Q4 2022 TAL Education Group Earnings Call

April 29, 2022

Speaker 1: I the.

Operator: Good day, and thank you for standing by. Welcome to TAL Education Group's fourth quarter FY 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session.

Operator: To ask a question during the session, you would need to press star one on your telephone keypad. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. And now, I'd like to hand the conference over to Mr. Jackson Ding, Investor Relations Director. Thank you, Please go ahead, sir.

Jackson Ding: Thank you, Operator. Thank you all for joining us today for TAL Education Group's fourth fiscal quarter and fiscal year 2022 earnings conference call. The earnings release was distributed earlier today, and you may find a copy on the company's IR website or through the news wires.

Speaker 3: Thank you all for joining us today for TAL education group's fourth fiscal quarter and fiscal year 2022 earning conference call.

Speaker 3: The earnings release was distributed earlier today.

Speaker 3: And you may find a copy on the company: our website.

Speaker 3: All through the news wires.

Jackson Ding: During this call, you will hear from Mr. Alex Peng, President and Chief Financial Officer, and myself, Investor Relations Director. Following the prepared remarks, Mr. Peng and I will be available to answer your questions.

Speaker 3: Investor Relations Director.

Speaker 3: Following the prepared remarks, Mr puon and I will be available to answer your questions.

Jackson Ding: Before we continue, please note that the discussions today will contain forward-looking statements made under the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to those outlined in public filings with the SEC. For more information about these risks and uncertainties, please refer to our filings with the SEC. Also, our earnings release in this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of the non-GAAP measures to the most directly comparable GAAP measures. I would like now to turn the call over to Mr. Alex Peng. Alex, please.

Speaker 4: Please note that the discussions today will contain forward-looking statements made under the the safe harbor provisions of the? U's Private Securities Litigation Reform Act of one thousand nine hundred and ninety-five.

Speaker 4: Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations.

Speaker 4: Potential risks and uncertainties include but are not limited to.

Speaker 4: Those outlined in public ffindings with the SEC.

Speaker 4: For more information about these risks and uncertainties.

Speaker 4: Please refer to our filings with the SEC.

Speaker 4: alsoz our earnings release. In this call includes discussions of certain non-GAAP financial measures.

Speaker 4: Please refer to our earnings release, which contains a reconciliation of the non-GAAP measures to the most directly comparable GAAP measures.

Speaker 4: I would like now to turn the call over to Mr. Alex Peng. Alex, please.

Alex Peng: Thank you Jackson, and good evening everybody on the call. I guess, in the way it'll be good morning to those joining from the US. Let me start by noting it's been about a year since the company last organized its earnings conference call. So thank you all for making the time and joining us today, and I'm looking forward to this discussion.

Alex Peng: Let me start with our financial results for the fourth quarter and the whole fiscal year 2022. In the fiscal quarter ending on February 28, 2022, we recorded 541 US dollars in revenue, 0.6 million US dollars, so that's $600,000 in GAAP operating income, and 108 million US dollars in GAAP net loss attributable to tax.

Speaker 5: In the fiscal quarter ending our figure twenty-egh 2022, we recorded 541 longer U's dollars in revenue.

Speaker 5: Zero six thousand U's dollars, So that six thousand U's dollars in GAAP marketing income.

Speaker 5: And 108 million U's dollars in GAAP net loss attributable to tap.

Speaker 4: So since the recent market conditions and regulatory environment developing in our industry in the mainland of China, We've been taking actions and making necessary adjustments to our business.

Speaker 5: We've been taking actions and making necessary adjustments to our business.

Alex Peng: First of all, as of December 31, 2021, we seized offering K-9 academic after-school tutoring services in the mainland of China, which as you all know, used to constitute the majority of our overall revenue. We have since realigned our positioning as a smart learning solutions provider and we have repivoted our product and services along three main trusts, and those are learning services, technology solutions, and learning content solutions, and we offer these to learners and learning institutions both in China and Global.

Speaker 4: Which as you all know, used to constitute the majority of our although- revenue.

Speaker 4: We have since realigned our positioning as a smart learning solutions provider.

Speaker 4: And we have rehiivoted our product and services along three main trusts, and those are learning services, technology solutions and learning content solutions, and we offer these to learners and learning institutions both in China and global.

Speaker 5: The financial performance of our fourth fiscal quarter and fiscal year 2022 reflects such transformation and I will add it's a transformation in motion.

