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Tarena International, Inc. Announces the Results for the First Quarter of 2023

Tarena International, Inc. Announces the Results for the First Quarter of 2023

BEIJING, June 13, 2023 /PRNewswire/ -- Tarena International, Inc. (NASDAQ: TEDU) ("Tarena" or the "Company"), a leading provider of IT professional education and IT-focused supplementary STEAM education services in China, today announced its unaudited financial results for the first quarter ended March 31, 2023.

First Quarter 2023 Highlights

  • Total student enrollment in IT-focused supplementary STEAM education increased by 1.0% to 174,800 in the first quarter of 2023, compared to student enrollment of 173,100 in the same period of 2022.
  • Net revenues decreased by 38.2% year-over-year to RMB385.1 million (US$56.1 million) from RMB623.5 million in the same period of 2022.
  • Gross profit decreased by 44.0% year-over-year to RMB201.0 million (US$29.3 million) from RMB358.9 million in the same period of 2022.
  • Gross profit margin decreased by 5.4% points year-over-year to 52.2% from 57.6% in the same period of 2022.
  • Operating loss was RMB58.8 million (US$8.6 million), compared to operating income of RMB28.6 million in the same period of 2022.
  • Non-GAAP operating loss, which excluded share-based compensation expenses, was RMB57.7 million (US$8.4 million), compared to non-GAAP operating income of RMB30.0 million in the same period of 2022.
  • Income tax benefit was RMB8.1 million (US$1.2 million), compared to income tax expense of RMB5.4 million in the same period of 2022.
  • Net loss was RMB49.9 million (US$7.3 million), compared to net income of RMB27.1 million in the same period of 2022.
  • Non-GAAP net loss, which excluded share-based compensation expenses, was RMB48.8 million (US$7.1 million), compared to non-GAAP net income of RMB28.5 million in the same period of 2022.
  • Basic and diluted loss per American Depositary Share ("ADS"), each representing five Class A ordinary shares with an effective date of December 23, 2021, was RMB4.67 (US$0.68) in the first quarter of 2023. Non-GAAP basic and diluted loss per ADS, which excluded share-based compensation expenses, was RMB4.57 (US$0.67) in the first quarter of 2023.

 

Key Financial Results



For the Three Months Ended

March 31,

Variance


% of

 change



2022

Unaudited


2023

Unaudited


RMB





RMB


RMB






(in thousands, except for percentages)

Net revenues


623,506


385,104


(238,402)


-38.2

Cost of revenues(a)


(264,588)


(184,101)


80,487


-30.4

Gross profit


358,918


201,003


(157,915)


-44.0

Gross margin


57.6 %


52.2 %


-5.4 %



Selling and marketing expenses(a)


(172,400)


(113,151)


59,249


-34.4

General and administrative expenses(a)


(141,585)


(131,547)


10,038


-7.1

Research and development expenses(a)


(16,342)


(15,128)


1,214


-7.4

Total operating expenses


(330,327)


(259,826)


70,501


-21.3

Operating income/(loss)


28,591


(58,823)


(87,414)


N/A














Notes:

(a)  Includes share-based compensation expenses.

"The overall financial performance for the first quarter of 2023 indicates that the execution of our prudent financial and operational strategy has paid off amid the uncertain environment, with net operating cash outflow narrowing year-over-year. While we temporarily closed centers early in the quarter, leading to a year-over-year reduction in cash receipts, we strictly controlled our cash expenditures. By implementing effective cost reductions and efficiency enhancements, aided by increasing enrollments in our STEAM education services since February, as well as the general economic recovery following the Chinese New Year, we strove to minimize the impact of the macro headwinds," remarked Ms. Ying Sun, Tarena's Chief Executive Officer.

Ms. Sun continued, "As we enter the second quarter, our businesses have gradually recovered and our STEAM education services are expected to achieve a year-on-year increase. Additionally, to further focus on our core competence in IT-focused supplementary STEAM education services and IT professional education services for the To-C market, we would carve out the college-collaboration related business, which is expected to close soon."

"Going forward, we will continue to optimize our operational efficiency. As the business environment stabilizes, we are confident that we are well positioned to capitalize on a large and ever-evolving IT education market in China and continue to deliver enhanced shareholder value," concluded Ms. Sun.

