Ladies and gentlemen, thank you for standing by and welcome to Sunlands third quarter 2021 earnings conference call. At this time, all participants are in a listen- only mode. After prepared remarks by the management team, there will be a Q&A session. Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the call over to your host today, Yuhua Ye, Sunlands IR representative. Please go ahead.
Hello, everyone, and thank you for joining Sunlands' third quarter 2021 earnings conference call. The company's financial and operating results were issued in our press release via Newswire services earlier today and are posted online. You can download the earnings press release and sign up for our distribution list by visiting our IR website. Participants on today's call will be our CEO, Mr. Tongbo Liu, and our CFO, Selena Lu Lv. Management will begin with prepared remarks and then the call will conclude with a Q&A session. Before I hand it over to the management, I'd like to remind you of Sunlands' safe harbor statement in relation to today's call. Except for the historical information contained herein, certain of the matters discussed in this conference call are forward-looking statements. These statements are based on current trends, estimates and projections, and therefore you should not place undue reliance on them.
Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. For more information about the potential risks and uncertainties, please refer to the company's filings with the Securities and Exchange Commission. With that, I would now like to turn the call over to our CEO, Tongbo Liu.
Thank you, Yuhua. Hello, everyone, and thank you for joining Sunlands third quarter 2021 earnings conference call. We are pleased with our third quarter financial metrics. Our net revenues grew 9.9% year-over-year to RMB 595.1 million, despite the evolving industry dynamics. We recorded net profit of RMB 93.8 million, compared with net loss of RMB 165.8 million during the same period last year. A year-over-year 13.3% and a 29.3% decline in new enrollments and gross billings, respectively, which are attributed to our continued efforts to execute our balanced long-term growth and profitability strategy.
As COVID-19 pandemic resurgences in certain regions in China continue to create challenges for business operation and the broader economy recovery, businesses have taken steps to improve operating efficiency and reduce costs. With respect to talent acquisition, many companies have become more prudent in selecting talent and have raised their expectations for candidates and the new hires. This ultimately led to a more competitive labor market in the third quarter, prompting working professionals to seek enrichment courses like ours to increase their competitiveness through further education and reskilling and upskilling. Meanwhile, industry dynamics are also evolving rapidly, with the increasing number of companies joining the adult education business after the implementation of China's K-12 after-school tutoring regulations.
With this landscape, we continue to execute our balanced long-term growth and profitability strategy, and so to enhance our competitiveness by focusing on optimizing our product mix, improving services, reducing costs, and enhancing student acquisition efficiency. We are pursuing quality growth rather than user scale only. Our professional certificate and skills programs maintained their growth momentum during the quarter. Its revenue and gross billing increased 148.2% and 49.3% year-over-year, respectively, driven by our constant efforts to broaden our course catalog addressing user demand and skills, reflecting students' growing adoption of our platform as we refine our course offerings with more premium and diverse course content. The breadth of our course offerings also appeals to more people across a wider range of age groups, which could help further expand our student base.
We believe that with our relentless endeavor to provide our students with a better learning experience, we are well positioned to fulfill the urgent demand for low or interest-based learning catering to adults of all ages. We achieved a 20.8% year-over-year increase in net revenues in our master's degree programs, while new enrollments and gross billings decreased by 22.2% and 10.2% year-over-year, respectively, as we prioritized quality growth. However, we continue to expand our global footprint during the quarter by forming additional partnerships with overseas universities and made encouraging progress. At the same time, we continue to diversify our course portfolio for the segment, looking to capture the huge growth opportunities in this market. Demand for exam preparation courses remains strong, and we expect further growth, given the competitive employment market.
Notably, a large number of our students are middle or senior-level managers who are strongly motivated to acquire more knowledge and sharpen their management skills through MBA and EMBA degree education. Helping them to achieve their learning goals will continue to be a priority as we see solid growth momentum and potential in this space. Turning now to our STE programs, as we strive to optimize our product mix, gross billings and enrollments for STE moderated, which was also partially due to the tightening regulation on advertisements for continuing education. We believe these regulations will help the industry achieve healthy and sustainable growth and contribute to China's effort to build a life-long learning society. We have implemented strict compliance standards and will continue to monitor and comply with relevant rules and regulations while providing quality courses to our students.
In addition, we adopted stringent core policies and attractive incentive plans to enhance our operations and services in the third quarter. With the goal of providing students a smoother, more rewarding learning experience, we also implemented effective cost reduction measures with an emphasis on improving student acquisition efficiency, resulting in a 35.2% year-over-year drop in operating expenses. We achieved this remarkable improvement by fully embracing technology and utilizing the national centers across our various segments to realize meaningful growth. We leveraged targeted cost-effective new media marketing tools to acquire students and also continue to capitalize on cross-selling opportunities among different programs to increase repurchase rate and user lifetime value.