Speaker 5: Let me take this opportunity to express, on behalf of TAL's management team, our sincere appreciation to our customers for their trust and understanding, to our colleagues and ex-colleagues for their dedication, hard work, and perseverance, to our business partners for their assistance with advice, to the regulatory authorities for their supervision and guidance, and last but not least, to our shareholders for their continued support on this transformation journey. Thank you all.

Speaker 4: Further trust. And then you're standing to our colleagues and X colleagues.

Speaker 4: Further dedication, hard work and perseverance.

Speaker 4: To our busance partners or the systems in the Vice.

Speaker 4: To regulatory authorities further supervision guidance.

Speaker 4: And last but long least, to our shareholders.

Speaker 4: Further continued support on this transsp transformation journey. Thank you all.

Alex Peng: As we are transforming into a smart learning solutions provider, as I mentioned before, we're primarily offering the following products and services: learning services and others, learning technology solutions, and content solutions. We're also exploring other initiatives in China and globally.

Speaker 4: As I mentioned before we primary offering of following product and services.

Speaker 4: Learning services and others.

Speaker 4: Learning technology solutution and content solutions.

Speaker 4: We're also fully exploring other initiatives in China and globally.

Alex Peng: Jackson will give you an update on our operational developments in these business areas and review the fourth quarter and fiscal year financial results. After that, I'll update you on our business strategy and then we'll open the floor for questions. So Jackson, please go ahead.

Speaker 4: After that I'll update you on our business strategy and then we'll open the floor for questions.

Jackson Ding: Thank you, Alex. Now let me start by introducing our learning services and other businesses. We provide enrichment learning programs to learners between two and 18 years old. These programs are offered in various class sizes through both online and offline formats. Our offerings currently include the following programs: science and creativity, coding and programming, humanity and aesthetics and etc.

Speaker 4: Let me start by introducing our learning services and others business.

Speaker 4: We provide a richmo learning programs to the learners between two and 18 years old.

Speaker 4: These programs are offered in various clou sizes through both online and offline formats.

Speaker 4: Our offerings currently include the following programs: science and creativity, coding and programming, humanity and aesthetics and etc.

Speaker 4: Size and creativity.

Speaker 4: cooding and programming.

Speaker 4: Humanity and aesthetics and etc.

Jackson Ding: Let me now spend some time to talk about the programs themselves. Science and creativity, guide learners through observation, analysis, and application of various scientific phenomena and theories. The program is designed to develop learners' scientific curiosity and problem-solving capabilities. Coding and programming covers a broad range of computer science-related topics, including programming literacy, software development algorithm, and etcetera.

Speaker 4: sience and creativity, guide learners through observation, analysis and application of various scientific phenomena and theories.

Speaker 4: The program is designed to develop learnner' scientific curiosity and problem-solving capabilities.

Speaker 4: Calling and programming covers a broad range of computer science-related topicsincluding programming literacy.

Speaker 5: Software development algorithm and etcetera.

Speaker 4: The program is designed to advance learners' technological fluency and critical thinking skills. Humanity and aesthetics provide comprehensive learning at the intersection of history, art, and literature. The program is designed to cultivate learners' cultural and aesthetic literacy. Aside from the offerings mentioned above, we are actively developing additional programs. We have witnessed demand from our customers to develop as well-rounded people and lifelong learners. Our enrichment programs are designed to capture that demand. Enrichment learning will continue to be an important pillar in our business going forward.

Speaker 4: And critical thinking skills. Humanity and aesthetics provide comprehensive learning at the intersection of history, art and literature.

Speaker 4: The program is the guide to cultivate learner's cultural and aesthetic literacy.

Speaker 4: asidephon be often mentioned above, we are actively developing additional programs.

Speaker 4: We have witnessed demand from our customers to develop as well-rounded people and lifelong learners.

Speaker 4: Our enoriginment programs are designed to capture that demand.

Speaker 4: In rich.mond learning well continuue to be an important pillar in our business going forward.

Speaker 3: Our second main business area is a learning technology solution. We provide a full suite of enterprise-grade technology products and services to learning institutions. Our offerings cover many components in the value chain of the learning process, including online classroom, content development, teacher support, and learning center management. We are currently serving a number of full profit and multi-profit learning institutions, and we'll continue to expand our customer base.

Speaker 4: We provide a full suite of enterprise-grade technology products and services to learning institutions.

Speaker 4: Our offering cover many components in the value chain of the learning process.

Speaker 4: Including online classroom content development, teacher support and learning center management.

