Q3 2021 Youdao Inc Earnings Call
Yeah.
Good day and welcome to the yard our 'twenty to 'twenty, one third quarter earnings conference call.
Today's conference is being recorded.
This time I would like to turn the conference over to me instead of Jessie Wang Investor Relations Director of your though please go ahead Sir.
Thank you operator. Please note the discussion today will contain forward looking statements relating to future performance of the company, which are intended to qualify for the safe Harbor from liability as established.
Established bad, but you ask Bradley Security Litigation Reform Act such statements are not guarantees of future performance and are subject to certain risks and uncertainties as such.
And other factors some of these three are beyond the company's control and could cause actual results could differ materially from those mentioned in today's press release.
It <unk>.
A general discussion of the risk factors that could affect <unk> business and financial results is included in the filings of the company with the Securities and Exchange Commission.
The 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 purposes, only for the definition and stuff and then get financial measures and recalculate.
The non-GAAP to GAAP.
GAAP to non-GAAP financial results. Please see the 'twenty to 'twenty, one third quarter financial would be about news release issued earlier today as a reminder, please at the conference is being recorded.
A webcast replay of this conference call will be available on you at all.
<unk> corporate website at IR Dot dot dot com joining us today on the call from you at all seeing your bandwidth management.
Doctor from Joel our Chief Executive Officer, Mr. Lei Xu VP of operations.
He's chaired pelon, Sue <unk> VP of strategy and capital markets and Mr. Wang Li VP of finance and I will now turn the call over to Dr. Joe to review some of our recent highlights and strategic direction.
Thank you Geoffrey.
Thank you all for participating in today's call.
To begin I would like to remind everyone that all numbers are based on they need to be.
The third quarter was a good quarter for us with some development of our non tutoring business.
With the announcements of sweeping industry changes in late July.
We quickly evaluated all business and set out steps to better align with the Prc's latest regulations.
On September 30th.
Well, we are anticipated to terminate and announced our plan to dispose of the after school tutoring services for academic subjects included in China's compulsory education system and apply it to the competence local governments to approve the proposed disposal.
We expect the.
The disposal to be completed by the end of 2021.
Subject to regulatory approval there.
There can be no assurance regarding the ultimate timing or that the transaction will be completed.
Due to the execution of the double deduction policies gross billings from academic subjects included in China's compulsory education system decreased by approximately 70% year over year in the third quarter.
Gross billings include.
Including adult courses decreased by 33, 9% year over year to RMB 631 million in the third quarter.
Total net revenues for the quarter and the $1 4 billion, representing a 54% increase year over year.
With approximately 25% of our total revenue was derived from academic tutoring.
For compulsory education.
Operating loss decreased significantly to RMB 129 million.
And the operating loss margin was nine 3%.
Now we can.
Parents with a 99% for the same period of last year.
As we mentioned in our last call our learning products adults and vocational courses.
<unk> closely and education Digitization solutions are the four core pillars for our future growth.
Let me walk you through the progress of each segments.
First our learning products segment maintained strong growth momentum.
Q3 product revenue reached a record RMB 254 million.
56% increase year over year, and 23% increase quarter over quarter.
Led by our industry, leading pictionary paint.
We continue to upgrade the dictionary pen and launched the People's Education version in collaboration with People's Education Electronic can argue with your press in September.
The product marks our first significant partnership.
With P a P.
Whose parent company.
Elisha just basic education textbooks directly under China's Ministry of Education.
Through the upgraded dictionary pen, we provide over 4000 recordings of listening and speaking.
Training textbook content in Q3, we shipped approximately 400000 dictionary pen.
Also lunched Euro dictionary pump.
That to me Paul powered by our new generation adaptive learning technology.
Features like Hey, I have subtitles real time speech, scoring and pronunciation correction.
Facilitate students more effective English Sony.
First batch so you're not listening path, we're sold out within one week.
Reflecting strong demand.
We encourage you to view a related video on our IR website to get a more complete picture of EBITA listening path.
Now, let's look at our theme cluster.
They'll wait she they'll go.
Becoming more and more popular each quarter in Q3 revenue from your college again increased by more than 30% quarter over quarter.
Upgraded al Richey, AI system, and launched our Wechat mini program, which supports assessments and interactive features so that students can check their learning progress at anytime.
