Q4 2020 Youdao Inc Earnings Call
Good day, and welcome to the Yo down towards 24th quarter and full year earnings Conference call.
Today's conference is being recorded at this time I would like to turn the conference over to Mr. Jeffrey Wong Investor Relations Director of Yo DAU. Please go ahead.
Okay.
Thank you operator. Please note the discussion today will contain forward looking statements relating to future performance of the company, which are intended to qualify for the safe Harbor from liability as established.
Established by the U S Private Securities Litigation Reform Act.
Such statements are not guarantees of future performance and are subject to certain risks and uncertainties assumptions and other factors. Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release.
Gotcha agenda.
A general discussion of these risk factors.
Fact, you with our business and financial would be bad income.
It's included in certain filings of company with.
Net Securities and Exchange Commission, including our annual report filed on form 20-F. The company does not undertake any obligation to update its forward looking information except as required by law.
During today's call management will also discuss certain.
Non-GAAP financial measures for Cup.
For comparison purposes.
For the destination from non-GAAP financial measures and reconciliations of GAAP to non-GAAP financial results. Please see the 2024th quarter and full year financial results news release issued earlier today as a day.
Amanda She conference it's being reported.
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Webcast replay of this conference call will be available.
The property was at.
<unk> debt to EBITDA.
Dot com joining us today on the call from <unk> Senior management is Doctor from Joe <unk>, Our Chief Executive Officer, Mr. Le Qing VP of operations.
Accounts too.
Our VP of strategy and capital markets and Mr. Wang Li our VP of finance and will now turn the call over to Dr. Joe to review some of our recent highlights and strategic direction.
Thank you Jeffrey and thank you all for participating in today's call. It's all we begin I would like to remind everyone that all numbers that they started maybe.
The importance of online education has never been as evidence as it was in 2020.
Tony was a banner year for the adult let me start by going over our financial and operational highlights across our business.
Total gross billings from our online courses reached RMB, one 1 billion in Q4 and RMB three 1 billion in 2020.
Up to 22 per cent and a 233% year over year, respectively. Accordingly total revenue achieved was RMB. One 1 billion in Q4, 2020, and RMB three 2 billion in 2020 for yet.
116, 9% and 142% respectively on a year on year basis.
Paid student's enrollments from Caito Charles reached 659000 in Q4, 2020, and the 164 million in 2020.
301, 9% and 357% respectively.
On a year over year basis overall gross margin reached 47 five per cent in Q4, 2020 up over 17% year over year.
We achieved positive operating cash flow of RMB 129 million in here for 2020, marking our third quarter of positive operating cash flow in 2020.
Our operating cash outflow for 'twenty 'twenty narrowed to RMB 322 million.
Paired with RMB $372 million in 2019.
It means more than tripled of gross billings with the RMB 50 million decrease in cash outflow.
Quality of our pulses and products also got more reps from Michigan in the industry.
For all of our classes were recently granted five a rating for.
Online education service issued by China quality certification Center.
We raised.
Approximately a U S dollar 232 million of net proceeds from our follow on offering in February 2021. In addition, the board of directors of both net and our our company I've recently approved our proposed revolving loan facility to be extended by net is to us.
With a total commitment of 300.
In U S dollars to support our long term gross let me now turn to the progress of our business operations for.
We are strengthening our instructor team continues to be a focus for us because it drives me nuts.
Off course quality.
During the fourth quarter, we added another 42 instructors for the total reaching 214 other.
The end of December 'twenty 'twenty. We also had a total of 3786 highly trained tutors to support our continued growth.
[noise] foreseen in our high School segment, we reported so chain instructors and incubated three senior instructors in Q4.
With our customized cheered instruction service, we now can meet diversified needs of students of different learning levels.
We've also improved our assessment process of students to better match students with caused us to have the appropriate difficulty level.
Secondly, our junior High school teams continue to work on localized instruction as we mentioned in Q3.
We have lunched localized versions of our Chinese closest covering over 30 different slow cash.
<unk> have started to enroll in these courses to be offered in upcoming spring semester. We will also host for localized test preparation updates and analysis on senior high school entrance fee for that.
Suddenly we continue to upgrade our interactive features.
Simple we introduced a feature called interactive voice sensor for primary schools courses in this quarter.
Which simultaneously converted many students voice answers to Texas. So the instructor can quickly identify valuable answers for.
Just like these effectively improve the quality of interaction children are large classes.
These and other advancements in place we saw significant improvements in retention.
For a kid with golf courses during Q4.
Junior High School Chinese courses as an example.
The retention rates approached 70 per cent.
Overall paving enrollments for our Chinese courses for all grades rose nearly four times year over year.
