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17 Education Technology Group Inc (YQ), a prominent player in the educational technology sector with a market capitalization of $19.26 million, reported its financial results for the fourth quarter and full year of 2024. The company noted a year-over-year revenue increase, driven by strategic shifts and innovative products, while also highlighting challenges in the last quarter. The company’s stock saw a 5.02% rise, reflecting investor optimism about its future prospects. According to InvestingPro analysis, the stock appears undervalued compared to its Fair Value, presenting a potential opportunity for investors interested in the education technology sector.
Key Takeaways
- Full-year 2024 net revenues increased by 10.7% year-over-year.
- Q4 2024 net revenues decreased by 22.7% compared to Q4 2023.
- Operating expenses were reduced by 34%, supporting a focus on profitability.
- The company launched AI-powered tools, enhancing its educational offerings.
- A 5.02% increase in stock price indicates positive market sentiment.
Company Performance
17 Education Technology Group Inc reported a positive performance for the full year 2024, with net revenues reaching RMB 169.2 million, a 10.7% increase from the previous year. The company’s latest twelve-month revenue growth stands at 22.55%, showing sustained momentum. However, the fourth quarter presented challenges, with net revenues declining by 22.7% to RMB 36.6 million. Despite this, the company managed to reduce its net loss by 35.2% compared to Q4 2023, indicating improved cost management. InvestingPro data shows the company maintains a strong financial health score of 2.24 (FAIR), with more cash than debt on its balance sheet.
Financial Highlights
- Full-year revenue: RMB 169.2 million, up 10.7% year-over-year.
- Q4 revenue: RMB 36.6 million, down 22.7% year-over-year.
- Q4 net loss: RMB 63.7 million, a 35.2% reduction from Q4 2023.
- Gross margin in Q4 2024: 33.6%, down from 43.4% in Q4 2023.
- Cash reserves as of December 31, 2024: RMB 359.3 million.
Outlook & Guidance
Looking ahead, 17 Education Technology Group plans to continue its investment in AI-enhanced educational products. The company aims to strengthen its school-based subscription model and improve teaching effectiveness through technology. Revenue forecasts for FY2024 and FY2025 are RMB 23.42 million and RMB 23.55 million, respectively, indicating steady growth prospects.
Executive Commentary
Michael Du, CFO, expressed confidence in the company’s future, stating, "We are well positioned to deliver sustainable growth and industry-leading innovations." He emphasized the importance of aligning data infrastructure with scalable solutions to empower educators. Lara Zhao, IR Manager, highlighted the dual focus on innovation and growth, stating, "We will strengthen our core business operations while exploring new opportunities."
Risks and Challenges
- Market volatility could impact revenue growth and stock performance.
- Competition in the EdTech sector may pressure pricing and margins.
- Economic uncertainties could affect educational spending and budgets.
- Technological advancements may require continuous investment in innovation.
- Regulatory changes in education and technology sectors could pose challenges.
By focusing on AI and personalized learning solutions, 17 Education Technology Group aims to maintain its competitive edge in the evolving educational technology landscape. Want deeper insights? InvestingPro subscribers get access to comprehensive financial analysis, Fair Value estimates, and expert research reports covering over 1,400 US stocks, including detailed coverage of emerging tech companies like 17 Education Technology Group.
Full transcript - 17 Education Technology Group Inc (YQ) Q4 2024:
Conference Operator: Good evening and good morning, ladies and gentlemen, and thank you for standing by for the ’seventeen EdTech’s Fourth Quarter twenty twenty four and Full Year Earnings Conference Call. At this time, all participants are in listen only mode. After the management’s prepared remarks, there will be a question and answer session. As a reminder, today’s conference call is being recorded. I will now turn the meeting over to your host for today’s call, Ms.
Lara Zhao, Seventeen’s EdTech’s Investor Relations Manager. Please proceed, Lara.
Lara Zhao, Investor Relations Manager, Seventeen EdTech: 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 Mr. Michael Du, Director and Chief Financial Officer and myself, Investor Relations Manager.
Michael will walk you through our latest business performance and strategies, and I will discuss our financial performance in more detail. After the prepared remarks, Michael 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 relates 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 risks, uncertainties and 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 Director and Chief Financial Officer to review some of our business developments and strategic direction. Michael, please go ahead.
Michael Du, Director and Chief Financial Officer, Seventeen EdTech: Thank you, Lara. Hello, everyone. Thank you all for joining us on our fourth quarter twenty twenty four and 2Q earnings 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 on RMB unless otherwise stated. Let me start with our latest business updates.
