Sunlands Technology Group Announces Unaudited Third Quarter 2022 Financial Results

Q3 net revenues decreased by 3.2% year-over-year

Q3 New student enrollments[1]increased by 44.7% year-over-year

Q3 net income reached RMB168.1 million

BEIJING,Nov. 23,2022 --Sunlands Technology Group (NYSE: STG)("Sunlands" or the "Company"),a leader in China's online post-secondary and professional education,today announced its unaudited financialresults for the third quarter ended September 30,2022.

Third Quarter 2022Financial and Operational Snapshots

Net revenues were RMB576.2 million (US$81.0 million),representing a 3.2% decrease year-over-year.

Gross billings (non-GAAP) were RMB365.5 million (US$51.4 million),representing a 21.0% decrease year-over-year.

Gross profit was RMB491.3 million (US$69.1 million),representing a 4.0% decrease year-over-year.

Net income was RMB168.1 million (US$23.6 million),representing an 81.1% increase year-over-year.

Net income margin,defined as net income as a percentage of net revenues,increased to 29.2% from 15.6% in the third quarter of 2021.

New student enrollments were 134,987,representing a 44.7% increase year-over-year.

As of September 30,2022,the Company's deferred revenue balance was RMB1,798.6 million (US$252.8 million).

[1] New student enrollments for a given period refers to the total number of orders placed by students that newly enroll in at least one course during that period,including those students that enroll and then terminate their enrollment with us,excluding orders of our low-price courses. (In June 2019,we introduced low-price courses,including "mini courses" and "RMB1 courses," to strengthen our competitiveness and improve customer experience. We offer such low-price courses mainly in the formats of recorded videos or short live streaming.)

"Despite the macroeconomic uncertainty and shifting industry landscape,we delivered encouraging results in the third quarter with sequential topline growth,further bottom-line improvement and increased new student enrollments. These achievements testified to the effectiveness of our strategic initiatives to prioritize profitability and healthy growth," said Mr. Tongbo Liu,Chief Executive Officer of Sunlands.

"With a leaner and more efficient organization,we further refined our product strategy in the third quarter. We focused more on margin accretive programs and allocated our capital and human resources accordingly to expand our course offerings in these programs,leading to an optimized product lineup and more diversified course content. Additionally,as we continued to hone our services to increase our user stickiness and cross-selling opportunities,we transformed our student acquisition methods,focusing more on users' lifetime value instead of investing heavily in marketing activities. Thanks to these measures,our new student enrollments for the quarter rose by 44.7% year-over-year and 11.8% quarter-over-quarter,despite a 23.9% year-over-year and 8.2% quarter-over-quarter decline in sales and marketing expenses. Looking ahead,we are confident that our proven business strategies and continued commitment todelivering premium and tailored courses to more students will help us navigate current challenges and achieve meaningful growth," concluded Mr. Liu.

Ms. Selena Lu Lv,Chief Financial Officer of Sunlands,commented,"We are pleased with our third quarter results amid an uncertain macro environment. Our net revenues reached RMB576.2 million during the quarter,exceeding the high end of our guidance range by 6.7% despite the slight 3.2% year-over-year decrease. Benefitting from our dedicated efforts and measured steps in cost control and operational efficiency enhancement,our third quarter operating expenses declined by 24.5% year-over-year and 7.4% quarter-over-quarter. As a result,we maintained our profitability with a net income of RMB168.1 million,up 81.1% year-over-year and 46.7% quarter-over-quarter. Our net income margin for the quarter remained solid at 29.2%,expanding 13.6 percentage points year-over-year and 8.6 percentage points quarter-over-quarter. Moving forward,we will continue to prudently manage costs and expenses,enrich our course offerings and further optimize our operations,aiming for continued success and additional shareholder value."

Financial Results for the third quarterof 2022

Net Revenues

In the third quarter of 2022,net revenues decreased by 3.2% to RMB576.2 million (US$81.0 million) from RMB595.1 million in the third quarter of 2021. The decrease was mainly driven by the decline in gross billings.

