Q3 2020 Youdao Inc Earnings Call

I feel free to paid no no. The discussion today will contain forward looking statements related to future performance of the company, we try and that's true Cody I told US is copper phone line.

Okay.

I'd be happy day by day, you I'd Wake Securities Litigation Reform Act.

This month on non guaranteed all the future of bonus and subject to certain grades and I.

The <unk> assumptions and the are there other factors some of those risks.

Beyond the the Companys control and of course of course actual results to the deeper.

The for maturity from those mentioned in todays press release and the this discussion.

It's such an all the risk factors that could affect the odell business and the financial results. It seems the yeah search on crowding out of so a company with the securities and share.

Cash Commission income.

Good day, our annual report on.

Oh, well on the 10th yet the company does not undertake any obligation to update the forward looking information except as required by law.

During today's call management will also discuss certain non-GAAP financial measure so hurt the public says all day. So the designation of non-GAAP financial measures and the rig calculation of GAAP to non-GAAP financial results.

The they'll tend to tend to sort of close or financial results news release issued earlier today as the.

Remainder of this conference is being on the okay. It's on.

Hi, Oh lot costs. The replay of this conference call will be available on the adult cooperate.

Sad as I, our thoughts your thoughts on the call joining us today on the call from the adult senior Managements. It's also on Jones, our Chief Executive Officer Mr. late Yeah. They appeal of our Oh Maciel operations on.

Mr pounds, so our VP of strategy and no capital markets and on me.

So when the are they people find that.

Now I'll turn the call over to Dr., Joe true of real some all of our results highlights and the strategic direction.

Thank you Regina answer.

Thank you all for participating on today's call.

Always again I would like to a mind the Sutherland on numbers up based on the need to be on.

Well not education is a more relevant today than ever before and it is profoundly transforming how people line.

We accelerated our rapid growth momentum in the sort of quarter and generated total revenue on the day 96 net.

Gross billings from on cost of reached on the line 65 million true.

The 28% guilty of 76% quarter on quarter.

The point of by all the lost sales marketing and branding campaign during the summer.

Well the in our pit itself that the month was particularly strong reaching a record high gross.

Gross billings from the schools were RMB 676 net.

Free 69% and a one penny per cent fuel the your end of quarter over quarter of the success.

The total paid for the moments reached 49000 up 52% quarter over quarter the.

Okay to total gross billings on some of your document courses increased to 77%.

The 67% in the Syncrude lots of it.

The speed for the Kid of trials second on what the slightly down primarily due to the increase will close on the public school enrollments, which have relatively lower as piece then on hi, Hi on true I spoke of.

Cost of.

Also a 22% of on newly do the students gross billings came from organic the classic from Q3, which school 180 per cent per year.

Gross margin also continued to improve the product improvements on logisticare.

Overall gross margin of what of 45.9%.

And the gross margin for our learning services saw was 53.9 per se.

True 20 basis points on Q2.

Oh, we expect to maintain the growth momentum of our GP margin, mainly due to the <unk>.

Well the <unk>.

The improvement of.

The economy of scale what.

The continued to strengthen the alistar, it's true the and the teaching assistance.

One of the 70% of our current construct sort of come from true heart in English. The he came into the city for the top 50 University and the wells. This year, we heard the only about the 0.3% all instructor of Senators.

Committed to continue hiring the leap instructors and offer a high quality force regarding fusion. The continues to extend out of the total T. Rowe price reached besides the 368 at the end of the Q3.

I don't pushing centers around the country.

On the product side or kind of true up matter of course has made significant progress in Q3, the number of paid in ruins the master.

In grade one to true increase in the third quarter, if I hope of the hunger the yeah.

On the school the out of long elections in classes of key knowledge points of Junior High School, it's about Oh.

Oh for regional and textbook specific cost us four high school.

The newly recruited the star teachers are available for students to meet the diverse the mouse.

[noise], we released a new set of kids programming costs of including price on programming and the custom hardware of well then it seems the street.

The net retention of the program called the exceeded 80.

85%.

Q3 is the main corridor of our summer of marketing campaign.

The the campaign included all on performance I bought of smart TV, sponsorships and pads and of et cetera.

We expect this marketing content for the the largest fourth fiscal year 2020 in Q3 brand and performance.

The spin spending on courses amounted to RMB.

Hey, just 51 million.

Although the increase sending that to more short term losses, the cult like sale and the done on of the script your net kind of mix of climate.

We looked at the Frontloaded non.

The the spending in this quarter and the total of expected returns over the next several quarters.

The project the make sure it's healthy.

How many total adult segment gross billings increased the R&D true zero 1 million up 185% year over year and 34% the court on the floor.

