Earnings Labs

17 Education & Technology Group Inc. (YQ)

Q3 2023 Earnings Call· Thu, Dec 7, 2023

$2.08

-1.89%

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Transcript

Operator

Operator

Good evening and good morning, ladies and gentlemen. And thank you for standing by for 17EdTech's Third Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I'll now turn the meeting over to your host for today's call, Ms. Lara Zhao, 17EdTech's Investor Relations Manager. Please proceed, Lara.

Lara Zhao

Analyst

Thank you, operator. Hello, everyone and thank you for joining us today. Our earnings release was distributed earlier today and is available on our IR website. Joining us today are Mr. Michael Du, Director and Chief Financial Officer; and myself, Investor Relations Manager. Michael will walk you through our latest business performance and strategies and I will discuss our financial performance in more details. After the prepared remarks, Michael will be available to answer your questions during the Q&A session. Before we begin, I'd like to remind you that this conference call contains forward-looking statements as defined in Section 21E of the Securities Exchange Act of 1934 and the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon management's current expectations and current market and operating conditions and relates to events that involve known, unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control. These risks may cause the company's actual results, performance or achievements to differ materially. Further information regarding these and other risks, uncertainties or factors is included in the company's filings with the U.S. SEC. The company does not undertake any obligation to update any forward-looking statements, as a result of new information, future events or otherwise, except as required under applicable law. I will now turn the call over to our Director and Chief Financial Officer, to review some of our business development and strategic direction. Michael, please go ahead.

Michael Du

Analyst

Thank you, Lara. Hello, everyone. Thank you all for joining us on our third quarter 2023 earnings call. Before we begin, I would like to note that the financial information and the GAAP numbers in this release are presented on a continuing operation basis and in RMBs unless otherwise stated. Let me start with our latest business update. In this quarter, our business continued to evolve and we made progress in establishing additional billing models to remain flexible under the current economic environment. We managed to deliver a high value of projects, compared to the same quarter last year. However, the decrease in our total revenue compared to the same quarter last year was because of the cessation of our self-directed learning products and services and our other educational services, due to regulatory environment change. There are 2 positive trends worth noting. We managed to sign contracts of higher value in the third quarter of 2023 than the second quarter 2023 when we exclude the RMB116 million long-term Minhang projects; and two, an increasing number of projects are now being signed under the SaaS billing model which although generates revenues over a longer period of time but is more likely to be recurring in nature. This will allow the company to accumulate a healthier and recurring project portfolios, that will lead to a healthier financial foundation. At the same time, we continue to pursue improvements in operational efficiency and reduce operational expenses. We are committed to build -- building a business that enhances teacher's teaching and student's learning experiences through our deep insights into education and technology. Now, please allow me to go into more details. During the quarter, the company successfully won the bid for our new smart-pen and intelligent homework-based digital transformation service projects in Shanghai Chongming project…

Lara Zhao

Analyst

Thanks, Michael and thank you, everyone, for joining us on the call. I will now walk you through our financial and operating results. Please note that all financial data I talk about will be presented in RMB terms. I would like to remind you that the quarterly results, we present here, should be taken with care and reference to our potential future performance and subject to potential impact. From seasonality and one-off events, as a result of the series of regulations introduced in 2021 and corresponding adjustments to our business model, organization and workforce. During the quarter, the company continued to pursue improvements in operational efficiency and innovative strategies to broaden our customer base. Leveraging artificial intelligence to further enhance user experience and improve efficiency capabilities. Our strong focus on innovation, customer experience and exploring new business models has put the company in a strong position for future success. In the third quarter of 2023, we recorded net revenues of RMB45.1 million, compared with RMB69.2 million in the second quarter, representing a 63.8% of decrease on a quarter-on-quarter basis. The net loss for the third quarter of 2023 was RMB72.9 million compared with RMB47.9 million in the second quarter of 2023. And RMB20.5 million for the third quarter of 2022. The adjusted net losses for the third quarter of 2023 was RMB53.7 million, compared with the adjusted net income non-GAAP of RMB8.3 million in the third quarter of 2022 and RMB28.6 million on a quarter-on-quarter basis. Furthermore, our gross margin has further improved to 54.1%, up 5.8 percentage points, compared with 48.3% in the second quarter of 2023. As of September 30, 2023, we have cash reserves of RMB523.5 million on our balance sheet, providing sufficient funds for future development. Next, I will go through our third quarter financials in…

Operator

Operator

Lara Zhao

Analyst

Thank you, operator. In closing, on behalf of 17EdTech's management team, we'd like to thank you for your participation on today's call. If you require any further information, please feel free to reach out to us directly. Thank you for joining us today. This concludes the call.