Q4 2023 TAL Education Group Earnings Call
Speaker 1: Ladies and gentlemen, good day and thank you for standing by. Welcome to Tele-Education Group Fourth Quarter and Fiscal Year 2023 earnings conference call. At this time, all participants are in a listen-only mode.
Speaker 1: After the speaker's presentation, there will be a question and answer session. Please be informed that today's conference is being recorded. I would now like to hand the conference over to Mr. Jackson Ding, investor relations director. Thank you. Please go ahead, sir.
Speaker 2: Thank you, operator.
Speaker 3: fiscal quarter and full fiscal year 2023 earnings conference costs.
Speaker 3: The earnings release was distributed earlier today, and you may find a copy on the company's IR website or through the newsletters.
Speaker 3: During this call, you will hear from Mr. Alex Pung, President and Chief Financial Officer.
Speaker 3: and myself, Investor Relations Director.
Speaker 3: Following the prepared remarks, Mr. Peng and I will be available to answer your questions.
Speaker 3: Before we continue, please note that today's discussions will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.
Speaker 3: Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from current expectations.
Speaker 3: potential risks and uncertainties included, but are not limited to those outlined in our public filings with the FCC.
Speaker 3: For more information about these risks and uncertainties, please refer to our findings with the SEC. Also, our earnings release and this call include discussions of certain non-GAAP financial matters.
Speaker 3: Please refer to our earnings results, which contain the reconciliation of the non-GAAP measures to the most directly comparable GAAP measures.
Speaker 3: I would like to now turn the call over to Mr. Alex Peng.
Speaker 4: Alex, please go ahead.
Speaker 3: Thanks, Jackson. I appreciate you all for joining us on today's call.
Speaker 3: I would like to take this opportunity to share with you our progress for the fourth fiscal quarter, as well as review some key results from the full fiscal year 2023.
Speaker 3: Let's start with our financial performance for the fourth fiscal quarter of 2020.
Speaker 3: We continue to improve our service offerings, develop new initiatives, and progress our strategic transformation roadmap.
Speaker 3: As a result, for the fourth fiscal quarter ending on February 28, 2023, we recorded $269 million and 1.845 billion RMB in net revenues for the quarter.
Speaker 3: The net revenues increased by 11% and 16% in RMB and US dollar terms, compared to the third fiscal quarter respectively.
Speaker 3: in terms of profitability.
Speaker 3: For the fiscal quarter ended on February 28, 2023.
Speaker 5: We recorded.
Speaker 3: 18.1 million US dollars.
Speaker 3: and $13.1 million in non-GAAP loss from operations.
Speaker 3: and non-GAAP net loss attributable to TAO, respectively.
Speaker 3: For the full fiscal year of 2023, we recorded net revenues of more than $1 billion US dollars.
Speaker 3: and generated positive non-gap operating profit.
Speaker 3: Physical year 2023 was a year of transformation for TAL.
Speaker 3: This was the first full fiscal year of our operations.
Speaker 3: Carson through grade nine in the mainland of China.
Speaker 3: In fiscal year 2023, some of our newer initiatives, such as enrichment learning, smart books, and smart devices exhibited material developments.
While we are
By these developments, we continue to upgrade our product offerings and improve our operational efficiency.
We believe the combination of these efforts by our team and all of our partners lay the foundation for our long-term sustainable development.
for and seize new opportunities.
At the same time, we would like to take this opportunity to express our gratitude to all of you.
for your continued support during our transformation journey.
As the whole industry and their goals ethnologically evolution would look forward to Charles' next stage of development. With that overview, I would like to hand the call over to Jackson. He will give you an update on the operational development of our fourth-estate line.
an update on our Go For strategy in plans for fiscal year 2024.
So then open the corporate version.
So Jackson, please go ahead. Thank you, Alex. I'm pleased to share some details on the progress we made in our three main business lines this past quarter. Before we start, please note that the financial data based on our end-of-the-resolve report.
First of all, let me talk about our learning services, which are counted for around 75% of our total revenues this fiscal quarter. Our enrichment learning programs continue to develop in this quarter and it is our largest revenue contributor within learning services. Our
The net revenue is generated from the Enrichment Learning programs through quarter over quarter.
That revenue is generated from the enrichment learning programs through quarter over quarter, primarily as a result.
of an increase in long term cost learner income. During this quarter, we have observed signs of recovery in offline activity, which has had a positive impact on offline enrichment learning services. As a result,
we expanded our Learning Center network in this quarter. Going forward, we'll continue to manage our network expansion plan in accordance with market demand and business efficiency. With also method, learning services business continues on its development path.
