With that, I will turn the call over to our Financial Controller, Hangyu, to run through our financials.
Hangyu Li: Thank you, Tongbo. Hello, everyone. I am pleased to present our third quarter results, which were in-line with our expectations and demonstrated the effectiveness of our pursuit of sustainable growth. As you can see, last quarter was another excellent quarter in operations. As a result of steady growth in interest programs, new student enrollments went up by 14.3% and gross billings increased by 6.7% year-over-year. Thanks to our strategy of balanced, sustainable growth and profitability, gross profit margin increased by 2.5 percentage points to 87.8%, compared to the same period last year. Operating expenses as a percentage of gross billings decreased by 2.1 percentage points, compared to the third quarter of last year.
These improvements were reflected in our net income. Last quarter, we achieved net income of RMB131.6 million, our tenth profitable quarter since the second quarter of 2021. Looking ahead, we are optimistic about long-term growth. We are committed to expanding online course offerings, optimizing cost-effectiveness, and providing exceptional service to our students. These strategic initiatives are conducive to seizing new opportunities and consolidating our position in the industry, which in turn will help us maintain our competitive edge in the industry and continue to create value for our stakeholders. Now, let me walk through some of our key financial results for the third quarter of 2023. All comparisons are year-over-year, and all numbers are in RMB, unless otherwise noted.
In the third quarter of 2023, net revenues were RMB524.6 million, a decrease of 9% year-over-year. Cost of revenue decreased by 24.5% to RMB64.1 million in the third quarter of 2023 from RMB84.9 million in the third quarter of 2022. The decrease was primarily due to lower compensation expenses related to our cost of revenues personnel. Gross profit decreased by 6.3% to RMB460.5 million from RMB491.3 million in the third quarter of 2022. In the third quarter of 2023, operating expenses were RMB338.5 million, representing a 4.1% increase from RMB325 million in the third quarter of 2022. Sales and marketing expenses increased by 9.6% to RMB295 million in the third quarter of 2023 from RMB269.1 million in the third quarter of 2022, primarily due to increased spend on branding and marketing activities.
General and administrative expenses decreased by 21% to RMB35.1 million in the third quarter of 2023 from RMB44.4 million in the third quarter of 2022. Product development expenses decreased by 27% to RMB8.4 million in the third quarter of 2023 from RMB11.5 million in the third quarter of 2022. Product development expenses were mainly comprised of compensation expenses. Net income for the third quarter of 2023 was RMB131.6 million compared with net income of RMB168.1 million in the third quarter of 2022. Basic and diluted net income per share was RMB19.13 in the third quarter of 2023. As of September 30, 2023, the company had RMB751.8 million of cash, cash equivalents and restricted cash and RMB122.3 million of short-term investments. As of September 30, 2023, the company had a deferred revenue balance of RMB1,277 million compared with RMB1,690.9 million as of December 31, 2022.
Capital expenditures were incurred primarily in connection with IT infrastructure equipment and a leasehold improvement necessary to support the company’s operations. Capital expenditures were RMB1.4 million in the third quarter compared with RMB1.3 million in the third quarter of 2022. And now for our outlook. For the fourth quarter of 2023, Sunlands currently expects net revenues to be between RMB490 million to RMB510 million, which would represent a decrease of 11.9% to 15.3% year-over-year. This outlook is based on the current market conditions and reflects the company’s management’s current and preliminary estimate of market, operating conditions and customer demand, which are all subject to change. With that, I’d like to open up the call to the questions.
Operator?
Operator:
Yuhua Ye: Once again, thank you, everyone, for joining today’s call. We look forward to speaking with you again soon. Good day and good night.
Operator: This concludes this conference call. You may now disconnect your line. Thank you.
