Q1 2021 Youdao Inc Earnings Call
Good day and welcome to the.
You do 2021 first quarter earnings conference call.
Today's conference is being recorded.
At this time I would like to turn the conference over to Mr. Jeffrey Wong Investor Relations Director of you doubt. Please go ahead.
Yeah.
Thank you operator. Please note the discussion today will contain forward looking statements relating to future performance of the company reached a 10 day to qualify for the safe Harbor from liability as established by the U S. Private Securities Litigation Reform Act.
Such statements are not guarantees of future performance and are subject to certain risks and uncertainties assumptions and other factors. Some sell at least for me I'd be out of the company's control ethical could cause actual results to differ materially from those mentioned in today's press release.
And this discussion.
Generally discuss it on the Retractors exactly what effect you would ask me and financing will be a balance is included in certain filings of the company.
For me the Securities and Exchange Commission.
Company does not undertake any obligation to update these forward looking information except as required by law. During today's call management will also discuss certain non-GAAP financial measures for comparison purpose only.
For the definitions of the non U.
GAAP financial measures and reconciliations of GAAP to non-GAAP financial results. Please see the 'twenty to 'twenty, one first quarter financial results news release issued earlier today.
For the remainder.
<unk> is being reported besides a webcast replay of this conference call will be available on <unk> corporate website at IR at <unk> Dot com joining us today on the call from you without spending on senior.
Senior management is doctor friendly Joe our Chief Executive Officer for late June VP of Finance operations, Let me start pellets to our VP of strategy and capital markets and Mr. Wang Li our VP of finance I'm on.
Now I'll turn the call over to Dr. Jill <unk>, who will review some of our recent highlights and strategic direction.
Thank you Jeffrey and I think he also participating on today's call before we begin I would like to remind everyone. The on numbers are based on them.
We achieved Sunday and sustainable growth across our businesses in the first quarter on this year.
Other revenue in Q1 was RMB, one 3 billion.
Net revenue from total Charles.
Is RMB 639 million up 217% year over year.
Meanwhile, gross billings from say the child reached RMB 442 million in this quarter up 130% yoga yet.
Hey students enrollments from tiered hotels climbed to 300 on 6000.
100% day over here.
With larger scale, we have also achieved higher operating efficiency gross billings from Kettle child, and adult segments reached approximately RMB 700 employees for a minute.
The other performance advertisement spending on courses amounted to approximately RMB 556 minutes.
Compared with Q3 2020.
The last quarter with mostly new students acquisitions and almost nobody news on a return on investment or what.
Improved by more than 30%.
Gross billings from the adult segment reached RMB 299 going on in the first quarter. This year up 17% year over year remember that the outbreak of COVID-19 in Q1, 'twenty 'twenty led to a higher base and thus more moderate year over year gross adulthood.
Margins were also improving.
Gross profit margins from learning services reached 65% in the first quarter of this year up from 51% in Q1 'twenty 'twenty. It is the best level since we became public operating loss margin.
Got it to 23, 9% in the first quarter this year compared with 32% in Q1.
Okay.
With that financial overview, I would like to review some business highlights.
Looking at our Credo trouble.
We launched for the industry's first localized version of Junior High School Chinese for.
To instruct us on during the spring semester during this things faster in Q1.
One instructor covers nationwide concept and the other covers localized concept.
More than 50% of our junior High School Chinese students updates for this localized provision of junior High School Chinese reflecting heightened interest in this of course format.
Of course for participation and satisfaction data, while also focusing on ASP.
For high school and premise for us.
We continue to Polish courses offered for more tailor made for that content to students of different learning levels.
Gross billings of high school math.
Increased by over 210% year over year in Q1 2021.
We had a 197 instructors and 4093 two days at the end of Q1 'twenty for anymore.
For extra curricular segments, it's always sheet or somehow in Chinese.
Maintained our strong momentum from last quarter and achieved for more than 100% quarter over quarter gross in gross billings in the meantime, you thoughts on co sponsored the channel as to what she youth team and we signed the could you anytime we cheap low churn.
As all brands spokesperson.
As for our adult segment in March 2021 we established adult education business unit.
This put several.
Under the same umbrella, including the adult oriented courses in Utah premium costs.
Now these cloud classroom.
China University and book New courses will be released under the net is cloud class from brands concentrating our investments and the sink.
Oh, great acclaim.
According to our data.
Extraordinary memory pretty chunky cost has become the number one mainly oriented cost in the industry only three quarters into its operations.
Our intelligent learning devices also grow at an accelerated clip in Q1 I'd like to highlight that.