As for our youth programming product I called we launched a new Python course, which our users have asked for a lot.
So a lot of Middle School and high school students are learning coding to participates in programming content like the CSP or I don't know why people are the most popular use programming contracts in China.
I called provides a CSP assessment tool.
Allowing students to better understand how well they're not doing it.
It has become quite popular and is now used by more than one third of course the S. P contestants.
Finally.
China Computer Federation, the organizing body of E. S. P. N Y P contests officially announced steps yoga Iqos has become a programming trainer accreditation accreditation P. T. I remember in the third quarter combining efforts in promoting programming teacher training.
Overall theme is already a very active area for us and we are seeing good results.
Moving onto adults and vocational courses gross billings were RMB $182 million with a slight decline of 9% year over year. The decrease is mainly due to relative weakness in English learning courses for reasons, including Covid.
The memory training course extraordinary memory.
Yeah.
Is doing very well.
It's returned the leading position in the segment with gross billings approaching RMB $100 million in Q3.
Recently Netease cloud classroom officially launched about 100 digital training courses of Amazon Web services.
Chinese it is created by Amazon Web services experts believe promised to provide these courses complementary to the whole society to help learners improve the cloud related skus.
A more general level, they are increasing consumer needs for adult learning and vocational training courses is also in the area.
Got it by government policies going forward, our teams have a lot of experience in creating popular learning concepts like the extraordinary memory courses.
We will release more self developed cost us in the coming quarters.
And drive growth in this area.
As for Education Digitization solutions.
The Ministry of Education, and other departments jointly issued guidelines on.
This initiative called new infrastructure infrastructure for education in Q3.
The guidelines proposed constructing an intensive efficient safe and reliable national New education infrastructure.
By 2025.
The initiative requires the comprehensive application of new technologies, such as five G artificial intelligence big data cloud computing and blockchain.
We believe our products and expertise.
In other recent policies very well in Q3, we launched you'll does smart learning terminal two.
AI driven applying that helps classrooms process homework and learning materials digitally.
It supports high speed scanning a paper based homework and tests.
Although medical grading of these students work.
In generation of in depth analytics.
Students teachers schools and school districts.
It is a first of its kind product.
I'm Leslie bridges paper based learning and digital intelligence.
Which we believe is both easy to deploy and truly helps teaching a lot since last year. The first generation of your doubts my learning terminal has been deployed in many schools. We look forward to working with most school educators on the adoption of the second generation.
Looking at the other parts of our business in Q3 Euro Dictionary.
And academics search function and its mobile apps supporting searching for academic papers and one click translation.
We also extended its search functionality to content like learning videos Euro Dictionary reached a milestone of 900 million cumulative users in Q3.
Moreover, as an intelligent learning company with a mission to help Poland achieved more efficient.
Additionally, we have started to pull.
Accessible feature our services for visually challenge to users. This feature aims to support users with disabilities to enjoy the benefits of technological advancements and expand their learning boundaries equitably.
We also help those in need when we can.
In Q3, we helped our customers have some tutoring companies going out of business by exchanging close hours on these companies what are your thoughts.
You would always commanded by the China Association for Nongovernment education for these are industry mutual assistance efforts. So far we have helped customers from over a dozen S T institutions.
The last few months have been a period of.
Introspection planning and implementation costs in July we started on a journey in transforming our company to a new growth trajectory. As we finished Q3, we have made good progress.
As always we are committed to running the business within the scope of laws and regulations and picking on corporate responsibilities for our community and the society at large.
We believe we have a solid growth plan.
The right team to execute it.
We look forward to helping a lot more users learn better through all our efforts and product.
With that I will hand over to Paul who will give you more updates on our financials. Thank you.
Frankly, the tactical and Hello, everyone today, I will be presenting some financial highlights from our 'twenty to 'twenty one so border.
We encourage you to read through our press release, you said, we're already preparing for further details.
That's what I put in the service of course, the bidding on the PE student enrollment decreased due to the exclusion of the Diebold reduction policy.
Of course, we didn't chronic stomach subject included in China compulsory system decreased by approximately 17% year over year.
In the third quarter total course meeting, including adult courses decreased by 33, 9% year over year to RMB 641.6 minutes in the third quarter.
Pennsylvania Womens included in China, compulsory auto braking system decreased by approximately 17% year over year in the third quarter as well.
