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DATE

Thursday, November 20, 2025 at 7 a.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — Tongbo Liu
  • Financial Director — Hangyu Li
  • Chief Operating Officer — Yuhua Ye
  • Operator

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RISKS

  • Revenue Guidance -- Hangyu Li provided guidance for 2025 net revenues of $440 million to $460 million, which represents a 4.9% to 9% year-over-year decline, reflecting an explicit expectation of a revenue contraction.
  • Deferred Revenue Decline -- Deferred revenue decreased to $695.5 million as of September 30, 2025, compared to $916.5 million at December 31, 2024, showing reduced forward sales commitments.

TAKEAWAYS

  • Net Revenue -- $523 million, an increase of 6.5% year over year, driven by interest-based course performance and a shorter average service period.
  • Net Income -- $125.4 million, up 40.5%, driven by gross margin expansion and a 5.5% decrease in total operating expenses.
  • Net Margin -- 24%, attributed to an optimized revenue mix and disciplined cost control.
  • Gross Profit -- $462.7 million, a 13.1% year-over-year increase, with gross profit rising faster than revenue.
  • Cost of Revenues -- Decreased 26.5% to $60.3 million, due to lower costs in sales of goods such as learning materials and books.
  • Sales & Marketing Expenses -- Reduced by 7.7% to $279.7 million, supporting margin improvement initiatives.
  • Product Development Expenses -- Increased 48.2% to $8.7 million, mainly from greater compensation expenses for an expanded development team.
  • Revenue Mix -- In the third quarter of 2025, non-degree programs, including professional certification and interest-based courses, accounted for approximately 73% of total revenue, while degree and diploma programs represented 15%.
  • AI-Driven Platform Transformation -- Automated grading now covers over 17% of assignments, delivering an eightfold increase in review efficiency and maintaining an accuracy rate above 95%.
  • Gross Billings per New Enrollment -- For interest, professional skills, and professional certification courses, gross billings rose 11.7% year over year, indicating improved monetization per new student.
  • Cash & Investments -- Cash, cash equivalents, and restricted cash were $601 million as of December 30, 2025, with an additional $176.5 million in short-term investments.

SUMMARY

Management explicitly forecasted 2025 net revenues to decline by 4.9% to 9%, reversing the current period’s growth and signaling a meaningful anticipated contraction. Deferred revenue fell sharply by $221 million since December 2024, suggesting weaker advance sales or shorter customer commitments. While non-degree and certification courses now comprise a dominant share of revenue, spending on product development surged by 48.2%, indicating prioritization of product innovation. Senior learning and AI-driven enhancements were highlighted as differentiators, with management describing their approach as "quality-driven growth" rather than continuing to pursue scale. Guidance was grounded in current operating conditions and customer demand, with risks flagged as preliminary and subject to change.

  • Hangyu Li referenced a shorter average service period as a reason for greater revenue recognition in 2025, a factor likely to influence future top-line reporting.
  • The decline in short-term investments, contrasted with higher cash balances, reshapes near-term liquidity and investment positioning.
  • Net cash from operating activities remained positive through the period, supporting management’s assertions regarding business health.
  • CEO Tongbo Liu stated, "success is no longer measured by sheer scale but by the balance of efficiency, innovation, and long-term value," implying an explicit change in strategic priorities.

INDUSTRY GLOSSARY

  • Deferred Revenue: Customer payments received for services to be delivered later; an indicator of future revenue recognition.
  • Gross Billings: Total sales before recognizing revenue, representing customer commitments secured in the period.
  • Silver Economy: Economic activity and business segments focused on serving senior citizens.

Full Conference Call Transcript

Tongbo Liu: Thank you, Yuhua Ye. Hello, everyone. Welcome to Sunlands Technology Group's Third Quarter 2025 conference call. Prior to commencing, I would like to kindly remind all attendees that the financial information referenced in this release is presented on a continuing operating basis, and all figures are denominated in RMB unless specified otherwise. We are pleased to see that the company has now entered a phase of steady and healthy growth. Our performance in this quarter once again demonstrates the resilience of our model and the effective execution of our strategic roadmap. We delivered net revenue of $523 million, coupled with a pronounced acceleration of profitability, as net income surged 40.5% year over year to $125.4 million.

This achievement validates the durability and stability of our operations. Our strategic pivot towards high-margin, demand-driven course categories continues to yield tangible financial benefits. The net margin expanded significantly to 24%, primarily attributable to optimized revenue mix and disciplined cost management.

Now let's turn to the performance of our major course programs. Our next degree and diploma programs continued to play a stable, supportive role, accounting for approximately 15% of total revenue. The strategic allocation of resources away from this segment has empowered us to aggressively capture growth in more dynamic markets. Moving to our non-degree offerings, including professional certification and interest-based courses, collectively accounted for approximately 73% of total revenue in the third quarter. In this sector, we continuously optimize our services and expand our offerings by launching new programs tailored to diverse user groups. These initiatives aim to provide engaging and interactive experiences, improve learning outcomes, and ultimately create value for our users.

Building on this momentum, we continue to deepen our presence in one of our most distinctive segments: senior learning. As an early mover in this space, we have established a strong foundation, particularly in arts education, where our curriculum and pedagogical depth remain unmatched. As the market evolves and competition intensifies, we have deliberately shifted from reactive scale to quality-driven growth, ensuring the long-term resilience of our business. In a recent feature, several of our senior learners shared their enthusiasm and renewed sense of vitality, reaffirming the social and emotional impact of our mission to make lifelong learning both enriching and transformative. We have also successfully cultivated a vibrant private ecosystem for this cohort, which continues to demonstrate exceptional engagement.

