Q4 2020 Rise Education Cayman Ltd Earnings Call
[music].
Ladies and gentlemen, thank you for standing by and welcome to rise education fourth quarter.
'twenty 'twenty earnings conference call at this time, all participants over in the listen only mode. There will be a presentation followed by a question and answer session a day.
Each time, if you wish to ask a question you will need to pass a star and one on your telephone please.
Be advised that today's conference is being recorded.
I'd like to hand, the conference over to your first speaker today, Mr. Aaron Li. Thank you. Please go ahead.
Thank you operator.
Hello, everyone and welcome to rise education fourth quarter and full year 2020 earnings conference call.
Today, you will hear for me Lee <unk> chairwoman and CEO at least for a war room CFO.
The whole milk over recent business update operation under the company's long term strategy.
What really will go over the financial results for the quarter.
Both will be available to take your questions in the Q&A session that follows.
Before we proceed I would like to remind you that today's discussion may contain certain forward looking statements made under the safe Harbor provision of the U S. Private Security Litigation Reform Act of net 95.
The forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations.
To understand the factors that you could call for it.
Sales to materially differ from those in the forward looking statements. Please refer to our form 20-F filed with SEC free on April 17 2020.
We do not assume any obligation to update any forward looking statements, except as required under applicable law.
Throughout today's call the hole and Warren will be referring to the earnings presentation that has been uploaded to our IR website as a supplement to today's call.
Now I'd like to turn the call over to legal day. One. Please go ahead.
Thanks, <unk> and Hello, everyone. Thank you for joining our earnings call. Today, we're very pleased to see solid improvement continued this quarter, our financial and operational performance.
For Q4, 2020, which at the high end of our guidance, both adjusted EBITDA and net income before a goodwill write down increased substantially.
2020 was an unprecedented year of challenges they make the COVID-19, pandemic, which affected that China's education industry and our company.
We took immediate action in the onset of the pandemic to stabilize the business with the quick deployment of our online merge offline or O M O strategy and gradually recover as the business with various initiatives to develop a unique and strong multi disciplinary capability based.
<unk> platform.
As the pandemic containment Gratulate returned life to normalcy in China, almost all of our offline learning centers resumed normal operations in the fourth quarter.
Following the reopening of our self owned learning centers in Beijing by the end of September 2020, our business essentially recovered during the fourth quarter with significant improvement on both operational and financial side. During this quarter, new student enrollments increased on a year yearly basis for both.
Its rise regular courses and other Cortez total revenue reached the high end of our guidance and adjusted EBITDA was close to the level compared with the fourth quarter of 2019.
This encouraging without not only demonstrated the effectiveness of our strategy to navigate this new economic environment and contain the impact of COVID-19, our business and has also positioned us well to seek new growth opportunities in the future.
I will begin my remarks from slide three.
Throughout 2020, we moved forward step by step to mitigate the impact of COVID-19, and steadily steer that recovery of our business. We are pleased to see that we are on track to transform our business into the OMB model, which focuses on our offline learning centers, while we will continue to enhance.
Our in house digital infrastructure and cater to online demand.
Our integrated offline and online operations are strategically put in place to leverage our large offline student base satisfy parents and students needs at the same time O M. O has tactical benefits to deal with the potential reemergence of COVID-19 restrictions.
Let's move on to our financial and operational highlights for fourth quarter on price for revenues were RMB $364 million in the fourth quarter up 14% from the prior quarter, adjusted EBITDA, which excludes share based compensation expense.
Expenses and the impairment loss on long term investments.
From EBITDA was RMB 85 million.
At 47 quarter over quarter, and close to the level compared with the for the fourth quarter of 2019 total number of new students for rise regular courses reached 8023 in the fourth quarter, an increase of 29% year over year as of December.
<unk> 31 2020 the cube.
Accumulative number of in growth students, who paid for regular courses and other courses since January.
2000, 2019 exceeded 187050 thousand respectively.
Our extensive tpa base underpins, our significant scalability and monetization potential.
Under the <unk> model with a comprehensive digital accretion system.
And the large customer database, we can conduct.
Cost efficient marketing to either expand cross selling opportunities or active.
Reactivated customers effectively for our capacity expansion as of the end of December 2020 ourself.
Self operated at 92 learning centers compared with 90 day in September 2020, our franchise partners opened another 14, new centers in the fourth quarter, bringing the total number of franchised learning centers to 420 at the end of December compared with 206 at the end of September two.
