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17 Education Technology Group Inc. reported a net revenue decline of 15% year-over-year in its Q1 2025 earnings call, with gross margins also slipping. Despite these challenges, the company emphasized its strategic focus on AI-driven educational technologies and operational efficiency. The stock remained stable at $1.97, reflecting a measured investor reaction to the earnings report. According to InvestingPro analysis, the company appears undervalued based on its Fair Value metrics, with a strong liquidity position evidenced by a current ratio of 3.32.
Key Takeaways
- Revenue fell by 15% year-over-year, with a gross margin decrease.
- Net losses were reduced by nearly 45%, showing cost management efforts.
- AI-driven innovations were highlighted, with implementations in over 50 schools.
- The company maintained a high customer renewal rate exceeding 90%.
Company Performance
17 Education Technology Group Inc. experienced a challenging quarter with a 15% decrease in net revenues, attributed to broader market pressures and a shift in strategic focus. The company has been pivoting towards AI-powered educational solutions, aiming to transform traditional learning environments. Despite the revenue decline, the firm reported a substantial reduction in net losses, suggesting effective cost management and operational streamlining. InvestingPro data reveals the company’s unique market position with a beta of -0.02, indicating its stock movements are largely independent of broader market trends. Get access to the comprehensive Pro Research Report for deeper insights into the company’s strategic transformation.
Financial Highlights
- Revenue: RMB 21,700,000 (15% decrease year-over-year)
- Gross Margin: 36.2% (down from 38.4% previous year)
- Net Loss (GAAP): RMB 30,900,000 (44.8% reduction year-over-year)
- Adjusted Net Loss (Non-GAAP): RMB 22,400,000 (47.5% decrease)
- Cash Reserves: RMB 333,300,000 as of March 2025
Outlook & Guidance
The company outlined its commitment to AI-driven educational technologies, aligning with national digital transformation strategies. Future guidance projects a continued focus on enhancing operational efficiencies and expanding AI applications in educational districts, particularly through school-based SaaS subscription models.
Executive Commentary
- "We aim to streamline teachers’ workflows, empowering them with evidence-based decisions," said Sushu Zhou, Acting CFO, underscoring the company’s focus on practical AI applications in education.
- "Over 90% of renewal customers opted to continue their subscriptions," added Zhou, highlighting strong customer retention.
- Laura Jao, Investor Relations Manager, stated, "We remain committed to enriching learning experiences," reflecting the company’s dedication to improving educational outcomes through technology.
Risks and Challenges
- Market Saturation: The educational technology sector is competitive, and market saturation could limit growth.
- Economic Pressures: Broader economic conditions may impact school budgets and spending on new technologies.
- Technological Adoption: Schools may face challenges in adopting new AI technologies, affecting the company’s growth rate.
- Regulatory Environment: Changes in educational policies and regulations could influence the company’s strategic direction.
The Q1 2025 earnings call highlighted 17 Education Technology Group’s strategic pivot towards AI-driven solutions while managing financial setbacks. The company’s focus on innovation and customer retention positions it to navigate the evolving educational landscape. Trading at a price-to-book ratio of just 0.34, the stock presents an interesting value proposition for investors seeking exposure to the educational technology sector. Discover more detailed valuation metrics and expert analysis with an InvestingPro subscription.
Full transcript - 17 Education Technology Group Inc (YQ) Q1 2025:
Conference Operator: Evening, and good morning, ladies and gentlemen, and thank you for standing by for 17x Tech’s First Quarter twenty twenty five Earnings Call. At this time, all participants are in a 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’ll now turn the meeting over to your host for today’s call, Ms.
Laura Jao, 17x Tech’s Investor Relations Manager. Please proceed, Laura. 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. Sushu Zhou, the acting Chief Financial Officer and myself, Investor Relations Manager. Sushu will walk you through our latest business performance and strategies, and I will discuss our financial performance in more detail. After the prepared remarks, Fisher 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 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 risks, 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 developments direction. Sisi, please go ahead.
Thank you, Lara. Hello, everyone. Thank you all for joining us on our first quarter twenty twenty five earnings conference call. Before we begin, I would like to note that the financial information on the non GAAP numbers in this release are presented on a continuing operation basis and in RMB, unless otherwise stated. And let me begin with our latest business updates.
We’re pleased to report a strong performance in the first quarter of twenty twenty five. This quarter has marked significant progress and innovation, particularly with the successful trial and implementation of our AI powered product upgrades, facilitating teaching and learning efficiency by delivering intelligent adaptive solutions that enhance daily instructional decision making, providing more personalized learning experiences for students. During the quarter, we have seen a strong growth in both new contract acquisitions and the expansion of our existing customer base. Our SaaS subscriptions business has risen as more schools and educational organizations recognize the value of our AI powered solutions, showcasing strong retention rate and increased adoption of our value added offerings. In the first quarter of twenty twenty five, we recorded net revenues of r and d 21,700,000.0, representing a 15% decrease from the previous quarter last year, which was primarily due to the reduction in net revenues from district level projects as we prioritize our resources on school based projects on a subscription model, which generally have longer revenue recognition period.
