On March 22, Beijing time, Suntech (NYSE: STG), a leading adult online education company in China, announced its unaudited financial reports for the fourth quarter of 2023 and the full year of 2023.
According to the financial report, as of December 31, 2023, Suntech achieved a net income of RMB542 million (RMB, the same below) and a gross profit of RMB468 million in the fourth quarter of 2023, with a net profit of RMB155 million and a net profit margin of 28.6%, achieving profitability for 11 consecutive quarters. At the same time, in 2023, Suntech achieved a net income of RMB2.16 billion, a gross profit of RMB1.894 billion, and a net profit of RMB641 million, with a net profit margin of 29.7%, achieving profitability for three consecutive fiscal years.
"In the past year, based on our deep insight into the adult education industry and the rapid response ability of the entire organization, we have continuously innovated our products and services to broaden our business boundaries in response to changes in the market environment and user needs. In the fourth quarter of 2023, our net revenue reached RMB542 million and exceeded expectations, with 164,700 new students, and for the full year, we achieved revenue of RMB2.16 billion with 616,300 new students, a year-on-year increase of 15.4%, achieving satisfactory results. ”
"In the past year, the company focused on achieving sustainable growth, continuously improving operational efficiency, and optimizing cost structure, and on this basis, we achieved a record net profit margin of 29.7% for the full year of 2023. At the same time, the annual net operating cash inflow exceeded 135 million yuan, laying a solid financial foundation for the long-term growth of the business. In the future, we will continue to carry out share buybacks in accordance with the guidance of the Board of Directors to create long-term value for shareholders. ”
Suntech's continued high-quality revenue and large-scale profitability show that in the context of the complex macroeconomic and adult education market situation, Suntech is constantly consolidating its barriers and opening up a small cycle to discover certainty by enhancing endogenous momentum while navigating through market cycles. With the macroeconomic recovery, the mainland's demographic dividend turning into a talent dividend, the society's demand for high-quality and full employment is stronger, and the lifelong learning society is becoming more and more perfect, the development pace of Suntech's institution and adult online education market will be more stable.
In line with the changes in the adult education market, diversified courses serve different groups of people
This year's government work report proposes to do a good job in continuing education. Continuing education is conducive to building a learning society, creating a good atmosphere of learning and lifelong learning in the whole society, and vigorously improving the quality of the people.
In the early days of its establishment in 2003, Suntech chose the self-examination and vocational skills training track, and relied on high-quality courses and products and services to accumulate reputation, and soon became the first in the self-examination training industry, and has always maintained a leading position in the market. Continuing to deepen continuing education, Suntech has brought together the top teachers in the market, more than 100,000 courses, and a question bank of nearly one million, and the pass rate of students has been leading for a long time.
With China's macroeconomic development and the improvement of quality of life, today's adults are increasingly aware of the concept of lifelong learning, and more people believe that learning should be a self-directed education for personal development, not just in the school. As a result, more and more adults are taking part in self-directed learning courses to achieve their personal goals, including developing their interests, receiving professional training, learning languages, preparing for university exams, and so on.
Many external factors, including the enhancement of competitiveness in the workplace, continue to encourage working adults to practice the concept of lifelong learning. Many companies set certain preferences when hiring to ensure that they find the best talent, and these requirements have stimulated many adults to do extra learning in their spare time to improve their competitiveness in the workplace. These factors have translated into the good performance of Suntech, which reported a net income of RMB542 million in the fourth quarter of 2023 and a net profit of RMB641 million for the full year of 2023.
According to the "China Adult Learning Market Industry Report" released by Frost & Sullivan, in terms of revenue, the size of China's individual adult learning market will reach 427.3 billion yuan in 2022, with a compound annual growth rate of 8.0% from 2018 to 2022, and the overall market size is expected to reach 792.9 billion yuan by 2027, with a compound annual growth rate of 13.2%.
Suntech is transforming its product structure and enriching its curriculum system to meet the increasing demand for adult education. In the fourth quarter of 2023, in addition to the traditional self-examination, postgraduate entrance examination and other higher education course services, the course content of professional certification, professional skills, and interest projects will be added, on the one hand, to help professionals improve their workplace skills and qualifications, and on the other hand, to meet the interest needs of users of a wider range of ages to broaden their hobbies. In the fourth quarter of 2023, Suntech added 164,700 new paying users, continuing to maintain rapid growth.
The rigid demand of adult education users is weak, the repurchase rate is low, the life cycle is short, and the adult learning energy is limited, which is difficult to adhere to, resulting in high after-sales pressure such as refunds. At the same time, the high cost of customer acquisition is a long-standing problem in the online education industry. Against this backdrop, Suntech has closely tracked market changes, diversified course content, improved course quality, optimized customer acquisition processes, and made 11 consecutive quarters of profitability indicating that Suntech has a first-mover advantage.
