Earnings call transcript: 17 Education Tech Q2 2025 sees net loss reduction

17 Education Technology Group Inc. reported a significant reduction in its net loss for the second quarter of 2025, despite a sharp decline in revenue. Following the earnings announcement, the company’s stock saw a slight uptick in aftermarket trading. According to InvestingPro data, the company maintains strong liquidity with a current ratio of 3.32x and holds more cash than debt on its balance sheet. The company unveiled multiple product innovations and strategic shifts, focusing on AI integration to bolster future growth.

Key Takeaways

• Revenue decreased by 62.4% year-over-year to RMB 25.4 million.
• Gross margin improved significantly to 57.5% from 16% the previous year.
• Net loss reduced by 53.4% year-over-year to RMB 26 million.
• New AI-driven products and services were launched to enhance educational offerings.
• A share repurchase program of up to USD 10 million was approved.

Company Performance

17 Education Technology Group Inc. experienced a challenging quarter with a substantial drop in revenue compared to the same period last year. However, the company managed to improve its gross margin and reduce its net loss significantly. This performance reflects the company’s strategic focus on enhancing operational efficiency and cutting costs, as evidenced by a 39% reduction in operating expenses. The company’s shift towards a school-based subscription model and resource allocation towards subscription services is aimed at stabilizing revenue streams.

Financial Highlights

• Revenue: RMB 25.4 million, down 62.4% year-over-year.
• Gross Margin: 57.5%, up from 16% year-over-year.
• Net Loss (GAAP): RMB 26 million, a reduction of 53.4% year-over-year.
• Adjusted Net Loss (Non-GAAP): RMB 18.9 million, a reduction of 55.6% year-over-year.
• Cash Reserves: RMB 350.9 million as of June 30, 2025.

Market Reaction

Following the earnings release, 17 Education Tech’s stock increased by 3.02% in aftermarket trading, reaching a price of $2.05. This movement reflects investor optimism about the company’s improved financial metrics and strategic initiatives, particularly in AI development. InvestingPro analysis suggests the stock is currently undervalued, trading at just 0.35x book value. The stock remains in the lower range of its 52-week high of $3.19 and low of $1.26, with a notably low correlation to market movements (Beta: -0.02), indicating potential for independent price action as the company executes its strategic plans. For deeper insights into the company’s valuation and 8 additional ProTips, visit InvestingPro.

Outlook & Guidance

Looking ahead, 17 Education Technology Group is committed to continuous product innovation and expanding its AI capabilities. The company is exploring integration into the consumer market and has announced a share repurchase program of up to USD 10 million, signaling confidence in its future prospects. Revenue forecasts for the fiscal years 2025 and 2026 are projected at USD 28.48 million and USD 29.48 million, respectively.

Executive Commentary

"We are pleased to announce a healthy financial result for 2025," said Sishi Zhou, Acting CFO. "We strive to upgrade AI capabilities of our product offerings to deliver more efficient, satisfying solutions to customers." Lara Chow, Investor Relations Manager, added, "Our integrated strategy is designed to generate synergies across all our business lines."

Risks and Challenges

• Revenue Decline: The significant drop in revenue poses a challenge to financial stability.
• Market Competition: Increasing competition in the AI-driven education sector may impact market share.
• Economic Conditions: Macroeconomic factors could affect consumer spending and educational investments.
• Technological Integration: Successful AI integration requires continuous innovation and adaptation.
• Regulatory Environment: Changes in educational regulations could influence operational strategies.

The company’s strategic initiatives and focus on AI-driven solutions are expected to drive future growth, despite the challenges posed by declining revenues and competitive pressures. InvestingPro’s comprehensive analysis, including the company’s Financial Health Score of 1.97 (FAIR) and detailed Pro Research Report, provides valuable insights for investors monitoring this transformation. Access the full analysis and discover how 17 Education Tech compares to its peers in the education technology sector through InvestingPro’s extensive metrics and expert insights.

Full transcript - 17 Education Technology Group Inc (YQ) Q2 2025:

Conference Operator: Evening and good morning, ladies and gentlemen, and thank you for standing by for 17x Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the management prepared remarks, there will be a question and answer session. As a reminder, today’s conference call is being recorded. I’ll now turn the meeting over to your host for today’s call, Ms.

Lara Chow, 17x Investor Relations Manager. Please proceed, Lara.

Lara Chow, Investor Relations Manager, 17x: Thank you, operator. Hello, everyone, and thank you for joining us today. Our earnings release was distributed earlier today and is available on our IR website. Joining us today are Ms. Sishi Zhou, the acting Chief Financial Officer and myself, Investor Relations Manager.