1020.
Now I would like to give you more color on the 5% quarter over quarter decline in the number of students in class in the fourth quarter of 2020.
Firstly from what we have observed during the COVID-19 pandemic offline education remains the top priority for many parents, which is also our core business under the OMB model due to the cumulative impact from the closure of our self owned learning centers during the first three quarters of two.
<unk> thousand 20.
Our new student enrollment number was lower than the normal levels.
<unk> online experience was not as good at offline learning our retention rates saw a decline compared with 2019 as some parents choose not to retain courses for their children during the pandemic slowdown.
Certainly with offline classes resumed a large number of students completed their courses and graduates from rise.
Therefore total outflow of students is larger than inflow, new students enrolled need to wait for classes to start. These factors altogether impacted the total number of students in class at the end of Q4 2020. However.
However, this should be a short term phenomena as new student enrollments continued to gain strong traction with healthy growth over the last two quarter and onward, plus the retention rate is trending up in the fourth quarter. We believe the number of students in offline classrooms will recover very soon in the first.
For 2021.
Now onto slide five as the COVID-19 epidemic continue to ease in China, almost all of our learning centers to resume to normal operations in the fourth quarter. Thanks to our strong offline presence and proven monetization capabilities under the OMB model our revenues continue to <unk>.
<unk> and close the gap vis vis the fourth quarter of 2019, and adjusted EBITDA increased to 47, 5% over the previous quarter, reflecting well our effective cost control measure our own more module provides more flexibility to students freeing up classrooms to increased utilization.
And our ability to switch seamlessly between online and offline resources also it makes the business resilient under the pandemic situation.
Now please turn to slide six we continue to see improved profitability in the fourth quarter.
Before adjusted EBITDA.
Trending up and the margin improved to 23, 4% from 21, 9% a year ago and $18 one per cent in the previous quarter.
We see three positive factors behind the encouraging without the first is a top line improvement driven by solid growth in enrollment and the number of classes delivered as a result of the successful deployment of the <unk> strategy.
The second is dollar continuous enhancement of our digital capabilities, which contributed to the improvement of the overall operational efficiency.
The third factor is our operational improvements, including various measures to increase retention rate classroom utilization rate and efficient cost control in the fourth quarter.
Cost of revenue decreased on both a quarterly and yearly basis and customer acquisition costs declined significantly to RMB 3225 from RMB 11730 for in the fourth first quarter of 2020 online acquisition of new student.
<unk> has become.
Become more and more costly in China in China's seriously competitive education industry.
Ever under the <unk> model, we can further reduce our customer acquisition costs by over weighting offline marketing channels and cross selling our product offerings.
Now onto slide seven we maintained solid growth momentum means you're in new student enrollment compared with the fourth quarter of 2019, our multi channel strategy proved very effective in driving new student enrollments, while controlling customer acquisition costs.
In the fourth quarter, new students in growth for regular courses increased by 29% year over year Chinese parents enthusiasm for investing in their children's education remains undeterred by any means and offline courses are still the preferred choice for our target young younger age.
Students.
In addition, we continued to diversify our course offerings beyond regular course at your students in growth for other courses in the fourth quarter significantly increased by 194% year over year fully demonstrating that our forces continuing to receive strong approvals from parents and students.
<unk>.
For other quarters, we provided.
Specialty online courses, including rise up can talk premium online English small causes.
Mathematics, and logic thinking course, it and liked courses as well as offline courses such as etch in Hong Kong here I would like to give you. Some updates on other courses in line with our online business strategy. We launched at one two for premium online English small classes, which would cause.
Online by putting future.
This high value online English course was a good option beyond our regular courses and cater to the diversified needs of our students study English.
<unk> courses.
Important part of our multi disciplinary effort, we started with the mathematics and logic sinking course it in early 2021 with dedicated classrooms in three self owned learning centers for mathematics, and logic thinking of course, and we intend to build up the franchise.
In this category.
Courses are short courses with very low entry fees.
And has been an effective acquisition channel for students interested in online English courses and steam course it.
Going forward, we will continue to enhance our efforts to develop into a multi disciplinary educational platform I am proud to say that we have done quite well on the part of new students inflow in the quarter for.
But due to the operational dynamic it will still take some time for the upfront to be fully reflected in the number of students in class with a delayed effect.
With such such strong momentum, we believe the number of students in offline context will recover in the first half of 2021.
