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Operator: Ladies and gentlemen, thank you for standing by, and welcome to Sunlands’ First Quarter 2025 Earnings Conference Call. [Operator Instructions] Today’s conference call is being recorded. I will now turn the call over to your host today, Yuhua, Sunlands’ IR representative. Please go ahead.

Yuhua Ye: Hello, everyone, and thank you for joining Sunlands’ First Quarter 2025 Earnings Conference Call. The company’s financial and operating results were issued in our press release via newswire services earlier today and are posted online. You can download the earnings press release and sign up for our distribution list by visiting our IR website. Participants on today’s call will be our CEO, Mr. Tongbo Liu; and our Financial Director, Mr. Hangyu Li. Management will begin with prepared remarks, and the call will conclude with a 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 historical information contained herein, certain 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’ll now turn the call over to our CEO, Tongbo Liu.

Tongbo Liu: Thank you, Yuhua. Hello, everyone. Welcome to Sunlands’ First Quarter 2025 earnings conference call. Prior to commencing, I would like to kind of remind all attendees that the financial information referenced in this release are presented on a continuing operations basis, and all figures are denominated in RMB unless explicitly specified otherwise. In the first quarter of 2025, we reported net revenue of RMB 487.6 million and net income of RMB 75.2 million, marking our sixteenth consecutive profitable quarter, and an encouraging start to the year that reinforces our confidence in delivering sustained growth throughout 2025. While net revenue remained relatively stable, our continued profitability and disciplined execution reflects the underlying resilience of our business model.

Net income margin reached 15.4% supported by effective cost optimization and ongoing operational efficiency improvements. Meanwhile, our financial fundamentals remain robust. This quarter marked our seventh consecutive period of positive operating cash flow underpinned by sound execution and prudent cash management. Looking ahead, we will continue to refine our business mix concentrating on high-margin, high potential areas to reinforce structural flexibility and long-term resilience. On the product front, we continue to deepen and diversify our course portfolio. We refined our core subject areas, while extending into adjacent domains such as wellness and lifestyle, aligned with increasingly diverse needs of lifelong learners. Driven by our course diversification strategy, this quarter’s total enrollment reached over 179,000 (sic) [ 169,000 ] also supported by meaningful improvements in learner engagement and retention.

Technology also remains central to our strategy. This quarter, we further advanced the digital transformation of cooperations by embedding AI tools that enhance curriculum precision and boost learner engagement. Now let’s turn to the performance of each of our major course programs. In the first quarter of 2025, degree and diploma post-secondary programs contributed 9.7% of total revenue. This sector has experienced a moderated trajectory and our celebrated scale back investments has allowed us to reallocate resources towards high-growth opportunities more effectively. Going forward, we will continue to monitor macro education trends and demographic shifts closely, ensuring our approach remains agile and responsive to evolving conditions. The sector encompassing interest-based programs, professional skills development and professional certification preparation, accounted for a substantial 78.2% of our total revenue, with interest-driving courses emerging as a fundamental pillar.

Unlocking the full potential of interest learning among middle-aged and senior learners remains a central strategic priority. In this area, we have remained steadfast in pursuing a clear future-oriented strategy rooted in openings, integration and innovation while deepening our initiatives across multiple fronts. First, we have embraced a partnership-driven approach to amplify value creation. As China’s aging population expands, the senior consumer market is drawing increased participation from diverse industries, including consumer brands, health care service providers and traditional media. This convergence presents significant opportunities for core sector collaboration. Following last year’s successful partnership with Beijing TV, we established a new cooperation with Hunan TV’s Happy Shopping platform this quarter, leveraging its broad consumer reach and brand influence.

Second, we have further strengthened our hyper delivery model to meet the evolving needs of older learners. For this demographic, education is not only about acquiring knowledge. It is equally about social participation and emotional fulfillment. To address this need, we have adopted primarily online supplemented by offline hybrid model that offers both flexibility and depth. This model has proven especially effective in boosting learner retention and satisfaction. Notably, our curated study tour with integrated education content with culture travel has been particularly well received for their immersive and differentiated value. At the same time, we are deepening our cross-sector collaboration by partnering with galleries and museums to codevelop cultural resonant experiences, further strengthening engagement within the senior segment.

Third, we have refined our curriculum design with a self-developed assist framework, which is answer, comment, supervisor and study to fuel ongoing growth and ensure learner success. This dual teacher model while pairs academic mentors and learning facilitators makes our courses more assessable, engaging and outcome-driven. Leveraging this collaborative learning system, we have attained 98% course competition (sic) [ completion ] rate among new students and 14% increase in knowledge retention, underscoring its effectiveness in delivering substantial educational outcomes. Beyond academic innovation, social mission remains integral to our strategy. Each year, we organize nearly 100 free public interest activities, ensure elderly individuals with cultural or intellectual operations access meaningful learning experiences.