Think Academy, our overseas learning service business, also maintained its growth momentum. For the fourth quarter of fiscal year 2023, think Academy once again realized a year over year should both dig it well. In both total revenues and long-term learning growth.
Moving on to our content solutions business, which accounted for more than 15%.
of total net revenues per quarter.
In this quarter, content solutions recorded year-over-year growth.
given by our product development.
and go-to-market capability. We continue to roll out new SKUs.
based on learner demand during different times of each day. In the fourth fiscal quarter, we launched a new small court that provides learners with a comprehensive and interactive learning experience for the way to move.
A total of more than 40,000 copies, sorry, a total of more than 400,000 copies have been sold in the fourth fiscal quarter. A key element of our constant solutions...
to combine quality learning content with product formats that apply innovative technology.
In February , we launched QRC X-Path, an AI-driven learning device with an 11-inch screen display.
designed with eye protection functions. The content library of X-Path includes both self-developed content and content from external partners.
by combining intelligent functions such as personalized processing.
learners can have a personalized and interactive learning experience.
We have installed this product through live streaming e-commerce and other channels. We have received some positive feedback from our customers on this product.
and will continue to upgrade the product based on user input and our understanding of the market.
to upgrade the product based on user input and our understanding of the market. Was that over the year?
I would now like to walk you through our key financial results for you. Our net revenues totaled 269 million US dollars.
representing a 50.3% decrease from $541.2 million in the same period last year.
The declining revenue was a result of the cessation of offering academic subjects to students from kindergarten through ninth grade in the mainland of China.
Cost of revenues decreased by 35.5% year over year.
be increased by 35.5% year over year to...
$127.7 million from $198.1 million in the fourth quarter of this year 2022.
non-GAAP cost of revenues, which excludes share-based compensation expenses, decreased by 36.9%.
to 124.9 million U.S. followers.
From 100 to 97.9 million US dollars in the fourth quarter of fiscal year 2022.
Growth profit decreased by 58.8%.
to $141.3 million from $343.1 million in the fourth quarter of fiscal year 2022.
Starting a market expenses decreased by 28% to $74.5 million from $103.5 million a year and yours haven't been so serious and??
long-d Prest wide across Marina market.
which includes shared-based conversations.
decreased by 40.9% year over year to $66.9 million.
from $113.1 million in the same period last year.
The year of year decreased was primarily the result of a reduced number of selling marketing activities. General administrative expenses increased by 47.1%.
So, 110 torque points. It's too many use? subst exploration.
from 200.1 million in the fourth fiscal quarter of last year.
non-GAAP general and administrative expenses which excludes share-based compensation costs.
decreased by 52.5% year over year to 96.3 million US dollars.
from $202.5 million in the same period of fiscal 2020.
$5 million in the same period of fiscal 2022.
Lots of operations was $44.4 million.
Compared with an income of $6 million in the fourth fiscal quarter of 2022. Long gap loss from operations, which includes share-based compensation expenses.
was $18.1 million compared with an income of $0.8 million in the same period of the prior fiscal year. The year-over-year decrease in operating loss was primarily a result of the cessation of awfully endemic subjects. In fact, when resonating with the
to students from kindergarten through ninth grade in mainland China, and our investments in several initiatives in this corner designed to support our business position.
That loss of sugar goals to powers was –
39.4 million US dollars in this quarter. Compared with a net loss of 108.1 million US dollars in the same period of the entire fiscal year.
Long gap net law should be the most of power, which excludes share based compensation expenses was $13.1 million.
compared with the loss of 108.0 million U.S. dollars in the same period of the prior fiscal year.
Turning to a balance sheet.
As of February 28, 2023, we had a
2 billion and 2 billion and 22 million.
US followers of Cash in Cash recruitment.
$1.15 billion of short-term investments.
and $273 million in current and non-current restricted cash.
Our deferred revenue balance was $237 million.
as of the end of the fourth fiscal quarter. The pairing was $187.7 million US dollars as of February 28, 2022.
Turning now to the fiscal year 2023.
financial result. Let me briefly review some key financials as well.
Fiscal year net revenues decreased by 76.8% to $1 billion at $19.8 million.
First profit decreased by 37.7% to 583.4 million. Loss from operations was 90.7 million in fiscal year 2023.
compared to the loss of operations of 614.5 million in the prior year.
non-GAAP income from operations, which excluded share-based compensation expenses, was 17.8 million for fiscal year 2023 compared to non-GAAP loss from operations.
of 439.7 million in fiscal year 2022.
Net loss of $0.2T was $135.6M in the fiscal year 2023, compared to net loss of $1.1B, $136.1M in the previous fiscal year.
non-GAAP net loss attributable to power, which excluded share-based compensation expenses.
was $27 million compared to non-gap net income in the last year and a half.
