Q4 2020 17 Education & Technology Group Inc Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to the 17 education and Technology group incorporated fourth quarter and fiscal year 'twenty 'twenty earnings Conference call. At this time all participants are in a listen only mode there'll be a presentation followed by a question and answer session.
At which time, if you wish to ask a question you will need to press star one on your telephone must advise you that this conference is being recorded today Tuesday didn't off of March 2021, I would now like to hand, the conference over to your first speaker today, Mr. Raymond Huang <unk> Investor Relations director of the company. Please go ahead.
Thank you operator, Hello, everyone and thank you for joining us today.
17 AD Tech earnings release, what's the truth.
Earlier today and is available on the company's IR website on the call with me today are Mr. Andy Each hotmail, founder Chairman and Chief Executive Officer.
Attack as Mr. Michael Chow tool.
The Chief Financial Officer, offset the AD Tech Andy will walk you through our latest business from a premise and strategies followed by Michael who will discuss our financial performance and guidance. They will be available to answer your questions. During the Q&A session. After their prepared remarks.
Before we begin I'd like to remind you that this conference call contains forward looking statements.
The infection 20 E.
The Securities Exchange Act up 19 to 34 and the U S. Private Securities Litigation Reform Act up 1995. This forward looking statements are based on management's current view currently back patients and current market.
Operating conditions and relate to events that involve known or unknown risks uncertainties and other factors all of which are difficult to predict and many of which are beyond the company's control.
These risks may cause the company's actual results performance or achievements to differ materially from.
Information regarding this and other risks uncertainties or factors is included in the company's filings with the SEC.
The company does not undertake any obligation to update update any forward looking statement as a result of new information future events or otherwise except as required under applicable law. It is now my pleasure to introduce our chairman and Chief Executive Officer. Andy. Please go ahead.
Thank you Robin Hello, everyone. Thank you all for joining us for our earning Corey. This is our first call as a public company since we successfully listed on NASDAQ early day.
<unk> 2020.
We are grateful for the support from the Investor community and we believe our IPO helped further strengthen our brand image among current <unk>.
<unk> and public school teachers, as well as help us attract more a great talent to join our team.
Please allow me to start with so very quick background for those who might be new to our story.
We have successfully.
Differentially either in school plus off the SKU integrated model that coherently brings together, our smart <unk> classroom solutions and online after school tutoring operations.
Our smart <unk> classroom solutions operation started in 2011, and the price school teachers was industry, leading tools and content libraries in a wide range of inks through teaching and learning scenarios, including class preparation class delivery.
Our assignment and grading and economic assessments.
To allow a smoother and more efficient data driven tech teaching learning and tracking experience for teachers and students at over 70000, K 12 schools across China.
We are now the largest martinsville classroom solution provider in China in terms of Miami you.
There are in Scoop plus after school remodel. We also offer unlikely 12 large class after school tutoring services that complement students in school learning leveraging our insights into students' localized education needs and personal learning profile came from our <unk> operations.
By our integrated model and technology are unlikely to our large class after school tutoring courses stand out in terms of unique approach to personalization based on what data driven understanding of individual students in school performance as well as our district level localize the insights.
Our business continues to grow rapidly in 2020.
In 2020, our net revenues grew by 217% to RMB, one <unk> billion from 27 2019, our cross billings from our online K 12 tutoring services were <unk>.
Approximately RMB 165 billion up 203%.
And our paid course, Enrolments reached 2.02 million up 178%.
We are committed to our differentiated <unk> plus after school integrated model in this highly competitive market.
After multiple years from investment our in school products now connected month of teachers students and parents and are used at schools across over 360 cities across China.
Through more than debt.
722 <unk>.
<unk> billing of homework assignments students completed on our platform, we're gaining insights into students' learning progress, which help us pinpoint the threats and the weakness of interest individual students teachers students and parents interact actively around the apps across whereas learning and teaching scenario.
Such as Palmer and academic assessment.
All of this makes it possible for us to deliver teaching and services with a higher level of personalization in the after school tutoring market.
In the fourth quarter of 2020.