For the primary school segment I'd like to highlight one.
Extra curricular course without wage sheet or without some of them.
The course, he's a bikini online calls for wage she all the game of golf.
It is a phone costless live video instructions colorful animations and also AI powered practice leveraging our new people.
Capability students can practice, the gold game Skus adaptively with various level of difficulty.
With the AI, and which generates learning reports automatically for parents and kids that wage is a pitch products and it's growing very rapidly.
The retention rates for this class was above 70 per cent in Q4, we have prepared a short video about the product and it is available on our investors website IR dot dot dot com for your convenience.
Turning to our courses for adult learners. In addition to existing courses like logic English.
We have a fast growing new course extraordinary memory for you.
Hum.
And of course helps learners gain new techniques for better memorization and improve concentration while alone.
The approach is effective for learners are different ages and backgrounds and help them become more productive in studying.
Different subjects the compound quarterly growth rates for gross spending of this cost is.
He is about 90 per cent.
In 2020.
I'd like to pause and talk a little about our strategy.
Our current product strategy has two sides. One we are implementing the interactive large class model, we talked about a few quarters back.
And building more and more live interactions some of them AI powered into our closeness the voice interaction I just talked about is a good example, among many other these features.
Second part of our product strategy is that we focus on a small set of star clusters, or we call blockbusters internally instead of evenly distributing.
Investments on all subjects and age groups.
For example, the Chinese coast makes up a large portion of our junior High school business.
By focusing on a few classes that are really innovative and solve students and parents vital needs, we attract more satisfied and loyal customers and gain better economies for our business.
This two fold strategy of interactive and focused cost us.
Oh, that's driven our quick growth in 2020, and we will continue to propel us forward.
It fits us because fundamentally it requires a diverse set of skus our teams, including our legacy design.
Technology and deep user research.
And maybe more importantly than it is in your top culture patients in collaboration.
Turning to our learning products segment, we continue to ramp up our R&D.
Smart learning devices investing in hardware technology capability and learning content, we launched the dictionary pen three in December.
It builds on top of the successful.
This is al.
And every 10 two.
By adding unique features like happened check quite astute and shop and interact with reading, who don't do that.
That allows even faster workflow cups and helps young learners.
English REIT.
Orders like the picture books right.
We're so happy to see hundreds of primary and secondary on high schools.
Well, it's universities from more than 25 provinces and municipalities across China.
Adopted for you about dictionary pen as a valuable learning tool.
A strong learning device pipeline ahead of us.
And we cannot wait to show them to our customers.
As we close the books on a football 'twenty 'twenty. Our teams are more excited than ever about our journey in 2021.
As an intelligent learning company, we are committed to deliver great learning content exciting technology and high quality service.
We work tirelessly to capture the growth opportunity.
The secular online learning adoption.
As we achieve more scale and natural byproduct will be profitability.
On the right path to achieve our goals and we invite you to join US on this journey. Thank you for your time and continued support as we work to bring purest Chinese mines to our intelligent learning vision without Libya I will now turn the call over to Sue Palmer to review our financial results. We will then open to questions. So far.
Thank you Tom for coal and Hello, everyone today, I will be presenting some financial highlights from our plenty plenty for score and the full year.
And I refer you to read through our press release issued earlier today for further details.
Total margin reacts like a special year for glass of the progress we brought in from all scale and are often not talked about but I think you saw we made considerable strides reaching more students products and our customers with that we have changed our segment reporting for more clarity DD&A, how offering which better reflects our emeritus.
All of our products interest should we just think the categories.
As we continue to grow each area, maybe I'll now be reporting learning services learning products and the online marketing services and doing so we have more gradually you will see the performance from our courses for birthdays, our intelligent devices.
Let's move to other financial and operating results of the fourth quarter.
Total gross feeding for online courses reached RMB 1.12 billion for the first quarter up 222.8 per cent from 2019.
And of course meeting for our premium clauses Russell RMB, one 4 billion up 268 per cent and the $18 two per ton you all year and of course all around for that.
Respectively.
Our K 12 segment continued to lead our growth, reaching a record of RMB 700 index.
And the 67 million in gross really in the fourth quarter up 354, five per cent year over year and up 13, 5% from the soap opera pay.
Hey, and <unk> from our K 12 School reached 659000 in Q4 up 300 at night for tax Yeah.
Yeah.
Pay enrollments for premium courses for up by 208% year over year.
29 per cent of all new students, while speeding came in for an hour.
Organic traffic for Q4, which growth 183 per cent you all year.
This growth thrown off the only all determination for our ability to quickly expand our business and that that's all remote OLT just walking.
For the fourth quarter total net revenue reached a record RMB 1.1 billion or U S. Dollar for hungry Asics for $9 6 million.