Most profit margin hit 44% in the first quarter a record high for our devices compared with 35, 6% in Q1 'twenty 'twenty.
March we introduced you that dictionary pen three Pearl.
The other supporting a bilingual translation of the Japanese and Korean day to meet the demand of Morley language learners, we shipped to over 297000 units other dictionary pen service in Q1 up 198% year over year.
We are only getting started we have more device products in the pipeline for 2021 and our teams are very excited about them.
As for our mobile learning lab, we launched a short video feature called for.
<unk> community.
Well Trust.
Additionally.
Users and content creators finally share of shop videos about learning and fun things in their life and your addiction of it this way.
Net to us is staying much longer on your debt dictionary and.
That is more ways for us to engage with argues for a standard work.
This along with other improvements of our apps facilitated organic traffic growth for the first quarter of this year, 26% of on newly enrolled students gross billings.
Came from organic traffic.
Billings from the Middle child segments generated by organic profit increased by 400 trained on since year over year.
Let us quickly discuss the potential additional regulation on the S. T market for new regulation is not yet obviously will not know the details on two it is up.
But that said, we continue to hold a cautiously optimistic attitude towards business operations other than new regulatory environment.
We believe the purpose here is to curb on orderly competition and promotes healthy development of the industry.
Well outlets for the benefit highly compliant players of scale in the mid to long term.
We believe our product strategy.
Very competitive.
Recently at the bank.
On the application of AI technology.
And all other diversified the disciplines, including learning devices in adult closest could help us better navigate the evolving online for fishing company.
Yeah.
Now, let us turn our attention to other aspects of the company, we pay attention to fulfilling social responsibilities, while we operate on Christmas.
In Q1, we made several donations, including two label Middle School.
I'm sorry.
While profit net.
That he's donated RMB 60 million.
Really for the yellow shouldn't harness on.
Foundation children's on country it anyway.
This supports its Matt research and we're looking forward to further cooperation with Mr. Yung Kim.
AI and basic education area.
Because we are still working on spot profitability in Q1, we secured additional funding to support our long term plan.
We raised approximately.
232 million U S dollars.
Our follow on offering in February.
And that is.
Recently offered us.
300 million in U S dollars loan facility agreement. In addition, our bank group provided.
On the commitment letter in April for the three year on.
150 million U S dollars revoking for a loan facility under the guarantee of medics in total that is over 680 million U S dollars additional funding.
Looking ahead, we are confident we can build on our position as the top quality cost provider and yourself for industry, leading intelligent learning devices services and from the.
It needs are.
Customer needs are.
For our diversified the business motto, along with the products and technologies for truly improve learning efficiency will help us navigate the evolving day S T and peptide market without overview I will now turn the call over to Sue call to review our financial results. We will then open to questions. So Paul.
[laughter].
Thank you Dr. Michael.
And Hello, everyone today, I will be presenting from a financial highlights from our 2021 first quarter the impact for you to read through our press release issued earlier today for further details.
We started for you or with a robust first quarter with multiple operational on our financial achievement.
Total gross feeding from our online courses reached RMB 808.7 minutes for the first quarter up 55, 9% from Q1 for anytime he.
And of course, leading from our premium quarter Rose to RMB 741, 5 million up 66, 2% you're on.
Sure.
K 12 segment continued to lead our growth, reaching RMB $442 2 million and gross beating in the first quarter up but I agree on the 32% year over year.
Okay student enrollment for K 12 reached 300 on 6000 in Q1 up 103% Yarbrough, you on where you're basically day enrollments for premium courses were up by 75, 6% year over year.
Tony back with plenty of diapers on top our K trough when you enroll student's score feeding Kim from organic traffic for Q1, which were all but I agree on 29% year over year.
Pittsboro shows not only our determination, but our ability to quickly expand our business and adapt our model is working.
For the first quarter total net revenue reached a record RMB, one 3 billion for U S dollar to hungry and a full 25 minutes. This represents an increase of low hungry and 47, 5% from the first quarter off anytime you.
Looking at this growth by segment.
Net revenue from Albert on the services were RMB 998, 9 million for U S. Dollar by 152.5 for meeting up 156, 8%.
From the same pure but you know plenty of time here.
The other creep it'll just gross to the increase the revenue generated from our online courses at least where first of all driven by a substantial increase in for student enrolment for the K 12 closest after review of the operating losses.
Net revenue from our other products were RMB 201, 9 million or U S. Dollar $30 8 million up 200 on 70, 928% from the same few other in 'twenty 'twenty.
