Q4 2020 GSX Techedu Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to.
The G S ex <unk>.
The ideal Inc, fourth quarter and fiscal year 2020 earnings conference call.
All participants will be in listen only mode should you need assistance. Please signal conference specialist by pressing the Starkey of followed buys the route.
After today's presentation there'll be an opportunity to ask the question.
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Please note. This event is being recorded on March 3rd of 2021 of.
I'd now like to turn the conference over to your first speaker of today.
Sandy Chen IR senior manager of the G. S. Ex thank you. Please go ahead.
Thank you Sarah Hello, everyone and thank you for joining us today he assets.
The well distributed earlier and is available on the company's IR website on the call with me today are with the lotteries <unk>. He is the founder Chairman and Chief Executive Officer, and MS Shannon share.
Our National Office, where they will go ahead of a general overview and we're sharing all of these sorts of financial.
Following the prepared remarks, Larry and Shannon will be available to answer your questions.
Before we begin our the likes to remind you that this call. The call contains forward looking statements as defined in the U S Y The Securities Litigation Reform Act of 90 95.
Forward looking statements are based upon management's current expectations and kind of market and operating conditions.
The relates to events that involve known or unknown risks uncertainties and other parts of it all.
All of which are difficult to predict and the many of which are beyond the cognizant <unk> and may cause the company's actual results performance or achievements to differ materially.
The other information regarding these and other of is how certain is the ore passes.
A recording of the Companys filings with the Yahoo.
The company does not undertake any obligation to update any forward looking statement, except as required and the applicable law.
As a reminder, the.
Called right of the thing recorded.
The addition of live and archived of that part of the conference call will be available on G. As debt Investor Relations website at the assets well see that's true dotcom.
You are also welcomed the supply to our quarterly and that's the newsletters.
Same websites.
It's now my pleasure to introduce now.
The Levy. Please go ahead.
Frankly, the sandy good evening and the morning to you all thank you for joining us today on our fourth quarter and the full year trying to try and take the call.
No net overreaching cash flow is essential indicators to measure the upper range of efficiency of the online education company in the.
Fourth quarter, we achieved the net operating cash inflow of RMB 600, and the sort of these things of media and afford us the flow here in 2020, our net operating cash flow remain the positive and the RMB 603 minutes.
In December 2020, we used to the first 40 completed private placement raising in the U S daughter age Android and the 17 million as of December 31st our cash and cash equivalents Charlotte term of investments in the non term investments total RMB eight.
It's kind of true to abate in <unk>.
The significant increase of throne of RMB two kinds of 72 point of seven 4 billion at the end of 2019.
In the fourth quarter, our selling expenses totaled RMB 1700, and the 98 million.
300, and the seven.
Per cent.
The increase.
The it's opportune for conduit and the 17th to median employee compensation and the Mei miscellaneous expenses and the safety non media and branding activities. It takes us to of traffic acquisition expenses of 1200.
And the 67 million.
She is our gross billings for the fourth quarter were RMB three times to one 5 billion debt.
Corresponding RLI Kevin COPD.
Youll theory of positioning in the industry.
Further our same it's been the state of the end of fourth quarter decreased the by RMB 200 in the 50 to 70 million of.
Sure Trey of kind of 5%.
From the third quarter.
We moderately control of our traffic acquisition expenses because of we firmly believe that good education takes time and it should be full of tire and a lot of.
Premium respectable and the sustainable education as the neighbors about shrunk variety the race to the banned by the school the embrace grid of teachers high quality car sales turnaround services effectively bring the results and excellent reputation.
I've always been remind you my team is that when we saw the chicken takes capital injections into our industry. The magazine the marketing campaign that followed and the irrational rates by some players to scale their business day at any cost we should always of pay per call.
And the stay true to our of regional mission.
Which is to focus on making education better through technology.
Folks recruiting on the training of the past the instructors Brooks of providing the best and the most caring education folks are operating in the most satisfying services until you get to students and the use of parent and the book pursuing the July the goes.
Regardless of the heartbeat with a long term and the sustainable value in.
In 2021, we will continue to expand our recruiting and training of the star instructors expand our efforts on content product and the technology of the bedroom event, maintaining our effective growth strategy on the lifetime value basis of.
Demise of our regional efficiency and effectiveness and the further improve our organizational capability and efficiency.
Our confidence that the way, we will continue to excel in terms of the offer of reaching efficiency in 2020 one.
Now I will pass of the call over to our CFO Shannon to walk you through all of the financial and operational details.
Thanks, Larry and think of I would one for John here the call.
Now I will walk you through our operating and financial results.
I'll conclude with how would be without the coming quarter.