This represents an increase of 106 to 19, 7% from the fourth quartile for so it's like 19.
Looking at growth by segment net revenue from our land and survey says well I'm B 700, I'm, sorry, one 6 million or U S. Dollar per 112 1 million up 198, 8% from the same period in 2019.
People will get gross plus substantial interest in both of the PE student enrollment for K 12 courses of yield operating losses, and then of course speeding per pet student enrollments also you would operating losses.
Net revenue from our learning products were RMB 203, seven points for a minute.
Alright, so just explain for a minute.
Up to other out of 53 eight per cent for.
From the same period into 2019.
Driven by increased sales of our new without dictionary pen of all work sort of 190000 units in the first quarter.
And then that revenue from online marketing services, well 177 8 million or <unk>.
Solar funded by putting by minute robots and he suddenly lifeway nine per cent of interest from the same period in 2019.
For the fourth quarter, all the time.
Our total gross profit greatly improved reaching RMB 525, 25 minutes for you.
Dollar 80.5 minutes.
Up 379, 2% comparable for the fourth quarter also from Nike.
Gross margin for long and sort of interest in crystal of $53 nine perfect for the.
Plus courthouse plenty of money upfront that southern cross that for the first quarter of 2019 for lots of market growth was primarily attributable to the bathroom economical scale and further optimization of our business and the faculty compensation structure.
Gross margin for learning product in Crystal of something like 25 per cent for support from the $26 seven per cent for the for same period in 2019.
So of course was driven by the tremendous growth in net sales sol-fa without it from a pet which carries a higher gross margin profile.
Other learning products.
Gross margin for online marketing for myself.
26, 49% for the fourth quarter of 2019, compared with three one plant fixed per cent for the same pure interest like 19.
The decrease was mainly due to the interest in performance based advertisement.
Third party for Internet properties, which carry lower margins.
For the fourth quarter total operating expense were RMB, $978 2 million or U S. Dollar by $149 9 million compared with RMB 326, 45 minutes for the same period last for you.
We continue to invest in our future on the top line expansion.
Specifically technology acquired in Poland, a T shirt, and the sales and marketing effort focus on student acquisition and expanding our brand awareness.
In Q4 brand and the performance out of about half net spending on Cortez amounted to approximately RMB 530 minute.
We imagine the interest rate branded underperformance I don't want highsmith from spending on reach reached a reached the zenith interest rate. This year. These strategies are yielding immediate gain that we expect to also positively impact our brand and the retention over the long term.
In line with our investment.
So it's much more efficient at a day each was a year ago.
And then we have the happy beneficiary, often rewarded receipts from our more economy of scale.
This is all possible award for the foreseeable future.
Is that for the first quarter, our sales and marketing were RMB 800, and for 8 million compared with RMB $205 8 million in the fourth quarter of 2019.
Research and development expense were RMB, $128 9 million compared with RMB $89 3 million in the first quarter of 2019.
Our operating loss margin was 49% in the fourth quarter of plenty of money compared with $49 seven per cent for the same period of last for you.
For the first quarter on plenty of money, our net loss attributable to ordinary shareholder was RMB 447.8 million or U S. Dollar six to $8 6 million.
Compared with a loss of RMB $205 7 million for the same period of last year.
Non-GAAP net loss attributable to ordinary shareholders for the first quarter was RMB 433.1 minute for U S.
Dollar six you think plenty for a minute.
Compared with a loss of RMB $186 1 million for the comparable carrier for the last year.
Basic and diluted net loss per Etfs for fourth quarter was RMB three nice week for U S dollar and fewer points ex non-GAAP basic and diluted net loss Brady as for the first quarter was RMB three eight for U S dollar euro playing for.
Net cash provided by operating activities for the fourth quarter was RMB $129 2 million for you.
Dollar $19 8 million.
Turning to our full year results, our total revenue for a tiny tiny increase back behind me on 42, 7% to RMB three to $3 2 billion.
Well you asked dollar 485, playing for a minute.
Net revenue from our learning services for a tiny tiny well RMB, two 2 billion or U S dollar sort of 132 minutes.
207, 27, 9% from the 2019.
Net revenue from our lending products for 2019.
Coral by 265.1% per year.
M B 540 million for U S dollar $82 8 million.
Net revenue from online marketing services for 2019 were up $4 four per cent year over year to RMB $472 9 million for U S dollar 72.5 minutes.
Total gross profit for 2019, well RMB, one 5 billion comparable to RMB $370 6 million in 2019.
Total operating expense for the tiny country increased to RMB, three 3 billion or U S dollar $499 6 million in comparison.
RMB 970 per I'm, putting 5 million interest from 19.
