[17 Education & Technology Group Inc. First Quarter 2023 Financial Results](index=1&type=section&id=17%20Education%20%26%20Technology%20Group%20Inc.%20First%20Quarter%202023%20Financial%20Results) [Financial Highlights](index=1&type=section&id=First%20Quarter%202023%20Highlights) The company experienced a **96.0% year-over-year decline in net revenues to RMB 9.3 million**, a **gross margin drop to 24.4%**, and a **significant increase in net loss to RMB 92.5 million** Q1 2023 Key Financial Metrics | Metric | Q1 2023 | Q1 2022 | Year-over-Year Change | | :--- | :--- | :--- | :--- | | Net Revenues | RMB 9.3 million | RMB 233.4 million | -96.0% | | Gross Margin | 24.4% | 60.7% | -36.3 ppt | | Net Loss | RMB 92.5 million | RMB 24.8 million | Increased by 273% | | Adjusted Net Loss (non-GAAP) | RMB 64.0 million | RMB 9.9 million (Income) | N/A | [Management Commentary](index=1&type=section&id=Management%20Commentary) Management attributed Q1 2023's poor performance to COVID-related project delays but anticipates future revenue recognition from recent major in-school SaaS project wins - The CEO stated that the COVID outbreak in Q4 2022 caused delays in bidding and delivery processes, adversely affecting financial performance[3](index=3&type=chunk) - The company has recently won multiple landmark projects, including a **RMB 116 million** project in Shanghai's Minhang District and a **RMB 20 million** project in Beijing's Xicheng District[3](index=3&type=chunk) - The CFO noted that revenues from these new major projects are expected to be delivered and recognized in financial statements over the upcoming quarters[3](index=3&type=chunk) [Detailed Financial Performance Analysis](index=2&type=section&id=First%20Quarter%202023%20Unaudited%20Financial%20Results) Project delays severely impacted financial performance, leading to a **96.0% revenue drop** and a **significant increase in operating and net losses**, despite a **37.8% reduction in total operating expenses** [Revenues and Gross Profit](index=2&type=section&id=Revenues%20and%20Gross%20Profit) Net revenues plummeted **96.0% to RMB 9.3 million** due to project delays, causing gross profit to decrease **98.4% to RMB 2.3 million** and gross margin to contract to **24.4%** Q1 2023 vs Q1 2022 Revenue and Gross Profit (RMB) | Metric | Q1 2023 (RMB) | Q1 2022 (RMB) | Year-over-Year Change | | :--- | :--- | :--- | :--- | | Net Revenues | 9.3 million | 233.4 million | -96.0% | | Cost of Revenues | 7.0 million | 91.8 million | -92.4% | | Gross Profit | 2.3 million | 141.7 million | -98.4% | | Gross Margin | 24.4% | 60.7% | -36.3 ppt | [Operating Expenses](index=2&type=section&id=Total%20Operating%20Expenses) Total operating expenses decreased **37.8% to RMB 106.3 million**, primarily due to **significant reductions in R&D (-54.6%) and G&A (-21.7%) expenses** from workforce optimization Q1 2023 Operating Expenses Breakdown (RMB) | Expense Category | Q1 2023 (RMB) | Q1 2022 (RMB) | Year-over-Year Change | | :--- | :--- | :--- | :--- | | Sales and marketing | 21.8 million | 22.0 million | -0.8% | | Research and development | 44.3 million | 97.5 million | -54.6% | | General and administrative | 40.2 million | 51.3 million | -21.7% | | **Total Operating Expenses** | **106.3 million** | **170.8 million** | **-37.8%** | - The decrease in R&D and G&A expenses was primarily attributed to workforce optimization and continuous expense management[10](index=10&type=chunk)[11](index=11&type=chunk) [Profitability](index=2&type=section&id=Profitability) Loss from operations widened to **RMB 104.0 million**, with net loss increasing to **RMB 92.5 million**, and adjusted net loss (non-GAAP) reversing to **RMB 64.0 million** Q1 2023 vs Q1 2022 Profitability (RMB) | Metric | Q1 2023 (RMB) | Q1 2022 (RMB) | | :--- | :--- | :--- | | Loss from Operations | (104.0 million) | (29.1 million) | | Net Loss | (92.5 million) | (24.8 million) | | Adjusted Net (Loss)/Income | (64.0 million) | 9.9 million | [Financial Position](index=4&type=section&id=Financial%20Position) As of March 31, 2023, the company held **RMB 639.5 million** in cash and equivalents, with total assets at **RMB 896.5 million** and total liabilities at **RMB 204.3 million** Key Balance Sheet Items (RMB) | Item | March 31, 2023 (RMB) | December 31, 2022 (RMB) | | :--- | :--- | :--- | | Cash, Restricted Cash, & Short-term Investments | 639.5 million | 737.7 million | | Total Assets | 896.5 million | 980.5 million | | Total Liabilities | 204.3 million | 221.7 million | | Total Shareholders' Equity | 692.2 million | 758.9 million | [Unaudited Condensed Consolidated Financial Statements](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section presents the detailed unaudited financial statements for Q1 2023, including Consolidated Balance Sheets, Statements of Operations, and GAAP to non-GAAP reconciliations [Consolidated Balance Sheets](index=7&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) As of March 31, 2023, the balance sheet shows total assets of **RMB 896.5 million**, total liabilities of **RMB 204.3 million**, and total shareholders' equity of **RMB 692.2 million** Balance Sheet Summary as of March 31, 2023 (RMB thousands) | Category | Amount (RMB thousands) | | :--- | :--- | | **Total Current Assets** | **833,878** | | Total Non-current Assets | 62,630 | | **TOTAL ASSETS** | **896,508** | | **Total Current Liabilities** | **197,104** | | Total Non-current Liabilities | 7,232 | | **TOTAL LIABILITIES** | **204,336** | | **TOTAL SHAREHOLDERS' EQUITY** | **692,172** | [Consolidated Statements of Operations](index=9&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20LOSS) The Q1 2023 statement of operations details the **RMB 92.5 million net loss**, with net loss per ADS at **(RMB 1.90)**, reflecting revenues of **RMB 9.3 million** and operating expenses Q1 2023 Income Statement Summary (RMB thousands) | Line Item | Q1 2023 (RMB thousands) | | :--- | :--- | | Net revenues | 9,273 | | Gross profit | 2,263 | | Total operating expenses | (106,283) | | Loss from operations | (104,020) | | **Net loss** | **(92,537)** | | Net loss per ADS (Basic and diluted) | (1.90) | - Total share-based compensation expenses included in operating expenses for Q1 2023 amounted to **RMB 28.5 million**[31](index=31&type=chunk) [Reconciliation of Non-GAAP Measures](index=10&type=section&id=Reconciliations%20of%20non-GAAP%20measures%20to%20the%20most%20comparable%20GAAP%20measures) This section reconciles the **GAAP net loss of RMB 92.5 million** to the **non-GAAP adjusted net loss of RMB 64.0 million** for Q1 2023 by excluding share-based compensation Q1 2023 GAAP to Non-GAAP Reconciliation (RMB thousands) | Description | Amount (RMB thousands) | | :--- | :--- | | Net Loss (GAAP) | (92,537) | | Add: Share-based compensation | 28,495 | | **Adjusted net loss (Non-GAAP)** | **(64,042)** | [Supplementary Information](index=4&type=section&id=Supplementary%20Information) This section provides logistical details, including earnings call information, non-GAAP measure definitions, the currency exchange rate, and the safe harbor statement for forward-looking statements - The company defines Adjusted net income (loss) as net income (loss) excluding share-based compensation expenses[17](index=17&type=chunk) - The exchange rate used for convenience translation to USD for the March 31, 2023 period was **US$1.00 = RMB 6.8676**[20](index=20&type=chunk) - The company will hold a conference call on June 14, 2023, at 9:00 p.m. U.S. Eastern Time to discuss the results[16](index=16&type=chunk)

