Santa Cruz County Bank

Second-quarter 2023 total net revenue was RMB 545 million, down 16% year over year from RMB 649 million. Gross profit was RMB 278.5 million and gross margin was 51.1%; operating loss was RMB 6.8 million versus operating income of RMB 48 million a year ago, and net income was RMB 8.3 million versus RMB 47.9 million a year ago, boosted by a RMB 26.8 million gain on disposal from the college-collaboration business carve-out. Non-GAAP operating loss was RMB 0.9 million and non-GAAP net income was RMB 9.2 million; basic income per ADS was RMB 0.7 and diluted income per ADS was RMB 0.67. Cash, cash equivalents, and restricted cash were RMB 368.1 million as of June 30, 2023, down RMB 5.9 million from December 31, 2022. For the core businesses, STEAM education revenue was in line with Q2 2022 and IT professional education revenue fell 34.8% year over year, while IT professional education revenue increased 47% quarter over quarter. Management did not provide formal next-quarter or full-year financial guidance.

Nancy Ying Sun framed the quarter as evidence that the business is recovering as external uncertainty fades, with better customer acquisition, stronger word of mouth, and improving social mobility helping the STEAM segment. She emphasized that the company’s focused strategy—especially the carve-out of the college collaboration-related business—should improve financial health and allow more attention on profitability and operational capability. Her tone was constructive and confident, pointing to digital transformation, AI, and supportive education policy as longer-term demand drivers.

Xiaobo Shao said the company cut its operating loss to RMB 6.8 million from RMB 58.8 million in Q1 as revenue rebounded 42% sequentially. He highlighted lower cost of revenues at RMB 266.3 million, gross profit of RMB 278.5 million, and gross margin of 51.1%, alongside total operating expenses down 13.1% year over year to RMB 285.5 million and non-GAAP operating expenses down 13% to RMB 284.6 million. He also noted net cash outflow from operations of RMB 20 million, capital expenditures of RMB 11.6 million, and ending cash, cash equivalents and restricted cash of RMB 368.1 million.

The main analyst question asked what drove the quarter-over-quarter improvement besides the better operating environment. Nancy answered that the key factors were improved customer acquisition and delivery efficiency, stronger word of mouth from challenges, competitions and camps, and supportive policies for programming and STEAM education. She also said parents are becoming more aware of these programs, which is helping deepen market penetration.