Total opinion woman, including adult courses for premium decreased by 49% year over year.
Pre school enrollments for our K 12, and adult segment accounted for 64% and a 36% of the PE student enrollment for premium quarters, respectively.
Well so quarter, although not revenue reached a record RMB, one 4 billion.
U S dollar 200, and a 15 point for a minute. This represents an increase of 54, 8% Bronco third quarter are pretty funny looking at growth by segment.
That revenue from our learning services were RMB, not hungry and a 95 seven minutes or U S. Dollar.
And at 54.4 0.5 minutes up 65, 9%.
Tim periodic and part of the country.
This growth was the increased revenue generated from our tutoring services reachable first of all driven by the growth in PE student enrollment during the second quarter of 2021.
That revenue will probably loving products were RMB 250, 425 minutes or.
Our U S. Dollar 39 point for a minute up 56% from the same period in 'twenty 'twenty.
Driven by a substantial increase in sales of all of them up you without any pets.
Net revenue from online marketing services were RMB 137 minutes or U S. Dollar plenty of one 3 million.
Presenting a three 4% interest promise in Peoria in 20th Honey.
For the third quarter, our total gross profit reached RMB $785 6 million or U S. Dollar 121.9 minutes up 19, 9% compared with first quarter on many fronts.
Of course market in Florida and in services increased to 66, 2% for the third quarter of plenty of Honeywell upfront up 53, 9% for the third quarter of Sunrun, Inc.
The increase was driven by the improved call me up skill and ongoing amortization of faculty compensation structure.
Yeah.
Of course, Margaritaville lending products increase school study, 3.7%, what's the water off money, calling you up from 29, 8% for this impurity in plenty of time. He the improvement was mainly attributable to a substantial rise in the sales volume.
Washington, REIT, which carry a higher both Martin and other learning products.
Gross margin for online marketing services was 29, 2% for the.
Third quarter, all plenty of money by comparison, but as I'm, putting 5% for the same period in 2000 times.
Well so quarter total operating expenses was RMB 900, and a 14.9 minutes Oh, you're a scholar 142 minute down.
29, 9% from RMB, one 3 billion for the same period last year.
We used that for them.
Third quarter, our sales and marketing spend well RMB 652 minutes.
Chris from RMB, one 1 billion in the third quarter of Sunny Sunny.
Research and development expenses were RMB.
<unk> hundred 93 points for a minute compared with RMB 421 minute.
So quarter of any country.
Our operating loss margin was.
Nine 3% in the third quarter off anytime they want compared with 99, 8% for the same period of last year.
For the third quarter of 2021.
Our net loss attributable to ordinary shareholder was RMB 128.9 billion or U S dollar punch a minute.
Compared with RMB $877 8 million for the same period last year.
Non-GAAP net loss of critical to all the Hanover shareholders for the third quarter was RMB 401 minute.
All U S dollar 15.7 minutes.
Compared with RMB $865 7 million for the same period of last year.
Basic and diluted net loss per ads for the fourth quarter was RMB one point of Euro five.
Our U S dollar euro claim unsafe.
Non-GAAP basic and that looking now.
Net loss for the soap water with Army 0.2, or U S. Dollar Wow Bureau, appoint a bunch right.
Oh and that you'll see you know operating activity for the third quarter was RMB 628, 7 million or U S. Dollar 97.6 minutes.
Looking at our balance sheet, that's almost September 20th only what our contract liabilities, which mainly consist golf before revenue fall, which was gonna services well.
Were RMB, one 1 billion.
S dollar 175 8 million.
Compared with RMB, one 4 billion as of December 31st plenty of money.
At the end of the period Okay.
Cash cash equivalents restricted share pack.
Time deposit and short term investment totaled RMB, one 3 billion or U S. Dollar 200, and up 1.7 minutes.
This concludes our prepared remarks, thank you for attention.
I'd now like to open the call to your questions. Operator. Please go ahead. Thanks.
Thank you we will now begin the question and answer session.
To ask a question you May Press Star then one on your touch home phone.
He was in a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our own.
The first question comes from the line of drunk sang of Morgan Stanley. Please go ahead.
Thank you for taking my question and congratulations for the good leads out so Alex that after that type of reduction I think Oh I thought on the potential beyond non K 12 business and I would like to start my question. Frank 90 devices can you pizza.