Average Mou of inks grew application flow students were approximately 29, representing a year over year increase of 28% approximately $60 million in the fourth quarter of 2019.
2021 spring semester has also recently started and we are happy to see continuous growth in the use of our in school applications among teachers and students in terms of day to you in the first week of the semester as compared with the first week of both master of 2020.
The long term trend of info monetization with entitled Public Education system presents tremendous growth opportunities government policy has also being supportive things technology will allow students in smaller cities to have a better chance than ever to access the same high quality teaching opportunity the stats and kunal have otherwise.
Only being enjoyed by kids living in large cities.
In April 2018, the Ministry of Education issued the education implementation two points of your action plan and in February 2019, The State Council issued China's education modernization 2035, emphasizing the position and real application implementation.
In the process of promoting application modernization.
Just recently from January 'twenty, eight 2021.
Opinions of the Ministry of Education, and other departments on strengthening the construction and application of online education and teaching resources for primary and secondary schools were released it released.
We believe education, if amortization will provide few room for our <unk> operations to grow in the years ahead.
We have continued to investing smartly in school solutions in terms of products content services and SKU coverage.
Standing of students learning profile continued to improve as the use of apps in the inks scenarios.
At the same time help us improve the quality of our after school tutoring business and services to better address their own learning needs.
See great synergies and further potentials between our in school and office group business, and helping us provide products and services that address the needs of our users and customers.
I'm Gonna do our integrated model, we have achieved the rapid growth in our after school tutoring business leveraging the advantages of our proprietary user race localized content and data insights into students' learning from our <unk> business.
Our paid course enrollments increased by 106% to 5% year over year to 849000 in the fourth quarter of 2020, and our annual total paid course enrollments.
<unk> reached 2.0 to both Millen.
The integrated model allows us to grow rapidly without relying on massive spending on external traffic acquisition. This allowed us to enjoy healthy new customer acquisition costs and a more attractive unit economics, we continue to maintain low and relatively stable new customer acquisition cost.
In this highly competitive market.
Given our differentiated customer acquisition approach and high entry barrier in the inks grew industry, our new customer acquisition costs are also less susceptible to industry competition and cost increases.
Our new customer see AC has demonstrated strong stability over the past few quarters, including this last winter.
Achieving increasing high number of new paid course enrollments conversion such advantage in customer acquisition cost has allowed us to achieve better unit economics and healthier growth.
We plan to continue to grow our online large class K 12 after school tutoring business relying on our proprietary user base on our integrated model. We are confident that this unique integrated model allows us to grow and compete effectively and efficiently in the market.
Another benefit of our integrated model is the insights we gain into student's personal learning needs and our understanding of the local teaching and assessment emphasis.
My team and I spend a significant time in reaching out to our customers to better understand their education needs.
Together with our feedback and our understanding of the <unk> atomic profiles, we have invested in our proprietary teaching assistant system per chip barring.
Barring the name of from Asian, Chinese Doctor, we can who can diagnose diseases from limited symptoms.
This system allows us to better integrate the insights we gain from our <unk> operations with our after school tutoring business.
<unk> basis to achieve higher level of personalization. We have noted that the renewal rates of students who are helped by such system tend to have renewal rates of up to high single digits higher than.
Those who are in school learning data are not yet available to us.
We see huge potential in our integrated model not only because it allows us to achieve healthy customer acquisition in this market. So that more resources can be invested into improving our products and services, but also because we believe it has its unique value in evaluating teaching and learning efficiencies and effectiveness.
This both in school and after school to a new hate that will create more value for our users and customers.
Now I will turn the call over to Michael our CFO to walk you through our latest financial performance. Thank you.
Thanks, Andy and thank you everyone for joining our call I will now walk you through our financial non operating results.
Please note that all financial data I talked about will be presented in RMB terms.
I am pleased to report our strong results for the fourth quarter and for the full year 'twenty.
We achieved strong top line growth net revenues increased by 153% year over year to RMB 487 million in the fourth quarter of 2020 and increased by $218 6%.
<unk>, one <unk> $1294 4 million in 2020.
