Tarena International, Inc. (NASDAQ:TEDU) Q3 2018 Earnings Conference Call - Final Transcript
Nov 19, 2018 • 08:00 pm ET
as the total selling and marketing expenses of adult business, divided by total adult training student enrollment was RMB5,971 in the third quarter as compared to RMB4,965 in the same quarter last year and RMB6,134 in the second quarter of 2018. We noted approximately 20% year-over-year increase of average student acquisition costs. However, we also observed a 3% quarter-over-quarter improvement in student acquisition efficiency.
Now let's continue on G&A expenses. In this quarter, we recorded bad debt allowances for doubtful account receivables of RMB19 million, which is a RMB14 million quarter-over-quarter decrease. As we discussed last quarter, we made bad debt allowances mainly to reflect the difficulties in the collection of account receivables from 2017 students. As company has stabilized the partnership with a group of loan providers, we believe that relatively high risks of account receivables from 2017 students is an isolated case and that won't change the long-term outlook of bad debt provision levels in our adult business.
Third, let's discuss about R&D expenses. Non-GAAP R&D expenses increased by RMB9 million year-over-year to RMB35 million in the quarter. Such increase consists of RMB7 million for adult business and RMB2 million for kids business. In this quarter, we launched two new courses in adult training segment, which are e-commerce and network engineering technology. Besides we'll also have other courses under development and we believe these investments are crucial to make our courses meet market demand and maintain our competitiveness over other market players.
For K-12 business, we enrolled 14,670 students in the quarter. The total tuition cash receipts were RMB139 million and net revenue recorded was RMB57 million. As we mentioned before, operating losses of K-12 business rise from K-12 student acquisition cost occurs ahead of revenue recognition as standard utilization has not yet reached through mature levels. By the end of the third quarter, about two thirds of our K-12 learning centers has been in operation less than 12 months and those learning centers are still loss-making.
Non-GAAP operating losses from kids business was about RMB104 million for the quarter. Although our K-12 sector operates in losses recently, we're confident that the K-12 business will grow fast in the future -- couple of years to evolve into one of the important pillars for Tarena's business and become a profitable segment, along with the increasing number of active students.
Our non-GAAP operating losses for this quarter was RMB27 million as compared to an operating profit of RMB115 million in the same quarter in 2017. Such decline in non-GAAP operating profitability in the quarter was a combination of increase in losses from K-12 business and a decrease in the process from other business due to deferral of revenues from university partnership programs to latter period and higher student acquisition costs. Looking forward to the fourth quarter of 2018, we expect that the total net revenues are between RMB625 million and RMB650 million.