First Quarter 2023 Results

Net Revenues

Total net revenues decreased by 38.2% to RMB385.1 million (US$56.1 million) in the first quarter of 2023 from RMB623.5 million in the same period of 2022. The decrease in revenues was primarily due to a reduction in student enrollment from the second half of the fourth quarter of last year and the earlier part of this quarter, particularly for IT professional education. Additionally, the Company suspended courses and services for almost the entire month of January, resulting in a dent in revenues.

Cost of Revenues

The cost of revenues decreased by 30.4% to RMB184.1 million (US$26.8 million) in the first quarter of 2023, from RMB264.6 million in the same period of 2022. The decrease was mainly attributable to a reduction in headcount and the resulting decrease in personnel and related welfare costs. Rental costs also decreased as the number of teaching centers decreased compared to the same period of 2022.

Gross Profit and Gross Margin

Gross profit decreased by 44.0% to RMB201.0 million (US$29.3 million) in the first quarter of 2023, from RMB358.9 million in the same period of 2022. Gross margin narrowed to 52.2% in the first quarter of 2023, compared to 57.6% in the same period of 2022, as revenues decline in the quarter is greater than the reduction in the cost of revenues.

Operating Expenses

Total operating expenses decreased by 21.3% to RMB259.8 million (US$37.8 million) in the first quarter of 2023, from RMB330.3 million in the same period of 2022. Total non-GAAP operating expenses, which excluded share-based compensation expenses, decreased by 21.3% to RMB258.7 million (US$37.7 million) in the first quarter of 2023, from RMB328.9 million in the same period of 2022. Total share-based compensation expenses allocated to operating expenses decreased by 21.4% to RMB1.1 million (US$0.2 million) in the first quarter of 2023, from RMB1.4 million in the same period of 2022.

Selling and marketing expenses decreased by 34.4% to RMB113.2 million (US$16.5 million) in the first quarter of 2023, from RMB172.4 million in the same period of 2022. The decrease was mainly due to a decrease in personnel-related costs resulting from a decrease in the number of sales staff in the first quarter of 2023, compared to the same period of 2022. In addition, the reduction in advertisement clicks resulted in a decrease in advertising expenses.

General and administrative expenses decreased by 7.1% to RMB131.5 million (US$19.2 million) in the first quarter of 2023, from RMB141.6 million in the same period of 2022. The decrease mainly resulted from the reduction of G&A related headcount and lower office attendance as we temporarily suspended operations early in the quarter. The decrease was partially offset by the provision of allowance on accounts receivable pertaining to certain college-related business which we disposed of subsequently.

Research and development expenses decreased by 7.4% to RMB15.1 million (US$2.2 million) in the first quarter of 2023, from RMB16.3 million in the same period of 2022. The decrease was primarily due to a lower number of staff and effective cost control in the first quarter of 2023.

Operating Income/(Loss)

Operating loss was RMB58.8 million (US$8.6 million) in the first quarter of 2023, compared to operating income of RMB28.6 million in the same period of 2022. Non-GAAP operating loss, which excluded share-based compensation expenses, was RMB57.7 million (US$8.4 million) in the first quarter of 2023, compared to non-GAAP operating income of RMB30.0 million in the same period of 2022.

Income Tax (Expense)/Benefit

The Company recorded an income tax benefit of RMB8.1 million (US$1.2 million) in the first quarter of 2023, compared to an income tax expense of RMB5.4 million in the same period of 2022.

Net Income/(Loss)

As a result of the foregoing, net loss was RMB49.9 million (US$7.3 million) in the first quarter of 2023, compared to net income of RMB27.1 million in the same period of 2022. Non-GAAP net loss, which excluded share-based compensation expenses, was RMB48.8 million (US$7.1 million) in the first quarter of 2023, compared to non-GAAP net income of RMB28.5 million in the same period of 2022.

Basic and Diluted Loss per ADS

Basic and diluted loss per ADS was RMB4.67 (US$0.68) in the first quarter of 2023. Non-GAAP basic and diluted loss per ADS, which excluded share-based compensation expenses, was RMB4.57 (US$0.67) in the first quarter of 2023.

Cash Flow

The total balance of cash, cash equivalents, and restricted cash decreased by RMB3.0 million from RMB374.0 million as of December 31, 2022, to RMB371.0 million (US$54.0 million) as of March 31, 2023. Net cash outflow from operating activities in the first quarter of 2023 was RMB17.7 million (US$2.6 million). Net cash inflow from investing activities in the first quarter of 2023 was RMB17.4 million (US$2.5 million), as we received a deposit of 19.0 million (US$2.8 million) on the sale of the building in this period. Net cash outflow from financing activities in the first quarter of 2023 was RMB2.5 million (US$0.4 million), as we repaid the bank borrowing of RMB2.0 million (US$0.3 million). Capital expenditures in the first quarter of 2023 were RMB5.8 million (US$0.8 million).