Net revenues from online K 12, tutoring services increased by 164% to RMB 468 million in the fourth quarter of 2020 and increased by 239% to RMB 1200, 19 million income in 'twenty.
Gross billings of online K 12, tutoring services, which is a non-GAAP measure increased by 166% year over year to RMB 517, 9 billion in the fourth quarter of 2020 and increased by 203% year over year to 1650.
$5 million.
For the full year.
Cost enrollments increased by 165% year over year to 849000 in the fourth quarter of 2020 and increased by 178% year over year.
<unk> $2.0 million to $2 million.
In addition to a robust revenue growth our operational efficiency continued to improve in the fourth quarter and the year of 2020.
Our gross margin was 64 three in the fourth quarter of 2020, improving from 660 62, 9% in the fourth quarter of 2019.
It was also six one.
161, 7% for the full year 2020, compared with 57, 3% in 2019.
Our adjusted net loss also on a non-GAAP measure, which excludes share based compensation expenses.
<unk> was RMB 130.
$4 6 million loss in the fourth quarter of 2020.
A decrease from RMB $163 million in the fourth quarter of 2019.
For the full year 2020.
Our adjusted net loss was RMB 984 million compared with RMB 871.002 million 19 in.
In terms of adjusted net loss as a percentage of net revenue.
It was negative 27, 7% in the fourth quarter of 2020 significantly narrowed from negative 84, 8% in the fourth quarter October 19 for.
For the full year 2020.
Our adjusted net loss as a percentage of net revenues was negative 76%.
Significantly decrease from the negative 214% in 2019.
We're happy to share that operating cash flow has also turned positive in the first in the fourth quarter uptime 'twenty.
Our business model it has strong operational leverage.
Our differentiated integrated model allows us to grow at relatively attractive and stable customer acquisition costs.
As our net revenue growth from online K 12, tutoring businesses will be much faster.
The increase in costs and expenses associated with our <unk> operations.
Our operating leverage continues to increase as we grow our larger revenue base allows us to better observe the sales and marketing R&D and G&A expenses associated with our <unk> operations.
And thus allow continuous improvements in our operational efficiency.
Next I would like to go through our fourth quarter financials in greater details.
Our net revenues for the fourth quarters of 2020 was RMB $487 million, representing a year over year increase of 153% from RMB $192 million in the fourth quarter of 2019.
The increase was primarily driven by increasing net revenues from our online K 12 tutoring businesses.
Our net revenues from online K 12 tutoring businesses.
406, 8 million up 106, 4% year over year from $177 million in the fourth quarter of 2019 and accounted for 96% of our total revenues. The increase was primarily driven by increasing paid cost improvements and increase in our medium levels of our coffee.
Yes.
Our paid course enrollments for fourth quarter total 28.
<unk> hundred 49000, representing an increase of 165% year over year from approximately 320000 in the fourth quarter of 2019.
Our cost per revenue for the fourth quarter total <unk> was 174 million RMB, representing an increase of 144% year over year.
Primarily due to the increase in compensation cost per instructors and tutors and teaching materials, which were largely in line with the revenue growth.
Our gross profit for the fourth quarter was RMB $313 million, representing a year over year increase of 159%.
The increase was primarily driven by increasing net revenues.
We also see growth our gross margin improving to.
To 64, 3%.
From 62, 9% in first quarter last year.
The increase was primarily attributed to attributable to the growth of the business operation scale as well as improvements in our operational efficiency.
Our average <unk> use of <unk> applications, where students for the fourth quarter in 2020 was $20 4 million, representing a year over year increase of 28% from around $16 million in the fourth quarter of 2019.
Moving to the expense side.
Our total expense operating expenses.
Were RMB 676 million.
This includes $230 million of share based compensation expenses.
Our total operating expenses as a percentage of net revenues.
Kris.
39% from 157% in the fourth quarter of total to 19.
Our selling and marketing expenses for the fourth quarter Acto from <unk>.
RMB $247 million.
This includes $23 4 million of share based compensation expenses.
This represents.
An increase of 74, 5%.
From RMB 142 million in the fourth quarter total 19, the increase was significantly slower than our revenue growth. This was primarily due to an increasing.
Our operational efficiency as well as.