Driven by increased sales of our U without extended pen of over 297000 units in the first quarter.
And net revenue from online marketing services for RMB 500 on Sunday night, playing one minute or U S. Dollar $21 2 million, representing a 40.1 person on the interest for on the same here in 'twenty.
Okay.
Yeah.
For the first quarter of tiny tiny what our total gross profit greatly improved reaching RMB 767, 5 million or U S. Dollar 117, playing on a minute.
200 on 25, 6% compared with the first quarter of Chinese on heat.
Gross margin for learning services increased with a.
65 point 65, 6% for the first quarter all for 2021 up from the 51, 9% for the first quarter on Sunday Riley.
We're all so what's primarily attributable to better economic of scale and the further optimization of our faculty compensation structure.
Gross margin for loading products increased to 40 for playing 1% for the first quarter from 25, 6% for the same period in plenty of time for.
So what's it for them back tremendous growth in sales soft our low topics when they peasants working for free which carry a higher gross margin profile than other learning product.
Gross margin on for online marketing services was 16, 4% for the first quarter of 2021 compared with about 25% for the simple yard or you can find the time he could.
The decrease was mainly due to the increase in performance based advertisement through the third party internet of profit.
Which carry our carried Laura Martin.
For the fourth quarter for the first quarter total operating expense were RMB, one 1 billion or U S dollar, but I agree on the 66 1 million compared with RMB 400, I think $11 7 million for the same pure it last for you.
We continue to invest in our future and the top line expansion.
Specifically technology acquiring scale on the teachers and net sales and marketing effort focus on student acquisition and expanding our branding awareness.
In Q1 brand on the performance advertisement spending on causes amounted to approximately RMB 565 9 billion.
With that for the first quarter, our sales and marketing expense were RMB 883 nine.
<unk> 9 million compared with RMB $299 2 million in the first quarter of Chinese on me.
Research and development expense were on.
Be behind but on a 50 55 1 million compared with RMB 84, 1 million in the first quarter of Chinese on him.
Our operating loss from our operating loss margin was at least for replay of.
9% in the first quarter on the 20th Honeywell compared with 32, 5% for the same pure net of last year.
For the first quarter of 'twenty 'twenty 'twenty, what our net loss.
Total ordinary shareholder was RMB 325 minute for you.
S dollar 49.7 minutes.
Compared with the RMB 469 point for a minute for the same period of last year.
Non-GAAP net loss attributable to ordinary shareholder for the first quarter was RMB $307 8 million or you're on.
Dollar 47 minutes.
Compared with RMB for hungry and $61 9 million for the comparable period last year.
Basic and diluted net loss for Etfs for the first quarter was RMB 275 for U S.
For the other point for you.
Non-GAAP basic and diluted net loss for Etfs for this first quarter was RMB two six for U S dollar zero.
Zero point for.
Our net cash used in operating activities for the fourth quarter was RMB 500 on $17 8 million for U S. Dollar 17 9 million.
Looking at our balance sheet, that's off the Mark study for 2021 our conflict of liabilities, which are mainly consists of deferred revenue for all of our online courses.
For RMB, one 2 billion for Ya.
S dollar 186 to 86.5 minute.
Compared with the RMB, one 4 billion, that's all from December 31st for plenty of money.
At the end of superior on a cash cash equivalent time deposit on the short term investments total RMB, two 2 billion or U S. Dollar 333 points on a minute.
This concludes our prepared remarks. Thank you for your attention we would now like to open the call for a question for Peter. Please go ahead.
We will now begin the question and answer session.
To ask a question you May press Star then one.
On your telephone keypad.
If you are using a speakerphone please pick up your handset before pressing the keys.
If at any time your question has been addressed.
And you would like to withdraw your question.
Please press Star then two.
Again it is star then one to ask a question.
At this time, we will pause momentarily to assemble our roster.
The first question comes from Sean Zhang with Morgan Stanley. Please go ahead.
Hi, Good evening management. Thank you for taking my question I have two questions on the first one day Sam how.
How can you share more color about the current.
Yeah.
Promotion from attachment on stockpile.
Okay.
And then what's your.
On a.
Promotion plan for the year.
From a holiday for that.
Do you have for an infection can shall we.
Got you.
And I. Thank him for me Oh, no, they're not I don't know.
I'm still confused I'll.
Congratulation.
Can you picture also for more patients.
Patients.
Yeah.
On the pension rate yeah, no call on a localized content.
Okay.
Also.
What's your current.
Now talking for.
For K 12 after school tutoring business.
And other sometimes machinery.
Speculation to me or uncertainty.