We continue our twofold strategy of here one we focus on high value cost of such of school learning and interest on the courses and shift away from the low bad debt costs as such at the college and.

On.

We leveraged our it's the thieves in content development in this area the lunch and quickly killing me.

Cost of funds.

On a staple of course, the continue to do well for example logic English lodging.

Over the 100% in gross yield.

The all the yes.

The Pepsico English courses released the this year.

Moving English bifurcation fan base on you and oral English training coaching job in Rand.

Rand quickly.

Which become the major component of our adult or would the over five times gross yeah. The U.S. in gross balance.

Our intelligent learning devices also grew at an accelerated its growth in Q3 the.

The revenue, reaching on B was 63 million up to 89% year over year.

Moving on per cent quarter over quarter.

We shipped the about 250000 units of of Dictionary pen true up 59% on Q2.

Oh, the 70% of our dictionary pens were purchased by full force a fatal 12 years of.

The continued to integrate the software and hardware here the deliberate even more seamless access.

For example, you can now scan words or phrases, it's kind of okay. I read the results on your phone screen, which is even faster the using the phone using the pen alone.

In Q4, we are launching the new deposits and now we are confident that you know what the strengthening our leading position intelligent lighting devices.

Let me say the few more words about how we look out to the end devices. During the last two years in the market and the Hep C.

One of the introduction of the flow of she was set of smile on in devices, the Pellington kidspost flow.

We believe ever could well essentially on one or more of these devices.

And these devices will be more and more tightly integrated with all the learning services, leading to the important cross selling and other opportunities.

Oh well.

What our expertise in AI learning content hardware design.

And then the condition, we believe we are well positioned to lead the fledgling area.

Overall the strategy. This year is to see the p. expansion opportunities.

One important principle.

Based on any decisions on.

Oh, yes.

The principal value of simulation.

We have put a lot of effort into ensuring that the along with revenue growth. We also of Kimberlites large amount of valley regarding product innovation capability.

Some of the base expansion teaching the expertise learning content learning all of the technology distribution channel and on the blood flow and.

And et cetera.

The cumulative all of this valley of enables us to offer constantly said of course, the snow and long into the future.

The future population of parents are willing to pay for high quality Education Park.

With that overview.

I'll now turn the call over to support the the do all the financial results. The well then open to questions.

[noise] that goes out the door on the Hello, everyone. Today I will be presenting some of that highlights for all worked on two countries the water.

We encourage you to read our press release issued earlier today for the first the detail.

We continue to scale all appreciate the scene so quarter of keeping considerable year over year growth almost.

Our strong technology quicker and that's supporting intelligent devices on that I'll be on.

<unk>.

Ex the natural growth actually pursue additional marketing on the branding activities to support all of the world.

Well the so called her total net revenue was RMB 896 minute well U.S. dollar per 130 per minute.

Represents the Anchorage itself the up I had been the P. 59% from so sort of caught her office on Nike.

Looking at the school.

Pardon me, we have had a disconnect. The please stay on the line.

Thank you.

[music].

Thank you we have rejoined the speakers you could go and you could go on thank you.

Okay, and the I will.

Starting I guess, that's part of it is kind of get the brought the saw the call.

They are they will be presenting some financial highlights from all the time you find yourself water. The encourage you to read our press release you already on the day for further details.

The company will to scale on accretion in the so called her actually being considerable year over year world on.

Our strong technology curriculum, that's supporting intelligent devices and that of the also explore that tracks. The natural world I think of course, you additional marketing on the branding activity to support all the world.

Well the so called her total net revenue were RMB 896, net it well U.S. dollar by debt free who minute just remember that the I'm, Chris off the line that 59% on some sort of <unk> total Nike.

Looking at its growth by segment net revenue from our learning from it on the product gross 239.1%.

The year to RMB, 700, and 763.5 minutes or U.S. dollar well have the on the call point for a minute.

Yeah previewed the its growth to our sharp uptick in K 12 piece student enrollment on of course, beating on purpose built on you on much of the stopping the infosys all of your whole year basis.

Net revenue for on the mopping somebody says were RMB 132.6 minute or U.S. dollar 19.5 minute and Chris on 9.8% comparable stuff in pure the office on Nike.

Well the so called helped on your money our total gross profit greatly improve reaching RMB 411.6 minute or U.S. dollar 60.6 moving up.

Three hungry and the 61.2 per cent compared with the so called sort of on Nike.

Gross margin for it on the surface on products improved to the 48.8% for the so called pennies on the upfront of the 27.5% sort of.

Some of what helps us on the team.

A lot of margin growth was primarily attributable to improved the all in costs if margin.

I think the arming subscale and of course, the optimization of our business on the faculty commodity should structure.