Cost of Revenues

Cost of revenues increased by 2.2% to RMB84.9 million (US$11.9 million) in the third quarter of 2022 from RMB83.1 million in the third quarter of 2021. The increase was primarily due to increased service fees paid to educational institutions and increased cooperation costs.

Gross Profit

Gross profit decreased by 4.0% to RMB491.3 million (US$69.1 million) in the third quarter of 2022 from RMB512.0 million in the third quarter of 2021.

Operating Expenses

In the third quarter of 2022,operating expenses were RMB325.0 million (US$45.7 million),representing a 24.5% decrease from RMB430.6 million in the third quarter of 2021.

Sales and marketing expenses decreased by 23.9% to RMB269.1 million (US$37.8 million) in the third quarter of 2022 from RMB353.5 million in the third quarter of 2021. The decrease was mainly due to: (i) lower spending on branding and marketing activities; and (ii) declined compensation expenses related to our sales and marketing personnel.

General and administrative expenses decreased by 29.6% to RMB44.4 million (US$6.2 million) in the third quarter of 2022 from RMB63.2 million in the third quarter of 2021. The decrease was mainly due to a decrease in rental expenses.

Product development expenses decreased by 17.5% to RMB11.5 million (US$1.6 million) in the third quarter of 2022 from RMB14.0 million in the third quarter of 2021. The decrease was mainly due to a decrease in compensation expenses to our product development personnel.

Other Income

Other income decreased by 58.6% to RMB5.3 million (US$0.7 million) in the third quarter of 2022 from RMB12.9 million in the third quarter of 2021.

Net Income

As a result of the foregoing,net income for the third quarter of 2022 was RMB168.1 million (US$23.6 million),compared with RMB92.8 million in the third quarter of 2021.

Basic and Diluted Net Income Per Share

Basic and diluted net income per share was RMB24.08 (US$3.38) in the third quarter of 2022.

Cash and Cash Equivalents and Short-term Investments

As of September 30,the Company had RMB678.8 million (US$95.4 million) of cash and cash equivalents and RMB170.1 million (US$23.9 million) of short-term investments,compared with RMB626.7 million of cash and cash equivalents and RMB184.2 million of short-term investments as of December 31,2021.

Deferred Revenue

As of September 30,the Company had a deferred revenue balance of RMB1,798.6 million (US$252.8 million),compared with RMB2,348.2 million as of December 31,2021.

Capital Expenditures

Capital expenditures were incurred primarily in connection with information technology ("IT") infrastructure equipment and leasehold improvements necessary to support the Company's operations. Capital expenditures were RMB1.3 million (US$0.2 million) in the third quarter of 2022,compared with RMB1.8 million in the third quarter of 2021.

Financial Results for the First Nine Months of 2022

Net Revenues

In the first nine months of 2022,net revenues decreased by 9.1% to RMB1,744.5 million (US$245.2 million) from RMB1,918.9 million in the first nine months of 2021.

Cost of Revenues

Cost of revenues decreased by 4.9% to RMB272.9 million (US$38.4 million) in the first nine months of 2022 from RMB286.8 million in the first nine months of 2021.

Gross Profit

Gross profit decreased by 9.8% to RMB1,471.7 million (US$206.9 million) from RMB1,632.1 million in the first nine months of 2021.

Operating Expenses

In the first nine months of 2022,operating expenses were RMB1,022.0 million (US$143.7 million),representing a 36.8% decrease from RMB1,616.8 million in the first nine months of 2021.

Sales and marketing expenses decreased by 39.2% to RMB857.0 million (US$120.5 million) in the first nine months of 2022 from RMB1,409.1 million in the first nine months of 2021.

General and administrative expenses decreased by 17.5% to RMB129.5 million (US$18.2 million) in the first nine months of 2022 from RMB157.1 million in the first nine months of 2021.

Product development expenses decreased by 30.0% to RMB35.5 million (US$5.0 million) in the first nine months of 2022 from RMB50.7 million in the first nine months of 2021.

Other Income

Other income for the first nine months of 2022 was RMB19.7 million (US$2.8 million),compared with RMB42.3 million in the first nine months of 2021. The decrease was primarily because value-added tax exemption offered by the relevant authorities as part of the national COVID-19 relief effort came to an end in April 2021.