User Base and Market Reach - The company has cumulatively serviced over 1.0 million verified teacher users, more than 50.0 million verified student users, and close to 50.0 million registered parent users, utilized in over 70,000 K-12 schools across more than 300 cities in China[186]. - As of December 31, 2022, the company's teaching and learning SaaS offerings are utilized in over 90 cities across 29 provincial-level regions in mainland China[188]. - In Minhang District, Shanghai, 100% of the 128 public schools have adopted the teaching and learning SaaS offering, serving over 120,000 students and completing over 16 million homework assignments[186]. Product Offerings and Development - The teaching and learning SaaS offerings were launched in September 2021, integrating software and hardware to provide data-driven recommendations for educational authorities and schools[185]. - The smart in-school classroom solution includes over 18 million homework questions and assessment sets, providing a comprehensive educational content library[184]. - The personalized self-directed learning product launched in December 2021 constituted the majority of revenue from other educational products and services in 2022[193]. - The teaching and learning SaaS offerings are designed to improve the efficiency of homework assignments and related teaching scenarios, reducing the burden on both teachers and students[185]. - The company aims to develop products and services that align with China's digital transformation in public schools[280]. Regulatory Compliance and Challenges - The company ceased offering K-12 Academic AST Services by December 31, 2021, in compliance with PRC regulations[181]. - The evolving regulatory environment poses significant uncertainties regarding compliance with PRC laws and regulations, which could adversely affect the company's business and financial condition[218]. - The Ministry of Education (MOE) requires all Academic After-School Tutoring (AST) Institutions for compulsory education to register as non-profit by the end of 2021, suspending student enrollment and fee charging until registration is complete[218]. - The company is actively monitoring regulatory changes and is taking necessary measures to ensure compliance with new requirements[218]. Financial Performance - Net revenues decreased by 75.7% to RMB531.1 million (US$77.0 million) in 2022, down from RMB2,184.5 million in 2021[275]. - The company generated a net loss of RMB177.9 million (US$25.8 million) in 2022, following losses of RMB1,441.9 million and RMB1,339.9 million in 2021 and 2020, respectively[275]. - The company expects its teaching and learning SaaS offerings to become an increasingly important source of net revenue going forward, given the significant market potential[284]. - The majority of net revenues in 2022 from other educational products and services came from personalized self-directed learning products, indicating a shift in focus towards user-facing products[284]. Operational Efficiency and Cost Management - The company reported a decrease in research and development expenses as a percentage of net revenues from 47.5% in 2020 to 34.4% in 2022, indicating improved operational scale and cost control capabilities[288]. - Sales and marketing expenses accounted for 84.9% of net revenues in 2020, which decreased to 14.9% in 2022, reflecting a substantial reduction in absolute amounts due to regulatory requirements and cost optimization efforts[289]. - Compensation costs, a major component of cost of revenues, decreased from RMB 327.6 million (25.3% of net revenues) in 2020 to RMB 112.4 million (21.0% of net revenues) in 2022[288]. Corporate Structure and Governance - The company has established a wholly-owned subsidiary in the British Virgin Islands and multiple subsidiaries in mainland China to streamline its corporate structure[174]. - The corporate structure includes significant shareholdings by Mr. Andy Chang Liu, who holds 99% in key subsidiaries[260]. - The company has established three committees under the board of directors: audit, compensation, and nominating and corporate governance[358]. Intellectual Property and Technology - As of December 31, 2022, the company had registered 304 trademarks, 137 patents, 96 software copyrights, and 115 domain names in China, highlighting its commitment to intellectual property protection[210]. - The company has a team of 164 technology professionals focused on enhancing technological capabilities, including automatic speech recognition and computer vision[199]. - The automatic speech recognition technology evaluated over 300 million audio messages daily, significantly improving local evaluation accuracy[200]. Social Responsibility and Community Engagement - The company engages in corporate social responsibility initiatives under the brand 17 Cares, focusing on improving K-12 education quality in impoverished regions in China[206]. - The company competes by offering diversified educational functions, high-quality localized content, and data-driven insights, aiming to grow the number of paid users efficiently[207]. Cash Flow and Investments - Net cash used in operating activities in 2022 was RMB 463.9 million (US$ 67.3 million), compared to RMB 1,506.7 million in 2021[325]. - Cash, cash equivalents, and restricted cash at the end of 2022 were RMB 718.1 million (US$ 104.1 million), down from RMB 1,180.9 million in 2021[322]. - Capital expenditures were RMB 2.8 million (US$ 0.4 million) in 2022, significantly lower than RMB 129.4 million in 2021[329]. Employee and Shareholder Information - The company had a total of 480 employees as of December 31, 2022, with the majority based in mainland China[364]. - The beneficial ownership of directors and executive officers includes 14.4% of total ordinary shares and 80.9% of aggregate voting power[367]. - As of February 28, 2023, options to purchase 11,208,163 ordinary shares under the 2015 Share Option Plan have been granted and remain outstanding[344].

17 Education & Technology Group Inc. (NASDAQ:YQ) Q4 2022 Earnings Conference Call March 27, 2023 9:00 PM ET Company Participants Andy Liu - Founder, Chairman, Chief Executive Officer Michael Du - Director, Chief Financial Officer Lara Zhao - Investor Relations Manager Conference Call Participants Operator Good evening and good morning, ladies and gentlemen, and thank you for standing by for 17EdTech's 2022 Earnings Conference Call. At this time all participants are in a listen-only mode. After management's ...

[Highlights and Management Commentary](index=1&type=section&id=Highlights%20and%20Management%20Commentary) This section summarizes the company's financial performance for Q4 and FY 2022, including management's commentary on operational challenges and strategic achievements [Fourth Quarter 2022 Highlights](index=1&type=section&id=Fourth%20Quarter%202022%20Highlights) 17 Education & Technology Group Inc. reported a significant year-over-year decline in net revenues and an increased net loss for Q4 2022, alongside a decrease in gross margin. Adjusted net loss also widened compared to Q4 2021 Fourth Quarter 2022 Highlights Summary | Metric | Q4 2022 (RMB) | Q4 2021 (RMB) | YoY Change | Q4 2022 (USD) | | :-------------------------------- | :------------ | :------------ | :--------- | :------------ | | Net Revenues | 39.6 million | 542.5 million | -92.7% | 5.7 million | | Gross Margin | 52.1% | 64.8% | -12.7 pp | - | | Net Loss | (103.1 million) | (25.6 million) | +302.7% | (15.0 million) | | Adjusted Net Loss (non-GAAP) | (70.1 million) | 17.0 million (income) | N/A | (10.2 million) | [Fiscal Year 2022 Highlights](index=1&type=section&id=Fiscal%20Year%202022%20Highlights) For the full fiscal year 2022, the company experienced a substantial decrease in net revenues but achieved a significant reduction in both net loss and adjusted net loss compared to 2021, while gross margin slightly improved Fiscal Year 2022 Highlights Summary | Metric | FY 2022 (RMB) | FY 2021 (RMB) | YoY Change | FY 2022 (USD) | | :-------------------------------- | :------------ | :------------ | :--------- | :------------ | | Net Revenues | 531.1 million | 2,184.5 million | -75.7% | 77.0 million | | Gross Margin | 61.2% | 59.8% | +1.4 pp | - | | Net Loss | (177.9 million) | (1,441.9 million) | -87.7% | (25.8 million) | | Adjusted Net Loss (non-GAAP) | (48.3 million) | (1,246.7 million) | -96.1% | (7.0 million) | [Management Commentary](index=1&type=section&id=Management%20Commentary) Management attributed Q4 2022 revenue delays to the COVID-19 outbreak impacting project bidding and delivery. Despite challenges, the company adapted product offerings and achieved significant progress in business transformation, highlighted by a new RMB 116 million educational digital transformation project in Shanghai Minhang District - The COVID outbreak in China in Q4 **2022** caused significant delays in project bidding and delivery processes, affecting revenue and financial