Sunlands Online Education (STG) Reports Q3 Revenues Miss

Sunlands Online Education (NYSE: STG) reported Q3 EPS of ($2.66). Revenue for the quarter came in at $73.8 million versus the consensus estimate of $78.15 million.

Third Quarter 2019 Financial and Operational Highlights

• Net revenues were RMB527.3 million (US$73.8 million), representing a 2.0% increase year-over-year.
• Gross billings (non-GAAP) were RMB613.6 million (US$85.8 million), representing a 18.8% decrease year-over-year.
• Gross profit was RMB413.6 million (US$57.9 million), representing a 2.5% decrease year-over-year.
• Net loss was RMB129.8 million (US$18.2 million), representing a 42.6% decrease year-over-year. Net loss margin, defined as net loss as a percentage of net revenues, decreased to 24.6% from 43.8% in the third quarter of 2018.
• New student enrollments were 95,286, representing a 20.8% decrease year-over-year.
• As of September 30, 2019, the Company's deferred revenue balance was RMB3,214.6 million (US$ 449.7 million).

"In the third quarter, we continued our focus on deploying a diversified set of methods towards student acquisition in an effort to both grow the total number of students utilizing our online platform and increase user stickiness," said Mr. Tongbo Liu, Chief Executive Officer of Sunlands. "Our efforts to further differentiate our offerings include providing a broader range of courses with more master's-oriented and professional certificate programs. Our unique and growing learning community adds a social and entertaining aspect to learning, in addition to our relentless pursuit of cutting-edge technologies, particularly with an emphasis on our strategy to apply AI to education. With these initiatives, as well as our significantly lower price points compared to traditional offline offerings, and our solid track record of pass rates, we expect to see positive results in gross billings and new student enrollments in the long run.

"In addition to our strategic focus on expansion, we also continued to execute on our balanced approach to improve profitability in the third quarter by prudently managing our expenses. As a result, our net loss narrowed by 42.6% year-over-year during the quarter, to RMB129.8 million."

Mr. Steven Yipeng Li, Chief Financial Officer of Sunlands, said, "For the third quarter, our net revenues were RMB527.3 million (US$73.8 million), in line with our guidance. Our gross billings and new student enrollments declined 18.8% and 20.8%, respectively, year-over-year, as we continued to adjust our marketing strategies in view of uncertainties in student acquisition cost and macroeconomic trends. However, the rate of decrease for gross billings and new student enrollments moderated from the second quarter, showing traction of our student acquisition efforts. In addition, following a reduction in net loss in the second quarter, third quarter net loss also narrowed year-over-year to RMB129.8 million, compared with a loss of RMB226.3 million in third quarter of 2018. This was primarily driven by the decrease in administrative expenses as well as sales and marketing expenses by 30.4% and 20.8%, respectively, compared with the same quarter last year. Going forward, we will continue with steady execution of our five-pronged expansion and retention strategies, to bring long-term returns for both our customers and shareholders."

Outlook

For the fourth quarter of 2019, Sunlands currently expects net revenues to be between RMB520.0 million to RMB540.0 million, which would represent a decrease of 5.1% to 8.6% year-over-year.

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

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