More color on the learning mindset.
I've got more maintenance and what's the what's that our product pipeline and and in Oh management package for the devices next year and also Q3, we see the booked margin after learning device. It is a bit low where Dan.
Last quartet and mean, a particular reason for this and what see what is the normalized margin should be for the learning devices. Thank you very much.
Thank you for the question Yeah. This is Joe.
Yeah.
New product revenue comes in that to be a 255 million yeah. So it's a 56% year over year of course.
So we were happy with it so it is a positively impacted by our new product launches like the People's Education Dictionary pen ink.
In collaboration with People's Education, some of it is oh negatively impacted by a Colgate episodes in August and September.
Yeah, so within the quarter September sales were the strongest in Q3. So this is a the start up the new school year and September.
The start of this new school year and parents and students are they shop for a new learning peers.
So oh lineup of products this year turned out to be a performing very well despite a more competition.
Last year, we didn't have any competition. This year, we have more competition and despite the COVID-19 episodes. So.
More recently last Thursday was the conclusion of the double 11 double double 11 shop.
Supping Oh festival, yeah, So Oh learning devices sales were up 57% compared to 2000 Twenty's definitely lessons yeah. So we have been the leading.
Electronic dictionary seller for three consecutive years, the JD JD platform.
Talking about new products so the.
People's Education Dictionary Pen was released on September 1st.
And.
It includes the full text and the audio materials from all the official elementary school English textbooks.
So this is a as we said that this is the number one ask for feature for the dictionary pen since the addiction independence relief. So now finally.
Students can enjoy a more convenient and economical textbook.
Expense.
And we also have.
Uh huh.
Another new product new products, the Utah listening listening part.
It is also released in Q3, you know, let me talk a little bit about its performance. So.
He was our first new product a new category of products since our 2020. It focuses on enhancing students English listening in and also speaking.
Capabilities.
Oh for thousands of assuming material employees in adaptive learning.
Technology and assaults key challenges our students face in a standardized English test so.
So it really solves students P pumps.
And perhaps more importantly, it provides all these features.
It's using the cellphone so for the students enjoy a language learning experience without the distraction from from cell phones yeah.
So once it's released it as such.
And actually it turns out to be quite popular as.
As we said the first batch Oh.
Several thousands of the of the impulse was sold out in a week or so.
It was off to a great start.
Yeah.
Uh huh.
So let me quickly comment on the competitive landscape here are the key thing is that for every learning products, we always leverage our proprietary technology.
And our deep understanding of students learning habits. So these comes from many years of R&D and working on these education products. So so we do believe these are all advantages against other hardware companies and also internet companies into it.
This space.
Also as we talked about in Q2, we are doubling down on learning products R&D. So we believe now are.
We have the strongest ever product pipeline in the next few quarters, yeah. So our new products will come out in the next few quarters and we'll share more information.
About them as a week, they're close so our teams are very confident about our future a future for them. So we can wait.
And talking about.
The margins are so gross margins are for building products, it's actually increased compared to the same periods of last year from a 29% to 33%.
So compared to Q2, it's a little bit.
Down from 43% Oh, yeah. So.
It is mainly due to the timing because we're now at the end of the.
The lifecycle of the second generation Dictionary pen. So so we are selling.
More third generation dictionary passed and the second generation, but as we get close to the end of life for a second generation.
So.
Naturally we lowered the price to clean the inventory yeah. So so so we expect this to be a temporary situation after cleaning up the the dictionary pen to inventory the gross margin, we expect to start to increase.
Yeah, I hope that answers your question. Thanks, a lot.
Yeah, that's very helpful. Thank you.
The next question is from Brian Gong of Citibank. Please go ahead.
Okay.
Yeah.
Mr Khan Your line is open.
Is your California mute.
Mr. Gong Yu. Your line is open if you want to you can proceed.
Yeah.
The next question is from Orange County C. I C. C. Please go ahead.
Hi, Thanks for taking.
My question is.
Finally in the continent opinions are there anything at the company is also planning to transform their business.
Dan coffee, especially that's cutting hakan et cetera, yeah, yeah sure. So what do you think about competition in the sector and go what is our competitive advantage.
Yeah.
Thank you Brenda Yeah. This is a telephone.
Oh, yeah, so stem courses or steam pulses, yeah. So.
