On May 17, Tarena (Nasdaq: TEDU) released its unaudited financial results for the first quarter as of March 31, 2022, before the U.S. market opened.
According to Tarena’s financial data, its net revenues increased by 16.8% year-over-year in the first quarter of 2022 to RMB 623.5 million, with a net profit of RMB 27.1 million. The company ended its losses to achieve a net income. This is also the first time Tarena has made a profit in the first quarter since the outbreak of the pandemic.
In the first quarter of 2022, Tarena‘s gross profit reached RMB 358.9 million, an increase of 43.6% compared with the same period of last year, with the gross profit margin increased by 10.8 percentage points to 57.6%; its operating income reached RMB 28.6 million, net profit RMB 27.1 million, with the operating margin increasing from -24.3% in the same period of 2021 to 4.6%.
Losses turn into gains: revenues of 2 major businesses grow synchronously to make a profit in the first quarter
The financial report shows that the Company’s net revenue from adult professional education reached RMB 269.6 million, with a year-on-year growth of 5.5%; the net revenue from the childhood & adolescent quality education business was RMB 353.9 million, with a 27.2% year-over-year increase in the first quarter of 2022. Both of the 2 main businesses increased in the first quarter, resulting in a 16.8% growth of the Company’s net revenues.
Sun Ying, the CEO of Tarena, said that Tarena’s adult professional education business renewed year-over-year growth, and the childhood & adolescent quality education business has seen positive year-over-year growth for seven consecutive quarters since the outbreak of the pandemic. In the meantime, thanks to continued effective cost management, Tarena reduced the cost of revenues and operating expenses by 6.8% to RMB 264.6 million and 12.9% to RMB 330.3 million, respectively.
In the first quarter of 2022, with revenue growth and continued cost reduction, Tarena ended losses, overcame seasonal factors of the Chinese New Year and achieved a net income of RMB 27.1 million, the first quarterly profit since the pandemic.
Sales expenses represent a substantial reduction of 19.3%; Tarena builds positive and healthy core competitive advantages
The financial report shows that Tarena significantly reduced its cost of revenues in the first quarter of 2022. Due to the successful adaptation of the Online-Merge-Offline (OMO) model for customer acquisition and omni-channel service delivery capability, Tarena has been able to cut marketing expenses greatly while realizing rapid revenue growth at the same time.
Sun Ying added that Tarena’s core competitive advantages are backed by the constant optimization and upgrading of its two businesses’ procedures and processes, which includes the OMO customer acquisition model and omni-channel services delivery capability. This ability was tested in the first quarter, when Tarena kept the business running smoothly, even a resurgence of COVID-19 cases emerged in certain areas in China. Looking ahead, Tarena will continue to focus on the core advantages of ‘adaptation of OMO model to develop and deliver its comprehensive products’, ‘offline learning center operation capability’ and ‘customer acquisition capability’ to continuously improve operational efficiency and maintain positive and healthy development.
In the first quarter of 2022, for adult professional education business, the 6-months post-graduate job placement rate remained above 90%; and for childhood & adolescent business, the proportion came from student renewal and word-of-mouth reached 74.4%, up 9.7 percentage points compared with the first quarter of last year, with a renewal rate of students who had enrolled for more than one year of over 83.4%.
Based on the Company’s current estimates, Tarena’s total net revenues for the second quarter of 2022 are expected to be in the range of RMB 600 million and RMB 630 million, after taking into consideration the seasonal fluctuation factor and the possible continued impact of the COVID-19.