results[4](index=4&type=chunk) - The Company was awarded a new educational digital transformation project in Shanghai Minhang District with a contract value of RMB **116 million**, illustrating industry recognition for its teaching and learning SaaS offering[4](index=4&type=chunk) - Continuous cost and expense reduction measures allowed the company to significantly reduce its net loss in **2022**, despite the termination of legacy K-**12** after-school online tutoring operations[5](index=5&type=chunk) [Company Overview](index=7&type=section&id=Company%20Overview) This section describes 17 Education & Technology Group Inc.'s core business, focusing on its education technology solutions and product offerings in China [Business Description](index=7&type=section&id=Business%20Description) 17 Education & Technology Group Inc. is a leading education technology company in China, focusing on smart in-school classroom solutions, data-driven teaching, learning, and assessment products. It provides teaching and learning SaaS offerings for digital transformation in schools and personalized self-directed learning products for families - The Company offers smart in-school classroom solutions that deliver data-driven teaching, learning, and assessment products to teachers, students, and parents[31](index=31&type=chunk) - It provides teaching and learning SaaS offerings to facilitate digital transformation and upgrade at Chinese schools, focusing on improving efficiency and effectiveness of core teaching and learning scenarios[31](index=31&type=chunk) - The Company also provides a personalized self-directed learning product to Chinese families, utilizing technology and data insights to offer targeted learning and exercise content[31](index=31&type=chunk) [Fourth Quarter 2022 Unaudited Financial Results](index=2&type=section&id=Fourth%20Quarter%202022%20Unaudited%20Financial%20Results) This section details the company's unaudited financial performance for the fourth quarter of 2022, covering key revenue, expense, and loss metrics [Net Revenues](index=2&type=section&id=Net%20Revenues_Q4) Net revenues for Q4 2022 decreased significantly year-over-year due to the cessation of online K-12 tutoring services. However, excluding K-12, net revenues from new businesses increased substantially. Quarter-on-quarter, revenues decreased due to COVID-19 related project delivery delays Net Revenues Summary | Metric | Q4 2022 (RMB) | Q4 2021 (RMB) | YoY Change | | :----------- | :------------ | :------------ | :--------- | | Net Revenues | 39.6 million | 542.5 million | -92.7% | - Excluding net revenue from online K-**12** tutoring services, net revenues increased significantly from RMB**16.6 million** to RMB**39.6 million**, representing a year-over-year increase of **137.7%**[6](index=6&type=chunk) - Net revenue decreased by **68.2%** on a quarter-on-quarter basis due to delays in project delivery and revenue recognition resulting from the COVID-**19** pandemic[6](index=6&type=chunk) [Cost of Revenues](index=2&type=section&id=Cost%20of%20Revenues_Q4) Cost of revenues for Q4 2022 decreased significantly year-over-year, largely mirroring the decline in net revenues due to the discontinuation of online K-12 tutoring services Cost of Revenues Summary | Metric | Q4 2022 (RMB) | Q4 2021 (RMB) | YoY Change | | :------------- | :------------ | :------------ | :--------- | | Cost of Revenues | 18.9 million | 191.2 million | -90.1% | - The decrease was largely in line with the decrease in net revenues due to the cessation of the Company's online K-**12** tutoring services[7](index=7&type=chunk) [Gross Profit and Gross Margin](index=2&type=section&id=Gross%20Profit%20and%20Gross%20Margin_Q4) Gross profit for Q4 2022 saw a substantial year-over-year decrease, and gross margin also declined by 12.7 percentage points compared to the same period in 2021 Gross Profit and Gross Margin Summary | Metric | Q4 2022 (RMB) | Q4 2021 (RMB) | YoY Change | | :----------- | :------------ | :------------ | :--------- | | Gross Profit | 20.6 million | 351.4 million | -94.1% | | Gross Margin | 52.1% | 64.8% | -12.7 pp | [Total Operating Expenses](index=2&type=section&id=Total%20Operating%20Expenses_Q4) Total operating expenses for Q4 2022 decreased by 62.9% year-over-year, primarily driven by reductions across sales and marketing, R&D, and G&A expenses due to business adjustments and staff optimization Total Operating Expenses Summary | Metric | Q4 2022 (RMB) | Q4 2021 (RMB) | YoY Change | | :------------------- | :------------ | :------------ | :--------- | | Total Operating Expenses | 141.0 million | 380.3 million | -62.9% | [Sales and Marketing Expenses](index=2&type=section&id=Sales%20and%20marketing%20expenses_Q4) Sales and marketing expenses decreased by 83.1% year-over-year in Q4 2022, mainly due to reduced promotional course expenses, advertising, and staff optimization following regulatory changes Sales and Marketing Expenses Summary | Metric | Q4 2022 (RMB) | Q4 2021 (RMB) | YoY Change | | :----------------------- | :------------ | :------------ | :--------- | | Sales and marketing expenses | 17.6 million | 104.1 million | -83.1% | - The decrease was mainly due to decreases in promotional course expenses and advertising expenditures as a result of changes in the regulatory environment, as well as staff optimization[11](index=11&type=chunk) [Research and Development Expenses](index=2&type=section&id=Research%20and%20development%20expenses_Q4) Research and development expenses decreased by 67.5% year-over-year in Q4 2022, primarily attributable to staff optimization in line with business adjustments Research and Development Expenses Summary | Metric | Q4 2022 (RMB) | Q4 2021 (RMB) | YoY Change | | :--------------------------- | :------------ | :------------ | :--------- | | Research and development expenses | 51.8 million | 159.5 million | -67.5% | - The decrease was primarily attributable to staff optimization in line with business adjustment[11](index=11&type=chunk) [General and Administrative Expenses](index=2&type=section&id=General%20and%20administrative%20expenses_Q4) General and administrative expenses decreased by 13.8% year-over-year in Q4 2022, mainly due to staff optimization General and Administrative Expenses Summary | Metric | Q4 2022 (RMB) | Q4 2021 (RMB) | YoY Change | | :------------------------------- | :------------ | :------------ | :--------- | | General and administrative expenses | 71.6 million | 83.1 million | -13.8% | - The decrease was primarily due to staff optimization in line with business adjustment[12](index=12&type=chunk) [Impairment for Property and Equipment and Right-of-Use Assets](index=2&type=section&id=Impairment%20for%20property%20and%20equipment%20and%20right-of-use%20assets_Q4) No impairment charges for property and equipment and right-of-use assets were recorded in Q4 2022, a 100% reduction from the previous year Impairment for Property and Equipment and Right-of-Use Assets Summary | Metric | Q4 2022 (RMB) | Q4 2021 (RMB) | YoY Change | | :------------------------------------------------- | :------------ | :------------ | :--------- | | Impairment for property and equipment and right-of-use assets | — | 33.6 million | -100.0% | [Loss from Operations](index=4&type=section&id=Loss%20from%20Operations_Q4) Loss from operations for Q4 2022 increased significantly year-over-year, with the loss as a percentage of net revenues widening to negative 304.2% Loss from Operations Summary | Metric | Q4 2022 (RMB) | Q4 2021 (RMB) | YoY Change | | :----------------- | :------------ | :------------ | :--------- | | Loss from Operations | (120.3 million) | (28.9 million) | +316.3% | - Loss from operations as a percentage of net revenues for Q4 **2022** was negative **304.2%**, compared with negative **5.3%** in Q4 **2021**[13](index=13&type=chunk) [Net Loss](index=4&type=section&id=Net%20Loss_Q4) Net loss for Q4 2022 increased to RMB103.1 million from RMB25.6 million in Q4 2021, with net loss as a percentage of net revenues significantly widening Net Loss Summary | Metric | Q4 2022 (RMB) | Q4 2021 (RMB) | YoY Change | | :------- | :------------ | :------------ | :--------- | | Net Loss | (103.1 million) | (25.6 million) | +302.7% | - Net loss as a percentage of net