961.3 minutes.
951.3 million US dollars in fiscal year 2022.
That concludes the financial highlights section. I'll now hand the call back to Alex to briefly update you on our Business Strategy Health.
As we move into fiscal year 2024, I would like to share with you the
three key directions that are really simple to our strategy.
elections that are really simple to our strategy. First.
in terms of execution of our current business.
Some of our businesses, such as in Richmond Learning, really demonstrated a viable business model.
while others are still in exploratory phases.
As for the more mature businesses, we plan to balance growth and profitability and manage our operation more efficiently.
Are the businesses still in exploratory phases such as learning divide?
We'll focus more on product market value.
and creating value for our customers. We expect our overall revenue to exhibit year-over-year growth in FY24, and will manage our profit-ability goals.
creating value for our customers. We expect our overall revenue to exhibit year-over-year growth in FY24, and we'll manage our profitability growth. Thank you.
AI technologies have brought and continue to bring profound changes to the learning industry.
particularly with regards to how concepts will be developed and how services will be developed.
the adoption of AI technologies will create a new paradigm in our industry.
and will present significant opportunities as well as challenges. We'll continue to innovate our business, adopt new technologies, and aim to see new opportunities to walk forth by this new wave of technology.
What's that noise?
We look for ways to generate shareholder return. In the last 12 months, under the share we purchased program from April 2022 to April 2023, the company spent approximately $66.4 million.
to repurchase 17.9 million shares of its American depository share.
representing 2.81% of total share outstanding on February 28, 2023.
House Board of Directors has authorized the stand in cheer of the purchase of them by 12 months.
As I come to the end of my prepared remarks, I'd just like to share with everyone that I've actually been doing quite some reading on artificial intelligence.
academic papers, articles, and actual books.
And I actually found a particularly fitting quote that is widely attributed to Alan King, the American computer scientist who was often accredited for inventing object-oriented learning. The best way to predict the future is to invent it.
The best way to protect the future is to invent it.
We live in a mirror where technology can evolve at a precedent speed, and rather than reacting to the new opportunities brought forth by evolving technologies, we can also be more designers deputy designers in companies that are leading this technology.AN S S S S S S T S S S
We intend to proactively create them.
So that concludes my prepared remarks. Operator, we're now ready to open the call for questions.
Thank you. We will now begin the question and answer session. To ask a question, please press star 1 1 on your telephone.
You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A roster. Once again, that's star 1 1 for questions. Our first question comes from the line of Felix Liu from...
include Smart Hardware. I noticed that you recently launched a new tablet and so good development there. So I think my question is on the long-term address market for learning hardware, what do you think, how big the market is?
What is the UNA economics that you would predict and what are the impact to our margin for the next fiscal year? Thank you. Thanks, Phillips. This is Alex. Let me take on that question. I think on the term question, you know, we've obviously been reading and doing...
to that, that the actual target market is not just that narrow definition of learning path. We're obviously seeing a lot of...
you know, tabla, general purpose tabla are being used, you know, for the learning scenario. And, you know, if you add that to the total 10, we're probably looking at maybe 10 million and even, you know, north of 10 million in terms of, in terms of shipment. So this was the significant mark.
energy supply chain and optimizing costs.
Right now, the business is really in pretty early stages.
And we're confident that they will have a positive impact on our revenue growth.
So I hope that answers your question.
So I hope that answers your question. OK, thank you.
Thank you. Our next question comes from the line of Hawitson from Macquarie. Please ask your question, Howitt.
Thank you. Our next question comes from the line of Howard Sun from Macquarie. Please ask your question, Howard. Hi, can you hear me?
Yes. Okay. I wanted to ask on the company's cash balance. So I see that you have a strong cash balance continuing to ask before. What is going to be the future direction in terms of investments? And could you elaborate more on how and when you're going to progress with your share repurchase plan? Basically, ask about financial information after the insurance RITR Member retails over the first rather than
use of cash, there are three main areas in the next, in this new fiscal year where we intend to invest, I intend to use on cash.
One is that some of the new, some of the initiatives are still in exploratory phases.
such as learning device such as overseas learning services.
So we'll continue to to fund these initiatives.
And secondly, as Alex talked about earlier, our industry is evolving and new technologies are developing.
So we'll seek opportunities to make strategic investments into adopting new technologies in our business.
Lastly, we continue to look for ways to generate shareholder returns.
We used about a total of 66.
million in total considerations in the last year and I will share a buyback program.
we'll continue to seek opportunities to generate return for our shareholders through our share buyback program.
I hope that answers your question, Paul. Yeah, thank you for the detailed explanation.