Speaker 4: We are currently serving a number of full profit and mtiful profit learning institutions.

Speaker 4: And we'll continue to expand our customer base.

Speaker 3: Our third main business area is counter solutions. We offer academic and non-academic learning content in both paper and digital formats. The learning content materials themselves are either created in-house, leveraging the broad content library we accumulated over the course of the company history or acquired and or licensed from domestic and global partners. These digitally integrated, highly interactive learning content enable our learners to self-study or to simply consume casually. All these business areas mentioned above are filled in the development stages and are subject to further adjustments. That concludes the operational development section.

Speaker 3: We offperate acthenemic and non-acemic learning content in both paper and digital formats.

Speaker 4: The learning content materials themselves are either created in-house, leveraging the broad content library we accumulated over the course of the company history.

Speaker 3: Or acquired andlow license from domestic and global partners.

Speaker 4: These digitally integrated, highly interactive learning content.

Speaker 4: Enable our learners to selfll-study or to simply consume casualty.

Speaker 4: All these business areas mention above a fill in development stages and are subject to further adjustments.

Speaker 4: That concludes the operational development section.

Jackson Ding: Let me now shift gears a little bit to go through some key financial highlights for the fourth fiscal quarter and then briefly review the fiscal year 2022 financial results. Please note that financial results in the fourth quarter and fiscal year 2022 are subject to impact from one-up business adjustments. They should be taken with care if to refer to our potential future performance. Please also note that such financial performance still includes partial results from K-9 academic after-school tutoring services prior to the succession.

Speaker 4: Please note that financial results in the full quarter and fiscal year 2022 are subject to impact from one-up business adjustments.

Speaker 4: As should be taken with care if to refer to our potential future performance.

Speaker 4: Please also note that such financial performance still includes partial results from K through Ni acemic after-schoolco tutoring services prior to the secession.

Speaker 6: In the fourth quarter of fiscal year 2022, net revenue totaled 541 million US dollars, representing a 60% decrease from 1,363,000,000 in the fourth quarter of fiscal year 2021. The decrease in revenue was primarily driven by the succession of K-9 academic ASC services.

Speaker 4: Representing a 60% the decrease from one point three six three billion in the fourth quarter of fiscal year 2021.

Speaker 4: The decreas in revenue was primarily driven by the succession of K I acemic as services.

Jackson Ding: Gross profit declined by 56% to 343 million US dollars, from 781 million US dollars in the same year-ago period.

Speaker 4: To 343 million U's dollars.

Speaker 4: From 781 minill U's dollars in the same year ago period.

Speaker 4: Selling and marketing expenses decreased by 84% to 103 million US dollars from 660 million US dollars in the fourth quarter of fiscal year 2021.

Speaker 4: Non-GAAP selling and marketing expenses, which excluded share-based compensations, decreased by 82% to 113 million US dollars, from $635 million US in the same year-ago period. Selling and marketing expenses as a percentage of revenue decreased by 29 percentage points to 19% in the last quarter on a year-on-year basis. The year-on-year decrease of selling and marketing expenses was primarily a result of the reduction of marketing promotion activity.

Speaker 4: Which excluded share-based compensations, decreased by 82% to 113 million U's dollars.

Speaker 4: From $635 million in the same year ago period.

Speaker 4: Selling and marketing expenses as a percentage of revenue decreased by 29 percentage points to 19% in the last quarter on a year-on-year basis.

Speaker 4: The year-on-year decreased of selling and marketing expenses.

Speaker 3: Was primarily a result of the reduction of marketing promotion activity.

Jackson Ding: General and administrative expenses decreased by 39% to 212 million US dollars, from 349 million US dollars in the fourth quarter of the fiscal year 2021.

Speaker 4: To 212 million U's dollars.

Speaker 4: From 349 minute U's dollars in the fourth quarter of the fiscal year 2021.

Speaker 4: Non-GAAP general and administrative expenses, which excluded share-based compensation expenses decreased by 31% to 203 million US dollars, from 294 million US dollars in the same year-ago period.

Speaker 4: Decreased by 31% to 203 million U's dollars.

Speaker 4: From 294 million U's dollars.

Speaker 4: In the same year ago period.

Jackson Ding: Income from operations was 0.6 million US in the fourth quarter of fiscal year 2022, compared to loss from operations of 297 million US dollars in the same year-ago period.

Speaker 3: Compared to loss from operations of 297 million U's dollars in the same year ago period.