revenues was negative **260.7%** in Q4 **2022**, compared with negative **4.7%** in Q4 **2021**[14](index=14&type=chunk) [Adjusted Net Income (Loss) (non-GAAP)](index=4&type=section&id=Adjusted%20Net%20Income%20(Loss)%20(non-GAAP)_Q4) The company reported an adjusted net loss of RMB70.1 million in Q4 2022, a significant shift from an adjusted net income of RMB17.0 million in Q4 2021 Adjusted Net Income (Loss) (non-GAAP) Summary | Metric | Q4 2022 (RMB) | Q4 2021 (RMB) | YoY Change | | :--------------------------- | :------------ | :------------ | :--------- | | Adjusted Net Income (Loss) | (70.1 million) | 17.0 million (income) | N/A | [Fiscal Year 2022 Unaudited Financial Results](index=4&type=section&id=Fiscal%20Year%202022%20Unaudited%20Financial%20Results) This section presents the company's unaudited financial results for the full fiscal year 2022, including comprehensive revenue, expense, and profitability analysis [Net Revenues](index=4&type=section&id=Net%20Revenues_FY) Net revenues for FY 2022 decreased by 75.7% year-over-year, primarily due to the cessation of online K-12 tutoring services. However, excluding K-12, net revenues from new businesses increased 8.5-fold, reflecting successful business transformation Net Revenues Summary | Metric | FY 2022 (RMB) | FY 2021 (RMB) | YoY Change | | :----------- | :------------ | :------------ | :--------- | | Net Revenues | 531.1 million | 2,184.5 million | -75.7% | - Excluding net revenue from online K-**12** tutoring services, net revenues increased significantly from RMB**55.9 million** to RMB**531.1 million**, representing an **8.5-fold** year-over-year increase, mainly attributable to steady business transformation progress[16](index=16&type=chunk) [Cost of Revenues](index=4&type=section&id=Cost%20of%20Revenues_FY) Cost of revenues for FY 2022 decreased by 76.5% year-over-year, largely in line with the overall decrease in net revenues Cost of Revenues Summary | Metric | FY 2022 (RMB) | FY 2021 (RMB) | YoY Change | | :------------- | :------------ | :------------ | :--------- | | Cost of Revenues | 206.2 million | 878.2 million | -76.5% | [Gross Profit and Gross Margin](index=4&type=section&id=Gross%20Profit%20and%20Gross%20Margin_FY) Gross profit for FY 2022 decreased by 75.1% year-over-year, while gross margin slightly improved to 61.2% from 59.8% in 2021 Gross Profit and Gross Margin Summary | Metric | FY 2022 (RMB) | FY 2021 (RMB) | YoY Change | | :----------- | :------------ | :------------ | :--------- | | Gross Profit | 324.9 million | 1,306.3 million | -75.1% | | Gross Margin | 61.2% | 59.8% | +1.4 pp | [Total Operating Expenses](index=4&type=section&id=Total%20Operating%20Expenses_FY) Total operating expenses for FY 2022 decreased substantially by 80.7% year-over-year, driven by significant reductions across all expense categories due to business adjustments and staff optimization Total Operating Expenses Summary | Metric | FY 2022 (RMB) | FY 2021 (RMB) | YoY Change | | :------------------- | :------------ | :------------ | :--------- | | Total Operating Expenses | 536.0 million | 2,779.8 million | -80.7% | [Sales and Marketing Expenses](index=4&type=section&id=Sales%20and%20marketing%20expenses_FY) Sales and marketing expenses for FY 2022 decreased drastically by 94.4% year-over-year, primarily due to reduced promotional and advertising expenditures and staff optimization following regulatory changes Sales and Marketing Expenses Summary | Metric | FY 2022 (RMB) | FY 2021 (RMB) | YoY Change | | :----------------------- | :------------ | :------------ | :--------- | | Sales and marketing expenses | 79.1 million | 1,412.9 million | -94.4% | - This was mainly due to the decreases in promotional course expenses and advertising expenditures as a result of the changes in regulatory environment, as well as staff optimization in line with business adjustment[21](index=21&type=chunk) [Research and Development Expenses](index=6&type=section&id=Research%20and%20development%20expenses_FY) Research and development expenses for FY 2022 decreased by 70.5% year-over-year, primarily due to staff optimization in line with business adjustments Research and Development Expenses Summary | Metric | FY 2022 (RMB) | FY 2021 (RMB) | YoY Change | | :--------------------------- | :------------ | :------------ | :--------- | | Research and development expenses | 235.8 million | 800.2 million | -70.5% | - The decrease was primarily attributable to staff optimization in line with business adjustment[22](index=22&type=chunk) [General and Administrative Expenses](index=6&type=section&id=General%20and%20administrative%20expenses_FY) General and administrative expenses for FY 2022 decreased by 50.4% year-over-year, mainly due to staff optimization General and Administrative Expenses Summary | Metric | FY 2022 (RMB) | FY 2021 (RMB) | YoY Change | | :------------------------------- | :------------ | :------------ | :--------- | | General and administrative expenses | 221.0 million | 445.4 million | -50.4% | - The decrease was primarily due to staff optimization in line with business adjustment[22](index=22&type=chunk) [Impairment for Property and Equipment and Right-of-Use Assets](index=6&type=section&id=Impairment%20for%20property%20and%20equipment%20and%20right-of-use%20assets_FY) No impairment charges for property and equipment and right-of-use assets were recorded in FY 2022, a complete elimination from the RMB121.3 million recorded in 2021 Impairment for Property and Equipment and Right-of-Use Assets Summary | Metric | FY 2022 (RMB) | FY 2021 (RMB) | YoY Change | | :------------------------------------------------- | :------------ | :------------ | :--------- | | Impairment for property and equipment and right-of-use assets | — | 121.3 million | -100.0% | [Loss from Operations](index=6&type=section&id=Loss%20from%20Operations_FY) Loss from operations for FY 2022 decreased significantly by 85.7% year-over-year, with the loss as a percentage of net revenues improving from negative 67.5% to negative 39.8% Loss from Operations Summary | Metric | FY 2022 (RMB) | FY 2021 (RMB) | YoY Change | | :----------------- | :------------ | :------------ | :--------- | | Loss from Operations | (211.1 million) | (1,473.5 million) | -85.7% | - Loss from operations as a percentage of net revenues in **2022** was negative **39.8%**, improving from negative **67.5%** in **2021**[23](index=23&type=chunk) [Net Loss](index=6&type=section&id=Net%20Loss_FY) Net loss for FY 2022 decreased by 87.7% year-over-year to RMB177.9 million, with net loss as a percentage of net revenues narrowing to negative 33.5% from negative 66.0% Net Loss Summary | Metric | FY 2022 (RMB) | FY 2021 (RMB) | YoY Change | | :------- | :------------ | :------------ | :--------- | | Net Loss | (177.9 million) | (1,441.9 million) | -87.7% | - Net loss as a percentage of net revenues was negative **33.5%** in **2022**, compared with negative **66.0%** in **2021**[24](index=24&type=chunk) [Adjusted Net Loss (non-GAAP)](index=6&type=section&id=Adjusted%20Net%20Loss%20(non-GAAP)_FY) Adjusted net loss for FY 2022 decreased dramatically by 96.1% year-over-year to RMB48.3 million, indicating improved operational efficiency after excluding share-based compensation Adjusted Net Loss (non-GAAP) Summary | Metric | FY 2022 (RMB) | FY 2021 (RMB) | YoY Change | | :------------------- | :------------ | :------------ | :--------- | | Adjusted Net Loss | (48.3 million) | (1,246.7 million) | -96.1% | [Cash and Cash Equivalents, Restricted Cash and Short-term Investment](index=6&type=section&id=Cash%20and%20Cash%20Equivalents,%20Restricted%20Cash%20and%20Short-term%20Investment_FY) Total cash and cash equivalents, restricted cash, and short-term investments decreased to RMB737.7 million as of December 31, 2022, from RMB1,180.9 million at the end of 2021 Cash and Cash Equivalents, Restricted Cash and Short-term Investment Summary | Metric | As of Dec 31, 2022 (RMB) | As of Dec 31, 2121 (RMB) | Change | | :-------------------------------------------------- | :----------------------- | :----------------------- | :----- | | Cash and cash equivalents, restricted cash and short-term investment | 737.7 million | 1,180.9 million | -37.5% | [Financial Statements and