Net Income

Net income for the first nine months of 2022 was RMB462.1 million (US$65.0 million),compared with RMB61.6 million in the first nine months of 2021.

Basic and Diluted Net Income Per Share

Basic and diluted net income per share was RMB68.07 (US$9.57) in the first nine months of 2022,compared with RMB9.69 in the first nine months of 2021.

Capital Expenditures

Capital expenditures were incurred primarily in connection with IT infrastructure equipment and leasehold improvements necessary to support the Company's operations. Capital expenditures wereRMB2.5million (US$0.4 million) in the first nine months of 2022,compared with RMB11.2 million in the first nine months of 2021.

Outlook

For the fourth quarter of 2022,Sunlands currently expects net revenues to be between RMB520 million to RMB540 million,which would represent a decrease of 8.3% to 11.7% year-over-year.

The above outlook is based on the current market conditions and reflects the Company's current and preliminary estimates of market and operating conditions and customer demand,which are all subject to substantial uncertainty.

Exchange Rate

The Company's business is primarily conducted in China and all revenues are denominated in Renminbi ("RMB"). This announcement contains currency conversions of RMB amounts into U.S. dollars ("US$") solely for the convenience of the reader. Unless otherwise noted,all translations from RMB to US$ are made at a rate of RMB7.1135 to US$1.00,the effective noon buying rate for September 30,2022 as set forth in the H.10 statistical release of the Federal Reserve Board. No representation is made that the RMB amounts could have been,or could be,converted,realized or settled into US$ at that rate on September 30,or at any other rate.

Conference Call and Webcast

Sunlands' management team will host a conference call at6:30 AMU.S. Eastern Time,(7:30 PMBeijing/Hong Kongtime) onNovember23,following the quarterly results announcement.

The dial-in details for the live conference call are:

International:

+1-412-902-4272

US toll free:

+1-888-346-8982

Mainland China toll free:

400-120-1203

Hong Kong toll free:

800-905-945

Hong Kong:

+852-3018-4992

Please dial in 10 minutes before the call is scheduled to begin. When prompted,ask to be connected to the call for "Sunlands Technology Group." Participants will be required to state their name and company upon entering the call.

A live webcast and archive of the conference call will be available on the Investor Relations section of Sunlands' website at http://www.sunlands.investorroom.com/.

A replay of the conference call will be available 1 hour after the end of the conference call until November 30,by dialing the following telephone numbers:

International:

+1-412-317-0088

US toll free:

+1-877-344-7529

Replay access code:

3978249

About Sunlands

Sunlands Technology Group (NYSE: STG) ("Sunlands" or the "Company"),formerly known as Sunlands Online Education Group,is the leader in China's online post-secondary and professional education. With a one to many,live streaming platform,Sunlands offers various degree and diploma-oriented post-secondary courses as well as online professional courses and educational content,to help students prepare for professional certification exams and attain professional skills. Students can access its services either through PC or mobile applications. The Company's online platform cultivates a personalized,interactive learning environment by featuring a virtual learning community and a vast library of educational content offerings that adapt to the learning habits of its students. Sunlands offers a unique approach to education research and development that organizes subject content into Learning Outcome Trees,the Company's proprietary knowledge management system. Sunlands has a deep understanding of the educational needs of its prospective students and offers solutions that help them achieve their goals.

About Non-GAAP Financial Measures

We use gross billings,EBITDA,non-GAAPOperating cost and expense,non-GAAPloss/income from operations and Non-GAAP net loss/income per share,each a non-GAAP financial measure,in evaluating our operating results and for financial and operational decision-making purposes.

We define gross billings for a specific period as the total amount of cash received for the sale of course packages,net of the total amount of refunds paid in such period. Our management uses gross billings as a performance measurement because we generally bill our students for the entire course tuition at the time of sale of our course packages and recognize revenue proportionally over a period. EBITDA is defined as net loss/incomeexcluding depreciation and amortization,interest expense,interest income,and income tax expenses/benefit. We believe that gross billings and EBITDAprovide valuable insight into the sales of our course packages and the performance of our business.