Uh huh.
Competition increase.
Right.
Non K 12 net income.
Yeah partner on that.
On your devices and debt.
Also like a balance.
About so education, so what's your view about this on the sectors.
And what are you well also want.
K 12.
Thank you.
Thanks, Sean.
So regarding the current proposed on promotional activities on the on the market.
Hum.
Yes, the first day is that our.
Currently we are running our advertisements on us.
Non mainstream media only yeah, so because because recent changes doesn't allow business to run ads on the mainstream media.
Anymore right now yeah. So so we're running assets on the non mainstream on.
Media and.
And also the.
Scrutiny for the.
In materials on materials become stricter.
Uh huh from other side, we have always been a fully compliant with the regulations. So so this is oh, we think it's a it's a.
On this process, what we we do need some changes about the changes on that.
Much.
Uh huh.
So that's.
That's the current Oh.
On the on that end.
Ah as you probably know we have suspended our best enrollment fee collection for the force supposed to master.
As required by the city and these closest will be sold at a at a later time and right now the only spring and summer semester courses are being yourself.
So overall, we have already been a frequent combined with the Permian regulation.
Yeah.
And then regarding on the new regulation, it's not it's not all yet so so we don't know on we.
We don't know the details.
And as I said in the ER.
Remarks, we are cautiously optimistic about the coming on.
Future operation in particular, the for some operations yeah. So.
Oh.
Obviously, theres, a theres a cost to being a complaint under a stricter regulation.
So we will understand that flow.
However, we have a couple of reasons that we think we can be a cautiously optimistic about so so so first is.
Sure.
The leading companies are used to be.
Sure happy more complaints and compare with the smaller ones. So so relatively speaking the leading companies could be on vantage clear on when the new regulation is up.
And also as we talked about so you don't have the diversified business lines yeah. So this.
This is basically a choice we've made a couple of years balance.
Not for regulation for say enough for being compliant per se, but more for broadening corner.
Potential for innovation.
And surely benefited us however diversification.
Obviously it has its benefits when when there is more regulation. So our learning for US has been the adult education business will probably not be impacted by this from the regs.
And as far as we know.
So.
Uh huh.
So for the summer basically we will comment on it.
The current actions the team is I've taken on this that we get several plants ready for the for this summer and.
And the structure out for courses will be a little bit different.
But as far as we know we think we will have solid plans to execute on when the regulation comes up. So we are again, we are women.
And cautiously.
Optimistic and lastly, I want a mission that's.
For the industry has sort of a theater.
It's a it's not a good thing so everybody goes forward yeah. So for example.
Institutions compete to assist our enrolment dates earlier and earlier every year.
Yeah. So no the enrollment data pushed back kind of took it yeah. So so we think.
Uh huh.
And our expense we think this leads to more orderly business.
Actually that the debate when it gets closer to when the Costar actually conversion rates get better so that's our view.
<unk> on the on regulation and Oh.
So we have a couple of plans ready, we will know which plants excuse for India regulation actually comes out.
I think he also asked about.
On a more competition on then.
Non caito choke on front.
Hardware adult yeah, so the other.
But just overall kind of a new direction plays in our favor I think because.
We have been working on the hardware business for.
Three for years now for almost four years so.
We all know that it's really hard to make devices yeah. So the.
Uh huh.
A lot of challenges so how do you manage inventory how do you mind misfire on supply chain.
What if the product for.
Faulty quality issues, a lot of fat and Oh, we have gone through all that so we think it is a good thing actually more and more people pay attention to learning devices and other people when they go.
But as men.
It also help people pay.
Pay more attention to the whole segment.
We thank us for.
It's a it's a way to build the beauty segments as well as industry. So.
So we think Oh, we're not worried about more competition and obviously, we will treat every competitor very seriously.
Pay a lot of tension, but we think it's a good thing that people are paying more and more.
Our attention to the segments and it's a testament to the strategy that we set some time ago.
Yeah. Thanks.
Yeah, just one more point with the telco for comments and yes perfect for Bolivar.
Definitely low right now.
If he can comply with all existing regulation that's about it so it's definitely without being fully comprehend the volatile become highway for all of the upcoming regulations along on the futures and the and also just for my Coca mentioned Autozone.
Effects on for mainstream media stuff for the advertisement for the write off but then you'll be on mute.
Medium half on myself stuff on the Internet and.
Overall net maybe it's something that work right now if you then.
If you didn't find out and she'll be on justice to execute our plan for the advertisement for the customer acquisition.
In the in the find out and but we are asked to go back to the regulation on questions. That's definitely we'd be on.