As we improve operational operational efficiency, operating expenses reduced by 42.6% compared to the same quarter last year, resulting in a 44.8% reduction in net loss on a GAAP basis. Looking ahead, we will remain vigilant in monitoring our financial performance and making strategic decisions to ensure a long term success and the sustainability of our business. And now let me go into more details. During the quarter, our district level teaching and learning staff business remained steady, continuously contributing an important portion in revenue recognition. Recently, we successfully supported Shanghai Minghang District to launch a specialized generative intelligent agent cluster and demonstrated it at a Shanghai Education Expo.
The intelligent agent integrates universal large language models, leveraging vast real time teaching and learning database in the district and integrating with the localized knowledge system, aiming to provide precise, contextualized support for learners and educators so that we can transform education services from knowledge transmission to competency development. And following the successful launch of the new AI powered solution in Shanghai, Minghan, we are confident that this offering will expand to other regions and serve as a model for potential partners pursuing transformative learning technologies. This initiative demonstrates our expertise in educational innovation by delivering adaptable, high value AI powered solutions that enhance daily instructional decision making, improve teaching and learning efficiency, and promote high quality regional education development. And our school based subscription business has sustained a steady growth driven by a year over year increase in newly sub sub subscribed students. This momentum underscores its strategic importance as a critical contributor and integral component of our overall revenue, which will continue to prioritize resource allocation.
And during the quarter, we have seen heightened demand and enthusiasm for our offerings in our partner schools, reflecting in a higher retention rate and increased adoption of our expandable value added services. Over 90% of renewal customers opted to continue their subscriptions with many expanding their service coverage. This strong retention and outstanding potential not only reinforce customer engagements and loyalty, but also safeguards the business for long term sustainable growth. And as for our product and the service offerings have been continuously upgraded with innovation, driving customer satisfaction and business growth By integrating AI into core teaching and learning scenarios, including lesson planning, in class interaction, assignment design, automated grading, data driven analysis, and personalized learning recommendations, We aim to streamline teachers’ workflows, empowering them with evidence based decisions and individual individualized learning path for each student. Specifically, our intelligent voice and classroom monitoring functions are expected to boost classroom efficiency.
As smart companion for teachers, it helps teachers understand students’ thinking process and learning state while providing teaching research report support. Teachers can interact with the smart assistance in real time, analyzing multidimensional data such as the students’ response time, thinking patterns, as well as learning trajectory, identifying group and individual differences with a much higher learning analytics so that evidence based teaching decisions can be made. Our intelligent solutions can customize classroom exercises and after school assignments for students based on personalized learning conditions, automatically grade them, and generate some dynamic error correction notebooks, and provide customized problem solving ideas and follow-up teaching suggestions. These advancements reduce teachers’ workload while enhancing students’ learning efficiency and achievement. To date, we have conducted trials in over 50 schools, providing teaching administrators with data driven management tools covering the entire teaching scenario as well as demonstrating scalable verification potential of this model.
And in terms of distribution channels, our multichannel marketing efforts and strategic partnerships have further solidified our presence in high growth markets. We have consistently prioritized strategic market penetration by diversifying our distribution methods and fostering collaboration. By aligning product development with emerging educational trends and enhancing our distribution network, we have improved product product delivery and customer engagement, leverage data analytics for targeted marketing and deeper customer insights. And now I will turn the call over to Lara to walk you through our latest financial performance. Thank you.
Thanks, Suzie, 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 first quarter of twenty twenty five, we recorded net revenues of RMB 21,700,000.0 compared with RMB 25,500,000.0 in the first quarter of twenty twenty four, representing a 15% decrease on year on 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 their subscription model, which generally have longer revenue recognition period.
Gross margin for the first quarter of twenty twenty five was 36.2 percent compared with 38.4% in the first quarter of twenty twenty four. Net loss on a GAAP basis for the first quarter of twenty twenty five was 30,900,000.0 RMB compared with 56,100,000.0 RMB in the first quarter of twenty twenty four, representing a decrease of 44.8% year on year. The adjusted net loss non GAAP for the first quarter of twenty twenty five was 22,400,000.0 RMB compared with adjusted net loss non GAAP of 42,700,000.0 RMB in the first quarter of twenty twenty four, a decrease of 47.5% year on year. As of March 2025, we have cash reserves of $3.03 333,300,000.0 RMB on our balance sheet compared with 359,300,000 as of 12/31/2024. Next, I will go through our our first quarter financials in greater detail.