These non-GAAP financial measures should not be considered in isolation from,or as a substitute for,their most directly comparable financial measure prepared in accordance with GAAP. A reconciliation of the historical non-GAAP financial measures to their respective most directly comparable GAAP measure has been provided in the tables included below. Investors are encouraged to review the reconciliation of the historical non-GAAP financial measures to their respective most directly comparable GAAP financial measures. As gross billings,operating cost and expenses excluding share-based compensation expenses,general and administrative expenses excluding share-based compensation expenses,sales and marketing expenses excluding share-based compensation expenses,product development expenses excluding share-based compensation expenses,non-GAAPnet loss/income exclude share-based compensation expenses,and basic and diluted net loss/income per share excluding share-based compensation expenseshave material limitations as an analytical metric and may not be calculated in the same manner by all companies,it may not be comparable to other similarly titled measures used by other companies. In light of the foregoing limitations,you should not consider gross billings and EBITDA as a substitute for,or superior to,their respective most directly comparable financial measures prepared in accordance with GAAP. We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure.

Safe Harbor Statement

This press release contains forward-looking statements made under the "safe harbor" provisions of Section 21E of the Securities Exchange Act of 1934,as amended,and the U.S. Private Securities Litigation Reform Act of 1995.These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Sunlands may also make written or oral forward-looking statements in its reports filed with or furnished to the U.S. Securities and Exchange Commission,in its annual report to shareholders,in press releases and other written materials and in oral statements made by its officers,directors or employees to third parties. Any statements that are not historical facts,including statements about Sunlands' beliefs and expectations,are forward-looking statements that involve factors,risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors and risks include,but not limited to the following: Sunlands' goals and strategies; its expectations regarding demand for and market acceptance of its brand and services; its ability to retain and increase student enrollments; its ability to offer new courses and educational content; its ability to improve teaching quality and students' learning results; its ability to improve sales and marketing efficiency and effectiveness; its ability to engage,train and retain new faculty members; its future business development,results of operations and financial condition; its ability to maintain and improve technology infrastructure necessary to operate its business; competition in the online education industry in China; relevant government policies and regulations relating to Sunlands' corporate structure,business and industry; and general economic and business condition in China Further information regarding these and other risks,uncertainties or factors is included in the Sunlands' filings with the U.S. Securities and Exchange Commission. All information provided in this press release is current as of the date of the press release,and Sunlands does not undertake any obligation to update such information,except as required under applicable law.

For investor and media enquiries,please contact:

Sunlands Technology Group

Investor Relations

Email: sl-ir@sunlands.com

The Piacente Group,Inc.

Brandi Piacente

Tel: +1-212-481-2050

Email: sunlands@tpg-ir.com

Yang Song

Tel: +86-10-6508-0677

Email: sunlands@tpg-ir.com

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands,except for share and per share data,or otherwise noted)

As of December 31,

As of September 30,

2021

2022

RMB

RMB

US$

ASSETS

Current assets

Cash and cash equivalents

626,715

678,763

95,419

Restricted cash

50,008

-

-

Short-term investments

184,159

170,088

23,911

Prepaid expenses and other current assets

176,349

114,399

16,082

Deferred costs,current

89,353

52,719

7,411

Total current assets

1,126,584

1,015,969

142,823

Non-current assets

Property and equipment,net

857,648

831,982

116,958

Intangible assets,net

2,761

1,834

258

Right-of-use assets

362,335

344,215

48,389

Deferred costs,non-current

109,020

83,811

11,782

Long-term investments

54,844

62,730

8,818

Deferred tax assets

39,265

30,354

4,267

Other non-current assets

40,163

43,814

6,159

Total non-current assets

1,466,036

1,398,740

196,631

TOTAL ASSETS

2,592,620

2,414,709

339,454

LIABILITIES AND SHAREHOLDERS' DEFICIT

LIABILITIES

Current liabilities

Accrued expenses and other current liabilities (including accrued expenses

and other current liabilities of the consolidated VIEs without recourse to

Sunlands Technology Group of RMB197,467 and RMB168,160 as of

December 31,2021 and September 30,respectively)