Our senior learners are not only embracing online learning as a lifestyle but also forming vibrant social ecosystems through our platform. Courses have become gateways to renewed identity and connection.

To further enrich this experience, we actively pioneer innovative collaborations across industries. Last quarter, we partnered with a leading television channel to co-host a cultural initiative celebrating traditional arts. They applauded the immersive learning journey that allows senior learners to explore the origins and beauty of Chinese calligraphy. Our pipeline for the coming quarter remains robust, with a series of integrated learning and lifelong enrichment initiatives already in motion. We are launching charity programs in rural schools, participating in the New Year's expos, organizing collaborations, and preparing for Spring Festival events. These activities are designed to help older users rediscover purpose, foster social connections, and shine in every aspect of their lives.

This holistic approach not only activates the intrinsic value of our educational offerings but also fuels a powerful and sustainable competitive moat.

Parallel to the offline initiatives, we are elevating the learning experiences through an AI-driven transformation of our platform. In response to learners' key needs, extending post-course engagement, preventing knowledge loss, ensuring 24/7 personal support, and bridging the gap to everyday practice, we have introduced two intelligent assistant models powered by large language models. The course intelligence assistant provides real-time reinforcement and precise explanations, while the AI agent enables natural language interactions to transform knowledge into actionable insights. As we continue to advance integration across operations, the results have been encouraging. Our internal data shows that AI-assisted automated grading now covers over 17% of assignments, increasing review efficiency by more than eight times and achieving an accuracy rate above 95%.

This has significantly reduced the repetitive workload of instructors and enhanced teaching quality.

Looking ahead, the adult education sector is entering a new phase driven by high-quality growth. For Sunlands Technology Group, success is no longer measured by sheer scale but by the balance of efficiency, innovation, and long-term value. We believe that healthy cash flow, organizational agility, and learner-centered product benefits will remain the core pillars of Sunlands Technology Group's competitiveness in the future. We extend our gratitude for your presence today and the continued support that you provide. Thank you. We look forward to your valuable engagement. With that, I will turn the call over to our financial director, Hangyu Li, to run through our financials.

Hangyu Li: Thank you, Tongbo Liu. Hello, everyone. The third quarter results reflect the company's focus on profitable growth and operational excellence. Net revenues for the quarter increased by 6.5% year over year to $523 million, primarily fueled by the strong performance of our interest-based courses. A key highlight was the substantial growth in profitability. Gross profit rose 13.1% to $462.7 million, outpacing revenue growth. This, together with a 5.5% reduction in total operating expenses, drove net income to $125.4 million, with the net margin reaching 24%. The company's balance sheet remains robust, with ample cash and cash equivalents and short-term investments.

We have also maintained our streak of generating positive net cash from operating activities, underscoring the health of our core business.

In 2025, the gross billings per new student enrollment for interest, professional skills, and professional certification courses grew 11.7% year over year, reflecting steady user acquisition momentum despite a more selective marketing approach. This growth indicates that we are attracting more committed users and achieving better monetization from each new cohort. The combination of enrollment growth and improved unit economics demonstrates the effectiveness of our refined strategy, focusing not merely on scale but on sustainable, high-quality growth.

Looking ahead, we are uniquely positioned at the confluence of demographic tailwinds and technological innovation. Our leadership in serving the silver economy, backed by a profitable and scalable model, sets the stage for continued value creation for our users and shareholders alike. We extend our sincere gratitude to our team and our shareholders for their continued support. Now let me walk you through some of our key financial results for 2025. All comparisons are year over year, and all numbers are in RMB unless otherwise noted.

In 2025, net revenues increased by 6.5% to $523 million from $491.3 million in 2024. The increase was primarily due to a shorter average service period in 2025, resulting in increased revenue recognition year over year. Cost of revenues decreased by 26.5% to $60.3 million in 2025 from $82.1 million in 2024. The decrease was mainly due to declined cost of revenues from sales of goods, such as learning materials and books. Gross profit increased by 13.1% to $462.7 million in 2025 from $409.2 million in 2024. Sales and marketing expenses decreased by 7.7% to $279.7 million in 2025 from $303 million in 2024.

General and administrative expenses increased by 4.3% to $36 million in 2025 from $34.5 million in 2024. Product development expenses increased by 48.2% to $8.7 million in 2025 from $5.8 million in 2024. The increase was mainly due to increased compensation expenses related to the expansion of the company's product development personnel. Net income for 2025 was $125.4 million, as compared to $89.3 million in 2024. Basic and diluted net income per share was $18.64 in 2025.

As of December 30, 2025, the company had $601 million of cash, cash equivalents, and restricted cash, and $176.5 million of short-term investments, as compared to $507.2 million of cash, cash equivalents, and $276 million of short-term investments as of December 31, 2024. As of September 30, 2025, the company had a deferred revenue balance of $695.5 million, as compared to $916.5 million as of December 31, 2024.

And now for our outlook for 2025, Sunlands Technology Group currently expects net revenues to be between $440 million to $460 million, which would represent a decrease of 4.9% to 9% year over year. The above outlook is based on the current market conditions and reflects the company's current and preliminary estimates of market operating conditions and customer demand, which are all subject to change. With that, I'd like to open up the call to questions.

Operator: Thank you. To ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. Thank you. Please standby while we compile the Q&A roster. And once again, if you would like to ask a question, you will need to press 11. And to withdraw your question, please press 11 again. And once again, that's 11 for any questions.

At this time, we are showing no questions coming through, so this would conclude the question and answer session. And at this time, I would like to turn the conference back over to Yuhua Ye for any closing remarks.

Yuhua Ye: 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 conference call. You may now disconnect your line. Thank you.