We'll keep our eye open to look what's called a watch closely about deregulation movement and definitely we'll oh.
I'll put ourselves into a.
Combined with the upcoming regulations centric.
Okay.
Yeah.
Thank you very much.
The next question comes from Brian <unk> with Citigroup.
Please go ahead.
Oh, Yeah. Thanks management for taking my question on so my first question on he is still regarding the other.
On a resolution so given the you know.
Pardon for regular regulatory environment. So can management share you know our gross strategy is going on for a word for.
For the whole company and the way you figure out for any new waste cooking on you know.
Okay students yeah.
That's a quick crush strength of all of our gypsum Montreal for learning services, which jumped on locking in for fourth quarter and how should we Oh, maybe we know the reason behind price and also offer the weighted kind of a trend on hand. Thank you.
Okay I'll take the first question so.
Regarding new ways to acquire customers. So we are obviously as.
As we talked about in meetings before so we are.
We're looking at many different fronts, including customer referrals.
Subject expanding off day.
Our existing customers and these actually have.
We have recently fixed picked up really well and also another another area. We are putting a lot of efforts into is a conversion those non organic users and as we just talked about a 26% of our coach a kid of 12 gross.
Gross billing actually come from.
Gross.
And if traffic and in Q1.
Uh huh.
The wild community the short video community on the dictionary.
Italy is a good example of that effort because video is really becoming a short video becomes.
The debt.
Really really popular given that our traffic has kind of.
The cost of the the bandwidth ex really come down to near zero and also a D. A.
The young generation really loves to watch videos on their cellphones. So.
So so that has been we have been working on that for them for some time and really Q1 is the quarter, where we released it and actually really already kept very good results.
Seth.
The average time.
But usually it spends on that externally actually doubled because of this feature.
It's a very good feature.
And <unk>.
Because these short videos are we can show a lot of confidence.
This media so so.
One of the key types of content is actually.
Conversion to our to our courses.
So.
We also have some progress on the AR on the offline channels and there are many many different ways to do offline offline conversion then we have Oh, we have some debt has already yielded good results and on the other hand is something we are still working.
Working for them.
And.
So so overall put together we are.
We were somewhat.
Teams are confident that they can do a good job and even even if we do.
Do you do get some loss from the from the regulatory front the other day.
The other channel was kind of makeup.
Most if not all of all of the other losses. So we think we are we are cautiously optimistic about debt.
So I.
I don't know if so probably for you have anything to add.
Yeah, Yeah just for them.
One more point to that and it's just that's.
That's actually my house, because right now that you asked about the holiday gross all businesses on the besides all stocked on mentioned regarding on as a whole we handle about the impact on our yes myself for the K 12, potentially five potentially possible upcoming regulations and and also besides okay for all businesses. We are also operating up all of them.
That's a multiple different business you know you know flow on those at all like for adult at open on a business that's very last though for hardware, but they don't think that that's happening on it yet.
The impact on the upcoming and potentially other possible on regulation.
For the adults.
Those two.
It's not for me operate over several years for several years and we have already had some experience and some insight about how all kept that as kind of a business whatever for the adult education for the or the hardware business and we think of automobiles on some of the battery on detectors. We also kind of just go broad with total.
Great drive Bys kicked off at the adult and the hardware business and in the long run that's our expectation of all of our business futures and besides all from kicked off and they'll go back for the kids off whatever we think the fundamentals for the Paypal business itself all the count on the paradox, because all the parents really care about quality of course ex Walmart kept on students.
And just like the Gulf of Mexico.
On the call and they'll be off we have the first one for all cross on localization.
For the Qunar High school Chinese for the for the online be cost from teachers model and then we even increased.
Truck or ask for localization from the instructor items without models and we received very positive feedback from parents and students and so we think about the rebuilt keep create more obedient weight billing for all content academic products on it.
The message with our suite of net users who try to elaborate more are.
Beneficial for all our products on a constant upgrade centric centre Brian.
Yeah. So for the second question the gross margin.
Our learning services.
We've got good performance.
The gross margin improvement during this quarter and it.
It's the fifth cause it to achieve over.
And let's see GP margin on the new services segment.
We believe the most key point is our capability to offer a good quality service after the debt.
A good price.
Which is further driven by our good he's.
He's jumped to bats technology.
And the synergy of the policies and our other businesses.
We will insist on the strategy and invest more on.
In detail the continued economic of scale on revenue and compensation structure improvements as we mentioned before mostly contributes the improvement on.
So you can imagine.
Its for the compensation structure.