586,043

530,783

74,618

Deferred revenue,current (including deferred revenue,current of the consolidated VIEs

without recourse to Sunlands Technology Group of RMB295,958 and

RMB368,117 as of December 31,respectively)

1,266,948

1,052,068

147,897

Lease liabilities,current portion (including lease liabilities,current portion of the

consolidated VIEs without recourse to Sunlands Technology Group of RMB8,366 and

RMB22,330 as of December 31,respectively)

14,310

28,783

4,046

Long-term debt,current portion (including long-term debt,current portion of the

consolidated VIEs without recourse to Sunlands Technology Group of nil and nil December

as of December 31,respectively)

38,654

38,654

5,434

Total current liabilities

1,905,955

1,650,288

231,995

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS-continued

(Amounts in thousands,

2021

2022

RMB

RMB

US$

Non-current liabilities

Deferred revenue,non-current (including deferred revenue,non-current

of the consolidated VIEs without recourse to Sunlands Technology Group of

RMB257,071 and RMB256,755 as of December 31,

respectively)

1,081,231

746,490

104,940

Lease liabilities,non-current portion (including lease liabilities,non-current portion

of the consolidated VIEs without recourse to Sunlands Technology Group of

RMB318,598 and RMB311,665 as of December 31,

respectively)

404,133

392,033

55,111

Deferred tax liabilities (including deferred tax liabilities of the consolidated

VIEs without recourse to Sunlands Technology Group of RMB2,312 and RMB2,111

as of December 31,respectively)

21,782

8,090

1,137

Other non-current liabilities (including other non-current liabilities of the consolidated

VIEs without recourse to Sunlands Technology Group of RMB963 and RMB963

as of December 31,respectively)

11,698

8,152

1,146

Long-term debt,non-current portion (including long-term debt,non-current portion of the

consolidated VIEs without recourse to Sunlands Technology Group of nil and nil

as of December 31,respectively)

181,973

152,982

21,506

Total non-current liabilities

1,700,817

1,307,747

183,840

TOTAL LIABILITIES

3,606,772

2,958,035

415,835

SHAREHOLDERS' DEFICIT

Class A ordinary shares (par value of US$0.00005,796,062,195 shares

authorized; 2,085,939 and 2,460,939 shares issued as of December 31,2021

and September 30,respectively; 1,839,553 and 2,123,691 shares

outstanding as of December 31,respectively)

1

1

-

Class B ordinary shares (par value of US$0.00005,826,389 shares

authorized; 826,389 and 826,389 shares issued and outstanding

as of December 31,respectively)

-

-

-

Class C ordinary shares (par value of US$0.00005,203,111,416 shares

authorized; 4,002,930 and 4,930 shares issued and outstanding

as of December 31,respectively)

1

1

-

Treasury stock

-

-

-

Accumulated deficit

(3,456,073)

(2,992,738)

(420,712)

Additional paid-in capital

2,364,313

2,311,240

324,909

Accumulated other comprehensive income

82,532

143,823

20,218

Total Sunlands Technology Group shareholders' deficit

(1,009,226)

(537,673)

(75,585)

Non-controlling interest

(4,926)

(5,653)

(796)

TOTAL SHAREHOLDERS' DEFICIT

(1,014,152)

(543,326)

(76,381)

TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT

2,454

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands,or otherwise noted)

For the Three Months Ended September 30,

2021

2022

RMB

RMB

US$

Net revenues

595,128

576,208

81,002

Cost of revenues

(83,103)

(84,902)

(11,935)

Gross profit

512,025

491,306

69,067

Operating expenses

Sales and marketing expenses

(353,508)

(269,056)

(37,823)

Product development expenses

(13,980)

(11,532)

(1,621)

General and administrative expenses

(63,156)

(44,443)

(6,248)

Total operating expenses

(430,644)

(325,031)

(45,692)

Income from operations

81,381

166,275

23,375

Interest income

3,144

2,200

309

Interest expense

(3,042)

(2,487)

(350)

Other income,net

12,853

5,325

749

Gain on disposal of subsidiaries

-

1,709

240

Income before income tax expenses

and loss from equity method investments

94,336

173,022

24,323

Income tax expenses

(1,110)