Note all financial data is in RMB terms.
In 'twenty, 'twenty, where the comprehensively upgraded our products in terms of our instructor and showed her teams.
Development and technology.
As we remain firmly committed to improving the learning experience and in fact of any of our students.
Firstly all of the past year more than 100 top notch instructors join us many of whom have considerable years of experience.
Florida Junior and senior High School segment, we have asked the Bailey of strong mode and decent of reputation by building up a team of industry of leading instructors.
Meanwhile, in 'twenty 'twenty, we've sort of you know what state of in Colorado eating our own instructors.
Candidates, who are young and have high potential.
Many of them graduated from the knowing the universities, including Peking University Xinhua University, Howard University, Columbia University, and Oxford University the Jaguar.
We have also asked the bellies of you don't like to train new instructors.
Many of our new instructors, who graduated in July of 'twenty 'twenty after or a hockey of training have growing into instructors seaward of by students and parents of lot.
Some of whom have attracted over 10000 like all of the price of course is needleman.
Secondly, when you're constantly you lapped to the valve and upgrade our educational content and the part of that.
Compared with the end of 2019 out of of course content development team expanded over four times range.
Bringing the rage and the localized content of specialty.
We have achieved the progress you're centralizing our curriculum in 'twenty 'twenty and how at the bellies critical of it all of the different difficulty of levels across our primary school and high school of courses.
In 2020, one we will continue to work all the refining our critical though.
What did you all of our of course content and I would like to trainee joins the late will streamline our of course to see the delivery process.
This practice ensure the scientific the nature of our of course the sale of both.
The specialization of our instructors.
The standardization of our quality control.
Lastly, technology plays a vital role in improving our in class experience.
Our upstream streaming media system, and our Arizona, Idaho detection system leverage artificial intelligence to automatically the jazz the system sidings to adapt to a different net working environments and hot way of stimulation of.
Cheating and I'll tell you that for the in class multi play of voicing interactions. Nevertheless.
Most of where we have deep out of <unk> sight laboratory side, which simulates the environment for the physics and chemistry experiments for junior and senior High school students and teachers.
The accounts and upgrade of our educational products.
Effectively translated into our improve the retention rate and provided a solid driver for our long term healthy and of sustainable development.
Despite a challenging environment, we closed our fiscal year 2020 with exceptional business out of the financial performance.
In the fourth quarter as we set all time records for revenue golfer fittings and pet enrollment.
We are pleased to see that the pandemic situation, improving and we are thrilled with the way our teams continue to focus and executives throughout the lease period of elevated uncertainty.
Moving all other I'll briefly recap the financials for the fiscal year 2020.
Our net revenues continued to growth, reaching seven point of 1 billion, representing a 237% in Kuwait from.
The two point of 1 billion in 2019.
This revenue growth to be more than three of one five times of the play of years figure for the past the three consecutive years.
That's building the.
The leading indicators of where net revenues was 9 billion Inc.
The increasing by 168% year over year from $3 4 billion last year.
Paid enrollments increased two 5870 1000 for fiscal year 2020, or two of six eight times that up the fiscal year 2019.
Four of 2020, we achieved net operating cash inflow of 603 million compared to 1000, and 1200 and many of them in 2019.
Removing the effect caused by the actual cash we paid over 100 and the final of million for the independent investigation, our net operating cash inflow of it would be higher.
That demonstrates our exceptional operating efficiency aimed in the intense competition for.
For the more in the second quarter 2020, we have the pushes approximately one point of 1 million a D S.
Approximately 200 of an 83 million.
These fabs that's cash outlay, we have ample cash reserves, our cash and short term investments and long term investments, reaching approximately 8.2 billion as of December 31st 2020.
Next let me go through the key financials for the fourth quarter of 2020 in details.
Revenue in Kuwait, 137% year over year to 2.2 of them true.
And by continuously expanding student numbers.
That's two hour you have teaching quality and brand recognition.
Our gross billings increased by 999% year over year to $3 1 billion.
The only due to increasing paid enrollment from the summer and the high level of retention in the fall.
Hey, man, which refer to any government price at or about 99 million equates to a record high of $2 2 million for the quarter.
And two times that of the same period in 2019.
That's the breakdown our revenue streams by business line.
Net revenue from our K 12 of courses increased by 156 per cent, yeah, all year to 1.98 billion.
<unk> accounted for 89% of net revenues.
We will continue to be our main source of revenue going forward.
The bidding contributed by K 12 of courses.
It's by 110% year over year to $2 92 billion.
Paid of course enrollments for K 12 grew by 113% year over year to 2.14 million.
