Ladies and gentlemen, thank you for standing by. And welcome to Sunlands’ Second Quarter 2019 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 conference over to your host today, Yingying Liu, Sunlands’ IR Director. Please go ahead.

Hello, everyone. And thank you for joining Sunlands’ second quarter 2019 earnings conference call. On the call, our CEO, Tongbo Liu, will provide an update on our operational performance, as well as our strategic initiatives. Our CFO, Steven Yipeng Li, will give you an overview of our financial performance and also provide our guidance for the third quarter of 2019. 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 Sunlands’ Safe 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 statements. For more information about the 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, Yingying. Hello, everyone. Welcome to Sunlands’ second quarter 2019 conference call. As we have outlined in previous quarters, Sunlands’ is gaining focus on developing and strengthening our brand through several key initiatives. I’m pleased to report that these initiatives drove second quarter topline revenue of RMB552.7 million, which was in line with our guidance and represented a 14.7% increase year-over-year. We also significantly narrowed our net loss margin to 2.3% in the second quarter versus 56.4% in the same period of last year as we took a firm and disciplined approach to managing costs and expenses. During the second quarter, we continued to advance our strategic initiatives in an effort to innovate our program offerings and strengthen our brand awareness. Through these unique initiatives, we are building a solid and multi-faceted foundation to reach a high-quality customer base and attract more students to our online platform. With increased platform accessibility and the diverse approach to student acquisition, we strive to attract new students to our platform. For example, creative marketing techniques, such as expansion of our free trial classes enable prospective students to experience our advanced online and mobile learning platform firsthand. In addition, diversifying our product offerings to include more professional certificates and masters-oriented products, launching and upgrading our mobile app, and building a unique learning community where students, teachers, and mentors freely interact with one another, all contributed to the rise in utility and the value of our program center solutions offer. Our strategic initiatives also entailed a commitment to using knowledge to further upgrade and distinguish our platform. So on, our one-to-many live streaming model, we are encouraged to attract and serve a large number of students, while at the same time adding new courses and content with ease and speed. By leveraging integrated AI…

Thank you, Tongbo, and hello, everyone. Thanks for joining us. As mentioned, we are pleased to report revenue in line with our guidance for the second quarter. Our gross billings and new student enrollment declined 43.1% and 44%, respectively, year-over-year. As we see the need to proactively respond to China’s slowing macroeconomy and the challenges our industry is facing surrounding student acquisition costs. Against this backdrop, we took quick and decisive actions to reduce operating expenses. As Tongbo just mentioned, our second quarter net loss narrowed significantly to RMB12.9 million compared with the loss of RMB112.9 million in the first quarter of 2019 and RMB271.8 million in the second quarter last year, representing a 95.3% decrease year-over-year. We are confident the steady and focused execution of our five-pronged strategy to expansion and the retention will improve average growth, commercial rates and sales efficiency over the long-term. Now, let me walk you through some of the key financial results for the second quarter. In the second quarter of 2019, net revenues increased by 14.7% to RMB552.7 million from RMB481.8 million in the second quarter of 2018. The increase was mainly driven by the growth in the number of students in the second quarter of 2019 compared with the second quarter of 2019, following new student enrollments increased over the past years. Cost of revenues increased by 8.1% to RMB95.7 million in the second quarter of 2019 from RMB88.5 million in the second quarter of 2018, which was primarily due to an increase in insurance premiums related to online education services with insurance coverage since late in 2018. Gross profit increased by 16.2% to RMB457 million from RMB393.3 million in the second quarter of 2018. In the second quarter of 2019, operating expenses were RMB498.7 million, representing a 27.5% decrease from RMB688.3…

Thank you. [Operator Instructions] The first question today comes from Christine Adoho [ph] with Goldman Sachs. Please go ahead.

Hello. Thank you, Tongbo and Steven. I have three quick questions. Firstly, I think, the guidance came in a bit softer than we were expecting. Could you elaborate on what are some of the macro industry trends that you’re facing and what needs to happen in order for you to regain confidence in stepping up the investments again? And then, secondly, how do you think about balancing growth and profitability in the second half of ‘19? And lastly, I think, we saw a very good effective cost savings come through this quarter, how much room do you think you have for further cost saving? Thank you.

Okay. For the first question regarding the guidance, like, we mentioned during the conference call, this guidance is based on the current market conditions. And I think we mentioned, both me and Tongbo mentioned that during our conference call that, the company is more focused on the user experience and also we are diversifying our product mix. We are relying less and less on STE and both the master oriented market and professionals education markets are increasing as well. So I think there’s - for the company is kind of in a transition period. So we, like, I said, our guidance is based on the current best estimates by the management. And the second question which is regarding the profitability, yes, our -- the net loss narrowed very significantly for the second quarter. But like we mentioned before, the profitability is not the company’s number one focus. We are still -- our primary goal is to gain as much market share as possible. Yeah, so in the future with that in mind, we will still to work really hard for this goal. In the meantime, we will control our cost also as much as possible. For the -- I’m sorry, I can’t remember the third question, could you repeat that, the third question one more time?

Yeah. I think it’s about the cost saving room going forward. You mentioned, I think, you have partly answered that in your second question?

Oh! Okay. Yeah. Yeah. Like, well, I can probably add a little bit regarding, while in terms of the cost savings. Yes, for the company we believe there is still room for us to further save the cost and also the sales. Like, for example, the sales and marketing expenses, as Tongbo mentioned, right now we are still expanding our free trial courses and some other new initiatives. And we believe once those new initiatives take effect then we will save more cost regarding the student acquisition cost. Yes, so we -- probably is [ph], yes, we’ll still have room to further save our costs and expenses.

Okay. Thank you.

[Operator Instructions] The next question comes from Timothy Zhao with Goldman Sachs. Please go ahead.

Hi, management. Thanks for taking my questions. Just one quick follow-up. I think you have made a good -- pretty good progress on diversifying the revenue and the gross billing. Can you discuss more about between the master-oriented program and STE and professional certification. Can you share more color on the ASP and also how much or how long does that take to recognize the revenue? Thank you.

Okay. For the -- I think, first of all, I want to really emphasize that both master-oriented education and professional certification market have huge potential, that’s the reason why the company is focusing more on those two subsectors compared to before. In terms of ASP and service period in the master-oriented education market and professional certification market unlike STE their courses sometimes are, like, very different. Some courses are long, some courses are pretty short, so while it’s really hard to give a very exact like service period and ASP. But, overall, compared to STE, those courses tend to have a shorter service period and higher especially the master-oriented education market has a higher ASP compared to the STE market.

Thank you.

[Operator Instructions] I am showing no further questions. This will conclude our question-and-answer session. At this time, I’d like to turn the conference back over to Yingying Liu, Investor Relations Director for any closing remarks.

Once again, thank you everyone for joining today’s call. We look forward to speaking with you again soon. Good day and good night.

This concludes the earnings conference call. You may now disconnect your line. Thank you.