Net revenues. Net revenues for the first quarter of twenty twenty five were RMB 21,700,000.0, representing a year over year decrease of 15% from 25,500,000.0 RMB in the first quarter of twenty twenty four. This was mainly due to the reduction in net revenues from the district level projects as we prioritize our resources on school based projects and the increasing number of contracts and the SaaS subscription model, which requires longer period of revenue recognition. Cost of revenue. Cost of revenues for the first quarter of twenty twenty five was 13,800,000.0 RMB, representing a year over year decrease of 11.9% from 15,700,000 in the first quarter of twenty twenty four, which was largely in line with the decrease of net revenues during the quarter.
Gross profit for the first quarter of twenty twenty five was 7,800,000.0 RMB compared with 9,800,000.0 in the first quarter of twenty twenty four. Gross margin for the first quarter of twenty twenty five was 60 36.2% compared with 38.4% in the first quarter of twenty twenty four. Total operating expenses for the first quarter of twenty twenty five was 41,700,000.0 RMB, including 8,500,000.0 RMB of share based compensation expenses, representing a year over year decrease of 42.6% from 72,700,000.0 RMB in the first quarter of twenty twenty four. Loss from operations for the first quarter of twenty twenty five was 33,900,000.0 RMB compared with 62,900,000.0 RMB in the first quarter of twenty twenty four. Loss from operations as a percentage of net revenues for the first quarter of twenty twenty five was negative 156.3 compared with negative 246.7% in the first quarter of twenty twenty four.
Net loss. Net loss for the first quarter of twenty twenty five was 30,900,000.0 RMB compared with the net loss of 56,100,000.0 in the first quarter of twenty twenty four. Net loss as a percentage of net revenues was negative a 142.8% in the first quarter of twenty twenty five compared with negative 02/2008 February in the first quarter of twenty twenty four. Adjusted net loss, non GAAP. Adjusted net loss, non GAAP, for the first quarter of twenty twenty five was 22,400,000.0 RMB compared with adjusted net loss non GAAP of 42,700,000.0 RMB in the first quarter of twenty twenty four.
Adjusted net loss non GAAP as a percentage of net revenues was negative 103.4% in the first quarter of twenty twenty five compared with negative 167.4% of adjusted net loss non GAAP as a percentage of net revenues in the first quarter of twenty twenty four. 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 the reconciliation of net loss under U. S. GAAP to adjusted net loss, non GAAP. Cash and cash equivalents, restricted cash and term deposits.
Cash and cash equivalents, restricted cash and term deposits were $3,333,300,000.0 RMB equals US 45,900,000.0 US dollar as of 03/31/2025 compared with RMB359.3 million as of 12/31/2024. Next, I’d like to share a brief update from the Board from our board. We warmly we warmly welcome mister Rui Jia as an independent director and a member of Audit Committee, the compensation committee, and the nominating and corporate governance committee of the board. Mister Jia has extensive experiences in fintech and education sectors, and we are confident that his insights will further strengthen the 17 ad tech strategic direction, governance and operations. We also extend our sincere gratitude to mister Xiaowei Gang for his outstanding service and invaluable contributions as he retires.
Additionally, mister Michael Chowdoo has resigned as director and chief financial officer, and the company announced appointing miss Zhu Zhou as our acting chief financial officer. Miss Zhou joined the company in December 2020 and has served as financial director since June 2022, overseeing the company’s overall financial operations, including financial reporting, business analysis, and strategies and strategy team. Miss Joe brings extensive financial expertise and has held adverse advisory roles at at several multinational companies, as well as senior auditor at PwC, Zhongqian CPAs LLP. He she received the due bachelor’s degree in accounting and law from Tsinghua University in 2011 and her MBA from Peking University’s Guanhua School of Management in 2000 in 02/2023. We welcome mister Jia and miss Zhou to the leadership team.
Their as the joint expertise will be instrumental as we drive forward to our next growth phase. We also sincerely thank you thank Mr. Michael Chaudhoo and Mr. Zhao Wei Gan for their invaluable We we a strong performance pleased a performance to actively align with the national strategy for the educational digital transformation and our story. The company remains as worthy in its commitment to enriching learning experiences while upholding the mission of making learning a wonderful experience.
Centered on delivering efficient, high quality educational project products and solutions, we aim to maintain growth momentum in in enhanced operational efficiency and steadily drive long term stable and sustainable development. With that, that concludes our prepared remarks. Thank you. Operator, we are now ready to begin the Q and A session. Thank you.
To withdraw your question, please press 11 again. There may be a short pause while we compile the q and a roster. Once again, to ask a question, please press star one one on your telephone keypad. As a reminder, to ask a question, please press star one one on your telephone keypad. I’m showing no questions.
I’ll now turn the conference back to Ms. Laura Zhao for closing comments. Thank you, operator. In closing, on behalf of Seventeen Air Tech’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. Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect your lines.
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