Average enrollment per class was 2006 hundred in the fourth quarter in 2020 compared to 2008 hundred in the sales quarter.
Called the Overcalled or the number of sleep lately, because we offered shorter term of courses with smaller lot sizes to cater to viral students' needs.
Average enrollments per class this quarter inquiries this thing and ethically from around 1700 in the same quarter of 2019.
Net revenues from our foreign language professional interest of courses and other services grew to 200 of instead of 6 million and accounted for 11% of net revenue.
The all springs contributed by foreign language professional interest of courses and other services reached 224 million.
Paid of course enrollments for spring of language professional and interest of courses.
100, and so the 6000.
Love of reading, our know how with all of light light large class education Bluebell swell of expense into at least large industry segment.
Moving over to selected financial metrics summary.
Our cost of revenues increased by 215% year over year to 600 end of 16 million.
The year over year growth was mainly due to increase in compensation of four instructors and tutors learning materials rental expenses as well as so and at less cost.
GAAP gross profit margin decreased to 72% down from 17, 9% in the same period of 2019.
Non-GAAP gross profit margin, which excludes share based compensation decreased to 73%.
Down from eight of present in the same period of 'twenty of 19th.
The decrease was primarily due to an increase in the number of the instructors and tutors to enhance our service level and the personalized the experience that our students receive.
As well as an increase in compensation for such stuff.
Selling expenses increased to about 1.798 billion.
Up from 400, and sort of 2 million in the fourth quarter of 2019.
Within that expenses, where traffic acquisition with approximately 1001 0.26 7 billion.
Expenses full branding activities well approximately 15 9 million.
And the remaining expenses tower of labor servers bandwidth is aircraft.
The selling expenses job by 13% from the third quarter, which is our first the sequential decline in sales expenses.
First of all of that attribute to the integration of our K 12 operations.
In two of the go to brand.
Which continues to bring synergies and the extra efficiency.
Going forward, we will focus our K 12 branding practices around the Gulf of brand, which we'll say and that the food cost in branding activities.
Secondly, we held the exploring and expanding new and the locales test of our acquisition, China's including offline, China short Windows live streaming exactly.
By balancing our investment across different China's we managed to control our cost of acquisition cost in excess of acceptable range and achieved and you factor of growth on the lifetime value of basis.
We have always focused all of our effective growth strategy and we would never pursue meaningless scale expansions at the expense of losses.
We have made a number of the technology innovations around customer acquisition include.
Including progress is all of the intelligent traffic acquisition sales of leased grouping tried to control and student satisfaction.
We have taken the lead to closely cooperate with major media providers of traffic channel I.
On the premise of ensuring data security.
Leveraging the strong algorithm type of capabilities of both parties to effectively control of our customer acquisition cost and recorded better quality of sales leads.
In the meantime, we have the embedded Cymbalta task of learning transfer of Green reinforcement of learning technologies into our internal surveys flow to effectively improve the traffic quality and efficiency in 19 tutors and students.
Gradually we have created a sad I would refine customer acquisition sales lead the quality control and the digital operating strategy all of our marketing flow.
Research and development expenses increased by 229% of that year over year to 275 million.
The increase was primarily due to an increase in the number of courses professionals and technology development personnel.
As well as in the in place in compensation for such stuff.
G&A expenses increased by 300 of M 73 per cent to true hanger, and 18 million, mainly due to our in place in D. N. A head count and related had a conversation I smell of I've been getting placement fees for investigation per person.
Non-GAAP net loss was 564 million compared to the net income of about 100 of an 8 million in the fourth quarter of 2019.
GAAP net loss margin was minus <unk> 28 per cent.
As of December 31st 2020, we had 300 of M 55 million of cash and cash equivalents.
$7 3 billion of short term investments and 500, instead of $1 million of long term investments.
Binding to be eight 2 billion.
That compares with a total of $2 7 billion of cash and cash equivalents short term investments and long term investments as of.
The December 31st 2019.
I thought the December 31st the 'twenty 'twenty, our deferred revenue balance was 2.7 through by them.
Deferred revenue primarily consist of of the tuition collected in the wrong.
Net operating cash flow for the fourth quarter of 'twenty 'twenty was 636 million.
This demonstrates our strong organizational capability in balancing the investment returns.
With that I will now provide our business outlook.
Before I start I would like to highlight the three factors influencing how they view of the coming closer to the fulfillment.
Firstly, the spring festival of 20th of her one started more than two weeks later day in 2020 housing.
Housing fewer of weekends to D. The will of course is this quarter.
And so as the corresponding revenue.
Therefore for the Apple to Apple comparison, we should add at least a 22% of growth rate to the guidance we are providing.