Net loss attributable to ordinary shareholder for Chinese money was.
It was RMB, one 8 billion.
For U S dollar $268 six minute.
And the basic and diluted loss per ads was RMB 15.53 for U S dollar two points for eight.
Looking at our balance sheet, that's all for the December 31st for plenty of money our contract liability, which mainly consist of the deferred revenue for online courses, where on the one point for Berlin or U S dollar 228 million.
Is that him and Chris after $215 three per cent.
From RMB $456 8 million that's after December 31st for 2019.
It'd be handled carrier, our cash cash equivalent time deposits and short term investment totaled RMB, one 2 billion or U S. Dollar 183 point about volume.
This concludes our prepared remarks, some fuel for your attention.
I'll like to open the call for questions. Operator. Please go ahead.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
If you are using a speakerphone please pick up your handset before pressing the keys.
If at any time for your question has been addressed and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
The first question comes from Brian Gong of Citigroup. Please go ahead.
Thanks management for taking my question congratulations on the results for that.
From a very quick question, so could management share some information about.
So then she Roman marketing cost for the winter session for the first quarter and also how does management see as our competition over upcoming summer session.
And whats our marketing budget to our 40 per year.
For you.
I can think of a central for questions, Brian a little break any.
New York background. So my understanding is that.
It gets caught up a share from <unk>.
Regarding the sales and marketing competition, although customer acquisition competition, and it'll be true and any color on any trends regarding all the customer acquisition. This summer right.
Yeah, Yeah, and also some information about the student enrolment for the winter session.
Okay.
Yes.
[laughter].
Discuss the order the call Yeah, that's we imagine that in the script, we did achieve the quakes tremendous achievement.
Shipments in the in the last year, especially in Q4, and although student enrollments and also with the retention and the also the Oh, that's a gross bleeding off the kids all business for reaching the peak in the original reaching the record.
Remember it seems like.
And then we think things are political disagree nurse right. Now we are he doesn't offer if any of the for guy like how do we kind of sharp I'm kind of issue.
For this winter everything because we are all be dedicated I'll come to the credit you shouldn't I should also be IBD that's the.
That's the that's the accounting for the.
The quality of the content and and.
Scott Kirk and the math is.
Instruct us for teaching behavior will scale there'll be they'll call that it will cause them to gross up for this loss. So they also will be dedicated on the content for high quality content creation and also we are looking for the past.
You're involved with the deep <unk>.
Uh huh.
Keep your involvement in the combined with the the online courses accounted for under the learning devices. So we think a person who task force without perspective, so for before but we think the key metrics for cloud to drive growth of our business. It's an all day sales marketing because the polycom for content. That's what we believe so right now I think everything is in line.
We didn't see the too much.
That was about relative in the puzzle for customer because they didn't cost late in the past and we think that will be that's strictly relate to flow to the concentration for us while caught a couple of content that's always true.
Overall product quality testing wheel, that's listen we all we spend all of the effort himself spinoff resource envelope to true walking on that so that for us it seems to be a terrible thing for our trend also for the trial regarding all the summer for companion or the summer promotions, that's a little bit.
Longer it'll be far away from Mt.
I'll definitely will be a brokers first because there'll be focus on the content secondly, there'll definitely be will care more healthy.
Healthy as we mentioned net loss and I guess, a healthy Pos growth, that's where I'll be terrible, but you're gonna economics that we all care about what can we get a return for our investment.
I think that that's what will be the other strategy, we will deliver it into the summer. We think we have we can share with more information when the summer excuse me ex calming effect.
And just to add to that so yeah. So so cut.
Customer acquisition recently has been relatively stable yeah. So I think part of that is is.
So so.
That's a that's a people different players use has been there has been a little bit more rules around those downsides and the other.
It has been a more.
Kind of.
There's always a stroke so so the.
Among the players how has it been a little bit Oh recently, yeah. So so that means.
The price is.
Relative stable or the other the other day is we were seeing more.
More and more diversification of our customer acquisition are ways to do customer acquisition. Yeah. So we were doing a different ways to do that and we also see other players to tune that yeah. So so yeah to answer that I hope that answers your question.
Yes, Thank you very helpful.
The next question comes from Sheng Zhong of Morgan Stanley. Please go ahead.
Yeah.
Thank you for taking my question I have a few questions first one is thanks for the update about the.
Yeah interactive.
So Archie.
I remember an en masse for time management mentioned that win.
You are focused on differentiation and then.
So that's your primary school classes can be different differentiated with other <unk>. So would you mind to keep for some more updates on your primary school to train some strategy and second one ex if we look at this for yeah, I think for that peak.
From a segment well what do you.