Sishi will you through our latest business performance and strategies, and I will discuss our financial performance in more details. After the prepared remarks, Sisi will be available to answer your questions during the Q and A session. Before we begin, I’d like to remind you that this conference call contains forward looking statements as defined in Section 21E of the Securities Exchange Act of 1934 and The U. S. Private Securities Litigation Reform Act of 1995.

These forward looking statements are based upon management’s current expectations and current market and operating conditions and relate to events that involve known and unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company’s control. These risks may cause the company’s actual results, performance or achievements to differ materially. Further information regarding these and other factors, uncertainties or factors is included in the company’s filings with the U. S. SEC.

The company does not undertake any obligation to update any forward looking statements as a result of new information, future events or otherwise, except as required under applicable law. I will now turn the call over to our acting Chief Financial Officer to review some of our business development and strategic direction. Sisi, please go ahead.

Sishi Zhou, Acting Chief Financial Officer, 17x: Thank you, Lara. Hello, everyone. Thank you all for joining us on our second quarter twenty twenty five earnings conference call. Before we begin, I would like to note that the financial information and the non GAAP numbers in this release are presented on a continuing operation basis and are in RMB, unless otherwise stated. Let me begin with our latest business updates.

We are pleased to announce a healthy financial result for the 2025. During this period, we sustained our business momentum and achieved consistent progress in our core operations with a quarter on quarter top line growth of 17.3%. Our commitment to cost control restored the gross margin to a normalized level of 57.5% in quarter two. Additionally, as we improved our operating efficiency continuously, Operating expenses decreased by 39%, leading to a 53.4% reduction in net loss on a GAAP basis compared to the same period last year. During the quarter, we are pleased to see positive growth fueled by our efforts and innovations.

Notably, our focus on the school based subscription model has led to an encouraging year over year and quarter over quarter growth. Meanwhile, our district level teaching and learning SaaS business remains a key component of our operations, continuing to be a vital revenue contributor in the quarter two. The company advanced its business by continuously optimizing and innovating AI technology across our product portfolios to constantly enhance customer satisfaction and customer engagement. We launched the meaning Classmates Studying Together, Intelligent Agent and successfully upgraded AI solutions in Shanghai, Minghan District during this quarter. Leverage our strong brand endorsements and customer loyalty from our district projects and subscription model as well as capitalizing on the emerging market opportunities and evolving customer needs, We will continuously strive to explore product innovation and new growth opportunities to extend our reach to a broader customer base so that we can drive sustainable growth.

Now let me go into more details. In the second quarter, our district level teaching and learning SaaS business continued to contribute an important portion in revenue, while school based subscription business maintained a strong growth momentum. The company continued to prioritize resource allocation towards the subscription model. We observed increased demand and enthusiasm for our service offerings in partner schools, underscoring its strategic importance and integral role in our overall strategy for sustainable growth. Meanwhile, in response to the advocated trend of integrating AI into the entire education process, We strive to upgrade AI capabilities of our product offerings to deliver more efficient, satisfying solutions to customers.

This quarter, in addition to upgrading AI solutions in Shanghai, Minghang District, which accelerated the digital transformation in regional education. We launched the It is an intelligent agent built on fourteen years of teaching experiences and extensive behavioral data and centered on the core concept of intelligent teaching and personalized learning. Representing a pivotal step in our AI driven transformation, iQIYI Hengxue serves as a teaching assistant that alleviates teachers’ workload, a smart learning companion that supports students in targeted learning and functions as a data intelligent brain that provides data support for managers and facilitates efficient decision making. The enhancement of these AI capabilities further strengthens the market competitiveness of our product and provides opportunities to reach a broader customer base. Capitalizing our strong brand endorsements accumulated from district projects and a subscription model, we will commit to further product innovation based on existing successful AI initiatives.

Resources will be allocated to explore potential integration of AI capabilities into the consumer C end market to capture new growth opportunities. During the period, we focused on strategic market penetration through diversified channels and enhanced customer acquisition efficiency. The strategy was highlighted at the recent Global Smart Education Conference, where we partnered with the National Engineering Research Center for Intelligent Technology and Applications in Internet Education to launch the public welfare initiative, AI empowerment for hundreds of districts, thousands of schools and tens of thousands of teachers. This initiative provides comprehensive support in terms of hardware, software, content and services, facilitating in-depth AI integration into teacher management and evaluation. We believe large scale rollout of this initiative will further deepen our market presence by driving widespread adoption of our solutions among teachers and students.

It will also enhance our credibility by building a strengthened ecosystem and fostering long term engagement. Now I will turn the call over to Lara to walk you through our latest financial performance. Thank you.