Secondly, the C. It's the winter break its short parents and students do not have enough time to take of both short term promotional courses and the winter semester of regular courses.
Instead, the company focus our offering all of the so the Greens and master of sessions and expect the second quarter's growth to be higher.
Suddenly we had a higher base of the golf billings and the revenues in the first quarter of 'twenty 'twenty of that paid a bag of sudden outbreak of COVID-19.
As such based all of our current estimate net revenue for the first quarter of 'twenty or 'twenty. One are expected to be between 1.816 billion and 1.856 billion, representing an increase of 40% share.
For the Super sent on a year over year basis.
That concludes my prepared remarks.
Operator, we are now ready to take questions. Thanks.
Thank you.
I'll begin the question and answer session.
To ask a question you May Press Star then one on your Touchtone phone.
If you're using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from Mark Li with Citi. Please go ahead.
Hi management, Thank you very much flow representation.
I want to also of for the year of 2021.
Do you have any full year guidance in terms of revenue.
Gross margin and the lost margin are the more color. Thank you.
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The all cause you to do the actual Richard it.
Mark we moderately we've used the cash.
Topic of provision expense of four information flow channels are in the fourth quarter of plenty of blending and the first quarter of plenty of any work so that might affect the growth need of first.
Quota are as you know that the.
It sounds like acquisitions through the information flow channel I see slowly they want all of that to bring the scale assertion of revenue.
It's easy to just the purely pursue the scale. However, if we are pursuing is that this growth that means real organizational capability of deciding that one day to do the kinds of of bulk Jorge on the job done either in the corporate should all operated at the yard you do you think you do or the.
Some of them, so I'm not sure doctor kind of yourself.
Secondly are you know the root cause that the board of course, the quarter of 'twenty kind of of course opens about two weeks later than the same period of 'twenty 'twenty that also and that's the way affected the first the quarter's revenue of rest of nation as Shannon mentioned, but boy are we are asked.
The we're exploring innovative acquisition channels, including offline option and we believe that.
All of the impacts to all of Q2 and Q3 growth.
The other one as I showed you the Tucson I forgot also the central operating for.
But then all of us, but he was kind of you're cautious on the XI vantage of that doesn't count the.
In terms of oil.
Fourth we continuously to raise the conversation for all of the tutor.
This will benefit the retention of all of the kudos.
All of the students.
Oh, we're not sure of women the tier within the country not the target he came.
You may want to align all of the challenge of that or any of our union. The shop I know I wasn't clear when you got somebody the Gulf of other than that.
That's a four hour about a dozen of business together, we have almost the dude established the team. So we believe the sovereigns Wilson a relatively high growth in the second half of 'twenty 'twenty four.
All of you went after the year country the tend to deal with the high yet already hurting you on the book to ban the truth is actually charged from yeah more opinion true shots on the football Hasher three times the other so of yeah.
Country of call when we have already had the phone boxes and the change due to volume loss.
Loss from from Doctor on the operating more Kenosha auction what comes out.
Oh validly Oh boy, that's the information flow sounds like acquisition channel in 2020, you'll have seen the type of acquisition called passing goes up if we can get out of the anesthesia versus the beginning of the yes. The a grade of inclusion of stake so oh.
Sometimes that there is just the purely the lie on the money sending traffic acquisition channels of information flow channel, who are bringing up the scale.
It does not work it's not working.
Nah Yoda kind of yoga opens the way.
From two of the piece of the French you got the them down and all of them.
And the other tortilla sure.
She wrong.
So what are you guys young three the Ah shall do the can come the Ah you're glad you wish all of them down.
Maybe some players are sacrificing the lot of it wasn't to have a relatively high growth, but all of a set of who is who can who are the out of the way how who is that this growth.
The one that I was wondering what are the home and the army of our Union the.
Actually a few times of agenda, all the she might earn out of union, the trunnion items or a number without having to choose adoptions of Usher in summary, we are of plenty of critical of them about our growth rate of four years plenty of only one so we hope for 2020 one of the whole will go through the thought of them.
And in the range of 70% 80 per cent.
Hello, Mark and adding to Larry's point of I also want to provide more colors on our revenue guidance as I mentioned in my prepared remarks, there were three of factors the needs to be taken into consideration when looking at our first quarter revenue guidance are the first day.
The class scheduling.
Back to the threat of the call her in 'twenty or 'twenty other.
The three it's a matter of courses actually started in February the second four Middle School and high school students and full of premise school students. The spring semester started during the last the ranking of February but this year in 2021 the.