We maintained the profitability for two consecutive quarters as we enriched our course offerings to address varied students' needs to optimize the cost structure to enhance students' acquisition efficiency with more cost-effective, innovative, and regulation-compliant market tools. We will continue to refine these measures to build on these successes and drive policy goals. That concludes my prepared remarks. Thank you, and I will turn the call to our CFO, Selena, for further review of our financials. Selena, please.
Thank you, Tongbo. Hello, everyone, and thank you for attending Sunlands third quarter conference call. We are encouraged by our sustained profitability in the third quarter, with registered net profit reaching a new high, driven by continued year-over-year top line growth, mainly attributable to professional skills and master's degree-oriented programs. Profits also benefited from our efficient cost control measures, which led to a 35.2% year-over-year reduction in operating expenses. Notably, sales and marketing expenses as a percentage of net revenues decreased significantly by 45.7 percentage points year-over-year. Going forward, we will continue to focus on operating efficiency enhancement, product mix optimization, and service improvement, which will prepare us for the opportunities and challenges ahead while pursuing sustainable growth. Now, I would like to share our financial results for the third quarter of 2021 in detail.
In the third quarter of 2021, net revenues increased by 9.9% to RMB 595.1 million, from RMB 541.6 million in the third quarter of 2020. The increase was mainly driven by year-over-year growth in gross billings since the second half of 2020 through the first quarter of 2021. Cost of revenues decreased by 10.6% to RMB 83.1 million in the third quarter of 2021, from RMB 92.9 million in the third quarter of 2020. The decrease was primarily due to reduced insurance-related costs incurred for our integrated online education service package purchased by students.
Gross profits increased by 14.1% to RMB 512 million in the third quarter of 2021, from RMB 448.7 million in the third quarter of 2020. In the third quarter of 2021, operating expenses were RMB 430.6 million, representing a 35.2% decrease from RMB 654.1 million in the third quarter of 2020. Sales and marketing expenses decreased by 37.9% to RMB 353.5 million in the third quarter of 2021 from RMB 569.4 million in the third quarter of 2020. The decrease was mainly due to, number one, lower spending on branding and marketing activities. Number two, decreased compensation expenses related to our sales and marketing personnel.
General and administrative expenses decreased by 17% to RMB 663.2 million in the third quarter of 2021 from RMB 76.1 million in the third quarter of 2020. The decrease was mainly due to a decrease in compensation expenses. Product development expenses decreased by 24.7% to RMB 14 million in the third quarter of 2021 from RMB 18.6 million in the third quarter of 2020. The decrease was mainly due to a decrease in compensation expenses. Other income was RMB 12.9 million in the third quarter of 2021, compared with RMB 47.3 million in the third quarter of 2020. Other income for the third quarter of 2021 was mainly comprised of rental income of RMB 7 million.
The decrease was primarily because value-added tax concession offered by the relevant authorities as part of the national COVID-19 relief effort came to an end in April 2021. Net income for the third quarter of 2021 was CNY 92.8 million, compared with net loss of CNY 165.8 million in the third quarter of 2020. As of September 30, 2021, the company had CNY 661.2 million of cash and cash equivalents and CNY 178.8 million of short-term investments. As of September 30, 2021, the company has a deferred revenue balance of CNY 7,254.9 million. Capital expenditures were incurred primarily in connection with IT infrastructure equipment and leasehold improvements necessary to support the company's operations.
Capital expenditures were RMB 1.8 million in the third quarter of 2021, compared with RMB 14.3 million in the third quarter of 2020. For more of our 2021 first nine months financial results, please refer to our earnings press release for further details. Now for our outlook. For the fourth quarter of 2021, Sunlands currently expects net revenue to be between RMB 590 million and RMB 610 million, which would represent an increase of 0.9% to 4.3% year-over-year. This outlook is based on current market conditions and reflects the company's management's current and preliminary estimates of the market, operating conditions, and customer demand, all of which are subject to change. With that, I'd like to open the call to questions. Operator?
Thank you. We will now begin the Q&A session. To ask a question, press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the key. To withdraw your question from the queue, please press star then two. For the benefit of all participants in today's call, if you wish to ask your questions to management in Chinese, please immediately repeat your question in English. At this time, we'll pause momentarily to assemble our roster. Again, if you have a question, please press star then one. Since there appears to be no questions, this will conclude our Q&A session. At this time, I'd like to turn the conference back over to Yuhua Ye, IR Representative, for any closing remarks.
Once again, thank you everyone for joining today's call. We look forward to speaking with you again soon. Good day and good night.
This concludes the earnings conference call. You may now disconnect your line. Thank you for attending.