Speaker 3: Non-GAAP income from operations, which excluded share-based compensation expenses was 0.8 million US dollars, compared to non-GAAP loss from operations of 217 million US dollars in the same period of the prior year.

Speaker 3: Net loss attributable to TAL was 108 million US dollars in the fourth quarter of fiscal year 2022, compared to net loss attributable to TAL of 169 million US dollars in the fourth fiscal quarter of fiscal year in 2021.

Speaker 3: Compared to that loss attributable to tl of 169 in a? U's dollar in the fourth fiscal quarter of fiscal year in 2021.

Speaker 3: Non-GAAP net loss attributed to TAL, which excluded share-based compensation expenses was 108 million US dollars, compared to non-GAAP net loss attributable to TAL of 89 million US dollars in the same period of the prior year.

Speaker 3: Compared to non-GAAP net loss attributable to til of 89 minute U's dollars in the same period of the prior year.

Speaker 3: As of February 28, 2022, the company had 1,638,000,000 of cash and cash equivalents. 1,071,000,000 US dollars of short-term investments, and 1,044,000,000 US dollars in current and non-current restrictive cash.

Speaker 4: one point zero seven one billion U's dollars of short-term investments.

Speaker 4: And one point zero four four billion your's dollars in current and noncurrent restrictive cash.

Speaker 3: As of February 28, 2022 thousand, the company's deferred revenue balance was 188 million US dollars, compared to 1,417,000,000 US dollars as of February 28, 2021, representing a year-over-year decrease of 87%, which was primarily driven by the succession of K-9 academic ASC services.

Speaker 4: Compared to one point four one seven billion U's dollars.

Speaker 3: As well. February , 20 egh twentthousand and 20, one representing a year-over-year decrease of 87%.

Speaker 3: Which was primarily driven by the succession of K two Ni academic as services.

Speaker 3: Turning now to the fiscal year of 2022 financial results, let me briefly review some key financials as [inaudible].

Speaker 3: Let me briefly review some key financials as fallse.

Speaker 4: Fiscal year revenues decreased by 2%, 4,391,000,000 US dollars. Growth profit decreased by 11% to 2,188,000,000 US dollars.

Speaker 3: To four point three nine one billion? U's stars growth profit decreased by 11%.

Speaker 3: To 2000000.188 trillion U's dollars.

Speaker 3: Loss from operations was 615 million US dollars in the fiscal year 2022, compared to the loss from operations of 438 million US dollars in the prior year.

Speaker 4: In the fiscal year 2020 two.

Speaker 4: Compared to the lastss Form operations of 438 million yours dollars in the prior year.

Speaker 3: Non-GAAP loss from operations, which excluded share-based compensation expenses was 440 million US dollars for the fiscal year 2022, compared to non-GAAP loss from operations of 233 million US dollars in the fiscal year 2021.

Jackson Ding: Net loss attributable to TAL was 1,136,000,000 US dollars in the fiscal year 2022, compared to net loss attributable to TAL of 116 sixteen million US dollars in the previous fiscal year.

Speaker 5: Non-GAAP net loss attributable to TAL, which excluded share-based compensation expenses was 961 million US, compared to non-GAAP net income attributed to TAL of 89 million US in the fiscal year 2021.

Speaker 5: That concludes the financial highlights section. Now, I'll hand the call over to Mr. Peng to briefly update you on the business strategy outlook. Alex, please.

Alex Peng: Thanks, Jackson. So fiscal year 2022 was certainly an eventful year in our industry. We went through significant changes in the regulatory environment and market conditions. And I think we just entered into the opening chapters of our transformation journey.

Speaker 7: And I think we just entered into the opening chapters of our transformation journey.

Alex Peng: But when I look forward and look into the future, and thinking about the mega trends in technology and in society, we're also seeing new opportunities, but also new challenges. I think the company will continue to strive to capture these opportunities and overcome these challenges through the strength of our brand, our experienced staff, our content development capabilities, our technology, and our operation in [inaudible].

Speaker 7: And thinking about the me trends in technology and in society. We're also seeing new opportunities, but also new challenges.

Speaker 4: I think the company will.

Speaker 5: Continue to strive to capture these opportunities and overcome these challenges.

Speaker 5: And through the strength of our brands, our experienced staff.

Speaker 5: Our content development capabilities, our technology and our operation in moleha.

Alex Peng: Looking forward, we expect learning services, learning technology solutions, and content solutions to have viable business models. And we'll continue to invest into other new initiatives. As a smart learning solutions provider in China and abroad, we'll continue to serve learners and learning institutions globally.