Chinese new year was relatively late and the school actually started in the first week in March. So basically we lost two whole lakes of revenue in the first of quarter in 'twenty, one and consider the high school and Middle School revenue still contribute a considerable amount of two hour.
Revenue the impact of our killer of revenue recognition should be higher than other companies, which are primary school and they take a leader position in the revenue recognition. So that's one of the thing I want to add to our revenue guidance. So consider the seasonal factor easily make a I'd hold true.
The comparison, the actual net revenue growth guidance for the first of quarter should be higher than our list 60.
The 62% of two six to eight five per cent.
All our all of our perspective.
The second as you let's quota in the.
First the quarter, we changed the way they recruit our students the.
This winter vacation.
Was too short to take both of the short term from promotional classes and the long term and formal interest the matter of courses for students and parents actually the winter vacation state by the end of the second of making in January and based on our class scheduling.
They're the only two weeks left for us to recruit the interest and that's a regular class students and and so that's how we changed our strategy, we basically replaced the.
We have the mass of regular classes into the short term promotional classes than the directly I record of students and have them sign up for our spring semester that basically means the gossiping, we'd collect the in the first quarter a majority of them will add to our second quarter of its revenue and.
That's why they do expect our second half revenue growth rate to be higher than the first quarter. This is all due to the seasonality and the reason is that because last year. The outbreak of the COVID-19 epidemic. We highly of finally, a larger base for both of the first quarter in the second quarter.
So these three factors should be taken into consideration when look at our guidance.
Guidance and I know you just mentioned the four year guidance for 'twenty of time, who won a specialist for top line of they expect a 70 to 80 per cent revenue increased and how do we come out of it that number. So so that's the big because like even though that I mentioned the way reduced some of.
The investment in the traffic acquisition of all media social platform, but we did the deployed all the Florida, new innovative ways to acquire more low cost of traffic for instance, like offline traffic or less from you all short radio so that will go out the.
Like the the potential all of the so the the the sales leads that can support our future growth of at least here with the lower our customer acquisition cost.
And also as our absolute net revenue will continue to increase compared to before our net revenue growth rate of will also show a seasonality and.
The industry just the change very quickly and the many cases the change happens within one month or even one or two weeks. So.
Well, we need to adapt quickly to these changes we will also be more cautious by providing more short term expectations, which are more foreseeable I hope that address your questions. Thanks Mark.
Thank you Larry I share that are very helpful.
Yes.
Yes.
Our next question comes from Christine Cho with Goldman Sachs. Please go ahead.
Hum.
I just wanted to get some update of the regulatory.
Many of them it seems like the Trump the competition stepping down a bit.
But also getting some news about a handful of Beijing tightening from the card of the teachers of Carnival et cetera.
How do you see the people of them and how it gets reflected in your guidance.
Thanks, Christian I'll happy to address that so in the past the quarter, our sales and marketing expenses declined over around 13% of quarter over quarter. They took at least as a positive signal in 2020, one we expect to spend of less of our cost of.
The acquisition budget all of the traffic acquisition from the social media platforms and extend of our investment all more of some new and more innovative channel such as live streaming platform already college of where that whole and I'm seeing in short radio channel isn't even offline China was one.
The way, revealing what do we have been doing in the past the year in 2020.
Baseband or all of the leading companies in the industry spend quite a lot of money all of the social media platforms.
One way of acquired traffic, but they do other observation was the overlap of ratio of pirates flying out of them for multiple educational platforms is increasing and we see like the conversion of May face some difficulties in the near future and that's why in the second half of China.
They started to explore new new channels and for the traffic acquisition from all of those social media platforms I still like the whole industry highlighted relies on the algorithm provided by the agencies all of the social media platform. The high cost of the Elias can now the translate into core capability.
As or competitive advantage and that's why it went up we want to explore new channels. So we did make some of our breakthroughs like for instance, our private traffic pool of matrix on some leading short radio platforms has been out of the top level of the industry and that has always been our core of comparator.
And the sales, although we have achieved the per lot of streaming insertion is also leading in the industry and this is what do we are good at we're well prepared on both the operational side and all of the technology side.
Truly a way literally all of observed the online business no matter, it's e-commerce or other business, we do see their trend of that at some level at some point the traffic will the will turn from the public trust of the into a private traffic matrix and this is really what we're all about and it actually.
Back to our comfort zone and as you mentioned are things in January the government has taken a closer look at the marketing campaign of the online education industry, and actually we highly well call them of and proactively embrace the change and the firmly support the government's current out of the following irregularly.
As a matter of my majors are where the.
With the policy will benefit the whole industry in the long run a for instance are firstly the potential customer acquisition cost is likely to decline.