Next question comes from the line of Tommy Wong from CMS. Please ask your question, Tommy.
Hi, can you hear me? Yes. Okay, thank you. Thanks for answering my questions. I just have two questions. First, can you share with us any operating data on the Enrichment Learning program?
And my second question is that recently, investor have a very mixed feeling about kind of consumption recovered in China. Some good, some bad. Just wondering what's your feel on the ground and how is that looking going into the summer high season? Thank you. Hey, Tommy, this is Jackson. I'll take this one. And just to clarify, the second part,
the overall macro obviously.
Right, got it. Okay, so I'll take the first part of your question first. Operating metrics for enrichment learning.
I was there if we look at the portal with portal trend.
In which we're learning grew both in terms of revenues and long-term course learner development.
And if we look at retention, I would say at the current retention rate, enrichment learning has a viable business model. Quarter over quarter retention rate has been fairly stable.
And various variants in retention rate across different subject areas for enrichment learning has also been converging.
and various variants in retention rate across different subject areas for enrichment learnings has also been converging.
It was, in regard to the second part of your question, general consumption behavior, you know, or just limit that question to how that reflects in our business. I would say, in this last quarter, we did see some signs of increasing offline activities.
and that has had a positive impact on our offline learning services business.
has had a positive impact on our offline learning services business. I hope that answers your question, Tommy.
Okay, that's great. Thank you. Thank you. Thank you. Our next question comes from the line of Lucy Yu from Bank of America Securities. Please ask your question, Lucy. Thank you, Alex and Jackson. This is Lucy from BAML. Two questions here. First of all, we are approaching the new year of FY24. Could you please...
give us some guidance on the outlook in terms of revenue and margins. And secondly, that on the enrichment courses or enrichment segments, how should we think about the extension in the following year as well? So like how many teachers we are going to recruit, how many learning centers that we are going to expand?
Thank you. Thank you Lucy for the question. I'll take the second part this is Jackson again. I'll take the second part of the question first in terms of expansion plan. I guess first on the capacity side
we did expand our learning center network in this past quarter.
And going forward in the new fiscal year, we'll manage our expansion plan according to market demand and operating efficiency.
You also asked about personnel and specifically teacher recruiting plan. I would just say that that would be a, you know, we will, we do intend to recruit additional teachers.
And the pace at which we do that will primarily depend on our business progression for enrichment learning. Lucy, the first part of your question was about guidance for fiscal 24.
I would just say in fiscal 24, we do expect revenue to grow year over year and will manage profitability closely.
I hope that answers your question, Lucy. Thank you, Jackson.
Hey, thank you. Our next question comes from the line of leaping job from CICC. Please go ahead, leaping.
Sure. Good evening, Alex and Jackson. Thanks for taking my question. So AI and large language model are really hot topics these days. Just wondering whether AIGC will change your business and does the company have any specific product plans in the future? Thank you. Thanks, Li-ping. This is Alex. Let me take this one on. Okay.
been traveling overseas, spend about attendees overseas very recently, talking to a number of
mature and develop companies from startup.
and really people in academics in the technology area, I think there's a profound sense of how the long-term impact of generative AI and large language models will lead to the learning space. I think, you know, for our voice speaking.
Humans have managed to help machines learn.
And this is very important. And this actually can come back and help us rethink and reimagine.
how we help other humans work. I think this was a very interesting but important context to this. Fundamentally learning is based on knowledge and content.
And this is exactly in the area of generative AI and large language models.
So we think the impact will be very fundamental to the industry and to every learner's experience.
Towel will for sure actively and proactively embrace these changes.
I think it's going to come in a few different areas.
can come from utilizing a large language model to assist to become essentially co-pilots.
from utilizing a large language model to assess to become essentially cold pilots to our teachers.
teachers assistants and service providers. Secondly, as we mentioned before, we are also a constant solutions provider.
So again, there's going to be, I think, improvements in both the quality and quality.
And then as a result, the operational efficiency in terms of content production. And thirdly, I think we really look forward to bringing a new type of interaction between students and students.
the operational efficiency in terms of content production. And thirdly, I think we really look forward to bringing a new type of interaction between students and content.
based on the large language model and natural language interface. So all of these I think will have pretty profound impact to the industry.
Now, I will paste into add that this is going to be a journey. It's not going to happen tomorrow. It's going to be a continued journey. And...
I think we're going to see the impact in the coming months and years to come.
So, I hope that answers your question.
Great. We have reached the end of the question and other session. We thank you all very much for your questions. I now like to turn the conference back to the management team for closing remarks. Thank you operator. One quick clarification before we end this call. Non-gap net law for triviality.