Puxin Limited (NYSE:NEW) Q2 2019 Earnings Conference Call Transcript

Aug 13, 2019 • 08:00 am ET

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Puxin Limited (NYSE:NEW) Q2 2019 Earnings Conference Call Transcript

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Presentation
Executive
Claire

early stage, along with a strong and stable teaching staff leading to a notable rise in the quality of classroom content and learning experience. This productive approach helped us grow our market shares in lower tier cities and increased especially attendance in facilities that PBS has operated for more than two years.

If you look at our P&L, our gross profit for the quarter increased by 23.6% year-over-year, while our gross margin reached 47.4%, an increase by 1.7 percentage points year-over-year. Gross profit margin reached 46.5% in the first half of 2019. Non-GAAP operating loss of 2019 Q2 decreased by 12.6% compared with the same period last year. Meanwhile, our net loss attributable to ordinary shareholders improved by 14.4%.

Overall, we are particularly pleased to have narrowed our loss while achieving such solid top-line growth in the first half of 2019. Gross margin continues to stay above 45% and the pace of overall business growth is in sync with our corporate strategy.

Since the first quarter of 2019, Puxin has been investing heavily in online product and offerings to seamlessly integrate the online and offline learning experience. We have to sufficient online learning at our [Indecipherable] and investment, one that we will patiently build and grow over time.

In addition, new regulations in lower tier cities has provided Puxin with more quality acquisition targets. Looking ahead, we plan to stay the course and continue to push our acquisition and [Indecipherable] strategy, which we are confident will lead to very positive results for the second half of the year.

With that, I would now like to turn the call over to Peng, who will go over the financials.

Executive
Peng Wang

Thank you, Mr. Sha, and again, to everyone. Please be reminded that all amounts quoted here will be RMB and all percentage increases well be on a year-over-year basis unless otherwise stated. Please also refer to our earnings release for detailed information of our comparative financial performance on a year-over-year basis.

Let's start. Net revenues were RMB632.9 million, an increase of 19.1% from the second quarter of 2018. This increase was primarily driven by increases in students enrollments. Students enrollments increased 39.5% to 725,000 from 520,000 during the same period of 2018. Cost of revenues was RMB332.8 million, an increase of 15.3% from the same period of 2018, primarily due to increase in teacher compensation.

Non-GAAP cost of revenues, which excludes share based compensation expenses, was RMB331.7 million, an increase of 15.8% from the second quarter 2018. Gross profit was RMB300.1 million, an increase of 23.6% from the same period of 2018. Gross margin was 47.4% compared with 45.7% for the same period in 2018.

Total operating expenses were RMB468.8 million, an increase of 42.6% from the second part of 2018. Selling expenses were RMB241.7 million, an increase of 15.1% from the second quarter of 2018. Non-GAAP selling and marketing expenses, which exclude share-based compensation expenses, were RMB236.4 million, an increase of 17.2% from the second quarter of 2018. The increases were primarily