Refined operation to improve quality and efficiency, and build a "moat" for teachers' teaching and research
In the fourth quarter of 2023, Suntech continued to perform well in controlling costs, improving quality and efficiency. Operating costs for the quarter were RMB73.75 million, down 2% year-on-year, and administrative expenses were RMB35.47 million, down 36.8% year-on-year, reflecting the Company's internal management reform and efficiency improvement.
Suntech has taken multiple measures to reduce costs and improve operational efficiency within a reasonable range. On the one hand, Suntech continues to control costs by improving operations and strictly managing expenses, and on the other hand, Suntech improves marketing efficiency by referring word-of-mouth marketing, internal conversion of students between different courses, and establishment of private domain traffic.
Why Suntech has been able to reduce costs while maintaining the growth of the number of trainees? This is due to the refined product production system. Suntech's curriculum development follows standard operating procedures (SOPs), which first identify relevant course topics through first-hand market and user research, then produce high-quality content based on the learning needs of precise users, and test the effectiveness of course content and delivery on a small scale before fully implementing the course. By broadening the types of courses with different content and different prices, we can cover more users and effectively improve operational efficiency in terms of increasing the repurchase rate and referral rate. Benefiting from Suntech's mature curriculum system, management system, business process and technical system over the years, Suntech has continuously expanded the supply of educational products at low cost and standardization, and achieved healthy growth in performance.
Teachers, teaching and research are the core of improving quality and efficiency. As a leading enterprise in adult education for 20 years, Suntech has unique advantages in teaching and research, and has established a student-oriented and innovative teaching team. Suntech proposes the strategy of "one core and multiple wings" to improve the quality of teachers, "one core" refers to recruiting high-quality teachers and improving the quality of courses, and "multi-wing" refers to relying on a complete teacher rating system to evaluate teachers' teaching level, relying on a rich teacher training system to help teachers grow, relying on multiple teaching channels to exercise teachers' teaching ability, and relying on a standard teaching plan and teaching template system to empower teachers to prepare for teaching.
It is worth noting that in the past two quarters, Suntech has been increasing its investment in faculty, marketing, and R&D, and the relevant indicators have increased quarter-on-quarter, which has led to an increase in cash income, which is conducive to further recognition of the subsequent net income growth. In the fourth quarter of 2023, cash receipts were $415 million, up 12% compared to last year and up 6.5% sequentially.
Pay close attention to the application of new technologies such as AIGC to improve the experience of online education products
As a leading enterprise in the field of adult online education, Suntech has completed its online transformation as early as 2014 and has been committed to the R&D and application of cutting-edge technologies such as AI for many years.
During the quarter, Suntech continued to dig deeper into digital productivity and paid close attention to the application of new technologies such as AIGC in the industry to enhance the endogenous driving force of business growth. In terms of big data, Suntech has set up a data center, has its own underlying computing cluster, and a complete data collection and processing process, and in terms of AI, it has integrated AI technology into the course recommendation and matching, teaching and research design, and student learning process, which not only helps teachers liberate themselves from tedious work, but also provides students with personalized learning solutions and improves students' learning efficiency. At present, cutting-edge technologies such as AI and big data have penetrated into the entire industrial chain of "teaching, training, testing and evaluation" of Suntech.
According to the China Adult Learning Market Industry Report released by Frost & Sullivan, in terms of revenue, the size of China's online personal adult learning market reached 109.3 billion yuan in 2022, accounting for 25.6% of the overall personal adult learning market, and is expected to reach 242.4 billion yuan by 2027, with a compound annual growth rate of 17.3% between 2022 and 2027.
As the "first domestic adult online learning stock to be listed in the United States", Suntech has always led the development of the industry with its forward-looking educational philosophy and innovative spirit. As early as 2011 and 2013, Suntech Institute began to explore a variety of online education models, including question banks, human-computer dialogues, and recorded broadcasts, and finally chose the live broadcast mode with the highest completion rate, and completed the transformation of comprehensive online teaching in 2014.
Now, with more than 20 years of intensive cultivation in the field of adult education and the advantages of big data accumulated over the years, Suntech has once again embraced the challenges and opportunities of technological innovation. In the face of the new wave of science and technology, Suntech will not only use new technologies to reduce costs and increase efficiency, but also continue to optimize educational products and services and improve teaching quality, in order to provide a more efficient and personalized learning experience for adult students.
"Looking ahead, we will continue to develop high-quality curriculum products and services through continuous innovation, and firmly implement the long-term growth and profitability balance strategy to create long-term value for shareholders and society," said the management of Suntech. ”