Reconciliations](index=8&type=section&id=Financial%20Statements%20and%20Reconciliations) This section provides the company's unaudited condensed consolidated financial statements and reconciliations of non-GAAP measures for Q4 and FY 2022 [Unaudited Condensed Consolidated Balance Sheets](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) The consolidated balance sheets show a decrease in total assets from RMB1,580.4 million in 2021 to RMB980.5 million in 2022, driven by reductions in current assets. Total liabilities also decreased significantly, while total shareholders' equity saw a slight decline Unaudited Condensed Consolidated Balance Sheets Summary | Metric | As of Dec 31, 2022 (RMB in thousands) | As of Dec 31, 2021 (RMB in thousands) | | :--------------------------------- | :----------------------- | :----------------------- | | Total Assets | 980,524 | 1,580,421 | | Total Liabilities | 221,661 | 783,385 | | Total Shareholders' Equity | 758,863 | 797,036 | [Unaudited Condensed Consolidated Statements of Operations (Q4 2022)](index=9&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20(Q4%202022)) The Q4 2022 statement of operations details a net loss of RMB103.1 million on net revenues of RMB39.6 million, with significant operating expenses including share-based compensation Unaudited Condensed Consolidated Statements of Operations (Q4 2022) Summary | Metric | Q4 2022 (RMB in thousands) | Q4 2021 (RMB in thousands) | | :-------------------------------- | :------------ | :------------ | | Net Revenues | 39,556 | 542,548 | | Gross Profit | 20,618 | 351,366 | | Loss from Operations | (120,343) | (28,898) | | Net Loss | (103,138) | (25,555) | | Share-based compensation expenses | 33,005 | 42,564 | [Unaudited Condensed Consolidated Statements of Operations (FY 2022)](index=11&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20(FY%202022)) The FY 2022 statement of operations shows a net loss of RMB177.9 million on net revenues of RMB531.1 million, reflecting substantial reductions in operating expenses and share-based compensation compared to the prior year Unaudited Condensed Consolidated Statements of Operations (FY 2022) Summary | Metric | FY 2022 (RMB in thousands) | FY 2021 (RMB in thousands) | | :-------------------------------- | :------------ | :------------ | | Net Revenues | 531,064 | 2,184,520 | | Gross Profit | 324,856 | 1,306,284 | | Loss from Operations | (211,148) | (1,473,486) | | Net Loss | (177,872) | (1,441,913) | | Share-based compensation expenses | 129,558 | 195,214 | [Reconciliations of Non-GAAP Measures (Q4 2022)](index=10&type=section&id=Reconciliations%20of%20Non-GAAP%20Measures%20(Q4%202022)) The reconciliation for Q4 2022 shows the adjustment from GAAP net loss to non-GAAP adjusted net loss by adding back share-based compensation expenses, resulting in an adjusted net loss of RMB70.1 million Reconciliations of Non-GAAP Measures (Q4 2022) Summary | Metric | Q4 2022 (RMB in thousands) | Q4 2021 (RMB in thousands) | | :------------------------- | :------------ | :------------ | | Net Loss | (103,138) | (25,555) | | Share-based compensation | 33,005 | 42,564 | | Adjusted net income (loss) | (70,133) | 17,009 | [Reconciliations of Non-GAAP Measures (FY 2022)](index=12&type=section&id=Reconciliations%20of%20Non-GAAP%20Measures%20(FY%202022)) The reconciliation for FY 2022 demonstrates the adjustment from GAAP net loss to non-GAAP adjusted net loss by adding back share-based compensation expenses, resulting in an adjusted net loss of RMB48.3 million Reconciliations of Non-GAAP Measures (FY 2022) Summary | Metric | FY 2022 (RMB in thousands) | FY 2021 (RMB in thousands) | | :------------------------- | :------------ | :------------ | | Net Loss | (177,872) | (1,441,913) | | Share-based compensation | 129,558 | 195,214 | | Adjusted net loss | (48,314) | (1,246,699) | [Additional Information](index=6&type=section&id=Additional%20Information) This section provides supplementary information, including explanations of non-GAAP measures, conference call details, exchange rates, and a safe harbor statement [Non-GAAP Financial Measures Explanation](index=6&type=section&id=Non-GAAP%20Financial%20Measures%20Explanation) 17EdTech uses adjusted net income (loss), which excludes share-based compensation expenses, as a non-GAAP financial measure to assess comparative operating performance and future prospects. Management believes it provides useful information for understanding ongoing business performance, though it has limitations and is not a substitute for GAAP results - Adjusted net income (loss) is a non-GAAP financial measure used by management to understand comparative operating performance and future prospects, excluding share-based compensation expenses[27](index=27&type=chunk) - Management believes this non-GAAP measure reflects ongoing business and operating performance, allowing meaningful period-to-period comparisons and providing useful information to investors[28](index=28&type=chunk) - The non-GAAP financial measure has limitations, as it does not include all items of income and expense, is not prepared in accordance with GAAP, and may not be comparable to measures used by other companies[29](index=29&type=chunk) [Conference Call Information](index=6&type=section&id=Conference%20Call%20Information) The company scheduled a conference call on March 27, 2023, to discuss its Q4 2022 financial results. Participants were required to preregister to receive dial-in and PIN numbers, with a live and archived webcast also available - A conference call was scheduled for Monday, March **27**, **2023**, at **9:00** p.m. U.S. Eastern Time to discuss the financial results for the fourth quarter of **2022**[26](index=26&type=chunk) - Participants needed to preregister via a provided link to receive dial-in numbers and a PIN[26](index=26&type=chunk) - A live and archived webcast of the conference call was available at https://ir.**17**zuoye.com/[26](index=26&type=chunk) [Exchange Rate Information](index=7&type=section&id=Exchange%20Rate%20Information) The financial reports translate RMB amounts into USD for convenience using an exchange rate of US$1.00=RMB6.8972, based on the U.S. Federal Reserve Board's noon buying rate on December 31, 2022 - Translations of RMB into USD are solely for the convenience of readers and were calculated at the rate of US$**1.00**=RMB**6.8972**, representing the noon buying rate on December **31**, **2022**[30](index=30&type=chunk) [Safe Harbor Statement](index=7&type=section&id=Safe%20Harbor%20Statement) This announcement includes forward-looking statements under the 'safe harbor' provisions, which involve inherent risks and uncertainties that could cause actual results to differ materially from expectations. The company does not undertake to update these statements except as required by law - The announcement contains forward-looking statements made under the 'safe harbor' provisions of the United States Private Securities Litigation Reform Act of **1995**[32](index=32&type=chunk) - Forward-looking statements involve inherent risks and uncertainties, and a number of factors could cause actual results to differ materially from those contained in any such statement[32](index=32&type=chunk) - **17**EdTech does not undertake any obligation to update any forward-looking statement, except as required under applicable law[32](index=32&type=chunk) [Investor and Media Inquiries](index=7&type=section&id=Investor%20and%20Media%20Inquiries) Contact information for investor and media inquiries is provided, directing interested parties to Ms. Lara Zhao, Investor Relations Manager, via email - For investor and media inquiries, contact Ms. Lara Zhao, Investor Relations Manager, at ir@**17**zuoye.com[33](index=33&type=chunk)

17 Education & Technology Group Inc. (NASDAQ:YQ) Q3 2022 Earnings Conference Call December 7, 2022 8:00 PM ET Company Participants Lara Zhao - IR Manager Andy Liu - Founder, Chairman & CEO Michael Du - Director & CFO Conference Call Participants Operator Good evening and good morning, ladies and gentlemen, and thank you for standing by for 17EdTech's Third Quarter 2022 Earnings Conference Call. Well, at this time, all participants are in a listen-only mode. After management's prepared remarks, there will be ...