This is consistent with our observation in January and February so in the past the two months the unit sales of leaves the price we acquired of from social media platforms were much lower compared to November and December in 2020.
And and and.
That's the basically we are the last of the company to join the campaign to sponsor of T V programs or like other shows or do like bus station Oh. The work has been from the bottom of our Hearts are we really wanted to have a effect of goes the other non interest the burning money. So.
So if something just came out a.
But it'll be a day.
The last fall and I think it's good to our company because we are a operations oriented company and we are now of your traffic already of the company.
And the second is like the measurement of will increase the trust of the.
Students and the parents towards online education campaign, but really one of the engagement between the parents and the us and the citizens of as a peaceful without creating an anxiety and talking about that in itself.
Patient.
All of those should not only help students to improve their academic performance, but more importantly show the full share of their academic capability. The valuable learning habits, and if we really have a the capital was really one of investing in upgrading our products out of the and send them in the sales and the marketing.
So weighted regard at least initiate who as positive factors. That's the hope that address your question.
Mhm.
Yeah.
Our next question comes from D S. Kim with J P. Morgan. Please go ahead.
How can you sort of 10, Shannon and Sandy good evening and thanks for taking my questions.
But of a few follow up from the previous teaching me personally on the guidance first of all there when you say two to revenue growth to be higher than the first quarter RV comparing <unk> with like for like 65 per cent Gulfport reported guidance of 45 per cent.
The performance.
Okay.
Oh sure, but when I was talking about I was talking about the revenue growth rate in the second quarter should be exaggerated compared with the first quarter revenue growth rate.
Okay. Okay. So comparing with the 45 per cent guidance I mean, the actual number we should.
Similar to two items.
And then of right.
Thank you.
Matt I check of roughly how much growth building in the one growth would you expect for the first of all right. You think this may be like on the latent demand better than the revenue guidance I think.
That's very helpful.
Oh, thanks, because we still have around one third of the cutter lapped and like I just mentioned our environment that seems just changed quickly and so it's about the weight per lot of our top line guidance as we always do and for other operating them actually.
Well it will be more cautious about that guidance, maybe we can pull out more details after the quarter end.
Thanks, Thank you.
Thank you. Your final question is debt can.
Can I ask you if you have seen any meaningful slowdown in the last month of the other like say in the past two or three weeks or.
First would be our first hustle first quarter of the reason why I'm asking this is comparing against some of our peers like Tia Yo their share of Stockholm guidance. It doesn't seem like slowing down as much of what the guidance I was just wondering whether this is the different this is because of the difference between the fiscal yearend I E.
Yeah Youll cuts of the guidance for the of February. We include March So just wanted to.
Double check whether it's nothing.
It just doesn't feel from it.
Ah Thanks, a lot of them so compared to tell all I'm really not in the position to do the comparison, because I I personally I'm not very sure about like the guidance behind all of our business because you Oh even.
Though we are all of you know of large class business. The other class scheduling can be different and the revenue attributed to a different segment income the difference.
So that's why it's really hard to say without knowing all the details behind the the guidance.
But the.
For us I mean, just compared to all of our business can we have a higher revenue growth rate I think the answer is yes, but the price of there'll be maybe in exchange for a larger scale of loss, but our operating philosophy. It's always weighted so it's all the effective growth and we need to make sure.
Sure the units of the unit economics are of the business model works in the L. T V sat at least the Alt TV side. So they really pay close attention to our data, especially all of our customer acquisition cost we need to make sure.
We are providing all of the bass.
Product to our student of at the same time and our business actually works. So so that may have different reasons behind all of the the top line girls and also when they could put comparator of topline girls I also.
Suggest you to take into consideration of the bottom lines see like the operating efficiency or maybe the the operating margin of liable to see how much was invested in how much of what's gained I think that's a more comprehensive picture.
Thank you I agree in the that's very very helpful. Thank you book now you follow a hold your point.
Are you seeing a little faster drop off or the slowdown in those matter of hustled the photo of purchases for stuff or you don't see much difference in terms of the growth building enrollment growth and et cetera.
Yeah.
Way day event.
Hmm.
Yeah, Yeah that that's actually a really good question and I think that's the.
The first to a bigger picture of the whole industry from our observation, we do see like the overlap ratio.
Between like the let's say the the parents sign up for multiple online learning platform like the ratio of keep rising so that makes the parents need longer time to make the decision, but I think of at least at this time, it's a really good thing after the rapid girls of for all of the top players in the industry.
It's really it comes to the I realize they need to be really focus all of our learning products and we care what they need to really care about the students that were they learn letter of the courses, we provided really help them and they can stay with us for a longer time and Oh, the fears that the compensation of I think the highest the rig.