(4,225)

(594)

Loss from equity method investments

(431)

(713)

(100)

Net income

92,795

168,084

23,629

Less: Net loss attributable to non-controlling interest

(2,506)

(1)

-

Net income attributable to Sunlands Technology Group

95,301

168,085

23,629

Net income per share attributable to ordinary shareholders of

Sunlands Technology Group:

Basic and diluted

14.16

24.08

3.38

Weighted average shares used in calculating net income

per ordinary share:

Basic and diluted

6,729,197

6,981,447

6,447

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

For the Three Months Ended September 30,

2021

2022

RMB

RMB

US$

Net income

92,629

Other comprehensive (loss)/income,net of tax effect of nil:

Change in cumulative foreign currency translation adjustments

(1,105)

32,103

4,513

Total comprehensive income

91,690

200,187

28,142

Less: comprehensive loss attributable to non-controlling

interest

(2,506)

(1)

-

Comprehensive income attributable to Sunlands Technology

Group

94,196

200,188

28,142

SUNLANDSTECHNOLOGY GROUP

RECONCILIATION OFGAAP ANDNON-GAAPRESULTS

(Amounts in thousands)

For the Three Months Ended September 30,

2021

2022

RMB

RMB

Net revenues

595,208

Less: other revenues

(26,497)

(28,525)

Add: tax and surcharges

41,674

11,394

Add: ending deferred revenue

2,540,886

1,798,558

Add: ending refund liability

222,266

204,961

Less: beginning deferred revenue

(2,690,221)

(1,998,062)

Less: beginning refund liability

(220,745)

(199,028)

Gross billings (non-GAAP)

462,491

365,506

Net income

92,084

Add: income tax expenses

1,110

4,225

depreciation and amortization

9,561

8,939

interest expense

3,042

2,487

Less: interest income

(3,144)

(2,200)

EBITDA (non-GAAP)

103,364

181,535

SUNLANDSTECHNOLOGY GROUP

RECONCILIATION OFGAAP ANDNON-GAAPRESULTS

(Amounts in thousands)

For the Three Months Ended September 30,

2021

2022

RMB

RMB

Cost of revenues

(83,902)

Less: Share-based compensation expenses in cost of revenues

(39)

-

Non-GAAP cost of revenues

(83,064)

(84,902)

Sales and marketing expenses

(353,056)

Less: Share-based compensation expenses in sales and marketing expenses

13

-

Non-GAAP sales and marketing expenses

(353,521)

(269,056)

General and administrative expenses

(63,443)

Less: Share-based compensation expenses in general and administrative expenses

(67)

-

Non-GAAP general and administrative expenses

(63,089)

(44,443)

Operating costs and expense

(513,747)

(409,993)

Less: Share-based compensation expenses

(93)

-

Non-GAAP operating costs and expense

(513,654)

(409,993)

Income from operations

81,275

Less: Share-based compensation expenses

(93)

-

Non-GAAP income from operations

81,474

166,275

Net income attributable to Sunlands Technology Group

95,085

Less: Share-based compensation expenses

(93)

-

Non-GAAP net income attributable to Sunlands Technology Group

95,394

168,085

Net income per share attributable to ordinary shareholders of

Sunlands Technology Group:

Basic and diluted

14.16

24.08

Non-GAAP net income per share attributable to ordinary shareholders of

Sunlands Technology Group:

Basic and diluted

14.18

24.08

Weighted average shares used in calculating net income

per ordinary share:

Basic and diluted

6,447

Weighted average shares used in calculating Non-GAAP net income

per ordinary share:

Basic and diluted

6,447

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands,or otherwise noted)

For the Nine Months Ended September 30,

2021

2022

RMB

RMB

US$

Net revenues

1,918,934

1,744,513

245,240

Cost of revenues

(286,811)

(272,859)

(38,358)

Gross profit

1,632,123

1,471,654

206,882

Operating expenses

Sales and marketing expenses

(1,409,068)

(857,031)

(120,480)

Product development expenses

(50,669)

(35,465)

(4,986)

General and administrative expenses

(157,103)

(129,538)