[Company Announcement & Highlights](index=1&type=section&id=Company%20Announcement%20%26%20Highlights) This section provides an overview of 17EdTech's company information, key financial highlights for Q3 and the first nine months of 2022, and management's strategic commentary [Company Information](index=1&type=section&id=Company%20Information) 17 Education & Technology Group Inc. (17EdTech) is a leading education technology company in China, announcing its unaudited financial results for the third quarter of 2022 - 17 Education & Technology Group Inc. (NASDAQ: YQ) is a leading education technology company in China[2](index=2&type=chunk) [Third Quarter 2022 Highlights](index=1&type=section&id=Third%20Quarter%202022%20Highlights) In Q3 2022, 17EdTech reported net revenues of RMB124.6 million, a significant year-over-year decrease of 74.9% due to the cessation of K-12 tutoring services, but a 549.0% increase excluding legacy services, achieving a gross margin of 74.5% and significantly narrowing its net loss to RMB23.5 million, while recording adjusted net income (non-GAAP) of RMB8.3 million, marking its fourth consecutive quarter of non-GAAP profitability Third Quarter 2022 Key Financial Highlights | Metric | Q3 2022 (RMB million) | Q3 2021 (RMB million) | YoY Change | YoY Change (Excl. K-12) | | :-------------------------------- | :------------ | :------------ | :--------- | :---------------------- | | Net Revenues | 124.6 | 496.8 | -74.9% | +549.0% | | Gross Margin | 74.5% | 49.4% | +25.1 pp | | | Net Loss | (23.5) | (489.9) | Significantly Decreased | | | Net Loss as % of Net Revenues | -18.9% | -98.6% | Narrowed | | | Adjusted Net Income (non-GAAP) | 8.3 | (456.6) | Improved to Income | | | Adjusted Net Income as % of Net Revenues | 6.7% | -91.9% | Improved | - The company achieved net profitability for the fourth consecutive quarter on a non-GAAP basis[6](index=6&type=chunk) [First Nine Months 2022 Highlights](index=1&type=section&id=First%20Nine%20Months%202022%20Highlights) For the first nine months of 2022, net revenues were RMB491.5 million, a 70.1% decrease year-over-year, with gross margin improving to 61.9%, and the net loss significantly decreasing to RMB74.7 million, achieving an adjusted net income (non-GAAP) of RMB21.8 million, improving from a loss in the prior year First Nine Months 2022 Key Financial Highlights | Metric | 9M 2022 (RMB million) | 9M 2021 (RMB million) | YoY Change | | :-------------------------------- | :------------ | :------------ | :--------- | | Net Revenues | 491.5 | 1,642.0 | -70.1% | | Gross Margin | 61.9% | 58.2% | +3.7 pp | | Net Loss | (74.7) | (1,416.4) | Significantly Decreased | | Net Loss as % of Net Revenues | -15.2% | -86.3% | Narrowed | | Adjusted Net Income (non-GAAP) | 21.8 | (1,263.7) | Improved to Income | | Adjusted Net Income as % of Net Revenues | 4.4% | -77.0% | Improved | [Management Commentary](index=2&type=section&id=Management%20Commentary) Management expressed encouragement regarding Q3 2022 performance, highlighting net revenues of RMB124.6 million despite COVID-19 impacts, continued development and upgrade of SaaS offerings, and exploration of personalized self-directed learning products, noting the achievement of non-GAAP net profitability for the fourth consecutive quarter due to resilient operations and new business opportunities - The company recorded net revenues of **RMB124.6 million** in Q3 2022 despite COVID-19 outbreaks[6](index=6&type=chunk) - Continued development and upgrade of teaching and learning SaaS offerings and exploration of personalized self-directed learning products[6](index=6&type=chunk) - Achieved net profitability for the fourth consecutive quarter on a non-GAAP basis, demonstrating resilient operational foundation and new business opportunities[6](index=6&type=chunk) [Third Quarter 2022 Unaudited Financial Results](index=2&type=section&id=Third%20Quarter%202022%20Unaudited%20Financial%20Results) This section details the company's Q3 2022 financial performance, including revenues, costs, gross profit, operating expenses, and net loss, highlighting significant improvements in profitability metrics [Net Revenues](index=2&type=section&id=Net%20Revenues) Net revenues for Q3 2022 were RMB124.6 million, a 74.9% decrease year-over-year, primarily due to the cessation of online K-12 tutoring services, though excluding these services, net revenues significantly increased from RMB19.2 million to RMB124.6 million Net Revenues (Q3 2022) | Metric | Q3 2022 (RMB million) | Q3 2021 (RMB million) | YoY Change | | :----------- | :------------ | :------------ | :--------- | | Net Revenues | 124.6 | 496.8 | -74.9% | | Net Revenues (Excl. K-12) | 124.6 | 19.2 | +549.0% | - The decrease in net revenues was mainly due to the cessation of online K-12 tutoring services by the end of 2021[7](index=7&type=chunk) [Cost of Revenues](index=2&type=section&id=Cost%20of%20Revenues) Cost of revenues for Q3 2022 decreased by 87.4% year-over-year to RMB31.7 million, largely in line with the decrease in net revenues following the cessation of online K-12 tutoring services Cost of Revenues (Q3 2022) | Metric | Q3 2022 (RMB million) | Q3 2021 (RMB million) | YoY Change | | :------------- | :------------ | :------------ | :--------- | | Cost of Revenues | 31.7 | 251.4 | -87.4% | - Decrease in cost of revenues was largely in line with the decrease in net revenues due to the cessation of online K-12 tutoring services[8](index=8&type=chunk) [Gross Profit and Gross Margin](index=2&type=section&id=Gross%20Profit%20and%20Gross%20Margin) Gross profit for Q3 2022 was RMB92.9 million, a 62.2% decrease year-over-year, however, gross margin significantly increased to 74.5% from 49.4% in Q3 2021, primarily due to more stringent and efficient cost management Gross Profit and Gross Margin (Q3 2022) | Metric | Q3 2022 (RMB million) | Q3 2021 (RMB million) | YoY Change | | :----------- | :------------ | :------------ | :--------- | | Gross Profit | 92.9 | 245.4 | -62.2% | | Gross Margin | 74.5% | 49.4% | +25.1 pp | - The increase in gross margin was mainly attributable to the Company's more stringent and efficient cost management[9](index=9&type=chunk) [Total Operating Expenses](index=3&type=section&id=Total%20Operating%20Expenses) Total operating expenses for Q3 2022 decreased by 83.8% year-over-year to RMB120.5 million, including RMB31.8 million in share-based compensation expenses, with this significant reduction driven by decreases across all expense categories, largely due to regulatory changes and staff optimization Total Operating Expenses (Q3 2022) | Metric | Q3 2022 (RMB million) | Q3 2021 (RMB million) | YoY Change | | :--------------------- | :------------ | :------------ | :--------- | | Total Operating Expenses | 120.5 | 743.7 | -83.8% | | Share-based Compensation | 31.8 | | | [Sales and Marketing Expenses](index=3&type=section&id=Sales%20and%20Marketing%20Expenses) Sales and Marketing Expenses (Q3 2022) | Metric | Q3 2022 (RMB million) | Q3 2021 (RMB million) | YoY Change | | :------------------------ | :------------ | :------------ | :--------- | | Sales and Marketing Expenses | 27.9 | 388.6 | -92.8% | | Share-based Compensation | 4.7 | | | - Decrease mainly due to reduced promotional course expenses, advertising expenditures, and staff optimization following regulatory changes[13](index=13&type=chunk) [Research and Development Expenses](index=3&type=section&id=Research%20and%20Development%20Expenses) Research and Development Expenses (Q3 2022) | Metric | Q3 2022 (RMB million) | Q3 2021 (RMB million) | YoY Change | | :--------------------------- | :------------ | :------------ | :--------- | | Research and Development Expenses | 50.9 | 201.2 | -74.7% | | Share-based Compensation | 6.9 | | | - Decrease primarily attributable to staff optimization in line with business adjustment[13](index=13&type=chunk) [General and Administrative