Well, it's harder for on the marketing services was 29.5% for the sport for for the sport sort of <unk> funny funny compared with the 22.6 per truck for the sort of caught all the time I can't see Chris was mainly the result of more revenue contributions from brand advertising services, which carry higher margin.

What's the sort of caught her total operating expense well I'm beep on planes repealing well U.S. dollar well hungry on 92 planes limited.

I'm here with the RMB 324 million for the same period a lot of field.

We continue on to your best the our future on the top line expansion yeah, the deeper into our investment in technology and the Crane Pailin he trusts to support our growing business for the long term.

I think where do ramp our of self on marketing effort focused on through the acquisition.

Depending on our brand awareness of this.

I guess, what he is back on the important to accelerate during our busy summer campaign.

This investment had the immediate possibly the impact our growth, which we expect to be lumpy.

In tandem with meeting last month, we are also succeeding on model to become more efficient on the recognizing economy of scale.

Maybe I'll continue on to your bass, the our fuel for growth that's how corporate.

Based on the mine.

So on the marketing spots on the so called her well RMB bump weighing on when it.

Compared with the RMB 230 by me on it in the so called put on Nike.

We'll talk on that the <unk> well, the so called her well I'm be behind that true boundary on how do you want me on it.

Compared with the RMB some people point ninemillion in the sort of course helps us on my team.

Oh, the operating loss margin was 99.9 99.8 percentage you know sort of caught on plenty of lucky compared with the 67 Queen now of course that for the same period on fluffier.

For the third quarter sort of caught her old plenty of R&D on that loss attributable to the audience share holder was RMB $877.8 million or U.S. dollar was 29.3 million compared.

Compared with net loss of RMB 242.2 million for the same period, an awful lot of fear.

Non-GAAP net loss attributable to ordinary share holder for the sort of caught her was RMB 865.7 million well U.S. dollar 127.5 minute.

Compared with the loss of RMB 278.8 million for the comparable period of Lafayette.

Basic and diluted net loss per share, yes for the for the quarter was RMB 7.73, O.U.S. dollar 1.14, non-GAAP basic and diluted net loss per yes, well the sort of caught her what the RMB 7.63, or U.S. dollar one point on too.

On that cash you will see net operating activity for.

For the quarter was RMB 500, and that gets reported limited well U.S. dollar beside the 87.4 million.

Looking at our balance sheet, that's off the September 30, 2020, although contract liabilities, which mainly consist of off before revenue for our line costs that were RMB 1.1 billion of U.S. dollar 156.9 million.

Yes, Andy I mean, Chris off of Black that sort of 3.3% for RMB 456.8 million that's off the December 31st just on Nike.

At the end of superior or cash cash equivalent some people think I felt on me investment total the RMB 1.1 billion or U.S. dollar 166.9 million.

This concludes our prepared remarks, some people of your attention we would now like to open the call to your questions. Operator. Please go ahead.

Thank you we will.

Well now begin the question and answer session to ask the question I Press Star then one on your Touchtone phone you're using the speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then too.

For the benefit of all participants on today's call. If you wish the ask your question to management in Chinese police immediately repeat your question in English, we will pause momentarily to assemble our roster.

The first question today.

Comments on Brian's on with Citigroup. Please go ahead.

Sure the corny filling just watch the won or what the once you draw high true people inside the cool a woman kind of fish in the equal the antigen collection called the meal for military or you don't do share with us. So cool that's your whole purging of New York actually cover most of the marketing campaign.

On a whole of your central range or woman, what do you consider that some of code of woman to Oh, well of course, other you called <unk> on ammonia and the.

Couple of quick some of the trunk line.

The woman Suji, the with the marketing dollar debt.

Boy I don't mean, yet until you go party the stuck on sport fishing.

Oh gosh.

That's the management for taking my questions of.

I forgot my first one is still up also compensation Commencements Gamespot sum up.

The updates on recent the competitive landscape and the the Ultrabook and the hotspots met some of that stays student acquisition cost trend.

So before the fourth quarter and of for next year and what do you all the marketing budget for.

The next year. Thank you.

[noise] non yeah. This the telephone so first the a couple of points the on the the.

Competitive landscape so I.

I think the whats all of this is the the sectors of the that's the whole are growing quickly yeah. The public because the last year I am.

And the the sector is investing money on not earning money yet so I think the clears the willing to invest the because the the two things one is the having the covenant to pay for a really high quality education and.

The profitability in the long run it's of a it's very much there and the second is Ah.

The total market size potential is huge so these two factors the state they they remain a true are there the Verizon, but true in 2020 and so that's.

That's why we Oh, we invested in the marketing and the summer and that's why I think what everyone is thinking about so so were bullish about the future yeah. So that's one of the.

