TCTM Kids IT Education Inc.
Q3 2020 Earnings Call Transcript

Published: 13 Nov 2020

[Operator:]

Ladies and gentlemen, thank you for standing by, and welcome to the Third Quarter 2020 Tarena International, Incorporated Earnings Conference Call. At this time, all participants are in listen-only mode. After speakers' presentation, there will be a question-and-answer session. And please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker today, Ms. Amanda Wang, IR, Director. Thank you. Please go ahead.

[Amanda Wang:]

Thank you, operator. Hello, everyone, and welcome to Tarena's earnings conference call for the third quarter of 2020. The company's earnings results were released earlier today and are available on our website, ir.tedu.cn, as well as on Newswire services. Today, you will hear from Mr. Yongji Sun, our CEO; Ms. Nancy Sun, our Senior VP and Mr. Kelvin Lau, our CFO, who will take you through the company's operational and financial results for the third quarter of 2020 and give revenue guidance for the fourth quarter. After their prepared remarks, Mr. Sun, Nancy and Kevin will be available to answer your questions.

[Yongji Sun:]

Thank you, Amanda, and thank you everyone for joining us today. We are delighted to announce our results for the third quarter of 2020. We had a weird recovered quarter with inspiring performance. Our total net revenue in the third quarter of 2020 was RMB620.8 million, which was higher than the guidance of RMB570 million to RMB600 million that we provided. Compare to the total net revenue of RMB659.2 million in the third quarter of 2019. The total net revenue in the third quarter of 2020 decreased by RMB38.4 million or 5.8%. The net loss in the third quarter of 2020 was RMB63.9 million as compared to the net loss of RMB110 million in the same period of 2019. Net revenue from K-12 education business increased by 146% from RMB117.7 million in the third quarter of 2019 to RMB289.6 million in the same period of 2020. The number of student enrollments for K-12 education increased by 62% from 75,800 in third quarter of 2019 to 122,800 in the same period in 2020. The number of new students recruited for K-12 education increased by 8.2% from 23,100 in the third quarter of 2019 to 25,000 in the same period in 2020. Net revenue from adult professional education business, decreased by 38.8% from RMB541.5 million in the third quarter of 2019 to RMB331.2 million in the same period of 2020. The number of student enrollments for adult professional education business decreased by 29.4% from 54,400 in the third quarter of 2019 to 38,400 in same period in 2020.

[Nancy Sun:]

Thanks you, Yongji. Hello everyone. Nice to meet all of you again and I'm going to present you with information regarding our operation performance in the third quarter of this year. First of all, I would like to update you the impact of COVID-19 pandemic on our business. In July and August, except for Beijing, Harbin, and Dalian, our adult and the K-12 offline 2C learning centers have resumed their in class session. Starting from September, the direct impact of COVID-19 pandemic on our learning centers in all cities in China, including Beijing, Harbin, and Dalian has basically faded out. Next, please let me share with you some operational information of our adult education business. As I have mentioned in the prior earning release conference, our operational strategy for adult education business is profit maximization. In the past more than one year, we have been optimizing our operational efficiency. Despite that our operations scale have shrunk, the profitability of our adult education has been elevating. Adult education business returned to be profitable in the third quarter of this year. The gross margin increased from 70%, in the third quarter of last year to 71.3% in the same period of this year, increased by 1.3%. Net revenue, in the third quarter of this year decreased by 38.8% to RMB331.2 million, compared to net revenue in the same period of last year. Cost of revenue in the third quarter of this year decreased, by 41.6% to RMB95 million, compared to cost revenue, in the same period of last year. Students enrollment decreased by 29.4%, from 54,400 in the third quarter of last year to 38,400, in the same period of this year. The number of new students recruited, decreased by 45.3% to 15,100, in the third quarter of this year, compared to the number of new students recruited, in the same period of last year. The decrease was mainly due to the significant decrease in number of learning centers. Moreover, due to the COVID-19 pandemic, we were not able to execute most of our summer vacation student recruitment activities. The average of six months and three months post-course job placement rate were 89% and 82% respectively. By the end of September 30, 2020, the three month post-course job placement rate for most of the students who attended our online lessons during the COVID-19 pandemic period was 74%. Our online tutoring experience and the capability, which has been accumulated for more than 18 years, can provide a very solid foundation for our future adult education business development.

[Kelvin Lau:]

Thank you, Nancy. Now, I would like to take you through the third quarter of 2020 financial highlights. Total net revenues decreased by 5.8% to RMB620.8 million in the third quarter of 2020 from RMB659.2 million in the same period of 2019. Net revenue from adult education business decreased by 38.8% to RMB 331.2 million in the third quarter of 2020 from RMB541.5 million in the same period of 2019. The decrease was primarily due to decline in student enrollments of adult education by 29.4%, from 54,400 in the third quarter of 2019 to 38,400 in the same period of 2020. Net revenues from K-12 education business increased by 146% to RMB 289.6 million in the third quarter of 2020, from RMB117.7 million in the same period of 2019. The increase was primarily due to increase in student enrollments of K-12 education by 62%, from 75,800 in the third quarter of 2019 to 122,800 in the same period of 2020.

[Operator:]

[Amanda Wang:]

Okay. Thank you, operator. If there's no further question's at present, we would like to conclude by thank you everyone for joining our conference call. We welcome you to reach out to our directly by emailing at ir.tedu.cn. Should you have any questions or requests for additional information, we encourage you to visit our Investor Relations site at ir.tedu.cn. Thank you.

[Operator:]

Thank you. Ladies and gentlemen, that concludes the conference for the day. And thank you for participating. You now all disconnect.