Business Outlook

Based on the Company's current estimates, net revenues for the second quarter of 2023 are expected to be in the range of RMB520 million and RMB550 million, which represents a decrease of 15% to 20% as compared to the net revenues in the second quarter of 2022, as the disposal of certain college-collaboration related business and the adverse macro environment at the beginning of this year will have some impact on our net revenues in the second quarter.

This guidance is based on current market conditions and reflects the Company's current and preliminary estimates of market and operating conditions, which are subject to change.

Exchange Rate Information

All translations made in the financial statements or elsewhere in this press release from RMB to United States dollars ("US$") are solely for convenience and calculated at the rate of US$1.00=RMB6.8676, representing the exchange rate as of March 31, 2023, set forth in the H.10 statistical release of the U.S. Federal Reserve Board. No representation is made that the RMB amounts could have been converted, realized or settled into US$ at that rate, or at any other rate, on March 31, 2023.

Conference Call

Company management will hold an earnings conference call and live webcast to discuss the Company's results at 8:00 AM on June 13, 2023, U.S. Eastern Time (8:00 PM on June 13, 2023, Beijing Time).

Please register in advance of the conference, using the link provided below. Upon registering, you will be provided with participant dial-in numbers, a passcode, and a unique registrant ID.

Conference call registration link: https://s1.c-conf.com/diamondpass/10030789-pz8jgm.html. It will automatically direct you to the registration page for "Tarena's First Quarter 2023 Earnings Conference Call," where you may fill in your details to RSVP. If it requires you to enter a participant conference ID, please enter "10030789".

In the 10 minutes prior to the call start time, you may use the conference access information (including dial in number(s), direct event passcode, and registrant ID) provided in the confirmation email received at the point of registration.

A replay of the conference call may be accessed by phone at the following number until June 20, 2023:

United States: +1855 883 1031
China: 400 1209 216
Hong Kong: 800 930 639
Conference ID: 10030789

Additionally, a live and archived webcast of this call will be available on the Investor Relations section of Tarena's website at https://ir.tedu.cn.

About Tarena International, Inc.

Tarena is a leading provider of IT professional education and IT-focused supplementary STEAM education services in China. Through its innovative education platform combining live distance instruction, classroom-based tutoring and online learning modules, Tarena offers professional education courses in IT and non-IT subjects. Its professional education courses provide students with practical skills to prepare them for jobs in industries with significant growth potential and strong hiring demand. Tarena also offers IT-focused supplementary STEAM education programs, including computer coding and robotics programming courses, etc., targeting students between three and eighteen years of age. Aiming to encourage "code to learn," Tarena embraces the latest trends in STEAM education and technology to develop children's logical thinking and learning abilities while allowing them to discover their interests and potential.

Safe Harbor Statement

This press release contains forward-looking statements made under the "safe harbor" provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Among other things, the business outlook, the quotations from management in this announcement, as well as the Company's strategic and operational plans contain forward-looking statements. Tarena may also make written or oral forward-looking statements in its reports filed with or furnished to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Any statements that are not historical facts, including any business outlook and statements about Tarena's beliefs and expectations, are forward-looking statements. Many factors, risks and uncertainties could cause actual results to differ materially from those in the forward-looking statements. Such factors and risks include, but not limited to the following: the impact of the COVID-19 outbreak; Tarena's goals and strategies; its future business development, financial condition and results of operations; its ability to continue to attract students to enroll in its courses; its ability to continue to recruit, train and retain qualified instructors and teaching assistants; its ability to continually tailor its curriculum to market demand and enhance its courses to adequately and promptly respond to developments in the professional job market; its ability to maintain or enhance its brand recognition, its ability to maintain high job placement rate for its students, and its ability to maintain cooperative relationships with financing service providers for student loans.

Further information regarding these and other risks, uncertainties or factors is included in Tarena's filings with the U.S. Securities and Exchange Commission. All information provided in this press release is current as of the date of the press release, and Tarena does not undertake any obligation to update such information, except as required under applicable law.

About Non-GAAP Financial Measures

To supplement Tarena's consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), Tarena's management uses non-GAAP measures of cost of revenues, operating expenses, operating income, net income, and basic and diluted net income per ADS, which are adjusted from results based on GAAP to exclude the share-based compensation expenses. These non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. In addition, calculation of the non-GAAP financial measures may be different from the calculation used by other companies, and therefore comparability may be limited.

