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DATE

Thursday, March 19, 2026 at 6:30 a.m. ET

CALL PARTICIPANTS

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

TAKEAWAYS

  • Net Revenue -- RMB 470.2 million in the fourth quarter, a 2.7% decrease compared to RMB 483.5 million in the prior-year period.
  • Net Income -- RMB 38.4 million for the fourth quarter, down from RMB 57.8 million in the same quarter last year.
  • Gross Margin -- 86.9% for the full year, representing a 2.9 percentage point increase year over year.
  • Operating Cash Flow -- RMB 147 million of positive net inflow for the full year.
  • Revenue Mix (Q4) -- Degree and diploma-oriented postsecondary programs contributed 18.2%, while interest, professional skills, and certification preparation programs made up 66.8%.
  • R&D Expenses -- Increased by 71.3% year over year to RMB 7.7 million in the fourth quarter, driven by higher outsourcing fees for technology development.
  • Sales and Marketing Expenses -- Decreased by 19% to RMB 254.9 million in the fourth quarter due to lower compensation and reduced branding spend for interest courses.
  • General and Administrative Expenses -- Rose 25.9% to RMB 40.2 million in the fourth quarter, primarily from higher compensation costs.
  • Deferred Revenue -- Stood at RMB 585.3 million at year end, down from RMB 916.5 million one year prior.
  • Guidance for Next Quarter -- Management expects net revenues between RMB 420 million and RMB 440 million, implying a 9.8%-13.9% year-over-year decline.
  • Profitability Streak -- Achieved 19 consecutive quarters of profitability, according to CEO Tongbo Liu.

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RISKS

  • Management’s Q1 2026 guidance indicates a projected net revenue decline of 9.8%-13.9% year over year, explicitly reflecting “substantial uncertainty” in market and operating conditions.
  • Deferred revenue balance fell to RMB 585.3 million from RMB 916.5 million, which may indicate weaker future revenue visibility.

SUMMARY

Management outlined a deliberate strategy focused on efficiency, margin expansion, and disciplined investment, especially in AI and interest-based education offerings targeted at senior learners. The company noted a meaningful ramp in R&D spending, particularly to advance its AI capabilities for personalized instruction and adaptive content delivery. Management described China's senior interest education market as offering a "long runway for growth," anchoring future expansion efforts in that segment.

  • CEO Tongbo Liu said, "the question is no longer whether we can sustain profitability. The more important question is whether we can continue to grow while preserving the operation foundation that made that profitability possible."
  • Management acknowledged reduced investment in degree and diploma-oriented programs and stated that interest-based learning is now the primary strategic direction.
  • Gross profit for the quarter increased to RMB 408.1 million, up 1.6% year over year, despite lower revenues.
  • Cash, cash equivalents, and restricted cash increased to RMB 576.8 million, while short-term investments declined to RMB 235.9 million.
  • Product development expense growth outpaced all other operating expense lines, reflecting a significant change in resource allocation.

INDUSTRY GLOSSARY

  • Deferred Revenue: Payments received for goods or services not yet delivered, carried as a liability as future revenue recognition depends on fulfillment.
  • Interest-Based Learning: Educational programs structured around learner hobbies or personal interests rather than formal degree paths.
  • STE (Self-taught Higher Education Examination): A Chinese national examination allowing learners to earn academic degrees through self-study and passing government exams.

Full Conference Call Transcript

Tongbo Liu: Okay. Thank you, Yuhua. Hello, everyone. Welcome to Sunlands' First Quarter and Full Year 2025 Earnings Conference Call. Prior to commencing, I would like to commencing, I would like to kindly remind all attendees that the financial information referenced in this release is presented on a continuing operation basis and all figures are denominated in RMB unless explicitly specified otherwise. We closed the fourth quarter with net revenue of RMB 470.2 million and net income of RMB 38.4 million, representing our 19th consecutive quarter of profitability. For the full year, net revenue reached RMB 2.02 billion, up 1.5% year-over-year, while net income increased 6.9% to RMB 365.6 million and the gross margin expanded by 2.9 percentage points to 86.9%.

These results reflect the operating priority we set at the beginning of the year, precision over scale. We made deliberate choices throughout 2025, tightening customer acquisition, strengthening delivery consistence and improving organizational efficiency. The margin and income outcomes you see are a direct product of those choices. Let me now turn to the performance of our major cost categories. In 2025, degree and diploma-oriented postsecondary programs contributed 13.5% of full year net revenues and 18.2% in the fourth quarter. The shift in mix was an intentional strategic choice. Demand in this segment remains stable, but we have been intentionally moderating investment and reallocating resources towards areas with greater long-term potential.

We will continue to stay close to leaner demand and adjust with discipline as market conditions evolve. Interest, professional skills and certification preparation programs together contributed 73.9% of full year net revenue and 66.8% in the fourth quarter. Over the past several years, we have invested steadily in product breadth, instructional design and community infrastructure across those offerings. Within this segment, as adult learning needs continue to evolve, our view remains clear. Based on our assessment of the market, interest-based learning continue to be a primary strategic direction for us going forward. As we have built out this strategy, senior learners have remained at the core of that opportunity.

Our focus here is a long-term and deliberate and the progress we are seeing today is a continuation of the work we started in 2020 when the category was still in its very early stages and largely overlooked. 5 years later, the structural tailwinds are more visible. China's senior population continue to expand and the market for senior interest education remains in the early stage of development, which, in our view, points to a long runway for growth. According to Frost & Sullivan, the user base for senior interest education in China is projected to reach approximately RMB 86 million in 2025 and exceed RMB 100 million by 2027.