As illustrated on slide eight the franchise business delivered a healthy and solid growth momentum in the fourth quarter.
Also our learning center sequentially that we opened in the third quarter, we resumed our expansion plans and increased our franchised learning centers to 400 to 20 by the end of December 2020, reflecting the strong endorsement from existing and new franchise partners during.
During the fourth quarter franchise revenues increased 14% year over year, and 49% quarter over quarter.
Benefiting from strong new enrollments in the third quarter of 2020.
Number of new students enrollments from franchised learning centers reached 22255, an increase of 26, 9% year over year, bringing the total number of students in class from franchisees to over one 100000.
Our franchisees are in an important growth engine for rise we will continue to scale the franchise business in 2021 and beyond.
Turning to slide nine we continue to enhance our digitization digitalization capabilities to fit into our own strategy. During the fourth quarter. We further improve our technology systems to support operations and execute digital digital initiatives to improve the quality of our courses we offer.
Weighted our proprietary online classroom technology and of course delivery system and he has enhanced our.
The ability to seamlessly switch between the online offline and OMB model whenever the circumstance demands in order to optimize user experience, we offer interactive H five courseware and rolled out an AI classroom supervision system for facilitating teaching quality control.
In addition, we improved our business intelligence system, which conducts real time operational data monitoring and supports data led business decision, making.
And of course offerings side, our <unk> courseware upgrade this round include better content with the complement of modern artistic animation in order to improve our teaching quality, we launched a dual teacher training system.
With an online E learning platform and onsite teacher development trainers to train and certify quantify teacher more efficiently and effectively we also launched an AI teaching and let them preparation system to help teachers improve efficiency and teaching quality as well as online.
Nick Education for them, an individualized reports to help parents track classes and learning progress of their children.
Now onto slide 10 for our 2021 strategy and beyond we will focus on for initiatives. Firstly, we will further expand our offline learning centers nationwide.
Getting to open around 100, new centers, each year, including self owned and franchised learning centers.
With a customer centric strategy, we will continue to upgrade or more courses and strengthened our operating capabilities.
Les will aggressively extend mathematics, and logic thinking offline classes.
Throughout our existing network and adding new partners nationwide.
Our goal is to become the number one education provider in the offline market for this category.
Certainly, we're proactively pursue franchise acquisitions and other M&A opportunities.
Last but not least we will further expand our fee paying students base or user.
Our registered user base and attract more students into our private domain traffic management system.
Where we can continue to benefit from cross selling and increased each student's lifetime value and <unk>.
Give you. An example, 30 February this year, we launched our life course about Chinese new year tradition with interesting content and attracted about three 335000 enrollments into our private domain signed with the 25000 registered users.
Yeah.
Yeah.
In summary, 2020 has been the most challenging year for us.
It also gave us the chance to stand out among our.
Competitions and show our strong capabilities to overcome all difficulties and transform our business into OLED more model.
Looking ahead, although there are still ongoing uncertainties and challenges around COVID-19 in light of our borrowers successful experience in coping with the pandemic.
Coupled with proven OMB strategy and strong monetization capabilities, we remain very confident about the direction of the business to deliver sustainable growth and profitability and increase shareholder value in the long run.
I will conclude here and would like to invite our CFO Lauren to talk about our fourth quarter financials. Thank.
Thank you.
[noise] Sensually horse.
We now go through our financial results for the fourth quarter of 2800 before I begin. Please note that all numbers stated are in RMB.
As expressed by the home.
I'm pleased to recall that our business gradually recovered in the fourth quarter as almost all of our offline learning centers resume normal operation in the fourth quarter.
Our top line and profitability continue to improve.
Central to our strong execution capacity and there's a whole ammo model.
While offline learning centers remain either call for almost strategy, we have continued to invest in our digital transformation.
Improved all online curriculum, so that causes can switch between online and offline seamlessly whenever the demand calls for it.
Turning to slide 11.
Total revenues for the fourth quarter of pardon the pun day increased by <unk>, 9% quarter over quarter and decreased by 12, 4% year over year to RMB $364 5 million.
Revenues from educational programs increased by 11% quarter over quarter and decreased by 14, 7% year over year to RMB 310, there for $8 million for <unk>.
Quarter over quarter increase in revenues from educational programs for sprint on a tribute to the offline operation resuming in Beijing and Shanghai at all by the end of September 2020.
Following the reopening of other self owned learning centers in share.