The second is a I think we see greater concentration in the Internet 20, compared with last year. So a in a sense out of it we only have the five six men players or the kind of doing the kind of tells a lot of courses. So.

Oh, so what would the investment we made in the marketing in Q3 of we significantly increased our customer base. So.

The I think with the very competitive customer acquisition cost so.

The this gives us a bit of reach and more leverage. So so yeah, I I don't want to comment too much on all of our peers.

Yes.

So that is for us that's sort of Italy, I think in terms of Ah or in the future of Q4, and how it of on computers and how fears of the competition is on I believe it is important to appreciate the fact that the west during the early early days.

So so.

Early in the how we create content of content on presented on it.

Early in the how we.

Of course customers were early in the how we deliver on monetize the the content. So.

So expect a lot of the things to the two to change a lot of new ways to to do these things. So so and we're doing performing sites to acquire new customers and the we're also looking on so.

On the land or are the other ways and ER on a kind of a expansion on the ground.

On that so.

It is not a simple math question of putting them, putting the money on one side and the acquiring the guy many students so.

Oh, it's all of coaches the look of this that's the dynamic process and our innovative.

They tend to focus on the healthy on robust a gross so.

So I'll just say, that's very high level and the regarding the marketing maybe circle you can talk a little bit [noise].

Patrick I'll go on the brunt of.

For the questions. The first of all of the.

On the cars for the Mcclean status for the upcoming quarter, but I think the first will be the only if any of the Hokkaido the them on to your line with on that the school that the first the you already have the countries. While the kids raised the will be on our biggest thing that's when the season due to the some of them hand, so I'm. The if we are based on the free or basis, indeed of a significantly.

The handful of marketing any batsman the in the kills me on this year by the way.

The really the highly valuable for the two of the fires amount of new students with healthy unit economics.

Oh the calls if it's not a one time for the current hope besides the it's not the Brady the onetime truck models for the for the kids all think off the lifetime value of the PD L. Steele done we expect to dose the you'll sort of they'll stay with us for a long time.

And the we ask teenage to cover the all the just on the margin cost.

With the one to two times for the repurchase for our kids all profit will kick off users <unk>.

So the chiefs of we'd all come through the summer marketing of again.

And the that's that's all of them I send the to us the payroll the pace enrollments increased over 400 per se in the end up doing the 'cause free and if you just covered the growth off the subject Ormats Board.

Chris over eight high year over year income off the paint woman.

So bad that occurred on the continued our force healthy growth with Inc.

And the we will not have stayed the to keeping about the our top line extension for the most protect with the healthy you on a unique the economics.

And on the other hand, the BBD of because all pretty unique put on me and.

We do not rely on the self marketing to expand on this month. We can also rely on the app and the backed out on a member of my true.

And for the always kind of ended the Risis, we shipped up all day or 250 salt in the unit fall with the current dependent.

Worsened too.

In the industrial sort of the over some papers on the all politics on or you will sort of was purchased by the all four of kicks off of your sort of.

And I think that's the we can divert the future of rebel deploying this current more synergy between our the type of India Vitesse I all on our online services.

So I think for the last question of off do the acquisition cost of I think.

I just mentioned the bulk of its volatile the some of them fancy, saying you're already what stuff was with the higher you'll sort of acquisition costs due to the increasing customer demand and the also then the other than the cost of wouldn't doctor of summer season.

But doing so some outsource so through the net hiring typically build rate based on fuel to of being hurt sees the all the coastal interest season, So true softer Oh school children in production.

And the we also I think actually to be trying to use the multi customer acquisition channel spartrac, you'll sort of like one of marketing ecommerce platform on the social network.

I think with the new paid woman's marketing the out of the ground marketing woo growth.

Grow up all of the several times the comparison here of Lafayette.

So what we will keep calling from on it hearables since the customer I would sort of call still keeps the healthy growth for all the whole total business for the whole business.

I hope that's on sort of questions. Thank you Brian.

Yes, definitely thank you very helpful.

The next question comes from sang Zone with Morgan Stanley. Please go ahead.

[noise] take the evening. Thank you for taking my question I have a couple of most of my questions on the first one of the follow up on about the Oh, the internal I mean, you kind of smell convention. So you have on a quick I mean your growth and also you have the a smart devices shipment to the student so.

Do we have some of them can you share the number how much hum how much of the central school enrollment in the <unk> and <unk> internal of traffic and and debt do you have any expectation on the SAP on numbers going forward.

On to me is that you have a nice true on a gross margin.

On Oh.

Net in past few quarters, especially the premium on my closing price. So what's your view about the no more life of Floss lost profit margin for you on I costs ex.