Our payments into the salary and welfare for sales and marketing personnel.
Branding related expenses as well as promotional cost expenses as we have enhanced our sales and marketing efforts to prepare our growth.
We have seen similar trends in our R&D expenses, which were RMB 192 million, representing an year over year growth of 49%.
The increase was primarily due to continuous investments in time, Inc.
Including salaries and welfare for R&D personnel.
G&A expenses were RMB $237 million.
Which also includes.
Share based compensation expenses of RMB $176 million.
The share based compensation was primarily due to an increase.
<unk>.
Share based compensation that related to IPO.
Our net loss on a GAAP basis was RMB 365 million compared with RMB 117, 8 million in last quarter, but our non-GAAP adjusted basis, which excludes share based compensation.
Our adjusted net loss narrowing to RMB $135 million.
Which was negative 27, 7% of our net revenues in the first in the fourth quarter of <unk> compared to a negative 84, 8%.
In the fourth quarter 2019.
As of December 31 trial.
Trial <unk>.
Audit and restricted cash of.
Around RMB, <unk> 2 million, our cash and cash equivalents were RMB two 8 billion.
Compared to was RMB 654 million as of December 31, and 2019.
And finally, our deferred revenue was RMB $598 million up 145% year over year.
This was primarily attribute to our rapid growth in our obstacle to trim businesses.
We generally collect cost feeding our bonds, which we initially recorded as deferred revenues.
We believe our deferred revenue give us greater visibility.
Coming quarters performance.
With that.
I will now provide our views on our business outlook.
Based on our current asked me.
Total revenues for the first quarter of total 21 are expected to be between $458 million and $417 million, representing an year over year increase of around 100 to 105, 2%.
These estimates are.
Present, now represent our current and preliminary review, which is subject to potential change.
Although due to enacted accretion of <unk> preferred shares.
Pure accounting treatment, we have actually.
<unk> net income available to ordinary shareholders of RMB $552 6 million in the fourth quarter of 2020.
We do not expect this to continue as this is one off events.
<unk>.
We will continue to balance that growth rate and profitability we believe.
At this stage continuous investment into our business growth is more important for the company.
To conclude I would like to remind everyone.
About the seasonality within our businesses.
The fourth quarter tends to be a quarter was relatively higher margins, we typically have higher revenue and lower selling and marketing expenses in the second and fourth quarters of the year and thus higher profitability.
Sure.
And also relatively lower quarter to quarter revenue growth.
It will be seen in the first and third quarters.
But together with higher selling and marketing expenses.
A majority of the conversion and promotion expenses activities take place in winter and summer vacations.
Therefore for the first and third quarters tend to have to experience that small losses.
This is primarily a result of first we primarily rely on our proprietary user base for our trial enrollment.
Therefore, the biggest chunk of our selling and marketing expenses are actually related to providing the services for potential students instead of paying to external parties for them to obtain our child causes that's why the substantial portion of our trial cost service fee takes place in the first quarter.
On a similar reason, we typically see more material increases in paid course enrollments after the winter and summer vacations.
And which have more rapid when you uplift in the second net fourth quarters.
Quarter over quarter basis.
Similarly, our selling and marketing expenses in second and fourth quarters tends to be lower than the first and third quarter.
This fluctuation is further amplified by the fact that we don't incur a larger amount of online external traffic acquisition expenses.
As common in the industry.
That's why relative to compared to our peers, we might be seeing a slightly stronger seasonality fluctuation between different quarters.
We do expect us to reach breakeven or profitability in the second or the fourth quarter's easier at earlier when compared with the first or third quarters.
On a full year basis.
However, if reaching profitability in certain quarter, especially in the second and the fourth quarter doesn't automatically guaranteed a next quarter to be profitable due to the seasonality reasons I mentioned above that's why we intend to review our performance and operational efficiency on a semi annual basis to gain a more complete view.
With that it concludes our prepared remarks.
Operator, we're now ready to begin the Q&A sessions. Thank.
Thank you ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question. Please press star one on your telephone and might be needed to be announced if you wish to cancel your request. Please press the pound or <unk>. Once again it is star one and wait for your next to me now thank you.