Shanghai, Guangzhou, Shenzhen and Wuxi since June 2010 day.
The COVID-19 situation was limited.
The year over year decrease in revenues from educational programs was primarily due to the decline of students in class as a result of the business impact from COVID-19.
From cash revenues increased.
49, 3% quarter over quarter.
13, 8% year over year to RMB, such as southern part H, meaning.
The quarter over quarter inquiries and franchise revenues was mainly due to growth in recurring franchise revenues as a REIT.
Out of the credit we opened the opening of the franchised learning centers for.
For year over year increase in for Intest revenues was primarily due to our growth in initial franchise fees associated with an increase in the total number of franchise for lending centers from 383 as of.
At December 31.
2019 to 420 as of December 31, 2020.
Other revenues decreased.
97 per cent quarter over quarter and decreased by $17 seven per cent year over year to RMB two upon 9 million.
Cost of revenues for the fourth quarter of total 800 decreased by four pounds per cent to RMB 155 9 million for.
RMB.
Wondered $62 9 million for the preceding quarter and decreased by 15 per 1% from RMB 183, 9 million for the same period of the per all year.
For quarter over quarter decrease was primarily due to decreased rental costs and the lower cost of learning materials.
For year over year decrease was primarily due to the decline in teachers compensation as a result of reduced teaching hours and social insurance exemption as.
As well as rental concession.
Non-GAAP cost of revenues for the fourth quarter of 2020 day.
<unk> by four points, 3% quarter over quarter and by $15 four per cent year over year to RMB 152 1 million.
Gross profit for the quarter was RMB 208 6 million.
Increase of 32, 8% quarter over quarter and decreased by 10, 3% year over year.
Slide 12.
Selling and marketing expenses decreased by 5% quarter over quarter.
And by 17, 8% year over year to RMB 72, 1 million for the fourth quarter of 2020.
So quarter over quarter and year over year decrease was primarily associated with company's disciplined.
Planned investment.
Online and offline marketing activities non.
GAAP siding and marketing expenses for the fourth quarter of 2010 day decreased five.
<unk> <unk> three per cent quarter over quarter and by 18.2 per cent year over year to RMB 17 8 million.
General and administrative expenses increased by $44 two per cent quarter over quarter.
By five 6% year over year.
To RMB 18, 9 million for the fourth quarter of 2020.
For quarter over quarter increase was primarily due to increased share based compensation expenses.
As a result of the modification of new grants of share based awards.
In September 10 day time there.
The year over year increase was primarily due to the increase in personnel costs related to our online courses business.
Non-GAAP general and administrative expenses for the fourth quarter of 2020 increased by 33 per cent.
Quarter over quarter, an increase to buy it for part one per cent year over year to RMB $77 2 million.
Operating income for the fourth quarter of 2020 was RMB.
For the southern Pen 5 million, an increase of RMB 10, 8 million from RMB $19 4 million for the preceding quarter.
Compared with operating income of RMB 60, plus other meetings for the same period also for all year.
Non-GAAP operating income for the fourth quarter of Tony Upon day was RMB.
Six for 4 million comparable with RMB 10. This other part 1 billion for the preceding quarter.
<unk> 75, plus six meeting for the same period of the per.
For all year.
Adjusted EBITDA income was RMB 80, 563 million compared with RMB 50 silent aid meeting for the preceding quarter.
RMB 91 million for the same period of the for all year.
Turning to slide 13.
Net income attributable to rise for the fourth quarter of 2800 was RMB, one 4 million compared with RMB, two 8 million for the preceding quarter and RMB 51, 1 million for the same period of the per all year.
During the fourth quarter.
For the RMB.
So the 7 million impairment loss on long term investment.
One time non operational loss was mainly due to a decline in the fair value of our long term investment yeah. Your recipe, which focused on education for young children, and whose spinach and the financial performance was severely impacted by COVID-19.
Non-GAAP net income attributable to rise for the fourth quarter of 2020 was RMB $55 4 million.
Paired with RMB.
$5 7 million for the preceding quarter and RMB 66 per 1 million for the same period of the prior year.
Basic and diluted net income attributable to rise for E D S.
M B.
Zero Ponzio suite in RMB.
Upon until two for the fourth quarter of 2020.
Basic and diluted non-GAAP net income attributable to rise per ADR.
S was RMB.
So you'll pardon.
Eight and RMB <unk> 90.
And that is solid.