I'm sorry, it's the last one needs. So quick one on maybe too early but can you shed some color on your the T. shirt range sound the self source of Master true winter costs. It's thank you very much.

Yeah, I think so some of it so the darting on converting and the use from a a organic traffic to oh paying users. So so so I can give you one data point is the 22% of all our billings in Q3.

Come from internal traffic that's.

So that's oh, well hundred and 88% growth the over over the last the temporary last year.

So in terms of a launch of Oh, Yeah, you can do the math here. So if you compute that number the good that the enrollment number as the percentage of the in the U., which is over 100 million. So it's still very low it's a lot of them on per cent or so.

There's still a lot of room for growth the kind of.

So so the share the end stage of long term potential.

I think the the short answer is we we believe a couple of percentage points is doable.

To explain why so first of the member Oh, we do have a big price GAAP yeah.

Yeah. So on the on one side, it's a free product the the dictionary the on the other side. It's a of the course of the several thousand debt. So so there's it isn't on tribute to the to do the conversion on the other half of the we Oh.

We have been the quite the come quite <unk> expenses at the US. So we do have the advantage that oh, the kind of users are quite a lot of people to come back a lot and.

Oh, we have many opportunities the touched them so.

We reuse ways like pretty true.

How's the of course the them.

We did the introduction of the customization features letting users tell us who they are things like that and they have been oh quite useful in the increasing or the the of conversion. So.

Most of the data Oh data, we have including the trajectory of shows that the a couple of percentage points is credible well a couple of other number in the <unk>.

And the futures. So we are always experimenting with ways to offer users more relevant of courses and the other services. So it could be higher yeah.

And and you also mentioned the learning.

The only devices. The yeah, we we we believe its oh. So they are the source of organic conversions. So on one of these devices on a purchase of the by Oh, Okay. The top students. So.

And that the overall.

Over a 25.

On the 250 paid a of a picture of the pen sold in Q3. So so it's already a sizable number. So we will look at this property in the future and the second question regarding Oh gross margin kind of in the long run on I think the the the short answer is.

But right now we are at sort of on 50 per cent. We think the 60 70 years is completely the doable and but its oh, there's a lot of factors play into that so we will see.

And then last question is the it's it's running retention.

It's too early.

But oh, we did start are signing up a current students for winter and spring courses in late October.

Oh it is an ongoing process that a extends into Q1 on 20 2021, so but what.

What I can assure you share with you is the preliminary data shows that in general we've been able to significantly increase the most of the number of new students and.

Improve the retention rates are at the same type of.

Over the same period of last year. So we feel good about the the final results at the end of the of attention primer on previous in January.

Yeah, I hope that answers the question. Thank you.

Yes, thank you very much.

The next question comes from Alex Day with Credit Suisse. Please go ahead.

Oh hi.

Hi management. Thank you for taking the questions on congratulations on the.

Coulter score on the spot and total my question would be about the competitive landscape on so.

Gross several of them.

The players in this market made the Coleman bad on.

The the.

Talk of all figures include 12 left us to tweet on daily event, the juice and again and I'm hopeful.

Well, the becomes bigger and bigger and.

The Oh, well the walk us through a couple of pay of sleep on the in September and and the recently so what would be the traditionally I'll feel though its market and Oh, how do you think about the competitive advantages.

Just kind of the.

Because the environment. Thank you.

Okay.

[noise] Oh, yeah. So.

So so yeah. The again about the competitive landscape. So I'm sorry, what I will tell you the yes in general we're not operating as on the market share yeah. So.

Well, we think all the competitive strengths is is a threefold yeah. So we focus on Oh high quality content.

The product innovations and great technology, three things a quality innovation them the technology.

Oh, so so we don't intend to do all of the courses and all of the grades are right. Now if you look at our offerings. We did the focus is clearly the <unk> Charles is on the.

During the high end or a high school.

Senior High School Junior debt, you haven't seen in high school and the.

So if you look at all or a truck or a code. So are the three things really Oh, we think the they really help us focus on quality.

In the brought us to deliver best seller of courses like logic, English lodging and our junior High school the Chinese cause.

To the on the your one or the innovation, let us to project like the dictionary pen.

Where are we on a great. Its oh in terms of new product categories that the people really love and it's growing in the superfast.

And taking.

Technology innovation like Oh automatic that's the grading, which we've talked a little bit about a in the past ER and the there no being integrated into our services during the summer of.

We believe the three things are a vital true true to our our success and the.

And that's the first point I want to make the of the then I'm looking at the operations side. The easy in Q3, we added a lot of students.

So.

We.

We did that because we think the the product are ready or are they the offer a great values and the retention the potential for a free users for the use of so.

So so so that's why we did it on <unk> during the summer and the philosophy. The obviously increased economy of scale only on the impact of our products are among the amount of the users. So so so we are quickly or expanding in a in on a scale, which.