Our first telephone question comes from Sheng Zhong from Morgan Stanley. Please ask your question Chen.
Good morning, Thank you very much for taking my question.
First question is on your net quarterly revenue guidance, how much impact do you see sound and Chinese new year and can.
Can you also provide guidance.
Yes.
And second question is.
All day recommendation.
Thank you gentlemen.
Electronic homework, and especially for Openreach school students.
That does.
Now with the homework to be done each day.
This will impact the <unk>.
With business.
<unk> growth and debt do you have that.
And to do more channel.
An acquisition.
There is impact from that.
Thank you very much.
Thanks, Jonathan.
Our assets, our first questions and then our path to Andy for for the second question.
So I have questions on that quarter's revenue guidance, how much of it was affected by a late Chinese.
Chinese new year's is actual indeed.
<unk>, we actually have.
Already complete our wind tech conversion cycle line, and we do see strong growth during that period.
However, as the Chinese new year is actually relatively late so actually.
For the spring of revenues actually it has one whole week last time revenue that is being recognized in the first quarters.
On line.
Our initial.
As he mentioned it probably we actually.
Decrease their overall revenue by around 10% assuming.
All cycles with similar.
As previous year.
In terms of annual revenue guidance, we actually do not provide revenue guidance for the full year.
With that our path to Andy for the second questions.
I will speak Chinese and Michael will translate into English.
Some collateral.
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Tell me what else Judy tickets for the game.
Even considering the regulation environment than we have seen we are still very confident in our overall annual growth in terms of revenues, especially we are confident that we are able to achieve that without relying on external traffic acquisition. So it's <unk>.
Total enrollments are smart.
Total classroom solution and the job of the actual material pay down debt.
In the challenging Natasha yugo from cutting the particularly challenging which I'll get to you. What you already have Natasha <unk> Hana should create day jockeying between war PC, but from what ipads line come through yet you agents around non interest to their usual detour you total eating the Tianjin.
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Some of it actually went up in total Glenn that Google went up non multimedia and I'm sure you don't create the woman who rely on them will garner. So you can tell me EBITDA under.
Hugo.
Jen <unk> can you push harder on Covid hold this margin.
Ah.
Then I will further elaborate on the reasons behind that so.
Firstly in terms of the hour hour and school ecosystem essentially is not only a homework actually in cruise cost preparation cost delivery homework homework assignments as well as a dam assessments, which is a comprehensive multiple scenarios interacting with the teachers students and parents.
Secondly.
Even in terms of homeward it can be completed by students in multiple types of devices, including Pcs.
Pat.
And including mobile phones in the home.
Also in terms of completing homework and homes.
On different on different multiple devices it was actually activities.
Controlled by the parents and students themselves. So we don't see much impact on that and also the philosophy I think so.
Starting from last years, we actually have been.
Exploring private domains, where we are able to backup.
And duplicate reached to parents and to Harris students.
All of our various social networks, which further allow us to be less impact in terms of the apps yourself from June.
The current once you had a question on few women, particularly around wage integral models selling each other ideas with emotional should you go on day, one yesterday and kind of what youre seeing away from other <unk> book Anita you May just really eager to hear from which all your boom you'll.
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But you would take a share in usage a day that we will continue to fee income.
Sure. So we have done on the treaty that took from damage at all to your choices and a day.
Note that our current team, which is non gold Eagle members, who don't win <unk> quarter. It won't borgata pulpwood by that with all kind of illegal debt. So you were kind of I mean, the PMI by debt with.
Gotcha.
Obviously as you watch EBITDA Vittorio dishwasher.
Hello.
So therefore, those in terms of near term and longer term.
All of our integrated model, we are fairly confident because we believe if you look at things.
Three of five years or even longer cycle or longer horizons. The ink from occasion from monetization and the modernization of China's education system and irreversible.
This is actually the only way to achieve or to improve education and quality.
<unk>.
In China.
So we are very confident as long as we can provide high values.
To the teachers students and parents in cost per formations deliveries homework assessments various learning and teaching scenarios. We are confident this is a model that has a long process prosperities.