For the fourth quarter of 2020.
Net cash outflow for operating activities for the fourth quarter of plenty of hunting for.
On the $108 five maybe.
Compared with net cash inflow from operating activities of RMB.
<unk> Street punk 2 million.
RMB 70 for pumps for meeting for the per.
She didn't quota in the same period for all year.
So it's back for the quarter over quarter decrease in cash generated from operating activities was mainly due to an increase you know accumulated refunds of tuition fees paid out and the decrease in cash collections from renewal enrollments during the fourth quarter.
For the year over year asking for decrease in net cash flow from operating activities was primarily attributable to reduced cash collection of tuition fees.
As a result of the temporary closure of certain learning centers during the COVID-19 pandemic.
As of December started one 2020, the company had combined cash and cash equivalents and restricted cash of RMB.
$679 2 million as compared with RMB once other than 22 8 million as of December 31, 2019.
As of December So other 110 day 20.
And the non current deferred revenue and customer was was RMB 601 9 million.
A decrease of $28 four per cent from RMB 756 million as of December for sort of one.
Total.
And.
The decrease was primarily due to the fact that revenue recognized for our courses and services was louder than the cash tuition clarity from the cultures.
Deferred revenue and customer losses.
For the fiscal upfront tuition payments from students and initial franchise fees from the companies for testing.
Now, let's look at the business outlook on slide 14.
Following a relatively stable environment in the fourth quarter of 10 day 20.
Local resurgence of COVID-19 had an impact our operation and the performance in the fourth quarter of 'twenty or 'twenty one.
Although the full economic impact of COVID-19 is there to be realized cause a stomach containment matters have been largely affected.
We believe we are well positioned to navigate the rapidly evolving market environment and kept for a potential opportunities in the education industry.
Our learning centers in Shanghai, Guangzhou Shenzhen Wuxi.
When he is for offline operation.
This interest in Beijing, and Shanghai Tang I expected to reopen for them later this month at a pace regulated by the current.
Oh for less ability to switch seamlessly between the online and offline models and our ability to manage both online and offline operations and currently have helped us mitigate risk and potential resurgence of COVID-19 impacting our business looking ahead.
Combined with solid, possibly book and continuously expanding offline operations across China.
The increase Nate.
Hudson online offerings and digital capacities of all our resources, we're very optimistic about our business outlook.
And well and will accelerate our growth for the last few years.
To solidify our leading market position by increasing our market share in the domestic education space and deliver strong financial results for more long term while it.
In 2021, we will continue to execute our expansion plan. He has the Oh I'm all model to new Heights, and Joe are plausible multiple disciplinary products system one.
<unk> causes fees.
I expected to slightly increase in 2801, taking.
Taking into account.
We expect our revenue in the full year of 2021 to be in the range of RMB.
1400 tons of million to RMB, one saw them for.
100, and circuit moving well.
With that I would now like to handle the call over to the operator. So we can begin the Q&A session. Thank you.
Thank you so much.
Ladies and gentlemen, we will now begin the question and answer session.
Wonder if you wish to ask a question you will need to press star one on your telephone.
For your name to be announced if you wish to cancel your request. Please press the pound Rd Husky again it start in one if you wish to ask a question.
And our first question comes from the line of.
Zone from Morgan Stanley.
Your line is now open.
Yes.
Hi, Shang. Your line is now open you may now ask your question.
Yeah.
Yes.
Hi, Shang. Your line is now open maybe you're on mute. Please UN mute your line. Thank you.
Yeah.
Oh, he got disconnected.
Once again, ladies and gentlemen, if you wish to ask a question it start in Hawaii.
Your telephone.
And your next question comes from the line of Larry <unk> from Credit Suisse.
Your line is now open.
I'm, Tom Aaron and thank you for taking my question and learn from credit Suisse. I have two questions on behalf of Alex. The first one is about the student acquisition cost considering the competition is getting much more intensified Ah would we expect to see higher student acquisition costs. This year.
And the second question is about online retention rate can management share more color on our current retention rate and how should we think about the trend. This year after launching digital at great. Thank you so much.
Yeah.
Okay Ah I can start and I was wondering can Ah Ah Ah Ah more insights.
For our customer acquisition costs are as you mentioned Lauren we see here is competition from online channel. So does the strategy.
For for US is to continue to.
Use our offline channels and other wage for the least to be generated through offline channels continue to increase the overall percentage is already close to 70 per cent. So 70 per cent of the leads coming from our offer.