I think the major ground won't be from a in terms of for maybe subjects are free coffee is that you will be folks are very focused on berth costa coffee.
And lastly, he saw what you might be some demand for.
Breakdown about your revenue and the cross training them on a true true D. A K 12 and adopt.
On a non yourself.
Thank you very much.
Yeah, I think so yeah I'll take the first one so regarding primary school. Yeah. This is a very important set of segment plus right.
Right now.
Junior High school and the senior High school are bigger for us and we talked about so we want to have more innovation.
Differentiated products for the primary school segment and that.
There had been a number of ongoing projects and I can give you two updates so.
First is oh, we have extend it to all our.
Chinese course, with which we are where we are have a very good reputation for for junior High School to two primary school yeah. So to.
For the fifth grade in six weeks, we have basically extended the junior High School Chinese close to two these two grades.
And and we adapted the content accordingly, yeah. So added to the content tender also features.
Technical features for for for the small for younger students.
Unlike the boy sensor I talked about like also.
More and more stronger interactions.
It is that project physically non-GAAP.
The second update is our basically for us.
Yeah. So we think for primary school segment, we are a.
Very interested in extracurricular courses are supposed to tell you did touch on extracurricular courses now so D, which of course Gogo and of course, we we talked about is a good example, yeah. So.
Because we think it is a cause the students in primary school as a D. A.
The students for themselves and also the parents are all very interested in extracurricular courses two to develop skills and talents in different areas.
We think it's a.
A very interesting area and other which of course is is doing doing good. So so U S. T us are working.
The salary.
Yeah.
And before.
For the second question picks up for question first.
And it's I think for the political spending on the revenue for the 'twenty 'twenty, one firstly, we did them.
Repeatedly we didn't give any I'll say for guidance.
Your line is all of that's true, but we think and also we just tried to emphasize again I'll I'll help strategies cortisol Crystal ball. We all focus also healthy on hospital, that's the first thing.
For the terrible Omics.
And that's we carve out for calling up a content in our products, which we deliver it to the Kosmos for school non customers.
And I think.
With that fundamental content based on the fundamentals.
We think we got cheap alcohol.
For the close yet.
That's how it would be wrong.
Our petrol boats in the Sundance Sundance 100 Watt and the second question I regarding alcohol stock losses.
It sounds like telco for formation, we were hoping for is that also a focus on top of all of the subjects for the for the special rate, we'd be able from all dedicated to that.
As a matter for gaining a little bit more dedicated also some stock close it's all for some cause for a sleepy D. For a brief wrap up this is the best quality athletes at all for basketball League leading positions in the in the market maybe I'll spend Liberals. He didn't evenly distributed always holds true for all of the subjects, even though the equal weighted.
Oh, it's definitely focus on the most value to that subtext at least we are leading all those appears all but he done a soccer so that will be the law from strategies for a week from operating off nothing that's not means maybe we didnt that if at all.
With all the contents are all for the all the for the all subjects weeks back too.
We released for more high quality to count on a year over year, just like we mentioned in the summer in the in this year and as the map for the for our business and it'll be growth for gross eight items in the in the Q3's or any other relief in her mom day enrollment.
I think that's the kind of that's kind of achievement, who can prove that we are on the retract who can produce high quality product classes and our customers. That's our strategy on the stock for stock.
Okay.
Again, if you have a question. Thank you very much and that's what got it.
I'm, sorry, if I may I'm, sorry for that could see a confusion on the gross bidding actually I want to ask if fourth quarter gross billing and revenue breakdown to K 12, and it sounds if I may thank you.
Oh sure.
So for the kick off of course meeting in the fourth quarter, you saw 767 minutes.
And Oh, Yeah, that's what I had hoped for that.
To add on that price $2 69, six not yet.
Okay.
And Ah Kim can provide revenue as well.
[noise] [noise] links.
Okay.
The total revenue from key trial.
Yeah.
Hmm behind it.
Yeah.
And.
The total revenue about 200.
For 14.
Hello.
Yeah.
Thank you. Thank you.
Thank you so much.
Thank you.
Yeah.
Again, if you have a question. Please press Star then one.
The next question comes from Alex <unk> of Credit Suisse. Please go ahead.
Okay. Thank you management congratulations on very strong results and thank you for taking my questions. My first question Oh, we'll be about your gross.
Okay Tim.
For me one I I've been told.
For for the second half of 2020.
Honest.
College to see the acceleration of growth in the second part, but let's just for the first.
First off the Sun Sentinel and Michelle.
Michelle Moore Connor stay Hum you expected.
Trying to continue and since you have the range for funding.
For me and I got a new revolving credit.
Uh huh.
Nick I'm more comfortable and.