Speaker 3: Learning technology solutions and comeent solutions to have viable business models.

Speaker 3: And we'll continue to invup into other new initiatives as of smart learning solutions providing in China and theabroad. We'll continue to serve learners and learning institutions global.

Speaker 3: And as I come to the end of my prepared remarks, I'll just make a personal reflection. As the Chinese saying goes, the journey is arguably long and you will get through by just going forward. And I think that speaks to the mindset of the management and the company, we'll just go forward. So that concludes my prepared remarks. Operator, we're now ready to take questions.

Speaker 3: As the Chinese thing goes, the journey is arous long.

Speaker 3: And you will get to by just going forward, and I think that speaks to the mindset of the management, and the company will just go forward.

Speaker 5: So that concludes my prepared remarks operator. We're now ready to take questions.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session.

Speaker 2: If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to withdraw your request, please press the pound or hash key. Please standby while we compile the question and answer roster.

Speaker 2: So once again, it's star one for questions. Our first question comes from Lucy Yu from Bank of America. Please go ahead.

Lucy Yu: Hi Alex, hi Jackson. Thanks for taking my questions. This is Lucy calling from Bank of America. I have a question on restructuring costs. So how much of the restructuring costs are related to K-9 termination that were recorded in your last fiscal year 2022, and how were these restructuring costs recorded in P&L and will there be any more similar costs in the upcoming year? Thank you.

Alex Peng: Lucy, thank you for your question. As previously announced by the company, we see the offering K-9 academic after-school tutoring services in the mainland of China by the end of last year. The one-time cost and expenses incurred in the process were primarily related to staff optimization and learning center optimization. Such cost and expense items have largely been reflected in the second half of our fiscal year 2022 financial results. I would just say it was tremendously difficult to say goodbye to some of our [inaudible] colleagues. We downsized significantly in the last year and tried our best to balance the career of our employees, the interest of our learners, and the staffing needs of the company in this downsizing process.

Speaker 5: The onetime cost and expenses incurred in a process were primarily related to staff optimization and learning bench optimization.

Speaker 3: Such cause and expense items have largely been reflected in the second half of our fiscal year 2022 financial results.

Speaker 3: I would just say it was tremendly difficult to say goodbye to some of our enddeared kct.

Speaker 3: We deal significantly in the last year and trit about best to balance the career of our employees.

Speaker 3: The interest of our learners and the staffing needs of the company in this delaric process.

Speaker 3: As for real estate-related costs and expenses, we have been having some active discussions with [inaudible]. The process itself is taking slightly longer than the staff optimization process. We'll consider the current business situation and future business need in adjusted learning markets. Besides, with the ongoing advances in the learning market, will continue to adjust our geographic footprint in the future. So, in short, I think the bulk of the K-9 succession-related cause and expenses have already been booked in the FY 2022 financial results. There might still be a small amount in the next couple of quarters. I hope that answers your question.

Speaker 5: The process itself is taking slightly longer than the fact, or an optimization process.

Speaker 5: We'll consider a current business situation and future business need in adjust Ed learning asset.

Speaker 3: Besides, with the ongoing vanes in the running in the learning market, will continue to adjust our geographic footprint in the future. So, in short, I think the bulk of the trinesth k-through nice secession related cause and expenses have already been booked in the FY 2022 financial results.

Speaker 3: There might still be a small a month in the next couple of quarters. I holdpe the answers your question.

Multiple speakers: Yes, thank you so much. Thank you. Our next question from DS Kim from JP Morgan. Please ask your question.

Multiple speakers: Hi Alex, hi Jackson. Good evening and thanks for taking my questions. And by the way, it's great to see our operating profit turning positive in this challenging market, congrats on that. Just to follow up on what you just mentioned, can I ask what would be the clean OpEx level for the coming quarters? We understand most of the restructuring courses have already been booked, but just to gauge how much would be the recurring level, can I know either how much was booked in fourth quarter so that we can straighten it out, or what would be the recurring level going forward? Got it. Thank you, DS for the question. That's a great question. But I think before we answer kind of the OpEx outlook on the future, the first step is probably to kind of discuss a bit how many learning centers and employees we have returned and as such will have a better estimate of our Opex going forward.

Jackson Ding: We have made substantial progress by now in restructuring. As Alex mentioned earlier, we're transitioning to be a small learning solutions provider to deliver learning services, learning technology solutions, and content solutions.