Tarena's management believes that excluding the share-based compensation expenses provides meaningful supplemental information regarding our performance and liquidity by excluding certain items identified as non-recurring and infrequent in nature, and non-cash charges. The amount of share-based compensation expenses is not built into the Company's annual budgets and quarterly forecasts, which generally will be the basis for information Tarena provides to analysts and investors as guidance for future operating performance.

The non-GAAP financial measures are provided to enhance investors' overall understanding of Tarena's current financial performance and prospects for the future. A limitation of using non-GAAP cost of revenues, operating expenses, operating income (loss) and net income (loss), excluding the share-based compensation expenses is that the share-based compensation charge has been and will continue to be a recurring expense in the Company's business for the foreseeable future. In order to mitigate the limitation, the Company has provided specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables include details on the reconciliation between GAAP financial measures that are most directly comparable to the non-GAAP financial measures the Company has presented.

For further information, please contact:

Investor Relations Contact:
Tarena International, Inc.
Investor Relations
E-mail: ir@tedu.cn

The Piacente Group, Inc.
In China
Yang Song
Tel: +86-10-6508-0677
E-mail: tedu@tpg-ir.com

In the U.S.
Brandi Piacente
Tel: +1-212-481-2050
E-mail: tedu@tpg-ir.com

 

 

TARENA INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data and per ADS data)




As of



December 31,


March 31,


March 31,



2022


2023


2023



Audited


Unaudited


Unaudited



RMB


RMB


USD

ASSETS







Current assets:







Cash and cash equivalents


356,237


362,648


52,806

Time deposits


6,277


2,119


309

Restricted cash


17,730


8,397


1,223

Accounts receivable, net of allowance for doubtful accounts


68,733


59,049


8,598

Amounts due from related parties


698


888


129

Assets held for sale


106,539


106,539


15,513

Prepaid expenses and other current assets


111,339


119,723


17,433

Total current assets


667,553


659,363


96,011

Time deposits-non current


228


223


32

Accounts receivable, net of allowance for doubtful accounts-non current


182


119


17

Amounts due from related parties-non current


701


693


101

Property and equipment, net


122,834


110,663


16,114

Intangible assets, net


7,542


6,980


1,016

Goodwill


52,782


52,782


7,686

Right-of-use assets


350,501


307,364


44,756

Long-term investments, net


46,183


46,137


6,718

Deferred income tax assets


40,127


51,082


7,438

Other non-current assets, net


48,867


59,653


8,686

Total assets


1,337,500


1,295,059


188,575








LIABILITIES AND EQUITY







Current liabilities:







Short-term bank loans


52,000


50,000


7,281

Accounts payable


6,330


5,110


744

Amounts due to related parties


87


86


13

Operating lease liabilities-current


197,969


167,076


24,328

Income taxes payable


108,434


110,615


16,107

Deferred revenue-current


1,688,610


1,734,341


252,540

Advance received for disposal of property


-


18,800


2,737

Accrued expenses and other current liabilities


603,516


607,648


88,480

Total current liabilities


2,656,946


2,693,676


392,230

Deferred revenue-non current


14,051


7,530


1,096

Operating lease liabilities-non current


168,736


145,118


21,131

Other non-current liabilities


4,448


4,370


636

Total liabilities


2,844,181


2,850,694


415,093

Commitments and contingencies


-


-


-

Deficit:







Class A ordinary shares


359


361


53

Class B ordinary shares


74


74


11

Treasury shares


(476,918)


(477,530)


(69,534)

Additional paid-in capital


1,363,845


1,365,012


198,761

Accumulated other comprehensive income


49,664


50,072


7,291

Accumulated deficit


(2,436,918)


(2,487,151)


(362,157)

Total deficit attributable to the shareholders of Tarena International, Inc.