Simon the what's made to the management team that handles such of a large organization at the same time, we need to keep.
Take the initiate aims to upgrade of our products in the long run I think it's a good thing and only the companies and companies with higher up the operating decisions because of their lives.
Thank you very helpful.
Thanks.
Our next question comes from Alex <unk> with Credit Suisse. Please go ahead.
Hi management, Thank you for taking my questions.
So I would like to ask a question from Chinese first and then I'll translate by myself.
She's going to associate what don't you what are you doing.
Great.
Sure sure.
Oh, you mean, the two that moved out of the journey of wouldn't you.
This is just the mature some just sort of say a true two homes.
The all I saw you saw the Chi.
We wanted some chunk of the Honeywell.
Sure well inside of that.
Maybe I'll just ask you kind of unusual.
Most of them pretty good news here total home Hitachi, if we're getting the kind of thought.
Oh the.
The other ones you don't hazards of showing what are you trying to think of a.
Charles which of your time doing some share.
Issue without foundation day, you'll do your own.
On the liquidity more liquid she won't.
The argument, we thought Oh, gosh I don't agree more.
During the two lost time due to.
Especially with the trade shows we are coming true.
Yeah. It was showing kind of thought all of them go there you go through each of them, which ones should we start to deal with what sort of Schneider.
Some of them.
The two children at.
The whole.
Bye bye.
From the schedule in the coming calls the Hanmi.
Children Youll share.
So the first my first question will be about.
How do you set your revenue growth targets, how do you balance the all of our efficiency versus the growth streak of market share.
What we thought the gap of trees or a member of the enrollments would widen the pizza.
Versus the peers and second question is about your of Phe would you. Please show us about.
About the size of the <unk> team and the highly we plan to.
Sometimes the one I'm also glad to see the upgrades of your of G&A to the.
So the second secondary instructor.
The program.
Please share a bit more about how do you help them upgrade in terms of quality and how do the measure of whether debt succeed. Thank you very much.
Uh-huh threat sort of woman there shortly sundar will be other sort of what you said you got the you feel much of your audio share, Michigan I'm sure you're going to each other sometimes a finding of onto our share now G. I L. T V's Shang the Liza, let them down a day.
Just a woman who depend on the tried yeah. So he is actually on things that kind of the job because of that.
You probably saw yesterday one of them if I can from what you saw in Tushar.
The other part knowing the jewelry, a Jewish zhengzhou under the telephone out jewelry true, Georgia didn't know how much you're doing out quicker the them down so a year one of your that you're trying to do what's in the the all I shall use of we more of not wanting to do women, which end up yeah sure sorry should be something that you don't want me to kind of of a day of the Guardian RDM yet in the shovel in the yes the old Orchard.
On top of what you say you are women the timber the Cui.
I'm not sure that through the Oh sure. So Josh I don't know, but I was just the not be debuted in the car you don't do them all of the Mayo shocks to the.
Just not sure when the silicon them. Another total Tom actually told the near about where you kind of find out what Chad I'll tell you that.
You can't share on the usual, it's one of your talk one of them as I already got even young women die of ship from all of our charter agreement from all of them and so that's what the actual cause for the all of the challenge.
The R&R I'm, yeah, there's a whole of tissues outside of if I'm not sure I know the woman said you need that.
It's already there with all of them and look at all of which are totally of young for cause in the push of a copy of it kingdom do cause in the sure nickel a food hall, one of the cool pool of industries.
The portion of them were down one day.
The neighborhood of number of them are you talking yoga.
Yeah.
So when we are a little walk beside of hub, how big the growth wave call. It should be there of the holiday indicator should always be effective book.
Oh, a K a the profitable growth based on lifetime value and the best pointless.
I feel quite of caveats Aqua calculation, if we cannot wishes. So we won't really we use debt sending all of these kind of who leads to a more sense of scientific growth.
We are also of calculating between all of our infusion from.
The the sale the balance between them and right now we are pretty satisfied with all of the status.
Okay. Okay of plenty of times of does that all.
Oh of $7 1 billion, but all of the net loss is less of what we're doing so.
If we compare all of the performance with some other quality sales according to some of that or think that.
So a lot of pools of spending $2 to debt $1 of any of that.
21 of them in terms of salaries in between the all along and the scale well being of really great job.
And the 'twenty 'twenty, one we are confident to do Oh of great job.
I always believe well we are doing the business. The core is not about competition, it's more about us.
The who is the.
Each of you all the Tesla real true well parent sooner instead.
Is that true.
Well help your employees to growth.
The army are in yen.