Learning Center promotions.
And offline activities, we think will continue to focus on offline. This year and of course, the fourth quarter number is a very encouraging but I think the full year 2020, what are the acquisition costs, well wont be slightly higher than that.
Fourth quarter, but I don't think will well use expensive channel.
To work well hopefully continue that acquisition cost level around the fourth quarter.
Third and fourth quarter of 2020, a day in terms of retention rates as I mentioned, our 2020 is done.
Unprecedented year.
Most of our students acquired in 2019, who did not experience offline learning.
Because the pandemic went out online right.
Right away after we launched the online courses. So the whole experience are not that's not satisfactory.
Retention rate came.
Came down in the in the third quarter. However, as I mentioned for the fourth quarter and continued in the first two months of this year, we see their retention rates are going up to the normal level so for the.
Beijing the debt.
The free installment the renewable rider is already.
Close to 90 per cent back to the level. Prior a pandemic and then a graduation retention rates also coming back to a high 60%. So we see a very encouraging recovery from retention rate.
A little more important for the first question. The addition, Tony mentioned.
For the customer acquisition and other studies by wasn't called Cognizance of rise a sequel imagined and also we offered more or all.
All other multi multiple causes to our customers. So we can use these the older or the lease we acquired more effectively. So that's why are these day they cost a decrease in this quarter. Thank you.
Yeah.
Okay.
Thank you so much.
Once again, ladies and gentlemen, if you wish to ask a question. It is star and one on your telephone keypad.
And your next question comes from the line of Sheng Zhong from Morgan Sunday share.
Your line is now open.
Hi, Thank you for taking my question I'm, sorry that I lost my connection for a while so if my question is already out there you are at least keeping them I have a few questions here. The first one day is about the regulation reached impact Consol can you can share some of your thinking about.
Are these sound regulation big time, this year, well, how and how could that impact the human anything telling me open new learning center openings of course, you have that I think and then you said you opened in pants and teacher and the truth tuition fee collection and also maybe the.
Capital supervision impact and Ah I think you mentioned that you are that you expect your thinking on new centers to be opened later. This month. So is that do you already get the government communicate what's happening with all day.
This is the last question.
And a second one needs. Some are you Hot you are now expense I.
He's saying you have got to mathematics, and logic Stinky. So could you share some more color on how you are how are what the what the Oh channel Oh.
Oh, no patience I think on things like that how are you.
Hobbies, so called developing internally and Oh, how well Wow.
And what the pie subject and you are talking to a number one oh for Hum in the offline.
In the offline.
So I can't happen then you times, how do you maybe want to comment on that any contribution from being such a mutation in this year and then last one is oh, what's that Y'all think high na acquisition. This year. Thank you.
Thank you Shawn let me answer other than the first question and first in terms of Reregulation. We we all know that are doing it.
Doing day, this month, particularly Ah Ah Ah Ah it started for from Beijing.
More regulation, a target Ah Ah Ah Ah Ah rich.
Rich I would say the the training or the we call they show that patients do go.
So as you mentioned are there there are a number of average that government wanted to tighten the the other regulations that will put more supervision. The first is.
So called D. The license to operate a M. A X curriculum Ah you know and for this one it it it really reinforced the regulation published in 2018.
So we check the our licensing and status and feel a majority of our schools already obtained our licenses are in approval only a very small number of schools is in the process.
Yes to getting license and other maybe a two to three in Beijing are there there are a hard obstacles for example would be the.
The property.
It is not.
You cannot satisfy the requirement so I would say we.
We don't have much issue around that.
Area. The second area is the government wanted to.
Put more maybe a restrictive measures is the tuition prepaid tuition however, how to really regulate Disney's front.
And certainly and for rise that we already have experience in Shanghai. For example is that we need to put in a so called the.
Custodian account for each school Ah, we opened and so that so this is not an issue for rise particular day with abundant cash that we have on hand them. The second possibility on this front is to work with us.
Our bank Orient choice for them to put in measures to make sure that if theres anything happened with the.
The.
So call that the debt.
The providers then.
Our parents can get the money you refund are on.
On this one we still are waiting for the detailed implementation I'm personally I feel this is not easy to implement a so we're in a well well look for partners and see.
What is that a better way to cope with the regulation are the the third you mentioned is.
Whether governments are encouraging are the education, a content I think for rice, we target a very young age are starting it.