(1,499,894)


(1,549,162)


(225,575)

Non-controlling interest


(6,787)


(6,473)


(943)

Total liabilities and deficit


1,337,500


1,295,059


188,575

 

 

 

TARENA INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(in thousands, except share data and per ADS data)






For the Three Months Ended

March 31,




2022


2023


2023




Unaudited


Unaudited


Unaudited




RMB


RMB


USD


Net revenues


623,506


385,104


56,075


Cost of revenues(a)


(264,588)


(184,101)


(26,807)


Gross profit


358,918


201,003


29,268


Selling and marketing expenses(a)


(172,400)


(113,151)


(16,476)


General and administrative expenses(a)


(141,585)


(131,547)


(19,155)


Research and development expenses(a)


(16,342)


(15,128)


(2,203)


Operating income/(loss)


28,591


(58,823)


(8,566)


Interest income, net


298


393


57


Other income


3,663


508


74


Foreign currency exchange loss, net


(85)


(114)


(17)


Income/(loss) before income taxes


32,467


(58,036)


(8,452)


Income tax (expense)/benefit


(5,398)


8,118


1,182


Net income/(loss)


27,069


(49,918)


(7,270)


Less: Net income attributable to non-controlling interests


508


315


46


Net income/(loss) attributable to Class A and Class B ordinary
shareholders


26,561


(50,233)


(7,316)










Net income/(loss) per ADS:








  Basic


2.39


(4.67)


(0.68)


  Diluted


2.35


(4.67)


(0.68)


Weighted average number of Class A and Class B ordinary shares
outstanding:








  Basic


55,676,443


53,800,614


53,800,614


  Diluted


56,603,993


53,800,614


53,800,614










Net income/(loss)


27,069


(49,918)


(7,270)


Other comprehensive income/(loss)








Foreign currency translation adjustment, net of nil income taxes


(51)


407


59


Comprehensive income/(loss)


27,018


(49,511)


(7,211)










Notes:








(a)  Includes share-based compensation expenses as follows:
















 



For the Three Months Ended

March 31,




2022

Unaudited


2023

Unaudited


2023

Unaudited




RMB


RMB


USD










Cost of revenues


11


6


1


Selling and marketing expenses


144


68


10


General and administrative expenses


958


852


124


Research and development expenses


275


154


22


 

 

 

TARENA INTERNATIONAL, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

(in thousands, except share data and per ADS data)






For the Three Months Ended March 31,




2022

Unaudited


2023

Unaudited


2023

Unaudited




RMB


RMB


USD










GAAP Cost of revenues


264,588


184,101


26,807


Share-based compensation expense in cost of revenues


11


6


1


Non-GAAP Cost of revenues


264,577


184,095


26,806










GAAP Selling and marketing expenses


172,400


113,151


16,476


Share-based compensation expense in selling and marketing
expenses


144


68


10


Non-GAAP Selling and marketing expenses


172,256


113,083


16,466










GAAP General and administrative expenses


141,585


131,547


19,155


Share-based compensation expense in general and administrative
expenses


958


852


124


Non-GAAP General and administrative expenses


140,627


130,695


19,031










GAAP Research and development expenses


16,342


15,128


2,203


Share-based compensation expense in research and development
expenses


275


154


22


Non-GAAP Research and development expenses


16,067


14,974


2,181










Operating income/(loss)


28,591


(58,823)


(8,566)


Share-based compensation expenses


1,388


1,080


157


Non-GAAP Operating income/(loss)


29,979


(57,743)


(8,409)










Net income/(loss)


27,069


(49,918)


(7,270)


Share-based compensation expenses


1,388


1,080


157


Non-GAAP Net income/(loss)


28,457


(48,838)


(7,113)


  Less: Net income attributable to non-controlling interests


508


315


46


Non-GAAP net income/(loss) attributable to Class A and Class
B ordinary shareholders


27,949


(49,153)


(7,159)


Non-GAAP net income/(loss) per Class A and Class B ordinary
share
(b)








  Basic


2.51


(4.57)


(0.67)


  Diluted


2.47


(4.57)


(0.67)


Weighted average number of ordinary shares outstanding used
in
calculating Non-GAAP net loss per Class A and Class B
ordinary share
(c)








  Basic


55,676,443


53,800,614


53,800,614


  Diluted


56,603,993


53,800,614


53,800,614



Notes:

(a) There was no tax impact of share-based compensation expenses for the first quarter of 2023 and 2022, respectively.


(b) The Non-GAAP net income/(loss) per ADS is computed using Non-GAAP net income/(loss) attributable to ordinary shareholders
and the same number of ordinary shares are used in GAAP basic and diluted net income/(loss) per ADS calculation.


(c) Each ADS represents five Class A ordinary shares. The weighted average number of ADS and earnings per ADS have been
retrospectively adjusted to reflect the ADS ratio change from one ADS representing one Class A ordinary share to one ADS representing
five Class A ordinary shares, which became effective on December 23, 2021.

 

 

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