Sunlands Technology Group Q1 FY2025 earnings call

• In Q1 2025, net revenue was RMB 487.6 million and net income was RMB 75.2 million, sixteenth consecutive profitable quarter. Net income margin was 15.4%. Seventh consecutive period of positive operating cash flow. - Refining business mix to focus on high-margin, high-potential areas. Deepening and diversifying course portfolio, refining core subject areas and extending into adjacent domains like wellness and lifestyle. - Total enrollment reached over 169,000, supported by improved learner engagement and retention. Advanced digital transformation by embedding AI tools in cooperations to enhance curriculum precision and learner engagement. - In interest-based programs, etc., embraced partnership-driven approach, e.g., new cooperation with Hunan TV's Happy Shopping platform. Strengthened hyper delivery model for older learners, using online supplemented by offline hybrid model. Refined curriculum design with self-developed assist framework, achieving 98% course completion rate among new students and 14% increase in knowledge retention. - Organize nearly 100 free public interest activities for elderly to ensure access to meaningful learning experiences.

In the first quarter of 2025, degree and diploma post-secondary programs contributed 9.7% of total revenue. The sector encompassing interest-based programs, professional skills development and professional certification preparation accounted for a substantial 78.2% of total revenue. Net revenue was RMB 487.6 million, net income was RMB 75.2 million, gross profit margin was 85.2%, net margin was 15.4%, net revenue decreased by 6.8% year-over-year, cost of revenue decreased by 6.3% year-over-year, gross profit decreased by 6.9% year-over-year, operating expenses were RMB 341.1 million (same as previous year), sales and marketing expenses were RMB 300.4 million (relatively stable), general and administrative expenses increased by 5.9%, product development expenses decreased by 11%, net income was RMB 75.2 million (down from RMB 112.7 million in previous year), basic and diluted net income per share was RMB 11.12, cash, cash equivalents and short-term investments totaled RMB 796.9 million, deferred revenue balance was RMB 891.6 million (down from RMB 916.5 million).

• For the second quarter of 2025, Sunlands currently expects net revenues to be between RMB 500 million to RMB 520 million, representing an increase of 1.6% to 5.6% year-over-year. This outlook is based on current market conditions and preliminary estimate of operating conditions and customer demand, subject to change.

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