Free and majority of for students our age three to six and the teaching content for rice.
Our focus is on how to communicate how to think logically and how do we become the leader for the future. I think these are teaching or education or philosophy is consistent with the what government a government wanted to promote and we are current.
<unk> got a you know we are a class b a mathematical logic thinking courses, we really focused on how to train the kids two to be a creative thinker to be a logic stinker, rather than focusing on test prep. So.
That so hopefully on the regulation side.
We will not be the other one really targeted by the government in terms of the learning centers in Beijing are.
We already received the a requirement from a local district.
Education Bureau.
Meet Documentations and we are not done that some of the requirements I still say with putting money in the custodian of comps and also Oscar.
A certain percentage of our best day nation. So we are all in the process to to satisfy those requirements are hybrid I don't know when we will be allowed to open crosses the nation, we don't see a stricter restrictions and.
And as you can see that our our new centers are continuing to open our outside Beijing AR.
You know those are direct owned and a franchisee centers. So we have full confidence that this should not be a problem on the center expansion.
That's the second question regarding the mathematical logic thinking in fact, though we started to create a scene. Our courses are in the middle of 2019. So this then of course development has been ongoing for quite some time during the pandemic because we.
To move everything online we made the decision to simplify the steam of course is to focus on mathematical logic thinking so that of course is already been offered to our students.
A June 2020, and we have tried out our in all our self owned learning centers to recruit students and also a higher new students are recruiting new students online directly.
So we have I experienced a on the teaching and we already have there are a number of times just renew for them for that classes. The reason, we think we wanted to target offline because first rise it has a very strong offline.
Network second do we have.
Very good day experience running offline centers, both on the operational side and teaching side. The third is the we are we see the landscape. We feel this is a sector already get are embraced by parents. However, there's no clear leader in the offline market.
And that's through the survey we conducted we feel are.
Very similar to English a majority of the parents are very are willing to consider offline courses offered in this category.
I actually I mentioned that we had for a plan. So the two ways that we expand our network. One is we'll open a dedicated a classroom in our existing self owned centers this year.
We already started a three in Beijing, and we target to open a dedicated costumes in 30 to 40, our self owned learning centers. This year on the franchisee a network side.
We will start from our existing franchisees are in fact that the first franchise our schools will be open in.
Hopefully in April in in Jungle and this year the target is to stay at a 100 franchisees partners. However, because its offline they need time to opens doors. So for the schools at the end of the year, hopefully we will see a dedicated to a message.
Mathematics logic franchisee learning centers two to be around 20 to 30 schools.
In terms of free revenue. It is still early so oh pardon me that we are.
We're not.
At this stage too to give you the number however, with the plan to leverage our existing student base and our learning centers and franchisee partners. We feel very confident that we can go out the methanol mathematical logic thinking courses.
Every quickly to beach are meaningful with meaningful scale as at the end of the year.
The third question, sorry, Tricia I forgot the third question is about yeah. It's about yeah, yeah I can see some.
10 of your franchise Oh, yeah, yeah.
Yeah, Yeah on this friend I worked out on and that's willing to add.
More color are they just are always our strategy it.
Since we are a.
This data in 2017, however, the first acquisition.
It really took some time to a complete and integrate a the good news is that the right.
Right now she's got wrong, and it's fully integrated into our a direct owned a business and performed quite resilient during the pandemic. The acquisition gave us a very good experience. So this year, we will continue the Ah <unk>.
And whenever the right opportunity comes up and we're in you you can go ahead and talk more about them.
How do we think about the pipeline.
Yes, we have a let's say a strong pipeline for the activation of all upfront cash.
Jeez, we look for we basically divided them into three categories for a second I'm sure and are we and all other let's say, we're talking to a few of them and we are in the middle for knowledgeable.
Oh, the charms, but power without a doubt.
Let's say, we're not allowed to disclose anything right now and hopefully we can you know are now some good news and filed.
All files for reasons.
Thank you.
Thank you very much that's very helpful.
Thank you so much.
And your next question comes from the line of Leap day.
From a vision investment right. Your line is now open.
Okay sex, taking my question, Firstly, I want to congratulate right Tim.
Great job on the number.
And you wrote in Q4 and my question is about 2021 business outlook I know what our assumption.
Assumption is 2021 guidance based on.
Is there any projection for the near term.
Yeah.
Meanwhile, I'll I'll take this the guidance for the for year turned it on day one.