Speaker 3: We're in an evolving market today and when we decide how many learning centers and how many employees to keep, we'll take into consideration the current business situation and future business needs.

Speaker 3: By now, staff optimization has achieved substantial results and our overall employee size is a fraction of what it used to be. The current employee scale will provide suitable human capital resources for the business transformation. As for our learning centers, you can see on our financial report that our operating needs right-of-use assets decreased by 5% compared with two quarters ago.

Speaker 5: The current employee scale will provide suitable Humana capital resources for the business transformationas. While our learning centers- you can see on our financial report- got operating. These right-of-use asse decreased by a 5% compared with two quarters ago.

Speaker 3: The reduction in learning centers is in line with the reduction of operating. Like I said earlier, we're still having some ongoing discussions with a few of our landlords to support optimized geographic [inaudible].

Multiple speakers: As for the OpEx itself, what you see on our fourth quarter financials, this still includes some OpEx prior to the K-9 succession. So as we look forward, you can expect all Op-Ex to change at the current level. Thank you, that's really helpful at congrats again on turning profits this quarter.

Speaker 3: So as we look forward, you can expect all PS to change at the example current level. Thank you, this really helpful at comeared to get or the turning profit this quarter.

Operator: Thank, you all. Our next question comes from Mark Lee from [inaudible] Please ask your question.

Mark Lee: Hi management, thank you for the presentation. May I know your future development plan for the technology solutions and content solutions, these two segments respectively; any key operating metrics we can track, and what do you think about the timing to see this assignment to take off? Thank you.

Alex Peng: Great, thanks Mark. This is Alex, let me take on that question. I think, before addressing specific plans, metrics, and timing, I want to bring this question sort of take a step back and bring it one level up. As I mentioned in my earlier remarks, looking forward, we're really seeing some very interesting and exciting developments in the industry across the world. In the last, I would say, six to eight months I've had the opportunity to speak with a number of players and colleagues from the industry from many different parts of the world, in the US, in Europe, and in other parts of Asia.

Speaker 7: Very interesting in citing developments in the industry across the world in the last out to six to eight months of how the opportunity to speak with a number of players and colleagues from the industry from many different parts of the world in the? U was in Europe , in other parts of Asia.

Speaker 7: And I think from those conversations, many of them are telling me that we're really at the cusp of a learning revolution. And from these discussions, I think, four words come to my mind. Those are online, digital, intelligence, and open. Let me explain a little bit around those four words, right?

Speaker 7: And from these discussions, I think, more words come to my mind.

Speaker 4: Those are online digital intelligence and open.

Speaker 4: Let me explain a little bit around. Those four works right, So online specialized less.

Alex Peng: So online, especially with the impact on attendance, the online learning format is really [inaudible]. It's here to stay. Digital, we're seeing digital content and digital devices playing an increasingly important part in the learning drill. Intelligence, with the advent of cognitive technologies and artificial intelligence-related algorithms, we're really seeing a much more natural and personalized experience for the learners. And the last one is open. It's like the proverbial, it takes a village. It takes many players in the learners' world and journey to make it successful. It takes content and technology from many players to make it possible.

Speaker 7: Digital we're seeing digital content and digital devices playing an increasingly important part in the learning drill.

Speaker 7: Intelligence were the advs of cognitive technologies.

Speaker 7: And artificial intelligence related all workcomms.

Speaker 7: We're really seeing a much more natural and personalized experience for the burners. And the last one is open.

Speaker 7: withs. Like the proverbal, it takes the village, it takes many players.

Speaker 7: In the learners's wordning Journal. To make it success it takes constants and technology from many players to make it possible. So just to build on that.

Speaker 4: So just to build on that, really if we talk about our strategy broadly speaking, I think we'll continue to strive to build world-class, first-party content, but also to work with content providers across the world to bring those content to learners, both in China and in the rest of the world. We really look forward to integrating this experience across many different formats with technology and to provide a much more natural and individualized, personalized learning journey for learners.

Speaker 4: But also to work with content providers across the world to bring those content to learners. bothingin China and in the rest of the world. We really look forward to integrating this experience across many different formouts for world technology. And to provide a much more natural and individualized personalized learning journy to learn us.

Speaker 4: bothingin China and in the rest of the world. We really look forward to integrating this experience across many different formouts for world technology. And to provide a much more natural and individualized personalized learning journy to learn us.

Speaker 4: And to provide a much more natural and individualized personalized learning journy to learn us.