It's a lot of companies are focusing the <unk> on this segment now yeah. So.
So I can share with you a simple thinking suite, we have right now on in terms of competition. So first is.
Hum.
We have always tried to focus on our larger verticals that.
We we really think we have a competitive advantage. So stem in steam they are they are actually quite large areas segments. Yeah. So when.
When we talk about Tam or steam close this we were actually talking about specific vertical so.
So for example, so.
A lot of people ask us why do we focus on are we Qi yeah. So.
When we started doing not doing starting to doing the wage because it's a it's a very small area. So not a lot of people pay attention to it but.
If you look at how many people are actually interested in learning Ricci and Oh.
Why they they actually have a hard time learning. It's themselves. Then then you can understand that too.
It is a good choice for online courses. So for example, according to the presidents of the Chinese wage She association.
Ours over 60 $60 million, which are players in China.
And every year.
3 million are new logos actually go about telephony, which is so so so we think it's potentially has a lot of a lot of users and.
It is hard actually for people to language by themselves because it's a it's a hard thing yeah. So.
In Q3, so which he revenue who are 30% sequentially. So so weak.
So we think we are we chose the right Oh.
And so we expect it to continue to grow quickly yeah.
So first we focus on the large verticals potentially large verticals yeah. So so the second one.
Principal we have stopped so we rethink quality in depth.
Key for a kind of a long lasting and highly satisfied our courses on product.
The quality and depth.
Both are weighed sheehan's coding our talk product right now have been in development for more than two years. So we.
Involved all of our self developed AI systems interactive learning techniques Oh.
Or even hardware products. So we have a hardware product for our coding course, yeah. It's oh, it's got good feedback so.
Uh huh.
So overall, we think so product excellence is a is more important.
Dan I'm.
The marketing is always so, especially so given that's double deduction limits mapping and.
We think our teams are very good at building excellent products.
And Oh and also grow the product with Oh, what a month or so so we think.
We have a very good shot at stem courses, because we focus on quality and depth.
And lastly, I think the students' needs are increasing.
So for example, because a lot of students young students have more time.
So students used to Oh I used to.
They are they now have more time to pursue them.
Theres steam interests after double deduction and.
We will also work with the schools and other institutions on these classes. So again, we expect the market to be more organic and rational after double reduction and so no money burning a promotion worse. So we think the.
Our high quality and a really a really.
Good products.
They will.
Yeah. Thank you.
Thank you.
The next question is from Thomas Chong of Jefferies. Please go ahead.
Uh huh.
Mr. <unk> your line is open.
Oh wait you won't somehow I, Bobby you see going on in St. Louis I always say I find a bit like I said my name is from.
You bet whatever issue Guangxi.
Cushing by me and Oh boy, but it seems like a strategy that we like the Panasonic I E.
So I don't.
Sure sure.
Yeah, and if you can go a woman a competitive edge of that.
You can find them in our basement instrumental part taking my questions I have a question regarding Oh about education can management comment about our strategies in light of the competition as well as our competitive edge.
Thank you.
Thank you I'm trying to tell them upstairs, so Paul and I have a handful of questions.
So first of all I will probably ask your second question first and I think he is a ballsy intensive a comparative landscape, yeah, and yes, indeed, it would be pretty close also.
The regulation change more and more players are entering to the adult education baseless and without adequate investment, but if we just have but just want to highlight what do you see what seems to be close we are not a peep started our business just now and we have already thought all business back to the 2016.
When we saw a I don't know Bishop will restart all business for our Oh, that's kind of English passed legislation passed which I don't think in business started in the fourth at all so let's think about the way I'll have already collected a lot of the accumulative experience about the house all paid up all the adult business I know how to do.
The high quality.
Well of course, that's a content, but I thought I'd kick off for the adult education for a different SKU.
We have probably a very successfully buildup of cat at the high School English education, that's what all I suppose the extra extra ordinary memory.
Causes for the for the for the for the for the adults. So we think things are in the long run we will definitely be that'll be followed with software experience to Halloween.
While we build up the content and how they operate are volatile.
That's for causes for the adult and to offer more.
Concept on the survey says for the adult footwear.
We need insulin in the long run.
And also a in addition, we think we have strengths all we're planning between batsmen Dana vocational training as well and then in the in the.