We expect to continue to do.

And lastly, we are really happy about our.

Part of pipeline. So that's that's that's pretty important so a full force will kill the child for kinda of kind of.

Hi, preschool of courses and also for adult of course is we have a nice projects a really strong projects in R&D. So when the when these products are ready we.

We will we will release on promote the man Tom.

I believe this is how how we grow the business instead of just the spending a lot of dollars on the Oh on on the sales and marketing.

I got to thinking about the so I've a follow up on some of the question. So see several immediate figures.

On the recently debt.

We think it will be the condition of the volume.

About two two ways of funding all what the would be the condition of that you won't see the waste on the thank you.

[laughter] of yeah, well, we're happy with our current cash position and Ah Ah. So it's the one thing you want to look out of the if you look at our operating.

Operating cash flow for the first three quarters. So so so so it's the.

So it's actually a two day.

Yeah. It it's actually a healthy you how the process for us. So oh. So that's that's one of the second is a yeah youre. Obviously, we have on ways to to raise funding. If we can free need. So so we will of course keep that in mind and lastly Ah.

Yes, the Oh controlling shareholder net either the has always been very supportive of your das business and the they believe fully in the in the vision. So they will always have on back. Thank you.

Got it thank you very much.

Next question kind of some of the pain day, let's see I see please go ahead.

I don't think so somehow it oh, okay. So this all of its you know the whole it to be in the reality of living.

The go to acquire you on the commercial.

That's cool down because it depends on the college towns a couple of things.

I'm not the that was on I would say you do quite yet, but it just sounds like how many of you put me on that.

The way to acquire two of <unk>.

Uh huh.

This is something we are good ideas on that.

The agenda.

That's true.

Oh, yeah, but when she was the Glen Oh, we're making them all yet because the do it had to kind of Oh, Okay. Sorry to go Oh of course, no one is that the jeanie good.

Hi, there isn't a true outdoor.

So what kind of because that's the adoption of make that upside it's interesting I didn't go Oh.

No it's the things that okay.

Oh, good even management for taking my question I have to of course, you Kids Oh, sorry, you noted strong gross adds on where they need the license and why why why is that and.

Yes, well the Dallas interest strategy on that business and what the 10 markets and.

The overall backlog of she will have no a in the Stapleton the true.

Great set of pension is likely to be the P. margin Oh, we don't do that well we have the quite good improvements on the CP margin had been anything on share a force. Okay. Well of course is the average number of either the of course, it and he said the average number of Susan.

The future. Thank you.

[noise] [noise]. The fact the run the eyes of this football we think of for the entire on devices. That's a that's like the Doctor mindset I think of your new sector device give up by the <unk> and the U.S.

The the number of sort of shift of for the 60 day, depending on the interest rate I think it's a it's a core of every pasta in the in the numbers weeks, we are pretty confident about the number for you in the next few quarters and the legal.

And the the all told we think we'd expect to build out more of hardware pipeline.

On the field trips, we think the that's the combined with the the old combined with the they'll be part of the all I do patient into the futures and the I think that combined with the Taliban devices. The combined services. So we think the buckets potential is tremendous it's fine with me.

We believe and we think we lost on what time and resources towards the people more intelligent device. It seems the in the in the field force.

Well, we'll have the new version on the December 1st non.

So.

We really like that the that the new version of you'd be thinking yeah. We the does a lot of the innovation there yeah. So.

And I think the other thing about a these devices is that the it's not a judge.

Just the hardware device, it's it's actually the device plus content. So a lot of our the thinkings went into it by putting on really unique the content and the technology on it so.

The so so sort of so it's has good margins down, but it's really sticky.

No.

Yeah, I think that's the I hope that off of the question of all Youre the intelligence.

The intelligence the pricing on the second for the marketing tools and the least yes actually my friend the reaction Cooper lot of ballpark you can argue the results in this quarter compared with the same here a lot of figure. We think that's the all sorts of leverage from Ollie's Army of steel actually all that stuff we are strong.

The restructuring our accommodations trial struck first of all of this I found the type of the in the in the in this quarter and the for your questions about the average cost US I think Oh, that's north of already are I think the number off the student pulled on topic I think because of the our offer and walks the bus to start you towards the end of this quarter. That's built so I think it's the.

A couple of the average number I think with the little add the butter or seen couple of skills that we out of some quit a lot of the new future on the student had some hot and of course, the two hurts us on the front the teacher assistants side I think I remember its also a block of the 200, but.

If you use the totally on month divided the our total total that's what the different because of the we we all we have the pre Howard the all the two thirds of before we offer the services for all students. So thats the albeit that the in some part of the all too has built the increase of course I think its water. So I think it probably the operating efficiency for this quarter, we are hopeful ought to come habits of.