We achieved strong results with year over year top line growth of 11% to RMB189.2 million for the full year, driven by strategic market expansion and new contract acquisitions. Net revenues for the fourth quarters were RMB36.6 million reflecting a 23% decrease from the same quarter previous year, primarily due to the reduction in net revenues from district level flagship projects as we prioritize our sourcing on school based projects and the subscription model, which typically would generate revenues over a longer period. Meanwhile, our SaaS subscription business model maintained an upward trend as evidenced by three digit growth compared to the same quarter last year, bolstered by strong retention rates and multi year subscription renewals. Through rigorous cost optimization and leveraging economy on scales, operating expenses decreased by 34% from the same quarter last year, resulting in a 35% reduction in net loss on a GAAP basis. As we enhance our products and services through AI for improved automation and user experiences, we have received positive feedback and market recognition.
Looking ahead, with a strong pipeline on AI enhanced products and our customer centric roadmap, we are well positioned to deliver sustainable growth and industry leading innovations in the future. Now please allow me go into more details. Our original flagship project delivery and new contract acquisitions. During this quarter, our teaching and learning sales business for district level projects continue to make steady progress through successful delivery and new contract acquisitions. Major projects have successfully delivered and contributed significantly to the overall revenue.
We have continued to win teaching and learning SaaS projects this quarter further demonstrating the strong customer stickiness of our offering. Such projects will expand our services to cover more schools with increased number of students in both existing districts and new ones. It further demonstrate our capacity to enhance regional education quality and efficiency through scalable, high quality solutions and plays an exemplary role for other potential clients to adopt our products. Our accelerated growth in school based subscription model. In the meanwhile, our school based subscription model have witnessed rapid growth with triple digit growth in terms of the number of students newly subscribed year over year.
We have also identified an extensive opportunity pipeline that are expected to continue to expand our school coverage. As the succession model scales, it increasingly contributes to our overall revenue reflecting strategic importance and integral role to our overall strategy. This upward trajectory not only contributes significance to our revenue but also enhance customer engagement and loyalty. For our customers whose countries are subject to renewal, more than 90% have decided to continue to subscribe and some even decide to subscribe with further expanding coverage. Such highly recurring subscription together with opportunity to upsell additional value added services have paved a visible pathway for sustainable and healthy growth.
Synergies across business lines, the synergies across regional flagship projects and the school based subscription model initiatives have driven our product innovations into a virtual cycle of our business growth. Flagship district teaching and learning sales projects not only influential among authorities considering projects of similar nature, but also help us build a strong use case for our school based subscription model among our potential client base. They further generate insights that allow us to continuously enhance our school based sales offering products, while custom feedback strategy, iterative product upgrades and breakthrough innovations. This integrated approach has boasted operational agility, positioning us to seize emerging opportunities and deliver scalable solutions. For our product and service offerings, we are committed to enhance our products and service offerings to improve customer satisfaction.
Our focus on innovation and capabilities to deliver premium learning products has driven us to refine our teaching and learning SaaS solutions ensuring efficiency and high quality development. During this quarter, we have further advanced our offerings through the following strategic improvements. Unified data ecosystems, we have advanced cross domain data integration by leveraging gradual insights into across educational ecosystem including classroom interactions, assignments and assessments and evaluations. Through standardized data collection, we have built a cohesive multi scenario data framework that maximize analytical utility. Scale product portfolio, building on this foundation, our data driven product portfolio now connects teaching application with resources centers that streamline lesson planning and capture comprehensive instructional data through the following segments.
Smart school based workbook for capturing detailed lesson data, adaptive prepared system supporting flexible daily practice with digital tracking capabilities, benchmarking, personalized learning solutions for smart learning curves, individual practice books and a comprehensive evaluation dashboards for competency based teaching and analytical provided for educators and managers across all scenarios. The enhanced data value, automated accumulation and intelligent distribution of teaching resources data now addresses diverse learning needs while maintaining long term data integrity. Longitudinal analysis ensure academic quality monitoring while process oriented data exploration builds holistic student profiles and enables effective competency based evaluation. By aligning data infrastructure with scalable solutions, we are now empowering educators to make evidence based decisions while preparing students for future ready learning business. In this quarter, we have initiated a targeted internal pilot of our AI powered learning diagnostic agent, leveraging state of the art large language models to analyze student performance data and help teachers improve efficiency in class preparation and homework correction.
It generates personalized explanations for common mistakes and a recommended tailored teaching strategies. Initial data shows the tools potential to streamline instruction workflow and improve learning outcomes by enabling teachers to efficiently interpret and utilize data, thereby enhancing teaching effectiveness and improve the quality of education. The integration of AI marks a significant step forward in optimizing teaching practice and learning outcomes with our offerings. In terms of distribution channels, we have always intensified our focus on strategic market penetration through channel diversification and the customer centric innovations. By aligning product development with emerging education trends and optimizing distribution network, we have improved our customer acquisition efficiency.
Growth markets positioning us for sustained development. Now, I will turn the call over to Lara to walk you through our latest financial performance. Thank you.
Lara Zhao, Investor Relations Manager, Seventeen EdTech: Thanks, Michael, 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 adjustment to our business model, organization and workforce.