If some of you might be interest.
You are encouraged you to actually see the Fourteens five year plans.
Interpretation and discussion about in from my taxation of China's education over the next few years, we see very strong needs and willingness to per pad. This from China's government.
Total.
Okay.
Thank you. Thank you very much Andy and Michael Maths on that debt.
<unk> outlook for next year.
Yes.
Thanks, so much.
<unk>.
We don't actually provide say outlook for a particular, one year or so but I think despite the policy environment, we're still confident that.
<unk> apps and is likely to double over the next two to three years horizon.
Thank you.
Consider total PV plus <unk>.
And bush unusual from that you alluded to the USW.
Yes.
But when we have other Microsoft got other London.
Just to supplement our remarks and the added so probably it might be.
To be more accurate and will be unique ids, both in terms of apps as well as potentially the PC audit other other formats.
Our next telephone question in queue is from Lucy Yu from both the Securities. Please ask your question. Please.
Thank you Thomas Thank you Michael.
So I have two questions here. One is also on the policy side, but more on the book to touring so we have seen a couple of months.
Acquiring or instructions to have the teacher qualification. So may I know that how many of your current instructors watches your line now.
Out the qualification at the moment.
If they don't have the qualification does that mean that they cannot teach deposits what upcoming semester.
And also how should we think about the competition.
After school.
Going forward. So that's question number one.
Number two is.
We elaborate a bit more about our winter promotion strategy.
I have seen that the conversion rates from each school to after school went up quite nicely in the fourth quarter of last year.
With <unk> being largely flattish Q on Q.
But the it paid enrollment actually such a not so how should we think about the conversion rate from <unk> to <unk> <unk> 2021. Thank you.
Thanks, Alethia, let me quickly translate the questions to anything.
So basically in terms of an instructor qualifications.
As I recall, we have more than around two thirds operating structure is actually a properly qualified or have already.
Only around 10% of them have passed all the tests, but not yet got debt qualifications, yet we don't see this have a major impact on us as the vast majority of the revenues generated from instructors.
With those with qualifications and we actually among the debt.
The leading players with a higher percentage of teachers are instructed having such qualification.
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On Europe.
Second question.
In terms of Op school tutoring.
Competition in our how we can how we see our.
Fourth quarter pay close enrolment.
I think the first quarter paid course enrollments.
The combination of our improvements in terms of the students we can.
Convert from our <unk> traffic as well as you know.
The student existing students renew their close in signing up.
Cause if thats why you can see the number or keep increasing in the fourth quarter.
In terms of our winter strategies are actually out our expectation for total <unk> as you know the winter conversion season actually has already completed.
Have some preliminary statistics from that and we see them very promising and we're happy to see the trend.
In summary, we see.
Firstly in terms of the number of full price students that got converted from our winter actually has increased significantly which has actually more than double the same number of last winter.
In terms of.
Unit customer acquisition expenses. It's also remain highly stable I think it only increased by around 10% compared to the last conversion cycle, which is significantly slower than industry increase. We believe this is a significant benefits and ash of our AMT.
Tech Remodels.
That's why with as you mentioned earlier.
The Pecos enrollment that took place in the fourth quarter and also what we have seen a net winter cycle, we actually see us approaching.
What we believe is a major milestones.
Our business, where the number of concurrent students getting very close to two 1 million enrollments after the after the winter cycle.
So for 2021.
I think we are.
Andy has mentioned earlier, we are very confident to to continuously grow in these sectors. Despite the competition and we are confident delivering very strong overall year.
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We didn't forget how many according to this markup angle voucher and you've got some collateral portfolio going up to shingle more sooner so that at zero.
So.
The numbers that we have seen in the fourth quarter and also the initial statistics, we've seen on the winter wear.
Very stable CSC upfront, along with increasing of around 10% and also the number of students getting converted.
Actually doubling where we've seen the last winter of 2019 as we're also the hour over obstacle to champions approaching a skew very close to $1 million.
Current number concurrent.
Full price students enrollments.
It is actually.
<unk> be high as a result the law.