Basically shows a resume why run due to the uncertainties of COVID-19, and the progress of all all in offline operations. In this industry are as I mentioned in the script.
Good day E R M.
Basically we were.
Quite optimistic about the COVID-19 situations in this year and also we have you can see that we have.
All right.
Results in this quarter, we demonstrated that we.
Recovered from all this impact and we are quite optimistic about the coming year.
That's the again, let me pass the the guidance for the tiny tiny one week's final revenue into for years to be in the range of RMB place other than the 410 day median try and be well southern.
For the hundreds sort of moving.
And for.
For the.
This quarter, putting it on day, one but the Q1.
You'll probably know that theres, a slight calling 90 impact in.
But again this should at all around me.
Chinese new year and.
So the revenue is a wrong, let's say, it's 300 million.
Because of the COVID-19, and but the performance for this quarter will now run for them to actual operating outcome and that's we.
We have strong coffee than that for the whole year guidance, we can make it.
Yeah, I'll just add some color for this year as I mentioned are we right now have very strong operational capability are delivering O M O model, which means that a normal situations.
Our higher grade classes will have online during a week day, and then Oh the week weekend classes that are delivered are offline.
Ever each there is a any COVID-19 situation comes up we will switch the AR classes online we can do that within a couple of hours. So in the case off for Shijiazhuang and Beijing are basically the next day every classes was put online.
I am however, the online I see as you know that had the you know shorter.
Time, there for the revenue recognition will be some.
As you know.
For the compromise or discount.
That's why for the first quarter and we still don't know.
When Beijing will open therefore will impact our revenue recognition however, with the the capability to switch online offline also the ability to offer additional courses online.
Including the English small classes.
Plus the our expansion plans both on the network and D. A M.
Category, we feel 2021 will be a very exciting year, so near term and maybe some fluctuation but for that for the whole year, we have a very high confidence that we'll be able to deliver a very strong result.
Yeah.
Okay. Thank you very much.
Yes.
Thank you so much.
And your next question comes from the line of choice for them.
86 research your line is now open.
Hi management thanks.
Thanks for taking my question I have for one more question it's.
Patches of landscape.
So how do management view of the parent company competition environment.
We noticed that other than the ARINC.
Losses are gaining popularity amazing things, such as zebra <unk> cost, etc.
How does management view the challenge this kind of new for them player has brought thank you.
Thank you it's a very good question.
The competitive landscape.
We definitely feel.
Other than 'twenty are also onwards are going forward. It will be very interesting first thing first we still see very for very strong demand for offline learning AR at the same time combined with our desire to have for online exposure as well.
So for.
On the offline side, if in fact that we actually see fewer competitors. Some really cannot just survive during the pandemic and the people are so by the it especially like rice offering Oh I'm old model become stronger. That's also why you see.
<unk>, a very strong enrollment in fourth quarter normally fourth quarter is not a peak.
Peak season, however, the fourth quarter enrollment for us almost caught up with the third quarter of 2020. So they're all on the offline side are we feel very confident are we definitely are a day.
Our top choices for our parents and students for online. The there are more a format and our players are coming into the arena I think zebra as you mentioned are used AI to offer.
You know 15 minutes of Ah Ah Ah Ah Ah classes class a coaching and then they can offer at a very cheap price.
The observation I have is that definitely attract a lot of the young young age to them, our kids and it it it it's a very comfy mensch monetary courses two offline.
Ah study and are in fact are doing the survey we can see that 30 per cent of all of our students with a hyper some for form of online courses either zebra or.
VIP Kid however.
However.
For the same time the online on our students are normally would also happened one offline courses to complement that because the courses delivered online.
Limited effect, so going forward. We think this is a tool for mice will coexist and even for rise as I mentioned during the presentation, we definitely see the demand and therefore, we launched our one two for premium.
English small classes online.
Using flaring teachers. This is also a supplement to what we offer in offline and the two O M O. So on the higher grade from as to a boss.
For the online for any teacher is a part of the normal courses and for our case free and S. One we actually are selling our one two for premium online English for small classes are additional courses to supplement them and this.
Yeah. This is part of the strategy as well.
So when you think you know right now are the student base. We target are we we don't see are impacted by the D. E. AI are of course, there's of course, the efficacy or are entirely different.
Okay. That's very helpful. Thank you.
Thank you so much.
And there were no for good question at this time and that does conclude our conference for today. Thank you all for participating you may now disconnect.
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