course fittings respectively. At the same time, based on student demands and new market trends, Sunland is also actively expanding our course offerings in multiple categories, including professional certifications and trainings related to new occupations as well as new skills and hobbies training catering to persons' diverse interests. The segment reached 59.5 million RMB in growth spilling this quarter, up 58.4% year-over-year, accounting for 11.2% of total, compared with 6.9% in 2019. We expect continued robust growth for the segment, as its ASP is relatively low at approximately 3,000 RMB. and we are in the process of adding more courses for our new and existing students to experience on our live teaching platform. We are pleased to say that as these new categories of courses are much shorter than degree courses, students are sticker and have a higher repurchase rate, which we expect to contribute positively to our profitability improvement. In the future, We will continue to take advantage of the STG platform and our teachers-rich teaching experience, constantly developing more online short-term courses suitable for adults in order to expand our targeted user base and promote course selling. Lastly, due to the postponement of the national STE exams from April to August, The experience of STE programs of our largest segment also increased by 6.8% year-over-year in the second quarter, as both new student enrollments and ASB increased. In the second quarter, our students, including those taking trial and free classes, showed greater enthusiasm to study during the pandemic period, as we continuously optimized our three-teacher system. This system refers to our comprehensive solution that combines live streaming lectures, after-class mentors, and AI-powered personal tutors. In this quarter, total time spent on online classes on our learning platform was 22.3 million hours, increasing 16.4% year-over-year and 25% quarter-over-quarter. The total number of online class attendance reached 758,000 and the average time spent this quarter for each student was almost 30 hours. An interesting fact was that of total time spent on live streaming classes during this quarter, nearly 5.5 million hours or about 24.5% were driven by students spending time on pre-sale trial or free courses, including various new courses and mini tutorials. This was 8 times higher compared to the level in the same period last year and 7 times higher versus last quarter. In addition, trial classes students accounted for 27% of total students attending classes this quarter. Through the trial program, we enable prospective students to experience our course contents and teaching services in advance, which not only improves the retention rate of new students and expand our potential user pool, but also helps us develop a deeper understanding of student interests and realize additional course setting potentials. Looking forward, we are confident to maintain the market leading position of our existing service categories and continuously improve the learning effectiveness of our students through technical and operational advancement. We are also optimistic of the market opportunities and the possibilities of course setting as we develop new content and execute our efficient student acquisition strategy. With that, I would like to hand over the call to our CFO Selena to run through our financials.