TCTM Kids IT Education Inc.

Q2 2023 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%; average cost of revenues fell 2.2% to RMB 266.3 million. Operating loss was RMB 6.8 million versus operating income of RMB 48 million in the same quarter last year, and net income was RMB 8.3 million versus RMB 47.9 million last year, aided by a RMB 26.8 million gain on disposal. Basic income per ADS was RMB 0.7 and diluted income per ADS was RMB 0.67. For the first half, net loss was RMB 41.6 million and non-GAAP net loss was RMB 39.6 million. Cash, cash equivalents and restricted cash were RMB 368.1 million at June 30, 2023, down RMB 5.9 million from December 31, 2022. The company did not provide formal next-quarter or full-year numerical guidance on this call.

Nancy Ying Sun emphasized that the quarter benefited from easing external uncertainty, improved business conditions, and a more focused strategy. She highlighted that the company is strengthening its two core businesses—IT-focused supplementary STEAM education and To-C IT professional education—while adjusting the course catalog toward digital transformation and artificial intelligence. Her tone was constructive and optimistic, but she also acknowledged that the adult professional education business will likely take longer to recover because market supply and demand remain weak.

Xiaobo Shao walked through the financial improvement in detail, pointing to revenue of RMB 545 million, gross profit of RMB 278.5 million, gross margin of 51.1%, and operating loss of RMB 6.8 million. He said cost of revenues fell to RMB 266.3 million, operating expenses decreased 13.1% to RMB 285.5 million, and cash outflow from operating activities was RMB 20 million. He also noted RMB 76.6 million in proceeds from the sale of two buildings, capex 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 beyond the better operating environment. Management answered that three factors mattered most: improved social mobility and lower customer acquisition and delivery costs, stronger word-of-mouth from camps, competitions, and other youth activities, and favorable policy support for programming and STEAM education. The response also stressed that market conditions are stabilizing and that these trends are helping deepen market penetration.