Especially in the sub waters after a softer quarters and before a lot of support from different live off the government to encourage the all the investments Asheville I slip.
More resources into the sector, who helps us to promote up all that stuff.
And our location in China. So always think about there is a lot of great potential for this area. So we think that's the fabric.
Bright futures what gets pissed off.
And well go back to your first question, it's eyeballs or the progress of our quarters. Yeah. We are right now we are in the.
Good half hours <unk> pipeline and the weak spots. Besides all the our English classes and also our extra ordinary course that fleet, we expect to offer more vocational training, especially for the I T training and also the auto.
The other process in our AR in the next few quarters, we expect to share more information with you and when he's got caught I hope that answers your question Central Soma.
Thank you.
The next question is from Congress ton of dialogue. Please go ahead.
Hi, Good evening I've got that scholarship until analyst team I'm. So thank you for taking my question and my question is about the education virtualization can you share the progressing.
And also when do you foresee the increased investment.
And then finally can I ask one more question is about who are the key competitors in this area. Thank you.
Hi, This is Nathan.
We believe it's a huge potential for it if you didn't do.
The people with IP.
So the solution.
According to the types of credits are exactly the Mach societies over RMB 650 didn't you didn't put it in this week.
We built a new team intelligent audio.
Radio station into part of the.
The company, which would be targeted to the fuddruckers.
All of them, all but you shouldn't be doing that doosan solution.
The policy are encouraged as a company.
On the aged AR technology to help them you know what at what.
Based on the populated schools to establish the cause of.
I'm sorry.
Uh huh.
And then related to the technology, how do you buy it.
We appreciate your spirit and the digital comes into accretion ability.
And there'll be a lot of people.
The study of education, there probably are to leave us.
The vantage of too.
To meet told me that the amount of.
Education Trust their building.
Hmm this called her.
The Atlanta, though you would ask Martin spending with you right.
Are there new terminal.
This is the first of the two will create the highest.
On the high speed the printing William assumptions.
Huh.
And the other technologies effectively.
Great.
Luke that's than before and after class to comprehensively contracted.
The data is daily teaching per se.
The hardware software.
Trinity.
It looks like linear data collection.
We achieved that target to.
Teacher in the ER, then typically you see the.
We did have the Italians are in.
On the health of the indicators on the student loan.
More effectively and efficiently.
Using our.
All our technology.
Thank you.
Let me add a few words.
Yeah, So uh huh.
Education Digitization solutions. So this is a large area so.
A 400 billion to 500 billion.
Total market, so, it's neuro and others.
The company is doing this so more traditional companies doing this for a longer time not necessarily traditional companies doing this for a longer time. These includes Oh gosh I shouldn't say she will I flagged tech and Seawall S E. W O.
And there are also new companies entering this space, including more familiar names like Baidu Tencent Tencent, yeah. So a lot of companies are interested in doing this but we think we are we have been doing education products for a long time and we can combine.
As our product has shown we combine hardware artificial intelligence and education content. So so we think we can have a a different way of doing this product's emphatically yes. Thank you.
Great. Thank you very helpful.
Okay.
As a reminder, if you wish to ask a question. Please press star one on your telephone.
The next question is from sort of <unk> of Macquarie. Please go ahead.
Hello management. Thank you for taking my questions. My question is about that.
About spinning off that the canine business what is the progress on that and how well, but what do you project, but it's all finished it in a more specific time.
And my second question is how about the business license application, but its pure glass at that thank you.
Oh Hi, Thank you for your question this is Wayne.
I went to a young person.
We are.
Dealing in the process of disposing a war cainite academic piece of meat.
Or cannot be news will come in Sui indication.
As mentioned in our we see revenues from our P 19 accounted for approximately 75% of our total revenues so quota.
Up to now the government authority actively assessing all of the materials related to the business license application for the nonprofit organization.
But.
There's still no clear timetable on this.
We will continue to work constructively with the government authority and connection we see.
Proposed deal and you answered that.
COVID-19 needs to be disposed or terminated by the end of this year.
As disclosed in our official announcement on September 30.
The onion way each time, we reminded all of you again, that's there's no any insurance without M D.
Timing of the proposed deal or do you have the chance to actually will be completed.
Did you update the status of the deal.
The status of goodness.
The license application to the market if any material process with me. Thank you.
Okay. Thank you.