Long term advantage of our inherent advantage our integra models. So over the last few years, our accumulations of presence in ink SKU scenarios of more than 17000 schools as actually as a long term.
Trends in the benefit that we actually gradually play out from the next few quarters and years.
We are confident that we actually.
We will be growing on a very healthy unit customer acquisition expenses in a relatively solid growth rates without relying on external traffic.
Thank you so much from Michael Thank you.
Okay.
Once again, ladies and gentlemen, if you wish to ask a question. It is star one.
Our next telephone question is from Sheng Zhong from Morgan Stanley. Please ask your question.
Yes.
Hello Shing. Your line is open to ask question. Please ask.
Okay, asking my questions already but if I may.
Yes.
One question and one more question since you mention day, our retention, reaching net lease.
Joe.
Infinite. So do you can you tell us on this perspective.
Our retention rates for the student.
Yes.
Almost record and compared with a normal line. Thank you.
Hello, and thank you most English O'connor requesting a deferral of Indonesia, Hong EBITDA guidance.
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Yes.
Let me projects translate so.
As we have shared earlier and also some other investor has been communicating with us.
We do experience a customer acquisition expenses that is significant kind of lower than industry average and also at a similar retention rates among the leading players. Therefore, we have and we enjoy a significantly better unit economics with a much higher LTV per se CIC structures.
But we also want to share that we do see stronger potentials of our renewal rates between <unk> and.
As we share earlier that we have built a b interest system were utilized in school students, who learning and localized learning data and information together with our after school tutoring services. We believe vast majority of our potential students. Our current students I actually want to improve their grades in their in school learning scenarios.
That's why our in school learning scenarios, where we accumulate a lot of data in tons.
That make assessments homework d'etats, what's the student and the stakes and whats. The locally exact focuses such insights allows us to be much more efficient in terms of helping our students improve.
They're learning results and to be more targeted so.
I know people might be more.
Ah.
This might be more obvious to people where.
The integral model allows us to enjoy a significantly lower customer acquisition expenses.
In our mind, once even more valuable and especially with more valuable in the longer term and that the localized content and data that it provides to allow us to actually providing a stronger and more efficient and effective after school tutoring and learning.
Products to the students.
Our next telephone question is from Christine Cho from Goldman Sachs. Please ask your question.
Oh. Thank you so much for other comprehensive update Andy and Michael I'll just add.
I think <unk>.
Sir do you notice a lot more of your competitors is actually starting to talk about the competition as well as potentially.
Yes.
Exploring offline.
From channels can you highlight any product or R&D from some developments on that side over the last few months that you can highlight.
Okay. Thank you.
Sure.
Yes.
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<unk> EBITDA guidance.
Other eagle quarters of Illinois other server.
Okay.
Let me translate what Andy has been shared earlier so the question was about.
More and more players are talking about localization as well as trying to acquire students from offline channels and what was our investments, especially in R&D and products in this aspect so.
I think there's actually has.
And as well a trend where we have pioneered.
People.
If you remember remembers that even doing in last years.
Mass meetings Roadshows, we have already mentioned that we have already become.
Leading among the leading players has the most number of localized tax provisions in terms after school tutoring courses as well as multiple.
Levels of difficulties for all my large classes.
And this is what we have always been.
Focus about two so that we can provide more targeted services.
However, what we believe having multiple localized cost pressures and multiple difficulties actual only the first steps.
Has some value to the parents, but may not be as great.
From parents perspective, they don't really know about look they don't really look see localized versions, what they really needs us.
To have courses and services thats more targeted to helping them in solving the problems that they have seen from <unk> school and to help them per GAAP assets per pad to face exams with index scores.
And this to our perspective to the level of data of the <unk>.
Highest value differentiate our school level once or district level exam focuses teaching focuses and what's more likely to be tested.
And secondly, our individual level, so what the person's own learning problem is what's his strengths and weaknesses. How you can be more targeted to providing our tutoring services.
And this too is actually what we have particularly strong.
With our integrity model.
To share with a number more than 10 million students actually have took our academic assessments in 2020.
This is consistent with the trend where the Chinese governments and trying to you to use progress data instead of one off final exams to evaluate how students are learning.