Capability of possibly selling the young each up to the key.
Martin good for the ability to improve our cost structure.
Yeah.
This causes high GP margin mainly.
On contribution from our higher revenue base of our on it causes.
Because the more courses deliver.
Equal to what we believe are maybe that there's some seasonal strength.
Our learning centers.
Good day.
<unk> margin.
In the long run, we really Didnt know broadly believes any.
Gross margin on our let me say this.
For two.
Through our own.
Since this year.
I think maybe it's just tamiflu.
No question.
Yeah.
Thank you for some very helpful.
Once again, if you have a question.
Please press Star then one on your Touchtone phone.
Okay.
Yeah.
Yeah.
The next question comes from home Geez, Joe.
With C. ICC. Please go ahead.
Okay.
Uh huh.
Hi, This is Tony from P&C.
First congregation for yet a great performance this quarter and I have two questions.
First since you have introduced many new strategies for debt now kicked out business.
This means oh, the policy uncertainty for that.
Can you tell a business I like on like reach our attention on I'll put more investments to the that's business and for that.
Jack's industrial church, though what's the strategy for the long term and the second question I already talked to Peter to develop more offline develop scratchy. So she has oh opinions on experience for us as one offs that tragic COVID-19.
Our acquisition strategy.
Yeah.
First one.
Regarding investments are in the non kit kit kit.
Segments.
Yeah, I would say that with me.
It all planning for 2021 we've already taken into account.
Gross needs Oh.
Hardware and also of the adult section for US. So currently we will.
Keep on executing that plan and so so we don't we don't actually for C. A kind of a significantly different plans to invest in the other other segments stance.
And.
We think both hardware and and without a very very interesting and very promising so I use this opportunity to maybe talk a little bit about.
I was thinking behind the Oh.
Adult education segment so.
The main point is that we believe on.
So that the long term potential and we.
We have leading the assets on the expense. So so we think of this as a good fit for us so.
So LIFO learning in China, We think it's really going to take off it's a very clear trend because of.
The economy for the news flow and and more and more people will realize that so if you have to say they need to do.
They were likely to be alive for lifelong learner, so that's where our.
Adult education products are really Uh huh.
Positioned.
So.
So so.
If you look at the just the sector's history, yeah. So the Chinese adult education on kind of industry really our sector has a long history and we see that there are a couple of verticals that are really stand out.
The first one is yourself English as a second language they stick them on as a civil servants exam test prep.
When we uncover ship.
These two verticals on a really good examples of successful business. They have reached the kind of billion dollar annual run rate business.
And I think what's going to happen.
In the future is first.
First there will be new border.
These two will not be the only verticals that debt become large Christmas for us there would be new vertical stand there will be a oh there'll be new models for your existing verticals.
So oh and that's basically the approach our team to think about it. So when we look at some vertical we think whether we have something too.
Some way to imagine it for do we see some new vertical that really has the potential to be as large as a simple service test, perhaps or English on second language. So.
For example on yourself course, including the popular really popular you only on English course, it's already quite popular yes.
So.
These are basically re imagining of the of your existing verticals English learning now.
So I don't have time to talk about details about for anyone who try those closer to low speed, it's really end of it.
And.
Insulin new verticals, we are already seeing a potential once for example on.
Our extraordinary memory.
Uh huh.
Gross are really.
Picking up and also like others, what other types of inks like personal finance SKU.
Of course the iPhone.
Cars on cool Yeah. These are all are also quite quite quite.
Quite popular in pharmacy. So this is our thinking behind that.
The adult education sector.
Victor we'd be if we think it's a it's really promising and we will take the long view and we will focus on.
Thank you.
And for the second question for me and do about our offline stores. Our strategy is sound the whole weighted rafal were offline on the go on levels customer obligations for strategy and for our appointments. We are actually have this closely in the last several quarters now earnings we mention of all the we have some we have set up for.
On.
Offline exhibitions stores. So it's not all of these pieces Norfolk, southern and sand for peoples. We didn't think they brought on a sort of assisting festival.
And in debt.
Different province to task off all of the whole company is looking for the best basket for the best solution for the offline or the blood levels from our physicians for on our.
Business operators.
We're really we're thinking about for the other way because it's just we just started it started a couple of months ago assets.
Sorry, Paul.
Oh, the promise of the promising feedback from thought they have for the right knowledge that's doing the very small scale. So we didn't expand the scale.
Do too much.
In the last couple of months so in the past couple of months. So we think about it we had probably ritesh share more information we got on because these deals have cheap on kind of the scale that they have from offline customer acquisition, but we think of all of the desktop just.
