Sunlands Online Education (STG) Misses Q4 Revenue Estimates

Sunlands Online Education (NYSE: STG) reported Q4 EPS of ($3.88), $3.66 worse than the analyst estimate of ($0.22). Revenue for the quarter came in at $82.73 million versus the consensus estimate of $83.07 million.

Fourth Quarter 2018 Financial and Operational Highlights

• Net revenues were RMB568.8 million (US$82.7 million), representing a 65.0% increase year-over-year.
• Gross billings (non-GAAP) were RMB759.8 million (US$110.5 million), representing a 5.8% decrease year-over-year.
• Gross profit was RMB490.3 million (US$71.3 million), representing an 84.8% increase year-over-year.
• Net loss was RMB183.7 million (US$26.7 million), representing a 57.1% decrease year-over-year. Net loss margin, defined as net loss as a percentage of net revenues, decreased to 32.3% from 124.1% in the fourth quarter of 2017.
• New student enrollments were 119,746, representing a 10.8% decrease year-over-year.
• As of December 31, 2018, the Company's deferred revenue balance was RMB3,286.0 million (US$477.9 million).

Mr. Tongbo Liu, Chief Executive Officer of Sunlands, said, "2018 marked a year of strategic positioning and advancements for our Company. We completed our IPO, launched our AI-powered personalized study program, and broadened our graduate and post-graduate program offerings. We ended the year at the top end of our fourth quarter revenue guidance and narrowed our net loss margin.

"In 2018, we started to explore innovative ways to attract more students to our online learning platform. One of our biggest achievements was initiating free trials. By offering potential students our upgraded free trials withintroductory seminars and free short-courses, we believe we can increase average gross billings, conversion rates and sales efficiency over the longer-term.

"Our mission is to transform education with technology and innovation to make learning experiences enjoyable and rewarding. In line with these ideals, in 2018, we also began pursuing more user-friendly marketing tactics to introduce potential students not only to Sunlands' online STE platform, but to a broader range of our best-in-class programs. As we strengthen our brand awareness, we are capable of reaching a larger pool of prospective students who may benefit from our courses. In 2019, we will be focused on attracting more students to our platform by expanding our free trials with even more course offerings. We believe these initiatives will help develop online learning habits for more students, transferring them from offline to online, and enhance a stronger brand for Sunlands over the longer-term.

"As a pioneer in the massive and evolving online post-secondary and professional education market, we are dedicated to providing a comprehensive online continuing education ecosystem, powered by our proprietary software that is tailored to each student's learning patterns. In 2019, we will look to further expand our business and gain market share. Empowered by our one-to-many live streaming model, we plan to broaden our course offerings to serve a larger student base and leverage our premier AI-technology and industry leading online education platform to create additional value for our students, teachers, partners and investors," Mr. Liu concluded.

Mr. Steven Yipeng Li, Chief Financial Officer of Sunlands, said, "The continuous growth in the number of students[2] drove our growth in the fourth quarter, with our net revenues and gross profit increasing by 65.0% and 84.8%, respectively, year-over-year. Expanding our free trials with introductory seminars enabled us to enhance our sales productivity and efficiency, and our net loss margin decreased to 32.3% during the quarter from 124.1% in the fourth quarter of 2017. We plan to further invest in our growth by continuing to acquire and engineer best-in-breed content for our platform that supports our student acquisition efforts and maintains our leadership in the online post-secondary and professional education market."

For earnings history and earnings-related data on Sunlands Online Education (STG) click here.

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