You increase them more.
Okay.
Secondly.
Ah I see very strong results from the gross from the Oh, well lending products business.
Give us more color on for example, the sales volume of you or your thought dictionary.
We've seen with Penn in for Q and also in the last year and home how much percentage from the kitchen nearly 10.
Five years will be a K 12 students.
And and wasn't there.
<unk> stuck with that.
Strong sequential growth.
And this additional candidates Oh.
The new generation of products or.
The new sales channels. Thank you.
Yeah, I'll take the first one so.
Yes, we're running 2031, so our teams are very.
Very bullish about our attorney to anyone's so.
You said for for 'twenty 'twenty, it's the it's the first year that we are seriously participated in the summer southern campaign for acquiring large number of our students yeah. So yeah.
In Q3, we had a about a half to half a million enrollments in Q4, it's already up to.
650000, yeah. So.
Very good growth and if you look at our Oh, Okay for Q.
Q4, we have positive operating cash flow because mostly because the retention in Q4. He has is about far expectation yeah. So.
Given all this information that.
Our teams are I think a 'twenty 'twenty. One is is gonna be out from TR plus and.
The strategy remains the same yeah. So.
Yes.
We are focusing on.
Ah different projects for each different age groups.
Because the age groups as soon as they all have very different requirements.
For comments and needs for example for that closeness for high school, because we talked about we were doing a tiered level instruction because.
Students really they have high school students have very very limited time, yeah. So the quality the.
For the learning efficiency the quality of the closest really matter. So you have to.
You have to have.
Have a good.
A good level of course for for each different group of students Yeah and also other score for Junior High School, we've talked to.
A lot about localized content because that's the key pain points for for Junior High School students yeah. So different students from half a day.
Learn things in different oils, and there are tests exams have just for.
And content in each different city in a province. So we are we have prepared.
And.
Uh huh.
It's already launched its online and Oh.
The closest rules will start in a in the spring yeah. So with these we think we are well.
So very confident about 'twenty 'twenty, one and of course, there's a the devices business.
We also think we are leading in the industry.
There's a oh as we get to know more and more parents are buying our devices.
The teams have a lot of new ideas and someone's day I'm looking on on new products. Yeah. So so overall, we think we can maintain.
Uh huh.
Relatively high gross speed in 'twenty and 'twenty, one and.
Obviously cut from acquisition is a is available right. Yeah. So every year will be a little bit different.
Think our strategy works, because because as the markets become one for sure.
It's only the best products stopped can acquire customers.
Yeah, So maybe two or three years ago, you can flood the markets with our capital with money and we think that's a lot of students but for now you have to have the best course for a certain subject because you have to has to be innovative it has to be.
Kind of a soft deposits off the polymer for students to be able to kind of acquire students efficiency and.
Many of I'll call it closer to kind of redo that some they are still working on their you eat so we will manage this this process and our.
Be patient and we think we can have a good 2021.
Uh huh.
More information about the other.
Oh Linden per box.
Growing very fast.
The main channel.
Although deposits for us.
Maybe online are the official flagship store for you at all from the number of items.
It appears in the materials.
How much credit problems that ties to my language.
And the double 11 shopping festival in two ways one day.
So fixing their pen three released last December.
You can provision in your market share total.
Ladies shipped over 300 in Arkansas than that you'll need to help you with that because it depends.
Okay.
About the country.
For Central States.
The latest Oh, sorry.
Person.
In 2021.
One other new devices sales.
To keep the sustainable growth.
They'd be doing with their learning a few items are not the only.
Channel for the customer and patient.
Oh yeah.
Run down their learning I'll see you at all.
Yeah.
We target to create more neutral scenarios for the Congressman.
Thank you.
Got it I'll, just if I could.
Follow up so for the buyers of the product devices, how how much of them will be okay.
Well Steve.
And how much was the adult students.
I thought maybe it's 70%.
As we've just closely the feel free and the members that we disclose a bunch of over 70 per sand it seemed to get off to a.
Cool.
Thanks for that purpose.
We think the right thinking I'll speak for itself extremely patent that's real for specially designed for the English learnings Kennesaw. We believe that's the majority of them are in the long run for my daughter uses.
I can't help you pick up a pool, that's what will be the trend for the long run and produce a.
We expect that that will be oh after the doctor magazines are into the other.
And we also have a different learning do you watch it.
To serve towards a different demands for those for those for the learn English scenario. So we expect to be kind of just have more.
No not exactly for that for you.
The Doe student below the agent to be all three hours a day.
Good day.
Wifi or thinking at all.
Okay.
Got it very helpful.
Thank you.
The next question comes from Jesse <unk> of Nomura. Please go ahead.