Lara Chow, Investor Relations Manager, 17x: Thanks, Nishi, and thank you, everyone, for joining the call. I will now walk you through our financial and operating results. Please note that all financial data I talk about will be presented in RMB terms. I would like to remind you that the quarterly results we present here should be taken with care, and reference to our potential future performance are subject to potential impacts from seasonality and one off events as a result of the series of regulations introduced in 2021 and corresponding adjustments to our business model, organization and workforce. In the 2025, we recorded net revenues of RMB25.4 million compared with RMB67.5 million in the 2024, representing a 62.4% decrease on a year over year basis, which was primarily due to the reduction in net revenues from district level projects as we prioritize our resources on school based projects and the subscription model, which requires longer period of revenue recognition.

Gross margin for the 2025 was 57.5% compared with 16% in the 2024. Net loss on a GAAP basis for the 2025 was RMB26 million compared with RMB55.7 million in the 2024, representing a decrease of 53.4% year on year. The adjusted net loss, non GAAP, for the 2025 was RMB18.9 million compared with adjusted net loss non GAAP of RMB42.6 million in the 2024, a decrease of 55.6% year on year. As of 06/30/2025, we have cash reserves of RMB350.9 million on our balance sheet compared with RMB359.3 million as of 12/31/2024. Next, I will go through our second quarter financials in greater detail.

Net revenues. Net revenues for the 2025 were RMB25.4 million, representing a year on year decrease of 62.4 from RMB67.5 million in the 2024. This was mainly due to the reduction in net revenues from district level projects as we prioritize our resources on school based projects and an increasing number of contracts under SaaS subscription model, which requires longer period of revenue recognition. Cost of revenue for the 2025 was RMB 10,800,000.0, representing a year over year decrease of 81% from RMB 56,700,000.0 in the 2024, which was mainly due to the decrease in project deliveries for our teaching and learning SaaS offerings during the quarter. Gross profit for the 2025 was RMB14.6 million compared with RMB10.8 million in the 2024.

Gross margin for the 2025 was 57.5% compared with 16% in the 2024. Total operating expenses for the 2025 were million, including million of share based compensation expenses, representing a year over year decrease of 39.3 from million in the 2024. Loss from operations for the 2025 was RMB28.5 million compared with million in the 2024. Loss from operations as a percentage of net revenues for the 2025 was negative 112% compared with negative 89.2% in the 2024. Net loss.

Net loss for the 2025 was RMB26 million compared with net loss of 5,700,000.0 in the 2024. Net loss as a percentage of net revenues was negative 102.1% in the 2025 compared with negative 82.5% in the 2024. Adjusted net loss non GAAP for the 2025 was RMB18.9 million compared with adjusted net loss non GAAP of $2,600,000 in the 2024. Adjusted net loss non GAAP as a percentage of net revenues was negative 74.3% in the 2025 compared with negative 63.1% of adjusted net loss non GAAP as a percentage of net revenues in the 2024. Please refer to the table captioned Reconciliations of non GAAP measures to the most comparable GAAP measures at the end of this press release for a reconciliation of net loss under U.

S. GAAP to the adjusted net loss non GAAP. Cash and cash equivalents, restricted cash and term deposits were RMB350.9 million, equals US49 million dollars as of 06/30/2025, compared with RMB359.3 million as of 12/31/2024. In addition, we would like to announce that the company’s Board of Directors has approved a share repurchase program on 09/03/2025, and be effective starting from 09/04/2025, under which the company is authorized to repurchase up to USD 10,000,000 of the company’s ADS and common shares in the next twelve months. The company’s Board of Directors will review the share repurchase program periodically and may authorize adjustments of its term and size.

Looking ahead, we are committed to continuously innovating and enhancing our core product portfolio while empowering educational communities through advanced AI driven content solutions. Our integrated strategy is designed to generate synergies across all our business lines, creating a virtuous cycle that deepens customer loyalty, expands market reach and drives sustainable growth, ultimately delivering lasting value to both our users and shareholders. With that, we conclude our prepared remarks. Thank you. Operator, we are now ready to begin the Q and A session.

Conference Operator: Thank you. We will now begin the question and answer session. Star one one on your telephone and wait for a name to be announced. If you like to cancel your request, you can press 11 again. Please standby while we compile the q and a roster.

Once again, if you like to ask question, please press 11. Once again, if you’d like to ask question, please dial 11. To have no question at this time. I would like to hand the call back to the management. Please continue.

Lara Chow, Investor Relations Manager, 17x: Thank you, operator. In closing, on behalf of Setyan AdTech’s management team, we would like to thank you for your participation on today’s call. If you require any further information, please feel free to reach out to us directly. Thank you for joining us today. This concludes the call.

Conference Operator: Ladies and gentlemen, that concludes today’s conference call. Thank you for your participation. You may now disconnect your lines.

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