Lots and lots of <unk>. So we are pretty confident about to increase the whole picked the market from either the city.

Well I really thought of it has gradually in the in the next few quarters.

Oh, Okay. That's it.

Oh, yes. Thank you.

Next question comes from Benny Wong with HSBC. Please go ahead.

Hello, I could even the management average your question regarding on the competitive landscape. How do you see that get you wall of the into 'em 2021, especially when like I guess without really of box a lot of this private payers have been making a lot of capital. It seems that there also you know the spending a lot of you know like there.

The low pricing right you just tried the so I think just the acquisition so I'm not sure if like interest for any trend here do you think we will also be stepping up in terms of the marketing spend or to just try the faster growth on maybe you think at any any strategies that we can use more and then the second thing is the follow up on the last question.

In terms of any like cross selling racial price on day go without adding any debt they shouldn't the apt to cross sell into the opinion of courses.

And then you saw the premium cost growth actually of celebrate the tool for the younger of misaligned White I told the 200% growth last quarter. What are some of the key the says the S., Chile, we should be aware off and I can lock into the next quarter or not or Joel or funny. How are the ones you just mentioned.

How many challenges you're a woman comes out just share on that really are you Nancy bookings on the glitchy only of somebody get back on.

The kind of just the when he share type of the play of fish I guess without a lot of where your phone line. How much you should see the I'm, just saying well channel the will not be I thought the can do you think of all the time on kind of what he just your thoughts on surgical who got the price of true I do the true that just yet.

Well it was it was it all just your thoughts on a union just true total sorry, I shouldn't say on sound element of losses on that like the improvement so what you'll see on what the launch a woman Chicago on the good thing of course, usually of somebody shipping on mainly because I know, it's your first of all Oh Winchester woman cant all the took the.

Oh It you go on.

On the clutch on get the salaried all by just the subject to the I think the timing couldn't make oh. So just the Josh with all of that does sound bytes, all the things that don't show a gun or do you do then done by the end that's on the show so wish I will one day or somebody said the of Cushing. The he kept the why it was just the lost the according to a true the only well they like to eat out of that.

Your article to the to the talent show a woman type kind of though when I just on a super senior was your kind of people that woman. They put the central on watch are the Kahala, there's somebody shaking loose a curriculum of finish line in China Shibani channel.

Hi, any the season when I left.

And just lastly on the by both the adult for four of the competition landscape I think of the.

The quickly and the of the combination.

On the trading.

So you mentioned [noise].

We believe the company have the.

Okay few.

Definitely that's the company net better position and facing the.

The issue.

We we are comfortable with.

The current cash level.

The <unk>.

We have them.

Poverty cash flow into the but of course, it and we have the financial support from fund I will add on top of the math and you just mentioned and the the dollar on we could not that huge cash the tissue and incur the pool or 10 to 20.

However at the same time, you may note, our learning phase and the put the thing is sent to the very quickly so.

[laughter] proof.

Proof of our business.

Yeah.

On the pen all the of competition, you that position [noise] I think backup.

The two the hire good people on the stage at the two the good luck the window and the most on the band so a tiny.

Get different use the acquisition channel.

The two of the more often.

GAAP then Alan.

On the macro side actually the huge and getting the mall.

Compensated as just the message though.

Our.

You mean, the non healthy I think we will continue to seek advantage I think of it too.

The gets up and get the field I looked in the.

Yeah.

Not well it's on track when you thought of that.

Oh, Okay yeah.

[noise] [noise], okay, what's the out of the falloff testing the.

Oh, no sorry, Oh, it's on.

He's on a dozen or so no one is you're not the only recently on the yeah, they're going to show on the price the condo sales and marketing pressure on what you know you saw on that makes no sense of the saw as the percentage of revenue. The I saw that somebody on the Eagle Wayne nothing is supposed to be talking on the sit pushing the people do the it was enough that the marketing that caught on one of the worst roughly the on board on.

No that's not what you sound school of thought.

With somebody on the levels and to a doubling of the telco not anywhere like on me.

Yeah on the last break it out.

Oh, Yeah, I think the Q3 is on so we are kind of significantly raised on.

Sales and marketing level and the.

Uh-huh as we talk about the we think the three is the the largest oh the 2020 right. So obviously for the full for next year or the next year to Q3 of the summer is also a good opportunity to acquire users. So.

Uh huh.

Oh I think the it's too early in total kind of share. So so we are still small so so we will basically as William talked about so unique kind of mix is really key for our decision. So I.

I believe in Q on Q2, we've talked about.

So we have a we have the pair the money we have prepared the budget.