Thanks for.
Taking my question. My first question is also on smart devices.
Congrats on the gross margin.
And I said our growth encouragingly strong in the fourth quarter. So I wanted to understand how it's a shipment of a dictionary pen in January and February I work for it.
And secondly, how we should think about the gross margin.
I look for a lack of nice day for the next day courtyards and I'm talking about gross margin. If you could also comment on the gross margin outlook for premium price since that would be great. Thanks.
Hi.
Thanks for satisfaction.
Well for me gross margin for our additional Japan.
I think.
That's right.
240%.
So from turnkey.
Because of a very good improvement.
<unk> last year due to the.
Volume volume when we said.
We expect to have.
They more improvement on the gross margin our lending for example.
You too.
Due to the large scale.
U S T used lead time items.
So more in the future.
For the gross margin.
All of our learning services I think.
We've got a.
Sharp increase.
In 2020.
Going forward, we do okay in.
Our learning for life.
Annual visit.
But because.
Firstly, we more more.
<unk> expense for <unk>.
From non core skills.
We believe large classroom teachers from other overdue.
Can you gain.
Came from benefit how did we achieve.
We believe our gross margin.
Well it will rise to our industry median high level.
They 62.
No.
Secondly, we stand for we have more room to achieve higher asps.
Average selling price for.
Patient enrollment for other premium coffee.
For around RMB 1343.
2020.
Fortune magazine and the year over year.
However, yes, Pete where there could be cheaper when compared with our.
Online and offline here we were.
Uh huh.
Continue to invest more in our coffee so it would be our.
Our youth is willing to pay for higher price.
Finally, we expense.
We've got a Bachelor of compensations come true.
<unk> seen a lot in the skills we have.
Optimizing our company structure, we talked for leading to a standard you can imagine interest.
Uh huh.
It's helpful.
Yeah.
Thank you management income.
If I may I have one other question.
Oh, you're talking preschool.
Our interest.
Can you talk from a mountain parents.
You always have for Mike Capone online learning tools and of course, it so I want to understand what gets your view and your strategy here.
You said, a preschool learning products services.
Yes preschool learning from it.
Oh, yes, yes of course.
Yeah. So this is an area, where if you follow us for.
For a long time, you wouldn't know that we've been working on a PC.
Preschool.
Of course, there's for quite some time now yeah. So we have oh, you'll dump math, we also have.
A little with the Chinese reading apps and also yeah, which he also covers a.
A lot of preschoolers now so oh is that as I said in the prepared remarks.
We seem to extracurricular learning and also before school time preschool learning is a very interesting other and.
In the market. So we have Oh, yeah, we have a I call. It says we have.
Small group classes.
Phone factors also causes yeah for us we think.
We think that you have to have a very good combination that will actually.
B interactive so that the content is.
That's up to them to the kit and also are not made for this just to pass time, you'll have to have good learning learning results yeah. So.
So that's a balance we want to strike and which is a is a is a very good example is our philosophy.
We think that the kids really loves of course, and it is an area, where oh, where the existing products on the market is not up to standard.
Yeah. So.
So we will keep looking for opportunities like this and of course, we have multiple ongoing projects and we think we are investing in them because we think they are.
Okay.
The directions are other promising now so so we think we can have multiple successful products in this area. So in some sense that it's.
Little bit like the.
Adult oriented closeness that we have so we have a commodity of incubation.
Uh huh.
Our courses are in these two areas and therefore.
For for adults level, we already have multiple.
Clusters apps are.
Upscale yeah, so for logging logic English for the that's extraordinary memory.
And a couple of others. So we think we can.
We can also do that.
For preschool causes yeah.
I hope that answers your question, Yeah, Hey.
Jesse.
Additionally for the tranche of my comments regarding August push for products. So we think for another PARP and so you don't think shrimp penetration.
Zero. It's also another a new 10 or something you know things from a patent it's also you're able to interact with the leading functions for.
For the specialty for the principal kit and we think that's the real pizza and other new channel for lots of comfort all users for the Appeals court.
That's for the services, we think that will be the combined scratch deposits.
It helps our principal interest.
Thank you that's very helpful.
Okay.
The next question comes from only co of CRT D. C. Please go ahead.
Yes.
Alright.
Okay.
Yes.
Oh, yeah. Thanks for taking my question congratulations for great. That's.
Some of my question has to be answered. So I just have a quick follow you can question about 19 devices. So I absolutely see that.
Learning projects.
Thank you Christian.
So what what is our expectation.
Propulsion and that's very true.
Like in the long term and the second question here.
So we learned a lot about our scratch see for that to town dogging sorry.