Multiple speakers: Lastly,I think with the technology that we've built over the years and with experiencing the path of serving other players in an industry, we really look forward to empowering the entire ecosystem on its digital transformation journey. So if you say naturally, that's how you look at this, I look at the trends going forward and the big direction for us. But we are still in the early stages of this transformation. We have many of the components that I talked about that we've built over the years but we're really still striving to build viable business models to fine-tune and optimize our product and services and continue to work with more partners across so many different margins. So I look forward at a future date to give everybody updates on the metrics and how this drives our transformation forward. Thanks, Mark, Thank you, Alex.

Speaker 7: Experiencing the pth of serving other players in an industry. We really look forward to empowering the entire ehco system.

Speaker 7: On its digital transformation J So if you say macly, that's how you look at this. I look at the transds going forward and the big direction for us.

Speaker 4: But we are still in the early stages of this transformation.

Speaker 7: We have many of the components that I talked it about that. We've BU over the years but we humually.

Speaker 7: Still striving to build viable business models, to fine-tune and optimize our product and services and continue to work with more partners across so many different margins. So I look for Ward, at a future date, to give everybody updates on the metrics and how this drives our transformation. For thanks Mark, Thank you, Alex.

Operator: Thank you. Our next question comes from LC Shank from Morgan Stanley. Please go ahead.

LC Shank: Thank you management for taking my questions. My question is also related to the new initiatives. So you just talked about many new projects and also projects that you are working on, so which of them are more important than the others? And also, how much revenue contribution do you expect from this new business in the future? Thank you.

Jackson Ding: Thanks, LC for that question. Great question. As I mentioned before, we think the main contribution to [inaudible] upcoming of [inaudible] the revenue will come from those three buckets: learning services, learning technology solutions, and content solutions. And out of these three areas it's likely that learning services will be the largest revenue contributor in that [inaudible].

Speaker 3: And out of these three areas is likely, the learning services will be the largest revenue contributor in that pipetime T.

Speaker 7: But I'll [inaudible] to add that these businesses are still relatively early and we'll have more clarity on their overall side as they continue to develop. Other new initiatives, let's take an example, overseas academic tutoring, those are still really in exploratory phases and it's probably even harder to really predict their size. We'll continue to operate and develop these initiatives, and scale them up when the right market conditions and the right internal capabilities arrive.

Speaker 7: Other new initiatives. Let's take an example: overseas I had done a tud. Those are still really in exploratory phases.

Speaker 3: And it's probably even the further to really predict their sideze. We'll continue to operate and allve these initiatives.

Speaker 7: And scale them upp when the right market conditions and the right internal capabilities are thoses right now.

Speaker 3: Right now, as I mentioned before, we are in this transformation journey, in motion. We are indeed undergoing major business adjustments and those new initiatives in conjunction at the same time. Some of these business areas have just started and we'll obviously look forward to providing performance [inaudible] as soon as possible in the future. Thanks, LC.

Speaker 3: We are indeed undergoing major business adjustments and thoseing new initiatives- income junction- at the same time.

Speaker 12: Some of these business areas have just started and will obviously look forward to providing performance outlar as soon as popable in the future. That's elalthy.

Multiple speakers: Thank you, that's very helpful. Thank you. Our next question comes for Felix Liu from UBS. Please ask your question.

Felix Liu: Good evening and thank you management for taking my question, and congratulations on turning profitable in a very challenging environment. My question is on your transition towards the non-academic tutoring. So could you share a bit more color on the transition, more specifically, I'm coming from the typical angle [inaudible] enrollments. Are we looking at any retention rate this year and the margin outlook for the non-academic tutoring. Thank you.

Alex Peng: Great thanks, Felix. Another great question. Let me first recap a little bit what Jackson talked about before. I think, [inaudible] was the enrichment learnings services in terms of the subject areas are very different from academic after-school tutoring services.

Speaker 7: But the business model, if we look at the [inaudible] business model it's almost similar to that of academic ASC. The product format is different. I mentioned the content format is different. We provide enrichment learning services in both online and offline formats in various class sizes.

Alex Peng: And we are also making some very interesting observations- that these kind of classes typically will foster a lot more interaction, a lot more student-driven activity, and we absolutely look forward to continue to innovate and optimize those offerings to our customers and their operations. For sure, we're closely tracking the metrics that reflect the overall health and growth of the business, so we can continue to fine-tune the business model. So I think it's really built too early to discuss the metrics themselves, but we'll come back to you as soon as possible.