For the out of sort of be more all of that much of them.
Of that you'd go to shop with from John you wanted to do that off of the not sure why you guard we aren't used to do that most of which is.
You go put into a true me all of that drove him with hematology or of 'twenty.
The Governor of times will show you all of that shouldn't adjunct to each other or total.
So all of those the scale of plenty plenty of one for all of the $2.
As of now we fund too.
But we could always can follow the heaters.
The core of how we all allowing all of the two of those or we call. It in the second in sectors. There are two of course, especially how we can be we can find the recruiting modal of Oh.
Of the talent standard.
Secondly, we will expand of the team for all of a 7 million stuff. The office yeah. Thank you.
Yeah.
Thanks.
Thank you very much.
Our next question comes from Felix Liu with UBS. Please go ahead.
Hi, Good evening. Thank you very much for taking my question.
Mentioned about the you know the.
Slide 21 sales will be healthier.
The only I'd just say you know they've got a little bit into the details I know two of the GP margin in the fourth quarter decline of two young Kyo and you mentioned that teacher salary compensation increase was the reason I think definitely that is the right thing to do the how should we think about the GP margin trend.
The going forward in the next few quarters.
And the bad debt the increase in teaching system accounts.
Noting that the it should be rather to be less.
That you are running as well.
I mean, you know we could potentially see a higher teachers teach me at the same utilization of better GP margin.
And also of almost all of the marketing side.
Really happy to hear that E y.
You're spending less all sorts of media. So how should we think about the sales and marketing spending a trend going forward in the next fiscal year and FY 2021 thank you.
Oh, Thanks, I felt like.
In this quarter of three main factors are collectively led to our Laura a little of a cost probably imagine.
First of floor of the autumn semester of courses we offer of our students.
Second round of the all short term courses, we caught a true shack push all that started in November and that of course is has the lower E. S. P and the shorter term and also had the smaller class size, which all led to although the level of gross profit margin.
And the second reason is that as of we communicated before we position our tutors actually as a secondary structures for their ex out all of the array of services to our students so to better improve our students and employees satisfaction and to further return anti bot the bounds of our teachers.
Our patents they do believe that a good teacher needs time to grow so we need to be when a patient and we continue to increase our compensation to our tutors in the fourth quarter. So we believe our commitment to our secondary in sectors will translate into stronger organizational capability and future of business.
And like you just mentioned, we definitely think of it is just the right thing to do and the last the reason was we have taken the initiate he was to further the quake our students to tutor ratio with the aim to provide more of personalize the services to better serve our students for instance.
The primary school the sector with that day to provide it wasn't worth it six of three of course, a small task of children in his section that the tutor can actually see the faces of all the children and they can have a lot of the interaction before the.
The the formal session starts and we received positive feedbacks from our primary school students and parents.
And also for our Middle School and high school they provide it wasn't worth it certain of Chili's section after the classic the or and that's how we can group of people in different locations that provide the more localized and spirit of vacation a level of different specification level all of our Q&A session to our students.
All of these on these more time and more Canadians from our tutors and that's why we lowered the students and tutor ratio. So moving forward to 'twenty 'twenty, one I always think of our gross profit margin should be stable at around <unk> 70 per cent from the whole year perspective out of the all of the.
And that has been made and steel compared to offline business model. All of this gross margin will still be higher if.
If we just exclude the rental house than it was at the June two.
To to be from profitable and also.
The idea of structure for all of the P&L should be like we have a lower level of G. P. Madden and at the same time, they have a lower level of sales and marketing because really for the education company people should be the most of the available at that.
And regarding our sales and marketing expenses.
So.
Well for us because we see like in 2020 one other typical level, maybe all of it had to acquire traffic you know some public all open social media platforms and that's why we started to explore new Oh wait till ways to acquire new customers and that the only thing and I think the only.
That will lower our customer acquisition cost the all sexually so but as they try to it's just too early and I like I just said.
Just change politically in the industry, we may had a better position all talking about the whole years of sales and marketing budget, maybe when they plan.
Have a more I'll clarify of the plan for our summer campaign, and probably we can talk about that topic of side of that time, that's the like.
Okay got it very helpful. Thank you very much.
Yeah.
Sure.
This concludes our question and answer session.
I would like to turn the conference back over to MS. Sandy Chen for any closing remarks.
Okay. Thank you operator, and thank you everyone for joining the call today you have any set of questions. Please don't hesitate to contact the company or contact us via email at the Fisher.
The dot Com does absolutely feel free to subscribe to all the news alerts on.
The company I all of that's fine. Thank you very much.
Yeah.
Okay.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
Yeah.