Sunlands Online Education (STG) Reports Q4 Loss of $2.94, Revenues Beat

Sunlands Online Education (NYSE: STG) reported Q4 EPS of ($2.94). Revenue for the quarter came in at $79 million versus the consensus estimate of $74.35 million.

Fourth Quarter 2019 Financial and Operational Snapshots

• Net revenues were RMB549.7 million (US$79.0 million), representing a 3.4% decrease year-over-year.
• Gross billings (non-GAAP) were RMB642.0 million (US$92.2 million), representing a 15.5% decrease year-over-year.
• Gross profit was RMB448.2 million (US$64.4 million), representing an 8.6% decrease year-over-year.
• Net loss was RMB139.5 million (US$20.0 million), representing a 24.0% decrease year-over-year. Net loss margin, defined as net loss as a percentage of net revenues, decreased to 25.4% from 32.3% in the fourth quarter of 2018.
• New student enrollments were 92,718, representing a 22.6% decrease year-over-year.
• As of December 31, 2019, the Company\'s deferred revenue balance was RMB3,228.8 million (US$ 463.8 million).

[1] New student enrollments for a given period refers to the total number of orders placed by students that newly enroll in at least one course during that period (including those students that enroll and then terminate their enrollment with us, excluding orders of our low-price courses). In June 2019, we introduced low-price courses, including "mini courses" and "RMB1 courses," to strengthen our competitiveness and improve customer experience. We offer such low-price courses mainly in the formats of recorded videos or short live streaming.

"In the fourth quarter of 2019, we continued to focus on our multi-pronged strategy for student acquisition and retention. Our efforts centered around the further development and differentiation of our products and services through the application of big data analytics and AI technology. This has allowed us to produce significant operational benefits to both our employees and students, facilitate our digital transformation, and further strengthen our data security and risk control capabilities," said Mr. Tongbo Liu, Chief Executive Officer of Sunlands. "In order to satisfy the diverse needs of our students, we also continued broadening our online course offerings, with more choices for master's-oriented and professional certificate programs. Our master's-oriented programs accounted for 19.8% of total gross billings in the fourth quarter of 2019, significantly higher compared with 7.8% in the same period a year ago. These initiatives, coupled with and our solid track record of pass rates, position us well to capture the strong long run growth opportunity in the online post-secondary and professional education market."

Mr. Steven Yipeng Li, Chief Financial Officer of Sunlands, said, "Our net revenues were RMB549.7 million in the fourth quarter of 2019, in line with our guidance. Our gross billings and new student enrollments declined 15.5% and 22.6%, respectively, year-over-year, primarily as a result of slowing macroeconomic growth in China and adjustment of marketing strategies in view of challenges in student acquisition cost. During the fourth quarter, we continued to pursue a balanced approach to grow revenue and improve profitability, by executing our student acquisition strategy while continually streamlining our cost structure. Our administrative expenses, as well as sales and marketing expenses decreased by 30.9% and 10.2%, respectively, compared with the same quarter last year. Our cost efficiency improvement measures led to a reduction in net loss in the fourth quarter, to RMB139.5 million, 24.0% lower compared with a loss of RMB183.7 million in fourth quarter of 2018. Looking ahead into 2020, we are optimistic that our dedication to persistent product and service upgrades will continue to bring value to our customers, and ultimately our shareholders."

Outlook

For the first quarter of 2020, Sunlands currently expects net revenues to be between RMB540.0 million to RMB560.0 million, which would represent a decrease of 4.3% to 0.7% year-over-year.

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

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