The next question is from Brian Gong of Citibank. Please go ahead.
[noise]. Thank you management for taking my question I'm, sorry, sorry about the technical advantages happened.
And my question is that it has been a few months seems to be proposed.
Some new directions on that business, which includes other agitations S. T. A M courses and also smart devices. So can management give us some updates on that.
The latest progress.
And whether there are any modifications to our new strategies. Thank you very much.
Oh.
Yeah. This is Joe yeah. So.
You're asking about a D a.
Uh huh.
Any any change to the to the <unk> strategy I have to double reduction yeah. So.
Yeah.
Let me, let me talk about a few key things yeah. So.
Yeah. The short answer is that so we think we have the right strategy and we're executing it and we're making good progress and.
Yeah, Let me, let me talk about a few things about Oh actually Oh more thinking about C. A fourth pillar, we called our four pillar strategy. So.
First point I want to make is that.
Oh business, Oh always will have a strong core that is the.
AI and AR learning content creation yeah.
We talk about the four directions for for businesses, but.
It's actually centered around a single course decoy is artificial intelligence center.
Noting content so around this call.
All right.
We have built these oh, there's four different products or services.
And right now.
B E.
We think about whether we want to we thought about whether we wanted to focus on one of them or two of them but.
We do think that's at.
All of them represent good growth opportunities and are.
We will put efforts into each of them right now and down the road.
We may find that one of them is more is so compelling that.
We will just focus on that.
There could be the case, but now we think.
This this is a good setup for us.
So the second point I want to make is that our.
So the importance of our good products so.
I have always had the view that if you can build one differentiate its focus to products that solve other people's problems. Then you can already viewed a very strong business around the product so far.
Product progress.
Is key for our future growth of our business. So.
At this particular time when.
Some of these two.
For businesses are relatively small in.
And scale. So it is more important to actually look at our product our product program. That's why we are we spent more time talking about products.
During the last two calls now so.
We will.
Watch for signs of success from these products. So for example, I talked about you don't listen impart it without any ball.
Filling out the first batch and in a week.
Uh huh.
Uh huh.
It's it's an early sign that shows that we use actually.
Likely achieved a put a market fit for for this product after many months of R&D. Yeah. So so we think that this is just the key yeah. So.
As long as we have product market fit for products are then we can relentlessly iterate and improve and spend more and more energy on marketing and sales and then.
And then we can scale the business yes.
But before that achieving product market fit is key so so we will pay more attention and talk to you more about our product progress and let me also share with you that Oh. Another example is that are we relaunched a chest costs could you Shaanxi.
Of course in September.
So I.
I think it's a pretty special cost because it uses our innovative teaching methods, combining Chinese and English and also.
It's bilingual and also in <unk>.
Collective AI based teaching yeah. So.
So the first months Ah, we watch for its trajectory and we found out that the chest close was actually multiple times better compared with you don't wait for the for the first.
For wages for some months now so so we think that's another way another signed up.
So we are doing something right.
The third and last point I would make is oh, what about the our financial ramifications of this new strategy for going forward yeah. So.
Hum as the academic tutoring side of our business Oh quickly goes down.
That's to be expected and.
Non tutoring business Oh, they actually keep growing they have been growing for some time for many quarters now, but they keep growing and overall.
We expect our top.
Topline growth to see a deceleration in the short term and after that.
<unk> accelerated its growth again, because the none tutoring business will take more parked.
A P P a larger part at that time.
So.
In terms of our bottom line, we expect to see a relatively stable or slightly improving our bottom line.
Sales and marketing S N M costs our expenses.
Expenses quickly go down in the short term.
I would like to highlight that in Q3.
Our operating loss has a substantial substantially shrunk yeah, so it's a $130 million.
Versus.
Oh, hey, $90 million a year.
For here or compare with a $540 million last.
Last quarter.
So I think we're making good progress yeah.
So that's the three points so I hope that answers. Your question. Thank you very much.
Okay.
Thank you very much.
And that concludes the question and answer session I would like to turn the conference back over to the management for any additional or closing comments.
Thank you once again for joining US today, if you have any further questions. Please feel free to contact us directly or reach out to TPG investor relations in China or the back half of a great day.
Yeah.
Ladies and gentlemen, thank you for joining the conference is now over you may disconnect. Your telephones. Thank you.
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