This is a product and services, whereas highly demanding in terms of dosing in terms of technology.
As well as expertise accumulation over the last few years such.
Large number of students attending.
Dennis estimates our platform more than 10 million of them actually give us significant knowledge advantage in terms.
What the SKU is unlikely to tapped.
Whats exempt focuses all such information, we actually be imported into our interest system. This system will be used by our two test so that they can be providing when they provide services to our students that can be more targeting and organize more.
More tutoring sessions to talk about more localized SKU base and individual based.
Questions in complementing to the overarching relatively general launch causes.
In terms of the offline customer positions.
We do see this trend.
Fairly early as we've shared earlier, we believe all the players will be actually having a matrix of customer acquisition trends.
Channels, both online and offline as the customer acquisition expenses.
Social platform are becoming increasing and increasingly more expensive.
However in terms of when you look at offline.
We can still refer to.
Dissecting two multiple.
Segments.
You can first is offline, but still outside of schools. This is not difficult and doesn't have much batteries and all and Thats has.
All the English offline as she has been doing over the last series, but the difficulty is that it's more difficult to scale.
It's not as scalable you can do that you have lower customer acquisition expenses.
Yeah.
It will be difficult for our players to build to such an offline.
Structures within short times, a day it can provide major growth.
Secondly, as does that involve any SKU scenarios, even within the Ensco scenarios you have multiple.
Bruce Pat's first is product driven.
In school.
Systems similar to us this requires a much longer multiple years of investments both in terms of products contents.
<unk> and our relationship build up within our schools.
Students.
This one will be Lee will we believe will be very difficult for others to replicate and build up in a short time.
Others, what we have seen is more trying to do more efficient in terms of.
Timing and one off approach such as holding seminars.
<unk>. This is similar to those that took place in ops and outsized schools. This is also something were offline.
Institutions has been using for multiple years. It has some advantage in terms of costs, but more difficult to scale up.
We'll match.
<unk>.
Our next telephone question is from medical margin from Fremont capital. Please ask your question Mike.
Thanks, a lot book.
In fact under the guidance.
Just have one question index around.
Drink so how should we think about the other selling price.
Good thing.
Going forward then.
You can share on.
How it has been trending as per your expectation.
So.
So you take off from here in Nevada, where the 100 and if you want to.
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Yeah, and John legal opinion, and how you think.
Okay.
We can do that you don't share VITAS, essentially and visa will now Pasha dollar total census, yet tissue you had targeted three duolingo channel.
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So you got you should as much up noma vehicles from a realized I mean, what do you mean from.
European Union DSP <unk> back from the shoe Xiaomi, but viewpoint.
So so.
Let me share my view of yourself.
In terms of Asps.
I believe it's very likely that the average.
Our average basis.
It's likely to grow at around 15% annual growth over the next few years.
The reasons behind that is that if you look at average.
<unk> online large classes, it's around 3000 RMB for the whole year.
This is a price even highly acceptable when uncomfortable for students in tier three and tier four cities.
This would account for a round up to 10% of their annual income even in tier three and tier four cities.
We have also conduct several surveys we believe this is.
A fairly comfortable levels, where they can take accept second and in terms of the emphasis and focus on education as whole and driven by the continuous product improvements of the industries.
Indeed, the online large classes actually bringing.
Better than <unk>.
Attractive instructors.
Two lower tier cities.
So that will be we believe it will actually drive continuous demands.
Ah from even lower tier cities.
Also as.
For online launch causes an alternative to other formats.
Also have significant price advantage compared to multiple other other.
So even with 15% annual price increase over say two next two to three as price were still remain competitive.
Okay.
There are no more further questions at this time I would like to hand, the call back to the speakers for closing remarks. Please continue.
Thank you operator in closing on behalf of <unk>.
<unk> team, we'd like to thank you for your participation on today's call. If you require any further information feel free to reach out to us directly. Thank you for joining US today. This concludes the call.
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Ladies and gentlemen, thank you for standing by and welcome to the 17 Education and Technology Group incorporated fourth quarter and fiscal year 2020 earnings Conference call.
At this time all participants are in a listen only.