Just like bolt on banks and we are right now about testing.
So different several different channels for the customer positions from the offline channel.
Not only in the for the ex.
Ex data centers for it.
It was all in do we think about the desktop. We are we are well. We are looking we are now looking for vascular solutions for the customer.
The customer acquisition.
Offline channel.
Thank you.
The next question comes from Jesse <unk> with Nomura. Please go ahead.
Thank you Thanks management for taking my question.
No. It's just that the revenue gross smart devices has seen very strong for the prostitute I'll try it.
We expect the momentum to continue and on top of that.
Any opportunity on a cross branding work without premium costs.
Okay.
Thanks Jesse.
Yeah, Yeah, I'll talk about the gross and that's really kind.
Talk about the process so.
Yeah relative gross of our smart devices.
It's looking very good and Q4 is the traditional strong quarter, yeah. So Q1 day.
Q1 numbers were happy for it so yeah. So.
As I said Oh.
The prepared remarks are we on.
We have new new products on upcoming yeah. So this year so.
And we don't talk about our actual new products.
But for their lunch. So so so yeah. So so we do have some new products and you kept your category for us.
So we are.
We really think that this theory is is the year that oh for Ya.
We have.
Uh huh.
Products serving.
Certain peoples different needs that's gonna be released in this year now so different categories. So.
So the seasonality of the of the learnings on devices.
Businesses that are normally you would see a Q3 and Q4 being a strong.
Strong quarters, because Q for Q3 is the beginning of the new news on new learning year on new academic year and Q4 is that.
Your comments on most strong quarter. So these two quarters on the stronger quarters.
Q1, and Q2 are relatively weaker and.
And obviously.
Start of the academic year is a very important time.
Timing for their for their for the smart devices for the developed for them.
Learning devices business. So so I would look at Q3, that's a pretty important quarter for us for that business, yes. So.
So so.
That's the way the teams have a lot of.
Ideas that let us projects for you on the sole source. So we think that this is gonna be a.
That's important and for for years.
For for learning learning devices.
I spoke offsetting.
Oh for the.
Commodity devices.
They are they doing.
That's on all with lots of devices, there will be a more customer friendly functions in the U S.
Are they focused on the productivity on the continuously update our ingredients.
On that.
Because I think for independents here for that.
Which leads to fulfill on the better margin and the other.
And then one for that segment.
In the fourth quarter, we shipped over almost a 300000, you'll need to follow through from the kind of theorist in Q1.
Oh, a 200% gross year over year for Palladium, Oh, 500 linear you can see on it.
Lever on effective linear on what your parents with the new agree to this.
Oh caused all of us must be license and other.
Especially on the synergies between our dividend.
And are you starting to have an intent to end up here with me for the different opinions. They funded their personal linear in summary on the vocabulary no notable.
And there are you at all because on that.
Thank you.
Yeah.
Yeah.
The next question comes from Charlotte Wei with HSBC.
Please go ahead.
Yeah.
Yeah.
Hello management. Thank you for taking my question and congratulations on very strong quarter I have two small follow up question regarding deregulation I to me Yeah. Some news, saying that the online like accretion players are not allowed at all four classes class low cost assets.
That's confirmed.
There's a rumor.
Where do you think that's grabbed U K O N CCAR cases for attracting new users and how we our camo promotion plans king According to day.
Thank you.
Yeah regarding the course of.
Kind of selling force, there's a below the low cost.
So.
So are.
We are having ongoing discussion with our with all authorities.
Bye now.
But basically as being a.
Conservative so we have actually for their for the summer courses, we have revealed the assets.
The sales price for our courses and actually raise to some of.
The prices of some on some more closely. So obviously, we are awaiting a clarification from from from Dr. <unk> on these on this issue and also.
On the other issue.
We believe we will work with them in some time and.
I.
I think the.
For the thing here is that.
Uh huh.
Is that the conversion funnels for acquiring new customers.
The teams as we have operated in this business for for quite a long time, we have many choices in the in the way that we convert users from from someone who was interested in getting the course to actually paying paying customers on that.
Of course, so we have many choices that we can we can choose to.
One of them on from the other so so we think as long as we get clear guidance from authority for our teams will have Oh, we will have kind of changed that debt that they need to apply to the reconversion channel and that's true for the low cost of course, that's also true for.
How long before close all things you can sell you can start selling those classes.
February she was here that's that's pretty important.
So long as we shouldn't give clear guidance, we should be Oh, we should be okay.
And thank you I have one more question regarding the oxy trough isn't it.