Expenses](index=3&type=section&id=General%20and%20Administrative%20Expenses) General and Administrative Expenses (Q3 2022) | Metric | Q3 2022 (RMB million) | Q3 2021 (RMB million) | YoY Change | | :------------------------------ | :------------ | :------------ | :--------- | | General and Administrative Expenses | 41.7 | 123.1 | -66.1% | | Share-based Compensation | 20.2 | | | - Decrease primarily due to staff optimization in line with business adjustment[14](index=14&type=chunk) [Impairment for Property and Equipment and Right-of-Use Assets](index=3&type=section&id=Impairment%20for%20Property%20and%20Equipment%20and%20Right-of-Use%20Assets) Impairment Expenses (Q3 2022) | Metric | Q3 2022 (RMB million) | Q3 2021 (RMB million) | YoY Change | | :-------------------------------------------------- | :------------ | :------------ | :--------- | | Impairment for Property and Equipment and Right-of-Use Assets | Nil | 30.8 | -100.0% | - No impairment losses recognized in Q3 2022, compared to **RMB30.8 million** in Q3 2021 due to changes in the online education industry's regulatory environment[14](index=14&type=chunk) [Loss from Operations](index=3&type=section&id=Loss%20from%20Operations) Loss from operations significantly narrowed to RMB27.6 million in Q3 2022 from RMB498.3 million in Q3 2021, improving as a percentage of net revenues from negative 100.3% to negative 22.2% Loss from Operations (Q3 2022) | Metric | Q3 2022 (RMB million) | Q3 2021 (RMB million) | YoY Change | | :--------------------- | :------------ | :------------ | :--------- | | Loss from Operations | (27.6) | (498.3) | Significantly Decreased | | Loss from Operations as % of Net Revenues | -22.2% | -100.3% | Improved | [Net Loss](index=3&type=section&id=Net%20Loss) Net loss for Q3 2022 was RMB23.5 million, a substantial reduction from RMB489.9 million in Q3 2021, with net loss as a percentage of net revenues improving from negative 98.6% to negative 18.9% Net Loss (Q3 2022) | Metric | Q3 2022 (RMB million) | Q3 2021 (RMB million) | YoY Change | | :-------------------------------- | :------------ | :------------ | :--------- | | Net Loss | (23.5) | (489.9) | Significantly Decreased | | Net Loss as % of Net Revenues | -18.9% | -98.6% | Improved | [Adjusted Net Income (Loss) (non-GAAP)](index=3&type=section&id=Adjusted%20Net%20Income%20(Loss)%20(non-GAAP)) Adjusted net income (non-GAAP) for Q3 2022 was RMB8.3 million, a significant improvement from an adjusted net loss of RMB456.6 million in Q3 2021, with adjusted net income as a percentage of net revenues improving to 6.7% from negative 91.9% Adjusted Net Income (Loss) (non-GAAP) (Q3 2022) | Metric | Q3 2022 (RMB million) | Q3 2021 (RMB million) | YoY Change | | :---------------------------------------- | :------------ | :------------ | :--------- | | Adjusted Net Income (Loss) (non-GAAP) | 8.3 | (456.6) | Improved to Income | | Adjusted Net Income (Loss) as % of Net Revenues | 6.7% | -91.9% | Improved | [Business Outlook & Non-GAAP Financial Measures](index=4&type=section&id=Business%20Outlook%20%26%20Non-GAAP%20Financial%20Measures) This section discusses the company's decision to cease revenue guidance due to market uncertainties and explains the use and limitations of non-GAAP financial measures [Business Outlook](index=4&type=section&id=Business%20Outlook) Due to uncertainties from COVID-19 outbreaks impacting government procurement, project delivery, consumer sentiment, and local government budgeting, 17EdTech has decided to cease providing revenue guidance, as new businesses are still in early development stages, making accurate forecasts challenging - COVID-19 outbreaks in China have led to uncertainties and potential delays in government procurement processes and unpredictable project delivery timetables, impacting revenue recognition[19](index=19&type=chunk) - Uncertainties also affect consumer sentiment and local government budgeting[19](index=19&type=chunk) - The Company has decided not to provide revenue guidance going forward due to these challenges and the early stage of new business development[19](index=19&type=chunk) [Non-GAAP Financial Measures](index=4&type=section&id=Non-GAAP%20Financial%20Measures) 17EdTech uses adjusted net income (loss) as a non-GAAP financial measure to assess comparative operating performance and future prospects, excluding share-based compensation expenses for a clearer view of core operating results and meaningful period-to-period comparisons, while acknowledging its limitations as a substitute for GAAP results - Adjusted net income (loss) is a non-GAAP financial measure used by management to understand comparative operating performance and future prospects[21](index=21&type=chunk) - It represents net loss excluding share-based compensation expenses, which management believes reflects ongoing business and operating performance for meaningful comparisons[21](index=21&type=chunk)[22](index=22&type=chunk) - Non-GAAP measures have limitations, are not prepared in accordance with GAAP, may not be comparable to other companies, and are not a substitute for GAAP results[23](index=23&type=chunk) [Additional Company Information](index=5&type=section&id=Additional%20Company%20Information) This section provides context on the company's operations, exchange rate information, a safe harbor statement, and contact details for investor relations [Exchange Rate Information](index=5&type=section&id=Exchange%20Rate%20Information) The company's revenues are primarily denominated in Renminbi (RMB), and for convenience, periodic reports translate RMB amounts into U.S. dollars (USD) using the exchange rate of US$1.00 = RMB7.1135 as of September 30, 2022, based on the U.S. Federal Reserve Board's noon buying rate - Company's business is primarily conducted in China, with all revenues denominated in Renminbi (RMB)[25](index=25&type=chunk) - USD translations for the three and nine months ended September 30, 2022, use an exchange rate of **US$1.00 = RMB7.1135**[25](index=25&type=chunk) [About 17 Education & Technology Group Inc.](index=5&type=section&id=About%2017%20Education%20%26%20Technology%20Group%20Inc.) 17 Education & Technology Group Inc. is a leading education technology company in China, providing smart in-school classroom solutions with data-driven teaching, learning, and assessment products, offering teaching and learning SaaS to facilitate digital transformation in Chinese schools, and a personalized self-directed learning product for families - 17 Education & Technology Group Inc. is a leading education technology company in China[26](index=26&type=chunk) - Offers smart in-school classroom solutions with data-driven teaching, learning, and assessment products[26](index=26&type=chunk) - Provides teaching and learning SaaS offerings for digital transformation in Chinese schools, focusing on homework and in-class teaching efficiency[26](index=26&type=chunk) - Offers a personalized self-directed learning product (not a tutoring service) for families, using technology and data for targeted content[26](index=26&type=chunk) [Safe Harbor Statement](index=5&type=section&id=Safe%20Harbor%20Statement) This announcement includes forward-looking statements under the 'safe harbor' provisions of the United States Private Securities Litigation Reform Act of 1995, which involve inherent risks and uncertainties, and actual results may differ materially due to various factors, with the company not undertaking to update any forward-looking statements except as required by law - Contains forward-looking statements under the 'safe harbor' provisions of the United States Private Securities Litigation Reform Act of 1995[27](index=27&type=chunk) - Forward-looking statements involve inherent risks and uncertainties, and actual results may differ materially due to various factors including growth strategies, market trends, and regulatory environment[27](index=27&type=chunk) - The company does not undertake any obligation to