In the fourth quarter, in addition to continue to enrich our portfolio of online courses for senior learners, we also placed a greater emphasis on offline activities. Further extending the learning experiences beyond the classroom. During the quarter, we organized multiple category and planting exhibition for our learners, including one in collaboration with rumba, one of China's most established cultural institution. Our senior students also participated in the recording of a Spring Festival Gala program broadcast by China Education Television in January. These activities are an important part of the learning journey for senior learners, creating opportunity for expression, social connection and a stronger sense of participation.

Looking ahead, we will continue to scale this business with patience, discipline and a clear respect for delivery capacity -- for this cohort, we look beyond a single repurchase cycle and focus more on brand loyalty and lifetime participation, which is how long learners they are active with us and how constantly they return over time. Interest-based learning is a strong entry point for us. It allows us to build a closer relationship with learners through repeatedly participation and community engagement. And it opens up more opportunities over time to serve them across additional learning needs and life stages. The past year also marked a meaningful step forward in the practical application of AI in adult education.

The emergence of large language model has explained what is operationally possible, particularly in personalized instruction and adaptive content delivery at scale. As the technology matures, AI is becoming a real productive driver across the online education value chain from curriculum design and delivery models to the student experience. And we intend to advance in deliberate and disciplined way. Reflecting that commitment, fourth quarter R&D expenses increased 71.3% year-over-year, moving intentionally in the opposite direction of selling expenses as we invest in the next layer of capability. As we enter 2026, the question is no longer whether we can sustain profitability.

The more important question is whether we can continue to grow while preserving the operation foundation that made that profitability possible. Looking ahead, we remain focused on capturing the AI opportunity by embedding it across more parts of the business and turning source of growth and operation momentum while results with speed and discipline. As always, we will make the results speak for themselves. That concludes Tongbo's prepared remarks. I will turn the call over to our Financial Director, to run through our financials.

Hangyu Li: Thank you, Tongbo. Hello, everyone. I'm pleased to share our fourth quarter and full year results. Numbers that reflect both the discipline of our execution and the durability of our business model. For the full year, we delivered net revenues of RMB 2.02 billion, up 1.5% year-over-year with net income of RMB 365.6 million. Gross margin expanded 2.9 percentage points to 86.9% and the net margin reached 18.1%. These are not just strong numbers. They are the product of deliberate choices made over several years about where to invest, where to pull back and how to build a business that improves with time. Our operating cash flow remained healthy with positive net inflow totaling RMB 147 million in 2025.

Cash generation at this level gives us the flexibility to invest with conviction, manage through uncertainty and stay focused on the long term rather than the quarter in front of us. The year was defined by a shift in focus from doing more to doing things better. We tightened our approach to customer acquisition and consistency and accelerated product development cycles. Each of these improvements compounded into the margin and cash flow performance you see today. Looking ahead, we enter 2026 with a clear sense of where the opportunities are and the proven operational foundation to pursue them. Our work is never finished, but the progress we've made gives us every reason to be confident in what comes next.

Now let me walk you through some of our key financial results for the fourth quarter of 2025. All comparisons are year-on-year and all figures are in RMB, unless otherwise noted. In the fourth quarter of 2024, net revenues decreased by 2.7% to RMB 470.2 million from RMB 483.5 million in the fourth quarter of 2024. Cost of revenues decreased by 23.9% to RMB 62.1 million in the fourth quarter of 2025 from RMB 81.7 million in the fourth quarter of 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 1.6% to RMB 408.1 million in the fourth quarter of 2025 from RMB 401.8 million in the fourth quarter of 2024. In the fourth quarter of 2025, operating expenses were RMB 302.9 million, representing a 13.8% decrease from RMB 351.3 million in the fourth quarter of 2024. Sales and marketing expenses decreased by 19% to RMB 254.9 million in the fourth quarter of 2025 from RMB 314.8 million in the fourth quarter of 2024. The decrease was mainly due to the decline in compensation for sales personnel and the spending on branding and marketing activities focused on interest courses offerings.

General and administrative expenses increased by 25.9% to RMB 40.2 million in the fourth quarter of 2025 from RMB 32 million in the fourth quarter of 2024. The increase was mainly due to a rise in compensation expenses related to company's general and administrative personnel. Product development expenses increased by 71.3% to RMB 7.7 million in the fourth quarter of 2025 from RMB 4.5 million in the fourth quarter of 2024. The increase was mainly due to higher outsourcing service fee for the company's technology development. Net income for the fourth quarter of 2025 was RMB 38.4 million as compared to RMB 57.8 million in the fourth quarter of 2024.

Basic and diluted net income per share was RMB 5.72 in the fourth quarter of 2025. As of December 31, 2025, the company had RMB 576.8 million of cash, cash equivalents and restricted cash and RMB 235.9 million of short-term investments as compared to RMB 507.2 million of cash, cash equivalents and RMB 276 million of short-term investments as of December 31, 2024. As of December 31, 2025, the company had a deferred revenue balance of RMB 585.3 million as compared to RMB 916.5 million as of December 31, 2024.

Now for our outlook, the first quarter of 2026, Sunlands currently expects net revenues to be between RMB 420 million to RMB 440 million, which would represent a decrease of 9.8% to 13.9% year-over-year. The above outlook is based on the current market conditions and reflects the company's current and preliminary estimates of market and operating conditions and customer demand, which are all subject to substantial uncertainty. With that, I'd like to open up the call to the questions. Operator?

Operator: [Operator Instructions] At this time, we are showing no questions. So this will conclude our question-and-answer session. And I would like to turn the conference back over to Yuhua 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.

Operator: This concludes this conference call. You may now disconnect your lines. Thank you.