The 10 year I think more information about them that naphtha parts that you had about a smoke smoke online categories and do we have any their trips and true like car should be dismissed.
Like other scratchy comp ratio range.
Uh huh.
Yeah of course.
Yeah, So oh.
For the addiction opinions are doing really great.
Q4 and are we just we actually only released a dictionary pen three at the end of Q4 December yeah. So.
So we think.
The products will have a long runway ahead of them yeah. So.
And.
Yeah, so regarding future yeah, we we want our clusters and our learning devices to both be very successful yeah. So we don't want to put a percentage number on them yeah about.
But for the for the for the short to midterm, Yeah, I would say of course. This of course will be a majority of the business going forward because it has really high growth and we have.
A lot of really exciting.
Our stock losses are coming off yeah. So.
And.
We also said that the AR devices, we will have for new devices for for this year more than one yeah. So so we feel good about both sides of the business and of course, we want them to.
For two to two kind of strength in each other right now so we have been talking about that for some time now so we will keep working on cross selling between the two categories and we will report back when we have the results yeah and.
Regarding University your products yeah. So.
Internally, we are we basically we think so.
You kind of weigh it in this way basically for all the products.
Targeting us.
Learners over 18 years old we try to put them in this day.
Yeah, So and we want them to we want the teams to work with each other true.
To have a holistic strategy for adult oriented.
Products and.
We are really like Colorado talked China University book, and also nicky's clouds classroom.
These two oh.
I'll kind of one of the most.
Two of the most important and successful online learning products for University level burning yeah. So so we really like them we feel.
Responsible to keep them in good hands for for the future. So.
Actually we will have something to announce maybe are in a month yeah. So.
So we have been working on.
We kept working on them for some time now so we will be have something coming up so so.
Yeah, just for first of all of US Yeah, if you're if you're interested thank you.
Thank you.
Yeah.
And the last question today will come from Binnie Wong of HSBC. Please go ahead.
Okay.
Oh. Thank you measurements for taking my question. So I just want to understand that if we look into 2021.
Especially on piracy and also I think technology on user acquisition and also how is our share.
Strategies to compete are will be different from last year, especially considering oh as we talked about earlier that we're records. She like Mercury free split to me in terms of the has a question.
These accounts are marketing strategy and do you expect that those will be coming you know rationalized.
Among the tiniest and shit, we meet as favorable or unfavorable kicked out. Thank you.
Yeah. So regarding competition, yeah, I would just say Ah yeah, we prepare for tough price.
Yeah, We don't think we don't assume that market will be a friendly to us. So that's our that's always the good.
Good day approach to take yeah. So so we think.
Given that the adoption of online courses continue to rise yeah, we would expect still large scale customer acquisition activities kind of high level. If that's in the marketplace. So.
And our teams are good items, yeah. So so because we have good cost of course good conscience.
Highly competitive closeness yeah. So we think all are.
Customer acquisition cost as flow you can see that from us.
Achieving the three quota.
Positive cash from operating cash flow in 2020 so.
So so so so we think we have a good outcomes for our competitiveness in the.
And also.
What's your what you've talked about as whites.
Zinc.
Players will be more rational and because.
Because of what kind of restrictions and limits placed on the market by by the regulators I think I think it'll be good for the benefits for the for the house households to industry in the long run and.
Hum.
Because our customer.
Customer acquisition techniques has been always within the rules yeah. So we think we will continue to do good.
Yes. Thank you.
Okay. Thank you. So do you think that the marketing spend in general and I could tell you spend less in terms of such a piece or maybe a question for marketing strategy or do you think that overall and and this is something that you would call a how should we be.
In terms of directional it that sounds something I can spend in 'twenty. One should we expect that Dean I think this is a percentage of revenue.
Yeah.
Yeah. It is.
It's just the beginning of this year.
[laughter].
Yeah, Yeah yeah.
Yes.
I mean, even talk for mentioned up all day. So all of the other trends in the strategy itself from a fall back here and there.
We've seen that really sort of get comfortable with the detail number even the range of a threat or just the beginning of this year and it's very difficult to predict.
It's about being suffering with intestinal.
Earnings will be the first of all just kind of on the results I would probably weekend sharply.
It's probably close to some or all of the Oppenheimer.
It's all of it will be the key season for quite a new students for that.
Other window business.
Okay. Okay, Okay, great great. Thank you so much I appreciate it okay.
And that concludes the question and answer session I would like to turn the conference back over to management for any additional or closing comments.
Yeah.
Yeah. Thank you once again for joining US today. If you have any further questions. Please feel free to kind of half from tech and he was out directly or reach out to TPG investor relations in China or do you have a per day.
Thank you. The conference has ended you may disconnect your line.
Yes.
Yeah.
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