Speaker 3: For sure we're closely tracking the metrics that reflect the overall health and growth up the business. So we can continue to finds in the business model. So I think it's really built too early to discuss the metrics themselves. But we'll come back to you as and that's topicalthank.

Operator: Thank you. Our next question comes from Linda Huo from Maccary. Please ask your question.

Linda Huo: Hi, thanks management. So I have one question regarding our cash position, we know that we probably need to spend some money to continue to invest in the new business and we probably also will suffer from the certain [inaudible] of the lossmaking. So I just want to know how should we look at our cash position and to which point of the cash level you will we drawdown? And from our announcement, I also noticed that the company would like to continue to reward its shareholders by share repurchase. So I just want to know that, in addition to the share repurchase, the management has ever considered to use the cash to return to the shareholder, and when the management is thinking about the shareholder return for like the cash return versus share repurchase, what is the rationale there behind that? Do you prefer one over the other? Thank you very much.

Alex Peng: Thanks, Linda. Again, let me unpack that question a little bit. I think in our earnings release there are numbers from the balance sheet you can see. I think Jackson talked a little bit about that. Let me just briefly say we believe the cash position is very solid. You talked about this share repurchasing plan, again as mentioned in our press release earlier, the Board has authorized an expansion of our share repurchase plan. And this is the expansion from the plan that was put in place about a year ago. The plan effectively allows the company to repurchase up to approximately 800 million US dollars of the company's share over the next 12 months. And the company was also informed that senior management of the company will use their personal funds to purchase up to 100 million of the company's shares.

Speaker 3: You talked about this share repurchase plan again as, mentioning our trust rease earlier, it- the Board has authorized an expansion of our share therepurchase plan.

Speaker 7: And the food expansion from the plan that was put in place about a year ago. The plan that factivethat we allowed the company to reppurchase up to approximately eight million U's dollars of the company's share over the next 12 monthsand the company was also informed a senior management of the company.

Speaker 3: Will use their personal funds to purchase up to one million of the company's ships. I think that.

Speaker 3: I think that the share repurchase has long been a way for us to create value for our long-term investors and shareholders. Last year we approved the current share repurchase plan and executed a portion of it, and we really, really appreciate our shareholders continued support through this transformation and we'll continue to create shareholder value. Thanks, Linda.

Speaker 3: Last year we approved the current share reppurchase plan as executed, a portion of it, and we really, really appreciate. Our shareholders continue to support throughue this transformation and we'll continue to create shareholder value in Selena.

Linda Huo: Okay, very clear. Thank you very much.

Operator: Thank you. Our next question comes [inaudible] from [inaudible]. Please ask your question.

Unknown Speaker: Thanks Alex and Jackson for taking my question. Just one quick one from me on the Board compensation. So could management elaborate a little bit more on the change of the Board compensation? Thank you.

Alex Peng: Thanks [inaudible]. First of all, let me just say we're really delighted to appoint Janet Yan Feng to our Board of Directors. Janet is currently a Senior Vice President and the CEO of financial services business unit of [inaudible].com and she has extensive experience in business and finance.

Speaker 3: Janet is currently a Senior Vice President and the ceield financial services business unit of ch com. As a extensitive experience in business in sciance.

Speaker 3: So we're really confident that this addition of a seasoned senior executive, such as Janet will add tremendous value to the company. And I will also take this opportunity to really thank Janet for over a decade of service on the Board of Directors. Jane is a dear friend and a mentor. We learned a tremendous amount from Jane and I wish for her the best of luck in her future endeavors.

Speaker 3: And I will also take those opportunity to really thank janes sum for her over a decade of service on the Board of the lectctors.

Speaker 3: jie for dear friend and the mentor. We learned a tremendous amount from Jane and I wish for the setsel lock click up in her future endepers.

Alex Peng: Besides this change, our core members on the Board are stable. Our Founder and CEO, Bangxin Zhang will serve as the Chairman of the Board and Mr. Yunfeng Bai will continue serving as a Director. I think our founders continue to be really committed to the business group and are actively lining the business transformation. Thanks.

Speaker 7: And Mr unful buyer will continue serving as a Director. I think our foundenders continue to be really committed to the business group and are actively lining the business transformation. Thank, lrena.

Unknown Speaker: Right, thank you.

Operator: So we have reached the end out of the question and answer session, and with that, we conclude our conference for today. Thank you for participating. You may all disconnect.

Speaker 1: The.

Speaker 1: So.

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