I'm wondering what genes, but revenue contribution percentage from.
From day non subsequent chatfield correct, yeah, just because I know that light coking coal cars is very popular right now just one half to a sense of non-GAAP.
Total Inc.
That's all from Africa.
Oh for the for the.
Non stop Texas was waiting for and Oh, We think of all this I guess for you Yeah right now we on the top from I shouldn't and default. We are starting we all have to receive a very a Permian we have a very promising protocols with all base, you'll do what I'll call program kind of force.
A big school also for the premise from students and I think for just for that especially on from the Seahawks commandos potentially from the parents on users and for their for their demands.
And if we think about that we expect with you about net.
Capability for four months for base, Oh program offered with our preschool kids all the young students and in the primary school and we think about that property maybe.
In the debt.
Since the current area and then we think about that that's real.
For the more for potential plus two for.
Besides off the program existing like the Oh, good all kids programming, that's what I thought he was hoping she'd program. When you think about it we have to but we know we have been started for this system for several years that may have been if he had the experience and know how to develop and also build up that kind of momentum.
The program for the kids and young students how do we think about it I know we've repositioned for this.
Yeah.
Okay. Thank you.
Yeah.
Okay.
The next question comes from Linda Huang with Macquarie.
Please go ahead.
Hi management I have a one.
Just regarding for opera feeling because of for this quarter, we saw that the gross bidding up assets at two 6% and debt went.
Now looking back for the the several quarters. After we go debt I think this probably if there's still room to grow from a line of course breach so.
How should we think bodies number and is there any reason behind this slow down for this we're feeling and whether we should worry about that guidance.
Our gross are likely to moderate to kind of coming quarters.
Well within government.
The guidance quota on enrolment up by almost 100%.
Patriot in the previous quarter, almost I think 200% to 300%. So that's also the other day Christian I wanted to ask is that whether we need to think about them.
Moderating trend and what should be be GAAP.
Come on at the end and as you say the Bronx estimation for this number going on for like constantly for it.
Yeah.
Okay. That's it for about the for the total force fitting indeed, we've just a gross for low to moderate tend to compare with the same here a lot for your first for also just like we explained in our defaulting on our calls and if you close desktop for the desktop mixed.
Mixed by the adult and that keeps it off if you adjusted when we go to the kcl sector sales to grow about Oh.
342% year over year Augusta, you are still in the relatively high for a course, great just thinking off the for.
Scale up our business and it has to.
In total it just go for that they slowed down on us because of the adult business only grow about Oh, it's a single or a.
Double digits in the for.
First quarter comparable or superior Sofia, that'd be cross out because of FX impact on COVID-19 off the year a railroad.
So for speeding them for the adult business into Alaska Q1, it'll be the high base comparison shows that we just that cheap for only a double digits gross with add on business Sofa fight together, you'll see up all the total number of income bandwidth kicked off and I don't go to that double digit number of spot. He would go back for Ya.
I'm doing well.
Other kids off on that at all and you can see low kick it off for you.
In the vertical with great gross.
Momentum for fall business and look for.
Back to enrollment.
One it's not only is it just like we are migrating up all in the last two one it's also whatever picks up for an up yourself on the on at all this thing would be impacted by the COVID-19, and the lofty and although we are just only a week. We are most likely in blocks of every beneficial about the gross from smoothed out impactful for us Idaho fashion.
So I'll kick off.
They also beneficial for that.
Uh huh.
Yes, its benefit for sure would that gross but for the business for basket of what we think on Lithia, 100% I always think about it it's a relatively steep great momentum for the role and and also for the two one it's not really it's a big system for flowers for the for our customer acquisition in this momentum and we think about if you'll go.
For back to see our close rates up all of the caito business lofty up on a two one for what you would think about it. It's also accelerates the balls up gross rates in comparison with a.
Same time lives a year before so we think about it.
We all will be well.
Is back on the Baltimore.
Good members for the gross in the wrap up for quota you know our expectation, but it still depends on the situation with Alberta.
Thrombin environments and also including on the population or the other issue is probably potentially by the effect of all though the gross rate, but you know a separation expense so business there'll be a gross rate for our business and there'll be acceleration Pfizer force water from the bond yield.
Yeah.
And that concludes the question and answer session I would like to turn the conference back over to management for any closing remarks.
Yeah. Thank you once again for joining US today. If you have any further questions. Please feel free to come to us asking without directly or reach out to TPG investor relations from China or the U S high for a great day.
The conference.
<unk> has now concluded. Thank you for attending today's presentation you may now disconnect.
[music].
Uh-huh.
[music].