update any forward-looking statement, except as required under applicable law[27](index=27&type=chunk) [For Investor and Media Inquiries](index=6&type=section&id=For%20Investor%20and%20Media%20Inquiries) Contact information for investor and media inquiries is provided, directing interested parties to Ms. Lara Zhao, Investor Relations Manager, via email - Investor and media inquiries can be directed to Ms. Lara Zhao, Investor Relations Manager, via email: ir@17zuoye.com[28](index=28&type=chunk) [Unaudited Condensed Consolidated Financial Statements](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section presents the company's balance sheets and statements of operations for Q3 and 9M 2022, including reconciliations of non-GAAP to GAAP measures [Unaudited Condensed Consolidated Balance Sheets](index=7&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) As of September 30, 2022, total assets decreased to RMB1,082.4 million from RMB1,580.4 million at December 31, 2021, primarily driven by a reduction in cash and cash equivalents, while total liabilities also significantly decreased to RMB225.3 million from RMB783.4 million, mainly due to reductions in accrued expenses, deferred revenue, and operating lease liabilities, and total shareholders' equity increased to RMB857.2 million Condensed Consolidated Balance Sheet Highlights | Metric | As of Dec 31, 2021 (RMB thousand) | As of Sep 30, 2022 (RMB thousand) | As of Sep 30, 2022 (USD thousand) | | :-------------------------------- | :----------------------- | :----------------------- | :----------------------- | | Cash and cash equivalents | 1,180,898 | 850,943 | 119,624 | | Total Current Assets | 1,342,724 | 1,002,998 | 141,000 | | Total Assets | 1,580,421 | 1,082,448 | 152,169 | | Total Current Liabilities | 683,056 | 213,184 | 29,969 | | Total Liabilities | 783,385 | 225,283 | 31,670 | | Total Shareholders' Equity | 797,036 | 857,165 | 120,499 | [Unaudited Condensed Consolidated Statements of Operations (Three Months Ended September 30, 2022)](index=9&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) For the three months ended September 30, 2022, net revenues were RMB124.6 million, a significant decrease from RMB496.8 million in the prior year, but gross margin improved substantially to 74.5%, and total operating expenses were significantly reduced, leading to a narrowed net loss of RMB23.5 million compared to RMB489.9 million in Q3 2021 Condensed Consolidated Statements of Operations (Q3 2022) | Metric | Q3 2021 (RMB thousand) | Q3 2022 (RMB thousand) | Q3 2022 (USD thousand) | | :-------------------------------------------------- | :------------ | :------------ | :------------ | | Net revenues | 496,834 | 124,570 | 17,512 | | Cost of revenues | (251,426) | (31,712) | (4,458) | | Gross profit | 245,408 | 92,858 | 13,054 | | Total operating expenses | (743,686) | (120,469) | (16,935) | | Loss from operations | (498,278) | (27,611) | (3,881) | | Net loss | (489,930) | (23,537) | (3,309) | | Net loss per ADS (Basic and diluted) | (9.90) | (0.50) | (0.10) | Share-based Compensation Expenses (Q3 2022) | Category | Q3 2021 (RMB thousand) | Q3 2022 (RMB thousand) | Q3 2022 (USD thousand) | | :-------------------------------- | :------------ | :------------ | :------------ | | Sales and marketing expenses | 7,111 | 4,689 | 659 | | Research and development expenses | 12,002 | 6,912 | 972 | | General and administrative expenses | 14,170 | 20,248 | 2,846 | | Total | 33,283 | 31,849 | 4,477 | [Reconciliations of Non-GAAP Measures to GAAP Measures (Three Months Ended September 30, 2022)](index=10&type=section&id=Reconciliations%20of%20non-GAAP%20measures%20to%20the%20most%20comparable%20GAAP%20measures) For Q3 2022, by excluding share-based compensation expenses of RMB31.8 million from the GAAP net loss of RMB23.5 million, the company achieved an adjusted net income (non-GAAP) of RMB8.3 million, a significant improvement from an adjusted net loss of RMB456.6 million in Q3 2021 Non-GAAP Reconciliation (Q3 2022) | Metric | Q3 2021 (RMB thousand) | Q3 2022 (RMB thousand) | Q3 2022 (USD thousand) | | :----------------------- | :------------ | :------------ | :------------ | | Net Loss | (489,930) | (23,537) | (3,309) | | Share-based compensation | 33,283 | 31,849 | 4,477 | | Adjusted net (loss) income | (456,647) | 8,312 | 1,168 | [Unaudited Condensed Consolidated Statements of Operations (Nine Months Ended September 30, 2022)](index=11&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS_1) For the first nine months of 2022, net revenues were RMB491.5 million, a substantial decrease from RMB1,642.0 million in the prior year, with gross profit at RMB304.2 million and a gross margin of 61.9%, while total operating expenses were significantly reduced to RMB395.0 million, resulting in a net loss of RMB74.7 million, a considerable improvement from RMB1,416.4 million in the same period of 2021 Condensed Consolidated Statements of Operations (9M 2022) | Metric | 9M 2021 (RMB thousand) | 9M 2022 (RMB thousand) | 9M 2022 (USD thousand) | | :-------------------------------------------------- | :------------ | :------------ | :------------ | | Net revenues | 1,641,972 | 491,508 | 69,095 | | Cost of revenues | (687,054) | (187,270) | (26,326) | | Gross profit | 954,918 | 304,238 | 42,769 | | Total operating expenses | (2,399,506) | (395,043) | (55,534) | | Loss from operations | (1,444,588) | (90,805) | (12,765) | | Net loss | (1,416,358) | (74,734) | (10,507) | | Net loss per ADS (Basic and diluted) | (29.10) | (1.50) | (0.20) | Share-based Compensation Expenses (9M 2022) | Category | 9M 2021 (RMB thousand) | 9M 2022 (RMB thousand) | 9M 2022 (USD thousand) | | :-------------------------------- | :------------ | :------------ | :------------ | | Sales and marketing expenses | 18,705 | 12,037 | 1,692 | | Research and development expenses | 35,251 | 21,272 | 2,990 | | General and administrative expenses | 98,694 | 63,244 | 8,891 | | Total | 152,650 | 96,553 | 13,573 | [Reconciliations of Non-GAAP Measures to GAAP Measures (Nine Months Ended September 30, 2022)](index=12&type=section&id=Reconciliations%20of%20non-GAAP%20measures%20to%20the%20most%20comparable%20GAAP%20measures_1) For the first nine months of 2022, after excluding share-based compensation expenses of RMB96.6 million from the GAAP net loss of RMB74.7 million, the company reported an adjusted net income (non-GAAP) of RMB21.8 million, representing a significant improvement from an adjusted net loss of RMB1,263.7 million in the same period of 2021 Non-GAAP Reconciliation (9M 2022) | Metric | 9M 2021 (RMB thousand) | 9M 2022 (RMB thousand) | 9M 2022 (USD thousand) | | :----------------------- | :------------ | :------------ | :------------ | | Net Loss | (1,416,358) | (74,734) | (10,507) | | Share-based compensation | 152,650 | 96,553 | 13,573 | | Adjusted net (loss) income | (1,263,708) | 21,819 | 3,066 |

17 Education & Technology Group Inc. (NASDAQ:YQ) Q2 2022 Earnings Conference Call September 13, 2022 9:00 PM ET Company Participants Lara Zhao - IR Manager Andy Chang Liu - Founder, Chairman & CEO Michael Chao Du - CFO Conference Call Participants Operator Good evening, and good morning, ladies and gentlemen, and thank you for standing by for 17EdTech's First [ph] Quarter 2022 Earnings Conference Call. At this time all participants are in listen-only mode, after the Management's prepared remarks there'll be ...

17 Education & Technology Group Inc. (NASDAQ:YQ) Q1 2022 Earnings Conference Call June 9, 2022 9:00 PM ET Company Participants Lara Zhao - IR Manager Michael Du - CFO Andy Chang Liu - Founder, Chairman & CEO Conference Call Participants Operator Good evening and good morning, ladies and gentlemen and thank you for standing by for 17EdTech's First Quarter 2022 Earnings Conference Call. At this time, all participants are in listen-only mode. After the management's prepared remarks, there will be a question-an ...