In the fiscal year of 2024, we recorded net revenues of RMB169.2 million compared with RMB171.0 million in 2023, representing a 10.7% of the increase on a year over year basis. Net revenue for the fourth quarter of twenty twenty four was RMB36.6 million compared with RMB47.3 million in the fourth quarter of twenty twenty four. Net loss on a GAAP basis for the fourth quarter of twenty twenty four was RMB63.7 million compared with RMB98.4 million in the fourth quarter of twenty twenty three, representing a decrease of RMB 35.2 year on year. The adjusted net loss non GAAP for the fourth quarter of twenty twenty four was RMB 40,100,000.0 compared with adjusted net loss non GAAP of RMB81.8 million in the fourth quarter of twenty twenty three, a decrease of RMB51.0 year on year. Gross margin for the fourth quarter of twenty twenty four was 33.6% compared with 43.4% in the fourth quarter of twenty twenty three.
The relatively lower gross margin this quarter is mainly attributable to the delivery of RMB99 9,000,000 legacy moral education project, which did not include the typical components of our teaching and learning SaaS offering and thus had a lower margin dragging down the overall margin. This project was as a result of historical attempt and no longer a core offering for us. As of 12/31/2024, we have cash reserves of RMB359.3 million on our balance sheet. Next, I will go through our fourth quarter financials in greater detail. Net revenues.
Net revenues for the fourth quarter of twenty twenty four was RMB36.6 million, representing a year over year decrease of 22.7% from RMB47.3 million in the fourth quarter of twenty twenty three. This was mainly due to the reduction in net revenues from district level project as we prioritize our resources on school based project under subscription model and two, a higher proportion of contract under SaaS subscription model we signed in the fourth quarter of twenty twenty four, which requires longer period of revenue recognition. Cost of revenue for the fourth quarter of twenty twenty four was RMB24.3 million, representing a year over year decrease of 9.2% from RMB26.8 million in the fourth quarter of twenty twenty three, which was mainly due to the fewer district level project deliveries for our teaching and learning SaaS offerings as a result of the growing proportion of recurring revenue and a subscription model that requires fewer hardware and software deliveries. Gross profit for the fourth quarter of twenty twenty four was RMB12.3 million compared with RMB20.6 million in the fourth quarter of twenty twenty three. Gross margin for the fourth quarter of twenty twenty four was 33.6% compared with 43.6% in the fourth quarter of twenty twenty three.
Total operating expenses for the fourth quarter of twenty twenty four were RMB81.4 million, including RMB15.5 million of share based compensation expenses, representing a year over year decrease of 33.8% from RMB122.8 million in the fourth quarter of twenty twenty three. Loss from operations for the fourth quarter of twenty twenty four was RMB69.1 million compared with RMB102.3 million in the fourth quarter of twenty twenty three. Loss from operations as a percentage of net revenues for the fourth quarter of twenty twenty four was negative 188.8% compared with negative 216% in the fourth quarter of twenty twenty three. Net loss for the fourth quarter of twenty twenty four was RMB63.7 million compared with net loss of RMB98.4 million in the fourth quarter of twenty twenty three. Net loss as a percentage of net revenues was negative 174.2% in the fourth quarter of twenty twenty four compared with negative 207.9 in the fourth quarter of twenty twenty three.
Adjusted net loss non GAAP for the fourth quarter of twenty twenty four was RMB40.1 million compared with adjusted net loss non GAAP of RMB81.8 million in the fourth quarter of twenty twenty three. Adjusted net loss non GAAP as a percentage of net revenues was negative 109.5% in the fourth quarter of twenty twenty four compared with negative 172.8% of adjusted net loss, non GAAP as a percentage of net revenues in the fourth quarter of twenty twenty three. Please refer to the table captioned reconciliations of non GAAP
Michael Du, Director and Chief Financial Officer, Seventeen EdTech: measures to the most comparable GAAP measures at the end of
Lara Zhao, Investor Relations Manager, Seventeen EdTech: this press release for a equivalents, restricted cash and term deposits were RMB359.3 million equals US49.2 million dollars as of 12/31/2024, compared with RMB176.7 million as of 12/31/2023. Business as As we look to the future, we remain steadfast in our commitment to advancing educational digitization and enriching learning experiences. We will strengthen our core business operations while exploring new opportunities through dual focus on innovation and sustained growth. By prioritizing AI driven solutions, we aim to redefine personalized education and empower learners, teachers and educators with valuable insights. With that, that concludes our prepared remarks.
Thank you. Operator, we are now ready to begin the Q and A session. Thank you.
Conference Operator: Thank you so much
Lara Zhao, Investor Relations Manager, Seventeen EdTech: Thank you, operator. In closing, on behalf of Seventeen AdTech’s management team, we’d 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: This concludes today’s conference call. Thank you for participating. You may now all disconnect. Have a nice day.
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