(18,210)

Total operating expenses

(1,616,840)

(1,022,034)

(143,676)

Income from operations

15,283

449,620

63,206

Interest income

13,157

9,208

1,294

Interest expense

(8,029)

(7,764)

(1,091)

Other income

42,301

19,667

2,765

Impairment loss on long-term investments

-

(500)

(70)

Gain on disposal of subsidiaries

-

1,709

240

Income before income tax expenses

and loss from equity method investments

62,712

471,940

66,344

Income tax expenses

(963)

(8,568)

(1,204)

Loss from equity method investments

(155)

(1,317)

(185)

Net income

61,594

462,055

64,955

Less: Net loss attributable to non-controlling interest

(3,586)

(1,280)

(180)

Net income attributable to Sunlands Technology Group

65,180

463,335

65,135

Net income per share attributable to ordinary shareholders of

Sunlands Technology Group:

Basic and diluted

9.69

68.07

9.57

Weighted average shares used in calculating net income

per ordinary share:

Basic and diluted

6,806,672

6,672

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

For the Nine Months Ended September 30,

2021

2022

RMB

RMB

US$

Net income

61,955

Other comprehensive (loss)/income,net of tax effect of nil:

Change in cumulative foreign currency translation adjustments

(7,841)

61,291

8,616

Total comprehensive income

53,753

523,346

73,571

Less: comprehensive loss attributable to non-controlling

interest

(3,280)

(180)

Comprehensive income attributable to Sunlands Technology

Group

57,339

524,626

73,751

SUNLANDSTECHNOLOGY GROUP

RECONCILIATION OFGAAP ANDNON-GAAPRESULTS

(Amounts in thousands)

For the Nine Months Ended September 30,

2021

2022

RMB

RMB

Net revenues

1,513

Less: other revenues

(58,208)

(86,520)

Add: tax and surcharges

119,873

55,815

Add: ending deferred revenue

2,961

Less: beginning deferred revenue

(3,024,443)

(2,348,179)

Less: beginning refund liability

(232,859)

(243,236)

Gross billings (non-GAAP)

1,486,449

1,125,912

Net income

61,055

Add: income tax expenses

963

8,568

depreciation and amortization

28,266

28,100

interest expense

8,029

7,764

Less: interest income

(13,157)

(9,208)

EBITDA (non-GAAP)

85,695

497,279

SUNLANDSTECHNOLOGY GROUP

RECONCILIATION OFGAAP ANDNON-GAAPRESULTS

(Amounts in thousands)

For the Nine Months Ended September 30,

2021

2022

RMB

RMB

Cost of revenues

(286,859)

Less: Share-based compensation expenses in cost of revenues

(45)

(33)

Non-GAAP cost of revenues

(286,766)

(272,826)

Sales and marketing expenses

(1,031)

Less: Share-based compensation expenses in sales and marketing expenses

72

(4,166)

Non-GAAP sales and marketing expenses

(1,140)

(852,865)

General and administrative expenses

(157,538)

Less: Share-based compensation expenses in general and administrative expenses

(324)

(2,982)

Non-GAAP general and administrative expenses

(156,779)

(126,556)

Operating costs and expense

(1,903,651)

(1,294,893)

Less: Share-based compensation expenses

(297)

(7,181)

Non-GAAP operating costs and expense

(1,354)

(1,287,712)

Income from operations

15,620

Less: Share-based compensation expenses

(297)

(7,181)

Non-GAAP income from operations

15,580

456,801

Net income attributable to Sunlands Technology Group

65,180

(463,335)

Less: Share-based compensation expenses

(297)

(7,181)

Non-GAAP net income attributable to Sunlands Technology Group

65,477

(470,516)

Net income per share attributable to ordinary shareholders of

Sunlands Technology Group:

Basic and diluted

9.69

68.07

Non-GAAP net income per share attributable to ordinary shareholders of

Sunlands Technology Group:

Basic and diluted

9.73

69.13

Weighted average shares used in calculating net income

per ordinary share:

Basic and diluted

6,672

Weighted average shares used in calculating Non-GAAP net income

per ordinary share:

Basic and diluted

6,672

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