So we feel really pulled the trigger a only when the when we see good or are you you force so.

So the so does that's a the flex our ways of thinking so we're still small obviously if you use good we will we will grow and true.

The kind of the Pete how we've talked about this on many times. So the way we look out of your views about the marketing marketing spending is a plus it's fun loans.

Then we will basically look at the current quarter projected return from these investments that's a two maybe three quarters and then we will do it the termination yeah. So if we see a good numbers stand.

And we see good opportunities to true between debt and then we will do it now so oh. So that's that's the way we think about it but the market the dynamic of course, but we we think [noise] per.

Probably.

The next year. We're also has good opportunities to invest in the current users.

Yeah, but we'll see.

Yes, and the how that you can't force Cynthia yes, indeed, the the at Liberty the smoking, it's the definitely it's about the driver the call, but since the but if something in the fundamental that's on top to imagine brought the policy on the differentiation for the of the Port on the it's also the company bundle usage to be fine up on the structural so total market.

About what it before for example, the Oh, if the if the gist of them, having the true steel products and all the cost of self marketing, it's because of how what's kind of the service. If you can provide was on the what's kind of your thoughts on the result of the coffee clips on godfathers caused.

And so that's the keeping the that's the reason why we increased salt work on a number of Saputra I felt on that ball the teach outs isn't kind of step of seven on Tennessee with the you create healthy batsmen they'd be the summer so when things Oh, that's the product of content costs on a per day they'll fundamentally to change of the structural so it's the competitive landscape all the others.

So that the so that's why we spend more times to the BOP more of the different devices on some of it was probably the golf centric company.

Oh, Thank you hang on I guess your line I think it's on like they kind of me. Thank you.

[noise] next question kind of Symcom Mustang with Jefferies. Please go ahead.

[noise] line somehow share Bunny total not day, so what if you win a would've been t. Sri Lanka are the eco shoot one of a woman the up one called the show you that.

On the to me one of the tone woman seems right you don't get on Oh, you Isis Yale on body, the N.B. do well by the way to look on that day the settlement net weighed on the five.

I feel confident issue why did you take.

Oh, you cash flow that of you'll be the friend of mine agile shubham of the free cash flow of could eat all the <unk> positive on somebody German up on taking my question is on my question is the about our advertising services given all the launch of use of scale. Okay.

Can you comment about how piece of business line would trend a income in quotas and separate to the I'll be comping, our free cash flow or can you comment about the I spent any time on my I talking about but you've been on positive I think it.

Hi, I'm Oh, what type of my memory only like the wash line, there's oh on them to does the current.

Oh, the there's enough on lot of didn't go to these items you did on several well known allow income kind of.

For what.

<unk> side to go through debt uncle woman the open for the true or somebody you know for the whole Buffalo, New York and draw Oh.

On your children you the internet of anymore not just here in the video will hold true for if you don't really on often.

The often gokul will be how do you plan on Monday or woman side. There's an example of the news article of don't do we opened brought a ton of on them.

With the philosophy on the way you caught a woman or could the students. So the units the true end of them do the do it up at all.

The I'm kind of and well see the sorry on all of US in the you're talking I thought you feel free to halt.

Uh huh.

Thank you Don Khan from.

The other one of 'em, rather soon on the well do some views on the second question on whether or not you got to.

The golfer or somebody the doors, yes, that's true don't use on I should because on on the pressure of Susan.

[noise] [noise] asset the type of Hamas I lots of stuff to do a great free price saving for the the surgeon and the for the advertisement although the smartest the will have the wrong kind of.

Also a half of the competitive landscape in the out of what happened the sectors, but everything the way we brought up the virus agreed opportunity of what the it's about the strategy for the young generation, although income on the revenue after all of the pp margin to the Alco improve the losses, excluding these quote because free on a GAAP habits since you're the all of the RCR saw where we think we got a copy of it.

Of all the falls off all of the healthy growth off all of the out of what has on the business in the future, but at the same time you do see the growth rate helped all the different segments of our business you will see the on costs as well not foster the an advertisement. So we believe the future. It's we the majority of the revenue is salary the <unk> I'll call. It says on the process and the way I do patients a day they visit liking the how did the.

Yes, so the five <unk> as a percentage.

<unk> the Atwood has not real big keep go keep going down in the next few quarters. How do we think that will be a very healthy and oh previous EPS for spend on <unk> <unk> central standard almost.

And this concludes our question and answer session I would now like to turn the conference back over to Regina for any additional or closing comments.

[noise] right you'll have.

[noise] like.

Actually the about debt free.

The fish out the TPG, let me share of China on the U.S. have a weighted day.

[noise]. This concludes our conference in May of this now disconnect. Thank you for attending.