We view this not only as an expression of corporate responsibility, but as a long-term investment in brand trust and mission element. Recent policy developments further reinforce our confidence. With government’s focus on stimulating the domestic consumption and expanding service-oriented sectors, including cultural, tourism and education align closely with our strategic direction. Targeted initiatives and fiscal incentives for innovation in community-based and lifelong learning programs affirm that we are operating in the right space at the right time with ample room to scale, lead and grow. Taken together, these efforts reflect our holistic and forward-looking approach to lifelong learning. Today’s adult learners are increasingly value conscious, seeking premium, immersive and social engaging experiences.

This shift affirms our early position and highlights the long-term potential of adult learning economy. Moving forward, we will continue enhancing our offerings, strengthening ecosystem integration and deepen engagement, ensuring we remain well positioned to lead this evolving sector. While macroeconomic and geopolitical uncertainties persist, the impact on our business has been limited given our domestic focus. Nonetheless, we remain vigilant proactively managing risks while staying alert to new opportunities. Looking ahead, we will continue strengthening our core capabilities, expanding our core offerings, embracing [Technical Difficulty] disciplined focus on value creation. We are confident this approach will deliver sustainable long-term returns for shareholders and meaningful learning outcomes for our students.

This concludes my prepared remarks. With that, I will turn the call to our Financial Director, Hangyu, to run through our financials.

Hangyu Li: Thank you, Tongbo. Hello, everyone. I’m pleased to report our results for the first quarter of 2025. During the quarter, we successfully responded to the volatile market environment and achieved solid results. We had gross profit margin of 85.2% and a net margin of 15.4% with net income of RMB 75.2 million. This solid start is a testament to our prudent financial management and the sustainability of our business. Our co-interest and professional certification programs continue to be engines of growth. The series of successful strategic initiatives supported average order value growth of 7.5% and resulted in 169,083 new student enrollments. Financially, we maintained positive operating cash flows for the seventh consecutive quarter with cash, cash equivalents and short-term investments totaling RMB 796.9 million.

Our healthy financial position further strengthens our ability to cope with market uncertainties while making strategic investments. Looking ahead, we maintain efficient operations, enhance artificial intelligence-driven cost personalization and capitalize on policy benefits in the lifelong learning space. Despite the recent decline in revenues, we believe our healthy financial position and the flexible business model will allow us to capitalize on the long-term opportunities in China’s aging-driven education market. Let me now walk you through some of the key financial results for the first quarter of 2025. Unless otherwise noted, all figures are in RMB and all comparisons are made year-over-year. In the first quarter of 2025, net revenues decreased by 6.8% to RMB 487.6 million from RMB 523.2 million in the first quarter of 2024.

The decrease was driven by the decline in gross billings from post secondary courses over the recent quarters, resulting in a year-over-year decrease in net revenues from post secondary courses. Cost of revenue decreased by 6.3% to RMB 72.3 million in the first quarter of 2025 from RMB 77.2 million in the first quarter of 2024. The decrease was mainly due to the declined compensation expenses related to head count reduction including teachers and mentors. Gross profit decreased by 7.9% (sic) [ 6.9% ] to RMB 415.3 million in the first quarter of 2025 from RMB 446.1 million in the first quarter of 2024. In the first quarter of 2025, operating expenses were RMB 341.1 million which were the same as the first quarter of 2024. Sales and marketing expenses were RMB 304 million (sic) [ RMB 300.4 million ] in the first quarter of 2025, which remained relatively stable as compared to RMB 301.6 million in the first quarter of 2024.

General and administrative expenses increased by 5.9% to RMB 34.5 million in the first quarter of 2025 from RMB 32.6 million in the first quarter of 2024. Product development expenses decreased by 11% to RMB 6.2 million in the first quarter of 2025 from RMB 7 million in the first quarter of 2024. The decrease was mainly due to declined compensation expenses related to headcount reduction of our product development personnel. Net income for the first quarter of 2025 was RMB 75.2 million as compared to RMB 112.7 million in the first quarter of 2024. Basic and diluted net income per share was RMB 11.12 in the first quarter of 2025. As of March 31, 2025, the company had RMB 596.2 million of cash and cash equivalents and RMB 200.7 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 March 31, 2025, the company had a deferred revenue balance of RMB 891.6 million as compared to RMB 916.5 million as of December 31, 2024. Now for our outlook. For the second quarter of 2025, Sunlands currently expects net revenues to be between RMB 500 million to RMB 520 million, which would represent an increase of 1.6% to 5.6% year-over-year. This outlook is based on the current market conditions and reflects the company’s management’s current and preliminary estimate of current market operating conditions and the customer demand, which are all subject to change. With that, I’d like to open up the call to the questions. Operator?

Operator: [Operator Instructions] As we are showing no questions, I will conclude our question-and-answer session. At this time, 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 line. Thank you.